11

Fiscal Period Business Reportth(Statement of Financial Performance)

May 1, 2019 – October 31, 2019

Hopeful future
for Japan

Stock
Code
6-2-1 Ginza, Chuo Ward, Tokyo3308
http://www.nippon-healthcare.co.jp/en/

I. Overview of Nippon Healthcare Investment Corporation
To Our Investors
Message from Executive Director
We would like to express our deep gratitude to all our unitholders for your support of Nippon Healthcare Investment
Corporation ("NHI").
NHI posted financial performance of 707 million yen in operating revenue, 283 million yen in operating income and 253
million yen in net income for the fiscal period ended October 2019 (11th Fiscal Period). Concerning distributions, NHI
declared a distribution amount per unit of 3,399 yen and a distribution amount in excess of earnings per unit of 880 yen,bringing the total distribution amount per unit to 4,279 yen. See page 3 for Financial and Management Highlights
As of the end of the 11th Fiscal Period, NHI manages a portfolio with asset size of 19,712 million yen and the numberof operators of facilities owned by NHI of 11. NHI has realized maintenance and improvement of portfolio stability bypressing forward diversification of operators and concluding long-term fixed rent lease agreements.
See page 9 for details of Stable Management Strategy

On the financial front, NHI will continue to work to further strengthen its financial standing while reducing refinancing risks
in the future. See page 11 for Financial Conditions
On November 19, 2019, NHI entered into a merger agreement with Japan Rental
Housing Investments Inc. (The merger agreement provides for the merger to comeinto effect on April 1, 2020, subject to approval of the related proposals at thegeneral meeting of unitholders of both REITs, each of which are to be held in
February 2020, and other conditions precedent.)
Utmost efforts will be made to realize maximization of unitholder value by
combining both REITs’ respective characteristics and strengths through themerger.
We wish our unitholders continued success and ask for your continued
support of NHI.
Healthcare Investment Corporation
Executive俊一
Director
Shunichi Suzuki Nippon日本ヘルスケア投資法人
執行役員 鈴木
Contents

I. Overview of Nippon Healthcare Investment Corporation

II. Asset Management Report…………………………… 12

To Our Investors……………………………………………… 2

III. Balance Sheets… ……………………………………… 18

Financial and Management Highlights………………………… 3
Portfolio List………………………………………………… 4
Portfolio Map………………………………………………… 5
Merger with Japan Rental Housing Investments Inc.… ……… 6
Portfolio Status……………………………………………… 8

IV. Statements of Income………………………………… 20
V. Statements of Changes in Net Assets… ………… 21
VI. Statements of Cash Flows…………………………… 21
VII. Notes to Financial Statements……………………… 22

Stable Management Strategy………………………………… 9

VIII. Independent Auditor’s Report……………………… 35

Initiatives for ESG… ………………………………………… 10

IX. Description of Asset Manager… …………………… 37

Financial Conditions… ……………………………………… 11

X. Investor Information…………………………………… 38
Please refer to the pages starting from the back cover for information on operators.

2

Financial and Management Highlights
Steady growth in asset size and maintenance of stable distribution level■ Actual Financial Results for Fiscal Period Ended October 2019 (11th Fiscal Period) and Financial Results Forecasts for Fiscal
Period Ending March 2020 (Final Fiscal Period)
10th Fiscal Period(April 2019)11th Fiscal Period(October 2019)

23

23

-

23

-

705

707

+2

589

-118

424

424

+0

230

-194

281

283

+1

265

-18

28

28

+0

21

-7

257

254

-2

264

+10

256

253

-2

263

+10

(result)

No. of properties owned at the end of the
fiscal period
Operating revenues (million yen)
Operating expenses (million yen)
Operating income (million yen)
Non-operating expenses (million yen)
Ordinary income (million yen)
Net income (million yen)(result)

Final Fiscal Period Difference from11th Fiscal(March 2020)(forecast) (Note 1)
PeriodDifference■ Distribution Results for 11th Fiscal Period and Distribution Forecasts for Final Fiscal Period
11th Fiscal Period(October 2019)

10th Fiscal Period(April 2019)(result)

Number of investment units issued andoutstanding at the end of the fiscal period (units)
Distribution per unit
(including distribution in excess of earnings) (yen)Distribution per unit

(excluding distribution in excess of earnings) (yen)Distribution in excess of earnings
per unit (yen)Depreciation per unit (yen)Ratio of distribution in excess of earnings
to depreciation per unit (%)(result)

Final Fiscal Period(March 2020)

Difference(forecast) (Note 1)

74,632

74,632

-

4,307

4,279

-28

3,437

3,399

-38

870

880

+10

2,714

2,727

32.0

32.3

Reference

Number ofinvestment units
issued andoutstanding at
the end of the
fiscal period

74,632(units)Cash delivered
upon the merger
per unit (yen)3,525(Note 2)

(Note 1) The period for the forecasts of financial results and cash delivered upon the merger for the Final Fiscal Period is the five-month period from November 1, 2019 to March 31, 2020.
(Note 2) The forecast figures above are based on the merger coming into effect and other assumptions. The actual operating revenues, operating income, ordinary income, net income and cash delivered upon themerger per unit may vary due to real estate market and other developments, changes in the management environment and other circumstances surrounding NHI, and other factors.
In addition, the forecasts are not a guarantee of the amount of cash delivered upon the merger.

■ Operating Revenues■ Operating Income■ Net Income(million yen)
1,000

(million yen)600

(million yen)
400

500

800
600

300

697

697

697

705

400

707

300
400

200

200

273

273

271

281

8th FP

9th FP

10th FP

11th FP

(yen)
4,500
4,000
3,500

8th FP

9th FP

10th FPDistribution inexcess of
earnings per unit

3,471

0

Distribution
per unit
excluding
distribution inexcess of
earnings（）

11th FP

9th FP

10th FP

11th FP

Reference:
Cash delivered upon
the merger

4,230

6-month equivalent:yenSame level as previous fiscal period’s forecasts

4,067 4,295 4,106 4,143 4,124 4,163 4,130 4,307 4,279
768

800

800

800

850

860

870

870

880

3,495

3,306

3,343

3,274

3,303

3,260

3,437

3,399

4,230
880

810

2,000

500

8th FP

253

0
7th FP■ Distribution per Unit (including distribution in excess of earnings)

1,000

7th FP

256

283

0
7th FP

1,500

243

100

0

2,500

246

100

200

3,000

244

2,661

3,299

3,525

Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period
ended
ended
ended
ended
ended
ended
ended
ended
ended
ended
endingApril 2015 October 2015 April 2016 October 2016 April 2017 October 2017 April 2018 October 2018 April 2019 October 2019 March 2020
(2nd FP)(3rd FP)(4th FP)(5th FP)(6th FP)(7th FP)(8th FP)(9th FP)(10th FP)
(11th FP)
(Final FP)(forecast)For
5-monthperiod3,350

Forecast for
fiscal period ending
April 2020
announced onJune 19, 2019

I. Overview of Nippon Healthcare Investment Corporation

3

Portfolio List (as of October 31, 2019)
Consists of 23 properties and 11 operators

Acquisition(Note 1) period
No

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

Property nameFacility type

(Note 1)

(Note 1)Fee-based homes forthe elderly withnursing care
Residential-type
2nd Fiscal Super Court
fee-based homes for
Period JR Nara-Ekimae
the elderly
Fee-based homes for
1st Fiscal Sompo Care LAVIER
the elderly with
Period Hiroshima Hikarigaoka
nursing careFee-based homes for
1st Fiscal Sompo Care LAVIER
the elderly with
Period Sagamihara Chuo
nursing careFee-based homes for2nd Fiscal Sompo Care LAVIER
the elderly with
Period Kinugasayama Koen
nursing careFee-based homes for
5th Fiscal Sompo no ie
the elderly with
Period Nishitanabeekimae
nursing careFee-based homes for
1st Fiscal
the elderly with
Sawayaka Kaikyokan
Periodnursing careFee-based homes for
1st Fiscal
the elderly with
Sawayaka Meisuikan
Periodnursing care
Residential-type
1st Fiscal Sawayaka Heart Life
fee-based homes for
Period Nishikyogoku
the elderly
Fee-based homes for2nd Fiscal
the elderly with
Sawayaka Hinodekan
Periodnursing care
Residential-type
2nd Fiscal Sawayaka Riverside
fee-based homes for
Period Kurinoki
the elderly
Residential-type
2nd Fiscal Sawayaka Obatakefee-based homes for
Period Sanbankan
the elderly
Fee-based homes for
1st Fiscal Nichii Care Center
the elderly with
Period Fukushima Omori
nursing careFee-based homes for2nd Fiscal
the elderly with
La’nassica Arakogawa
Periodnursing care
Residential-type
1st Fiscal
fee-based homes forVerger Hirakata
Periodthe elderly
Fee-based homes for3rd Fiscal Minna-no-ie Omiya
the elderly with
Period Tsutsujigaoka Parknursing careFee-based homes for3rd Fiscal Minna-no-ie Chuo-ku
the elderly with
Period En’nami
nursing careFee-based homes for3rd Fiscal Silver Heights
the elderly with
Period Hitsujigaoka No. 3
nursing care
Residential-type
4th Fiscal Alpha Living Okayama fee-based
homes for
Period Nishigawa Ryokudokoen
the elderly
Residential-type
4th Fiscal Alpha Living Okayama fee-based
homes for
Period Korakuen
the elderly
Residential-type
4th Fiscal Alpha Living Takamatsu fee-based
homes for
Period Ekimae
the elderly

1st Fiscal Charm Suite
Period Ryokuchi Koen

OperatorCharm Care
Corporation

Toyonaka City,
Osaka

1,950

9.9

3,030

128

98.4

95.3

-3.1

Super Court Co.,
Nara City, Nara
Ltd.

1,569

8.0

1,700

155

92.9

92.9

0.0

Hiroshima City,
Hiroshima

960

4.9

1,210

80

93.7

98.7

5.0

Sagamihara
City, Kanagawa

1,170

5.9

1,780

80

96.2

97.5

1.3

Yokosuka City,
Kanagawa

1,839

9.3

2,000

104

86.5

89.4

2.9

Osaka City,
Osaka

710

3.6

736

42

100.0

100.0

0.0

Kitakyushu
City, Fukuoka

630

3.2

898

65

100.0

93.8

-6.2

Kitakyushu
City, Fukuoka

590

3.0

812

87

96.5

94.2

-2.3

Kyoto City,
Kyoto

750

3.8

1,130

84

98.8

91.6

-7.2

Niigata City,
Niigata

773

3.9

896

50

96.0

100.0

4.0

Niigata City,
Niigata

266

1.3

306

33

92.3

89.7

-2.6

Kitakyushu
City, Fukuoka

289

1.5

349

50

94.0

100.0

6.0

Nichiigakkan Co., Fukushima City,
Fukushima
Ltd.

265

1.3

336

52

100.0

100.0

0.0

Cedar Co., Ltd.

Nagoya City,
Aichi

1,279

6.5

1,400

100

96.0

97.0

1.0

Nihon Kaigo Iryo
Center Co., Ltd.

Hirakata City,
Osaka

950

4.8

1,560

104

78.5

83.1

4.6

Saitama City,
Saitama

740

3.8

774

33

84.8

84.8

0.0

Saitama City,
Saitama

838

4.3

859

51

94.1

94.1

0.0

Sapporo City,
Hokkaido

1,200

6.1

1,330

109

91.8

96.3

4.5

Okayama City,
Okayama

730

3.7

789

53

78.1

81.8

3.7

Okayama City,
Okayama

610

3.1

661

45

93.7

91.6

-2.1

Takamatsu
City, Kagawa

605

3.1

642

43

86.3

95.4

9.1

Takamatsu
City, Kagawa

605

3.1

628

50

85.1

98.1

13.0

Komae City,
Tokyo

394

2.0

399

59

98.3

93.2

-5.1

11 operators 23 properties Total

19,712100.0

24,225

1,657

-

-

-

Sompo Care Inc.

Sawayaka Club
Co., Ltd.

Wisnet Co., Ltd.
Silver Heights
Sapporo Co., Ltd.

Anabuki Medical
Care Inc.

Fiscal Alpha Living Takamatsu Elderly housing with
22 4thPeriod
supportive services
Hyakkenmachi
FiscalIrise Komae Bettei
23 10thPeriod

Fee-based homes forthe elderly withnursing care

Location

Acquisition priceAppraisal Number Occupancy Occupancy(million yen) (Note 2)
value
of rooms rate in the rate in the
Share of (million yen) (rooms) 10th FP (%) 11th FP(%) Difference
portfolio(Note 5)(Note 6)(Note 3)(Note 4)(%)

HITOWA Care
Services Co., Ltd.

(Note 1) Red numbers refer to Three Major Metropolitan Areas and blue numbers to Core City Areas. The background colors for “Property name” and “Facility type” columns indicate types of facilities; orange for feebased homes for the elderly with nursing care, blue for residential-type fee-based homes for the elderly and yellow-green for elderly housing with supportive services.
(Note 2) “Acquisition price” is excluding consumption tax, local consumption tax and the various expenses required for the acquisition. “Share of portfolio” is the respective acquisition price expressed as a percentageof the total of the acquisition prices, rounded to the first decimal place. Therefore, the total of “Share of portfolio” may be different from the figure indicated in “Total.”(Note 3) “Appraisal value” is as of October 31, 2019. “Appraisal value” for Irise Komae Bettei is calculated for the 30% quasi-co-ownership interest.
(Note 4) “Number of rooms” is the figure indicated in the written explanation of important matters pertaining to the fee-based home for the elderly provided by the operator. “Number of rooms” for Irise Komae Bettei
indicates the number of rooms in the entire facility.
(Note 5) “Occupancy rate” is obtained by dividing the number of residents indicated in the written explanation of important matter received in May 2019 from operators by the resident capacity, rounded down to thefirst decimal place.
(Note 6) “Occupancy rate” is obtained by dividing the number of residents indicated in the written explanation of important matters received in November 2019 from operators by the resident capacity, rounded down to
the first decimal place.

4

Portfolio Map (as of October 31, 2019)
Making diversified investment in healthcare facilities in Japan

Three Major Metropolitan Areas
1

2

4

5

6

9

Charm Suite
Ryokuchi Koen

Super Court
JR Nara-Ekimae

Sompo Care LAVIER
Sagamihara Chuo

Sompo Care LAVIER
Kinugasayama Koen

Sompo no ie
Nishitanabeekimae

Sawayaka Heart Life
Nishikyogoku

Toyonaka City, Osaka

14

Nara City, Nara

15

Sagamihara City, Kanagawa

Yokosuka City, Kanagawa

Osaka City, Osaka

Kyoto City, Kyoto

16

18 Silver Heights Hitsujigaoka No. 3

La’nassica Arakogawa
Nagoya City, Aichi

Verger Hirakata
Hirakata City, Osaka

Minna-no-ie
Omiya Tsutsujigaoka Park

10 Sawayaka Hinodekan

Saitama City, Saitama

11 Sawayaka Riverside

Kurinoki17
9 Sawayaka Heart Life Nishikyogoku

13 Nichii Care Center

Fukushima Omori

1 Charm Suite Ryokuchi Koen

16 Minna-no-ie Omiya

20 Alpha Living Okayama Korakuen

Minna-no-ie
Chuo-ku En’nami

3

Saitama City, Saitama

23

Tsutsujigaoka Park

19 Alpha Living Okayama Nishigawa Ryokudokoen

17 Minna-no-ie

Sompo Care LAVIERE Hiroshima Hikarigaoka

Chuo-ku En’nami
23 Irise Komae Bettei
5 Sompo Care LAVIER

Kinugasayama Koen

12 Sawayaka Obatake Sanbankan
7 Sawayaka Kaikyokan

14 La’nassica Arakogawa

8 Sawayaka Meisuikan

4 Sompo Care LAVIER

Sagamihara Chuo

2 Super Court JR Nara-Ekimae
15 Verger Hirakata
6 Sompo no ie Nishitanabeekimae

Irise Komae Bettei

22 Alpha Living Takamatsu Hyakkenmachi

Komae City, Tokyo

21 Alpha Living Takamatsu EkimaeCore City Areas
3

7

8

10

11

12

Sompo Care LAVIER
Hiroshima Hikarigaoka

Sawayaka Kaikyokan

Sawayaka Meisuikan

Sawayaka Hinodekan

Sawayaka Riverside
Kurinoki

Sawayaka Obatake
Sanbankan

13

18

19

20

21

22

Nichii Care Center
Fukushima Omori

Silver Heights
Hitsujigaoka No. 3

Alpha Living Okayama
Nishigawa Ryokudokoen

Alpha Living Okayama
Korakuen

Alpha Living Takamatsu
EkimaeAlpha Living Takamatsu
Hyakkenmachi

Kitakyushu City, Fukuoka

Kitakyushu City, Fukuoka

Niigata City, Niigata

Hiroshima City, Hiroshima

Fukushima City, Fukushima

Niigata City, Niigata

Sapporo City, Hokkaido

Okayama City, Okayama

Okayama City, Okayama

Takamatsu City, Kagawa

Kitakyushu City, Fukuoka

Takamatsu City, Kagawa(Note) Red numbers refer to Three Major Metropolitan Areas and blue numbers to Core City Areas. The background colors for property names indicate types of facilities; orange for fee-based homes for the elderly withnursing care, blue for residential-type fee-based homes for the elderly and yellow-green for elderly housing with supportive services.

I. Overview of Nippon Healthcare Investment Corporation

5

Merger with Japan Rental Housing Investments Inc.

On November 19, 2019, NHI entered into a merger agreement with Japan Rental Housing Investments Inc. (“JRH”). Upon approval of therelated proposals at each REIT’s general meeting of unitholders, NHI and JRH are scheduled to merge and change the name to “Daiwa
Securities Living Investment Corporation” on April 1, 2020. For details, please refer to “Presentation Material for Merger and Series ofConcurrent Transactions” dated November 19, 2019 and other materials available on NHI’s website.

1. Overall Structure of the Merger
Asset manager

Before merger
Asset managementagreement

Asset managementagreement

Absorption-type merger

From April 1, 2020

Asset manager

Asset management agreement※*Change name fromJapan Rental Housing Investments Inc.

2. Merger Ratio

1:2.05

Allotment of 2.05 investment units of JRH for each investment unit of NHI to the unitholders of NHI

3. Significance of the Merger, Etc.
1. Achieve expansion of asset size through the merger
2. Achieve new medium-term target (property replacement strategy) at an early stage and activate
opportunities for growth at an early stage through disposition of 27 properties (13.4 billion yen), mainly
old properties, and acquisition of 28 healthcare facilities (62.6 billion yen)
3. Enhance unitholder value through capital increase by way of third-party allotment

4. Schedule of the Merger
November 19, 2019
December 13, 2019
February 4, 2020
February 13, 2020
March 30, 2020
April 1, 2020

6Conclusion of merger agreement, etc. (merger, capital increase by way of third-party allotment, and disposition and acquisition ofproperties)
Record date for general meeting of unitholders
NHI’s general meeting of unitholders
JRH’s general meeting of unitholders
NHI’s delisting
Effective date of the merger (disposition of properties, capital increase by way of third-party allotment and additional borrowing offunds to be executed concurrently, and then acquisition of new properties on next day (April 2, 2020))

List of Assets to be Acquired (scheduled to be acquired on April 2, 2020)
The assets to be acquired are appropriate healthcare facilities pursuant to the basic policy for asset management set forth in the Articles of Incorporationof NHI and the management policy of NHI. Appreciating their rarity, stable profitability, etc., the decision was made to acquire and lease them.
Property
number

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Property name

AIP Kachidoki-Ekimae
PLAISANT GRAND MINAMI YUKIGAYA
Aira no mori Higashi-Ofuna
Aira no mori Shakujiikoen
Aira no mori Edogawa-Shinozaki
Senior Forest Yokohama-Tsuzuki
Sompo no ie Toyonaka-Minamisone
Irise Komae Bettei (70% quasi-coownership interest)
Alpha Living Takamatsu Konyamachi
Good Time Living Center-Minami, Platesia Center-Minami
Good Time Living Chibaminato-Kaigandori·Platesia Chibaminato
Good Time Living Yokohama-Tsuzuki
Good Time Living Senri-Hinatagaoka
Good Time Living Nakamozu
Good Time Living Kourigaoka
Good Time Living Kameido
Good Time Living Mikage
Good Time Living Amagasaki-Shintoshin
Good Time Living Minami Senri
Good Time Living Kobe-Tarumi
Good Time Living Chibaminato-Ekimaedori
Good Time Living Senboku-Izumigaoka
Good Time Living Ikeda-Midorigaoka
Good Time Living Nagatsuta-Minamidai
Good Time Living Saitama-Hasuda
Good Time Living Nagareyama-Ichibankan
Good Time Living Nagareyama-Nibankan
Good Time Living Amagasaki-Ekimae

Total scheduled acquisition price

Location
Chuo-ku, Tokyo

3,380

3,400

4.1

0.8

Ota-ku, Tokyo

2,271

2,510

5.0

0.8

Yokohama-shi, Kanagawa

2,070

2,190

4.5

0.1

Nerima-ku, Tokyo

1,499

1,560

4.6

0.3

Edogawa-ku, Tokyo

1,202

1,270

4.7

0.2

Yokohama-shi, Kanagawa

825

835

5.0

18.8

Toyonaka-shi, Osaka

920

931

4.6

2.8

Komae-shi, Tokyo

1,225

1,250

5.1

3.1

Takamatsu-shi, Kagawa

11,15011,700

4.6

4.4

Yokohama-shi, Kanagawa

4,516

4,700

5.1

12.6

Chiba-shi, Chiba

4,064

4,170

4.6

11.2

Yokohama-shi, Kanagawa

2,800

2,840

4.7

5.1

Suita-shi, Osaka

2,180

2,190

4.8

4.6

Sakai-shi, Osaka

2,120

2,160

4.8

11.6

Hirakata-shi, Osaka

1,860

2,310

5.8

11.0

Koto-ku, Tokyo

1,820

2,260

5.7

9.8

Kobe-shi, Hyogo

1,585

1,660

4.8

10.5

Amagasaki-shi, Hyogo

1,430

1,520

5.2

26.7

Suita-shi, Osaka

1,370

1,380

5.5

13.3

Kobe-shi, Hyogo

1,320

1,550

6.0

12.4

Chiba-shi, Chiba

980

1,030

5.7

11.6

Sakai-shi, Osaka

920

929

5.1

12.5

Ikeda-shi, Osaka

850

855

4.6

6.4

Yokohama-shi, Kanagawa

659

667

5.4

12.6

Hasuda-shi, Saitama

610

612

5.1

12.0

Nagareyama-shi, Chiba

563

677

6.9

3.6

Nagareyama-shi, Chiba

320

392

6.1

11.1

Amagasaki-shi, Hyogo

Total appraisal value

62,660 million yen
1

Scheduled
Appraisal Appraisal NOI
Building age
acquisition price
value
yield
(years)(%)(million yen)(million yen)
8,150
8,340
4.0
2.5

Average building age

65,888 million yen

6.8 years

2

10

PLAISANT GRAND MINAMI YUKIGAYAGood Time Living Center-Minami,
Platesia Center-Minami

15

20

Good Time Living Kourigaoka

Good Time Living Kobe-Tarumi

AIP Kachidoki-Ekimae(Note) “Appraisal value” is as of November 1, 2019. “Appraisal NOI yield” is obtained by dividing appraisal NOI by the scheduled acquisition price, rounded to the first decimal place. “Building age” is as of November
19, 2019 (“Average building age” is the weighted average based on the scheduled acquisition price).

I. Overview of Nippon Healthcare Investment Corporation

7

Portfolio Status (as of October 31, 2019)
Focusing investment on private nursing homes and other facilities for the elderly for which large demand is expected

Diversification Status■ Region■ Type■ Operator

Elderly housingwith supportive
services

Nihon Kaigo Iryo HITOWA Care Services Co., Ltd. 2.0%
Center 4.8%
Nichii Gakkan 1.3%
Silver Heights
Sapporo 6.1%
Sompo

3.1%
Core City
Areas

Three Major
Metropolitan
Areas

38.2%

Care Inc.

6.5%

Cedar

8.0%

Super Court

23.7%
Sawayaka
Club

61.8%

AnabukiMedicalCare

Wisnet8.0%
Fee-based home for the elderly 96.9%
With nursing care 67.7%
Residential-type 29.3%

16.7%

12.9%
Charm Care Corporation 9.9%

(Note) The ratios in the above three pie charts are calculated based on total acquisition prices, and rounded to the first decimal place.

Portfolio Status■ Proportion of Long-Term Care Fee (Note 2)■ Rent-Paying Capacity (Note 1)

More than 60%,
but 70% or less

8.8%

More than
2.0x

1.2x or less

■ Proportion of One-Time Entrance Fee
Amortization Income (Note 3)

18.1%

22.5%

50.6

1.7x

More than
5%, but 15%
or less

50％ or less

% 44.7%More than
50%, but on average
60% or lesson average

3.5% 5% or less

38.9% on average 61.1%

46.5%

More than 1.5x, but
2.0x or less

59.5%

(Note 1) “Rent-paying capacity” refers to the multiple obtained by dividing the respective acquired asset's most recent EBITDAR by rent. EBITDAR ＝ Operating Income + Depreciation + Rent
(Note 2) “Proportion of long-term care fee” refers to the proportion of the acquired asset's net sales that is accounted for by long-term care fee (including residents’ co-payment portion).
(Note 3) “Proportion of one-time entrance fee amortization income” refers to the proportion of the acquired asset's net sales that is accounted for by one-time entrance fee amortization income(*) Data are based on information on business income and expenditures from October 2018 to September 2019 disclosed by the respective operators. Exceptions are Silver Heights Hitsujigaoka No. 3
for which these are based on information on business income and expenditures from September 2018 to August 2019.

■ Portfolio Occupancy Rates(%)
100

Total resident capacity (right axis)(persons)
2,000

Occupancy rate (left axis)

94.1%
80

1,600

60

1,200

40

800

20

400

0
April 2016

0
October 2016

Stableoccupancy rates

April 2017

October 2017

April 2018

October 2018

October 2019

・The overall occupancy rate rose by 0.9 percentage points from 93.2% at the end of April 2019 to 94.1% at the end of October 2019.
・The period average rose by 1.5 percentage points from 92.2% for the 10th Fiscal Period to 93.7% for the 11th Fiscal Period.
・With each property’ s occupancy rates improving and no properties having significant drops, the occupancy rates remained at the highest
level since listing for both period-end and period-average.

(Note) Occupancy rates are obtained by dividing the number of residents based on interviews with all facilities at the end of each month, by resident capacity.

8

April 2019

Stable Management Strategy
Concluding long-term fixed rent lease agreements

Stable Management Strategy■ Lease Agreements with Highly Reliable Operators
Number of facilities Number of rooms
operated (cases) operated (rooms)(Note 1 and 2)(Note 1)

Operator
Sompo Care Inc.

436

25,740Nichiigakkan Co., Ltd.

428

13,923

Wisnet Co., Ltd.

123

3,465

HITOWA Care Services Co., Ltd.

117

7,042

Sawayaka Club Co., Ltd.

85

4,943

Charm Care Corporation
Super Court Co., Ltd.
Cedar Co., Ltd.
Anabuki Medical Care Inc.
Nihon Kaigo Iryo Center Co., Ltd.
Silver Heights Sapporo Co., Ltd.

53
48
42
31
21
3

3,692
3,209
2,254
1,390
905
321

Established

Attributes

Subsidiary of Sompo Holdings, Inc., a company listed on the first section of the Tokyo Stock
May 1997 Exchange
August 1973 Listed on the first section of the Tokyo Stock Exchange
Subsidiary of Sohgo Security Services Co., Ltd. a company listed on the first section of theTokyo Stock Exchange
November 2006 December 2004 Subsidiary of Uchiyama Holdings Co., Ltd., a company listed on the first section of the Tokyo
Stock Exchange
August 1984 Listed on the first section of the Tokyo Stock Exchange
May 1995 April 1981 Listed on JASDAQ Standard on the Tokyo Stock Exchange
June 2009 Subsidiary of Anabuki Kosan Inc., a company listed on the first section of the Tokyo Stock Exchange
October 1997 December 1961 January 1998

(Note 1) “Number of facilities operated” and “Number of rooms operated” indicate the number of facilities and the number of rooms for fee-based homes for the elderly, group homes and elderly housing withsupportive services based on operators’ websites and interviews with them (as of October 31, 2019).
(Note 2) Operators are indicated in order of the number of facilities they operate.

■ Overview and Status of Management Back-Up Agreement (as of December 19, 2019)

Backup operators
Investment
Corporation

Management

Asset
Manager

Hokkaido Area

No. of Operators: 7

Chubu Area

Ownership

Healthcare
facility A

Operator A

Healthcare
facility B

Operator B

Healthcare
facility C

Operator C

Each operator has
concluded amanagement
back-upagreement with NHI.
Discuss handoverof operation to otheroperators in caseof contingency

No. of Operators: 5

Chugoku Area

No. of Operators: 5
九州地方 Area
KyushuNo. of Operators: 6

Tohoku Area

No. of Operators: 6

Kanto Area

No. of Operators: 8

Kinki Area

No. of Operators: 10

Shikoku Area

Management Back-Up Contractors

No. of Operators: 4

Properties Renovated in the 11th Fiscal Period
・With “Sompo Care LAVIERE Hiroshima Hikarigaoka” constructed approximately 14 years ago and “Alpha Living Takamatsu Hyakkenmachi”
constructed approximately 10 years ago, repair work for maintaining the esthetic appearances has been implemented in order to stay competitive
with rival properties in the surrounding area.
・Proactive implementation of necessary repair work has led to higher satisfaction of not only the residents and their families but also of facility
employees, and has also resulted in a stronger relationship with the operator.

■ Sompo Care LAVIERE Hiroshima Hikarigaoka (Acquisition price: 960 million yen)

■ Alpha Living Takamatsu Hyakkenmachi (Acquisition price: 605 million yen)

Site Features: Located approximately 1.1km from
Hiroshima Station on the JR Sanyo Main Line
Property Features: The Property provides rooms of
18m2 or more, which is the standard size forrooms designed for people requiring long-termcare, and the rooms are equipped with sink, toilet
and bed.

Site Features: Located approximately 1.1km from Takamatsu
Station on the JR Yosan Line
Property Features: The Property provides private rooms ofapproximately 27m2, which is larger than the standard size forfacilities designed for independent elderly people, and therooms are equipped with mini-kitchen, bathroom, sink andtoilet.

Renovation of exterior walls (Construction cost: 14 million yen)
Before construction
work

After construction
work

Renovation of exterior walls (Construction cost: 4 million yen)
Beforeconstruction
work

After
construction
work

I. Overview of Nippon Healthcare Investment Corporation

9

Initiatives for ESG• The Asset Management Company positions initiatives for ESG (Environment, Social, Governance) as important management issues.
• NHI contributes to “Health and welfare for all” within “Achievement of Good Health and Longevity,” which is a priority of Japan in the SDGs
Implementation Guiding Principles set by the SDGs Promotion Headquarters.

ESG Policies (established March 2019)
In managing assets, NHI has determined that emphasizing environment, social, and governance (ESG) contributes to improving corporate value in themedium to long term, and we focus our efforts on the following items.

1. Initiatives for Environmental Conservation (Environment)
Through measures that contribute to environmental conservation and installation of facilities and equipment, etc., we will proactively promote
initiatives that lead to environmental conservation such as resource and energy conservation.

2. Connection with Society (Social)Through IR activities, etc., we proactively disclose information and are accountable to all of our stakeholders. By providing high-quality,
comfortable spaces, we fulfill our corporate social responsibility.

3. Corporate governance (Governance)
Adhering to laws and regulations and rules, we are aware of the importance of corporate ethics and compliance, and our decision-making is highly
transparent and rational.

Environment

Social■ Energy-Saving Initiatives■ Participation in Facility Events

Installation of solar panels Minna-no-ie Omiya Tsutsujigaoka Park

The Asset Management Company participated in seasonal events, summer festivals and other facility
events. There was interaction with care managers, local residents, facility staff and residents.

Annual reduction rate ofelectricity generation (Note)

11.2%(Note) Actual figures from November 2018 to October 2019

Sompo Care LAVIERE
Replacement of air-conditioners Hiroshima
Hikarigaoka

Reduction ratio of electricity
consumption (Note)

Minna-no-ie Omiya Tsutsujigaoka Park

Alpha Living Takamatsu Ekimae■ Gatherings on Facility Operation Hosted by Operators
The Asset Management Company participated in gatherings on facility operation hosted by operatorsfor residents and their families. The Asset Management Company explained who they are as well as
the relationship with the operators and initiatives taken for the facilities.

48.4%(Note) Forecast of manufacturer with air conditioning replacement

Irise Komae Bettei

Silver Heights Hitsujigaoka No. 3

Governance10■ Corporate Governance■ Compliance System

The Asset Management Company of NHI has established a governance system that gives
top priority to compliance, and strives to prevent conflicts of interest, manage risks andcomply with laws and regulations.

The Asset Management Company not only adheres strictly to all laws and regulations,rules, internal regulations and market rules related to its business but also focuses on
conducting sincere and fair corporate activities while fully understanding social norms.

Financial Conditions
Stable financial management by converting interest rates into fixed rates and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of October 31, 2019)
Term

Balance(million yen)

LenderInterest rate(%) (Note 1)

Mizuho Bank (Note 2)

500

0.524

Mizuho Trust & Banking (Note 2)

500

0.524

Current portion The Musashino Bank (Note 2)of long-termloans payable Resona Bank (Note 2)
Sumitomo Mitsui Trust Bank (Note 2)

500
500

Drawdown date

Repayment deadline

June 1, 2015

May 29, 2020
October 30, 2020

0.524

Fixed

0.474

October 15, 2015

500

0.138

April 28, 2016

April 30, 2020

Shinkin Central Bank (Note 2)

500

0.265

October 31, 2017

October 30, 2020

Mizuho Bank (Note 2)

800

0.402

The Musashino Bank (Note 2)

500

0.365

Shinsei Bank (Note 2)

500

0.467

Sumitomo Mitsui Trust Bank (Note 2)Long-term

Type of interest

1,200
400

0.390

Shinsei Bank (Note 2)

300

0.467

200

0.480

Resona Bank

1,200

0.352

Mizuho Bank

1,000

Mizuho Trust & Banking

Floating

0.352

700

Total of 8 banks

9,800

September 28, 2018

0.390

Fixed

Shinkin Central Bank (Note 2)
The Dai-ichi Life Insurance

October 31, 2017

October 31, 2022
April 28, 2022
September 29, 2023
October 31, 2022

October 31, 2018

September 29, 2023
October 31, 2023

October 31, 2019

October 31, 2024

0.352
-

-

-

-

(Note 1) Interest rates are rounded to the third decimal place.
(Note 2) For loans of which floating interest rates have been converted to, in effect, fixed rates through a swap agreement, interest rate indicates the rate after such conversion.

■ Ratio of Long-Term Loans and Short-Term Loans Payable

Current portionof long-termloans payable■ Ratio of Fixed Rates and Floating Rates

Floating rate

29.6%

30.6%

Long-term loans payable

Fixed rate

69.4%

70.4%

Average remaining period (Note 1)

LTV (Note 2)

3.0 years

46.8%(as of October 31, 2019)(Note 1) Average remaining period is rounded to the first decimal place.

(as of October 31, 2019)(Note 2) LTV is calculated based on total assets.

Indices that Include NHIMonth/year

Name of index

September 2015

Thomson Reuters GPR / APREA Composite Index

I. Overview of Nippon Healthcare Investment Corporation

11

II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

11th Period 10th Period 9th Period(

From May. 1, 2019
To Oct. 31, 2019)(

From Nov. 1, 2018
To Apr. 30, 2019)(

From May. 1, 2018
To Oct. 31, 2018)(

8th Period
From Nov. 1, 2017
To Apr. 30, 2018)(

7th Period
From May. 1, 2017
To Oct. 31, 2017)

(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
708
705
698
698
698
Rental revenues
708
705
698
698
698
Operating expenses
425
424
426
425
425
Property-related expenses
297
299
290
299
297
Operating income
283
281
272
273
273
Ordinary income
255
257
244
247
245
Net income
254
257
243
247
244
(2) Properties, etc. (as of end of period)
Total assets
20,96221,01921,06821,146
21,218[period-on-period percentage changes][-0.3%][-0.2%][-0.4%][-0.3%][-0.2%]
Interest-bearing liabilities
9,800
9,800
9,800
9,800
9,800
Net assets
10,226
10,293
10,345
10,412
10,474[period-on-period percentage changes][-0.7%][-0.5%][-0.6%][-0.6%][-0.6%]
Unitholders’ capital, net
Note 2
9,972
10,037
10,102
10,166
10,229(3) Distributions
Total distribution amount
319
321
308
311
308
Total distribution of retained earnings
253
256
243
247
245
Total distribution in excess of retained earnings
66
65
65
64
63
Dividend payout
100%
100%
100%
100%
100%
(4) Per Unit Information
Total number of units issued (units)
74,632
74,632
74,632
74,632
74,632
Net assets per unit (yen)137,012137,920
138,613
139,516
140,337
Distribution per unit (yen)
4,279
4,307
4,130
4,163
4,124
Distribution amount from earnings per unit (yen)
3,399
3,437
3,260
3,303
3,274
Distribution amount in excess of earnings per unit (yen)
880
870
870
860
850
(5) Financial Indicators
ROA
1.2%
1.2%
1.2%
1.2%
1.2%
Notes 3and 4[annual rate][2.4%][2.5%][2.3%][2.4%][2.3%]
ROE
2.5%
2.5%
2.3%
2.4%
2.3%
Notes 4and 5[annual rate][4.9%][5.0%][4.6%][4.8%][4.6%]
Capital ratio
48.8%
49.0%
49.1%
49.2%
49.4%
[period-on-period percentage changes][-0.2%][-0.1%][-0.1%][-0.1%][-0.1%]LTV (loan to value)
46.8%
46.6%
46.5%
46.3%
46.2%
Property leasing cash flows (NOI)
Note 6
614
609
607
597
596
(6) Other Referential Information
Number of investment properties
23
23
22
22
22
Number of tenants
Note 7
23
23
22
22
22
Total rentable area (m2)
67,903.84 67,903.84 67,298.83 67,298.83 67,298.83
Occupancy rate
Note 8100.0%
100.0%
100.0%
100.0%
100.0%
Depreciation
204
203
200
198
196
Capital expenditures
13
19
32
26
60
(Note 1) Operating revenues, etc. do not include consumption taxes, etc.
(Note 2) The indicated amounts are unitholders’ equity less deduction amount of unitholders’ equity.
(Note 3) ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100(Note 4) Annualized figures are calculated by using the asset management period of the respective fiscal period; 184 days for the 7th Fiscal
Period; 181 days for the 8th Fiscal Period; 184 days for the 9th Fiscal Period; 181 days for the 10th Fiscal Period and 184 days for the
11th Fiscal Period.
(Note 5) ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100(Note 6) Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation(Note 7) Number of tenants is the total number of end tenants.
(Note 8) Occupancy rate: Total leased area ÷ Total rentable area × 100

12

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Nippon Healthcare Investment Corporation (hereinafter referred to as “NHI”) was established on January
7, 2014 in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951;
including amendments thereto) (hereinafter referred to as the “Investment Trusts Act”) with Daiwa Real Estate
Asset Management Co. Ltd. (hereinafter referred to as the “Asset Management Company”) as the founder. After its
establishment, NHI conducted an additional issuance of investment units through private placement (18,800 units)
on April 3, 2014. NHI commenced actual management with the acquisition of eight properties on March 28, 2014 byusing the proceeds from the concerned capital increase through private placement and loans.
After accumulating a track record for roughly seven months after the start of asset management, in the previous
fiscal period, NHI conducted a public offering through the issuance of an additional 39,000 investment units on
November 4, 2014. On the following day, NHI made additional acquisitions of six properties concurrently with thelisting on the REIT Securities Section of the Tokyo Stock Exchange (Stock code: 3308). In the 3rd Fiscal Period,
NHI made additional acquisitions of three properties with borrowing and cash on hand, and in the 4th Fiscal Period,
NHI implemented an additional issuance of investment units through public offering (12,130 units) on November
17, 2015 and additionally acquired four properties. Furthermore, in the 5th Fiscal Period, NHI made an additional
acquisition of one property on October 6, 2016 with borrowing and cash on hand and in the 10th Fiscal Period, NHI
made an additional acquisition of one property on December 20, 2018 with cash on hand. Through these additional
acquisitions of a property, the total acquisition price of NHI properties is 19,712 million yen as of October 31, 2019.
As the REIT specializing in healthcare facilities in that it invests solely in properties of which the principal use ishealthcare facilities, NHI effectively utilizes investor capital to initiate expansion of supply of high-quality healthcare
facilities that provide users with high-standard services, while at the same time produce ample and dependable
returns to investors for further capital circulation. In this way, NHI aims at creating a new value cycle for healthcare
facilities and the services provided, together with investors. Through these efforts, NHI would like to contribute to therealization of Japan’s major policy to improve the residential environment for the elderly by effectively utilizing private
sector funds.

(2) Investment Environment and Management Performance(A) Investment Environment (from May 1, 2019 to October 31, 2019)
NHI was established to address Japan’s structural problem of age demographics where the younger
population is decreasing and the ratio of elderly people is increasing, and the associated social demand
for the enhancement of private nursing homes and other facilities for the elderly, which are thought to belacking.
Japan has the population of the elderly aged 65 years or over (hereinafter referred to as the elderly
population) accounting for approximately less than 30% of the total population as of November 1, 2019(according to the Ministry of Internal Affairs and Communications’ “Population Estimates” announced on
November 20, 2019), and the population of the elderly is forecast to continue to account for an
increasingly greater proportion and the population of the elderly living alone is forecast to continue togrow. There is thus recognized to be sufficient potential for greater development of housing for the elderlywith nursing care services, etc. that are designed for the elderly to reside (referring to “silver housing”(public housing for the elderly), “good rental housing for the elderly,” “elderly housing with supportive
services,” “fee-based homes for the elderly” and “low-cost homes for the elderly;” the same shall apply
hereinafter).
The Ministry of Land, Infrastructure, Transport and Tourism has set as a policy target that the ratio of
housing for the elderly to the elderly population shall be 4% in 2025.
In this manner, as social demand is mounting for healthcare facilities – particularly, private nursing
homes and other facilities for the elderly – and the enhancement of private nursing homes and otherfacilities for the elderly is one of the priority tasks even as a national policy, NHI will focus investment for
the time being on private nursing homes and other facilities for the elderly among healthcare facilities andthereby seize opportunities to earn cash flows arising from the mounting social demand.
(B) Management Performance
In the 11th Fiscal Period (fiscal period ended October 31, 2019), NHI acquired no investment properties.
Concerning the properties held as of the end of the 11th Fiscal Period (October 31, 2019), the leasable floorarea was 67,903.84m2 and the occupancy rate was 100.0%.
II. Asset Management Report13(3) Overview of Capital Procurement(A) Procurement of Funds for Repayment of Borrowings
In the 11th Fiscal Period (fiscal period ended October 31, 2019), NHI conducted the following borrowingof funds for repayment of borrowings.
(a) In order to procure funds for repayment of a total of 2,900 million yen of borrowings from Resona Bank
Ltd., Mizuho Bank, Ltd. and Mizuho Trust & Banking Co., Ltd., which were due for repayment on
October 31, 2019, NHI conducted borrowings of the same amount from each of the respective banks
on the same day.
(B) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 11th
Fiscal Period (October 31, 2019) stood at 9,800 million yen (all long-term debt). The balance of the current
portion of long-term debt stood at 3,000 million yen. In addition, the average remaining period of interestbearing liabilities as of the end of the 11th Fiscal Period stands at 3.0 years.
The unitholders’ capital (net) was 9,972 million yen, and the total number of units issued was 74,632
investment units as of the end of the 11th Fiscal Period.
(4) Capital Expenditures During the 11th Fiscal Period
The following summarizes the main construction work that constitutes capital expenditures conductedduring the 11th Fiscal Period. Capital expenditures for the 11th Fiscal Period amounted to 13 million yen and,
when combined with the 26 million yen in repair expenses charged to 11th Fiscal Period expenses, totaled 39
million yen in construction work implemented.
Name of Property
Expenditure
Purpose
Period(Location)(Millions of yen)
Sompo Care LAVIERE Hiroshima
Renewal of air conditioning From: May 2019
Hikarigaoka
4equipment in dwelling units
To: May 2019
(Hiroshima City, Hiroshima)
Other
Total

From: May 2019
To: October 2019913(5) Overview of Financial Performance and Distributions
As a result of the management described above, NHI posted financial performance for the 11th Fiscal Periodof 708 million yen in operating revenue, 283 million yen in operating income, 255 million yen in ordinary incomeand 254 million yen in net income.
Concerning distributions, to ensure that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation on
investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (hereinafter referred to as the “Special Taxation Measures Act”)), NHI decided to
distribute the entire amount of unappropriated retained earnings, excluding fractions of the distribution amount
per unit that are less than 1 yen. Accordingly, NHI declared a distribution amount per unit of 3,399 yen.
In addition, in principle, NHI adopts a policy of implementing cash distributions in excess of earnings
uninterruptedly every fiscal period in accordance with the distribution policy set out in the articles ofincorporation (Note). Based on this policy, NHI decided to distribute 65,676,160 yen, which is the amountroughly equivalent to 32% of the 204 million yen in depreciation for the 11th Fiscal Period, as reimbursement ofinvestments in capital. Accordingly, NHI declared a distribution amount in excess of earnings per unit of 880
yen.

(Note) NHI adopts a policy of implementing uninterrupted distributions in excess of earnings (reimbursement of investments in capital) in an amount not toexceed 40% of depreciation in every accounting period within the scope that would not have adverse impact on the financial position of NHI after
setting aside the cash and deposits that NHI deems appropriate, taking into account the status of establishment of lines of credit, etc., in order to notaffect long-term repair plans in light of the capital expenditures for each accounting period assumed based on the long-term repair plans and to meetneeds for funds (new acquisition of investment assets, repairs and capital expenditures required to maintain and enhance portfolio assets, NHI’s
working capital, repayment of obligations, payout of distributions, etc.).
The six-month average amount of the sum total amount of emergency repair expenses, short-term repair expenses and long-term repair expenses
stated in the engineering report by Tokio Marine & Nichido Risk Consulting Co., Ltd., Assets Research and Development Inc. and ERI Solution Co.,
Ltd. for all assets held as of the end of the 11th Fiscal Period (23 properties) is 37 million yen.

14

3. Future Management Policy and Tasks(1) Investment Environment
Japan has the population of the elderly accounting for approximately less than 30% of the total population,and the population of the elderly is expected to continue to account for an increasingly greater proportionand the population of the elderly living alone is expected to continue to grow. With the development of
medical technology, among other factors, the average life expectancy at birth for Japanese people is at 81.25
years for males and 87.32 years for females according to the Ministry of Health, Labour and Welfare’s“Abridged Life Tables for Japan 2018,” while record-highs were set in terms of the population aged 65 years
or over at 36 million people and the proportion of the elderly population is at 28.3% of the total population of
126 million as of November 1, 2019 according to the Ministry of Internal Affairs and Communications’“Population Estimates” (announced on November 20, 2019).
According to the National Institute of Population and Social Security Research’s “Population Projections forJapan (2017),” the total population will increase to 123 million people, the elderly population to 37 million
people and the proportion of the elderly population to 30.0% in 2025 and then, while the total population will
decrease by approximately 38 million people from that at present to 88 million people, the elderly population
will reach 34 million people and the proportion of the elderly population to 38.4% in 2065.
To provide for future growth in demand for housing for the elderly, the Ministry of Land, Infrastructure,
Transport and Tourism has set as a policy target that the ratio of housing for the elderly to the elderly
population shall be 4% by 2025.
In such an environment, there is recognized to be sufficient potential for greater development of housing forthe elderly with nursing care services, etc. that are designed for the elderly to reside through effective
utilization of private sector funds.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
NHI implements the following measures to earn stable revenue and serve to maintain and enhanceunitholder value.
(a) Stabilization of earnings
In principle, NHI shall invest in properties with the actual remaining lease contract period at the timeof acquisition of 10 years of more, taking into account also the possibility of contract renewal. In viewof lease agreements concluded between NHI or trustees and operators realizing conversion of
expenses borne by operators into fixed rates and stabilization of earnings of NHI, the policy shall be to
make the lease agreements of content that, in principle, operators pay a fixed amount of rent. The
lease agreements with operators for the assets that NHI has acquired are all fixed-rent agreements.
(b) Criteria and methods for selecting operators
In the event of acquisition of healthcare facilities, not only the quality of the facilities as real estate, butalso the creditworthiness, operational capabilities, etc. of the operators operating the facilities are
regarded as important factors by NHI in realizing stable occupancy. This is because the operators
being capable of providing services of a quality and type that matches the entrance fee, monthly
service fee, etc. in order to be the residents’ choice and the operators being capable of operating thefacilities continuously are regarded as important factors in terms of also the profitability and asset valueof healthcare facilities.
(c) Employment of “Backup Operator Membership”
NHI has concluded an agreement on backup of operational management with the operators. The
main purpose of said agreement is that, in the event that a lease agreement for a healthcare facility
held by NHI has ended or is expected to end due to contract termination, contract cancellation or otherreason, where NHI requests the operator to operate the healthcare facility by conclusion of a new leaseagreement with NHI, the operator shall sincerely discuss the request. In addition, NHI shall consider
concluding a similar agreement with also the operators of healthcare facilities to be acquired in the
future. Such relationship by agreement with operators is referred to as “Backup Operator Membership.”

II. Asset Management Report15

(B) Investment Strategy for New Properties
NHI aims to realize stable external growth through not only leveraging the track record and network of
the Asset Management Company, but also sourcing property information, etc. by working in collaboration
with the sponsor group and adviser.
(a) Track record and network of the Asset Management Company
The Asset Management Company is striving for property acquisitions that utilize the wide range ofproperty sourcing channels based on strong relationship building with various related parties (businesscompanies, financial institutions, major real estate brokerage companies and real estate brokerage
parties, etc.) accumulated through asset management of Daiwa Office Investment Corporation (balanceof assets for which management is entrusted as of the end of November 2019: approximately 461
billion yen), Japan Rental Housing Investments Inc. (balance of assets for which management is
entrusted as of the end of November 2019: approximately 227.8 billion yen), Daiwa Residential Private
Investment Corporation (balance of assets for which management is entrusted as of the end of
November 2019: approximately 121.8 billion yen) and Daiwa Hotel Private Investment Corporation(balance of assets for which management is entrusted as of the end of November 2019: approximately
40.7 billion yen). In addition, in order to expand and boost opportunities to acquire healthcare facilities
in which NHI invests, the Asset Management Company has installed an investment team specializing in
healthcare facilities and is promoting also the building of relationships with new suppliers and sourcesof property information (healthcare facility operators, developers, etc.) other than existing property
sourcing channels to collect property information.
(b) Sourcing of property information, etc. by working in collaboration with the sponsor group
The Asset Management Company believes that leveraging the network of branches and clients
possessed by the sponsor group, the Daiwa Securities Group, as needed will enable a search acrossJapan for operators that meet the selection criteria set forth by the Asset Management Company andconsideration of the feasibility of collaboration in property acquisition and development, commissioningof facility operation, etc., and thinks that expansion of property acquisition opportunities can thus beexpected. In addition, in order to expand property acquisition opportunities, NHI and the AssetManagement Company have concluded a pipeline support agreement with Daiwa ACA Healthcare Inc.,
which invests in nursing care facilities and hospitals in Japan and of which a stake of 66% is held by
the Daiwa Securities Group Inc.
(c) Sourcing of property information, etc. by working in collaboration with the adviser
The Asset Management Company has concluded an advisory agreement with AIP Healthcare Japan
GK, which implements an investment strategy that has been focused on the healthcare sector(hospitals and nursing care facilities) since 2001 and has been engaged in investment specializing inprivate nursing homes and other facilities for the elderly since 2008. Based on this agreement, theAsset Management Company receives advice on information provision, management and operation ofhealthcare facilities that are the investment assets of NHI, collaboration with operators, etc. The AssetManagement Company believes that this would contribute to realization of stable performance in themedium to long term of NHI.
(C) Financial Strategy
NHI will procure and manage funds in accordance with the following policy in pursuit of realization of
stable revenue and steady growth and efficient management of assets under management.
(a) Additional issuance of investment units
Additional issuance of investment units shall be implemented with agility, while comprehensively
taking into account the timing of acquisition of real estate that are to be newly acquired, ratio ofinterest-bearing liabilities to total assets (hereinafter referred to as “LTV”), economic and market
conditions, etc. and also taking into consideration the dilution of investment units.
(b) Borrowing of funds and issuance of investment corporation bonds
LTV shall be set at a level that takes heed of securing of financing capacity and, in principle, nohigher than 60%. However, LTV may temporarily exceed 60% for such purposes as acquisition of new
investment assets and reduction of refinancing risk.
In order to build a stable financial base and underpin future growth strategies, NHI shall not only
establish a so-called main-bank system of having leading financial institutions as its main banks ofaccount, but also make proactive efforts to diversify fund procurement sources through such means as
borrowing from multiple lenders and issuing investment corporation bonds.

16

Funds shall be procured appropriately by negotiating with several financial institutions over borrowing
costs, borrowing period, whether or not collateral is provided and other terms and conditions upon the
borrowing of funds, and comprehensively considering the terms and conditions while taking into
consideration the balance of interest rate trends, market level, financial agility and security, lendercomposition and other factors.
In order to reduce the risk of interest rate fluctuations and refinancing risk, NHI shall consider
extending financing periods, converting interest rates to fixed rates, staggering repayment dates,
introducing highly-flexible financial covenants, etc. as needed.
NHI shall consider securing committed, revolving or other lines of credit as needed for agile
procurement of various required funds.
(c) Fund management
NHI shall retain at all times the cash and deposits that NHI deems appropriate, taking into accountalso the status of establishment of lines of credit, etc., in order to meet needs for funds (newacquisition of investment assets, repairs and capital expenditures required to maintain and enhance
portfolio assets, NHI’s working capital, repayment of obligations, payout of distributions, etc.).
NHI shall pursue efficient fund management whereby, of the amount equivalent to depreciation, theamount remaining after setting aside cash and deposits shall be allocated to implementing cash
distributions in excess of earnings to unitholders uninterruptedly every fiscal period in an amount not toexceed 40% of depreciation in every accounting period, comprehensively taking into account NHI’s
surrounding economic environment and real estate market trends, the status of portfolio assets andfinancial status of NHI and other factors.
There may be cases where surplus funds will be invested into securities and monetary claims that arehighly secure and liquid.
Derivative transactions (Article 2, Paragraph 6 of the Investment Trusts Act) shall be limited to thosemanaged for the purpose of hedging the risk of fluctuations in interest rates on the liabilities of NHI.
(D) Merger of NHI and JRH
NHI and Japan Rental Housing Investments Inc. (hereinafter referred to as “JRH”; and together with NHI,
hereinafter collectively referred to as “both REITs”) resolved at their respective board of directors’ meetings
held on November 19, 2019, to implement an absorption-type merger (hereinafter referred to as the“Merger”) with NHI as the absorbed corporation and JRH as the surviving corporation with the effective
date being April 1, 2020; and entered into a merger agreement (hereinafter referred to as the “Merger
Agreement”) dated November 19, 2019, based on the judgement that the Merger will enable both REITs tofurther grow in the future and thereby maximize unitholders’ value by securing earnings and stabilizing andimproving distribution.
(E) Schedule of Capital Expenditures
The following summarizes the main capital expenditures in line with currently planned construction
works for renovation, etc. Furthermore, the scheduled construction amounts include portions that will becharged as expenses in terms of accounting.
Name of Property(Location)

Purpose

Sompo Care LAVIERE Hiroshima Hikarigaoka Renewal of(Hiroshima City, Hiroshima)
elevator equipment
Silver Heights Hitsujigaoka No. 3 (Sapporo
Renewal ofCity, Hokkaido)
elevator equipment
Sawayaka Heart Life Nishikyogoku
Renewal of elevator(Kyoto City, Kyoto)
equipment
Minna-no-ie Omiya Tsutsujigaoka Koen
Renewal of(Saitama City, Saitama)
elevator equipment
Super Court JR Nara-Ekimae (Nara City,
Renewal ofNara)elevator equipment
Sompo Care LAVIERE Kinugasayama Koen Renewal of(Yokosuka City, Kanagawa)
elevator equipment
Nichii Care Center Fukushima Omori
Renewal of(Fukushima City, Fukushima)
elevator equipment

Estimated Cost
(Millions of yen)
Payment Cumulative
Estimated Period
for theTotal current
amountpaid
periodFrom: March 2020
7––
To: March 2020
From: March 2020
5––
To: March 2020
From: March 2020
5––
To: March 2020
From: March 2020
4––
To: March 2020
From: March 2020
4––
To: March 2020
From: March 2020
3––
To: March 2020
From: March 2020
2––
To: March 2020

II. Asset Management Report17III. Balance Sheets
As of October 31, 2019 and April 30, 2019

(Thousands of yen)

As of
October 31, 2019

As ofApril 30, 2019

AssetsCurrent Assets:
Cash and cash equivalents [Notes 3, 4 and 5]

1,703,571

1,584,104

Prepaid expenses

21,377

15,237

Other current assets

2,233

1,893

Total Current Assets

1,727,181

1,601,234

Land in trust accounts

8,233,176

8,233,176

Buildings and structures in trust accounts

12,796,504

12,791,539

Machinery and equipment in trust accounts

19,17019,170Tools, furniture and fixtures in trust accounts

61,45153,794–

1,080

Less: accumulated depreciation(1,952,799)(1,749,236)

Leasehold rights in trust accounts

40,88640,88619,198,388

19,390,409

Right of trademark

101

112

Software15

382

Lease and guarantee deposits

10,00010,000Long-term prepaid expenses

26,467

17,117

Deferred tax assets [Note 12]14

1436,597

27,62520,962,166

21,019,268

Investment Properties, at cost: [Notes 4, 6 and 7]

Construction in progress in trust accounts

Total Investment Properties, net
Other Assets:

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

18

(Thousands of yen)

As of
October 31, 2019

As ofApril 30, 2019

Liabilities
Current Liabilities:
Operating accounts payable

22,562

21,3953,000,000

3,400,000

71,37660,926884895

Accrued consumption taxes

1,149

847

Rent received in advance

86,877

86,817562

528

Other current liabilities

2,873

4,215

Total Current Liabilities

3,186,283

3,575,623

Long-term debt [Notes 4, 5 and 10]

6,800,000

6,400,000

Tenant security deposits [Note 5]

750,376

750,376

7,550,376

7,150,376

10,736,659

10,725,999

10,504,334

10,504,334

Deduction from unitholders’ capital(532,540)(467,610)

Unitholders’ capital, net

9,971,794

10,036,724

253,713

256,545

10,225,507

10,293,269

Total Net Assets

10,225,507

10,293,269

Total Liabilities and Net Assets

20,962,166

21,019,268

Long-term debt due within one year [Notes 4, 5 and 10]
Accounts payable – other
Income taxes payable

Deposits received

Long-Term Liabilities:

Total Long-Term Liabilities
Total Liabilities

Net Assets [Notes 9 and 13]
Unitholders’ Equity:
Unitholders’ capital

Units authorized: 10,000,000 units
Units issued and outstanding: 74,632 units
Retained earnings
Total Unitholders’ Equity

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

III. Balance Sheets

19IV. Statements of Income
For the fiscal periods ended October 31, 2019 and April 30, 2019

(Thousands of yen)

For the fiscal period ended For the fiscal period ended
October 31, 2019
April 30, 2019
Operating Revenues and Expenses
Operating Revenues:
Rental revenues [Note 8]

707,645

705,128

707,645

705,128

296,755

298,978

Asset management fees
Asset custody fees
Administrative service fees
Trust fees

58,472731
10,3836,601

57,654732
10,434
6,608

Directors’ compensation
Audit fees

4,800
6,000
40,8554,800
6,000
38,870424,597
283,048

424,076
281,052

2
394
–
49

2
143
4,504
176

445

4,825

22,003
6,927

21,645
6,805

28,930254,563

28,450257,427

Income Before Income Taxes
Income taxes – current
Income taxes – deferred

254,563

257,427

884
1

894
(1)

Total Income Taxes [Note 12]
Net Income
Retained Earnings Brought Forward

885
253,67835
253,713893
256,534
11
256,545

Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 8]

Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Insurance income
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Borrowing expenses
Total Non-Operating Expenses
Ordinary Income

Retained Earnings at End of Period

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

20

IV. Statements of Income

V. Statements of Changes in Net Assets
For the fiscal period ended April 30, 2019

Balance as of October 31, 2018
Distributions in excess of retained
earnings
Distributions of earnings
Net income
Balance as of April 30, 2019

(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders' Capital, Net
Capital74,632 10,504,334(402,680) 10,101,654
–

–

–
–
–
–
74,632 10,504,334(64,930)

Retained
Earnings

243,311 10,344,965(64,930)––––(467,610) 10,036,724

For the fiscal period ended October 31, 2019

Total

–

(64,930)(243,300)(243,300)
256,534
256,534
256,545 10,293,269(Thousands of yen)

Deduction
Number of Unitholders’fromUnitholders’Units
CapitalUnitholders' Capital, Net
Capital74,632 10,504,334(467,610) 10,036,724

Balance as of April 30, 2019
Distributions in excess of retained––(64,930)(64,930)
earnings
Distributions of earnings––––
Net income––––
Balance as of October 31, 201974,632 10,504,334(532,540) 9,971,794
The accompanying notes are an integral part of these financial statements.

Retained
Earnings

Total

256,545 10,293,269–(64,930)(256,510)(256,510)
253,678
253,678
253,713 10,225,507

VI. Statements of Cash Flows
For the fiscal periods ended October 31, 2019 and April 30, 2019
For the fiscal period
ended
October 31, 2019
Cash Flows from Operating Activities:
Income before income taxes
254,563
Depreciation and amortization
203,942Interest expense
22,003
Decrease (Increase) in prepaid expenses(6,140)
Increase (Decrease) in accounts payable
13,932
Increase (Decrease) in rent received in advance60
Decrease (Increase) in long-term prepaid expenses(9,350)Cash payments of interest expense(22,482)(901)
Other, net
Net Cash Provided by Operating Activities
455,627
Cash Flows from Investing Activities:
Payments for purchases of investment properties in trust(13,856)
accounts–
Proceeds from tenant security deposits
Net Cash Used in Investing Activities(13,856)
Cash Flows from Financing Activities:
Proceeds from long-term debt
2,900,000
Repayments of long-term debt
(2,900,000)
Payments of distributions of earnings(257,180)(65,124)
Payments of distributions in excess of retained earnings
Net Cash Used in Financing Activities(322,304)
Net Change in Cash and Cash Equivalents
119,467
Cash and Cash Equivalents at Beginning of Period
1,584,104
1,703,571
Cash and Cash Equivalents at End of Period (Note 3)
The accompanying notes are an integral part of these financial statements.

(Thousands of yen)

For the fiscal period
ended
April 30, 2019257,427
202,985
21,644
6,195(17,890)
1,678
5,371
(21,166)(271)
455,973(435,516)
20,160(415,356)––(243,342)(64,924)(308,266)(267,649)
1,851,753
1,584,104

V. Statements of Changes in Net Assets
VI. Statements of Cash Flows21

VII. Notes to Financial Statements
For the fiscal periods ended October 31, 2019 and April 30, 2019

Note 1 – Organization and Basis of Presentation
Organization
Nippon Healthcare Investment Corporation (hereinafter referred to as “NHI”) was established on January 7,
2014 as an investment corporation in accordance with the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the “Investment
Trust Act”) by the founder (Daiwa Real Estate Asset Management Co. Ltd (hereinafter referred to as the “AssetManagement Company”)).
NHI is an externally managed real estate fund, established as an investment corporation. The AssetManagement Company is engaged in acquiring, managing, leasing, and renovating healthcare facilities of NHI.
Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Management Company.
On November 4, 2014, NHI had raised 5,616,000 thousand yen through an initial public offering of units. Those
units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of October 31, 2019, NHI had trust beneficiary interests in 23 healthcare facilities with approximately 67,904
square meters of healthcare facilities space and had leased space to 23 tenants. The occupancy rate for thehealthcare facilities was 100%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of NHI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
NHI maintains its accounting records in Japanese yen.
NHI’s fiscal period is a six-month period ending at the end of April and October of each year.

Note 2 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
Investment Properties
Investment properties are stated at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the properties. Investment properties balances are depreciated using the straight-line
method over the estimated useful lives. The estimated useful lives of the principal tangible fixed assets (including
assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

As of October 31, 20193-58 years
10-17 years
2-15 years

As of April 30, 20193-58 years
10-17 years
2-15 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add value to a property or prolong its useful life are expensed when incurred.

22

Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary
differences between the amounts of assets and liabilities for financial statements and for income tax purposes isrecognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, NHI capitalizes a portion of the real estate taxes that relate to a period from the purchasedate of each property until the end of the calendar year as part of the acquisition cost of the relevant property.
There were no capitalized real estate taxes for the fiscal period ended October 31, 2019. Capitalized real estatetaxes amounted to 52 thousand yen for the fiscal period ended April 30, 2019.
Consumption Taxes
Consumption taxes are excluded from transaction amount.
Non-deductible consumption taxes on acquisition of assets are included in the acquisition costs of the relevant
asset.
Hedge Accounting
NHI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation based on
its risk management policy. NHI utilizes derivative financial instruments such as interest-rate swap agreements only
for the purpose of hedging its exposure to changes in interest rates. NHI deferred recognition of gains or losses
resulting from changes in fair value of interest-rate swap agreements because its interest-rate agreements met thecriteria for deferral hedging accounting.
However, NHI applies special treatment to the interest-rate swap agreements that meet the criteria for such special
treatment. Under the special treatment, interest-rate swaps are not remeasured at fair value: instead, the net amount
paid or received under the interest-rate swap agreements is recognized and included in interest expense. The hedge
effectiveness for interest-rate swap agreements is assessed each fiscal period except for those that meet the criteriaof special treatment.
Revenue Recognition
Operating revenues consist of fixed rental revenues, which are recognized on an accrual basis over the life of eachlease.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For 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 sheet and income
statement accounts.

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as of
October 31, 2019 and April 30, 2019 consisted of the following:(Thousands of yen)

Cash and deposits
Cash and deposits in trust accounts
Cash and cash equivalents

As of October 31, 2019
1,232,364
471,207
1,703,571

As of April 30, 2019
1,130,312
453,792
1,584,104

VII. Notes to Financial Statements

23

Note 4 – Pledged Assets and Secured Liabilities
The carrying amount of assets pledged as collateral and the secured liabilities as of October 31, 2019 and April
30, 2019 were as follows:(Thousands of yen)

Assets pledged:
Cash and deposits in trust accounts
Land in trust accounts
Buildings and structures in trust accounts
Machinery and equipment in trust accounts
Tools, furniture and fixtures in trust accounts
Construction in progress in trust accounts
Leasehold rights in trust accounts
Total

As of October 31, 2019

Secured liabilities:
Long-term debt due within one year
Long-term debt
Total

As of April 30, 2019471,2078,233,176
10,866,913
16,71840,695–40,886
19,669,595

453,792
8,233,176
11,059,666
17,30938,292
1,080
40,886
19,844,201

3,000,000
6,800,000
9,800,000

3,400,000
6,400,000
9,800,000

Note 5 – Financial Instruments(For the fiscal periods ended October 31, 2019 and April 30, 2019)(1) Status of Financial Instruments(A) Policy for financial instruments
NHI procures funds through various financing methods (such as borrowings, issuance of investment
units) for acquisition and renovation of investment properties, payments of dividends and reimbursementof bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, NHI secures long-term fixed-rate borrowings with well-diversified maturities.
NHI manages surplus funds with safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are conducted only for the purpose of reducing risk of future interest rate
fluctuations.
(B) Types and risks of financial instruments and related risk management system
Proceeds from debt financing are used mainly for acquisition of investment properties. While these debts are
exposed to liquidity risk upon repayment, NHI manages the risk by maintaining the LTV ratio at low levels,
diversifying maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders
with particular focus on domestic financial institutions. Bank borrowings with floating interest rates are exposedto the risk of future interest rate fluctuations and NHI manages that by using derivative transactions such as
interest-rate swap agreements.
NHI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes of hedged
items and that of hedging items, and then verifies the ratio of both amounts of changes. Furthermore, NHI
omits assessment of hedge effectiveness for the interest-rate swap agreements which meet the criteria ofspecial treatment.
Execution and management of derivative transactions have been carried out based on the regulations
defined in the basic policy of risk management.
Tenant security deposits represent funds deposited by tenants, and NHI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving someparts of the funds.
Deposits are used for investing NHI’s surplus funds. These deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. NHI manages credit risk by restricting the tenor of thedeposit relatively short and setting a minimum credit rating requirement for the depository financial institutions.

24

(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. As certain assumptions are used for theestimation of fair value, the result of such estimation may differ if different assumptions are used. Also, thecontractual amounts of derivative transactions do not represent the market risk involved in these derivativetransactions.
(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of October 31, 2019 and April 30, 2019were as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded
from the following table.
(As of October 31, 2019)
Cash and cash equivalents
Total
Long-term debt due within one year
Long-term debt
Total
Derivative transactions(Thousands of yen)Book Value
1,703,571
1,703,571
3,000,000
6,800,000
9,800,000–

Fair Value
1,703,571
1,703,571
3,001,986
6,832,901
9,834,887–(As of April 30, 2019)
Cash and cash equivalents
Total
Long-term debt due within one year
Long-term debt
Total
Derivative transactions

Difference
–
–
1,986
32,901
34,887–(Thousands of yen)Book Value
1,584,104
1,584,104
3,400,000
6,400,000
9,800,000–

Fair Value
1,584,104
1,584,104
3,401,341
6,412,701
9,814,042–

Difference
–
–
1,341
12,701
14,042–

Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets(1) Cash and cash equivalents
As these instruments are settled in short period of time, their fair value and book value are nearly identical.
Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Long-term debt due within one year and long-term debt
For long-term debt due within one year and long-term debt with floating interest rates, their fair value andbook value are nearly identical and there are no significant changes in NHI’s credit risk after borrowing.
Therefore, for these items, their book value is assumed as their fair value. For long-term debt due within one
year and long-term debt with fixed interest rates, their fair value is based on the present value of principle andinterest cash flows discounted at the current interest rate estimated to be applied if similar new debt is enteredinto. However, the fair value of certain floating-rate long-term debt due within one year and long-term debt that
qualifies for the special treatment of interest-rate swaps is determined by discounting the sum of its principal
and interest payments net of any cash flows from the interest-rate swaps.

VII. Notes to Financial Statements25Derivative Transactions(1) Derivatives to which hedge accounting is applied(As of October 31, 2019)
Method of Hedge
Accounting
Special treatment forinterest rate swap
transactions(Thousands of yen)Type of Derivative
Transactions
Interest rate swap
transactions
Receive floating andpay fixed

Hedged Items

Contract Amount(due after one year)

Long-term debt
due within one
year and longterm debt

6,700,000(3,700,000)–(**)

6,700,000(3,700,000)

–

Total
(As of April 30, 2019)
Method of Hedge
Accounting
Special treatment forinterest rate swap
transactions

Fair Value(*)(Thousands of yen)Type of Derivative
Transactions
Interest rate swap
transactions
Receive floating andpay fixed

Hedged Items

Contract Amount(due after one year)

Long-term debt
due within one
year and longterm debt

9,600,000(6,200,000)–(**)

9,600,000(6,200,000)

–

Total

Fair Value(*)*The fair value is provided by the financial institution.
**The values of derivatives qualifying for special treatment of interest rate swap transactions are included in that of related long-term debt. This isbecause such swaps are handled together with hedged long-term debt.

2. Financial instruments whose fair value is extremely difficult to estimate
Tenant security deposits (with the book value of 750,376 thousand yen as of October 31, 2019 and that of
750,376 thousand yen as of April 30, 2019) that have been deposited from tenants are not marketable and theactual deposit period cannot be reliably determined, thus making it impossible to reasonably estimate their future
cash flows, and therefore, it is considered to be extremely difficult to estimate their fair value.
3. Redemption schedule for money claims(As of October 31, 2019)

Cash and cash equivalents
Total(As of April 30, 2019)

Cash and cash equivalents
Total

26

(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
1,703,571––––
1,703,571––––

Due after
5 years––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
1,584,104––––
1,584,104––––

Due after
5 years––

4. Redemption schedule for long-term debt
(As of October 31, 2019)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Long-term debt due within one year 3,000,000––––
Long-term debt–
– 2,900,000 1,000,000 2,900,000
Total
3,000,000– 2,900,000 1,000,000 2,900,000(As of April 30, 2019)

Due after
5 years–––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Long-term debt due within one year 3,400,000––––
Long-term debt
– 2,500,000
500,000 2,400,000 1,000,000
Total
3,400,000 2,500,000
500,000 2,400,000 1,000,000

Due after
5 years–––

Note 6 – Schedule of Tangible Fixed Assets of Investment Properties(Thousands of yen)
Investment properties as of October 31, 2019 and April 30, 2019 consisted of the following:		
As of October 31, 2019
As of April 30, 2019
Acquisition Accumulated Book value
Acquisition Accumulated Book value
costs
depreciation
costs
depreciation
Land in trust accounts
8,233,176–
8,233,176
8,233,176–
8,233,176

Buildings andstructuresin trust accounts
Machinery andequipment in trust
accounts
Tools, furniture andfixtures in trust
accounts
Construction inprogress in trust
accounts
Total

12,796,504(1,929,591)

10,866,913

12,791,539(1,731,873)

11,059,666

19,170(2,452)

16,71819,170(1,861)

17,30961,451(20,756)

40,69553,794(15,502)38,292

–

–

–

1,080

–

1,080

21,110,301(1,952,799)

19,157,502

21,098,759(1,749,236)

19,349,523

Note 7 – Investment and Rental Properties
NHI owns fee-based homes for the elderly, etc. (including land) in the three major metropolitan areas and core cities.
The book value, net change in the book value and the fair value of the investment and rental properties are as follows:(For the fiscal period ended October 31, 2019)
Book Value
ChangeAs of April 30, 2019
during the period(*1)
19,389,329(190,941)(For the fiscal period ended April 30, 2019)
Book Value
ChangeAs of October 31, 2018
during the period(*2)
19,158,095
231,234(Thousands of yen)

As of October 31, 201919,198,388

Fair value as of
October 31, 201924,225,000(Thousands of yen)

As of April 30, 2019
19,389,329

Fair value as ofApril 30, 201924,508,000(Note 1) The book value represents the acquisition costs less accumulated depreciation.
(Note 2) Significant changes(*1) For the fiscal period ended October 31, 2019, the major reason of decrease is depreciation (203,564 thousand yen).
(*2) For the fiscal period ended April 30, 2019, the major reason of increase is acquisition of one property (394,500 thousand yen). The major
reason of decrease is depreciation (202,607 thousand yen).
(Note 3) The fair values as of October 31, 2019 and April 30, 2019 represent the sum of appraisal values estimated by external real estate appraisers.

Income and loss from investment and rental properties for the fiscal periods ended October 31, 2019 and April 30,
2019 are disclosed in Note 8.

VII. Notes to Financial Statements

27

Note 8 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended October 31, 2019 and April 30, 2019 were as follows:(Thousands of yen)

A. Revenues from property leasing
Rental revenues
Total revenues from property leasing
B. Property-related expenses
Consignment expenses
Taxes and dues
Non-life insurance expenses
Repair expenses
Depreciation
Leasehold fees
Other property-related expenses
Total property-related expenses
C. Operating income from property leasing [A – B]

For the fiscal period ended
October 31, 2019

For the fiscal period endedApril 30, 2019707,645
707,645

705,128
705,128

14,12350,567
1,375
25,926
203,564
1,200–
296,755
410,890

13,282
49,915
1,406
30,496202,607
1,200
72
298,978
406,150

Note 9 – Net Assets
NHI issues only non-par value units in accordance with the Investment Trust Act and all of the issue prices of newunits are designated as stated capital. NHI maintains at least 50,000 thousand yen as the minimum amount of net
assets, as required by the Investment Trust Act.

Note 10 – Long-term debt due within one year and long-term debt
Long-term debt due within one year and long-term debt as of October 31, 2019 and April 30, 2019 consisted of thefollowing:(Thousands of yen)

Secured loans due 2019 to 2024, principally frombanks and insurance companies with interest rates
mainly ranging from 0.1% to 0.6%
Total

As of October 31, 2019

As of April 30, 2019

9,800,000

9,800,000

9,800,000

9,800,000[Note] The interest rates presented are daily weighted average interest rates. As for long-term debts due within one year and long-term debts whichwere hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of long-term debt due within one year and long-term debt asof October 31, 2019 were as follows:(Thousands of yen)

Due within one year
Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years

3,000,000–
2,900,000
1,000,000
2,900,000–

Note 11 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of October 31, 2019 andApril 30, 2019 were as follows:(Thousands of yen)

Due within one year
Due after one year
Total

28

As of October 31, 2019
1,413,378
8,583,414
9,996,792

As of April 30, 2019
1,413,378
9,238,431
10,651,809

Note 12 – Income Taxes
NHI is subject to income taxes in Japan. The effective tax rate on NHI’s income based on applicable Japanese
tax law was estimated as 0.35% for the fiscal period ended October 31, 2019 and as 0.35% for the fiscal period
ended April 30, 2019. The following table summarizes the significant differences between the statutory tax rates
and NHI’s effective tax rates for financial statement purposes.
For the fiscal period ended
For the fiscal period ended
October 31, 2019
April 30, 2019
Statutory tax rate
31.51%
31.51%
Deductible dividends(31.40)(31.40)
Others0.24
0.24
Effective tax rate
0.35%
0.35%
NHI was established as an investment corporation under the Investment Trust Act, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period
and other requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment
corporation is allowed to deduct the total amount of dividends, excluding distribution in excess of earnings, incalculating its taxable income under Japanese tax regulations.
The significant components of deferred tax assets and liabilities as of October 31, 2019 and April 30, 2019 wereas follows:(Thousands of yen)

As of October 31, 2019
Deferred tax assets:
Accrued enterprise tax
Total deferred tax assets
Net deferred tax assets

As of April 30, 2019
14
14
14

14
14
14

Note 13 – Per Unit Information
Information about net assets per unit and net income per unit as of October 31, 2019 and April 30, 2019 andfor the periods then ended were as follows. The computation of net income per unit is based on the daily
weighted average number of units outstanding during the period. The computation of net assets per unit isbased on the number of units outstanding at each period end.

Net assets at period end per unit
Net income per unit

For the fiscal period ended
October 31, 2019
137,012yen
3,399yen

For the fiscal period endedApril 30, 2019
137,920 yen
3,437 yen

Net income per unit is calculated by dividing the net income by the daily weighted average number ofinvestment units issued and outstanding. The diluted net income per unit is not stated as there are no diluted
investment units.
(Note) The basis for calculating the net income per unit is as follows.

For the fiscal period ended
October 31, 2019
253,678

For the fiscal period endedApril 30, 2019
256,534––

Net income available to ordinary unitholders

253,678

256,534

Average number of units during the period (units)

74,632

74,632

Net income (thousands of yen)Amount not available to ordinary unitholders(thousands of yen)(thousands of yen)VII. Notes to Financial Statements

29

Note 14 – Distribution
In accordance with the cash distribution policy described in Article 33-1-1 of the Articles of Incorporation of
NHI, NHI determines that the amount of distribution shall exceed the amount equivalent to 90% of its
distributable profit as stipulated in Article 67-15 of the Special Taxation Measures Law, and shall be up to its
earnings as the maximum amount. Following this policy, NHI has decided that it shall distribute 253,674,168 yen
for the fiscal period ended October 31, 2019, which is the maximum integral multiple to 74,632 units issued andoutstanding as the distribution of earnings, and 256,510,184 yen for the fiscal period ended April 30, 2019,
which is the maximum integral multiple to 74,632 units. In addition, NHI will continue to make distributions inexcess of earnings (refund of capital contribution to unitholders) every period in accordance with the cash
distribution policy described in Article 33-1-2 of the Articles of Incorporation of NHI. Based on the policy, NHI
has decided that it shall distribute 65,676,160 yen, which is calculated as the approximate equivalent of 32% of
203,564,063 yen of the depreciation amount posted for the fiscal period ended October 31, 2019, as
distributions in excess of earnings (refund of capital contribution to unitholders) and 64,929,840 yen for the fiscal
period ended April 30, 2019, which is calculated as the approximate equivalent of 32% of 202,606,601 yen of
the depreciation amount posted for the fiscal period ended April 30, 2019.
(Yen)

Unappropriated retained earnings
Distributions in excess of retained earnings
Deduction from unit holders’ capital
Distributions
Distributions of retained earnings
Distributions in excess of retained earnings
Total distributions
Retained earnings brought forward

For the fiscal period ended
October 31, 2019Total
Per unit
253,712,805

For the fiscal period endedApril 30, 2019Total
Per unit
256,544,639

65,676,160

64,929,840

253,674,168
65,676,160
319,350,328
38,637

3,399
880
4,279

256,510,184
64,929,840
321,440,024
34,455

3,437
870
4,307

Note 15 – Transactions with Related Parties(For the fiscal period ended October 31, 2019)
Classification
Name of company, etc.
Location
Capital stock (thousands of yen)
Business description
Percentage of voting rights, etc. held byrelated party (held in NHI)
Relation to the related party

Subsidiary of major unitholder
GK DA Healthcare 2
Minato-ku, Tokyo
300
Real estate business–

Acquisition of trust beneficial interests in real estate
Acquisition of trust beneficial interests in real estate (Note 1,
Nature of transaction
2, 3 and 4)
Amount of transaction (thousands of yen)
394,500
Account–
Balance at end of period (thousands of yen)–Consumption taxes are not included in transaction amounts.

(Note 1) Acquisition of trust beneficiary interests in real estate mentioned above is for Irise Komae Bettei, and the amount of transaction indicates theamount (purchasing amount for real estate, etc. indicated in the sales contract for trust beneficiary interests) that does not include expenses(taxes and dues, etc.) required for the acquisitions of the real estate, etc.
(Note 2) Terms of transaction with interested party are decided based on rules against conflict of interest, which are internal rules of the AssetManagement Company.
(Note 3) Terms of transaction are determined based on market prices.
(Note 4) NHI holds the quasi-co-ownership (30%) of the trust beneficial interests in the real estate of Irise Komae Bettei.

30Note 16 – Segment Information
For the fiscal periods ended October 31, 2019 and April 30, 2019
Segment Information
Segment information has been omitted as NHI has only one segment, which is the property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements ofincome and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for morethan 90% of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for morethan 90% of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of
the operating revenues recorded in the statements of income and retained earnings.

Note17 – Significant Subsequent Events(1) Conclusion of Merger Agreement between NHI and JRH
Both REITs resolved at their respective board of directors’ meetings held on November 19, 2019, to
implement the Merger with the effective date being April 1, 2020, and entered into the Merger Agreement
dated November 19, 2019.
(A) Purpose of the Merger
To date, both REITs have taken the following measures to ensure stable income over the medium tolong term and steady expansion of their assets, taking advantage of their respective characteristics. At
the same time, both REITs are also aware of the challenges they face.
JRH has achieved sustained dividend growth by taking advantage of steady demand for rental housingwith a focus on the three major metropolitan areas including the 23 wards of Tokyo, as well as otherregions, and by establishing a stable portfolio of 227.8 billion yen based on the total acquisition price.
However, JRH is affected by changes in the supply-demand conditions in the rental housing investment
market, as is the case with other residential J-REITs. For instance, the competition for acquisition ofsuperior properties has intensified under the continued low interest rate environment. In such a situation,
JRH has adopted a property replacement strategy with a view to improve the quality of its portfolio as
the top priority under the new medium-term targets announced by JRH in May 2019, and has been
replacing its owned properties steadily thereafter, but expects that it will take some period of time
(approximately three to five years) to complete the strategy.
NHI has developed its expertise on healthcare assets, a growing market, has established good
relationships with operators by engaging in numerous transactions with operators, and has accumulated
a track record of asset management under the backdrop of social demand for the enhancement ofprivate nursing homes and other facilities for the elderly under the macro environment of age
demographics where the youth population is decreasing and the ratio of elderly people is increasing. On
the other hand, there are constraints on opportunities for external growth due to factors such as
stagnation in its investment unit price due to the small scale of its portfolio assets.
Under such circumstances, given that both REITs are managed by the same asset manager andsponsored by the same company and that both REITs manage assets that can be considered as having
a certain degree of affinity in the framework of “places where people live and reside” for a wide range ofage groups from single-person households, DINKS (double-income households with no kids), andfamilies to senior households, expansion of their current respective investment targets from rental
housing/healthcare facilities to those with a certain degree of affinity in the above framework through the
Merger would enable JRH to secure investment opportunities in other asset classes when property
VII. Notes to Financial Statements

31acquisition opportunities decrease due to changes in the supply-demand conditions in the rental
housing investment market, as well as to secure opportunities to acquire healthcare facilities
warehoused by the same sponsor after the Merger. This would enable NHI to secure large-scale external
growth opportunities and improve stability in its portfolio income and risk diversification by increasing
the likelihood of equity financing through future issuance of new investment units as a result of
expansion of asset size and market capitalization. Therefore, both REITs believe that the Merger would
contribute to resolving the challenges faced as stated above. In addition, both REITs share the view thatas a result of industry reorganization and new entries led by major companies in the healthcare industry,the credit risk of healthcare operators, which had been an issue of concern, has declined and thereby
the cap rates of rental housing and healthcare facilities are now considered to be almost converging.
Accordingly, both REITs reached the conclusion that the Merger would combine the characteristics andstrengths of the two and recharacterize them as a REIT that “comprehensively provides comfortableliving spaces suited to each life stage” and it would therefore contribute to ensuring further growth in the
future and thereby maximize unitholders’ value by securing earnings and stabilizing and improving
distributions. Accordingly, both REITs entered into the Merger Agreement as of today.
(B) Method of Merger
JRH will be the surviving corporation under the absorption-type merger and NHI will be dissolved
upon the Merger.
(C) Merger Ratio

Allocation of units upon the Merger

JRH(Surviving corporation in
the absorption-type merger)
1

NHI(Absorbed corporation in
the absorption-type merger)
2.05(Note 1) The number of new JRH investment units to be issued upon the Merger: 152,995 investment units (scheduled)(Note 2) Fractions of less than one unit will arise with respect to the number of investment units to be allotted to the unitholders of NHI
through the allotment of 2.05 units of JRH per unit of NHI. These fractional units will be sold through a market transaction inaccordance with statutory provisions, and the proceeds from the sale will be delivered to the unitholders who are allocatedfractions in proportion to the size of their fractional units to be allocated.

(D) Payment on Merger
After the Merger, in lieu of cash distributions to the unitholders of NHI for NHI’s final accounting period
from November 1, 2019, to March 31, 2020, JRH, the surviving corporation, will, within a reasonable
period after the effective date of the Merger, make a payment on the Merger based on the distributableamount of NHI to the unitholders of NHI (the unitholders listed or recorded on the final unitholders
register of NHI as of the day immediately prior to the effective date of the Merger (excluding theunitholders of NHI who have demanded the purchase of their investment units pursuant to the provisionsof Article 149-3 of the Act on Investment Trusts and Investment Corporations (hereinafter referred to as
the “Allotted Unitholders”))) or the registered pledgees of investment units held by Allotted Unitholders,in an amount equivalent to the cash distributions for the abovementioned period (the payment will be
the amount of distributable profit of NHI as of the day immediately prior to the effective date of the
Merger divided by the number of investment units that is obtained by deducting (a) the number ofinvestment units held by the unitholders other than the Allotted Unitholders of NHI from (b) the total
number of investment units issued and outstanding of NHI as of the day immediately prior to theeffective date of the Merger (rounded down to the nearest yen). The same applies hereinafter.)(E) Overview of the fiscal period immediately preceding the Merger (fiscal period ended September 2019) of
the surviving corporation (JRH)Business activities: Managing assets of investment corporations by investing mainly in real estate, etc.
among other specified assets, based on the Investment Trusts Act
Operating revenue: 8,460 million yen
Net income:
3,364 million yen
Assets:227,187 million yen
Liabilities:
118,740 million yen
Net assets:
108,447 million yen(F) Date of the Merger
The Merger is scheduled to take effect on April 1, 2020.

32

(2) Decision on Acquisition of Assets
NHI concluded sales and purchase agreements concerning acquisition of the following assets on November
19, 2019, and decided on the acquisitions contingent upon the effectuation of the Merger, etc. The position
as well as the rights and obligations of the buyer in the sales and purchase agreement for the Assets to be
Acquired are scheduled to be succeeded from the Investment Corporation to JRH on April 1, 2020, which isthe effective date of the Merger.
Date of
Scheduledconclusion
Scheduledacquisition
Type of
Property nameLocation
of
sale
and
acquisition
Sellerprice
asset(thousands of yen) purchasedate(Note 1)agreement
Trust(Note 6)AIP Kachidoki-Ekimae beneficiary Chuo-ku,
8,150,000
Tokyo
interests
Trustbeneficiaryinterests
Trust
Aira no moribeneficiary
Higashi-Ofuna
interests
Trust
Aira no moribeneficiary
Shakujiikoen
interests
Aira no mori Edogawa- Trust
beneficiary
Shinozaki
interests
Trust
Senior Forest
beneficiary
Yokohama-Tsuzuki
interests
Trust
Sompo no ie
Toyonaka-Minamisone beneficiaryinterests
Trust
Irise Komae Bettei(additional acquisition) beneficiaryinterests
Alpha Living
Trust
Takamatsu
beneficiary
Konyamachi
interests
Good Time Living
TrustCenter-Minami,
beneficiary
Platesia Center-Minami interests
Good Time Living
Trust
Chibaminatobeneficiary
Kaigandori Platesia
interests
Chibaminato
Trust
Good Time Living
beneficiary
Yokohama-Tsuzuki
interests
PLAISANT GRAND
MINAMI YUKIGAYAGood Time Living
Senri-Hinatagaoka
Good Time Living
Nakamozu
Good Time Living
Kourigaoka
Good Time Living
KameidoGood Time Living
MikageTrustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Ota-ku,Tokyo

3,380,000(Note 8)

Yokohama-shi,
Kanagawa

2,271,195(Note 9)Nerima-ku,
Tokyo

2,070,000(Note 7)

Edogawa-ku,
Tokyo

1,499,307(Note 7)

Yokohama-shi,
Kanagawa

1,202,000(Note 10)

Toyonaka-shi,
Osaka825,000(Note 5)

Komae-shi,Tokyo920,500(Note 5)

Takamatsu-shi,
Kagawa1,225,000 November 19,
2019

Yokohama-shi,
Kanagawa

11,150,000(Note 11)

Chiba-shi,
Chiba

4,516,000(Note 11)

Yokohama-shi,
Kanagawa

4,064,000(Note 11)

Suita-shi,
Osaka

2,800,000(Note 11)

Sakai-shi,
Osaka

2,180,000(Note 11)

Hirakata-shi,
Osaka

2,120,000(Note 11)

Koto-ku,Tokyo

1,860,000(Note 11)Kobe-shi,Hyogo

1,820,000(Note 11)

April 2,2020

(Note 5)

VII. Notes to Financial Statements

33

Property name

Type of
asset

Trust
Good Time Living
Amagasaki-Shintoshin beneficiaryinterests
Trust
Good Time Living
beneficiary
Minami Senriinterests
Trustbeneficiaryinterests
Good Time Living
Trust
Chibaminatobeneficiary
Ekimaedori
interest
Trust
Good Time Living
beneficiary
Senboku-Izumigaoka
interests
Trust
Good Time Living
beneficiary
Ikeda-Midorigaoka
interests
Trust
Good Time Living
Nagatsuta-Minamidai beneficiaryinterests
Trust
Good Time Living
beneficiary
Saitama-Hasudainterests
Good Time Living
Trust
Nagareyamabeneficiary
Ichibankaninterests
Trust
Good Time Living
Nagareyama-Nibankan beneficiaryinterests
Trust
Good Time Living
beneficiary
Amagasaki-Ekimaeinterests
Total–
Good Time Living
Kobe-Tarumi

Date ofconclusion Scheduledof sale and acquisition(thousands of yen) purchasedate(Note 1)agreement
Scheduledacquisition
price

SellerAmagasaki-shi,
Hyogo

1,585,000(Note 11)

Suita-shi,
Osaka

1,430,000(Note 11)Kobe-shi,Hyogo

1,370,000(Note 11)

Chiba-shi,
Chiba

1,320,000(Note 11)

Sakai-shi,
Osaka

980,000(Note 11)

Ikeda-shi,
Osaka920,000 November 19,
2019

Yokohama-shi,
Kanagawa

850,000(Note 11)

Hasuda-shi,
Saitama

659,000(Note 11)610,000(Note 11)563,000(Note 11)

Amagasaki-shi,
Hyogo320,000(Note 11)–62,660,002

Location

Nagareyamashi,
Chiba
Nagareyamashi,
Chiba

–

April 2,2020–

(Note 11)–

(Note 1) Scheduled acquisition price indicates an amount excluding expenses required for the acquisition of the real estate (intermediary fees,
taxes and public dues, etc.) stated in the purchase and sale agreement of the real estate.
(Note 2) Funds procured in the issuance of new investment units through third-party allotment, proceeds from sale in the sale of assets, cash on
hand and borrowings scheduled to be announced in the future are scheduled to be allocated to funds for the acquisition.
(Note 3) There is no intermediary in the acquisition of the respective Assets to be Acquired.
(Note 4) The position as well as the rights and obligations of the buyer in the sales and purchase agreement for the Assets to be Acquired arescheduled to be succeeded from NHI to JRH based on the Merger on April 1, 2020, which is the effective date of the Merger, andacquired by JRH, the surviving corporation of the Merger.
(Note 5) The seller is GK DA Healthcare 2.
(Note 6) The seller is GK DA Healthcare 3.
(Note 7) The seller is GK DA Healthcare 4.
(Note 8) The seller is GK DA Healthcare 5.
(Note 9) The seller is GK DA Healthcare 6.
(Note 10) The seller is GK DA Healthcare 7.
(Note 11) The seller is GK GTL Healthcare.

34

VIII. Independent Auditor’s Report

VIII. Independent Auditor’s Report35

IX. Description of Asset Manager
Organization of Asset Manager (as of December 19, 2019)■ Corporate Profile■ Directors and Auditors

Company Name

Daiwa Real Estate Asset Management Co., Ltd.

Chairman of the Board

Akira Yamanouchi

Address

6-2-1 Ginza, Chuo-ku, Tokyo

President and Representative Director

Toshio Fukushima

Established

October 21, 2004

Vice President and Representative Director

Yoshiki Nishigaki

Paid-in Capital
President

200 million yen
Toshio Fukushima

Director
Director

Hajime Imbe
Yuji Shinotsuka

9
Executive directors: 5 Executive auditors: 1
Non-executive directors: 1; Non-executive auditors: 2

Director (non-executive)

Keiichi Ishikawa

Board of Directors

AuditorTamaki Shibayama

114 (excluding dispatched employees)

Auditor (non-executive)

Sachiko Hanaoka

Auditor (non-executive)

Shinji Kiso

Employees

Registration of Financial
Registration No. 355 (Financial Instruments), Director
Instruments Business Operator General, Kanto Local Finance Bureau (Kinsho)
Building Lots and Buildings
Transaction Business License

License No. (4)-83920, Governor of Tokyo

Discretionary Agent for Real
Estate Transaction Approval

License No. 34, Minister of Land, Infrastructure, Transport
and Tourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association■ Organizational Chart
Shareholders’ Meeting
Corporate Auditors

Board of Directors

Compliance Committee
Investment Committee

Compliance Officer

President andRepresentative Director
Acquisition and Asset Management Division
DOI Asset
Management
Dept.

Private Fund Division

DOI Investment
Team

AM Team

Construction
Private Fund
Investment Management
Management Planning
Dept.
Dept.
Department
DRP ManagementTeam

JRH Investment
Team

Portfolio
System TeamNHI Management
Team

Acquisition
Department

Origination
Department

JRH Asset
Management
Department

DRP Investment
Team

DHP Management
Team

NHI InvestmentTeam

DLP Management
Team

Internal Control Office

Corporate Division

Private FundREIT
Management
Department Planning Dept.
Infrastructure
Team

Finance
Department

Management
Team

Accounting
Team

Administration
Department

Corporate
Planning
Department

FinanceTeam

Compliance &RiskManagement
Department

ManagementTeam

DHP InvestmentTeam
DLP Investment
Team

Structure (as of December 19, 2019)
Asset Custodian②

Investment Corporation③

Administrator of Unitholders’ Register

Mizuho Trust & Banking Co., Ltd.

Sumitomo Mitsui Trust Bank, Ltd.

Management Back-Up Contractors
Good Time Living Co., Ltd.
Charm Care Corporation
Super Court Co., Ltd.
Sompo Care, Inc.
Sawayaka Club Co., Ltd.
Nichiigakkan Co., Ltd.
Cedar Co., Ltd.
Nihon Kaigo Iryo Center Co., Ltd.
Wisnet Co., Ltd.
Silver Heights Sapporo Co., Ltd.
Anabuki Medical Care Inc.
HITOWA Care Services Co., Ltd.

④⑤

SponsorDaiwa Securities Group Inc.

Other Specially Related Company

Reiwakaikeisha Tax Corporation
General Meeting of Unitholders

Accounting Auditor
Board of Directors
Executive Director: Shunichi Suzuki
Supervisory Director: Tomohiko Shimizu
Supervisory Director: Chizuko Nakata

KPMG AZSA LLC⑧

Pipeline Support Company
Daiwa ACA HealthCare Inc.

Specially Related Company(Parent company of the Asset Manager)

General Administrator (Accounting, etc.)⑥①
Asset Manager General Administration(Organization)）

Daiwa Real Estate Asset Management Co., Ltd.

⑦

① Asset management agreement/General administration affairs agreement related to operation ④ General administrator of accounting agreement⑤ Management back-up agreement② Asset custodian agreement⑥ Sponsor support agreement③ General administrator of unitholders’ registry agreement

AdvisorAIP Healthcare Japan GK⑦ Advisory agreement⑧ Pipeline support agreement

IX. Description of Asset Manager

37

X. Investor Information
History of Investment Unit Prices(yen) 230,000

16,000 (units)
Unit price (left axis)

Volume (right axis)

217,500

14,000205,000

1,200

192,500

1,000

180,000

800

167,500

600

155,000400

142,500200
0

130,000
Nov.
2017

Dec.

Jan.
2018

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2019

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Overview of Investment Units and Unitholders (as of October 31, 2019)■ No. of Investment Units by Investor TypeFP ended
October 2019(11th FP)

Individuals/others
30,299 units (40.6%)

Foreigners 10,224 units (13.7%)

Other domestic companies 12,003 units (16.1%)
Securities companies 2,436 units (3.3%)

Total 74,632 units

FP ended
April 2019
(10th FP)

Financial institutions
19,670 units (26.4%)■ No. of Unitholders
by Investor Type

Individuals/others
34,735 units (46.5%)

Financial institutions
17,721 units (23.7%)

Foreigners 8,695 units (11.7%)

Other domestic companies 12,265 units (16.4%)
Securities companies 1,216 units (1.6%)

Total 74,632 units

Top Ten Unitholders (as of October 31, 2019)
Name of Investor

8,302(97.2%)

Financial
institutions
Other domestic
companies

22(0.3%)

Foreigners

77(0.9%)

Securities
companies

24(0.3%)

Total

8,539

114
(1.3%)(Note) Rounded to the first decimal place

Merger Related Schedule
Number of Percentage
Units Owned
Share(units)(%)

2019
November 19

Conclusion ofmerger agreement, etc.

December 13

Record date forgeneral meeting of unitholders

1. Daiwa Securities Group Inc.

7,600

10.2

2. The Master Trust Bank of Japan, Ltd. (Trust Account)

6,036

8.1

3. Japan Trustee Services Bank Ltd. (Trust Account)
SCB SG S/A SCB THAILAND AC FOR CIMBPRINCIPAL
4.
PROPERTY JP000294300545
5. NOTHERN TRUST CO. (AVFC) RE FIDELITY FUNDSThe Nomura Trust and Banking Co., Ltd.
6.
(Investment Trust Account)
Trust & Custody Services Bank Ltd.
7.
(Securities Investment Trust Account)
8. Daiwa Real Estate Asset Management Co., Ltd.

4,396

5.9

3,001

4.0

February 4

Holding ofgeneral meeting of unitholders

2,800

3.8

March 30

Delisting

2,677

3.6

March 31

1,845

2.5

End of final fiscal period(from November 1, 2019
to March 31, 2020)

1,000

1.3

April 1

Effective date of the merger

9. Fukui Medical Credit Association

945

1.3

Mid-June

10. UENOYA BUILDING Co. Ltd.

940

1.3

Payment of cash delivered
upon the merger

Total

31,24042.0

End of
SeptemberEnd of first fiscal period
after the merger (fiscal period
ending September 2020)(Note) Rounded to the first decimal place

38

Individuals/others2020

Investor Memo
End of fiscal period

April 30 and October 31 of each year

General Meeting of Unitholders

Held at least once every two years

Date for finalizing Unitholders with voting
Date specified in Article 16 of the Articles of Incorporationrights for the General Meeting of Unitholders
Reference date for finalizing payment of
distributions

April 30 and October 31 of each year (distributions are paid within three months of the reference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 3308)

Newspaper in which notice is posted

The Nikkei

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi, Suginami-ku, Tokyo 168-0063
Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and all branches of the Sumitomo Mitsui Trust Bank nationwide(Note) From February 14, 2020, the Manager of Unitholder Registry, etc. is scheduled to be changed to Mitsubishi UFJ Trust and Banking Corporation (Address: 1-4-5 Marunouchi, Chiyoda-ku, Tokyo). The officehandling administrative affairs will be as follows:
Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corporation ◦Address: 1-1 Nikko-cho, Fuchu-shi, Tokyo ◦ Mailing address: P.O. Box No. 29, Shin-Tokyo Post Office 137-8081◦TEL: 0120-232-711 (toll-free in Japan)

Procedures for Changing Address, Etc.
Please notify the securities company you are dealing with for changes in address, name, etc. For procedures concerning investment units recorded in
special account, please contact Stock Transfer Agency Department at Sumitomo Mitsui Trust Bank, Limited (TEL: 0120-782-031 (toll-free in Japan)), butfrom February 14, 2020, Corporate Agency Division at Mitsubishi UFJ Trust and Banking Corporation (TEL: 0120-232-711 (toll-free in Japan)).

Distributions
Distributions will be payable upon presenting the “Receipt for Distributions” at a post office nearby. If the due date has passed, please designate themethod of receiving on the back of the receipt and send it to Stock Transfer Agency Department at Sumitomo Mitsui Trust Bank, Limited, but from February
14, 2020, Corporate Agency Division at Mitsubishi UFJ Trust and Banking Corporation, or bring it to the head office or branch offices of the bank to receive
it. Please note that distributions will not be payable after three years of the payment start date as specified by the Articles of Incorporation of NHI.
If you wish to receive distributions via bank transfer, etc. in the future, please contact the securities company you are dealing with.

Notice[Concerning Statement of Distributions]
The “Statement of Distributions” sent upon payment of distributions serves as a “Notice of Payment” required pursuant to the Act on Special
Measures Concerning Taxation. The document may be used to confirm the amount of distributions after receiving, or can serve as an attachment
document upon filing a tax return. Thus please make sure to keep it if you are planning to file a tax return. However, if you have selected the methodof allocation of dividends in proportion to the number of shares, the amount of withholding tax will be calculated by the securities company, etc.
Please confirm with the securities company you are dealing with for any attachment document required for filing a tax return.

X. Investor Information

39

Introduction of Operators

Nichii’s Network
We perform community-rooted “total long-term care services” for in-home and facility care at around 1,400 bases in 47 prefectures across Japan.
Currently, we provide long-term care services to about 130,000 people around the country.

(As of April 2019)

Number of regional offices

5

Number of branch
offices (in 47 prefectures)

94

East Japanregional office(As of March 31, 2019)

Number of Service
Centers by Area

Head office
Chu-Shikoku
regional officeCentral Japanregional office
Kyushuregional officeKinkiregional office

Area

Number ofservice centers

Hokkaido

52

Tohoku

126

Kanto

482

Chubu

262

Kinki

247

Chugoku

92

Shikoku

34

Kyushu

108

Total

1,403

*Including operating bases of a subsidiary,
Nichii Carepalace Company.

Company
Profile5

Introduction of Operators

Name
NICHIIGAKKAN CO., LTD.

Capital11,933 million yen (as of March 31, 2019)

FoundedDecember 1968

Net sales (consolidated)
287,882 million yen (as of March 31, 2019)

Established
August 1973

Number of employees (consolidated)
Employees:35,745 (as of March 31, 2019)
Sub-contract employee:60,247 (average for theperiod ended March 2019)

Banks
MUFG Bank, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui
Banking Corporation, Kiraboshi Bank, Ltd., Mitsubishi UFJ
Trust and Banking Corporation, and Sumitomo Mitsui
Trust Bank, Ltd.
Major business partners
Government agencies, municipalities, medical institutions,schools, companies, etc.

NICHIIGAKKAN CO., LTD.

Making Kindness
Our Strength
Since its establishment in 1968, Nichii Group has worked to pioneer

have developed housekeeping support services operated by Filipinos in

new value and services in anticipation of market needs and changes

the National Strategic Special Zones. We have opened a pet groomingin the social environment, establishing its position as a leadingsalon based on the health of dogs. We are also developing nursing

company in its three main businesses: education, medical support, andcare services in China. Using the service expertise we have cultivated,

long-term care. In recent years, given progress in childcare support

we are striving to improve corporate value through the development ofand globalization, we have expanded into childcare and language

new businesses that create synergy.

education. As a provider of total life services, we have developed a

Responding to rapid changes in social conditions, we introduced

wide range of daily living assistance services and have endeavored todiverse work patterns and established nursery schools for employees,

create prosperous lives.

and we have devoted considerable effort to creating a pleasant working

Japan has become a super-aging society. Almost every day, theenvironment. To develop a company, the support of good employees ismedia reports on issues associated with the declining birth rate anda must.

aging population. In 2025, baby boomers will become 75 or older.

This is why we believe that a corporate culture that nurtures andIn this environment, Nichii Group will strive to contribute as much as

maintains forward growth while supporting each and every employee

possible in the fields of medical support, long-term care, and childcare

is becoming increasingly important.

to the creation of communities where women and the elderly can workand live without undue concern by making the most of our long-term
experience as a leading company in the industry.
As the labor force is expected to decline over the long term due tothe effects of the declining birthrate and the aging population, it isnecessary to shift the paradigm of business development in the service
industry where “workers” are indispensable.
In view of these circumstances, in order to realize long-term stable
growth of the company, we have responded to diversifying societal
needs and, simultaneously, we have been working on building newpillars of business growth.

We aim to continue being an excellent company full of vitality bymaking full use of the Nichii Group's unique core competencies suchas excellent employees, business scale, and service expertise.
The determination to cultivate the inherent kindness of considerationfor other people from the heart into the sincere strength that supportssociety is reflected in Nichii Group’s slogan of “Making kindness ourstrength.”
Bearing this determination in mind, we aspire to continue to be acompany that will develop operations, both in Japan and overseas,that support society with kindness to people and that will contribute topeople and society.

The Cabinet Office is promoting the success of women; as such, weNobusuke Mori
President and COO

Affiliation
Japan Home Care Association

Japan Association of Personnel Ability Development

Kanagawa Welfare Service Association

Keidanren (Japan Business Federation)

Japan Medical Insurance Administration Association

Kansai Silver Service Association

Japan Staffing Services Association (JASSA)

Japan Visiting Nursing Foundation

Care Work Foundation

Japan Municipal Hospital Association

Japan Child Upbringing Conference

The Kobe Chamber of Commerce and Industry

National Medical Promotion Association

Australian Labradoodle Association Japan (ALAJ)

Japan Investor Relations Association

Japan Health Enterprise Foundation

The Association for the Promotion of International Trade, JapanThe 21st Century Public Policy InstituteJapan Hospital Association

DPC Management Association

Japan Audit Bureau of Circulations

Japan Assistive Products Association (JASPA)

Compliance Promotion Council

Japanese Council of Daily Life Long-Term Care Service Facilities

Elderly Service Providers Association

Financial Accounting Standards Foundation(As of March 31, 2019)

Introduction of Operators

4

Introduction of Operators

Nichii’s “Total Long-TermCare Services”“Total long-term care services” available throughout thecountry provide you with the care that you need when you
need it. We deliver trusted services as a leading company
in the long-term care industry.

In-homeservices

Home-visit
nursing careservice

In-homelong-term care
support service

Home-visit
nursing careservice

Disability
equipment service

Small scale
multi-function
home care

Preventive
care service

Small scale
multi-function homecare with nursing careWelfareservices forthe disabled

Home-visit
bathing service

Custo
Day careservice

Living support service

3

Introduction of Operators

NICHIIGAKKAN CO., LTD.

We all want to live fully in our own way for as long as possible. To help realize such a wish, Nichii provides
total long-term care services across the nation. A broad range of services accommodating physical andliving conditions of the elderly are provided in cooperation with doctors, nurses and family members, suchas preventive care for unassisted living, home visit care in which helpers come to your home and fee-based
nursing homes with reliable around-the-clock support. Nichii offers long-term care and welfare services
rooted in communities with an aim to create a gentle society where all people can live with peace of mind.

Residential
Fee-basedfacility
homes forservicethe elderly

Group homes

merElderly housing withsupportive services

Housekeeping service

Healthcare products

Introduction of Operators2

Introduction of Operators

Feature Vol.

NICHIIGAKKAN CO., LTD.

10