Investment
Invincible Corporation

Financial Summary
for the December 2018 Fiscal Period(from July 1, 2018 to December 31, 2018)
February 21, 2019

Name
Representative
Stock Listing
Securities CodeURL
Contact

:
:
:
:
:
:

Invincible Investment Corporation
Naoki Fukuda, Executive Director
Tokyo Stock Exchange8963
http://www.invincible-inv.co.jp/eng/
Consonant Investment Management Co., Ltd.
(Asset Manager of Invincible Investment Corporation)
Jun Komo, General Manager of Planning Department
Tel. +81-3-5411-2731

Start date fordividend distribution: March 20, 2019

This English language notice is a translation of the Japanese-language notice released on February 21, 2019 and was prepared solely for the convenience of, andreference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution readers to undertake investment
decisions based on their own investigation and responsibility. This translation of the original Japanese-language notice is provided for informational purposes
only, and no warranties or assurances are given regarding the accuracy or completeness of this English translation. Readers are advised to read the original
Japanese-language notice. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail in all respects.

1.

(Figures are rounded down to the nearest JPY million)
Financial Results for the Fiscal Period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)(1)

Operating Results(Percentages indicate percentage change from the preceding period)
Operating Revenues
JPY million%

Operating Income

Ordinary Income

JPY million%

Net Income

JPY million%

JPY million%

Fiscal period ended
December 31, 2018

14,451

10.3

9,514

12.8

8,384

8.6

8,384

8.6

Fiscal period ended
June 30, 201813,104

3.6

8,433

2.6

7,722

5.7

7,721

5.7

Net Income per Unit

Ordinary Income /Total Assets

Net Income /Unitholders’ Equity

Ordinary Income /Operating Revenues

JPY

%

%

%

Fiscal period ended
December 31, 2018

1,504

4.2

2.0

58.0

Fiscal period ended
June 30, 2018

1,611

4.3

2.1

58.9

(Note)(2)“Net Income per Unit” in the table above is calculated based on the average number of investment units during the relevant period and isrounded to the nearest yen. Net income per unit for the fiscal period ended December 31, 2018 is JPY 1,479, if calculated based on thenumber of investment units issued and outstanding at the end of fiscal period ended December 31, 2018 (5,666,840 units) and rounded
down to the nearest yen.

Distributions
Distribution(Excluding excess profit
distribution)

Per Unit

Total

Distribution

Excess Profit
Distribution
Per Unit(Including excess profit
distribution)

Total

Per Unit

Total

Dividend
Distribution /PayoutNet Assets
Ratio

JPY

JPY million

JPY

JPY million

JPY

JPY million%%

Fiscal period ended
December 31, 2018

1,632

9,248

51

289

1,683

9,537

110.3

4.2

Fiscal period ended
June 30, 2018

1,430

6,854

-

-

1,430

6,854

88.8

3.8

(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)

(3)

Distribution (excluding excess profit distribution) differs from net income for the fiscal period ended December 31, 2018, since INV
distributes almost all of the profit as defined in Article 136, Paragraph 1 of the Investment Trust and Investment Corporation Act, which
includes deferred gain on hedge.
Distribution (excluding excess profit distribution) differs from net income for the fiscal period ended June 30, 2018, since INV
distributed 90% of Distributable Income (JPY 7,610 million, which is a total of net income and JPY 111 million of retained deficits
carried forward from the preceding fiscal period) and reserve the remaining amount as internal reserve.
The distribution in excess of profit for the fiscal period ended December 31, 2018 is JPY 289 million (JPY 51 per unit), of which JPY 85
million (JPY 15 per unit) is the allowance for temporary differences adjustment arising from different rules and practices in tax andaccounting and JPY 204 million (JPY 36 per unit) is the refund of investment for the purpose of stabilizing distributions.
Dividend Payout Ratio is calculated in accordance with the following formula:
Dividend Payout Ratio = Distribution Amount (Excluding excess profit distribution) ÷ Net Income × 100
Moreover, the Dividend Payout Ratio for the fiscal period ended June 30, 2018 calculated in accordance with the following formula is
90.1%:
Dividend Payout Ratio = Distribution Amount (Excluding excess profit distribution) ÷ Distributable Income × 100
Dividend Payout Ratio is rounded to the nearest one decimal place.
Distribution/ Net Assets is calculated based on the figures excluding excess profit distribution.

Financial Position
Total Assets

Net Assets

Net Assets / Total Assets

Net Assets per Unit

JPY million

JPY million%

JPY

Fiscal period ended
December 31, 2018455,362

221,36448.6

39,063Fiscal period ended
June 30, 2018374,512

181,52348.5

37,871(Note)Net Assets per Unit is calculated based on the number of investment units issued and outstanding at the end of each fiscal period, and isrounded to the nearest yen.

2

(4)

Cash Flows
Cash Flows fromOperating
Activities

Cash Flows from
Investment
Activities

Cash Flows from
Financing
Activities

Closing Balance ofCash and
Cash Equivalents

JPY million

JPY million

JPY million

JPY million

Fiscal period ended
December 31, 2018

10,654(85,738)

71,075

11,064

Fiscal period ended
June 30, 2018

20,483(21,020)(5,083)

15,0722.

Forecasts for the Fiscal Periods ending June 30, 2019 (from January 1, 2019 to June 30, 2019) and December 31, 2019(from July 1, 2019 to December 31, 2019)

Operating
Revenues

Operating
Income(Percentages indicate percentage change from the preceding period)
Distribution
Distribution
Excess Profit per Unit
per Unit
Ordinary(excluding Distribution (including
Net Income
Incomeper Unit
excess profit
excess profit
distribution)
distribution)

JPY million % JPY million % JPY million % JPY million %Fiscal Period ending
June 30, 2019
Fiscal Period ending
December 31, 2019
(Reference)

JPY

JPY

JPY

14,923

3.3

9,804

3.0

8,890

6.0

8,889

6.0

1,568

14

1,582

15,596

4.5

10,365

5.7

9,422

6.0

9,421

6.0

1,662

14

1,676

Estimated net income per unit for the fiscal periods ending June 30, 2019 is JPY 1,568.
Estimated net income per unit for the fiscal periods ending December 31, 2019 is JPY 1,662.

* Others(1) Changes in Accounting Policies, Accounting Estimates or Restatements(a) Changes in Accounting Policies due to Revisions to
Accounting Standards and Other Regulations(b) Changes in Accounting Policies due to Other Reasons(c) Changes in Accounting Estimates(d) Restatements(2) Number of Investment Units Issued and Outstanding(a) Number of Units Issued and Outstanding
as of the End of the Fiscal Period (Including Treasury Units)

None
None
None
None

December 31,
2018

5,666,840 June 30,
20184,793,181(b) Number of Treasury Units as of the End of the Fiscal Period December 31,
2018

0 June 30,
2018

0(Note)

Please refer to “Notes Related to Per Unit Information” regarding the number of investment units which is the basis for the calculation of
net income per unit.

3ͤThe Implementation Status of Statutory Audit
At the time of this financial summary report, the audit procedures for the financial statements pursuant to the Financial
Instruments and Exchange Act are yet to be completed.
ͤExplanation on the Appropriate Use of the Forecast of Results and Other Matters of Special Consideration(Explanation on the Appropriate Use of the Forecast of Results)
The forward-looking statements contained in this financial summary report are based on the information currently
available to us and certain assumptions which we believe are reasonable. Actual operating performance may differ
significantly due to factors we cannot predict as of this date, including gains or losses from the disposition of properties,
repayment of borrowings, decreases in rents and changes in operating conditions. Further, there is no guarantee of thepayment of the forecast distribution amount.
Please refer to “Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Periods ending
June 2019 and December 2019” on page 19 for assumptions used in the forecasts and precautions regarding the use of suchforecasts.
Unless otherwise specified herein, amounts less than JPY 1 are rounded down, and ratios are rounded to the nearest one
decimal place.

41. Related Companies of the Investment Corporation
Disclosure is omitted because there have been no material changes in the “Structure of the Investment Corporation”
section of the latest securities report (filed on September 25, 2018) (available in Japanese only).

2. Management Policy and Operating Conditions(1) Management Policy
Disclosure o f “Investment Policy,” “Investment Targets,” “Distribution Policies” and the “Investment Restriction” isomitted because there have been no material changes from the relevant sections of the latest securities report (filed on
September 25, 2018) (available in Japanese only).
(2) Operating Conditionsa

Overview of the Fiscal Period Ended December 31, 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 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 otheraffiliates of FIG, collectively the “Fortress Group”) was the main allottee, and the sponsor changed to the Fortress Group.
FIG became a subsidiary of Softbank Group Corp. (“SoftBank Group”), after SoftBank Group acquired FIG effective on
December 27, 2017 (Note 1). Calliope, an affiliate of FIG, who owned 100% of the issued shares of Consonant
Investment Management Co., Ltd., the asset manager to which INV entrusts the management of its assets (the “AssetManager”), 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 the basic agreement which was enteredinto 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 ofsuch external growth efforts, INV's portfolio as at the end of the previous fiscal period ended June 2018 comprised of 126
properties (60 hotels (Note 3), 64 residential properties and two others) with a total acquisition price of JPY 363,831
million. The total acquisition price of the portfolio has significantly grown by 5.0 times, compared to May 22, 2014,
which is the date immediately prior to INV’s initial investment in hotels.
In the Fiscal Period ended December 31, 2018 (“Reporting Period”), INV implemented a global offering of new
investment units for the fifth consecutive year to acquire four domestic hotels including two hotels operated under the“Hotel MyStays Premier” brand, as well as TK (Japanese anonymous association (tokumei kumiai)) interest in two
overseas hotels as underlying assets for the first time ever in J-REIT history. As a result, INV's portfolio at the end ofReporting Period comprised of 132 properties (66 hotels (Note 3) (Note 4), 64 residential properties and two others) witha total acquisition price of JPY 448,360 million (Note 5).
The Asset Manager revised the Investment Guidelines as of July 17, 2018 to allow the acquisition of overseas real estate
assets as a new investment policy, and changed its investment policy regarding domestic hotels. Please refer to “(e)Change in the Investment Guidelines” for more details.
5

On July 17, 2018, INV amended and renewed the Memorandum of Understanding (the “MOU") entered into with affiliatesof Fortress Group with respect 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 subject to the preferential negotiating rights under the MOU.
(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 reached100% in October 2013. Calliope transferred 80.0% of issued shares to Fortress CIM Holdings L.P., a subsidiaryof SoftBank Group and 20.0% to SoftBank Group on March 29, 2018. As of the date of this document,
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 a special
purpose company (tokutei mokuteki kaisha) refers to 178,458 units of preferred equity interest issued by
Kingdom Special Purpose Company (the “TMK”) (equivalent to 49.0% of the total issued and outstanding
preferred equity interest), which owns the trust beneficiary interest of the Sheraton Grande Tokyo Bay Hotelas an underlying asset. Moreover, INV’s investment amount of the preferred equity interest is used as theacquisition price of the preferred equity interest, unless otherwise stated. The “underlying asset” refers to thereal estate or the real estate related assets to be acquired or owned by a TK operator of TK interest or a TMK
relating to the preferred equity interest which INV owns, thus the real estate or the real estate related assets
which will be the revenue source of INV. Hereinafter the same shall apply.

(Note 4)The TK interest is counted as two properties, based on the number of the underlying assets (two hotels) of the
TK interest. The TK interest is an interest in Seven Mile Resort Holdings Ltd. (the “Cayman SPC”), a
Cayman Islands special purpose company that holds leasehold interests in “Westin Grand Cayman Seven Mile
Beach Resort & SPA” and “Sunshine Suites Resort” as underlying assets. The TK interest is classified as a
hotel property, based on the use of the underlying assets of the TK interest, and INV’s investment amount for
the TK interest is used as the acquisition price of the TK interest, unless otherwise stated. The acquisition
price is rounded down to the nearest JPY million.

(Note 5)In investing in the Cayman SPC, INV initially funded USD 339,836 thousand (JPY 37,534 million), which
was an amount which was reasonably estimated to enable the Cayman SPC to acquire the underlying assets.
However, based on the closing settlement, the Cayman SPC did not need as much capital as anticipated.
Therefore, INV received a refund of the TK investment in the amount of USD 6.8 million on December 10,
2018 (Cayman Island local time) from the Cayman SPC. INV’s investment amount to the TK interest is
calculated based on the amount reflecting such partial refund (i.e., USD 333,036 thousand).

(b)

Operational Environment and Performance

For the December 2018 period, the portfolio NOI increased by 21.8% or JPY 2,184 million to JPY 12,192 million
compared to the same period in the previous year (the December 2017 period). The hotel portfolio NOI increased by
JPY 2,419 million, which is equivalent to the increase by 24.2% of the portfolio NOI, due to a combination of internaland external growth. While the residential portfolio is also benefitting from strong rental growth, NOI for the
residential portfolio declined by JPY 55 million, which is equivalent to the decrease by 0.6% of the portfolio NOI, due
to asset sales as part of INV’s asset recycling program. Other portfolio assets also experienced a decline in NOI of
JPY 179 million, which is equivalent to the decrease by 1.9% of the portfolio NOI, due to the sale of assets. The
portfolio continued to maintain a high average occupancy rate (Note 1) of 98.5% for the period.
Commentary on hotel and residential performance in the Reporting Period is described below.
The NOI (Note 2) for the Reporting Period of the 51 hotels (Note 3) owned by INV increased by 2.6% compared to thesame period in the previous year (figures exclude nine hotels with fixed-rent lease agreements of the 60 hotels owned by
INV at the beginning of the December 2018 Fiscal Period). The 51 hotels recorded an occupancy rate (Note 4) of
90.7% (+0.1 points YoY), ADR (Note 5) of JPY 11,148 (+2.5% YoY), and RevPAR (Note 6) of JPY 10,106 (+2.6%
YoY). Fixed rent revenues accounted for 49.8% (JPY 4,909 million) of total hotel revenue and variable rent revenues
accounted for 50.2% (JPY 4,953 million) of total hotel revenue (figures based on the 63 domestic owned hotels as of theend of the December 2018 Fiscal Period, and excludes Sheraton Grande Tokyo Bay Hotel, the underlying asset of thepreferred equity interest of the TMK owned by INV).
6

Inbound visitors reached a record high of 31.19 million (+8.7% YoY) in 2018, while government targets continued
growth of 40 million visitors in 2020 and 60 million visitors in 2030. Japan will host the Rugby World Cup in 2019and Tokyo Olympics Games in 2020, and these world-class events are anticipated to further increase attention to Japanand more inbound tourists to Japan.
The NOI (Note 7) of the 64 residential properties (Note 8) for the Reporting Period increased by 5.0% compared to thesame period in the previous year, and the average occupancy rate achieved 95.4%, an increase of 0.6 points compared tothe same period in the previous year.
Trends for rent at city-center residential properties with small-type rooms maintained a moderate increase. Due to thepositive 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 53.4% (based on the number of contracts) of the new residential
lease contracts for an average rent increase of 2.9% compared to the previous rent across all new leases (Note 9).
INV achieved a rent increase for 52.8% (based on the number of contracts) of contract renewals for an average rent
increase of 4.6% compared to the previous rent across all renewal leases (Note 9), while maintaining a high contract
renewal rate (Note 10) of 79.1%. Combined, new leases and renewal leases were signed at 3.8% higher than theprevious leases (Note 9).
Specifically, at Royal Parks Tower Minami-Senju, INV’s flagship residential property, INV achieved strong results withrent increases for 90.4% (based on the number of contracts) of the new lease contracts and 94.9% (based on the numberof contracts) of contract renewals, with an average rent increase of 9.8% compared to the previous rent across all newleases and renewal leases (Note 9).
The total appraisal value of 129 properties was JPY 462,580 million (3 out of the 132 properties owned by INV at theend of the Reporting Period are excluded from the appraisal calculation: Sheraton Grande Tokyo Bay Hotel (preferred
equity), Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort (TK interest) for whichappraisal values of such securities is not applicable). The portfolio has an unrealized gain of JPY 79,930 million (Note11) and an unrealized gain ratio of 20.9% (Note 11). The total appraisal value of 125 properties which were owned
throughout the Reporting Period increased by 0.5% from JPY 411,542 million at the end of June 2018 period to JPY
413,720 million at the end of the Reporting Period.
Key Performance Indicators of 51 Hotel Properties (Note 2)
Occupancy Rate (Note 4)
ADR (JPY) (Note 5)
RevPAR (JPY) (Note 6)
GOP (JPY million) (Note 12)

December 2018 fiscal period
90.7%
11,148
10,106
9,707

7Year-on-year change+0.1pt
+2.5%
+2.6%
+2.1%

Key Performance Indicators of 64 Residential Properties (Note 7)
Occupancy Rate (Note 1)
Average Rent per Tsubo per Month(JPY) (Note 13)
NOI (JPY million) (Note 8)

December 2018 fiscal period
95.4%

Year-on-year change+0.6pt

9,832

+2.2%

2,566

+5.0%

(Note 1)

“Average Occupancy Rate” for the entire portfolio and “Occupancy Rate” for the residential properties iscalculated by dividing the sum of total leased area by the sum of total leasable area at the end of each month
during the relevant period.

(Note 2)

NOI includes a simulated amount of dividend income from Kingdom Special Purpose Company that owns
Sheraton Grande Tokyo Bay Hotel as an underlying asset. The fiscal periods of the TMK are semi-annual
periods from April 1 to September 30 and from October 1 to March 31 every year, and INV will receive thedividend within three months from the end of each semi-annual fiscal period of the TMK. Since INV does
not receive a dividend from the TMK on a monthly basis, the amount of dividend INV receives from the TMK
for each month is a simulated figure, which is calculated by deducting (i) simulated expenses such as
operating expense of the TMK and the interest of debt (calculated by dividing the budget of the TMK for the
fiscal period that includes the relevant month by the number of months in such fiscal period) from (ii) NOI
based on the performance of Sheraton Grande Tokyo Bay Hotel in the month which is three months before thetarget month for this performance disclosure and multiplied by INV’s ownership ratio of the preferred equity
interest in the TMK (49.0%). However, NOI excludes a simulated amount of dividend income from TK
interest the underlying assets of which are Westin Grand Cayman Seven Mile Beach Resort & Spa andSunshine Suites Resort, which were acquired by INV in September 2018.

(Note 3)Of the 60 hotels held as of the beginning of the December 2018 Fiscal Period (including the Sheraton GrandeTokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by INV), the following
nine hotels with fixed-rent lease agreements are excluded: Super Hotel Shinbashi/Karasumoriguchi, Comfort
Hotel Toyama, Super Hotel Tokyo-JR Tachikawa Kitaguchi, Super Hotel JR Ueno-iriyaguchi, Comfort Hotel
Kurosaki, Comfort Hotel Maebashi, Comfort Hotel Tsubame-Sanjo, Comfort Hotel Kitami and Takamatsu
Tokyu REI Hotel. The figures assume that all properties acquired after July 2017 by INV had been owned
since July 1, 2017. The actual results before acquisition by INV are based on the data provided by the sellers.

(Note 4)

“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 5)“ADR” means average daily rate, and is calculated by dividing total room sales (excluding service fees) for acertain period by the total number of days per room for which each room was occupied during the same period.
Hereinafter the same shall apply.

(Note 6)

“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 the same shallapply.

(Note 7)

Based on the 64 residential properties owned as of the beginning of December 2018 Fiscal Period. In
addition, the figures for the properties acquired after July 2017 are calculated on the assumption INV had
acquired those properties on July 1, 2017, using the actual figures provided by the sellers of such properties
for the period before the acquisition, for the purpose of comparison with previous year.

(Note 8)For the comparison of NOI, insurance income and related repair expenses, which are temporary items, as well
as expenses required to detach trust beneficiary interest from an integrated trust account are excluded.

(Note 9)

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 10) 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 period8

(Note 11) 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 of theend of the Reporting Period.
(Note 12) “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 the preferred
equity interest. Hereinafter the same shall apply.
(Note 13) “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 (tsubo) at the end of each month during therelevant period.
(c)Overview of Fund Raising
As a result of the measures described below, INV’s interest-bearing debt outstanding balance was JPY 229,873
million and the Interest-Bearing Debt ratio (Note 1) and LTV (appraisal value basis) (Note 2) were 50.2% and44.2% respectively, as of the end of the Reporting Period, with an average interest rate (Note 3) of 0.53%.
(Note 1) Interest-Bearing Debt ratio uses the calculation formula below:
Interest-Bearing Debt ratio = total outstanding interest (excluding short-term consumption tax loan)-bearing debt/total assets x 100(Note 2) LTV (appraisal value basis) uses the calculation formula below:
LTV = total outstanding interest (excluding short-term consumption tax loan) -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) is deemed asappraisal value of Sheraton Grande Tokyo Bay Hotel (preferred equity interest). Also, for the TK
interest with two overseas real estate as underlying assets, the acquisition price (which is the INV’s
TK investment amount after a partial refund: INV originally funded an amount which wasreasonably estimated to enable the Cayman SPC to acquire the underlying assets, however, basedon the closing settlement, the Cayman SPC did not need as much capital as anticipated, therefore
INV received a refund of the TK investment from the Cayman SPC) of such TK interest, USD
333,036 thousand (JPY 36,783 million, converted into JPY amount via exchange rate of USD
1=JPY 110.45 based on the foreign exchange forward contract executed on July 26, 2018 andimplemented on September 26, 2018), is deemed as the appraisal value and included.
(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) Equity Financing
INV implemented a global public offering which closed on August 1, 2018 (the number of new investment units issued:909,524; total issue value: JPY 40,280 million) and a third party allotment which closed on August 21, 2018 (the numberof new investment units issued: 45,476; total issue value: JPY 2,013 million) in order to procure part of the funds for theacquisition of four domestic hotels and the TK interest with two overseas hotels as underlying assets described in “(d)Overview of Acquisition of Assets”.
(ii) Debt Financing
a. Borrowing of Funds
INV borrowed New Syndicate Loan (I) on July 17, 2018 (total amount borrowed: JPY 28,979 million; interest rate:variable interest rate of 1-month JPY TIBOR plus 0.50%, 0.40% and 0.30% for durations of five, four and three
years), which was arranged by Mizuho Bank, Ltd. as the arranger in order to repay New Syndicate Loan (E) in theamount of JPY 28,979 million which was due on July 17, 2018.

9

In tandem with the public offering as described in (i) above, INV borrowed New Syndicate Loan (J) on August 2,
2018 and September 26, 2018 (total amount borrowed: JPY 40,458 million; interest rate: variable interest rate of
1-month JPY TIBOR plus 0.50%, 0.40%, 0.30%, and 0.20% for durations of five, four and three years and one year),which was arranged by Mizuho Bank, Ltd. as the arranger in order to pay a portion of the acquisition price andrelated expenses for the acquisition of the four domestic hotels and the TK interest with two overseas hotels as
underlying assets described in “(d)Overview of Acquisition of Assets”.
b.

Issuance of Investment Corporation Bonds
INV issued its Third Series of investment corporation bonds for the purpose of raising funds for repaying existing
borrowings, 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 Amount(JPY million)

Interest Rate(annual rate)

Redemption
Date

Security/
Guaranty

Third Series Unsecured Investment
Corporation Bonds (with pari passu
conditions among specified corporate
bonds)

October 12,
2018

2,000

0.550%

October 12,
2023

Unsecured /Unguaranteed
Rating: A (JCR)(d)

Overview of Acquisition of Assets(i) Acquisition of four domestic hotel properties
The Asset Manager decided on the acquisition of four domestic hotels as follows on July 17, 2018, and acquisitionof the assets has been closed on August 2, 2018.

Use

Property
Number

D60
D61
Hotel
D62
D63

(Note 1)

Property Name

Location

Hotel MyStays Premier
Akasaka
Hotel MyStays Premier
Sapporo Park

Minato-ku,
Tokyo
Sapporo,Hokkaido

Hotel MyStays Ueno
East

Taito-ku,Tokyo

AcquisitionPrice(million yen)
(Note 1)

Appraisal
Value(million yen)
(Note 2)

20,691

20,90016,731

16,900

5,286

5,340

5,039

5,090

47,747

48,230Hotel MyStays Midosuji
Osaka, Osaka
Honmachi
Total

SellerCategory ofSpecified Assets

Aki Tokutei
Mokuteki Kaisha
Raetia Tokutei
Mokuteki Kaisha
Trust Beneficial
HL Investments 2Interest
Tokutei Mokuteki
KaishaDogo Tokutei
Mokuteki Kaisha-

Acquisition Prices do not include adjustments for property taxes, city planning taxes, or national or local consumption taxes; thesame shall apply hereinafter.

(Note 2)

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.

10

(ii) Acquisition of TK Interest with two Overseas Real Estate as Underlying Assets
The Asset Manager decided on acquisition of TK interest as follows on July 17, 2018 and acquisition of asset has
been closed on September 28, 2018 (Cayman Island local time; September 29, 2018 in Japan local time).
(1) Asset acquired

TK interest in a Cayman Islands special purpose company that holds 99-year Leasehold
Interests (Note 1) (with a lease payment of USD 1 or KYD 1 per year) in overseas realestate as underlying assets (the “Cayman Hotel TK Interest”)(2) Acquisition price
USD 333,036 thousand (JPY 36,783 million) (Note 2) (Note 3) for 100.0% of the
Cayman Hotel TK Interest(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) Acquisition date
September 28, 2018 (Cayman Island local time)(5) TK operator
Seven Mile Resort Holdings Ltd.
(Note 1)
Rights equivalent to long-term real estate leasehold rights in Japan (hereinafter referred to collectively as the“Leasehold”). The TK operator also acquired 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.
(Note 2)The 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 USD 1 = JPY 110.45.
Hereinafter the same.
(Note 3)
The acquisition price is INV’s investment amount for the Cayman Hotel TK Interest. In investing in the
Cayman SPC, INV initially funded USD 339,836 thousand (JPY 37,534 million), which is an amount which
was reasonably estimated to enable the Cayman SPC to acquire the underlying assets. However, based on theclosing settlement, the Cayman SPC did not need as much capital as anticipated. Therefore INV received arefund of the TK investment in the amount of USD 6.8 million on December 10, 2018 (Cayman Island localtime) from the Cayman SPC. INV’s investment amount to the TK interest is calculated based on the amountreflecting such partial refund. The acquisition price is rounded down to the nearest JPY million.
(Note 4)Seven Mile Resort Management Ltd. (the “Hotel Operating SPC”), a special purpose company establishedseparately from the Cayman SPC under the laws of the Cayman Islands, has been entrusted with all aspects of
the hotel operations pursuant to a hotel management agreement with the Cayman SPC for each of the Westin
Grand Cayman Seven Mile Beach Resort & Spa and the Sunshine Resort (collectively, the “HotelManagement Agreement”). Each of the common shares issued by the Cayman SPC and the Hotel Operating
SPC is 100% owned by a general incorporated association (ippan shadan hojin) established according to the
Act on General Incorporated Associations and General Incorporated Foundations in Japan. The ippan
shadan hojin by its nature will not receive any cash distributions from the hotel operations. The outline of
the Hotel Management Agreement concluded between the Hotel Operating SPC and the Cayman SPC is asfollows:11

(e)Hotel Management Assignor

Seven Mile Resort Holdings Ltd.

Hotel Management Trustee

Seven Mile Resort Management Ltd.

Term of Agreement

The agreement term shall last ten years from the Hotel management
assignor’s acquisition of the Two Overseas Hotel Assets and renew
automatically every five year unless the hotel management assignor andthe hotel management trustee mutually agree to terminate the agreement
75 days prior to the end of the term.

Remuneration

Equivalent to actual costs

Other Special Matters

Both the hotel management assignor and the hotel management trustee
may cancel the Hotel Management Agreement for any reason by
60-days’ prior written notice.

Amendment to the Investment Guidelines

The Asset Manager revised the Investment Guidelines as of July 17, 2018. Such revision is intended to establish an
investment policy and asset management structure regarding investments in overseas assets, and also to change theinvestment policy regarding domestic hotels to focus on (i) Limited service hotels, which feature relatively higher profit
margins and potential for revenue growth backed by increasing demand for accommodations, and (ii) Full-service andResort 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 latest securities report for the fiscal
period ended June 2018 (from January 1, 2018 to June 30, 2018) (available in Japanese only) filed on September 25,
2018 for details of the revised investment policy.
(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 1,346
million from the previous period (+10.3%) to JPY 14,451 million, net income increased by JPY 662 million (+8.6%)
to JPY 8,384 million and unappropriated retained earnings including the retained earnings carried forward (JPY 756
million) reached JPY 9,140 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. With respect to the Reporting Period, dueto i) one-off expenses in connection with the public offering, the asset acquisition and the borrowings, ii) therevenues of the four domestic hotels acquired during the December 2018 fiscal period will contribute for only apart of the period, and iii) distributions from the TK interest will start from the fiscal period ending June 2019,
earnings per unit decreased. Therefore, from the perspective of maintaining stable distributions, INV intends to make
distributions in excess of profits in the amount of JPY 204 million (JPY 36 per unit) within the scope of the expectedshortfall between actual earnings per unit and the simulated earnings per unit after the transactions including i) the asset
acquisitions and dispositions in the fiscal period ended June 2018, ii) asset acquisitions completed or to be completed, inthe fiscal period ended December 2018, and iii) refinancing, issuance of new investment units by public offering andthird-party allotment, and new borrowing. Further, INV intends to make distribution in excess of profits in the amountof JPY 85 million (JPY 15 per unit) in order to cope with the discrepancy between tax and accounting treatment on
depreciation. As a result, distribution per unit (including excess profit distribution) is JPY 1,683.
Moreover, in the Reporting Period, deferred gain on hedging of JPY 108 million has arisen. Deferred gain on hedging
is included in profit as defined in Article 136, Paragraph 1 of the Investment Trust and Investment Corporation Act, andINV has decided to distribute almost all of the profit as defined in Article 136, Paragraph 1 of the Investment Trust andInvestment Corporation Act. As a result, retained deficit carried forward of JPY 107 million is recorded.
Furthermore, INV conducted a unit buyback in December in order to increase unitholder value after taking acomprehensive review of performance indicators, including NAV per investment unit and dividend yield, concludingthat the investment units were undervalued. INV entered into a discretionary transaction agreement with a securities
company to acquire units from the market (Tokyo Stock Exchange) for an acquisition period of December 13, 2018
through February 28, 2019. All the acquired own investment units were acquired by December 18, 2018 and wereretired on December 28, 2018. The total number of investment units acquired and retired in the Reporting Period was
81,341 units (representing 1.4% of the total number of issued and outstanding units before such acquisition andretirement of own investment units), and the amount of investment units acquired was JPY 3,999 million.
12b

Outlook for the Fiscal Periods Ending June 30, 2019 and December 31, 2019

The DPU for the June 2019 fiscal period and December 2019 fiscal period are forecast to be JPY 1,582 (+10.6% YoY)
and JPY 1,676 (-0.4% YoY). The full year DPU for calendar year 2019 is forecast to be JPY 3,258 (+4.7% YoY),
providing steady growth.

Future 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 the resources thatare expected to become available through SoftBank Group. SoftBank Group has market-leading expertise intechnology fields such as digital marketing for both mobile and desktop, online payment systems, search engine
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 and increasecustomer engagement. For example, INV plans to pursue opportunities to better manage the increased number offoreign visitors and their related online research, bookings and payments, improve the process in setting hotel rates andmanage 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 synergies 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 lengthening the average maturity period of its interest-bearing debt
through borrowings and the issuance of investment corporation bonds

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 canbe achieved. Rent revenue from residential assets and other assets as well as the fixed rent portion from hotels
will also contribute to more stable revenue, which was 63.5% 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, withthe aim of acquiring properties where growth and stability of GOP and rental revenue are forecasted to increase.
In regards to residential properties, INV will analyze occupancy rates, rental market trends, the presence ofcompeting properties among other factors, and consider acquiring 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.

13

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
July 2014
February 2015

24 residential properties
Two hotels
18 hotels
Two hotels
11 hotels andthree residential properties
One hotel
Five hotels andone residential property
Four hotels andone residential property
Two hotels
Two residential properties
One hotel
Five hotels (Note 2)
Four hotels
Two hotels
Four hotels
Two hotels (Note 3)
94 properties(of which 63 are hotels and 31 areresidential properties)

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

July 2015
August 2015
January 2016
March 2016
June 2016
March 2017
May 2017
October 2017
February 2018
June 2018
August 2018
September 2018
Total

JPY 35,258 million
JPY 5,069 million
JPY 10,207 million
JPY 66,697 million
JPY 15,900 million
JPY 24,562 million
JPY 8,000 million
JPY 57,444 million (Note 2)
JPY 12,425 million
JPY 7,325 million
JPY 47,747 million
JPY 36,783 million (Note 3)
JPY 391,745 million(of which hotels: JPY 340,107 million;
residential: JPY 51,638 million)

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 4). In addition, by utilizing the property transaction information available through the Fortress Group andthe Asset Manager’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 5)

Location

No. of rooms

1

Rihga Royal Hotel Kyoto

Full Service Hotel

Kyoto, Kyoto

489

2

Hotel MyStays Premier Narita

Full Service Hotel

Narita, Chiba

711

3

Fusaki Beach Resort Hotel & Villas

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

149

Full Service Hotel

Niigata, Niigata

304

10 Hotel MyStays Fuji Onsen Resort

13 Art Hotel Niigata Station
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
14

Sapporo, Hokkaido

305

No.

Asset name

Asset type (Note 5)

Location

No. of rooms

17

Hotel MyStays Sapporo Nakajima Park
Annex

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

Hotel subtotal

3,937

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

4,680

(Note 1)The percentage indicates composition of rent revenue based on the actual results for the fiscal period ended
December 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 the preferred
equity interest, is counted as one property and the INV’s investment amount to the preferred equity interest iscounted as the acquisition price of the preferred equity interest.

(Note 3)

The Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort acquired by the
Cayman SPC, of which INV owns the TK interest, are counted as two properties and the INV’s investment
amount to the TK interest is used as the acquisition price of the TK interest. In investing in the Cayman SPC,
INV initially funded USD 339,836 thousand (JPY 37,534 million), which was an amount which wasreasonably estimated to enable the Cayman SPC to acquire the underlying assets. However, based on theclosing settlement, the Cayman SPC did not need as much capital as anticipated. Therefore INV received arefund of the TK investment in the amount of USD 6.8 million from the Cayman SPC. INV’s investment
amount to the TK interest is after such partial refund (USD 333,036 thousand). USD is converted into JPY
amount via exchange rate of USD 1=JPY 110.45 based on the foreign exchange forward executed on July 26,
2018 and implemented on September 26, 2018.

(Note 4)

The term of validity of the MOU is from July 17, 2018, the date of execution of the updated MOU, to July 16,
2019. However, 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 5)

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.

15

Property Sales
While INV places priority on increasing unitholders’ value through external growth by taking into account the increased
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 64 domestic hotels (Note 1) owned by INV as of the end of the Reporting Period, 55 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 hotel revenue
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 52 hotels, MHM and subsidiaries of MHM have
implemented sophisticated revenue management initiatives seeking to maximize revenue. INV will continue toaccurately 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 and increase
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 thehigh-season in the residential rental market that occurs during the June 2019 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 in maintaining
and enhancing the competitiveness and market value of the properties as well as ensuring high tenant satisfaction.
Therefore, INV will continue to monitor current strategic plans with flexible implementation as it sees fit.
(Note 1)

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

(iii) Financial strategy
In the Reporting Period, INV issued the investment corporation bonds for the purpose of raising funds fromrepaying existing borrowings, as described in “a Overview of the Fiscal Period Ended December 2018 (“Reporting
Period”) (c)Overview of Fund Raising (ii) Debt Financing b. Issuance of Investment Corporation Bonds” andlowered its financing costs while at the same time lengthened the average maturity period of its debt and diversified
the maturity date of its debt and funding sources. Going forward, INV seeks to maximize unitholders’ value by
way of further reduction of borrowing costs, diversification of loan maturity dates and financing measures, andimprovement 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 accountant) 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.

16

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 place acompliance committee which, chaired by such compliance officer, is in charge of deliberating on compliance with laws,
regulations and other relevant matters as well as transactions with sponsor related parties. Compliance committee
meetings are attended by an outside expert (an attorney) who, sitting in as a compliance committee member, conducts
rigorous deliberations on the existence of conflicts of interest in transactions with sponsor related parties as well as strict
examinations with respect to INV’s compliance with laws and regulations.
INV intends to continually take steps to strengthen its compliance structure.
c

Significant Subsequent Events

Not applicable. Reference information is stated below.
(Reference Information)(a)Overview of Fund Raising
INV has decided to implement new borrowings (Term Loan (I)) on January 18, 2019, in order to repay Term Loan (B) in
the amount of JPY 4,250 million which was due on January 22, 2019.
Overview of Term Loan (I)LenderBorrowing
Date

Outstanding
Amount(JPY million)

Interest Rate(annual rate)

Maturity
Date

Borrowing
MethodMUFG Bank, Ltd.
Sumitomo Mitsui Trust Bank,
LimitedJanuary 22,
2019

4,250

0.37250%（Note 1）January 22,2022

Unsecured/nonguarantee(Note 1)This borrowing has a floating interest rate, but the interest rate is fixed through an interest rate swap
agreement as of January 18, 2019. Therefore, the interest rate stated is fixed in consideration of the swap.

17

dOperational Outlook

The forecasts of financial results for the fiscal periods ending June 30, 2019 (from January 1, 2019 to June 30, 2019)and December 31, 2019 (from July 1, 2019 to December 31, 2019) are as follows. For reference purposes, full-year
forecasts (aggregate of the fiscal periods ending June 30, 2019 and December 31, 2019) are provided as well, since hotelrevenues are influenced by seasonal effects.
June 2019
Fiscal Period

December 2019
Fiscal Period(Reference)
Full-year 2019

Operating Revenues

JPY 14,923 million

JPY 15,596 million

JPY 30,519 million

Operating Income

JPY 9,804 million

JPY 10,365 million

JPY 20,170 million

Ordinary Income

JPY 8,890 million

JPY 9,422 million

JPY 18,312 million

Net Income

JPY 8,889 million

JPY 9,421 million

JPY 18,311 million

Total Distribution Amount(Including excess profit distribution)

JPY 8,964 million

JPY 9,497 million

JPY 18,462 million

Net Income per Unit

JPY 1,568

JPY 1,662

JPY 3,230

Distribution per Unit
(Excluding excess profit distribution)

JPY 1,568

JPY 1,662

JPY 3,230

Excess Profit Distribution per Unit

JPY 14

JPY 14

JPY 28Distribution per Unit
(Including excess profit distribution)

JPY 1,582

JPY 1,676

JPY 3,258

For the assumptions underlying the operational outlook for the fiscal periods ending June 30, 2019 and December 31,
2019, please see “Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Periods
ending June 2019 and December 2019.”(Cautionary Note regarding Forward Looking Statements)
Forward looking statements such as the forecasts set forth herein are based on information currently available andcertain assumptions that are deemed reasonable. Actual operating performance may vary significantly due to factors
not foreseen at the time of this present notice, such as the occurrence of gains and losses associated with the sale ofproperties, repayment of borrowings and a decrease in rent received. Also, this forecast is not a guarantee of
distribution amounts.

18

<Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Periods ending June 2019 andDecember 2019>
Item

Assumptions

Fiscal period

The June 2019 fiscal period: from January 1, 2019 to June 30, 2019 (181 days)
The December 2019 fiscal period: from July 1, 2019 to December 31, 2019 (184 days)

Assets undermanagement

Based on the properties held as of the date of this document (129 properties and a preferred
equity interest in one TMK and a TK interest), and INV assumes that there will be no changes
through the end of the fiscal period ending December 31, 2019.
As of the end of the June 2019 fiscal period: 5,666,840 units
As of the end of the December 2019 fiscal period: 5,666,840 units

Units outstanding
INV assumes that there will be no change to the current 5,666,840 units issued and outstanding
through the end of the fiscal period ending December 31, 2019.
Balance as of the end of the fiscal period ending June 30, 2019: JPY 229,873 million(borrowing: JPY 225,873 million, investment corporation bonds: JPY 4,000 million)
Balance as of the end of the fiscal period ending December 31, 2019: JPY 228,774 million(borrowing: JPY 224,774 million, investment corporation bonds: JPY 4,000 million)
Interest-bearing
liabilities

INV assumes that out of the current balance of JPY 229,873 million, INV intends to repay
consumption tax loan of JPY 1,099 million maturing on August 2, 2019 in the fiscal period
ending December 31, 2019. Regarding other loans maturing during the June 2019 fiscal period
and December 2019 fiscal period, INV intends to refinance at a similar condition. INV
assumes no other new loan or prepayment of loan through the end of the December 2019 fiscal
period.
INV expects to record rental revenues as follows:
June 2019
Fiscal Period
JPY 12,248 million(JPY 8,497 million)(JPY 4,168 million)(JPY 4,329 million)
JPY 892 million
JPY 1,782 million

・Rental revenues(of these, hotel rents)(fixed hotel rents)(variable hotel rents)
・TMK Dividend amount・TK Dividend amountOperating revenues

December 2019
Fiscal Period
JPY 13,688 million(JPY 9,948 million)(JPY 5,044million)(JPY 4,904 million)
JPY 774 million
JPY 1,133 million

We estimate the amount of dividends on the preferred equity interests (TMK dividend) based on
the performance of the underlying asset and the assumed amount of expenses incurred by the
TMK.
TK dividend has been calculated based on the exchange rate of 1 USD = 110.00 JPY, as theexchange rate is fixed based on the currency put/call options as announced in “Noticeconcerning Cancel of Existing Foreign Exchange Forward and Execution of Put/Call Options”
dated November 2, 2018.
Rental revenues are calculated based on estimates as of the date of this document. In addition,
INV assumes there will be no delinquencies or non-payment of rent by tenants.

19

Item

Assumptions
INV expects to incur property related expenses as follows:
June 2019
Fiscal Period
JPY 652 million(JPY 27 million)
JPY 550 million

・Facility management fees(of these, repair costs)
・Taxes and other public charges(Note)
・Insurance expenses
・Depreciation expenses
・Other expenses
Operating expenses

Total property related expenses

December 2019
Fiscal Period
JPY 638 million(JPY 26 million)
JPY 665 million

JPY 13 million

JPY 13 million

JPY 3,181 million

JPY 3,232 million

JPY 205 million

JPY 169million

JPY 4,604 million

JPY 4,720 million(Note) Property taxes and city planning taxes on the assets acquired in 2018 are calculated on a
pro-rata basis with the previous owners and settled at the time of acquisition, and are notrecorded for the fiscal period ended December 31, 2018 and will be recorded from thefiscal period ending June 30, 2019 as the amount equivalent to such settlement is includedin the acquisition cost.
INV expects to incur other operating expenses than the property related expenses as follows:・Other operating expenses(of these, asset management fees)

June 2019
Fiscal Period
JPY 514 million

December 2019
Fiscal Period
JPY 510 million(JPY 300 million)(JPY 300 million)

INV expects to record net operating income as follows:
June 2019
Fiscal Period
JPY 13,500 million

・NOI
NOI

December 2019
Fiscal Period
JPY 14,108 million(of these, hotel NOI)(JPY 8,057 million)(JPY 9,404 million)(of these, residential NOI)(JPY 2,584 million)(JPY 2,611 million)(of these, TMK dividend amount)(JPY 892 million)(JPY 774 million)(of these, TK dividend amount)(JPY 1,782 million)(JPY 1,133 million)

NOI calculation method in the above table is as follows
・NOI＝ Rental Revenues Property Related Expenses + Depreciation Expenses + Dividend on
the preferred equity interest (TMK dividend) + Dividend on TK interest (TK dividend)

INV expects to incur non-operating expenses as follows:

Non-operating
expenses・Interest expense
・Finance related costs・Interest for investment corporation bond・Depreciation of investment
corporation bonds issuance expenses
Total Non-operating expenses

20

June 2019
Fiscal Period
JPY 600 million
JPY 298 million
JPY 11 million

December 2019
Fiscal Period
JPY 641 million
JPY 286 million
JPY 11 million

JPY 3million

JPY 3 million

JPY 914 million

JPY 943 million

Item

Distribution per unit

Excess profit
distribution per unit

Assumptions
The distribution per unit is calculated in accordance with the cash distribution policy as set forthin INV’s Articles of Incorporation.
With respect to the distribution for the fiscal period ending June 30, 2019, INV expects todistribute an aggregate amount of JPY 8,964 million (distribution per unit: JPY 1,582) based on
the assumption that excess profit distribution will be paid (JPY 79 million) in addition to
distribution of profit (JPY 8,885 million) to be distributed from the net income for the fiscal
period ending June 30, 2019 (JPY 8,889 million).
With respect to the distribution for the fiscal period ending December 31, 2019, INV expects todistribute an aggregate amount of JPY 9,497 million (distribution per unit: JPY 1,676) based on
the assumption that excess profit distribution will be paid (JPY 79 million) in addition to
distribution of profit (JPY 9,418 million) to be distributed from the net income for the fiscal
period ending December 31, 2019 (JPY 9,421 million).
For the fiscal period ending June 30, 2019 and December 31, 2019, INV expects to record
deferred gain on hedge of the interest rate swap and the currency option as the valuation andconversion adjustments, etc. of JPY 108 million, which is equal to the amount for the fiscal
period ended December 31, 2018. The distribution per unit is calculated based on theassumption that fluctuation of the market value of the interest rate swap does not affect the
distribution per unit.
Distribution per unit may vary due to various factors, including changes of the assets undermanagement, fluctuation of rent income associated with reasons such as change of tenants andoccurrences of unexpected repairs.
INV believes maintaining the stability of cash distributions over the medium term is one of themost important factors in determining the amount of distribution for a given fiscal period, andtherefore, INV has adopted the policy to make distributions in excess of profits in order tostabilize distributions, in cases where dilution of investment units or significant expenses are to
be recorded in connection with, among other things, the acquisition of assets or the raising of
capital, leading to a temporary decrease in distribution per unit, taking into consideration thelevel of distribution per unit assuming such acquisition of assets or capital raising had
contributed for a full fiscal period.
INV may also consider making distributions in excess of profits for the purpose of decreasing
the impact from corporate tax increase arising from different rules in tax and accounting
practices, such as treatment on depreciation of fixed term land lease or asset retirement
obligation.
INV intends to make distribution in excess of profits (JPY 14 per unit for each of the fiscal
periods ending June 30, 2019 and December 31, 2019) in order to cope with the discrepancy
between tax and accounting treatment on depreciation.

Excess profit distribution per unit

Other

June 2019
Fiscal Period
JPY 14

December 2019
Fiscal Period
JPY 14

INV assumes there will be no amendments to applicable laws and regulations, the taxation
system, accounting standards and other regulations, including the proposed amendments to the
Income Tax Act stated below, that would affect the foregoing forecasts.
However, as announced in “Notice concerning Tax Reform Outline for FY 2019 proposed byGoverning Parties” dated December 16, 2018, the governing political party of Japan adopted andmade public on December 14, 2018 their Tax Reform Outline for Fiscal Year 2019, including
the proposal (“Proposal”) to amend the requirement that “J-REIT must not hold 50% or more of
the share or the investment in another corporation”, one of the requirements for special taxation
measures for J-REITs (so-called “tax conduit requirements”) to include investments in TK
interest within the meaning of the investment in another corporation. On February 5, 2019, abill to amend a portion of the Income Tax Act in Japan, including the said Proposal, wassubmitted to the Diet. INV has acquired the TK Interest with Overseas Real Estate as
Underlying Assets (“TK Interest with Overseas Real Estate”) on September 29, 2018 and holds
100% TK interest.
Therefore, there is a possibility that we may fail to satisfy tax conduit
requirements when the Proposal is formally adopted and enacted. To deal with suchcircumstances, INV is currently consulting with Japanese and Cayman regulators regarding achange in the investment structure in order to maintain compliance with the tax conduit
requirements while enjoying the full economic benefits derived from the underlying assets of the
TK interest. Nevertheless, since it is difficult to incorporate the detail and the timing ofinvestment structure change in the assumption, the forecasts of financial results here does notassume such change of investment structure.
21

Item

Assumptions
In addition, INV assumes there will be no unforeseen material changes in general economic
trends, real estate market conditions and other trends and conditions.

(3) Investment Risk
Changes are made as follows to certain items contained in “Part 1 Fund Information, I. Fund Status, 3. Investment Risks”
in the latest securities report for the fiscal period ended June 2018 (from January 1, 2018 to June 30, 2018) (available inJapanese only), filed on September 25, 2018. Underlined parts below indicate major changes or additions, while
deletions are not indicated.
6. Taxation Risks(a) Risks regarding tax conduit requirement(Snip)
While we intend to maintain tax conduit requirements, our current favorable tax treatment, available to J-REITs thatcomply with Japanese tax laws, there is a possibility that we would fail to satisfy such requirements due to the factors
below or other factors. If we are unable to meet such requirements, we will not be able to take advantage of thisfavorable tax treatment. In such a case, we would not be able to deduct our distributions from our taxable income as
expenses. As a result, we would have to pay distributions after our taxable income has been subject to Japanese
corporate income tax at a regular rate, which might have adverse effect on the amount of distributions to be paid tounitholders. However, due to the availability of tax loss carryforwards totaling JPY 22,685 million as of the end of the
31st Fiscal Period (fiscal period ended December 31, 2018), we do not expect to incur any additional corporate tax
liability at least up to the 32nd Fiscal Period (fiscal period ending June 30, 2019) even if we are unable to meet suchrequirements.
(Snip)(e) Risks regarding requirement to restrict J-REITs holding control over another corporation
We understand that investment in anonymous association (tokumei kumiai) under the Commercial Code in Japan is notincluded within “share or the investment in another corporation” under the requirement to restrict J-REITs holding
control over another corporation and that holding the Cayman Hotel TK Interest does not conflict with the requirement of“J-REIT must not hold 50% or more of the share or the investment in another corporation” under the current tax system
in Japan as of the date of this document. On February 5, 2019, a bill to amend a portion of the Income Tax Act inJapan was submitted to the Diet, which includes the proposal (“Proposal”) to amend the requirement that “J-REIT must
not hold 50% or more of the share or the investment in another corporation” to include investments in anonymous
associations within the meaning of the investment in another corporation. Also, since the Proposal does not haveparticular transitional measure, there is a possibility that we may fail to satisfy requirement to restrict J-REITs holding
control over another corporation when the Proposal is formally adopted and enacted, applicable from the 33rd Fiscal
Period (fiscal period ending December 2019), which is the first fiscal period of INV immediately after the anticipatedeffective date (April 1, 2019) of tax law amendment. INV is preparing an investment structure change in order toenjoy the full economic benefits derived from the underlying assets of the TK interest, while maintaining compliancewith the tax conduit requirements, complying with Japanese and Cayman laws, and avoiding excessive economic
burden in the event the Proposal is adopted and enacted. However, in the event (i) such investment structure change
cannot be carried out due to laws and regulations or other factors, (ii) such investment structure change requires a large
amount of costs, or (iii) such investment structure change cannot be carried out in a timely manner, it could have amaterial adverse effect on INV or its unitholders.

223. Financial Statements(1)

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

AssetsCurrent assets:
Cash and bank deposits
Cash and bank deposits in trust
Accounts receivable
Rental receivables
Prepaid expenses
Income taxes receivable
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 and accompanying facilities in trust,at costAccumulated depreciation
Buildings and accompanying facilities intrust, net
Structures in trust, at cost
Accumulated depreciation
Structures in trust, net
Tools, furniture and fixtures in trust, at cost
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property and equipment, net
Intangible assets
Leasehold rights in trust
Total intangible assets
Investments and other assets
Investment securities
Guarantee deposits
Long-term prepaid expenses
Derivatives assets
Other
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

23(Unit: JPY thousand)Fiscal period ended
December 31, 2018(as of December 31, 2018)

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

3,985,335
7,079,268
583,0122,591,368
539,442
172,912434,3260(86)
15,385,582

3,192
(444)
2,748
133,579,099(10,479,742)
123,099,357

3,192
(669)
2,522
144,380,745(12,260,835)
132,119,910

28,918,145

32,567,092(6,237,852)(7,258,920)

22,680,292

25,308,172

225,353(86,498)
138,854
1,395,339(392,369)
1,002,969
173,298,062
320,222,285

228,964(92,586)
136,377
1,690,363(504,581)
1,185,781
203,881,464
362,634,229

16,712,637
16,712,637

20,015,700
20,015,700

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

54,640,213
1,700,670
708,191
216,555
22,66757,288,298
439,938,228

24,94524,945374,512,988

38,98538,985455,362,796

Fiscal period ended
June 30, 2018(as of June 30, 2018)
Liabilities
Current liabilities:
Accounts payable
Short-term loans payable
Current portion of long-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Deposits received
Total current liabilities
Non-current liabilities:
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits in trust
Derivatives liabilities
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity:
Unitholders’ capital
Surplus:Capital surplus
Deduction of capital surplus
Allowance for temporary differences
adjustment
Other deduction of capital surplus
Total deduction of capital surplus
Capital surplus (net)(Unit: JPY thousand)Fiscal period ended
December 31, 2018(as of December 31, 2018)598,870
2,000,000
46,663,000
131,783
195,481605
14,902551,506
21,697

431,891
1,099,000
54,745,000
651,992
200,203605
571,668
134,085

50,177,846

57,834,445

2,000,000
138,752,000
2,026,400
1,586
31,8914,000,000
170,029,000
2,009,816
92,525
32,107

142,811,878

176,163,449

192,989,724

233,997,895

168,798,455

211,092,540

6,264,432

6,264,432*2 (46,329)*2 (46,329)(1,194,818)*3 (5,194,798)(1,241,148)(5,241,128)

5,023,283

1,023,303

Retained earnings

7,610,548

9,140,372

Total surplus

12,633,832

10,163,675

181,432,288

221,256,215

90,975

108,684

90,975

108,684

Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets*1

Total liabilities and net assets

181,523,263
374,512,988

24*1

221,364,900
455,362,796

(2)Statement of Income and Retained Earnings

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
Operating revenue
Rental revenue―real estate
Gain on sale of real estate properties
Dividend income*1 11,122,481*2 1,249,645
732,714

Total operating revenue(Unit: JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)*1

13,104,841

Operating expenses
Property related expenses
Asset management fees
Directors’ compensation
Asset custody fees
Administrative service fees
Provision of allowance for doubtful accounts
Other

*1

Total operating expenses
Operating income
Non-operating income
Interest income
Foreign exchange gains
Interest on tax refund
Other
Total non-operating income
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
Total non-operating expenses

4,136,619
275,000
4,800
18,162
39,697
2
197,039

13,604,224
846,780
14,451,005*14,450,676
275,000
5,200
18,64552,60786
134,032

4,671,320

4,936,248

8,433,520

9,514,756

78
3,086
1,181

82
34,468
72
906

4,347

35,528479,456
1,216

555,811
8,490

379

2,625

234,19764

407,683
186,997
3,999

715,314

1,165,608

Ordinary income

7,722,553

8,384,676

Income before income taxes

7,722,553

8,384,676

605

605

Income taxes
Total income taxes
Net income

605

605

7,721,948

8,384,071

Retained earnings (deficit) brought forward(111,399)

756,300

Unappropriated retained earnings

7,610,548

9,140,372

25

(3)

Statement of Changes in Net Assets

Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Unitholders’capitalDeduction of capital surplus
Capital surplus

Balance at the beginningof the period
Changes during theperiodDistributions fromsurplus
Other excess profit
distribution

168,798,455

Allowance fortemporarydifferences
adjustment

6,264,432(46,329)

Other
deduction ofcapital surplus

Total
deduction ofcapital surplus

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

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

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

Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiodTotalunitholders’equityDeferred
gains or losses
on hedges

Totalvaluation andtranslation
adjustments

113,592

113,592

Total
net assets

7,212,580

12,408,419

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

7,721,948

7,721,948

7,721,948

Other excess profit
distribution
Net income

Total
surplus

Valuation and translation adjustments

7,721,948

181,320,466(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

26

Fiscal period ended December 31, 2018 (from July 1, 2017 to December 31, 2018)(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Unitholders’capitalDeduction of capital surplus
Capital surplus

Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplusAcquisition of own
investment units
Retirement of own
investment units

168,798,455

Allowance fortemporarydifferences
adjustment

6,264,432(46,329)

Other
deduction ofcapital surplus

Total
deduction ofcapital surplus

Capital surplus(net)(1,194,818)(1,241,148)

5,023,283(3,999,980)(3,999,980)(3,999,980)

42,294,085

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod42,294,085－－(3,999,980)(3,999,980)(3,999,980)

211,092,540

6,264,432(46,329)(5,194,798)(5,241,128)

1,023,303

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplus7,610,548

Total
surplusOwn investment
units

12,633,832－(6,854,248)

Retirement of own
investment units
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod181,432,288

42,294,085(6,854,248)(6,854,248)

Acquisition of own
investment units

Net income

Total
unitholders’equity(3,999,980)(3,999,980)(3,999,980)

3,999,980－

8,384,071

8,384,071

8,384,071

1,529,823(2,470,157)－

39,823,927

9,140,372

10,163,675－

221,256,215

27

Valuation and translation adjustments

Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units

Deferred
gains or losses
on hedges

Totalvaluation andtranslation
adjustments

90,97590,975Total
net assets

181,523,263

42,294,085

Distributions fromsurplus(6,854,248)

Acquisition of own
investment units(3,999,980)

Retirement of own
investment units－

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod8,384,071
17,70917,70917,70917,70917,70939,841,636

108,684

108,684

221,364,900

28

(4) Statement of Cash Distribution(Unit: JPY)
Fiscal period ended June 30, 2018(from January 1, 2018 to June 30, 2018)

Fiscal period ended December 31, 2018(from July 1, 2018 to December 31, 2018)

7,610,548,999

9,140,372,069

Allowance for temporary
differences adjustment-

85,002,600

Other deduction of capital surplus-

204,006,240

6,854,248,830

9,537,291,720(1,430)(1,683)

Of which, distributions ofearnings(Distributions of earnings perunit)
Of which, allowance fortemporary differences adjustment(Excess profit distribution perunit (Allowance for temporary
differences adjustment))
Of which, other excess profit
distribution(Excess profit distribution perunit (Other excess profit
distribution))

6,854,248,830

9,248,282,880(1,430)(1,632)-85,002,600

-

(15)

-

204,006,240

-

(36)

IV Retained earnings (deficit) carriedforward756,300,169(107,910,811)

I

Unappropriated retained earnings

II

Excess profit distribution

III Distributions(Distribution per unit)

29Calculation method of distribution
amountIn accordance with the distribution
policy set forth in Article 17, Paragraph
1 of the Articles of Incorporation of
INV, the distribution amount shall be theamount which does not exceed theamount of profits but exceeds 90% of
the distributable profit as defined in
Article 67-15 of the Special Taxation
Measures Act. However, in the eventthat any tax losses arise, or if no profits
have been recorded for tax purposes due
to tax losses carried forward, thedistribution amount may be as
reasonably
determinedby
INV.
Pursuant to this policy, INV determinedthe distribution 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 of Incorporation.

30

As shown above, the distribution perunit for the Reporting Period is JPY
1,683.
With respect to profit distributions (notincluding 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 per unit lessthan JPY 1, aiming to include themaximum amount of profit distributions
in deductible expenses in accordancewith Article 67-15, Paragraph 1 of the
Act on Special Taxation Measures (ActNo. 26, 1957).
As a result, thedistribution of earnings per unit (notincluding Excess Profit Distribution perunit) is JPY 1,632.
In addition, in accordance with the
distribution policy as set forth in the
Articles of Incorporation, INV makes
distributions in excess of earnings of theamount that it determines (the “Excess
Profit Distribution”).
For theReporting Period, INV decided to make
Excess Profit Distribution of JPY 85
million in order to cope with thediscrepancy between tax and accounting
treatment, making Excess Profit
Distribution from the allowance fortemporary differences adjustment of JPY
15 per unit. INV decided to also make
Excess Profit Distribution of JPY 204
million as refund of investment in orderto stabilize distributions, making other
Excess Profit Distribution of JPY 36 per
unit.
Under the Reporting Period, deferredgain on hedge of the interest rate swapof JPY 108 million has arisen.
Deferred gain on hedge of the interest
rate swap is included in profit as definedin Article 136, Paragraph 1 of theInvestment Trust and Investment
Corporation Act, and INV has decided to
distribute almost all of the profit as
defined in Article 136, Paragraph 1 ofthe Investment Trust and Investment
Corporation Act. As a result, retained
deficit carried forward of JPY 107
million is recorded.

(5)Statement of Cash Flows
Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Investment unit issuance costs
Amortization of investment corporation bond issuance costs
Loan-related costs
Interest income
Interest expenses
Foreign exchange losses (gains)
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 and equipment 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 in trust
Purchases of leasehold rights in trust
Purchase of investment securities
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
Payments of TK investment
Proceeds from withdrawal of TK investment
Other, net
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Borrowing related expenses
Payments for acquisition of own investment units
Payment of distributions of earnings
Payment of other distributions in excess of retained 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

31(Unit: JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

7,722,553
2,772,510
379
234,197(78)
480,6720
158,132(149,624)
661,287
39,752(32,819)
49,627(75,177)(49,246)(47,348)
9,181,866
20,177
20,966,865
78(483,261)(605)
20,483,077

8,384,676
3,039,033
186,997
2,625
407,683(82)
564,302(7,261)(3)(764,772)(23,292)(434,326)(32,970)(14,902)(49,755)(2,611)
20,161(75,818)
9,283
11,208,966
82(553,985)(605)
10,654,458(20,847,991)(1,927)(320,542)
132,593(30,000)
47,201(21,020,665)(45,485,560)(3,421,194)(64,862)
49,032(19,105)(37,534,886)
751,060(12,784)(85,738,300)(1,068,000)
1,500,000
1,977,436(40,494)(7,280,040)(172,554)(5,083,652)(5,621,240)
20,693,794*1 15,072,553

1,099,000(2,000,000)
68,338,000(28,979,000)
1,980,352(804,736)(3,999,980)(6,664,830)
42,107,087
71,075,892(4,007,949)
15,072,553*1 11,064,604

(6)Notes to Concerning Going Concerns Assumption
Not applicable(7)

Notes to Concerning Significant Accounting Policies
1. Evaluation standards and evaluation method of assets
Other securitiesThose with no fair value
Cost method through moving-average method is used.
2. Method of depreciation of non-current assets(a) Property and equipment (including assets in trust)The straight-line method is used.
The useful lives of major property, plant and equipment are as follows.
Tools, furniture and fixtures
4-8 years
Buildings in trust
5-67 years
Buildings and accompanying facilities in trust
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 rights in trust (fixed-term land lease for business purposes), thestraight-line method based on the lease period is used.
(c) Long-term prepaid expenses
The straight-line method is used.
3. Accounting treatment of deferred assets(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.
4. Method of calculating allowances
Allowance for doubtful accounts
To reserve for losses on doubtful accounts, allowances are provided for normal receivables using a rate determinedbased on past bad debt experiences, and specific allowances are provided for accounts with a possibility of default
based on the estimated amounts considered to be uncollectible by considering the collectability of accounts on an
individual basis.
5. Conversion of assets and liabilities in foreign currency into Japanese yen
Receivables and payables denominated in foreign currencies are translated into yen at the spot exchange rate at the endof the fiscal period date, and differences arising from the translation are treated as a profit or loss.
6. Revenue and expense recognition
Accounting treatment of property taxes and other taxes
With respect to property taxes, city planning taxes and depreciable asset taxes, of the tax amount assessed anddetermined, the amount corresponding 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 amount equivalent to property taxes is capitalized
as part of the acquisition cost of the real estate instead of being charged as expense. The amount equivalent toproperty taxes that was included as part of the acquisition of real estate during the fiscal period ended December 31,
2018 is JPY 54,754 thousand.
32

7. Method of hedge accounting(a) Method of hedge accounting
Deferred hedge accounting is used.
(b) Hedging instrument and hedged item
(Borrowings)
Hedging instrument: interest rate swap
Hedged item: interest on borrowings(Scheduled foreign currency-denominated transactions)
Hedging instrument: Foreign exchange option
Hedged item: Scheduled foreign currency-denominated transaction(c) Hedge policy
INV enters into derivative transactions for the purpose of hedging against the risks set forth in INV’s Articles ofIncorporation in accordance with its risk management policy.
(d) Method of evaluating hedge effectivenessHedge effectiveness is evaluated by comparing the cumulative amount of changes in cash flows of the hedging
instrument and the cumulative amount of changes in cash flows of the hedged item and verifying the difference inthe amounts of change of both the hedged item and the hedging instrument.
8. Cash and cash equivalents as stated in Statement of Cash Flows
Cash and cash equivalents as stated in the Statement of Cash Flows consist of cash on hand and cash in trust, floating
deposits, deposits in trust and short-term investments that are very liquid and realizable with a maturity of threemonths or less when purchased and that are not subject to significant risks of changes in value.
9. Other significant matters which constitute the basis for preparation of financial statements(i) Accounting treatment of trust beneficiary interests in real estate
As to trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as all
income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheets and income
statement accounts. Of such items, the following significant trust assets and liabilities are shown separately on thebalance sheet.
(a) Cash and bank deposits in trust(b) Buildings in trust
Buildings and accompanying facilities in trust
Structures in trust
Tools, furniture and fixtures in trust
Land in trust(c) Leasehold rights in trust(d) Tenant leasehold and security deposits in trust(ii) Accounting treatment of consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.

33

(Additional Information)(Notes Related to Provision and Reversal of Allowance for Temporary Differences Adjustment)
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
Not applicable
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
The following provision was made in the statement of cash distribution:
1. Reasons, related assets and amounts

Related assets, etc.

ReasonLeasehold rights in trust

Depreciation of leasehold rights(Unit: JPY thousand)Allowance fortemporary differences
adjustment
85,002

2. Method of reversal
Related assets, etc.

Method of reversal

Leasehold rights in trust(8)

The corresponding amount is scheduled to be reversed upon sale, etc.

Notes to the Financial Statements(Notes to the Balance Sheet)*1. Minimum net assets as required by Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations(Unit: JPY thousand)Fiscal period ended
Fiscal period ended
December 31, 2018
June 30, 2018(as of December 31, 2018)(as of June 30, 2018)
50,00050,000*2. Allowance for temporary differences adjustment
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

Depreciationof leasehold
rights

Total

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

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

34

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
1. Reasons, related assets and amounts

Relatedassets, etc.

ReasonLeaseholdrights in trust

Depreciationof leasehold
rights

Total

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

2. Method of reversal(1) Leasehold rights in trust
The corresponding amount is scheduled to be reversed upon sale, etc. of the relevant property.
*3. Status of retirement of own investment units
Fiscal period ended

Fiscal period ended

June 30, 2018(as of June 30, 2018)
Total number of units retired-

December 31, 2018(as of December 31, 2018)
81,341 units

Total amount of retirement-

JPY 3,999,980 thousand(Notes to Statement of Income and Retained Earnings)*1. Real estate rental revenues and expenses
Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
A.

(Unit: JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Real estate rental revenues

Rental revenue-real estate
Rent/common area charges (Note)

10,769,777

Other revenues

13,258,939

352,704

345,284

11,122,481

13,604,224

Maintenance costs

665,093

667,393

Taxes and public dues

470,692

547,232

Non-life insurance expenses

12,845

13,8172,772,510

3,039,033

215,476

183,199

Total

4,136,619

4,450,676

C.

6,985,862

9,153,548

3,789,484

4,953,767

Total

B.

Real estate rental expenses

Property related expenses

Depreciation expenses
Other expenses

Real estate rental income (A-B)(Note) Of which, revenue from variable hotel rents35*2. Gain on sales of properties
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
Harmonie
Ochanomizu
Proceeds from sales ofproperties
Cost of sales ofproperties
Other expenses onsales of properties
Gain on sales ofproperties

Growth Maison
Ikebukuro

1,606,646

1,059,850

734,817

1,357,090

1,346,372

743,659

623,867

1,125,668

38,843

26,625

20,81723,268221,430

289,565

90,132

208,153

Ohki Aoba
Building
Proceeds from sales ofproperties
Cost of sales ofproperties
Other expenses onsales of properties
Gain on sales ofproperties(Unit: JPY thousand)
Cross Square
NAKANO

Capital Heights
Kagurazaka

Lexington Plaza
Nishi-Gotanda

728,446

5,180,003

709,604

4,632,693

11,439114,348

7,402

432,961

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Not applicable(Notes to Statement of Changes in Net Assets)
Number of issuable investment units authorized and number of investment units issued and outstanding
Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Number of issuable investment units

10,000,000 units

10,000,000 units

Number of investment units issued and outstanding

4,793,181 units

5,666,840 units(Notes to Statement of Cash Flows)*1. Relationship between cash and cash equivalents in statement of cash flows and amounts in accompanying balance sheet
is as follows:

Cash and bank deposits

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
8,505,792(Unit: JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
3,985,335

Cash and bank deposits in trust

6,566,761

7,079,268

Cash and cash equivalents

15,072,553

11,064,60436

(Notes Related to Lease Transactions)Operating lease transactions (as lessee)
Unexpired lease fees
Fiscal period ended
June 30, 2018(as of June 30, 2018)
312,959(Unit: JPY thousand)Fiscal period ended
December 31, 2018(as of December 31, 2018)
312,959

Due after one year

10,090,556

9,934,076

Total

10,403,515

10,247,035

Fiscal period ended
June 30, 2018(as of June 30, 2018)
8,623,053(Unit: JPY thousand)Fiscal period ended
December 31, 2018(as of December 31, 2018)
9,754,753

Due after one year

58,058,083

63,134,893

Total

66,681,137

72,889,647

Due within one year

Operating lease transactions (as lessor)
Unexpired lease fees

Due within one year

(Notes Related to Financial Instruments)
1.

Status of financial instruments(1) Policy for financial instruments
INV principally conducts its operations through investments in real estate and other specified assets to seek to ensurestable income in the medium to long term.
The policy for raising funds is principally through issuing new investment units, investment corporation bonds, etc. orborrowing loans.
Derivative transactions are to be entered into for the purpose of hedging against the risks of future interest rate
fluctuations, exchange rate fluctuations, 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
The funds raised through borrowings and issuing investment corporation bonds are mainly used to acquire realestate properties or trust beneficiary interest in real estate (including related acquisition costs) and for therefinancing of existing loans. Liquidity risks relating to loans are managed by the finance department of the AssetManager by preparing and updating plans for funds, and monitoring the financial covenants set forth in loan
agreements.
(3) Supplemental information regarding market value, etc. for financial 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 reasonable estimate. Since certain assumptions, etc. are used inestimating the fair value, different assumptions, etc. may result in the variance of such value.

37

2.

Estimated fair value of financial instruments

Fiscal period ended June 30, 2018 (as of June 30, 2018)
Book value, fair value and the difference between values as of June 30, 2018 are as follows.
(Unit: JPY thousand)Book Value

Fair Value

Difference(1) Cash and bank deposits

8,505,792

8,505,792-(2) Cash and bank deposits in trust

6,566,761

6,566,761-

Total assets

15,072,553

15,072,553-(3) Short-term loans payable(2,000,000)(2,000,000)-(4) Current portion of long-term loans payable(46,663,000)(46,663,000)-(5) Investment corporation bonds(2,000,000)(1,998,500)

1,500(138,752,000)(138,752,000)-(189,415,000)(189,413,500)

1,500

90,97590,975-(6) Long-term loans payable
Total liabilities(7) Derivatives

Fiscal period ended December 31, 2018 (as of December 31, 2018)
Book value, fair value and the difference between values as of December 31, 2018 are as follows.
(Unit: JPY thousand)Book Value

Fair Value

Difference(1) Cash and bank deposits

3,985,335

3,985,335-(2) Cash and bank deposits in trust

7,079,268

7,079,268-

Total assets

11,064,604

11,064,604-(3) Short-term loans payable(1,099,000)(1,099,000)-(4) Current portion of long-term loans payable(54,745,000)(54,745,000)-(5) Investment corporation bonds(4,000,000)(3,996,500)

3,500(170,029,000)(170,029,000)-(229,873,000)(229,869,500)

3,500

124,029

124,029-(6) Long-term loans payable
Total liabilities(7) Derivatives(Note 1) Items recorded in the Liabilities Section are shown in parenthesis.
(Note 2) Receivables and payables arising from derivative transactions are recorded in net amounts, and if the total net
amount is a negative amount, such amount is shown in parenthesis.

38

(Note 1) Methods to calculate fair values of financial instruments(1) Cash and bank deposits(2) Cash and bank deposits in trust(3) Short-term loans payable
Due to the short maturities, the book value of these instruments is deemed a reasonable approximation of the fairvalue, and therefore, the book value is used as the fair value.
(4) Current portion of long-term loans payable (6) Long-term loans payable
Long-term loan with floating interest rates reflecting changes in market rates within a short-term period arestated at their book value as their book value approximate their fair value.
(5) Investment corporation bonds
Fair value is calculated using a method based on market price.
(7) Derivatives
Please refer to the “Notes Related to Derivative Transactions” below.

(Note 2) Financial instruments for which fair value is extremely difficult to value

Tenant leasehold and security deposits in trust

Fiscal period ended
June 30, 2018(as of June 30, 2018)
2,026,400(Unit: JPY thousand)Fiscal period ended
December 31, 2018(as of December 31, 2018)
2,009,816

17,856,387

54,640,213

Investment securities

Tenant leasehold and security deposits in trust have no observable market price, and it is impracticable to reasonably
estimate their future cash flows because the repayment dates of those deposits and the timing of the lessee’s exit fromthe property are not certain. Thus, their fair value is not disclosed.
Investment securities (preferred equity interest and TK interest) has no observable market price, and it is impracticable
to assess its fair value. Thus, its fair value is not disclosed.
(Note 3) Remaining schedule of monetary claims after the closing date of the fiscal period
Fiscal period ended June 30, 2018 (as of June 30, 2018)

Cash and bank deposits(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
8,505,792-

Cash and bank deposits in trust

6,566,761

-

-

-

-

-

Total

15,072,553

-

-

-

-

-

Fiscal period ended December 31, 2018 (as of December 31, 2018)

Cash and bank deposits(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
3,985,335-

Cash and bank deposits in trust

7,079,268

-

-

-

-

-

Total

11,064,604

-

-

-

-

-

39

(Note 4) Repayment schedule of investment corporation bonds, long-term loans payable and other interest-bearing debts
after the closing date of the fiscal period
Fiscal period ended June 30, 2018 (as of June 30, 2018)

Short-term loans payable(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
2,000,000-

Current portion of long-termloans payable

46,663,000

-

-

-

-

-

Investment corporation bonds

-

-

-

-

1,000,000

1,000,000

Long-term loans payable-

51,744,000

57,380,000

15,638,000

6,865,000

7,125,000

48,663,000

51,744,000

57,380,000

15,638,000

7,865,000

8,125,000

Total

Fiscal period ended December 31, 2018 (as of December 31, 2018)

Short-term loans payable(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
1,099,000-

Current portion of long-termloans payable

54,745,000

-

-

-

-

-

Investment corporation bonds

-

-

-

-

3,000,000

1,000,000

Long-term loans payable-

50,130,000

55,601,000

32,895,000

27,843,000

3,560,000

55,844,000

50,130,000

55,601,000

32,895,000

30,843,000

4,560,000

Total(Notes Related to Investment Securities)
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
Other securities
Preferred equity interest (JPY 17,856,387 thousand in the balance sheet) has no observable market price, and it isimpracticable to assess its fair value. Thus, its fair value is not disclosed.
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Other securities
Preferred equity interest (JPY 17,856,387 thousand in the balance sheet) and TK interest (JPY 36,783,826 thousand in thebalance sheet) have no observable market price, and it is impracticable to assess its fair value.
not disclosed.
(Notes Related to Derivative Transactions)1.

Derivative transactions to which hedge accounting is not applied
Fiscal period ended June 30, 2018 (as of June 30, 2018)
Not applicable
Fiscal period ended December 31, 2018 (as of December 31, 2018)
Not applicable40

Thus, their fair values are

2.

Derivative transactions to which hedge accounting is applied
Fiscal period ended June 30, 2018 (as of June 30, 2018)
The contract amount as of the closing date under each hedge-accounting method and the amount equivalent to thenotional principal prescribed in the contracts are as shown below.
(Unit: JPY thousand)
Method of hedge
accounting

Derivativetransaction type, etc.

Primary
hedged item

Contract amount, etc. (*1)
Fair value (*2)

Amount due
after one year

Long-term
Interest rate swap
loans
100,619,000
67,390,000
90,975
Receive floating
payablerate/pay fixed rate
(Note 1) The contract amount, etc. is stated based on a notional principal.
(Note 2) The fair value is estimated based on the price, etc. presented by the correspondent financial institutions.
Principle
accounting method

Fiscal period ended December 31, 2018 (as of December 31, 2018)
The contract amount as of the closing date under each hedge-accounting method and the amount equivalent to thenotional principal prescribed in the contracts are as shown below.
(Unit: JPY thousand)
Method of hedge
accounting

Principle
accounting
methodDerivativetransaction type, etc.

Primary hedged
itemInterest rate swap
Receive floating
rate/pay fixed rate

Borrowings

Currency option
transaction
USD/Call(Option fees)
Currency option
transaction
USD/Put

Scheduledforeigncurrency-denominatedtransactions(Option fees)

Contract amount, etc. (*1)
Amount due
after one year

Fair value (*2)

71,640,00
034,729,000

48,781

4,444,000

1,903,000(124,943)(53,157)

4,444,000

1,903,000(140,288)(88,792)(87,318)(162,566)(Note 1) The contract amount, etc. for interest rate swap are stated based on a notional principal.
(Note 2) Estimation method for fair value
Interest rate swap
Estimated based on the price, etc. presented by the correspondent financial institutions.
Currency option
Indicates fair values of option fees, etc. presented by the correspondent financial
institutions.
(Notes Related to Retirements Payments)
Not applicable(Notes Related to Asset Retirement Obligations)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 the period
The amount of the asset retirement obligations has been calculated by estimating the period of use at 43 years, basedon the remaining period until the expiration of the fixed-term land lease agreement, and by using a discount rate of
1.342%.
41

3.

Increase/decrease in the total amount of asset retirement obligations
Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
31,680210
31,891

Balance at the beginning of the period
Increase due to the acquisition of properties
Accretion expense
Balance at the end of the period(Unit: JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
31,891
215
32,107(Notes Related to Segment and Related Information)
I. Segment Information
Disclosure is omitted because the real estate investment business is INV’s sole business and it has no reportable segments.
II. Related Information
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted forover 90% of the operating revenue on the statement of income.
2. Information about each geographic area
(1) Net sales
Disclosure is omitted because net sales to external customers in Japan accounted for over 90% of the operating
revenue on the statement of income.
(2) Property and equipment
Disclosure is omitted because the amount of property and equipment located in Japan accounted for over 90% of
the amount of property and equipment on the balance sheet.
3. Information about each major customer(Unit: JPY thousand)Name of customer

Operating revenues
5,324,738

MyStays Hotel Management Co., Ltd.

Related segment
Real Estate Investment

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted forover 90% of the operating revenue on the statement of income.
2. Information about each geographic area
(1) Net sales
Disclosure is omitted because net sales to external customers in Japan accounted for over 90% of the operating
revenue on the statement of income.
(2) Property and equipment
Disclosure is omitted because the amount of property and equipment located in Japan accounted for over 90% of
the amount of property and equipment on the balance sheet.
3. Information about each major customer(Unit: JPY thousand)Name of customer

Operating revenues
7,297,799

MyStays Hotel Management Co., Ltd.

42

Related segment
Real Estate Investment

43

(Notes Related to Rental Properties)
INV owns residential properties and hotels as core assets principally in the Tokyo area and major regional cities with an aim
to establish a portfolio focusing on both stability and growth potential. The book value changed during the period andbalance at the end of the period are as follows.

Residences

Book value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

OfficesBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Commercial facilities

Book value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

HotelsBook value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Total

Book value

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

44

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

89,949,664

86,569,109(3,380,554)(660,828)

86,569,109

85,908,280

100,387,000

102,044,000

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

-

-

-

-

-

4,957,292

4,912,468(44,824)(45,728)

4,912,468

4,866,739

6,170,000

6,170,000

226,328,017

245,453,345

19,125,328

46,421,563

245,453,345

291,874,909

304,985,000

354,366,000

327,709,905

336,934,923

9,225,018

45,715,006

336,934,923

382,649,930

411,542,000

462,580,000

(Note 1) Book value is the figure calculated by subtracting 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 acquisition of hotels and capital
expenditures related to construction work, and the major factors for the decrease were sale of residential
properties and office properties, and depreciation. The major factors for the increase for the Reporting Period
were acquisition of hotels and construction work related to capital expenditures, and the major factor for thedecrease was depreciation.
(Note 3) The fair value as of the end of the reporting period is determined 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., Tanizawa Sogo Appraisal Co., Ltd., and Daiwa Real Estate Appraisal Co., Ltd.
For information related to profits and losses from rental properties, please refer to “Notes to Statement of Income andRetained Earnings.”

45

(Notes Related to Tax Accounting)
1. Significant components of deferred tax assets and liabilities(Unit: JPY thousand)Fiscal period ended
June 30, 2018

Fiscal period ended
December 31, 2018

(Deferred tax assets)
Enterprise tax payable

1,325

Allowance for doubtful accounts

1,294

28

27

561,751

549,474

Land (merger)

1,374,216

1,367,722

Loss carried forward (Note)

7,200,289

7,153,149

Asset retirement obligations

10,122

10,142

Buildings and other (merger)

Depreciation of fixed-term leasehold rights

116,528

153,295

9,264,262

9,235,105-(7,153,149)-(2,037,871)

Subtotal(9,225,589)(9,191,020)

Total

38,67344,084(Deferred tax liabilities)
Removal expenses included in asset retirement
obligations
Deferred gains or losses on hedges

9,797

9,751

28,87534,333

Total

38,67344,084--

Subtotal
Valuation allowance for tax loss carried forward
Valuation allowance for the total of deductible
temporary differences, etc.

(Deferred tax assets, net)

(Note) The amounts of tax loss carried forward and the deferred tax assets are indicated by carry-forward period.
Fiscal period ended December 31, 2018 (as of December 31, 2018)
Due within Due after one Due after two Due after three Due after four
one yearto two years to three years to four years to five years
Tax loss carried forward(a)Valuation allowance

5,164,678

1,317,493-

349,185

321,791(5,164,678)(1,317,493)-(349,185)(321,791)---

Deferred tax assets(a) Tax loss carried forward is multiplied by statutory tax rate.

(Unit: JPY thousand)Due after
Total
five years- 7,153,149- (7,153,149)--

2. Significant difference between statutory tax rate and the effective tax rate
(Unit: %)Fiscal period ended
June 30, 2018

Fiscal period ended
December 31, 2018

Statutory tax rate

31.74

31.51

Deductible cash distributions(22.95)(31.84)

Changes in valuation allowance(8.79)(0.35)

Others0.01

0.69

Effective tax rate

0.01

0.01

46

(Notes Related to Equity-Method Income)Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
Amount of investment in affiliates
JPY 17,856,387,000
Amount of investment when accounted for by the equity method
JPY 17,845,800,000
Amount of investment profit when accounted for by the equity method JPY 722,127,000
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Amount of investment in affiliates
JPY 54,640,213,000
Amount of investment when accounted for by the equity method
JPY 54,640,213,000
Amount of investment profit when accounted for by the equity method JPY 846,780,000(Notes Related to Transactions with Related Parties)
1.

Transactions with Parent Company and Major Unitholders
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)

Classification

Name

Address

Ginga Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

HL Investments
Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo

Statedcapital(JPY
million)Type oftransaction

Transaction
amount(JPY
thousand)(Note 1)

Account

Balance atthe end of
the period(JPY
thousand)(Note 1)-

Purchase of
trust
Seller oftrust
beneficiary
beneficiary interests ininterests in real estate
real estate (Note 2)(Note 4)

5,326,000---

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

2,772,000---

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

2,723,000---

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

1,604,000

-

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

7,325,000--

Percentage
Relationshipof votingBusiness orrightsCommon Businessoccupation
owned
board
relation(%)
membership

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness--(Note 3)

MonzaTokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)
Interested
party of the
Asset
Manager(Note 1)
(Note 2)

Suisei Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness--

Calvis Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Investment
0.1 managementbusiness

Naqua Hotel &Resorts
Management
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

10

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

576,941

Accounts
receivable

221,582

MyStays HotelManagement
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

100

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

5,324,738

Accounts
receivable

1,387,974

Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regarding transactions withsponsor related parties.

47

(Note 3)(Note 4)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. haveno 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 partnershipinvestment or investment through funds that are managed by affiliates of FIG (an affiliate of Calliope, which is a parent company of theAsset 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 (asubsidiary 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 HotelManagement Co., Ltd. have received an anonymous partnership investment or investment through funds 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 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.
The purchase of trust beneficiary interests pertains to the following properties. The transaction amount is the purchase 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.

Purchase Price(JPY thousand)

Property Number

Name of Property

Counterparty

D54

Hotel MyStays Yokohama Kannai

Ginga Tokutei Mokuteki Kaisha

5,326,000

D55

Art Hotel Joetsu

HL Investments Tokutei Mokuteki Kaisha

2,772,000

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

19,750,000

48

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Classification

Name

Address

Aki Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Raetia Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

HL Investments
2 Tokutei
Minato-ku,
TokyoInterested Mokuteki Kaisha
party of the(Note 3)
Asset
ManagerStatedcapital(JPY
million)Type oftransaction

Transaction
amount(JPY
thousand)(Note 1)

Account

Balance atthe end of
the period(JPY
thousand)(Note 1)-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

20,691,000

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

16,731,000

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

5,286,000

-

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

5,039,000--

141,119

Percentage
Relationshipof votingBusiness orrightsCommon Businessoccupation
owned
board
relation(%)
membership

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness---

Dogo Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Investment
0.1 managementbusiness

Naqua Hotel &Resorts
Management
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

10

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

1,112,683

Accounts
receivable

MyStays HotelManagement
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

100

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

7,297,799

Accounts
2,264,664
receivable(Note 1)
(Note 2)
(Note 3)(Note 4)

Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regarding transactions withsponsor related parties.
Aki Tokutei Mokuteki Kaisha, Raetia Tokutei Mokuteki Kaisha, HL Investments 2 Tokutei Mokuteki Kaisha, Dogo Tokutei Mokuteki
Kaisha and Naqua Hotel & Resorts Management Co., Ltd. and MyStays Hotel Management Co., Ltd. have no capital relationship to bedisclosed with the Asset Manager. However, these Tokutei Mokuteki Kaisha or the tenant and operator have 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). Accordingly, INV treats Aki Tokutei
Mokuteki Kaisha, Raetia Tokutei Mokuteki Kaisha, HL Investments 2 Tokutei Mokuteki Kaisha, Dogo Tokutei Mokuteki Kaisha andNaqua Hotel & Resorts Management Co., Ltd. and MyStays Hotel Management Co., Ltd. as the equivalent to interested parties.
The purchase of trust beneficiary interests pertains to the following properties. The transaction amount is the purchase 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.

Purchase Price(JPY thousand)

Property Number

Name of Property

Counterparty

D60

Hotel MyStays Premier Akasaka

Aki Tokutei Mokuteki Kaisha

20,691,000

D61

Hotel MyStays Premier Sapporo Park

Raetia Tokutei Mokuteki Kaisha

16,731,000

D62

Hotel MyStays Ueno East

HL Investments 2 Tokutei Mokuteki
Kaisha5,286,000

D63

Hotel MyStays Midosuji Honmachi

Dogo Tokutei Mokuteki Kaisha

5,039,000

Total

47,747,000

49

2.

Transactions with Affiliates
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)
Not applicable
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)

Classification

Name

Address

BalanceatTransaction
Investment
the endRelation-s
amountamountInvest-mof
hip with Type of(JPY(JPY Business or
Account
ent ratiotherelated transaction million)
million) occupation(%)
periodparties(Note 1)
(Note 1)(JPY
(Note 2)
(Note 2)
million)Seven
Investment (InvestInvest-me
Grand
TK
Mile
Manage-m ment
nt in TK
Cayman,invest-me
36,78336,783
ResortAffiliate
ent
ratio)(Note 2)
Caymannt
Holdings
business
100.0(Note 3)Islands
Ltd.
(Note 1) Investment amount in USD is converted to yen using the exchange rate fixed by foreign exchange forward (USD
1=JPY 110.45 (rounded down to two decimal places)).
(Note 2) INV initially funded USD 339,836 thousand (JPY 37,534 million). However, based on the closing settlement, theCayman SPC did not need as much capital as anticipated. Therefore, INV received a refund of the TK investmentin the amount of USD 6.8 million on December 10, 2018 (Cayman Island local time) from the Cayman SPC. Thus,
the amounts indicated are those after the partial refund.
(Note 3) Investment was made based on a TK agreement.
(Note 4) The TK is a TK with Seven Mile Resort Holdings Ltd. as an operator.
3.

Transactions with Companies under Common Control
None for both the fiscal period ended June 30, 2018 and the fiscal period ended December 31, 2018.

4.

Transactions with Directors and Major Unitholders
Fiscal period ended June 30, 2018 (from January 1, 2018 to June 30, 2018)

Classification

Name

Business or occupation

Details of transaction

rightsDirectors
relatives

Naoki
FukudaAccount

the period(JPY
thousand)(Note 3)(Note 3)

Payment of asset

INV and President &CEO of Consonant(JPY
thousand)(%)

and closethe end ofamountvotingExecutive Director of

Balance atTransaction

Ratio ofmanagement fees to-Investment

Consonant Investment

308,849

Management Co., Ltd.

Management Co., Ltd.

Accruedexpenses

149,291(Note 1)
Payment ofadministrative agency

Same asSame as

above

above

fees for organizational
Same as above-

management to600

Consonant Investment

Accruedexpenses

324

Management Co., Ltd.
(Note 2)
(Note 1)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of
INV.

(Note 2)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in “Administrative Agency
Agreement for Organizational Management,” entered into by and between INV and the Asset Manager.

(Note 3)

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

50

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)

Classification

Name

Business or occupation

Details of transaction

rightsNaoki
Fukudarelatives

Account

the period(JPY
thousand)(Note 3)(Note 3)

Payment of asset

INV and President &CEO of Consonant(JPY
thousand)

Executive Director of
Directors

the end ofamountvoting(%)

and close

Balance atTransaction

Ratio ofmanagement fees to-Consonant Investment

Investment

279,774

Management Co., Ltd.

Management Co., Ltd.

Accruedexpenses

148,500(Note 1)
Payment ofadministrative agency

Same asSame as

above

above

fees for organizational
Same as above-

management to

1,100

Consonant Investment

Accruedexpenses

864

Management Co., Ltd.
(Note 2)
(Note 1)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of
INV.

(Note 2)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in “Administrative Agency
Agreement for Organizational Management,” entered into by and between INV and the Asset Manager.

(Note 3)

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

(Notes Related to Parent Company or Any Material Affiliated Company)
1. Information of parent company
Not applicable
2. Summarized financial information of material affiliated company
Kingdom Special Purpose Company was the material affiliated company during the Reporting Period, and thesummary of financial statements are as below;(Unit: JPY thousand)
Kingdom Special Purpose Company
Fiscal period ended
June 30, 2018
100,422,370
5,409,900

Fiscal period ended
December 31, 2018
100,856,568
3,784,525

Total current liabilities
Total non-current liabilities

1,436,173
66,480,660

212,208
66,280,661

Total net assets

37,915,436

38,148,224

Operating revenue
Income before income taxes
Net income

1,957,744
1,496,394
1,495,336

2,350,784
1,729,001
1,728,124Total specified assets
Total other assets

51

(Notes Related to Per Unit Information)
Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
Net assets per unit

JPY 37,871

JPY 39,063

Net income per unit

JPY 1,611

JPY 1,504

Net income per unit is calculated by dividing net income for the period by the average number of investment units during
the period. 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.

Net income (JPY thousand)Fiscal period ended
June 30, 2018(from January 1, 2018 toJune 30, 2018)
7,721,948

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
8,384,071--

7,721,948

8,384,071

4,793,181

5,575,457

Amounts not attributable to common unitholders(JPY thousand)Net income attributable to common units(JPY thousand)Average number of investment units during the period(units)(Notes Related to Significant Subsequent Events)
Not applicable

52

(9)

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.
Date

Type of Issue

Total Number of Investment
Units Issued and Outstanding
Increase

Total

Unitholders’ Capital (JPY)
Increase

Reference

Total

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

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)

November 1, 2017

Third-party
allotment

44,3984,793,181

1,895,883,396

168,798,455,314(Note 14)

August 1, 2018

Public offering

909,524

5,702,705

40,280,089,388

209,078,544,702(Note 15)

August 21, 2018

Third-party
allotment

45,476

5,748,181

2,013,995,612

211,092,540,314(Note 16)

December 28, 2018

Retirement(81,341)

5,666,840-

211,092,540,314(Note 17)

(Note 1)
(Note 2)

An investment unit split of 5 units per 1 unit was conducted.
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, 4 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 repayment of 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 make repayment 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 theunderwriters’ 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 toappropriate 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 theunderwriters’ 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 theunderwriters’ 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) Reversal of allowance for temporary differences adjustment was decided at the meeting of the Board of Directors of INV held
on February 22, 2017 and the amount was incorporated into unitholders’ capital.

53

(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 theunderwriters’ 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 theunderwriters’ 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 purpose of allocation to
cash reserves to be used as part of the funds for future acquisition of specified assets.
(Note 15) New investment units were issued in a public offering at a price of JPY 45,776 per unit (JPY 44,287 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 16) New investment units were issued in a third-party allotment at a price of JPY 44,287 per unit for the purpose of raising a partof the funds for the acquisition of new properties.
(Note 17) INV acquired own investment units from December 13, 2018 to December 18, 2018 (on a trade date basis) through themarket purchase at Tokyo Stock Exchange based on a discretionary transaction contract with a security company.
INV resolved the retirement of all the acquired own investment units at the Board of Directors' Meeting held on December 25,
2018 and the acquired own investment units were retired on December 28, 2018.
The acquisition of own investment units was conducted using capital surplus, and thus there is no change to unitholders’capital.

54

4. Change in Directors
Changes in directors are disclosed in a timely manner upon the determination of such changes.

5. Reference Information(1)

Composition of INV’s Assets

Type of
Purpose

Geographic area

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

Fiscal period ended December 31, 2018(as of December 31, 2018)

Percentage of
total assets(%)

Amount held
(JPY million)

2

0.0

2

0.0

-

-

-

-

2
2

0.0
0.0

2
2

0.0
0.0

70,87718.9

70,386

15.5

15,691

4.2

15,521

3.4

86,56923.1

85,908

18.9

-

-

-

-

4,912

1.3

4,866

1.1

4,912

1.3

4,866

1.1

133,64035.7

159,13634.9

111,80929.9

132,735

29.1

245,45065.5

291,872

64.1

Total real estate in trust

336,932

90.0

382,647

84.0

Preferred equity interest (Note 4)

17,856

4.8

17,856

3.9--

36,783

8.1

19,721

5.3

18,072

4.0

374,512100.0

455,362100.0(336,934)(90.0)(382,649)(84.0)

asset

Amount held
(JPY million)(Note 1)

(Note 2)

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
HotelscitiesSubtotalRealestate

TK interest (Note 5)
Deposits and other assets
Total assets (Note 5)(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)Percentage of
total assets(%)(Note 2)“Greater Tokyo area” refers to Tokyo, Kanagawa, Chiba and Saitama.
“Amount held” is from the balance sheet as of the end of the reporting period and is calculated by deducting accumulated depreciation fromthe acquisition price (including acquisition related costs).
Part of Hotel MyStays Haneda falls under this category.
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).
TK interests of INV in the SPC in Cayman Islands which holds The Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine
Suites Resort as underlying assets.
The figures indicated in parenthesis under “Total assets” show the amounts related to owned real estate (excluding the amount of preferred
equity interest and TK interest owned).

Total Liabilities
Total Net Assets
Total Liabilities
and Net Assets

Fiscal period ended June 30, 2018(as of June 30, 2018)
Percentage ofAmount (JPY million)
total assets (%)
192,989
51.5

Fiscal period ended December 31, 2018(as of December 31, 2018)
Percentage ofAmount (JPY million)
total assets (%)
233,99751.4

181,52348.5

221,36448.6

374,512100.0

455,362

100.0

55

(2)

Real Estate Properties, Etc.
The following summarizes the real estate and real estate held in trust as well as preferred equity interest and TK
interest that INV held as of December 31, 2018.

aProperty
number(Note 1)Price and investment percentage

Name of property

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)

A26

Nisshin Palacestage Daitabashi

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

A27

Nisshin Palacestage
Higashi-Nagasaki

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

A28

Growth Maison Gotanda

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

A29

Growth Maison Kameido

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

A30

Emerald House

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

A32

Suncrest Shakujii-Koen

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

A33

Growth Maison Shin-Yokohama

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

A34

Belle Face Ueno-Okachimachi

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

A35

Grand Rire Kameido

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

A37

Growth Maison Yoga

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

A38

Route Tachikawa

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

A39

Shibuya-Honmachi Mansion

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

A40

City Heights Kinuta

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

A41

Acseeds Tower
Kawaguchi-Namiki

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

A43

College Square Machida

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

A44

Belair Meguro

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

A45

Wacore Tsunashima I

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

56

Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests
Trustbeneficiaryinterests(Note 7)Trust
beneficiaryinterests
Trustbeneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

1,251

1,104

0.3

1,210

A

1,229

1,065

0.3

1,330

A

888

844

0.2

1,030

A

1,070

963

0.2

1,140

A

1,505

1,344

0.3

1,430

A

1,088

1,064

0.2

1,090

A

1,059

948

0.2

1,180

A

1,023

935

0.2

1,090

A

906

808

0.2

1,010

A

795

736

0.2

770

A

676

640

0.2

669

A

651

698

0.1

638

A

646

652

0.1

499

A

620

527

0.1

755

A

589

556

0.1

535

A

589

553

0.1

621

A

572

520

0.1

515

A

Property
number(Note 1)Name of property

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)

A46

Foros Nakamurabashi

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

A47

Growth Maison Kaijin

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

A48

College Square Machiya

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

A51

City House Tokyo Shinbashi

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

A52

Winbell Kagurazaka

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

A53

Nishiwaseda Cresent Mansion

3-18-9 Nishi-Waseda, Shinjuku-ku,
Tokyo

A54

Lexington Square Akebonobashi

3-8 Yochomachi, Shinjuku-ku,
Tokyo

A59

Towa City Coop Shinotsuka II

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

A61

Bichsel Musashiseki

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

A63

Towa City Coop Sengencho

4-338-2 Sengencho, Nishi-ku,
Yokohama-shi, Kanagawa

A64Royal Park Omachi

2-11-10 Omachi, Aoba-ku,
Sendai-shi, Miyagi

A65

Lexington Square Haginomachi

1-15-16 Haginomachi,
Miyagino-ku, Sendai-shi, Miyagi

A66

Visconti Kakuozan

2-44 Otanacho, Chikusa-ku,
Nagoya-shi, Aichi

A71

Lexington Square Daitabashi

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

A72

Lexington Square Honjo
Azumabashi

4-20-6 Higashikomagata,
Sumida-ku, TokyoA73

AMS TOWER Minami 6-Jo

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

A75

Spacia Ebisu

3-6-22 Higashi, Shibuya-ku, TokyoA76

Neo Prominence

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

A77

Invoice Shin-Kobe Residence

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

A78

Cosmo Court Motomachi

3-12-20 Motomachidori Chuo-ku,
Kobe-shi, Hyogo

A79

Revest Honjin

2-13 Toriidori Nakamura-ku,
Nagoya-shi, Aichi

A80

Revest Matsubara

3-13-12 Matsubara Naka-ku,
Nagoya-shi, Aichi

A82

Alba Noritake Shinmachi

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

57

Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests(Note 7)Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

566

510

0.1

573

A

557

515

0.1

497

A

510

446

0.1

554

A

2,520

2,293

0.6

3,360

B

3,260

3,017

0.7

4,280

C

1,880

1,885

0.4

2,650

C

1,450

1,306

0.3

1,950

D

866

813

0.2

1,130

B

577

550

0.1

740

C

1,110

1,008

0.2

1,390

B

415

383

0.1

588

B

330

277

0.1

453

B

255

230

0.1

281

D

977

838

0.2

1,260

D

511

432

0.1

650

D

1,180

937

0.3

1,290

D

7,010

6,446

1.6

8,280

B

1,660

1,603

0.4

2,100

B

1,260

1,152

0.3

1,430

B

973

881

0.2

1,110

B

674

607

0.2

831

B

657

596

0.1

815

B

608

547

0.1

752

B

Property
number(Note 1)Name of property

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)

A83

Revest Meieki Minami

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

A84

Revest Heian

2-13-17 Heian, Kita-ku,
Nagoya-shi, Aichi

A85

Vendir Hamaotsu Ekimae

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

A86

Salvo Sala

2-6-21 Shimanouchi Chuo-ku,
Osaka-shi, Osaka

A87

Excellente Kagurazaka

128-1 Yamabukicho Shinjuku-ku,
Tokyo, and other one parcel

A88

Luna Court Edobori

3-4-11 Edobori, Nishi-ku,
Osaka-shi, Osaka

A89

Winntage Kobe Motomachi

7-2-2 Motomachidori, Chuo-ku,
Kobe-shi, Hyogo

A90

Queen's Court Fukuzumi

1-3-10 Fukuzumi, Koto-ku, Tokyo

A91

Corp Higashinotoin

380-1 Kawaranomachi,
Higashinotoindori Nijo Kudaru,
Nakagyo-ku, Kyoto-shi, Kyoto,
and other two parcels

A92

Belair Oimachi

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

A93

Siete Minami-Tsukaguchi

3-18 Minami-Tsukaguchimachi,
Amagasaki-shi, Hyogo

A94

Prime Life Sannomiya Isogami
Koen

4-3-23 Isogamidori, Chuo-ku,
Kobe-shi, Hyogo

A95

HERMITAGE NANBA WEST

4-10-3 Sakuragawa, Naniwa-ku,
Osaka-shi, Osaka

A96

Century Park Shinkawa 1-bankan

4-1-2 Shinkawacho, Minato-ku,
Nagoya-shi, Aichi

A97

West Avenue

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

A98

Little River Honmachibashi

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

A99

Prime Life Mikage

2-25-11 Mikage Tsukamachi,
Higashinada-ku, Kobe-shi, Hyogo

A100 City Court Kitaichijo

1-6-3 Kita 1-jo Higashi, Chuo-ku,
Sapporo-shi, Hokkaido

A101 Lieto Court Mukojima

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

A102 Lieto Court Nishi-Ojima

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

A103 Royal Parks Momozaka

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

A104 Royal Parks Shinden

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

A105 Royal Parks Tower Minami-Senju

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

58

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

597

537

0.1

769

B

595

537

0.1

727

B

581

516

0.1

736

B

544

494

0.1

652

B

543

506

0.1

650

B

525

478

0.1

584

B

512

461

0.1

626

B

456

426

0.1

642

B

446

411

0.1

540

B

412

388

0.1

541

B

374

348

0.1

446

B

373

341

0.1

457

B

355

326

0.1

447

B

335

318

0.1

452

B

331

312

0.1

328

B

310

287

0.1

389

B

297

271

0.1

332

B

1,782

1,749

0.4

2,040

B

1,683

1,680

0.4

1,810

B

1,634

1,624

0.4

1,820

B

2,910

2,825

0.6

3,130

C

5,024

4,951

1.1

5,560

C

21,87922,1304.9

23,100B

Property
number(Note 1)

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)Name of property

A106 Royal Parks Seasir Minami-Senju

Trust
beneficiaryinterests

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

Subtotal (64 properties)

B17

Lexington Plaza Hachiman

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

B18

AEON TOWN Sukagawa

105 Furukawa, Sukagawa-shi,
Fukushima

Trust
beneficiaryinterests
Trustbeneficiaryinterests

Subtotal (2 properties)

D01

Hotel MyStays Kanda

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

D02

Hotel MyStays Asakusa

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

D03

Hotel MyStays Kyoto-Shijo

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

D04

MyStays Shin-Urayasu Conference
2-1-4 Akemi, Urayasu-shi, Chiba
CenterD05

Hotel MyStays Maihama

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

D06

Hotel MyStays Premier Dojima

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

D07

Hotel MyStays Nagoya-Sakae

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

D08

Hotel MyStays
Sakaisuji-Honmachi

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

D09

Hotel MyStays Yokohama

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

D10

Hotel MyStays Nippori

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

D11

Hotel MyStays
Fukuoka-Tenjin-Minami

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

D12

Flexstay Inn Iidabashi

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

D13

Hotel MyStays Ueno Inaricho

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

D14

Flexstay Inn Shinagawa

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

D15

Flexstay Inn Tokiwadai

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

D16

Flexstay Inn Sugamo

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

D17

Hotel MyStays Otemae

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

D18

Flexstay Inn Kiyosumi Shirakawa 1-12-16 Tokiwa, Koto-ku, Tokyo

D19

Flexstay Inn Nakanobu P1

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

59

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

2,683

2,727

0.6

2,790

B

90,15485,90820.1

102,044

-

3,280

3,040

0.7

3,720

C

2,320

1,826

0.5

2,450

C

5,600

4,866

1.2

6,170

-

2,851

2,982

0.6

4,930

B

2,584

2,543

0.6

4,620

B

6,024

5,922

1.3

14,300

B

4,930

4,704

1.1

7,280

B

4,870

4,821

1.1

6,710

B

3,845

3,812

0.9

7,490

B

2,958

2,692

0.7

6,410

B

2,514

2,398

0.6

6,940

B

2,119

1,983

0.5

3,560

B

1,898

1,816

0.4

2,870

B

1,570

1,497

0.4

5,700

B

1,381

1,364

0.3

1,980

B

1,331

1,254

0.3

2,190

B

1,242

1,206

0.3

1,960

B

1,242

1,214

0.3

2,100

B

1,192

1,131

0.3

2,050

B

1,192

1,147

0.3

4,300

B

749

723

0.2

1,250

B

589

571

0.1

769

B

Property
number(Note 1)Name of property

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)

D20

Flexstay Inn Nakanobu P2

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

D21

APA Hotel Yokohama-Kannai

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

D22

Hotel MyStays
Hakodate-Goryokaku

26-17 Honcho, Hakodate-shi,
Hokkaido

D23

Flexstay Inn Shirogane

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

D24

Hotel MyStays Haneda

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

D25

Hotel MyStays Kameido P1

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

D26

Hotel MyStays Ueno Iriyaguchi

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

D27

Hotel MyStays Kameido P2

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

D28

Hotel Vista Shimizu

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

D29

Super Hotel Shinbashi/
Karasumoriguchi

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

D30

Flexstay Inn Higashi-Jujo

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

D31

Hotel MyStays Utsunomiya

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

D32

Flexstay Inn Kawasaki-Kaizuka

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

D33

Comfort Hotel Toyama

1-3-2 Takara-machi, Toyama-shi,ToyamaD34

Flexstay Inn Kawasaki-Ogawacho

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

D35

Flexstay Inn Ekoda

8-6 Sakaecho, Nerima-ku, Tokyo

D36

Super Hotel Tokyo-JR Tachikawa
Kitaguchi

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

D37

Super Hotel JR Ueno-iriyaguchi

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

D38

Hotel MyStays Shinsaibashi

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

D39

Comfort Hotel Kurosaki

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

D40

Comfort Hotel Maebashi

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

D41

Comfort Hotel Tsubame-Sanjo

2-115 Sugoro, Sanjo-shi, Niigata

D42

Comfort Hotel Kitami

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

D43

Hotel MyStays Gotanda Station(Note 9)2-6-8 Nishi-Gotanda,
Shinagawa-ku, Tokyo

60

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

283

289

0.1

370

B

8,350

7,821

1.9

9,720

B

2,792

2,830

0.6

3,700

B

2,119

2,100

0.5

2,220

B

7,801

7,412

1.7

8,160

B

5,594

5,427

1.2

7,170

B

3,821

3,712

0.9

3,850

B

3,742

3,626

0.8

4,770

B

2,198

2,062

0.5

2,340

B

1,624

1,599

0.4

1,840

B

1,277

1,269

0.3

1,340

B

1,237

1,232

0.3

1,610

B

980

928

0.2

1,150

B

979

935

0.2

1,110

B

906

884

0.2

1,030

B

5,069

4,914

1.1

4,820

B

1,170

1,122

0.3

1,230

E

1,130

1,096

0.3

1,220

E

3,160

3,077

0.7

3,050

B

1,148

1,085

0.3

1,220

E

1,128

1,068

0.3

1,160

E

1,010

965

0.2

1,070

E

851

804

0.2

906

E

26,523

26,436

5.9

26,600C

Property
number(Note 1)

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)Name of property

D44

Hotel Epinard Nasu

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

D45

Hotel MyStays Fukuoka Tenjin

3-5-7 Tenjin, Chuo-ku,
Fukuoka-shi, Fukuoka

D46

Hotel MyStays Hamamatsucho

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

D47

Hotel MyStays Premier Kanazawa

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

D48

Takamatsu Tokyu REI Hotel

9-9 Hyogomachi, Takamatsu-shi,
KagawaD49

Hotel MyStays Premier
Hamamatsucho

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

D50

Hotel MyStays Shin Osaka
Conference Center

6-2-19 Nishinakashima,
Yodogawa-ku, Osaka-shi, Osaka

D51

Hotel MyStays Premier Omori

6-19-3 Minami Oi, Shinagawa-ku,
Tokyo

D52

Beppu Kamenoi Hotel

5-17 Chuo cho, Beppu-shi, Oita

D53

Hotel MyStays Sapporo Station

4-15 Kita Hachijyo Nishi, Nita-ku,
Sapporo-shi, Hokkaido

D545-65, Onoe-cho, Naka-ku,
Hotel MyStays Yokohama Kannai Yokohama-shi, Kanagawa and3 other lots

D55

Art Hotel Joetsu

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

D56

Art Hotel Hirosaki City

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

D57

Hotel MyStays Oita

1-32, Niagemachi Oita-shi, Oita

D58

Hotel MyStays Gotanda

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

D59

Hotel MyStays Tachikawa

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

D60

Hotel MyStays Premier Akasaka

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

D61

Hotel MyStays Premier Sapporo
Park

2-2-10, Minamikujo Chuo-ku,
Sapporo-shi, Hokkaido

D62

Hotel MyStays Ueno East

5-5-6, Higashi UenoTaito-ku,
Tokyo

D63

Hotel MyStays Midosuji
Honmachi

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

－

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)20,981

19,911

4.7

23,100

C

8,059

7,876

1.8

8,740

C

7,959

7,843

1.8

7,040

C

13,761

13,2273.1

14,500

C

2,139

2,117

0.5

2,220

E

8,000

8,017

1.8

9,800

B

13,06813,0092.913,500

D

9,781

9,746

2.2

10,100

D

8,870

8,553

2.0

9,010

D

7,880

7,765

1.8

8,300

D

5,326

5,293

1.2

5,490

D

2,772

2,750

0.6

2,810

D

2,723

2,698

0.6

2,760

D

1,604

1,581

0.4

1,640

D

4,068

4,073

0.9

4,140

D

3,257

3,256

0.7

3,290

E

20,691

20,668

4.6

21,400B

16,731

16,682

3.7

17,000

D

5,286

5,277

1.2

5,370

D

5,039

5,026

1.1

5,090

B

Subtotal (63 properties)

297,977

291,87466.5

354,366-

Total (129 properties)

393,732

382,64987.8

462,580-

17,845

17,856

4.0

Sheraton Grande Tokyo Bay
Hotel (preferred equity
interest)

Preferredequity interest
issued by
specialpurposecompany(Note 8)－61

- (Note 5)Property
number(Note 1)

BalanceAcquisition
sheet
price
Legal form ofcarrying
(JPY
asset
value
million)(JPY(Note 3)
million)Location(Note 2)Name of property

Subtotal of preferred equity interest issued by special purpose company (1 property)－－

Westin Grand Cayman Seven
Mile Beach Resort & SPA (TKinterest)－

Sunshine Suites Resort (TKinterest)－

TK interest
(Note
10)

Appraisalvalue atInvestment
the end ofpercentage
Appraiser
the period(%)(Note 6)(JPY
(Note 4)
million)(Note 5)

17,845

17,856

4.0

36,78336,783

8.2--- (Note 5)- (Note 5)

Subtotal of TK interests (2 properties)

36,78336,783

8.2--

Total (132 properties)

448,362

437,290

100.0

-

-

(Note 1)

“Property number” indicates the use categorization of properties owned by INV, with “A” standing for residence, “B” standing for office andcommercial facility, “C” standing for parking lots and “D” standing for hotel, and the number assigned for each property. The number
following “A”, “B”, “C” and “D” is assigned based on how early the acquisition was made, except for acquisitions made at the same time alower number is assigned to the property with a greater acquisition price.

(Note 2)

“Location” is, in principle, based on the indicated address (jyukyohyoji), except that if the jyukyohyoji system has not been implemented forsuch property, the location is based on the land number (chiban).

(Note 3)Acquisition price” is the purchase price indicated in the real estate or trust beneficiary purchase agreement. (However, for Sheraton GrandeTokyo Bay Hotel (preferred equity interest) described below (Note 8), “Acquisition price” indicates the amount invested by INV for the
preferred equity interest; and for Westin Grand Cayman Seven Mile Beach Resort & SPA (TK interest) and Sunshine Suites Resort (TKinterest) described below (Note 10), “Acquisition price” indicates INV’s investment amount for the TK interests (the amount after the partial
refund from the Cayman SPC as it received a larger adjustment amount than anticipated from the seller). The same shall apply hereinafter inthis document.) Such price excludes consumption tax and other taxes, and has been rounded down to the nearest million yen. The amounts
are converted into JPY using exchange rate of USD 1=JPY 110.45 based on the foreign exchange forward contract executed on July 26, 2018
and implemented on September 26, 2018.

(Note 4)

“Investment percentage” is the ratio of the acquisition price to the aggregate acquisition price of INV’s portfolio, and has been rounded to thefirst decimal place.

(Note 5)

“Appraisal value at the end of the period” is the value appraised or determined based on research by the real estate appraiser as of the end of
the fiscal period in accordance with the Articles of Incorporation of INV and the regulations of The Investment Trust Association, Japan. For
Sheraton Grande Tokyo Bay Hotel (preferred equity interest), there is no Appraisal value at the end of the period due to it being preferred
equity interest; and for Westin Grand Cayman Seven Mile Beach Resort & SPA (TK interest) and Sunshine Suites Resort (TK interest), there
are no Appraisal values at the end of the period due to they being TK interests. Appraisal values for the underlying assets as of the date ofacquisition by each SPC are as follows.
Name of property

Appraisal value

Appraiser(Note 6)

Sheraton Grande Tokyo Bay HotelJPY 101,000 million

C

Westin Grand Cayman Seven Mile Beach Resort & SPA

JPY 30,280 million(USD 272,800,000)

F

Sunshine Suites Resort

JPY 5,838 million(USD 52,600,000)

F

The amounts in USD are converted into JPY using the exchange rate of USD 1=JPY 111.00 (Telegraphic Transfer Middle rate (TTM)
announced by Mitsubishi UFJ Research and Consulting Co., Ltd.), which is the exchange rate at the end of the Reporting Period (December
28, 2018).

(Note 6) “Appraiser” is shown in code in the table above.

The code used to represent the appraisers is as follows:

Appraiser
A: Assets Research and Development Inc.
B: Japan Real Estate Institute
C: JLL Morii Valuation & Advisory K.K.
D: The Tanizawa Sogo Appraisal Co., Ltd.
E: Daiwa Real Estate Appraisal Co., Ltd.
F: CBRE K.K.
As to appraisal of Westin Grand Cayman Seven Mile Beach Resort & SPA and Sunshine Suites Resort, the local appraiser verification
method is adopted and CBRE K.K. has entrusted such verification to CBRE, Inc. The appraisal value for Sunshine Suites Resort includes
the acquisition price of the unused land adjacent to the hotel.

62

(Note 7) These trust beneficiary interests were integrated into three groups with other trust beneficiary interests when INV procured funds throughdebt financing backed by trust assets in July 2011. As a result of disposition of assets and detachment of trust beneficiary interest from an
integrated trust account thereafter, the grouping of trust beneficiary interests at the end of the Reporting Period 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, and Foros Nakamurabashi
Group 2
College Square Machida, Belair Meguro, and Wacore Tsunashima I
Group 3
Suncrest Shakujii-Koen, Grand Rire Kameido, Acseeds Tower Kawaguchi-Namiki, Growth Maison Kaijin, and College Square Machiya(Note 8)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 issued and outstanding after the issuance of the said preferred equity
interest), with the Sheraton Grande Tokyo Bay Hotel as an underlying asset, and is recorded as one property.

(Note 9)Appraisal value at the end of the period indicates appraisal value calculated deeming the owned portion and the floor expansion portion asone.

(Note 10) TK interests of INV in the SPC in Cayman Islands which holds The Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine
Suites Resort as underlying assets, and is recorded as two properties based on the number of the underlying assets.

63

b

Capital expenditures for assets under management(a) Schedule for capital expenditures
The schedule for the principal capital expenditures for property maintenance construction, etc., as of the end of the
fiscal period ended December 31, 2018 for the real estate assets is as follows.
Estimated Cost (JPY thousand)

Total

Payment for
the Fiscal
Advance
Period ended
Payments
December31, 2018

From January 2019
To June 2019

329,652--

Renovation work

From January 2019
To June 2019

250,000--

Shizuoka-shi,
Shizuoka

Renovation work

From January 2019
To June 2019

120,000--

PurposeScheduled Time of
Implementation

Nasu-gun,Tochigi

Introduction ofenergy-saving
equipment

Hotel MyStays
Yokohama

Yokohama-shi,
Kanagawa

D28 Hotel Vista Shimizu

Name of Property

D44 Hotel Epinard Nasu
D09

Location

D48

Takamatsu Tokyu
REI Hotel

Takamatsu-shi,
KagawaReplacement of
From January 2019
automatic fire alarm
To June 2019
system

20,500--

D56

Art Hotel Hirosaki
City

Hirosaki-shi,
AomoriInterior work (hotel From January 2019
3rd floor, etc.)
To June 201918,500--(b) Capital expenditures for the fiscal period ended December 31, 2018
The principal construction work constituting capital expenditures for the real estate assets for the fiscal period ended
December 31, 2018 is as follows. Capital expenditures for the fiscal period totaled JPY 910,527 thousand, andtogether with JPY 26,602 thousand in repair costs included in this fiscal period’s expenses, construction work
totaling JPY 937,129 thousand was implemented.
Payment(JPY thousand)Location

Hotel MyStays
Kyoto-Shijo

Kyoto-shi,
Kyoto

Renovation work

From July 2018
To December 2018

150,396

Hotel MyStays
D49 Premier
Hamamatsucho

Minato-ku,
TokyoHot-and-chilled-water generator
replacement

From July 2018
To December 2018

39,000

D06

Hotel MyStays
Premier Dojima

Osaka-shi,
Osaka

Renovation work

From July 2018
To December 2018

37,429

A39

Shibuya-Honmachi
MansionShibuya-ku,
TokyoRenovation work

From July 2018
To December 2018

30,315

D48

Takamatsu Tokyu
REI Hotel

Takamatsu-shi, Disaster prevention switchboard
replacement
KagawaFrom July 2018
To December 2018

21,800

D03

PurposeTime ofimplementation

Name of property

Other construction

631,585
Total

910,52764

(c) 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 maintenancerepairs in the medium to long term in accordance with the long-term maintenance plan for each property.

Fiscal period(Unit: JPY thousand)
27th
28th
29th
30th
31st
fiscal period
fiscal period
fiscal period
fiscal period
fiscal period
From July 1, 2016 From January 1, From July 1, 2017 From January 1, From July 1, 2018
to December 31, 2017 to June 30, to December 31, 2018 to June 30, to December 31,
2018
2018
2017
2017
2016

Reserved funds at beginningof period
Amount reserved(Note)
Amount reversed(Note)
Amount carried over for
next fiscal period(Note)

1,303,685

1,397,286

1,397,243

1,566,108

1,611,828

446,066

468,145

697,444468,448

618,404

352,464

468,189

528,579

422,728

415,718

1,397,286

1,397,243

1,566,108

1,611,828

1,814,515

The amount reserved for the relevant fiscal period includes the reserves for acquired properties, and the amount reversed includes
the reserves for disposed properties.

(3)

Tenant Summary

a Summary of lease conditions by property
Disclosure is omitted because the information is described in the presentation material for 31th Fiscal Period Ended
December 2018 announced today.
b Occupancy trend
Disclosure is omitted because the information is described in the presentation material for 31th Fiscal Period Ended
December 2018 announced today.

65