Asset Management Report
For the Year Ended December 31, 2022

Japan Hotel REIT Investment Corporation

Dear Investors,
Thank you for your support and patronage to Japan Hotel REIT Investment Corporation (JHR) and its asset managementcompany, Japan Hotel REIT Advisors Co., Ltd.
Having settled the accounts for the 23rd fiscal period (from January 1, 2022 to December 31, 2022) of JHR, we are pleased
to present you with the status of management and detail of the settlement of accounts for the period.
In the third year of COVID-19 pandemic, the Japanese economy has been on a recovery track because the government has
gradually eased restrictions on activities and the impact of COVID-19 on social life has gradually decreased since thelifting of the stricter measures to prevent the spread of the virus in March. Although, the domestic accommodation andtourism market was severely affected by COVID-19 pandemic in the first half of the fiscal year, gradually began to recoveralong with the easing of restrictions on activities. In particular, the hotel market recovery gained strength toward the endof the year since October, when the national travel subsidy program and a significant relaxation of entry restrictions were
implemented.
Under such environment, JHR worked to secure hotel earnings through reduction of operating costs, etc. and promoted
measures to improve earnings in preparation for a full-fledged recovery period in accommodation demand while
continuously maintained close communication with the lessees and operators of its respective hotels. The HMJ Group,
JHR's largest lessee and strategic partner, implemented large-scale restructuring since 2020 to thoroughly reduce costs,
and has been able to establish an operating structure that enables it to aggressively pursue sales, including theimplementation of measures to strengthen sales during the recovery period of hotel market. As a result of these efforts,
JHR posted operating revenue of JPY14,912 million and net income of JPY2,671 million for the 23rd fiscal period.
Dividend per unit came to JPY682.
In 2023, under the government's goal of balancing to prevent infection and social and economic activities, the national
travel subsidy program resumed in early January, and inbound tourism is also making progress toward normalization. The
rising demand for hotel accommodations has led some parts of the hotel market to exceed their pre-pandemic operating
indicators. JHR believes that Japan’s growth potential of accommodation demand from inbound visitors is strong, given
the large potential demand for overseas tourism globally and the popularity of Japan as a travel destination. With therecovery and growth of inbound accommodation demand added to robust domestic travel demand, we expect Japan's
accommodation and tourism market to grow beyond the pre-pandemic indicators in 2019 for the medium to long term.
JHR and its asset management company, Japan Hotel REIT Advisors Co., Ltd., will make full efforts together for further
growth and improvement of the attractiveness of JHR by leveraging the high level of expertise and know-how cultivated
to date.
We would appreciate your continued support for us.

Kaname Masuda
Executive Director
Japan Hotel REIT Investment Corporation
Hisashi Furukawa
Representative Director, President and CEO
Japan Hotel REIT Advisors Co., Ltd.

1JAPAN HOTEL REIT INVESTMENT CORPORATION
Contents:I.

ASSET MANAGEMENT REPORT

3This section (P1-P42) is the translation of the Asset Management Report for the 23rd Period released on March 20, 2023 except
for, if any, the update on outlook of issuer rating described in I.2. Asset management operation for the fiscal period under review(3) Funding conditions and I.6. Significant subsequent events. If any discrepancy is identified between this translation and theJapanese original, the Japanese original shall prevail.

II.

FINANCIAL STATEMENTS
For the Years ended December 31, 2022 and 2021
Balance Sheets

43

Statements of Income

45

Statements of Changes in Net Assets

46

Statements of Cash Flows

47

Notes to Financial Statements

49

Independent Auditor’s Report

65

2

Ⅰ

ASSET MANAGEMENT REPORT

Outline of Asset Management Operation

1. Operating results and financial position, etc.
Fiscal period

19th period

20th period

21st period

22nd period

23rd period

Account closing date

December 2018

December 2019

December 2020

December 2021

December 2022

Operating revenue[Real estate operating revenue]
Operating expenses[Real estate operating costs]

JPY MM

28,25328,278

13,838

13,633

14,912JPY MM[26,318][28,278][10,495][10,374][14,912]JPY MM

10,26011,12910,662

10,673

10,616JPY MM[8,344][8,997][8,717][8,830][8,796]

Operating income

JPY MM

17,993

17,148

3,176

2,959

4,296

Ordinary income

JPY MM

16,211

15,291

1,398

1,298

2,672

Net income (Note 1)

JPY MM

16,21015,290

1,527

1,296

2,671

Total assets

JPY MM

350,556

415,722400,296394,323

396,799[Period-on-period change]
Net assets[Period-on-period change](%)
JPY MM[18.6][(3.7)][(1.5)][0.6]

236,522

221,201

221,542

223,574[0.7][16.3][(6.5)]

[0.2]

[0.9]

JPY MM

153,516

186,894

186,894

187,194

187,194

Units

4,010,847

4,462,347

4,462,347

4,467,006

4,467,006

Net assets per unit

JPY

50,70553,00449,57049,59550,050Net income per unit (Note 2)

JPY

4,041

3,447

342

290

598

Total dividends

JPY MM

15,602

16,466

1,829

1,634

3,046

Dividend per unit

JPY

3,890

3,690

410

366

682

JPY

3,890

3,690

410

366

682

JPY

―

―

―

―

―

%

4.6

4.0

0.3

0.3

0.7

Unitholders’ capital
Number of investment units issued andoutstanding[Earnings dividend per unit][Dividend per unit resulted from excess ofearnings]
Ratio of ordinary income to total assets(Note 3)(%)[(0.5)]
203,372

Return on unitholders’ equity (Note 4)

%

8.0

7.0

0.7

0.6

1.2

Ratio of net assets to total assets (Note 5)

%

58.0

56.9

55.3

56.2

56.3

[0.7]

[(1.1)][(1.6)]

[0.9]

[0.2]

%

96.2

107.7

119.8

126.1

114.0

[Period-on-period change]
Payout ratio (Note 6)[Additional information]
NOI (Note 7)

JPY MM

22,10424,087

6,547

6,366

10,963

FFO per unit (Note 8) (Note 9)

JPY

4,588

4,503

632

640

1,683

FFO multiple (Note 9) (Note 10)

Times

17.1

18.0

83.9

87.8

46.0

Debt service coverage ratio (Note 9) (Note 11)

Times

18.0

17.5

3.3

3.4

7.5

Interest-bearing debt

JPY MM

136,671

168,754

168,754

164,754

164,231

39.0

40.6

42.2

41.8

41.4

Ratio of interest-bearing debt to total assets(Note 12)

Number of investment properties
Total leasable area
Number of tenants at end of period (Note 13)
Occupancy rate at end of period (Note 14)%
Properties
m2
Tenants

41

43

42

41

41

678,714.48

746,329.68

741,083.02

733,995.61

733,995.61

126

125

121

116

110

%

99.9

99.9

99.9

99.8

99.8

Depreciation

JPY MM

4,091

4,557

4,761

4,804

4,787

Capital expenditures

JPY MM

3,056

6,767

1,665

3,367

4,497

Days

365

365

366

365

365

Number of operating days

(Note 1) Net income for the 19th fiscal period includes gain on sale of real estate properties (¥1,934 million). Net income for the 21st fiscal period
includes gain on sale of real estate properties (¥3,158 million) and gain on exchange of real estate properties (¥184 million). Net income forthe 22nd fiscal period includes gain on sale of real estate properties (¥3,258 million).
(Note 2) The computation of net income per unit is based on the weighted-average number of units outstanding during the year.

3

(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Ratio of ordinary income to total assets = Ordinary income / ((Total assets at beginning of period + Total assets at end of period) / 2) × 100
Return on unitholders’ equity = Net income / ((Net assets at beginning of period + Net assets at end of period) / 2) × 100
Ratio of net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Payout ratio = Total dividends (excess of earnings exclusive) / Net income × 100
NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets + Asset retirement
obligations expenses(Note 8) FFO per unit = (Net income + Depreciation + Loss on retirement of noncurrent assets + Asset retirement obligations expenses - gain on saleof real estate properties - gain on exchange of real estate properties ± Extraordinary loss or income (excluding loss on disaster)) / Number ofinvestment units issued and outstanding(Note 9) For the 19th fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain on sale of real estate
properties (¥1,934 million). For the 21st fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding
gain on sale of real estate properties (¥3,158 million), gain on exchange of real estate properties (¥184 million) and extraordinary income (¥130
million). For the 22nd fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain on sale of realestate properties (¥3,258 million).
(Note 10) FFO multiple = Investment unit price at end of period / Annualized FFO per unit
(Note 11) Debt service coverage ratio = (Income before income taxes + Depreciation + Loss on retirement of noncurrent assets + Asset retirement
obligations expenses - gain on sale of real estate properties - gain on exchange of real estate properties ± Extraordinary loss or income(excluding loss on disaster) + Amortization of investment corporation bond issuance costs + Amortization of investment unit issuance expenses± Loss or gain on derivative instruments + Interest expense + Interest expense on investment corporation bonds) / (Interest expense + Interest
expense on investment corporation bonds + Total of contractual principal repayments (excluding lump-sum principal repayments))(Note 12) Ratio of interest-bearing debt to total assets = Interest-bearing debt at end of period / Total assets at end of period × 100(Note 13) Number of tenants at end of period indicates the total number of tenants based on the lease contracts for respective real estate properties intrust (excluding tenants of parking lots, etc.) as of the end of each fiscal period. However, for properties with pass-through master lease
contracts in which JHR receives the same amount of rents, etc. paid by end tenants as is in principle, the total number of the end tenants(excluding tenants of parking lots, etc.) is indicated.
(Note 14) Occupancy rate at end of period indicates the percentage of leased area to leasable area of respective real estate properties in trust as of the endof each fiscal period.

4

2. Asset management operation for the fiscal period under review(1) Brief history and principal activities

Japan Hotel REIT Investment Corporation (hereinafter referred to as “JHR”) was established under the Act on
Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended; hereinafter referred to as the“Investment Trusts Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust (“REIT”) sectionof the Tokyo Stock Exchange (Securities code: 8985) on June 14, 2006.
JHR entrusts the asset management to Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “AssetManagement Company”). Focusing on the importance of hotels as social infrastructure and their profitability as
investment real estate properties, JHR has primarily invested in real estate related assets which are in themselves
wholly or partially used as hotels or real estate equivalents of such real estate or which are backed by such real estateor real estate equivalents (hereinafter referred to as the “Real Estate for Hotels, etc.”).

JHR, the former Nippon Hotel Fund Investment Corporation, merged with Japan Hotel and Resort, Inc. with aneffective date of April 1, 2012 (hereinafter referred to as the “Merger”), and changed its name to Japan Hotel REIT
Investment Corporation. Since the Merger through the end of the fiscal period under review (12 months period fromJanuary 1, 2022 to December 31, 2022), JHR has carried out nine public offerings for capital increase andcontinuously acquired “highly competitive hotels” in mainly “strategic investment areas” where domestic andinbound leisure demand can be expected over the medium to long term.
By implementing the aforementioned growth strategy, JHR has expanded its asset size while improving the qualityof its portfolio through new property acquisitions of 26 properties amounting to ¥275,160 million (acquisition pricebasis) in total through the end of the fiscal period under review. As of the end of the fiscal period under review, JHR
had a portfolio of 41 properties with a combined acquisition price of ¥363,542 million, and the total number ofinvestment units issued and outstanding stood at 4,467,006 units.

(2) Investment performance for the fiscal year under review

The Japanese economy in the fiscal period under review (12 months period from January 1, 2022 to December 31,2022) was on a recovery trend as the impact of COVID-19 on social and economic activities gradually became limitedwith the easing of movement restrictions by the government in phases since the strict measures to prevent the spreadof the virus were lifted in March.

The domestic accommodation and tourism market in the first half of the year was heavily impacted by COVID-19
like in the previous fiscal year but showed robust recovery in the second half of the year, particularly after Octoberdue to launch of the national travel subsidy program and substantial easing of entry restrictions to Japan for foreign
visitors to Japan (hereinafter referred to as “inbound visitors”). The number of inbound visitors is estimated as 3.83
million for 2022 (increased 1,458.6% compared with the previous year and decreased 88.0% compared with 2019).
However, in November to December of 2022, the figure ended up decrease around the 46.4% level compared withthe same period of 2019 due to the easing of entry restrictions to Japan. The trend of recovery in domestic demand
was striking and the cumulative number of overnight guests of Japanese nationality among the cumulative numberof overnight guests at domestic accommodation facilities since October 2022 turned positive compared with the same
period of 2019. As a result, the cumulative number of overnight guests at domestic accommodation facilities in 2022
was increased 42.9% from the previous year or decreased by 23.8% from 2019 to 454 million guest nights(preliminary release).
JHR maintained close communication with the lessees and operators of its hotels under management and worked tosecure hotel earnings through reduction of operating costs, etc., as well as promoted measures to increase earnings
for when accommodation demand makes a full-fledged recovery. In particular, Hotel Management Japan Co., Ltd.
(hereinafter referred to as “HMJ”), which is a group company of the Asset Management Company, and its subsidiaries(hereinafter collectively referred to as the “HMJ Group”) kept implementing large-scale restructuring (such as
reduction of labor costs through closure of unprofitable restaurants within hotels, reduction of outsourcing costs withthe switch from outsourcing to insourcing and change of specifications, and consolidation of back offices andcommon operations) from 2020. HMJ Group have succeeded to accomplish cost reduction that were better thaninitially planned and to organize an operating system that could facilitate proactive pursuit of profits in the hotel
market where the recovery trend is striking.
As to the performance of hotels owned by JHR under these circumstances, RevPAR (Note 1) of The 25 Hotels with
Variable Rent, etc. (Note 2) for the fiscal period under review significantly exceeded that of the previous year by
89.4%, and GOP (gross operating profit) was ¥8,874 million (increased 274.9% from the previous year) due toearnings improving with the recovery in the accommodation and tourism market and also cost management measures
at hotels proving effective.
5For further details of sales, GOP (gross operating profit) and other operating indexes for the 25 Hotels with Variable
Rent, etc., please refer to “<Reference Information 2> Hotel operation indexes, sales and GOP (gross operating profit)”on page 15.

(Note 1) RevPAR represents Revenue Per Available Room, which is calculated by dividing total rooms revenue for a certain
period (including service charges) by the total number of rooms available for sale during the period. The same shallapply hereinafter.
(Note 2) “The Five HMJ Hotels” represent following 5 hotels which JHR leases to HMJ.
Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, and Oriental
Hotel Hiroshima“The 14 HMJ Hotels” represent Five HMJ Hotels plus following hotels JHR leases to subsidiaries of HMJ.
Oriental Hotel Okinawa Resort & Spa, Sheraton Grand Hiroshima Hotel (main facility of ACTIVE-INTER CITYHIROSHIMA), Oriental Hotel Fukuoka Hakata Station, Holiday Inn Osaka Namba, Hilton Tokyo Narita Airport,
International Garden Hotel Narita, Hotel Nikko Nara, Hotel Oriental Express Osaka Shinsaibashi, and Hilton Tokyo
Odaiba“The Two Rebranded HMJ Hotels” represent following 2 hotels which lessees were changed to subsidiaries of HMJ in
2021 due to rebranding.
Hotel Oriental Express Fukuoka Tenjin and Oriental Hotel Universal City
“The 16 HMJ Hotels” represent The 14 HMJ Hotels plus The Two Rebranded HMJ Hotels.
“The Accor Group Hotels” represent following 5 hotels.
ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, and Mercure Yokosuka.
“The Ishin Group Hotels” represent following 4 hotels.
the b suidobashi, the b ikebukuro, the b hachioji, and the b hakata.
The 25 Hotels with Variable Rent, etc. refers to 25 hotels, which are The 16 HMJ Hotels plus The Accor Group Hotels
and The Ishin Group Hotels.
The same shall apply hereinafter.

(3) Funding conditions

In the fiscal period under review (12 months period from January 1, 2022 to December 31, 2022), JHR took out loans
in January, March, June and September to refinance existing borrowings that were due for repayment in the samemonth. Total amount of the loans was ¥30,936 million. Moreover, with regard to the fifth unsecured investment
corporation bonds of ¥6,000 million due for redemption in October 2022, in addition to issuance of investment
corporation bonds in amount of ¥2,800 million in September which part of the procured fund were appropriated forredemption, JHR took out new loans in amount of ¥4,600 million and used cash on hand to appropriate for theredemption. For the loans took out in October, we invited The Minato Bank, Ltd. as a new lender to expand ourlenders formation. In addition, a part of the procured fund from issuance of investment corporation bonds mentioned
above were appropriated to repay existing loans to enhance our financial soundness through controlling balance ofinterest-bearing debt.
Consequently, as of the end of the fiscal period under review, the balance of interest-bearing debt totaled ¥164,231
million, including short-term loans payable of ¥35,113 million, current portion of long-term loans payable of ¥15,432
million, long-term loans payable of ¥76,786 million, and investment corporation bonds of ¥36,900 million, and theratio of interest-bearing debt to total assets (Note) at the end of the fiscal year under review stood at 41.4%. The ratioof fixed interest rate to total interest-bearing debt at the end of the fiscal year under review was at 76.8%.
(Note) Ratio of interest-bearing debt to total assets at end of period = Balance of interest-bearing debt at end of
period / Total assets at end of period x 100
As of December 31,2022, JHR’s issuer ratings were as follows:
Rating agency

RatingJapan Credit Rating Agency, Ltd. (JCR)A+(Negative) (Note 1)

Rating and Investment Information, Inc. (R&I)

A(Negative) (Note 2)(Note1: Outlook of issuer rating by JCR was changed from Negative to Stable on March 14, 2023)(Note2: Outlook of issuer rating by R&I was changed from Negative to Stable on April 11, 2023)(4) Financial results

As a result of the abovementioned asset management, operating revenue, operating income and ordinary income were
¥14,912 million, ¥4,296 million and ¥2,672 million, respectively, for the fiscal period under review (12 months period
from January 1, 2022 to December 31, 2022). Net income was ¥2,671 million. Regarding dividends, it was decided
that ¥3,046 million, an amount excluded fractions of less than one yen of dividend per unit from ¥3,049 million will
be distributed. ¥3,049 million was calculated by adding a reversal of reserve for temporary difference adjustment(appropriation for dividends) of ¥376 million to unappropriated retained earnings of ¥2,672 million. Consequently,
the dividend per unit came to ¥682. For details of the appropriation for dividends for the fiscal year under review,please refer to “<Reference Information 3> Dividend per unit and appropriation for dividends” on page 17.
63.

Changes in unitholders’ capital, etc.

The table below indicates increases (decreases) in the number of investment units issued and outstanding and unitholders’capital of JHR in the past five years.
Number of units issued
Unitholders’ capital (JPY
(Units)MM)
Date
Capital transaction
Note
Increase
Increase
Balance
Balance(decrease)(decrease)
January 23, Capital increase through public
447,800
4,458,647
33,104
186,620 (Note 1)
2019
offering of investment units
February 20, Capital increase through third2019
party allotment of investment
3,700
4,462,347
273
186,894 (Note 2)
units
March 16,
Capital increase through third2021
party allotment of investment
4,659
4,467,006
300
187,194 (Note 3)
units(Note 1) New investment units were issued through public offering with an issue price per unit of ¥ 76,342(issue value of ¥73,927) in order to raise funds for the acquisition of new properties, etc.
(Note 2) New investment units were issued through third-party allotment with an issue value per unit of ¥73,927 in order to raise
funds for allocation to part of the acquisition of new properties.
(Note 3) New investment units were issued through third-party allotment with an issue value per unit of ¥64,400 in order to raise
funds for allocation to a part of capital expenditures.

[Fluctuation in market price of investment units]
The highest and lowest prices (closing price) during each fiscal period of the investment units of JHR on the Tokyo Stock
Exchange REIT section are as follows:(JPY)
Fiscal period
19th period
20th period
21st period
22nd period
23rd period
Account closing
December
December
December
December
December
month
2018
2019
2020
2021
2022
Highest price

85,00091,80082,40071,40081,100

Lowest price

75,00075,90024,70051,60054,400Price at end of period

78,40081,20053,00056,20077,5007

4. Dividends, etc.

Earnings dividend for the period under review was decided in accordance with the monetary distribution policy stipulated
in Article 34, paragraph 1 of JHR’s Articles of Incorporation. It was decided that ¥3,046,498,092, an amount excluded
fractions of less than one yen of dividend per unit from ¥3,049,429,074 which was calculated by adding a reversal ofreserve for temporary difference adjustment (appropriation for dividends) of JPY376,501,098 to unappropriated retained
earnings of ¥2,672,927,976. Consequently, the dividend per unit came to ¥682.
19th period

20th period

21st period

22nd period

23rd period(From January 1, 2018
to December 31, 2018)(From January 1, 2019
to December 31, 2019)(From January 1, 2020
to December 31, 2020)(From January 1, 2021
to December 31, 2021)(From January 1, 2022
to December 31, 2022)

16,213,482,816

15,290,314,375

1,527,790,689

1,300,724,473

2,672,927,976-

744,789

3,922,801

1,171,664

2,930,982

Total cash dividends

15,602,194,830

16,466,060,430

1,829,562,270

1,634,924,196

3,046,498,092[Dividend per unit][3,890][3,690]

[410]

[366]

[682]

Of the above, total earnings dividends 15,602,194,830

16,466,060,430

1,829,562,270

1,634,924,196

3,046,498,092[3,890][3,690]

[410]

[366]

[682]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

Classification
Unappropriated retained earnings
Retained earnings[Earnings dividend per unit]
Of the above, total return of capital
contributions[Return of capital contributions perunit]
Of total return of capital
contributions, total distributions
from allowance for temporary
difference adjustment[Of return of capital contributions
per unit, distributions fromallowance for temporary difference
adjustment per unit]
Of total return of capital
contributions, total distributions
from the unitholders’ capital for tax
purpose[Of return of capital contribution perunit, distributions from theunitholders’ capital for tax purpose
per unit]

85. Investment policies and issues to be addressed
General investment outlook
The Japanese economy is in transition period to post COVID-19 society and expected to recover due to the effect by various
policies by the government. On the other hand, we need to keep our eye on impact on financial and foreign exchange
market caused by worldwide monetary tightening, etc. as well as inflation caused by heightening of geopolitical risks andother factors.
With regard to hotel market in 2023, we see domestic demand for accommodation to overcome recovery and exceed thelevel prior to COVID-19 due to governmental measures to stimulate leisure demand such as restart of national travelsubsidy program from January 10, 2023 under policies to implement simultaneous pursuit to prevent infection and to
stimulate social and economic activities without enforcement of new moving restrictions despite of increased cases ofinfection by COVID-19 from the end of 2022 as the 8th wave of spread of infection. With regard to inbound visitors,
although we need to pay attention to tendency of policy for COVID-19 by Chinese government as well as recovery ofinternational flight and other factors, steady progress to normalization is seen since significant easing was made on entry
restrictions in October 2022. Since behavior pattern of people is sifting to enjoy travels and events while paying enoughattention to prevent infection, we expect demand for accommodation will be gradually enhanced due to the inbounddemand for travel in addition to steady domestic demand for travel.
JHR will continue to implement a variety of measures with lessees and operators, such as reducing operating costs throughreview of operations, etc., at each hotel, maintaining necessary employment, handling cash management, and also
implementing sales measures in response to new demand including “staycation” and “workation.” We intended to draw
the demand which is under the recovery trend through these measures. Especially for the hotels with variable rent, etc.,
JHR will endeavor to maximize GOP of each hotel and thus maximize the rent JHR can receive as a result. In particular,
with the HMJ Group, a strategic partner of JHR, in addition to strengthening the initiatives of the restructuring plan
mentioned earlier and together with further reduction of constant cost, measures to develop and capture demand will be
proactively promoted, such as making attractive products which turn the hotel itself as the tourism destination andincreasing brand awareness through TV commercials, etc. The HMJ Group is conducting initiatives from both sides toenhance profitability. The rent scheme with the HMJ Group was changed to full variable rent scheme until the end of
December 2022 and it returned to fixed rent plus variable rent scheme from January 2023 as before based on memorandumof understanding related to fixed term building lease contract concluded on February 25, 2022.
On the other hand, given the large potential demand for overseas tourism globally, particularly due to the improvement inincome levels in Asian countries and the popularity of Japan as a travel destination, etc., JHR expects that accommodation
demand from inbound visitors will show growth to exceed numbers achieved in 2019. As such, JHR believes that theaccommodation and tourism market will expand. On the belief that the location and competitiveness of individual hotels
as well as the capabilities of operators (the ability to differentiate from other hotels, improve profitability including costmanagement and capture recovering demand, etc.) will lead to differentiation of performance among hotels, JHR will
implement strategies to differentiate its hotels.
In the meanwhile, as a result of the spread of infection by COVID-19, contactless behavior patterns, such as web
conferencing, have spread, and these may cause structural changes in the hotel industry, for instance, a reduction in banquet
demand, etc. JHR will work more closely than ever with hotel lessees and operators to flexibly respond to the changes.
Under the recognition of such circumstances, JHR intends to work with the Asset Management Company to continue to
implement strategies to differentiate by utilizing the experience it has cultivated as a J-REIT specializing in hotels, andmanage assets based on the approach described below.
Internal growth
JHR will work to secure “stability” mainly with fixed rent contracts, while at the same time aim for “upside potential”
through implementation of active asset management strategies which proactively pursue greater profitability and asset
value in properties by way of a variety of measures such as adopting adequate brand to meet characteristic of each hotel
and coordinating with HMJ.
For properties with fixed-rent contracts, JHR will continue to focus on setting and maintaining appropriate rents based onrent levels in the market where respective hotels are located or each tenant’s creditworthiness and ability to bear the rent
costs, and aiming at raising rents (including introduction of a revenue-sharing structure) in accordance with the conditionsof the accommodation market while appropriately respond if there are any requests for reduction of fixed rent, etc. fromlessees greatly affected by COVID-19).
For hotels under variable rent contracts and under a management contract structure, JHR is working to increase variable
rent, etc.by implementing active asset management strategies.
A. Properties under variable rent contracts
JHR works to enhance the profitability of its properties under variable rent contracts through its active asset
management strategies. JHR has adopted world-leading international brands such as Hilton, Sheraton, Mercure andHoliday Inn as well as leading brands in Japan including Oriental Hotel (brand of the HMJ Group) and Hotel Nikko
and, together with excellent operators, aims to increase variable rent, etc. through improved performance of thesehotels. JHR coordinates with the operators in an effort to enhance hotel performance by requesting them to implement
9marketing initiatives to attract a wider range of demand with considerations given to recovery of leisure demand fromdomestic and inbound visitors, measures to maintain and increase room rates, and realization of synergy effects likecost reductions from operating multiple properties, among other efforts.
On the other hand, JHR will continue to closely cooperate with the lessees and operators of respective hotels to
promote drastic reform of the earnings structures of hotels through various cost-cutting measures centered on
thoroughly enhancing efficiency of the operating system, while considering for the health of guests and employeesof respective hotels and environmental sanitation management. JHR will also promote various measures to restore
hotel earnings, such as the creation of appropriate products in response to major changes in the market environment
and the preparation of hotel facility environments.
Moreover, JHR will strive to recover and improve hotel earnings by implementing strategic capital expenditure(CAPEX) as necessary through accurately grasping the conditions in the domestic accommodation and tourism
market, and changing customers’ needs.
B. Properties under fixed rent contracts
JHR will monitor operating conditions of these hotels appropriately, pay careful attention to each lessee’s ability tobear the cost of rent, and pursue efforts to set and maintain reasonable rent, while appropriately responding to requests
for reduction of fixed rent from lessees greatly affected by the spread of infection by COVID-19 (if any). In addition,
JHR will continuously execute investment to maintain and renew facilities and equipment in order to ensure each
hotel becomes prominent in the market and to maintain and enhance asset value.
External growth
In terms of external growth strategy, JHR believes that domestic and inbound leisure demand will recover over the medium
to long term and will continue targeting acquisition of highly competitive Real Estate for Hotels, etc. (Hotel Assets) inareas which can expect “domestic and inbound leisure demand” over the medium to long term as it has done to date. In
addition, JHR will build a portfolio which can secure stable revenues with future growth potential in mind in order toachieve upside gains.
Upon acquiring properties, JHR will focus on infrastructure aspects of the relevant Hotel Assets such as buildings andfacilities, services aspects such as the credibility of the hotel lessee and operator (including the ability of the hotel lessee
to bear the cost of rent) as well as operation and management capabilities, and the properties’ locational superiority thatserves as the base for stability in demand and growth potential.
Specifically, JHR will aim to invest in “full-service hotels” and “resort hotels” that pose barriers to new opening due tosuch factors as operation and management know-how required for operating the hotels and limitations in terms of invested
capital and location. As for “limited-service hotels,” JHR emphasizes the credibility and operation capabilities of the hotel
lessee and operator as well as the building age, location, guestroom composition, profitability, etc. of the properties.
Moreover, JHR will take a particularly selective approach to hotels specialized for accommodation and of a budget type(low price zone) that mainly offers single rooms and where the source of competitiveness relies only on prices.
In the hotel transaction market, some investors continue to take cautious stance for investment due to a sense of uncertainty
over the domestic accommodation and tourism market stemming from the impact of COVID-19. On the other hand,transactions, including those involving large properties, have seen since 2021 due to expectation for recovery of hotel
market and easing attitude by financial institutions to provide finance on hotels. Furthermore, there is also increasing
possibility of special investment opportunities unlike before, such as sales of assets due to rapid deterioration in thefinancial position of operators, sales of hotels which are non-core assets due to deterioration in main business performance,
sales of hotels completed or scheduled to be completed without operators, etc. JHR will flexibly deal with such investment
opportunities by utilizing the efficient hotel operation platform of HMJ and such. Moreover, over the medium to long term,
JHR believes that transition to post COVID-19 society and accompanying recovery of domestic accommodation demand
including that from inbound visitors, many investors who have been on the sideline may resume investment in hotels, andcompetition over acquisition may become more active. Going forward, while closely monitoring market trends from many
angles, JHR will flexibly respond to changes in earnings structures of hotels and the investment environment by leveraging
the strengths and advantages it has cultivated as a J-REIT specializing in hotel investment and JHR will aim to expand
asset size that accompanies improvement of the portfolio quality through acquiring highly competitive properties, while
utilizing the operation platform of the HMJ Group as necessary.
Finance strategy
JHR will focus on the enhancement of financial stability and soundness and intends to maintain and enhance therelationship of trust with financial institutions with which it does business through close communication and such.
With regard to refinancing of existing borrowings, JHR will work to extend borrowing period while paying attention tofinancing costs and maintaining good relationships with respective lenders under the conditions that the hotel market is on
recovery trend. In addition, JHR will strengthen its financial foundation through invitation of new lender and appropriate
control of capital expenditures, etc. JHR aims to conduct financial operations by keeping the ratio of interest-bearing debt
to total assets at no larger than 50% as in the past, but it maintains roughly the current level for the time being. In addition,
when seeking new borrowing for property acquisitions, JHR will work to disperse the maturity dates of its debt as well as
further reinforce its composition of lenders and further diversify funding methods, such as issuance of investment
10

corporation bonds (including green bonds), while considering the balance with the funding costs.
Policy on handling of negative goodwill
From the fiscal year ended December 31, 2017 (18th period), JHR started appropriation for dividends through reversal ofreserve for temporary difference adjustment in connection with partial amendments to the “Ordinance on Accounting ofInvestment Corporations” (Cabinet Office Ordinance No. 47 of 2006, as amended; hereinafter referred to as the “Ordinanceon Accountings of Investment Corporations”) and the “Regulation for Real Estate Investment Trusts and Real Estate
Investment Corporations” of The Investment Trusts Association, Japan. JHR stipulated a policy to reverse ¥262 million(hereinafter called the “50-year amortization amount of negative goodwill”), which is an amount equivalent to 2% (1/50)of the balance of the reserve for temporary difference adjustment for the fiscal year ended December 31, 2017, to pay out
as dividends every year, with the balance of the reserve for temporary difference adjustment remaining at the time ofreversal set as the maximum reversal amount (Note).
Furthermore, in cases of incurrence of losses caused by property dispositions, impairment loss of assets, dilution ofdividend per unit due to the issuance of new investment units through public offerings, etc., loss on retirement of noncurrent
assets, and suspension of sales and such due to large-scale renovations with significant impact on revenues, JHR stipulated
a policy to reverse additional portion of the negative goodwill on top of the 50-year amortization amount of negative
goodwill (¥262 million) (Note).
(Note) The policy may change due to a resolution of the board of directors, and it does not guarantee the method ofreversing the reserve for temporary difference adjustment, and amounts to be reversed, etc., in the future.
Initiatives for sustainability
In recent years, consideration for ESG (Environment, Social and Governance) has grown in importance in the investment
management industry from the standpoint of long-term sustainability. JHR recognizes that conducting real estate
investment management that considers for ESG is important to maximize unitholder value and to further raise theattractiveness of JHR. In addition, JHR believes that it is indispensable to establish favorable relationships with its
stakeholders, including unitholders, hotel guests, lessees, operators, business partners such as property managers, local
communities, and officers and employees of the Asset Management Company, and to fulfill our social responsibilities
expected from each of them.
In order to put such ideas into practice, JHR, along with the Asset Management Company, has established a “Sustainability
Policy” as guidance to ESG initiatives. We have promoted efforts to reduce environmental impact at properties in our
portfolio based on this policy and received the Building-Housing Energy-efficiency Labeling System (BELS) evaluationfor Hotel Nikko Alivila and Mercure Okinawa Naha in February 2018 as first such cases for hotel properties owned by a
J-REIT (Note 1). In September 2018, JHR became the first J-REIT specializing in hotels to be recognized by GRESB(Note 2) for its environmental awareness and sustainability initiatives. And JHR acquired “Green Star” in the GRESB Real
Estate Assessment. Moreover, for the third consecutive year, JHR was selected as a Sector Leader of Asian Hotel Sector
in the GRESB Real Estate Assessment conducted in 2022. In April 2020, Hilton Tokyo Odaiba acquired CASBEE(Comprehensive Assessment System for Built Environment Efficiency) Certification for Buildings, the first such
recognition for an existing property used as hotel. In May 2021, Oriental Hotel Fukuoka Hakata Station also acquired
CASBEE Certification for Buildings, the second case of such for an existing property used as hotels following Hilton
Tokyo Odaiba. In addition, in December 2021, JHR defined its materiality (key issues) in terms of ESG from the dual
standpoints of stakeholder expectations and impact on its business. Also, the Asset Management Company expressed
support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the
Financial Stability Board (FSB), and joined the TCFD Consortium, an organization made up of Japanese companies that
support the recommendations. In August 2022, it disclosed the initiatives for the four disclosure themes recommended by
the TCFD, including the degree of financial impact based on climate change-related scenario analysis. In addition, it isworking to sequentially clarify targets in numerical terms, such as formulating and disclosing the CO2 reduction target by
2050 in February 2023. Going forward, JHR, together with the Asset Management Company, will continue to actively
promote enhancement of its initiatives and disclosure on a variety of sustainability issues. Furthermore, JHR issued green
bonds in July 2019 to allocate funds mainly to refinancing of loans procured for funding investment capital andconstructions cost, etc. for equipment which contribute to environment, including reduction of CO2 and water consumption
in the renovation work at Oriental Hotel Fukuoka Hakata Station. It was the first case of a J-REIT specializing in hotels
issuing green bonds. Of the funds procured from the green bonds, the remaining funds, excluding the repayment of suchloans, were used to fund renovation work, etc. at other hotels, and JHR allocated funds to construction costs for reductionof CO2, etc. at four hotels including Hilton Nagoya. As a result, the funds procured from the green bonds have been fully
appropriated for eligible projects and there is no unappropriated balance.
In addition, as an effort under the spread of infection by COVID-19, JHR worked together with the lessees to provide totalof nine hotels it owns as facilities to accept patients with mild or no symptoms who do not require hospital treatment among
the patients infected with COVID-19 from 2020 through the date of this document. JHR also provided restaurants andbanquet rooms in Oriental Hotel tokyo bay and Hotel Nikko Nara as venues for vaccination under workplace vaccination
programs and for local residents. Furthermore, the HMJ Group conducted workplace vaccination to provide vaccinations
to its employees who wish to be vaccinated so that hotel guests can use the hotels safely with peace of mind.
Recognizing its social responsibility towards local communities as a J-REIT specializing in hotels, JHR will continue to11

proactively carry out social contribution activities capitalizing on the characteristics of the hotel sector and each hotel.

(Note 1) Investigated by the Asset Management Company based on public information.
(Note 2) GRESB which stands for Global Real Estate Sustainability Benchmark is an annual benchmarking assessment to measure
ESG (Environmental, Social and Governance) considerations of real estate companies and funds. It evaluates initiatives forsustainability of real estate companies, REITs and real estate funds, not of individual properties. The GRESB Rating makes
relative assessment based on total scores, with 5 Stars being the highest ranking.

6. Significant subsequent events
Acquisition of assets

JHR acquired two properties as follows:
Name of acquired asset
UAN kanazawa
Type of specified asset
Beneficial interest of real estate in trust and movable asset attached to the hotel
Asset type
Hotel
Location (displayed address) 6-30 Oyama-machi, Kanazawa-shi, Ishikawa
Acquisition date
January 31, 2023
SellerAcquisition price (Note 1)

GK Esquilino Investment¥2,050 million

Name of acquired asset
Type of specified asset
Asset type
Location (displayed address)
Acquisition dateSellerAcquisition price (Note 1)

Sotetsu Fresa Inn Shimbashi-Karasumoriguchi
Beneficial interest of real estate in trustHotel
10-2 Shimbashi 4-chome, Minato-ku, Tokyo
March 24, 2023
Not disclosed (Note 2)¥8,400 million

Notes:(Note 1) The acquisition price does not include expenses for acquisition, settlement of property tax, city planning tax, etc., andconsumption tax and local consumption tax.
(Note 2) Not disclosed because the approval of the seller has not been obtained.

12

7. Reference information<Reference 1> Major indexes of the hotel business for the fiscal period ended December 31, 2022

The following tables indicate the figures related to the hotel business of the HMJ Group Hotels for the operating period
from January 1, 2022 through December 31, 2022, based on the data provided by the hotel lessees, etc. Furthermore, while
the indexes of the hotels are among the indicators that show the operating status of the rooms departments, they do notnecessarily represent the operating revenue and the ability to bear rent, etc. of the respective hotels, as the room rates andprofit margins, etc. are not uniform, among other reasons. As such, the indicators are no more than the reference figures.
Kobe Meriken Park Oriental Hotel tokyo
Oriental Hotelbay
Ratio to
total
sales

Namba Oriental
Hotel

Ratio to
total
sales

Hotel Nikko Alivila

Ratio to
total
sales

Oriental Hotel
Hiroshima

Ratio to
total
sales

Ratio to
total
sales

The Five HMJ
hotelsTotal/Average
Ratio to
total
sales

Occupancy rate

66.9%

－

77.1%

－

54.9%

－

56.3%

－

100.0%

－

70.0%

－

ADR (Note 1)

19,310－17,902－

10,264－30,471

－

9,092

－

17,928－

RevPAR (Note 2)

12,915－13,800

－

5,634

－

17,151

－

9,092

－

12,558－

Total sales(JPY MM)

4,016

100.0

4,201

100.0

1,047

100.0

4,057

100.0

1,145

100.0

14,466

100.0

Rooms department

1,523

37.9

2,574

61.3

531

50.7

2,485

61.3

753

65.8

7,866

54.4

Food & beveragedepartment

2,187

54.5

1,296

30.8

32

3.1

1,232

30.4

37

3.2

4,784

33.1

Tenant department

68

1.7

159

3.8

454

43.4

2

0.0

－

－

684

4.7

238

5.9

171

4.1

31

3.0

338

8.3

355

31.0

1,133

7.8

495

12.3

1,053

25.1

506

48.3

1,113

27.4

692

60.4

3,859

26.7

Other departments(Note 3)GOP
(JPY MM)

Oriental Hotel
Okinawa Resort &Spa
Ratio toRatio to
total
total
sales
sales

Oriental Hotel
Universal City

Sheraton Grand
Hiroshima Hotel(Note 4)

Ratio to
total
sales

Oriental Hotel
Holiday Inn Osaka
Fukuoka Hakata
Namba
StationRatio toRatio to
total
total
sales
sales

Hotel Oriental
Express Fukuoka
TenjinRatio to
total
sales

Occupancy rate

61.5%

－

47.9%

－

58.2%

－

65.0%

－

100.0%

－

63.1%

－

ADR (Note 1)

20,661－

22,836－

20,837－

13,402

－

3,395

－

7,024

－

RevPAR (Note 2)

12,716－

10,940－12,131

－

8,717

－

3,395

－

4,430

－

Total sales(JPY MM)

1,797

100.0

2,307

100.0

2,222

100.0

1,614

100.0

408

100.0

446

100.0

Rooms department

1,532

85.3

1,441

62.5

1,054

47.4

703

43.6

389

95.3

425

95.3

Food & beveragedepartment

256

14.2

588

25.5

1,087

48.9

615

38.1

－

－

9

2.0

Tenant department

－

－

45

2.0

－

－

236

14.6

18

4.4

－

－

10

0.6

232

10.1

80

3.6

59

3.7

1

0.2

12

2.7

648

36.1

224

9.7

443

19.9

632

39.2

236

57.8

166

37.2

Other departments(Note 3)GOP
(JPY MM)13

International
Hilton Tokyo Narita
Hotel Nikko Nara
AirportGarden Hotel Narita
Ratio to
total
sales

Ratio to
total
sales

Ratio to
total
sales

Hotel Oriental
Express Osaka
Shinsaibashi(Note 5)

The 16 HMJ Hotels
Total/Average

Hilton Tokyo
OdaibaRatio to
total
sales

(Note 6)

Ratio to
total
sales

Ratio to
total
sales

Occupancy rate

64.1%

－

62.7%

－

54.9%

－

5.0%

－

59.2%

－

64.1%

－

ADR (Note 1)

11,039

－

7,362

－

13,208－

11,684－25,201－

15,121－

RevPAR (Note 2)

7,079

－

4,616

－

7,245

－

579

－

14,907

－

9,694

－

Total sales(JPY MM)

2,192

100.0

1,016

100.0

1,688

100.0

26

100.0

6,569

100.0

34,752

100.0

Rooms department

1,416

64.6

780

76.8

873

51.7

26

100.0

2,465

37.5

18,97054.6

Food & beveragedepartment

640

29.2

191

18.8

772

45.7

－

－

3,781

57.6

12,723

36.6

Tenant department

22

1.0

4

0.4

4

0.2

－

－

80

1.2

1,095

3.2

114

5.2

41

4.0

40

2.4

0

0.0

243

3.7

1,965

5.7

319

14.6

223

21.9

206

12.2

(11)

(42.3)

812

12.4

7,757

22.3

Other departments(Note 3)GOP
(JPY MM)(Note 1) ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (including service
charges) by the total number of rooms sold during the period.
Service charges are 10% for Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko
Alivila, Oriental Hotel Hiroshima, Oriental Hotel Okinawa Resort & Spa, ACTIVE-INTER CITY HIROSHIMA (Sheraton
Grand Hiroshima Hotel), International Garden Hotel Narita, Hotel Nikko Nara and Oriental Hotel Fukuoka Hakata Station;
12% for Hilton Tokyo Narita Airport; and 13% for Hilton Tokyo Odaiba. Oriental Hotel Universal City, Holiday Inn Osaka
Namba, Hotel Oriental Express Fukuoka Tenjin and Hotel Oriental Express Osaka Shinsaibashi do not request service charges.
The same shall apply hereinafter.
(Note 2) RevPAR: Represents revenue per available room, which is calculated by dividing total rooms revenue for a certain period(including service charges) by the total number of rooms available for sale during the period. The same shall apply hereinafter.
(Note 3) Figures for the Other departments include sales of the product sales department.
(Note 4) The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
(Note 5) The properties were temporarily closed for a certain period of time during the fiscal period under review due to the impact of
COVID-19, but the occupancy rate has been calculated by including the closed period.
(Note 6) For Total/Average of The 1 6 HMJ Hotels, figures are calculated by JHR as reference since no figures have been provided
by the hotel lessees.
(Note 7) The occupancy rate is rounded off to one decimal place, while ADR and RevPAR are rounded off to single units. Sales and
GOP are rounded off to the nearest million yen. For the ratio to total sales, the ratio of sales in each department to total sales isrounded off to one decimal place.

14

<Reference 2> Hotel operation indexes, sales and GOP (gross operating profit)
The numeral figures are based on figures obtained from hotel lessees, etc. Please note that these figures have not been
audited nor have they gone through other procedures. No guarantee is made as to the accuracy or completeness of the
figures and information.
ADR (Note 1) and RevPAR (Note 2) are rounded off to the nearest yen. Sales and GOP are rounded off to the nearest
million yen. Occupancy rate and comparison with the previous period are rounded off to one decimal place.
<1> The 16 HMJ Hotels

Fiscal year ended
December 31, 2021
ResultOccupancy
rate

ADR(Note 1)

RevPAR(Note 2)

Sales
(JPY MM)GOP(JPY MM)(Note 1)
(Note 2)First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year

Fiscal year ended December 31, 2022

Comparison
with 2019

ResultComparison
with previous
periodComparison
with 2019

26.4%(59.5pt)

54.6%

28.2pt(31.3pt)

47.8%(40.6pt)

73.4%

25.6pt(15.0pt)

37.2%(50.0pt)

64.1%

26.9pt(23.0pt)

12,615(26.2%)

12,292(2.6%)(28.1%)

14,038(26.2%)

17,192

22.5%(9.6%)

13,537(25.1%)

15,121

11.7%(16.3%)

3,333(77.3%)

6,716

101.5%(54.2%)

6,709(60.1%)

12,62588.2%(24.9%)

5,035(68.0%)

9,694

92.5%

(38.5%)

8,429(66.8%)

12,72050.9%(49.8%)

13,140(54.0%)

22,031

67.7%(22.9%)

21,569(60.0%)

34,752

61.1%(35.6%)(164)(102.1%)

1,536

－%

(80.5%)

2,178(79.5%)

6,222

185.7%(41.4%)

2,014(89.1%)

7,757

285.1%(58.0%)

ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (including
service charges) by the total number of rooms sold during the period. The same shall apply hereinafter.
RevPAR: Represents revenue per available room, which is calculated by dividing total rooms revenue for a certain period(including service charges) by the total number of rooms available for sale during the period. The same shall apply hereinafter.

15

<2> The 25 Hotels with Variable Rent, etc.
Fiscal year ended
December 31, 2021
ResultOccupancy
rate

ADR

RevPAR

Sales(JPY MM)GOP(JPY MM)First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year
First halfof the year
Second halfof the year
Full year

Fiscal year ended December 31, 2022

Comparison
with 2019

ResultComparison
with previous
periodComparison
with 201929.5%(56.0pt)

55.8%

26.3pt(29.6pt)

48.7%(38.6pt)

74.2%

25.5pt(13.1pt)

39.2%(47.2pt)

65.1%

25.9pt(21.3pt)

10,755(30.9%)

10,8721.1%(30.1%)

12,143(28.9%)

15,01823.7%(12.1%)

11,625(28.8%)

13,25514.0%(18.8%)

3,169(76.2%)

6,063

91.4%

(54.4%)

5,913(60.4%)

11,14088.4%(25.3%)

4,552(67.7%)

8,623

89.4%

(38.9%)

9,512(67.3%)

14,36451.0%(50.6%)

14,567(55.0%)

24,73569.8%(23.6%)

24,079(60.8%)

39,10062.4%(36.4%)(96)(101.0%)

1,819

－%

(80.8%)

2,463(79.9%)

7,055

186.4%(42.3%)

2,367(89.1%)

8,874

274.9%(59.1%)

16

<Reference 3> Dividend per unit and appropriation for dividends
Dividend per unit for the fiscal period ended December 31, 2021, and the fiscal period ended December 31, 2022, arecalculated based on the following assumptions.
Fiscal period ended
December 31, 2021
(JPY MM)
1,300

Unappropriated retained earnings
Total of reserve for temporary difference adjustment(negative goodwill) used
50-year amortization amount of negative goodwill

Fiscal period ended
December 31, 2022
(JPY MM)
2,672

335

376

262

262

Loss on retirement of noncurrent assets

16

57

Amortization of trademark rights

56

56

1,634

3,046

4,467,006 units

4,467,006 units

¥366

¥682

Total dividends
Total number of investment units issued and outstanding
Dividend per unit

<Reference 4> Balance of reserve for temporary difference adjustment
The balance of reserve for temporary difference adjustment (negative goodwill) after appropriation for dividends for the
fiscal period ended December 2022 is as follows.
Balance of reserve for temporary difference adjustment as ofDecember 31, 2022
Appropriation for dividends as of December 31, 2022
Balance of reserve for temporary difference adjustment after appropriation
for dividends for the fiscal period ended December 31, 2022

17

¥9,976 million(¥376 million)¥9,600 million

Overview of JHR
1. Unitholders’ capital
Account closing date

19th period
As ofDecember 31,
2018

20th period
As ofDecember 31,
2019

21st period
As ofDecember 31,
2020

22nd period
As ofDecember 31,
2021

23rd period
As ofDecember 31,
2022

20,000,000

20,000,000

20,000,000

20,000,000

20,000,000

4,010,847

4,462,347

4,462,347

4,467,006

4,467,006

153,516

186,894

186,894

187,194

187,194

31,15530,574

35,11731,481

27,573

Total number of authorized units(Units)Number of investment units
issued and outstanding(Units)Unitholders’ capital(JPY MM)
Number of unitholders(Persons)

2. Matters regarding investment units
Major unitholders of JHR as of December 31, 2022 were as follows:
Number ofunits held
(Units)Percentage(Note)(%)

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

815,025

18.24

Custody Bank of Japan, Ltd. (Trust Account)731,291

16.37

The Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

232,834

5.21

The Chase Manhattan Bank, N.A. London Special Account Number One

107,498

2.40

JPMorgan Securities Japan Co., Ltd.

80,4601.80

BNYM AS AGT Clients 10 PERCENT

75,875

1.69

State Street Bank and Trust Company 505223

73,811

1.65

STATE STREET BANK WEST CLIENT TREATY 505234

73,503

1.64

State Street Bank and Trust Company 505103

68,691

1.53

SSBTC CLIENT OMNIBUS ACCOUNT

68,5991.53

2,327,587

52.10

Name

Total
(Note)The percentage indicates the ratio of the number of units held to the number of units issued and outstanding, rounded down to
the two decimal places.

183. Matters regarding officers, etc.
(1) Officers, etc. as of December 31, 2022 were as follows:

Position

Name

Executive Director

Kaname Masuda (Note 1)

Supervisory
Director

Tetsuya Mishiku (Note 1)

Supervisory
Director

Hiroto Kashii (Note 1)

Supervisory
Director

Mayumi Umezawa (Note 1)

Independent auditor KPMG AZSA LLC (Note 2)

Major concurrent postoutside JHR
Representative Partner,
Masuda & Partners Law
OfficeRepresentative Attorney,
Mishiku & Nagamachi Law
Office–Representative of
Umezawa Accountant
Office–Total amount of remuneration foreach position during thecorresponding fiscal period(JPY thousands)
6,600
3,600
3,600
3,600
26,750(Note 1) None of the Executive Director and the Supervisory Directors own investment units of JHR in their own name or anotherperson’s name. Moreover, although the Supervisory Directors may be officers in corporations other than those listed above,
there are no conflicts of interest between those corporations including those listed above and JHR.
(Note 2) Fees paid to independent auditor include fees related to provide comfort letter in relation with issuance of investment
corporation bonds (¥1,750 thousand).
(Note 3) In case the number of Executive Director does not meet the requirement stipulated by laws and regulations, Hisashi
Furukawa, Representative Director of the Asset Management Company, was reappointed as Substitute Executive Director,
based on the resolution made by the 11th General Meeting of Unitholders of JHR held on November 25, 2021.

(2) Policy for decisions on dismissal or non-reappointment of independent auditor
We have a policy to determine, at a General Meeting of Unitholders, whether to dismiss the independent auditor
pursuant to provisions of the Investment Trusts Act, and to determine whether or not to reappoint the independent
auditor taking into comprehensive consideration the audit quality, audit fees and other various matters.

4. Matters regarding directors and officers liability insurance contract
JHR has entered into a directors and officers liability insurance agreement as follows:
Scope of the insured

Executive Director
and Supervisory
Directors

Overview of contract(Overview of insured event covered by the insurance)
JHR has entered into a directors and officers liability insurance contract, as provided in Article 116-31 of the Investment Trusts Act, with an insurance company. The contract shall cover, to a certain
extent, such legal loss as compensation payment for damages and dispute costs to be borne by the
insured when they receive a claim for compensation of damages caused by the actions they have taken
as a director of JHR.
(Burden ration of insurance premium)
JHR bears 100% of the insurance premium. (Measures to ensure the appropriateness of the executionof duties by directors and officers)
When the insured suffer damages by actions which they executed while recognizing that it may
constitute criminal act or violate the laws and regulations, the loss is not subject of the protection.

19

5. Asset management company, custodian and general administrators
The asset management company, etc. as of December 31, 2022 were as follows:
Consignment classification

Name

Asset management company
Custodian
General administrator (administration of the unitholders’registry, etc., bookkeeping, etc., tax payments, etc.,
organizational operations, etc., and administration of the special
account management agency)
General administrator (administration regarding investment
corporation bonds)
General administrator (tax return preparation, etc.)20

Japan Hotel REIT Advisors Co., Ltd.
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
MUFG Bank, Ltd.
PwC Tax Japan

Status of Investment Assets
1. Composition of assets
Type ofassetsHotel
PrefecturalType
location(Note 1)Name of property, etc.

Holiday Inn Osaka Namba
Osaka

Tokyo

Limitedservice
hotel

FukuokaRealestate intrust

14,354

3.6

14,2503.6

Hotel Oriental Express Osaka Shinsaibashi

2,793

0.7

2,781

0.7

the b ikebukuro

6,567

1.7

6,548

1.7

CANDEO HOTELS UENO-KOEN

6,567

1.7

6,535

1.6

Comfort Hotel Tokyo Higashi Nihombashi

3,457

0.9

3,422

0.9

the b hachioji

2,683

0.7

2,685

0.7

Smile Hotel Nihombashi Mitsukoshimae

2,028

0.5

2,025

0.5

R&B Hotel Ueno Hirokoji

1,794

0.5

1,780

0.4

Chisun Hotel Kamata
the b suidobashi
dormy inn・global cabin Asakusa

1,452
1,170
930

0.4
0.3
0.2

1,442
1,155
922

0.4
0.3
0.2

775

0.2

773

0.2

ibis Styles Sapporo

6,432

1.6

6,366

1.6

Mercure Sapporo

5,671

1.4

5,614

1.4

Hotel Oriental Express Fukuoka Tenjin

5,716

1.4

5,728

1.4

the b hakata

2,345

0.6

2,330

0.6

Washington Hotel Plaza Hakata, Nakasu

2,054

0.5

2,062

0.5

Toyoko Inn Hakata-guchi Ekimae

1,382

0.4

1,364

0.3

Kyoto

ibis Styles Kyoto Station

6,599

1.7

6,580

1.7

Okinawa

Mercure Okinawa Naha

2,784

0.7

2,745

0.7

Kumamoto Dormy Inn Kumamoto

2,203

0.6

2,186

0.6

Nara

Washington Hotel Plaza Nara

1,736

0.4

1,703

0.4

Subtotal

108,259

27.5

107,654

27.1

Tokyo

Hilton Tokyo Odaiba

63,266

16.0

63,16015.9

Oriental Hotel tokyo bay

16,945

4.3

16,724

4.2

Hilton Tokyo Narita Airport

13,015

3.3

13,038

3.3International Garden Hotel Narita

9,059

2.3

8,983

2.3

Hotel Francs

3,141

0.8

3,142

0.8

17,0604.3

17,016

4.3

4,043

1.0

4,032

1.0

Chiba

Fullservice
hotel

Namba Oriental Hotel

Chisun Inn Kamata
Hokkaido

22nd period
23rd period(As of December 31, 2021) (As of December 31, 2022)
Total amount
Total amount
Ratio toRatio toof assetsof assets
total assets
total assets
held
held
(%)
(%)
(JPY MM)(JPY MM)(Note 3)(Note 3)(Note 2)
(Note 2)
26,757
6.8
26,646
6.7

ACTIVE-INTER CITY HIROSHIMA
Hiroshima (Sheraton Grand Hiroshima Hotel) (Note 4)
Oriental Hotel Hiroshima
Aichi

Hilton Nagoya

15,6184.0

15,560

3.9

Nara

Hotel Nikko Nara

10,145

2.6

10,047

2.5

Hyogo

Kobe Meriken Park Oriental Hotel

9,337

2.4

9,260

2.3

FukuokaOriental Hotel Fukuoka Hakata Station

8,955

2.3

8,720

2.2

1,598

0.4

1,608

0.4

172,18643.7

171,296

43.2

Kanagawa Mercure Yokosuka
Subtotal

21

Type ofassetsHotel
PrefecturalType
location(Note 1)Name of property, etc.

Hotel Nikko Alivila
Oriental Hotel Okinawa Resort & Spa

14,5973.7

15,408

3.9

The Beach Tower Okinawa

6,472

1.6

6,418

1.6

Chiba

Hilton Tokyo Bay

26,1596.6

26,097

6.6

Osaka

Oriental Hotel Universal City

7,019

1.8

7,302

1.8

Kanagawa

Hakone Setsugetsuka

3,593

0.9

3,552

0.9

OkinawaRealestate intrust

Resorthotel

22nd period
23rd period(As of December 31, 2021) (As of December 31, 2022)
Total
Total
Ratio toRatio toamount ofamount ofassets held total assets assets held total assets(JPY MM) (%) (Note 3) (JPY MM) (%) (Note 3)(Note 2)
(Note 2)
17,451
4.4
17,627
4.5

75,46919.1

76,231

19.2

Real estate in trust – Total

Subtotal

355,91590.3

355,182

89.5

Deposits and other assets (Note 5)

38,408

9.7

41,617

10.5

Total assets

394,323100.0

396,799

100.0(Note 1) Hotels are categorized as limited-service hotels, full-service hotels or resort hotels according to the manner of operation.
(Note 2) For real estate in trust, “Total amount of assets held” shows the amount calculated by deducting accumulated depreciation from acquisition
price (including expenses incidental to acquisition).
(Note 3) “Ratio to total assets” shows the ratio of each asset held to total assets, rounded off to one decimal place.
(Note 4) ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the hotel type of Sheraton Grand Hiroshima Hotel, its main facility.
(Note 5) Includes machinery and equipment, tools, furniture and fixtures, construction in progress, construction in progress in trust, and intangible
assets (excluding leasehold rights in trust and fixed-term leasehold rights in trust).

22

2. Major portfolio assets

An overview of the portfolio assets of JHR (41 properties in total) as of December 31, 2022 are as follows.
PropertyNo.

Name of property, etc.

Book
Leasable area Leased area
value
(m2)
(m2)
(JPY MM)(Note 2)
(Note 3)(Note 1)

22

Kobe Meriken Park Oriental Hotel (Note5)
Oriental Hotel tokyo bay
Namba Oriental Hotel
Hotel Nikko Alivila (Note 6)
Oriental Hotel Hiroshima
The Beach Tower Okinawa (Note 7)
Hakone Setsugetsuka
Dormy Inn Kumamoto
the b suidobashi
dormy inn・global cabin Asakusa
Washington Hotel Plaza Hakata, Nakasu
Washington Hotel Plaza Nara
R&B Hotel Ueno Hirokoji
Comfort Hotel Tokyo Higashi
Nihombashi
Smile Hotel Nihombashi Mitsukoshimae24

Toyoko Inn Hakata-guchi Ekimae

1,364

25
26
29
31
32
33
34
35
37
39
40
41
42
43

Chisun Hotel Kamata
Chisun Inn Kamata
Oriental Hotel Universal City (Note 8)
Hilton Tokyo Bay (Note 9)
ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha
the b ikebukuro (Note 10)
the b hachioji (Note 10)
the b hakata (Note 10)
Hotel Francs
Mercure Yokosuka (Note 11)
Oriental Hotel Okinawa Resort & Spa
ACTIVE-INTER CITY HIROSHIMA(Note 12)CANDEO HOTELS UENO-KOEN(Note 13)
Oriental Hotel Fukuoka Hakata Station
Holiday Inn Osaka Namba
Hotel Oriental Express Fukuoka Tenjin
Hilton Nagoya (Note 14)
Hilton Tokyo Narita Airport
International Garden Hotel Narita
Hotel Nikko Nara (Note 15)
Hotel Oriental Express Osaka
Shinsaibashi
Hilton Tokyo Odaiba
Total

1,452
779
7,732
26,106
6,594
6,414
5,679
2,807
6,570
2,701
2,343
3,142
1,629
15,7563,167.82
Mainbuilding:
3,581.66
Annex:
868.36
3,831.80
1,499.87
15,926.83
64,928.83
5,003.99
14,992.49
15,189.42
10,884.25
5,650.01
7,847.65
3,986.09
19,213.39
16,881.82
36,430.15

17,19031,181.03

6,548

1
2
3
4
5
8
9
10
12
13
14
15
16
18

44
45
46
47
48
49
50
51
52
53
54

Tenantoccupancy
ratio
(%)

Ratio of rental
revenue tototal rental
revenue(%)(Note 4)

Major
use

9,484

32,663.90

32,663.90

100.0

2.9

Hotel

16,88914,317
17,665
4,095
6,420
3,558
2,186
1,167
922
2,062
1,703
1,780

44,833.11
19,364.33
38,024.98
13,752.22
20,140.01
10,655.03
7,701.19
3,097.25
2,014.90
5,602.04
5,271.54
3,060.31

44,833.11
19,364.33
38,024.98
13,752.22
20,140.01
10,655.03
7,701.19
3,097.25
2,014.90
5,602.04
5,271.54
3,060.31

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

5.6
3.1
5.5
4.1
3.4
2.0
1.3
0.2
0.4
1.6
1.0
0.7

Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel

3,423

5,765.27

5,765.27

100.0

1.8

Hotel

2,025

3,167.82
Mainbuilding:
3,581.66
Annex:
868.36
3,831.80
1,499.87
15,926.83
64,928.83
5,003.99
14,896.40
14,532.53
10,884.25
5,650.01
7,847.65
3,986.09
19,213.39
16,881.82
36,430.15

100.0

0.9

Hotel

100.0

0.9

Hotel

100.0
100.0
100.0
100.0
100.0
99.4
95.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0

0.2
0.1
4.2
13.3
0.5
1.4
1.8
0.3
3.2
0.6
0.4
2.0
1.6
1.3

Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel

30,677.43

98.4

7.6

Hotel

7,934.26

7,934.26

100.0

2.3

Hotel

8,879
26,672
5,828
15,56013,247
9,050
10,135

18,105.42
11,501.10
8,238.75
47,942.71
56,817.28
21,814.93
21,011.31

18,105.42
11,501.10
7,751.21
47,942.71
56,817.28
21,814.93
21,011.31

100.0
100.0
94.1
100.0
100.0
100.0
100.0

4.1
1.4
1.9
7.0
1.5
1.4
1.2

Hotel
Hotel
Hotel
Hotel
Hotel
Hotel
Hotel

2,804

2,710.55

2,710.55

100.0

－

Hotel

63,369358,067

64,907.76
733,995.61

64,907.76
732,251.49

100.0
99.8

4.8
99.8

Hotel

(Note 1) Book value includes real estate in trust, machinery and equipment, tools, furniture and fixtures, construction in progress, construction in progressin trust, and intangible assets.
(Note 2) In principle, leasable area represents leasable area of the building, which does not include leasable area of land (including parking lots on
ground), based on a lease contract or plan for each real estate in trust. For properties in which the leased area is not described in the lease
contract, leasable area represents the area described in the registration of the building. Furthermore, when the leasable area in the lease contract
is indicated in tsubo units, the figure in the table has been converted to the area in metric units (3.30578 square meters per one tsubo).
(Note 3) In principle, leased area represents the leased area described in the lease contract of the building. For properties in which the leased area is not23

described in the lease contract, leased area shows the area described in the registration of the building. Furthermore, when the leased area inthe lease contract is indicated in tsubo units, the figure in the table has been converted to the area in metric units (3.30578 square meters per
one tsubo). However, for properties for which master lease companies have concluded lease contracts with lessees, etc. under the pass-throughscheme in which JHR receives the same amount of rents, etc. paid by end tenants as is in principle, the total area for which lease contracts
have been concluded with end tenants and which are actually leased is indicated. In this report, the same shall apply hereinafter.
(Note 4) Represents the ratio of rental revenue to total real estate operating revenue for the fiscal period under review. In calculating, the figures arerounded off to one decimal place. Please note that the sum of the ratio of rental revenue to total rental revenue is 99.8% because the relevant
ratios of the trademark rights for the Oriental Hotel brand, etc. are not included.
(Note 5) Kobe Meriken Park Oriental Hotel is a building owned in the form of a compartmentalized ownership by two owners (JHR and Kobe City).
The area in this table shows the portion owned exclusively by JHR (including an accessory building of 764.83 square meters).
(Note 6) Leasable area and leased area for Hotel Nikko Alivila include an accessory building of 120.10 square meters and exclude a building of 493.50
square meters rented by JHR from Kabushiki Kaisha Okinawa Umi No Sono.
(Note 7) Leasable area and leased area for The Beach Tower Okinawa include the floor area of a warehouse in a two-story light- gauge steel annex
building (91.20 square meters).
(Note 8) The building of Oriental Hotel Universal City is a building with compartmentalized ownership for Universal CityWalk Osaka, which comprises
two hotel buildings, business facilities, commercial facilities and others, as a single building. For the leasable area and leased area of theproperty, the leased area under the lease contract of the hotel is indicated.
(Note 9) The building of Hilton Tokyo Bay is co-owned with other right holders, and JHR owns co-ownership interest for 64,928.83 square meters(JHR owns 9/10 of co-ownership interest).
(Note 10) The b ikebukuro, the b hachioji and the b hakata are properties with pass-through master lease contracts in which JHR receives the sameamount of rents, etc. paid by end tenants as is in principle. In this report, the same shall apply hereinafter.
(Note 11) The building of Mercure Yokosuka is a building with compartmentalized ownership for Bay Square Yokosuka Ichibankan, which comprises a
hotel, a theater, stores, apartments, office spaces and parking lots, as a single building. For the leasable area and leased area of the property,
the leased area under the lease contract of the hotel is indicated.
(Note 12) The building of ACTIVE-INTER CITY HIROSHIMA is a building with compartmentalized ownership for ACTIVE- INTER CITYHIROSHIMA, which comprises Sheraton Grand Hiroshima Hotel, office spaces, stores, parking lots and bicycle parking lots etc., as a single
building. For the leasable area and leased area of the property, the leased area under the lease contracts of the hotel, office spaces and storesare indicated.
(Note 13) Leasable area and leased area of CANDEO HOTELS UENO-KOEN indicate the total floor area described in the certificate of inspection,
based on the building lease contract with the hotel lessee. Furthermore, the figure includes the floor area for the mechanical parking facilities.
(Note 14) The building of Hilton Nagoya is a compartmentalized ownership of AMMNAT SQUARE, which consists of a hotel building (including retailspace), office building and car parking space, etc., as a single building. Leasable area and leased area indicate the sum total of the leased area
for the hotel building, the office building and the retail space described in the lease contracts.
(Note 15) The building of Hotel Nikko Nara is a compartmentalized ownership of the entire building of Redeveloped Building 1 in front of JR Nara
Station, which consists of hotel building, retail space and car parking space, etc. JHR’s share of voting right of the building is 223/353(approximately 63.2%).
(Note 16) The omitted property numbers are the numbers for assets that have been transferred.

24

3. Details of property assets, etc.
(1) Details of property assets

The details of real estate properties, etc. held by JHR as of December 31, 2022 were as follows:

Property
No.
1
2
3
4
5
8
9
10
12
13
14
15
16
18
22
24
25
26
29
31
32
33
34
35
37
39
40

Name of property, etc.

Location (Displayed address)

Kobe Meriken Park
Oriental Hotel

Form ofownership

5-6 Hatobacho, Chuo-ku,
Beneficial
Kobe-shi, Hyogo
interest in trust
8-2 Mihama 1-chome,
Beneficial
Oriental Hotel tokyo bay
Urayasu-shi, Chibainterest in trust
8-17 Sennichimae 2-chome,
Beneficial
Namba Oriental Hotel
Chuo-ku, Osaka-shi, Osakainterest in trust
600 Aza Gima, Yomitan-son,Beneficial
Hotel Nikko Alivila
Nakagami-gun, Okinawa
interest in trust
6-10 Tanakamachi, Naka-ku,
Beneficial
Oriental Hotel Hiroshima
Hiroshima-shi, Hiroshima
interest in trust
The Beach Tower Okinawa 8-6 Aza Mihama, Chatan-cho,
Beneficial(Note 4)
Nakagami-gun, Okinawa
interest in trust
1300 Goura, Hakone-machi,
Beneficial
Hakone Setsugetsuka
Ashigarashimo-gun, Kanagawa
interest in trust
3-1 Karashimacho, Chuo-ku,
Beneficial
Dormy Inn Kumamoto
Kumamoto-shi, Kumamotointerest in trust
25-27 Hongo 1-chome,
Beneficial
the b suidobashi
Bunkyo-ku, Tokyo
interest in trust
dormy inn・global cabin 3-4 Hanakawado 1-chome,
Beneficial
Taito-ku, Tokyo
interest in trust
Asakusa
Washington Hotel Plaza 8-28 Nakasu 2-chome, Hakata-ku,
Beneficial
Hakata, Nakasu
Fukuoka-shi, Fukuoka
interest in trust
Washington Hotel Plaza
31-1 Shimosanjo-cho,
Beneficial
Nara
Nara-shi, Narainterest in trust
18-8 Ueno 1-chome,
Beneficial
R&B Hotel Ueno Hirokoji
Taito-ku, Tokyo
interest in trust
Comfort Hotel Tokyo
10-11 Nihonbashi-bakurocho 1-chome,
Beneficial
Higashi Nihombashi
Chuo-ku, Tokyo
interest in trust
Smile Hotel Nihombashi 4-14 Nihonbashi-Honcho 1-chome,
Beneficial
Mitsukoshimae
Chuo-ku, Tokyo
interest in trust
Main building: 15-5 Hakataekimae 1chome, Hakata-ku, Fukuoka-shi, Fukuoka Beneficial
Toyoko Inn HakataAnnex: 1-15 Hakataekimae 1-chome,interest in trust
guchi Ekimae
Hakata-ku, Fukuoka-shi, Fukuoka
20-11 Nishikamata 8-chome,
Beneficial
Chisun Hotel Kamata
Ota-ku, Tokyo
interest in trust
23-13 Kamata 4-chome,
Beneficial
Chisun Inn Kamata
Ota-ku, Tokyo
interest in trust
Oriental Hotel Universal 2-78 Shimaya 6-chome,
Beneficial
City
Konohana-ku, Osaka-shi, Osakainterest in trust
Beneficial
Hilton Tokyo Bay
1-33 Maihama, Urayasu-shi, Chibainterest in trust
47-1, 47-2 Higashikujo KamitonodaBeneficial
ibis Styles Kyoto Stationcho, Minami-ku, Kyoto-shi, Kyoto
interest in trust
10-10 Minami 8-jo Nishi 3-chome,
Beneficial
ibis Styles Sapporo
Chuo-ku, Sapporo-shi, Hokkaido
interest in trust
2-4 Minami 4-jo Nishi 2-chome,
Beneficial
Mercure Sapporo
Chuo- ku, Sapporo-shi, Hokkaido
interest in trust
3-19 Tsubogawa 3-chome,
Beneficial
Mercure Okinawa Naha
Naha-shi, Okinawa
interest in trust39-4 Higashi-ikebukuro 1-chome,
Beneficial
the b ikebukuro
Toshima-ku, Tokyo
interest in trust
6-12 Myojincho 4-chome,
Beneficial
the b hachioji
Hachioji-shi, Tokyo
interest in trust
3-9 Hakata-eki Minami 1-chome,
Beneficial
the b hakata
Hakata- ku, Fukuoka-shi, Fukuoka
interest in trust
25

Assessed value
at end ofBook value Appraisal
period(JPY MM)agency(JPYMM)(Note 2)
(Note 3)(Note 1)
14,1009,484

JR31,70016,889JR

31,00014,317

JR

28,10017,665

JR

4,150

4,095

JR

9,960

6,420

JR

5,260

3,558

JR

2,930

2,186

JR

2,270

1,167

JR

1,300

922

JM

4,520

2,062

JR

2,430

1,703

JR

1,800

1,780

JM

5,370

3,423

JM

2,940

2,025

JM

2,760

1,364

T

2,050

1,452

T

1,380

779

T

17,8007,732

R40,50026,106

D

9,990

6,594

D

11,1006,414

JR10,500

5,679

JR

6,940

2,807

JR

7,180

6,570

JR

2,570

2,701

JR

4,320

2,343

JR

Property
No.
41
42
43
44
45
46
47
48
49
50
51
52
53
54

Name of property, etc.

Location (Displayed address)10-2 Hibino 2-chome,
Mihama-ku, Chiba-shi, Chiba
27 Honcho 3-chome,
Mercure Yokosuka
Yokosuka-shi, Kanagawa
Oriental Hotel Okinawa
1490-1 Kise,
Resort & Spa
Nago-shi, Okinawa
ACTIVE-INTER CITY
12-1 Wakakusa-cho,
HIROSHIMA
Higashi-ku, Hiroshima-shi, Hiroshima
CANDEO HOTELS
2-13 Negishi 1-chome,
UENO- KOEN
Taito-ku, Tokyo
Oriental Hotel Fukuoka
4-23 Hakata-eki Chuo-gai,
Hakata Station
Hakata-ku, Fukuoka-shi, Fukuoka
5-15 Soemon-cho, Chuo-ku,
Holiday Inn Osaka Namba
Osaka-shi, Osaka
Hotel Oriental Express
3-14 Tenjin 3-chome, Chuo-ku,
Fukuoka Tenjin
Fukuoka-shi, Fukuoka
3-3 Sakae 1-chome, Naka-ku,
Hilton Nagoya
Nagoya-shi, Aichi
Hilton Tokyo Narita
456 Kosuge,
AirportNarita-shi, Chiba
International Garden
241-1 Yoshikura,
Hotel Narita
Narita-shi, Chiba
8-1 Sanjyo-honmachi,
Hotel Nikko Nara
Nara-shi, Nara
Hotel Oriental Express
2-13 Minamisenba 3-chome,
Osaka Shinsaibashi
Chuo-ku, Osaka-shi, Osaka
9-1 Daiba 1-chome,
Hilton Tokyo Odaiba
Minato-ku, Tokyo
Hotel Francs

Total

Form ofownership
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust
Beneficial
interest in trust

Assessed value
at end ofBook value Appraisal
period(JPY MM)agency(JPYMM)(Note 2)
(Note 3)(Note 1)
4,100

3,142

D

3,240

1,629

D

17,90015,756

JR

20,70017,190

D

7,460

6,548

D

15,0008,879

D26,60026,672

JR

6,520

5,828

D

14,90015,560D

12,30013,247

JR

9,080

9,050

JR

9,500

10,135

D

2,890

2,804

D

68,00063,369JR

483,110358,067(Note 1) Assessed value at end of period shows appraisal value as of the end of the fiscal period under review as the date of valuation, in accordancewith JHR’s Articles of Incorporation, the Ordinance on Accounting of Investment Corporations (Cabinet Office Ordinance No. 47, 2006) andregulations set forth by The Investment Trusts Association, Japan.
(Note 2) Book value includes amounts of real estate in trust, machinery and equipment, tools, furniture and fixtures, construction in progress,
construction in progress in trust, and intangible assets.
(Note 3) The letters indicate the appraisers for the properties as follows:
JR: Japan Real Estate InstituteJM: JLL Morii Valuation &Advisory K.K.
T: The Tanizawa Sōgō Appraisal Co., Ltd.
R: Rich Appraisal Institute Co., Ltd.
D: DAIWA REAL ESTATE APPRAISAL CO., LTD.
(Note 4) Due to the lack of a displayed address, “location” in the registration or registration record is shown.
(Note 5) The omitted property numbers are the numbers for assets that have been transferred.

26

(2) Transition of real estate leasing business, etc.

An overview of leasing business of real estate, etc. owned by JHR is as follows:

PropertyNo.

Name of property, etc.

1
2
3
4
5
6
8
9
10
12
13
14
15
16
18
22
24
25
26
29
31
32
33
34
35
37
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54

Kobe Meriken Park Oriental Hotel
Oriental Hotel tokyo bay
Namba Oriental Hotel
Hotel Nikko Alivila
Oriental Hotel Hiroshimaibis Tokyo Shinjuku (Note 3)
The Beach Tower Okinawa
Hakone Setsugetsuka
Dormy Inn Kumamoto
the b suidobashi
dormy inn・global cabin Asakusa
Washington Hotel Plaza Hakata, Nakasu
Washington Hotel Plaza Nara
R&B Hotel Ueno Hirokoji
Comfort Hotel Tokyo Higashi Nihombashi
Smile Hotel Nihombashi Mitsukoshimae
Toyoko Inn Hakata-guchi Ekimae
Chisun Hotel Kamata
Chisun Inn Kamata
Oriental Hotel Universal City
Hilton Tokyo Bay
ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha
the b ikebukuro
the b hachioji
the b hakata
Hotel Francs
Mercure Yokosuka
Oriental Hotel Okinawa Resort & Spa
ACTIVE-INTER CITY HIROSHIMACANDEO HOTELS UENO-KOEN
Oriental Hotel Fukuoka Hakata Station
Holiday Inn Osaka Namba
Hotel Oriental Express Fukuoka Tenjin
Hilton Nagoya
Hilton Tokyo Narita Airport
International Garden Hotel Narita
Hotel Nikko Nara
Hotel Oriental Express Osaka Shinsaibashi
Hilton Tokyo Odaiba(Note 1)

(Note 2)
(Note 3)(Note 4)22nd period(From January 1, 2021 to December 31, 2021)
Real estate Ratio to
Number of Tenant
operating total real
occupancy
estatetenants
revenue
rate
operatingat end ofduring theat end ofrevenueperiodperiod(Note 1)
period (%)(%)(JPY MM)(Note 2)23rd period(From January 1, 2022 to December 31, 2022)
Real estate Ratio toTenantNumber ofoperating total real
occupancy
tenants
estaterevenue
rate
at end ofoperatingduring theat end ofperiodrevenueperiod(Note 1)
period (%)(%)(JPY MM)(Note 2)

1
100.0
36
0.3
1
100.0
429
2.9
1
100.0
－
－
1
100.0
833
5.6
1
100.0
288
2.8
1
100.0
460
3.1
1
100.0
155
1.5
1
100.0
814
5.5
1
100.0
297
2.9
1
100.0
618
4.1
155
1.5
－
－
－
－
－
－
1
100.0
511
4.9
1
100.0
511
3.4
1
100.0
294
2.8
1
100.0
294
2.0
1
100.0
194
1.9
1
100.0
194
1.3
1
100.0
12
0.1
1
100.0
30
0.2
1
100.0
63
0.6
1
100.0
65
0.4
1
100.0
240
2.3
1
100.0
240
1.6
2
100.0
150
1.4
2
100.0
150
1.0
1
100.0
97
0.9
1
100.0
97
0.7
2
100.0
271
2.6
2
100.0
271
1.8
1
100.0
134
1.3
1
100.0
134
0.9
1
100.0
141
1.4
1
100.0
141
0.9
1
100.0
15
0.1
1
100.0
26
0.2
1
100.0
2
0.0
1
100.0
18
0.1
1
100.0
470
4.5
1
100.0
627
4.2
1
100.0
1,979
19.1
1
100.0
1,980
13.3
2
100.0
46
0.4
2
100.0
71
0.5
5
99.4
55
0.5
5
99.4
214
1.4
11
95.7
115
1.1
9
95.7
269
1.8
1
100.0
1
100.0
50
0.3
－
－
3
100.0
404
3.9
3
100.0
478
3.2
10
100.0
45
0.4
10
100.0
91
0.6
2
100.0
35
0.3
2
100.0
66
0.4
1
100.0
300
2.9
1
100.0
300
2.0
1
100.0
242
2.3
1
100.0
231
1.6
1
100.0
1
100.0
199
1.3
－
－
40
99.5
881
8.5
37
98.4
1,127
7.6
1
100.0
349
3.4
1
100.0
349
2.3
1
100.0
243
2.4
1
100.0
612
4.1
1
100.0
71
0.7
1
100.0
213
1.4
5
96.1
405
3.9
4
94.1
286
1.9
4
100.0
780
7.5
4
100.0
1,037
7.0
1
100.0
41
0.4
1
100.0
228
1.5
1
100.0
284
2.7
1
100.0
212
1.4
1
100.0
－
－
1
100.0
178
1.2
1
100.0
1
100.0
－
－
－
－
1
100.0
522
5.0
1
100.0
722
4.8
Total
116
99.8
10,340
99.7
110
99.8
14,87999.8
Number of tenants indicates the total number of tenants based on the lease contracts for respective real estate in trust (excluding tenants of parking lots, etc.) as of the endof each fiscal period. However, for properties for which master lease companies have concluded lease contracts with lessees, etc. under the pass-through scheme in which
JHR receives the same amount of rents, etc. paid by end tenants as is in principle, the number of end tenants is indicated. For properties with sub-lease-type master lease
contracts in which JHR receives predetermined rents despite fluctuations in rents from end tenants, the number of the master lease companies is indicated as tenants.
Represents the ratio of real estate operating revenue of each property to total real estate operating revenue. In calculating, the figures are rounded off to the first decimal
place. Please note that the sum of the ratio to total real estate operating revenue are 99.7% for the 22nd fiscal period and 99.8% for the 23rd fiscal period because therelevant ratio of the trademark rights for the Oriental Hotel brand, etc. is not included.
ibis Tokyo Shinjuku was sold on December 15, 2021.
The property numbers of assets that were transferred before the previous fiscal period are intentionally omitted.

27

4. Details of securities assets
There are no applicable securities held by JHR as of December 31, 2022.

5. Contractual amounts and fair values of specified transactions
The contractual amounts and fair values of specified transactions as of December 31, 2022 were as follows:
Amounts of contract, etc.
(JPY MM) (Note 1)
Classification
Transaction
Over 1 year

Transactions other thanmarket transactions

Interest rate swap transactions
Payable fixed rate / Receivable floating
rate
Total

Fair value(JPY MM)(Note 2)

81,95472,3501,184

81,95472,3501,184(Note 1) Contractual amounts, etc. of interest rate swap transactions are based on notional principal amounts, etc.
(Note 2) Fair value is based on the price, etc. provided by counterparty financial institutions.

6. Other assets
All of the beneficial interest in trust mainly invested in real estate held by JHR is included in “3. Details of property assets, etc.” presented
above. There were no other major specified assets that are considered to be JHR’s main investments in the portfolio of JHR as ofDecember 31, 2022.

7. Asset holdings by country and region
There is nothing to be reported on countries and regions other than Japan.

28

Capital Expenditures for Portfolio Properties
1. Planned capital expenditures (Note)

The following table shows major estimated capital expenditures items for renovation work planned as of the end of the fiscal period
under review for investment real estate properties (in trust) held by JHR. Expenditures are expected to total ¥4,858 million, which consistsof capital expenditures of ¥4,848 million (Note) and repair expenses of ¥10 million, for the next fiscal period.
Estimated construction
costs (JPY MM)
Name of property, etc. (Location)
PurposeScheduled period
Total Total amountamountpaid
Kobe Meriken Park Oriental Hotel
From July 2023
Renovation of restaurant
110－(Kobe-shi, Hyogo)
to September 2023
Kobe Meriken Park Oriental Hotel
Renovation of guest rooms
From May 2023
203－
(Kobe-shi, Hyogo)(12th and 13th floors)
to July 2023
Kobe Meriken Park Oriental Hotel
Renovation of prefabricatedFrom May 2023
55－
(Kobe-shi, Hyogo)bathrooms in guest rooms
to July 2023
Oriental Hotel tokyo bay
Tenant compartment
From July 2023
50－
(Urayasu-shi, Chiba)
construction
to November 2023
Oriental Hotel tokyo bay
From August 2023
Renovation of restaurant
63－(Urayasu-shi, Chiba)
to August 2023
Oriental Hotel tokyo bay
Renovation of guest rooms
From May 2023
300－
(Urayasu-shi, Chiba)(11th and 12th floors)
to July 2023
Hotel Nikko Alivila
From January 2023
Renovation of elevators
151－(Nakagami-gun, Okinawa)
to March 2023
Oriental Hotel Universal City
Renewal of disaster prevention
From June 2023
90－
(Osaka-shi, Osaka)boar
to December2023
Hilton Tokyo Bay
From January 2023
Renewal of elevators
73－(Urayasu-shi, Chiba)
to February 2023
Hilton Tokyo Bay
Renewal of air conditioning
From August 2023
79－
(Urayasu-shi, Chiba)
units in guest rooms
to November 2023
Oriental Hotel Okinawa Resort & Spa
From October 2023
Painting of exterior walls
60－(Nago-shi, Okinawa)
to December 2023
Oriental Hotel Okinawa Resort & Spa Renewal of air conditioning
From October 2023
88－
(Nago-shi, Okinawa)
units in guest rooms
to December 2023
Oriental Hotel Okinawa Resort & Spa
From October 2023
Renovation of guest rooms
465－(Nago-shi, Okinawa)
to December 2023
Oriental Hotel Okinawa Resort & Spa
From October 2023
Renewal of piping
60－(Nago-shi, Okinawa)
to December 2023
Hilton Tokyo Narita Airport
Renewal of telephone
From June 2023
60－
(Narita-shi, Chiba)
switchboard
to September 2023
Hilton Tokyo Odaiba
Renewal of power receiving
From November 2023
120－
(Minato-ku, Tokyo)
and transforming facilities
to November 2023
Total
(Note)

2,027－

New construction and renewal works includes that for buildings, attached facilities, etc. as well as items classified as furniture and fixtures. The scheduled
period of the above planned renovation work and whether or not the renovation work will be performed may change.

29

2. Capital expenditures during the period (Note)
For investment real estate properties (in trust) held by JHR, major construction work conducted during the fiscal period under review
that represents capital expenditures is as below. Capital expenditures for the fiscal period under review totaled ¥4,497 million, and repair
expenses that were accounted for as expense in the fiscal period under review totaled ¥21 million. In aggregate, ¥4,519 million of
construction work was carried out.
Construction costs
Name of property, etc. (Location)
Purpose
Period(JPY MM)
Kobe Meriken Park Oriental Hotel
From May 2022
Renovation of executive rooms
100(Kobe-shi, Hyogo)
to July 2022
Kobe Meriken Park Oriental Hotel
Renovation of prefabricatedFrom July 2022 to62(Kobe-shi, Hyogo)bathrooms in guest rooms
September 2022
Oriental Hotel Universal City
Renovation of guest rooms
From January 2022
283
(Osaka-shi, Osaka)(13th to 17th floors)
to February 2022
Oriental Hotel Universal City
Renovation of guest rooms
From January 2022
447
(Osaka-shi, Osaka)(5th to 12th floors)
to July 2022
Hilton Tokyo Bay
From November 2022
Renewal of elevators
65(Urayasu-shi, Chiba)
to December 2022
Oriental Hotel Okinawa Resort & Spa
Renovation of lobby andFrom December 2021
493
(Nago-shi, Okinawa)
swimming pool area
to March 2022
Oriental Hotel Okinawa Resort & Spa
Renewal of air conditioning
From May 2022
219
(Nago-shi, Okinawa)
equipment in guest rooms
to December 2022
Oriental Hotel Okinawa Resort & Spa
Renewal of piping in guest
From September 2022
51
(Nago-shi, Okinawa)
rooms
to December 2022
Oriental Hotel Okinawa Resort & Spa
From September 2022
Painting of exterior walls
64(Nago-shi, Okinawa)
to December 2022
Oriental Hotel Okinawa Resort & Spa
From September 2022
Renovation of guest rooms
337(Nago-shi, Okinawa)
to December 2022
ACTIVE-INTER CITY HIROSHIMA
Renovation of sixth floor lobby
From May 2022
144
(Hiroshima-shi, Hiroshima)and lounge area
to August 2022
Oriental Hotel Fukuoka Hakata Station Repair works of restaurant at
From August 2022
57
(Fukuoka-shi, Fukuoka)
B2 floor
to October 2022
Hotel Oriental Express Fukuoka Tenjin
From February 2022
Renewal of heat sources
57(Fukuoka-shi, Fukuoka)
to May 2022
Total
(Note)

2,382

New construction and renewal works includes that for buildings, attached facilities, etc. as well as items classified as furniture and fixtures.

30

3. Cash reserves for the long-term repairs and maintenance plan (reserve for repairs and maintenance)
JHR accumulates cash reserves from cash flows for each fiscal period as detailed below to utilize for medium- to long-term future
expenditures on large-scale repairs and maintenance projects based on long-term repairs and maintenance plans prepared for each
property.
(JPY MM)

19th period(From January 1, 2018
to December 31, 2018)

20th period(From January 1, 2019
to December 31, 2019)

21st period(From January 1, 2020
to December 31, 2020)

22nd period(From January 1, 2021
to December 31, 2021)

23rd period(From January 1, 2022
to December 31, 2022)

Balance at beginning of period

946

951

1,060

1,075

1,066

Provision during the period

15

116

25

1

9

Reversal during the period

9

8

10

11

―

Amount carried forward

951

1,060

1,075

1,066

1,076

Fiscal period

Expenses and Liabilities
1. Details of expenses related to asset management, etc.
(JPY thousand)

Item

22nd period(From January 1, 2021 to
December 31, 2021)(a) Asset management fees (Note)

23rd period(From January 1, 2022 to
December 31, 2022)

1,447,210

1,491,325(b) Asset custody and administrative service fee

121,700

115,661(c) Officers’ compensation

17,40017,400(d) Other operating expenses

257,097

195,024

1,843,408

1,819,411

Total(Note)For asset management fees for the 22nd fiscal period, besides the above amounts, there are ¥5,654 thousand of fees for property acquisition
included in the acquisition price of the relevant investment property, and ¥56,500 thousand of fees for property sale deducted from the gainon sale of real estate properties.

31

2. Loans payable
The status of loans by contractual agreement and by financial institution as of December 31, 2022 were as follows:

Category

LenderBalance at
Average
Balance at
Borrowing beginning ofinterest
end of period
date
periodrate (%)
(¥1M)
(¥1M)
(Note 1)

Sumitomo Mitsui Banking Corporation

648

－

2,516

－

1,120

－

2,516

－

6,800

－

Sumitomo Mitsui Banking Corporation

3,487

－

Mizuho Bank, Ltd.

4,670

－

2,450

－

2,220

－

2,085

－

Development Bank of Japan Inc.
(Note 3)505－

Aozora Bank, Ltd.

285－

15,702

－

626

－

434

－

310

－

130

－

1,500

－

Sumitomo Mitsui Banking Corporation－

909

Mizuho Bank, Ltd.

－

2,526

－

756

－

660

Shinsei Bank, Limited－

593

Aozora Bank, Ltd.

－

67

－

5,511

－

2,148

－

2,516

－

2,516

－

1,120

－

8,300

－

1,000

－

1,000

Shinsei Bank, Limited
Sumitomo Mitsui Trust Bank, Limited

March 31,2021

Resona Bank, Limited
SubtotalResona Bank, Limited
September
30, 2021

Shinsei Bank, Limited
Sumitomo Mitsui Trust Bank, Limited

Subtotal
Sumitomo Mitsui Banking Corporation (Note 3)
Mizuho Bank, Ltd. (Note 3)
ShortSumitomo Mitsui Trust Bank,
term
Limited (Note 3)
loans
payable Development Bank of Japan Inc. (Note 3)

December16, 2021

SubtotalResona Bank, Limited
Sumitomo Mitsui Trust Bank, Limited

January
31, 2022

Subtotal
Sumitomo Mitsui Banking Corporation
Shinsei Bank, Limited

March31, 2022

Resona Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
SubtotalJune
30, 2022

Aozora Bank, Ltd.
Subtotal

32

Maturity
date

Repayment
methodUse

Remarks

0.58%

March 31,2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.56%

September
30, 2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.56%

December16, 2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.57%

January
31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.57%

March
31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.57%

June
30,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteedCategory

LenderBalance at
Average
Balance at
Borrowing beginning ofinterest
end of period
date
periodrate (%)
(¥1M)
(¥1M)
(Note 1)

Sumitomo Mitsui Banking Corporation

－

3,487

Mizuho Bank, Ltd.

－

4,670

－

2,450

－

2,220

Sumitomo Mitsui Trust Bank, Limited

－

2,085

Development Bank of Japan Inc.

－

505

Aozora Bank, Ltd.

－

285

－

15,702

－

1,541

－

922

－

658

－

279

Resona Bank, Limited－

100

The Shizuoka Bank, Ltd.

－100

The Minato Bank Ltd.

－

1,000

－

4,600

24,00235,113

909

－

2,526

－

593

－

756

－

Sumitomo Mitsui Trust Bank, Limited

660－

Aozora Bank, Ltd.

67

－

5,511

－

1,500

－

1,500

－

1,000

－

423

－

1,423

－

960

960

960

960

960

960

2,880

2,880

703

703

189

189

892

892

Resona Bank, Limited
September
30, 2022

Shinsei Bank, Limited

Subtotal
Shortterm
Sumitomo Mitsui Banking Corporationloans
payable Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc.

October
20,2022

Subtotal
Short-term loans payable – Total
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Shinsei Bank, Limited

January 30,
2015

Resona Bank, Limited

Subtotal
Sumitomo Mitsui Banking Corporation

March 31,2015

Subtotal
LongAozora Bank, Ltd.
term
loans
MUFG Bank, Ltd.
payableJuly 10,2015
Subtotal

Sumitomo Mitsui Trust Bank, Limited
September
24, 2015

Resona Bank, Limited
The Nomura Trust and Banking Co., Ltd.
Subtotal
Sumitomo Mitsui Banking Corporation
Shinsei Bank, Limited
Subtotal

September
30, 2015

33

Maturity
date

Repayment
methodUse

Remarks

0.56%

September
29,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.56%

October
20,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.90%

January 31,
2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.93%

March 31,2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.95%

June 30,2022

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

1.07%

September
29, 2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

1.07%

September
29, 2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteedCategory

LenderSumitomo Mitsui Banking Corporation

Balance at
Average
Balance at
Borrowing beginning ofinterest
end of period
date
periodrate (%)
(¥1M)
(¥1M)
(Note 1)
1,050

1,050

1,050

1,050

2,100

2,100

1,200

1,200

600

600

550

550

186

186

2,536

2,536

Sumitomo Mitsui Banking Corporation

1,200

1,200

Mizuho Bank, Ltd.

1,000

1,000

1,000

1,000

Resona Bank, Limited

500

500

The Nomura Trust and Banking Co., Ltd.

388

388

4,088

4,088

800

800

800

800

500

500

500

500

2,900

2,900

1,700

1,700

1,700

1,700

1,000

1,000

The Nomura Trust and Banking Co., Ltd.

500

500

The Chiba Bank, Ltd.

500

500

1,200

1,200

9,500

9,500

1,300

1,300

1,300

1,300

2,000

2,000

2,000

2,000

700

700

700

700

500

500

500

500

1,750

1,750

500

500

2,250

2,250

Mizuho Bank, Ltd.

March 28,
2016

Subtotal
The Nomura Trust and Banking Co., Ltd.
The Chiba Bank, Ltd.
Development Bank of Japan Inc.

March 31,2016

The Bank of Fukuoka, Ltd.
SubtotalMarch 31,2016

Shinsei Bank, Limited

Subtotal
Sumitomo Mitsui Trust Bank, Limited

March 31,2016

Subtotal
Development Bank of Japan Inc.

March 31,2016

SubtotalLong-term
loans
Sumitomo Mitsui Banking Corporation
payableMizuho Bank, Ltd.
Shinsei Bank, Limited
September
1, 2016

Resona Bank, Limited

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Trust Bank, Limited

September
1, 2016

Subtotal
September
1, 2016

MUFG Bank, Ltd.
Subtotal
Development Bank of Japan Inc.

September
1, 2016

Subtotal
September
1, 2016

Aozora Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking Corporation
The Chiba Bank, Ltd.
Subtotal

July 12,2017

34

Maturity
date

Repayment
methodUse

Remarks

0.77%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.77%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.68%

March 31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.66%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.57%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.74%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.56%

September
30, 2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.56%

September
30, 2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.59%

September
30, 2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.71%

September
30, 2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.47%

June 30,
2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteedCategory

LenderBalance at
Average
Balance at end
Borrowing beginninginterestof period
dateof period
rate (%)
(¥1M)
(¥1M)
(Note 1)

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.

August 1,
2017

Shinsei Bank, Limited
Resona Bank, Limited
Subtotal
Sumitomo Mitsui Trust Bank, Limited

August 1,
2017

SubtotalAugust 1,
2017

MUFG Bank, Ltd.
Subtotal
Development Bank of Japan Inc.

August 1,
2017

Subtotal
The Bank of Fukuoka, Ltd.

August 1,
2017

SubtotalAugust 1,
2017

Aozora Bank, Ltd.
Subtotal
THE NISHI-NIPPON CITY BANK, LTD.
Longterm
Subtotalloans
payable Shinsei Bank, Limited

August 1,
2017
August 1,
2017

Subtotal
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited

September
19, 2017

Shinsei Bank, Limited
Subtotal
Sumitomo Mitsui Banking Corporation
Shinsei Bank, Limited

November15, 2017

Subtotal
Sumitomo Mitsui Banking Corporation
Shinsei Bank, Limited
Development Bank of Japan Inc.

November15, 2017

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Banking Corporation
SubtotalMarch 30,
2018

1,250

1,250

1,250

1,250

1,250

1,250

500

500

4,250

4,250

1,000

1,000

1,000

1,000

700

700

700

700

500

500

500

500

500

500

500

500

500

500

500

500

1,000

1,000

1,000

1,000

300

300

300

300

1,200

1,200

500

500

460

460

390

390

2,550

2,550

2,500

2,500

1,500

1,500

4,000

4,000

1,500

1,500

500

500

300

300

150

150

2,450

2,450

1,700

1,700

1,700

1,700

35

Maturity
date

Repayment
methodUse

Remarks

0.85%

September
30, 2026

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.73%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.68%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.75%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.73%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.73%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.73%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.68%

September
30, 2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.65%

March 31,2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.57%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.65%

March 31,2025

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.42%

March 31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteedCategory

LenderBalance at Balance at
AverageBorrowing beginningend ofinterest rate
date
of period
period
(%)
(¥1M)
(¥1M)
(Note 1)

Sumitomo Mitsui Banking Corporation

650

650

950

950

432

432

THE NISHI-NIPPON CITY BANK, LTD.

184

184

Sompo Japan Insurance Inc.

464

464

2,680

2,680

454

454

454

454

488

488

488

488

1,700

1,700

1,400

1,400

500

500

300

300

3,900

3,900

500

500

500

500

500

500

1,000

1,000

2,500

2,500

2,500

2,500

1,500

1,500

1,500

1,500

Sumitomo Mitsui Trust Bank, Limited

1,000

1,000

Development Bank of Japan Inc.

1,000

1,000

7,500

7,500

Sumitomo Mitsui Banking Corporation

4,000

4,000

Shinsei Bank, Limited

3,000

3,000

Mizuho Bank, Ltd.

3,000

3,000

Sumitomo Mitsui Trust Bank, Limited

2,500

2,500

1,000

1,000

500

500

Development Bank of Japan Inc.

1,000

1,000

The Bank of Fukuoka, Ltd.

1,000

1,000

Aozora Bank, Ltd.

1,000

1,000

THE NISHI-NIPPON CITY BANK, LTD.

1,000

1,000

18,00018,000

200

200

1,400

1,400

Shinsei Bank, Limited
April 26,
2018

The Chiba Bank, Ltd.

Subtotal
April 26,
2018

The Hiroshima Bank, Ltd.
Subtotal

September
28, 2018

The Shizuoka Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Shinsei Bank, Limited

September
28, 2018

Mizuho Bank, Ltd.
Subtotal
The Bank of Fukuoka, Ltd.
The Chiba Bank, Ltd.
THE NISHI-NIPPON CITY BANK, LTD.
LongtermloanspayableApril 8,2019

Sompo Japan Insurance Inc.
Subtotal
Sumitomo Mitsui Banking Corporation
Shinsei Bank, Limited
April 8,2019

Mizuho Bank, Ltd.

SubtotalResona Bank, Limited
The Nomura Trust and Banking Co., Ltd.

April 8,2019

Subtotal
The Chiba Bank, Ltd.
The Hiroshima Bank, Ltd.

September
30, 2019

36

Maturity
date

Repayment
methodUse

Remarks

0.42%

March 31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.52%

March 31,2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.55%

September
29, 2023

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.95%

September
30, 2027

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.38%

March 29,2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.72%

March 31,2027

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.82%

March 31,2028

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

0.23%

September
30, 2024

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteedCategory

LenderBalance at Balance at
AverageBorrowing beginningend ofinterest rate
date
of period
period
(%)
(¥1M)
(¥1M)
(Note 1)

Subtotal

1,600

1,600

Sumitomo Mitsui Banking Corporation

550

550

Shinsei Bank, Limited

450

450

Mizuho Bank, Ltd.

1,400

1,400

200

200

200

200

700

700

The Bank of Fukuoka, Ltd.

1,100

1,100

The Nomura Trust and Banking Co., Ltd.

1,000

1,000

Subtotal

5,600

5,600

Long-term loans payable – Total

100,652

92,218

Total loans payable

124,654

127,331

Sumitomo Mitsui Trust Bank, Limited
Longtermloanspayable(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)Resona Bank, Limited
Development Bank of Japan Inc.

September
30, 2019

0.68%

Maturity
date

Repayment
methodUse

Remarks

September
30, 2027

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed

The average interest rate is a weighted average of interest rates during the period, rounded off to second decimal places. As JHR has conducted interest rate swap
transactions in order to hedge against interest rate fluctuation risks, the interest rate of loans subject to such interest rate swap transactions is presented as the rate obtainedby taking into account the effect of interest rate swaps, rounded off to second decimal places.
The funds were appropriated for acquisition of the beneficial interest of real estate in trust, refinancing of borrowings and redemption of investment corporation bonds.
JHR made full early payment of the loan on September 30, 2022
In order to list each loan payable, ¥15,432 million of the current portion of long-term loans payable in the balance sheets is included in long-term loans payable in theabove table.
Shinsei Bank, Limited changed its name to SBI Shinsei Bank, Limited as of January 4, 2023.

37

3. Investment corporation bonds
Status of investment corporation bonds as of December 31, 2022 was as follows:

Name
Fifth unsecured
investment corporation
bonds
Sixth unsecured
investment corporation
bonds
Seventh unsecured
investment corporation
bonds
Eighth unsecured
investment corporation
bonds
Ninth unsecured
investment corporation
bonds
Tenth unsecured
investment corporation
bonds
Eleventh unsecured
investment corporation
bonds
Twelfth unsecured
investment corporation
bonds (green bonds)
Thirteenth unsecured
investment corporation
bonds

Issuance
date

Balance at
beginningof period(¥1M)

Balanceat end ofperiod(¥1M)

Interest
rate(%)

Maturity
date

October 23,
2015

6,000

－

0.820

October 21, Lump-sum
2022
repayment(Note 1)March 22,
2016

3,000

3,000

0.935

March 19,2026

Lump-sum
repayment(Note 1)

November29, 2016

9,000

9,000

0.600

November27, 2026

Lump-sum
repayment(Note 1)

November29, 2016

1,100

1,100

0.600

November27, 2026

Lump-sum
repayment(Note 1)

November24, 2017

1,000

1,000

0.530

November22, 2024

Lump-sum
repayment(Note 1)February21, 2018

10,00010,0000.840

February21, 2028

Lump-sum
repayment(Note 1)

June 14,
2019

8,000

8,000

0.854

June 14,2029

Lump-sum
repayment(Note 1)

July 31,
2019

2,000

2,000

0.400

July 31,2024

Lump-sum
repayment(Note 2)September
20, 2022

－

2,800

1.000

September
19,2025

Lump-sum
repayment(Note 1)

40,10036,900

Total

Repayment
methodUse

Remarks
Unsecured,
unguaranteed(Note 3)
Unsecured,
unguaranteed(Note 4)
Unsecured,
unguaranteed(Note 3)
Unsecured,
unguaranteed(Note 4)
Unsecured,
unguaranteed(Note 4)
Unsecured,
unguaranteed(Note 3)
Unsecured,
unguaranteed(Note 3)
Unsecured,
unguaranteed(Note 4)
Unsecured,
unguaranteed(Note 4)(Note 1) The funds were appropriated for acquisition of the beneficial interest of real estate in trust, refinancing of borrowings and redemption of investment corporation
bonds.
(Note 2) The funds were mainly appropriated for repayment of existing borrowings that were appropriated for capital expenditures and constructions costs which
contribute to environment, including reduction of CO2 and water consumption.
(Note 3) A special pari passu clause among specified investment corporation bonds is attached to the bonds.
(Note 4) A special pari passu clause among investment corporation bonds is attached to the bonds.

4. Short-term investment corporation bonds
Not applicable.

5. Subscription rights to new investment units
Not applicable.

Purchase and Sale during the Period
1. Purchase and sale, etc. of real estate, etc., asset-backed securities, etc. infrastructure assets, etc., and infrastructurerelated assets
Not applicable.

38

2. Purchase and sale of other assets, etc.
Assets other than real estate, etc., asset-backed securities, etc., infrastructure assets, etc. and infrastructure- related assets are mostly bankdeposits and bank deposits in trust.

3. Investigation into prices, etc. of specified assets(1) Real estate properties, etc.
Not applicable(2) Transaction of securities
Not applicable.

(3) Other
Not applicable.

394. Transactions with interested parties, etc. (Note 1)(1) Transactions(JPY MM)
Price, etc. (Note 2) (Note 3)

Category

Acquisition price, etc.

Total amountSale price, etc.
–

Real estate operating revenue–

14,912

Breakdown of transactions with interested parties, etc.
Hotel Management Japan Co., Ltd.

–

[–%]

–

[–%]

3,181

[21.3%]

Kyoritsu Maintenance Co., Ltd.

–

[–%]

–

[–%]

1,063

[7.1%]

Tokyo Humania Enterprise KK

–

[–%]

–

[–%]

722

[4.8%]

Hotel Centraza Co., Ltd.

–

[–%]

–

[–%]

612

[4.1%]KK Osaka Sakurajima Operations

–

[–%]

–

[–%]

607

[4.1%]

K.K. A.I.C Hiroshima Management

–

[–%]

–

[–%]

531

[3.6%]KK Narita Kosuge Operations

–

[–%]

–

[–%]

228

[1.5%]OW Hotel Operations KK

–

[–%]

–

[–%]

213

[1.4%]KK Narita Yoshikura Operations

–

[–%]

–

[–%]

212

[1.4%]KK Lagoon Resort Nago

–

[–%]

–

[–%]

199

[1.3%]KK Hotel Management

–

[–%]

–

[–%]

178

[1.2%]KK Fukuoka Tenjin Operations

–

[–%]

–

[–%]

174

[1.2%]

–

[–%]

–

[–%]

7,926

[53.2%]

Total(Note 1) Interested parties, etc. are the Asset Management Company’s interested parties, etc. stipulated in Article 201, paragraph 1 of the Investment Trust Act (hereinafterreferred to as “Interested parties, etc.”). The amounts in “(1) Transactions” above and “(2) Amounts of fees paid, etc.” below include transactions with theInterested parties, etc. as well as major transactions with sponsor-related parties stipulated in the Asset Management Company’s company code for transactions
with sponsor-related parties, which include 1. Interested parties, etc., 2. The Asset Management Company’s shareholders, 3. Companies, etc. that take a 50% ormore stake in a shareholder that holds 50% or more of the shares in the Asset Management Company, 4. Companies in which a shareholder of the AssetManagement Company have a 50% or more stake, 5. Companies with which the Asset Management Company has concluded an asset management agreement,a discretionary investment agreement or an investment advisory agreement, 6. Entity or persons who ceased to fall under 1. through 5. within 3 months, and 7.
Entity or persons who are deemed appropriate by the compliance officer of the Asset Management Company to be treated as sponsor-related parties in light ofthe company code for transactions with sponsor-related parties and the purpose of these rules.
(Note 2) Acquisition price, etc. and sale price, etc. indicate contracted amounts of the property in the purchase and sale agreement, etc. excluding related expenses(brokerage fees, taxes, etc.) incurred on the acquisition or sale of such property.
(Note 3) The figures in brackets show the ratio of the relevant amount to the total amount, rounded off to one decimal place.

(2) Amount of fees paid, etc.

Classification
Outsourcing
expenses (Note)(Note)

Total amounts offees paid, etc.
(A)352,400(JPY thousands)
Breakdown of transactions withinterested parties, etc.
Counter party
Hotel Management Japan Co., Ltd.
Tokyo Humania Enterprise KK

Amount of payment(B)

Ratio to total amount
B/A (%)

5,760

1.6

120

0.0

Includes base fees under the property management agreement as well as outsourcing expenses related to routine maintenance and management of buildings andfacilities and management contract fees, etc.

5. Transactions with the Asset Management Company in other businesses of the Asset Management Company
The Asset Management Company does not concurrently conduct any of the class 1 financial instruments transaction business, class 2 financial
instruments transaction business, building lots and buildings transaction business, or real estate specified joint enterprise business, and there are no
applicable transactions.

40

Financial information(1) Assets, liabilities, equity, and profit and loss
For the status of assets, liabilities, equity (contribution), and profit and loss, please refer to “Balance Sheets,” “Statements of Income,”“Statements of Changes in Net Assets,” and “Notes to Financial Statements.”(2) Changes in calculation method of depreciation
Not applicable.

(3) Changes in evaluation method of real estate, etc. and infrastructure assets, etc.
Not applicable

Status of beneficiary certificates of investment trusts set up by asset management company, etc.
Japan Hotel REIT Advisors Co., Ltd., the asset management company of JHR, has acquired JHR’s investment units as indicated below.

(1) Status of acquisition, etc.
Date
Accumulated total

Number of units acquired(units)－Number of units disposed(units)－Number of units held
(units)3,700(2) Status of holding units
Number of units
held at end of
period(units)Total investment
at end of period(JPY thousands)(Note 1)

Ratio to total
units issued(%)(Note 2)

(Reference)
Total number ofunits issued at
end of period(units)19th fiscal
From January 1, 2018 to
3,700
305,5710.09
4,010,847
periodDecember 31, 2018
20th fiscal
From January 1, 2019 to
3,700
305,571
0.08
4,462,347
periodDecember 31, 2019
21st fiscal
From January 1, 2020 to
3,700
305,571
0.08
4,462,347
periodDecember 31, 2020
22nd fiscal
From January 1, 2021 to
3,700
305,5710.08
4,467,006
periodDecember 31, 2021
23rd fiscal
From January 1, 2022 to
3,700
305,5710.08
4,467,006
periodDecember 31, 2022
(Note 1) Total investment at end of period indicates the acquisition price.
(Note 2) Ratio to total units issued is percentage of investment units held at end of period to the total investment units issued at end of period
and is rounded down to second decimal place.

Other(1) Announcements
The following shows the summary of major conclusions, changes, etc. of the principal agreements that were approved or reported at meetings of
JHR’s Board of Directors during the fiscal period under review.
Approval date

Item

Summary

August 24, 2022

Conclusion of Memorandum ofUnderstanding concerning an
entrustment contract foradministration of the unitholders'registry, etc.

A memorandum of understanding has been concluded that sets
forth the new additional administrative services and administrative
service fees following the implementation of the electronic
provision system of unitholders' meeting materials on September
1, 2022.

(2) Status, etc. of corporation owning foreign real estate41Not applicable.

(3) Status, etc. of real estate owned by foreign real property holding corporations
Not applicable.

(4) Other
Unless otherwise noted, amounts and ratios in this report are rounded down and rounded off to the stated unit, respectively.

42II. FINANCIAL STATEMENTS
JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2022 and 2021
Thousands of yen
As of
As of
December 31,
December 31,
2022
2021

ASSETS
Current assets:
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Income taxes receivable
Other current assets
Total current assets¥ 21,142,716
8,372,349
4,442,532
484,478
41
111,037
34,553,157¥ 22,838,609
7,458,225
1,750,164
485,240
40
108,41132,640,693

Less: Accumulated depreciation
Net property and equipment

804,3395,911,833
1,155
140,026,191
2,963,947
693,008
129,718
212,263,515
118,127
362,911,837(36,922,960)
325,988,877

677,977
4,889,299
21,972137,035,704
2,844,532
645,033
126,678
212,263,515
110,371358,615,085(32,471,257)
326,143,828

Intangible assets (Note 19):
SoftwareTrademark rights
Leasehold rights in trust
Fixed-term leasehold rights in trust
Other intangible assets
Total intangible assets

257,298
411,320
27,324,752
4,495,583
5,240
32,494,195

275,488
467,409
27,324,752
4,630,789
5,920
32,704,360

Other assets:
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Derivative assets (Notes 6 and 18)
Reserve fund for repairs and maintenance
Investment unit issuance costs
Investment corporation bond issuance costs
Total other assets

12,520139,668
1,958,131
1,195,251
327,173
4,165
126,8023,763,712

12,520139,668
2,191,650
12,117
327,476
7,735
143,863
2,835,031¥ 396,799,942¥ 394,323,913

Property and equipment, at cost (Notes 17 and 19):
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Buildings in trust (Note 14)
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust

Total assets(Continued)

43

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2022 and 2021

LIABILITIES AND NET ASSETS
Current liabilities:
Operating accounts payable
Short-term loans payable (Note 7)
Current portion of investment corporation bonds (Notes 6 and 8)
Current portion of long-term loans payable (Notes 6, 7 and 18)
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Derivative liabilities (Notes 6 and 18)
Other current liabilities
Total current liabilities

Thousands of yen
As of
As of
December 31,
December 31,
2022
2021
¥

1,943,815
35,113,000
15,432,000
570,397
1,210
398,802664,196
6,473
2,592
11,07921,994
54,165,561¥

1,426,861
24,002,000
6,000,000
8,434,000
538,359
1,210
172,743658,839
9,714
6,002
5,289
10,281
41,265,303

Long-term liabilities:
Investment corporation bonds (Notes 6 and 8)
Long-term loans payable (Notes 6, 7 and 18)
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Derivative liabilities (Notes 6 and 18)
Deferred tax liabilities (Note 15)
Asset retirement obligations (Note 9)
Total long-term liabilities

36,900,000
76,786,000
1,040,520
3,619,666
375,207338,413
119,059,807

34,100,000
92,218,000
1,040,520
3,614,474
202,673
3,812
336,783
131,516,263

Total liabilities

173,225,369

172,781,567

187,194,209

187,194,209

21,746,398

21,746,398

9,976,515
1,174,860
11,151,375
2,672,927
35,570,702
222,764,911

10,311,886
1,174,860
11,486,747
1,300,724
34,533,870
221,728,079

809,661
809,661(185,733)(185,733)

223,574,572

221,542,346¥ 396,799,942¥ 394,323,913

Net assets (Note 10):Unitholders’ equity:
Unitholders’ capital
Units authorized: 20,000,000 units
Units issued and outstanding; 4,467,006 units as of December 31, 2022
and 2021
Surplus:Capital surplus
Voluntary reserve:
Reserve for temporary difference adjustment (Note 11)
Reserve for advanced depreciation
Total voluntary reserve
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains (losses) on hedges (Note 18)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

44

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Income
For the years ended December 31, 2022 and 2021
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2022
2021
Operating revenue:
Real estate operating revenue (Note 12)
Other real estate operating revenue (Note 12)
Gain on sale of real estate properties (Note 13)
Total operating revenue¥ 13,925,987
986,984
14,912,972¥ 9,502,439
872,223
3,258,950
13,633,613

Operating expenses:
Real estate operating costs (Note 12)
Asset management fee
Asset custody and administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses

8,796,879
1,491,325
115,661
17,400
195,024
10,616,291

8,830,354
1,447,210
121,700
17,400257,097
10,673,763

Operating income

4,296,681

2,959,849

270
3,533
2,250
13,228541
19,824267
4,233
34,144
20,527
10,59015,730151
85,646855,183
301,631436,444
32,0903,570
14,6191,643,539
2,672,966
2,672,966

907,653
315,762
416,416
33,55459,0861,000
14,011
1,747,484
1,298,011
1,298,011

1,210
1,210

1,210
1,210

2,671,756

1,296,801

Non-operating income:Interest income
Gain on forfeiture of unclaimed dividends
Gain on insurance claims
Refunded taxes on property and equipment
Interest on tax refunds
Gain on derivative instruments
Other
Total non-operating income
Non-operating expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing costs
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Loss on derivative instruments
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 15):
Current
Total income taxes
Net income
See notes to financial statements.

45

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Changes in Net Assets
For the years ended December 31, 2022 and 2021
Thousands of yen
Unitholders’ equity
Surplus
Voluntary reserve

Unitholders’capitalCapital surplus

Reserve fortemporarydifference
adjustment¥¥

Balance, January 1, 2021¥
Changes of items during the year:
Issuance of new investment units
Reversal of reserve for temporary
difference adjustment
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear

186,894,169

Balance, December 31, 2021
Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear

187,194,209 ¥Balance, December 31, 2022¥¥

21,746,398

Reserve foradvanceddepreciation

10,617,580 ¥Total voluntary
reserve

1,174,860 ¥

11,792,441

Unappropriatedretained earnings¥

1,527,790

Total surplus¥

35,066,630

300,039

-

-

-

-

-

-

-

-

(305,694)--(305,694)-

305,694(1,829,562)
1,296,801(1,829,562)
1,296,801

-

-

-

-

-

-

-

300,039-(305,694)-(305,694)(227,066)(532,760)

21,746,398¥

10,311,886¥

1,174,860¥

11,486,747¥

1,300,724¥

34,533,870--(335,371)--(335,371)-

335,371(1,634,924)
2,671,756(1,634,924)
2,671,756

-

-

-

-

-

-

-

187,194,209 ¥

21,746,398(335,371)
9,976,515¥¥

1,174,860¥(335,371)
11,151,375

Thousands of yen
Unitholders’equityTotal unitholders’equityValuation and translation adjustments
Deferred gains
Total valuation(losses) on
and translation
hedgesadjustments

Balance, January 1, 2021
¥ 221,960,800 ¥Changes of items during the year:
Issuance of new investment units
300,039
Reversal of reserve for temporary
difference adjustment
Dividends paid
(1,829,562)
Net income
1,296,801
Net changes in items other thanunitholders’ equity
Total changes in amount during the(232,720)
year
Balance, December 31, 2021
¥ 221,728,079 ¥Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Dividends paid
(1,634,924)
Net income
2,671,756
Net changes in items other thanunitholders’ equity
Total changes in amount during the
1,036,832
year¥
222,764,911 ¥Balance, December 31, 2022

(759,492)¥(759,492)

Total net assets¥

221,201,308--

300,039--(1,829,562)
1,296,801

573,758

573,758

573,758

573,758(185,733) ¥573,758(185,733) ¥341,037
221,542,346--(1,634,924)
2,671,756

995,394995,394995,394995,394
809,661¥

995,394
809,661

See notes to financial statements.

46¥

2,032,226
223,574,572¥

1,372,203
2,672,927¥

1,036,832
35,570,702

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2022 and 2021
Thousands of yen

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on retirement of noncurrent assets(Gain) Loss on derivative instruments
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Decrease of property and equipment due to sale
Decrease of property and equipment in trust due to sale
Decrease of intangible assets due to saleInterest income
Interest expense
Interest on tax refunds(Increase) decrease in operating accounts receivable(Increase) decrease in prepaid expenses(Increase) decrease in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accrued expenses
Increase (decrease) in consumption taxes payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Other
SubtotalInterest received
Interest paid
Interest received on tax refunds
Income taxes – refunded (paid)
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Purchase of property and equipment in trust
Purchase of intangible assets
Payments of reserve fund for repairs and maintenance
Proceeds from collection of security deposits in trust
Proceeds from tenant leasehold and security deposits in trust
Repayment of tenant leasehold and security deposits in trust
Payments into deposit with withdrawal restrictions
Withdrawal from deposit with withdrawal restriction
Net cash used in investing activities

For the year
ended
December 31,
2022

For the year
ended
December 31,
2021¥ 2,672,966
4,787,822
57,811(13,228)
32,0903,570(270)1,156,814(2,692,368)
761
233,518(9,852)
33,714226,058
5,357(3,410)(811)
6,490,545
269(1,158,491)(1,210)5,331,112¥ 1,298,011
4,804,111
16,682(14,730)
33,55459,086
48,841
7,757,292
2,918
(267)
1,223,415(10,590)(1,077,749)
47,910257,888(1,694,120)
12,47529,354
235,483(3,108)(128,639)
12,897,821
271(1,225,104)
10,590(1,208)
11,682,370(1,102,874)(2,767,507)(48,094)(40,625)
51,124(32,161)(1,500,000)
1,800,000¥ (3,640,139)(666,633)(2,828,665)(199,936)(40,625)
10,55556,530(726,247)(300,000)¥ (4,695,022)(Continued)

47

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2022 and 2021
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2022
2021
Cash flows from financing activities:
Proceeds from short-term loans payable
Repayments of short-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bond
Repayments of investment corporation bondProceeds from issuance of investment units
Payments for investment corporation bond issuance costs
Dividends paid
Net cash provided by (used in) financing activities¥

35,536,000(24,425,000)(8,434,000)
2,800,000(6,000,000)(15,029)(1,634,712)(2,172,742)¥

25,082,000(13,862,000)(13,720,000)(1,500,000)
289,329(1,833,006)(5,543,676)

Net increase (decrease) in cash and cash equivalents(481,768)

1,443,670

Cash and cash equivalents at beginning of year

29,996,835

28,553,164

Cash and cash equivalents at end of year (Note 5)¥ 29,515,066¥ 29,996,835

See notes to financial statements.

48

JAPAN HOTEL REIT INVESTMENT CORPORATION
Notes to Financial Statements
For the years ended December 31, 2022 and 2021
1. Organization and Basis of Presentationa.

Organization
Japan Hotel REIT Investment Corporation (“JHR”), formerly known as Nippon Hotel Fund Investment Corporation(the “Former NHF”), was established under the Act on Investment Trusts and Investment Corporations (the “Investment
Trust Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust (“REIT”) Section on the Tokyo
Stock Exchange (Securities code: 8985) on June 14, 2006. JHR is externally managed by a licensed asset managementcompany, Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “Asset Management Company”).
Focusing on the importance of hotels as social infrastructure and their profitability as investment real estate properties,
JHR has primarily invested in real estate related assets which are in themselves wholly or partially used as hotels orreal estate equivalents of such real estate or which are backed by such real estate or real estate equivalents.
In the fiscal period ended December 31, 2012, the Former NHF, as the surviving entity, merged with Japan Hotel andResort, Inc. (the “Former JHR”), as the dissolved entity, with an effective date of April 1, 2012 (the “Merger”). In
conjunction with the Merger, the Former NHF changed its name to Japan Hotel REIT Investment Corporation.
Through the Merger, nine properties held by the Former JHR were succeeded by JHR. Since the Merger, JHR has
expanded its asset size while improving the quality of its portfolio through new property acquisitions of 26 properties
amounting to ¥275,160 million (acquisition price basis) in total through the end of the fiscal period under review. As ofthe end of the fiscal period under review, JHR had a portfolio of 41 properties with a combined acquisition price of¥363,542 million, and the total number of investment units issued and outstanding stood at 4,467,006 units.

b.

Basis of presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Law and their related accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been reformatted and translated into English (with certain reclassifications
and expanded descriptions) from the financial statements of JHR prepared in accordance with Japanese GAAP and filedwith the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments andExchange Law. Certain supplementary information included in the statutory Japanese language financial statements, but
not necessarily required for fair presentation, is not presented in the accompanying financial statements. JHR has notprepared consolidated financial statements, as JHR has no consolidating subsidiaries or entities.
As permitted by the regulations under the Financial Instruments and Exchange Law of Japan, the amounts are rounded
down to the nearest thousands or millions. As a result, the totals shown in the accompanying financial statements do
not necessarily agree with the sums of the individual amounts.

2. Summary of Significant Accounting Policiesa.

Cash and cash equivalents
Cash and cash equivalents in the statements of cash flows consist of cash on hand, cash in trust accounts, bank deposit
and trust deposit, which can be withdrawn at any time, and short-term investments with a maturity of three months orless when purchased, which can easily be converted to cash and subject to minimal risk of change in value.

b.

Property and equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line
method over their estimated useful lives. The useful lives of major property and equipment components are as follows:
Machinery and equipment:
2 to 17 years
Tools, furniture and fixtures:
2 to 26 years
Buildings in trust:
2 to 64 years
Structures in trust:
2 to 64 years
Machinery and equipment in trust:
3 to 32 years
Tools, furniture and fixtures in trust:
2 to 27 years
49

c.

Intangible assets
Intangible assets are stated at cost and amortized using the straight-line method. The amortization period of major
intangible assets is as follows.
Software (internal use): 5 years
Trademark rights: 10 years
Fixed-term leasehold rights in trust: 41 years (remaining contractual period at the time of acquisition) Leasehold
rights in trust are intangible assets with indefinite useful lives.

d.

Investment unit issuance costs
Investment unit issuance costs are capitalized and amortized using the straight-line method over three years.

e.

Investment corporation bond issuance costs
Investment corporation bond issuance costs are capitalized and amortized using the effective interest rate method over
the respective term of the bond.

f.

Revenue from contracts with customers
The details of main performance obligations concerning revenue generated from contracts with JHR’s customers andthe ordinary time to fulfil said performance obligations (ordinary time to recognize revenue) are as follows.
(1) Sale of real estate properties
For the proceeds from sale of real estate properties, JHR recognizes revenue when the purchaser who is a customer
obtains control of the relevant real estate properties, etc. as a result of the seller fulfilling its delivery obligations
stipulated in the transaction agreement of the real estate, etc.
The amount obtained by deducting “Costs of sale of properties,” which is the book value of real estate properties,
etc. sold, and “Other selling expenses,” which are the various expenses directly required in the sale, from “Proceedsfrom sale of properties,” which are the sales proceeds of real estate properties, etc., is indicated as “Gain on sale ofreal estate properties” or “Loss on sale of real estate properties” in the statements of income. There is no gain orloss on sale of real estate properties for the fiscal period ended December 31, 2022.
(2) Utilities income
For utilities income, JHR recognizes revenue in accordance with the supply of electricity, water, etc. to the lessee
who is a customer based on the lease contracts of real estate properties, etc. and agreements incidental to it.

g.

Taxes on property and equipment
Taxes imposed on properties such as property taxes, city planning taxes, and depreciable asset taxes are allocated to therespective reporting period and expensed as “Real estate operating costs.” Cash paid for those properties related taxes
to the transferor of real properties at acquisition is not recorded as “Real estate operating costs” but capitalized as partof the acquisition cost of the relevant property. The amount of such taxes capitalized in the acquisition cost of real
properties was not applicable either for the year ended December 31, 2022, or for the year ended December 31, 2021.

h.

Derivatives and hedging activities
JHR enters into certain derivative transactions in accordance with its financial policy in order to manage risks, which
are defined in the Articles of Incorporation, mainly arising from adverse fluctuations in interest rates on loans payable.
Derivative financial instruments are carried at fair value with changes in the unrealized gain or loss charged or credited
to operations, except for those which meet the criteria for hedge accounting in which case the unrealized gain or loss isdeferred as a component of net assets.
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging instruments and thehedged items and assessing the ratio between the changes.

i.

Beneficial interests of real estate in trust
For beneficial interests of real estate in trust, all assets and liabilities held in trust accounts as well as all income
generated and expenses incurred from assets in trust are presented in the relevant balance sheet and statement of income
accounts.

50

3.

Changes in accounting policies(Application of Accounting Standard for Revenue Recognition, etc.)
JHR has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan(hereinafter referred to as “ASBJ”) Statement No. 29 (revised 2020) issued on March 31, 2020; hereinafter referred
to as the “Revenue Recognition Accounting Standard”), etc. from the beginning of the fiscal period ended December
31, 2022, and JHR decided to recognize revenue at the amount expected to be received in exchange for the promised
goods or services when control of such goods or services is transferred to the customer. The impact of adoption ofthese accounting standards on the financial statements is minimal for the fiscal period ended December 31, 2022.
Furthermore, in accordance with the transitional treatment stipulated in Paragraph 89-3 of the Revenue Recognition
Accounting Standard, the notes for the fiscal period ended December 31, 2021, are omitted from the Note 20,“Revenue from Contracts with Customers.”(Application of Accounting Standard for Fair Value Measurement, etc.)
JHR has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30 issued on July 4,
2019; hereinafter referred to as the “Fair Value Measurement Accounting Standard”), etc. from the beginning of the
fiscal period ended December 31, 2022, and decided to apply the new accounting policy set forth in the Fair Value
Measurement Accounting Standard, etc. going forward in accordance with the transitional treatment stipulated in
Paragraph 19 of the Fair Value Measurement Accounting Standard and Paragraph 44-2 of the “Accounting Standard
for Financial Instruments” (ASBJ Statement No. 10 (revised 2019) issued on July 4, 2019). The impact of adoptionof these accounting standards on the financial statements is minimal for the fiscal period ended December 31, 2022.
Moreover, certain disclosures such as a breakdown of fair value of financial instruments by their levels in the fairvalue hierarchy are omitted pursuant to Article 2, Paragraph 5 of supplementary provisions in the Cabinet Office
Ordinance on Partially Amending Regulation on Terminology, Forms and Preparation Methods of Financial Statement.
etc. (Cabinet Office Ordinance No.61 issued on September 24, 2021).

4.

Significant Accounting Estimates
Valuation of noncurrent assetsa.

Amounts recorded in the financial statements

Property and equipment
Intangible assets
Impairment lossb.

Thousands of yen
For the year ended December
For the year ended December
31, 2022
31, 2021¥
325,988,877¥
326,143,828
32,494,195
32,704,360-

Information on the nature of significant accounting estimates for identified items
In accordance with the accounting standard for impairment of noncurrent assets, JHR has adopted the accounting
treatment to reduce the book value of noncurrent assets to a recoverable amount when the invested amount is deemed
to be unrecoverable due to decline in profitability.
In adopting the accounting treatment, the respective properties owned by JHR are regarded as a single asset group,and judgment is made whether it is required to recognize impairment losses when indications of impairment are
deemed to exist for the group due to a significant decline in the market value and such.
Future cash flow estimates are used to determine whether or not to recognize impairment losses. When it is determinedthat impairment losses should be recognized, the book value is reduced to the recoverable amount, and the reduced
amount is recorded as impairment losses.
In estimating the future cash flow, the underlying rent, occupancy rate and real estate operating costs, etc. are assumed
by comprehensively taking into account the market trends and transaction cases of similar properties, etc.
JHR’s asset management business in real estate has seen risks of its operating revenue decreasing, etc., due to adecrease in variable rents linked to hotel sales and other factors since our business is largely affected by the worldwide
spread of the COVID-19 infection and the changes in social and economic conditions caused by the spared.
Although it is uncertain and difficult to foresee when the spread of the COVID-19 infection will be contained and its
impacts, JHR made accounting estimates related to impairment accounting for noncurrent assets on the assumptionthat COVID-19 will be contained gradually and the business environment will improve from the fiscal period ending
December 31, 2023, based on information available as of the date of preparation of the financial statements for the51

fiscal period ended December 31, 2022.
However, as it is difficult to accurately predict when the spread of the COVID-19 infection will be contained and how
large its impact will be, JHR may see its financial position, results of operations and cash flows affected in case therecovery is delayed.
5. Cash Flow Information
Cash and cash equivalents as of December 31, 2022, and 2021 in the statements of cash flows consisted of the following:Thousands of yen
As of December
As of December
31, 2022
31, 2021
Cash and deposits¥
21,142,716¥
22,838,609
Cash and deposits in trust
8,372,349
7,458,225(300,000)
Deposit with withdrawal restrictions¥
29,515,066¥
29,996,835
Cash and cash equivalents
6. Financial Instruments
a. Status of financial instruments(1) Policy for financial instruments
JHR is an investment corporation set forth in Article 2, paragraph 12 of the Investment Trust Act, managing
investments mainly in specified assets as prescribed in the Investment Trust Act. As a policy, JHR procures funds
through issuance of investment units, etc. and loans from financial institutions in order to make investments inspecified assets. JHR does not utilize surplus funds to invest in financial instruments except for short-term deposits
and other equivalent short-term financial instruments. JHR may enter into derivative transactions in order to hedge
against interest rate risk, but not for speculative trading purposes.
(2) Details of financial instruments, their risks, and risk management system
Operating accounts receivable is operating receivables and is exposed to credit risks of clients. As for the risks, JHR
is managing payment dates and balances by each client with an aim to grasp concerns in collecting due todeterioration in their financial status and other factors at an early stage and reduce the risks.
The floating rate loans payable are exposed to risks of interest rate fluctuations. In order to mitigate interest raterisks, JHR may enter into derivative transactions, if it is judged that fixing interest payment is necessary.
Derivative transactions are conducted principally in accordance with rules prescribed by JHR and risk management
rules applied by the Asset Management Company. Derivative transactions are arranged by the finance section of theAsset Management Company by using financial institutions with high credit ratings through approval and resolution
by authorized personnel and a meeting committee structure set forth in its decision-making standards and resolutionof JHR’s board of directors.
Loans payable expose JHR to liquidity risks. The finance section of the Asset Management Company prepares andupdates projections and actual cash flows on a monthly basis to manage liquidity risks and monitors compliancewith restrictive covenants set forth in the loan agreements. JHR manages liquidity risks by managing the ratio ofshort-term and long-term loans payable, etc. considering the current financial environment and other conditions
through approval and resolution by authorized personnel and meeting committee structure in the Asset Management
Company and resolution of JHR’s board of directors.

52

b.

Fair value of financial instruments
Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as ofDecember 31, 2022 and 2021 were as follows. The notes on “Cash and deposits,” “Cash and deposits in trust,”“Operating accounts receivable” and “Short-term loans payable” are omitted as these are settled within a shortperiod of time and thus the fair value approximates the book value. Notes on “Tenant leasehold and security deposits”
and “Tenant leasehold and security deposits in trust” are also omitted as those items are immaterial.

(i) Current portion of investment corporation
bonds(ii) Current portion of long-term loans payable(iii) Investment corporation bonds(iv) Long-term loans payable
Total(v) Derivative transactions (*)(i) Current portion of investment corporation
bonds(ii) Current portion of long-term loans payable(iii) Investment corporation bonds(iv) Long-term loans payable
Total(v) Derivative transactions (*)

Thousands of yen
As of December 31, 2022
Carrying amount
Fair value¥

15,432,000
36,900,000
76,786,000
129,118,000
1,184,172

¥

¥

¥

- ¥
15,432,000
33,223,450
76,786,000
125,441,450
1,184,172 ¥Thousands of yen
As of December 31, 2021
Carrying amount
Fair value¥

6,000,000 ¥
8,434,000
34,100,000
92,218,000
140,752,000 ¥(195,846) ¥¥¥5,886,600 ¥
8,434,000
29,514,460
92,218,000
136,053,060 ¥(195,846) ¥Difference(3,676,550)(3,676,550)-

Difference(113,400)(4,585,540)(4,698,940)-(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net payables.

Notes:(1) Methods to measure fair value of financial instruments and derivative transactions(i) Current portion of investment corporation bonds, (iii) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(ii) Current portion of long-term loans payable, (iv) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable arefloating interest rates which are adjusted periodically to reflect market interest rates.
(v) Derivative transactions
The information on the fair value of derivative transactions is presented in Note 18.

53

(2) Schedule for repayment of loans payable and redemption of investment corporation bonds as of December 31, 2022
and 2021.

As of December 31, 2021
Investment corporation bonds
Long-term loans payable
Total

As of December 31, 2022
Investment corporation bonds
Long-term loans payable
Total

Due within
one year¥ 6,000,000
8,434,000¥ 14,434,000

Due within
one year¥
15,432,000¥ 15,432,000¥

Due after
one to two
years

15,432,000¥ 15,432,000

Due after
one to twoyears¥ 3,000,000
18,536,000¥ 21,536,000

54

Thousands of yen
Due after
Due after
two to three
three to four
years
years
¥ 3,000,000¥
18,536,000
19,000,000¥ 21,536,000 ¥ 19,000,000
Thousands of yen
Due after
Due after
two to three
three to four
years
years
¥ 2,800,000¥ 13,100,000
19,000,000
4,250,000¥ 21,800,000 ¥ 17,350,000

Due after
four to fiveyears
¥ 13,100,000
4,250,000¥ 17,350,000

Due after
five years¥ 18,000,000
35,000,000¥ 53,000,000

Due after
four to fiveyears¥
17,000,000¥ 17,000,000

Due after
five years¥ 18,000,000
18,000,000¥ 36,000,000

7. Short-Term and Long-Term Loans Payable
Short-term and long-term loans payable as of December 31, 2022 and 2021 consisted of the following:

Maturity date
Short-term loans payable:
0.58% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
0.57% Unsecured loan, payable in a lump-sum at maturity
0.57% Unsecured loan, payable in a lump-sum at maturity
0.57% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
Sub-total
Long-term loans payable:
0.90% Unsecured loan, payable in a lump-sum at maturity
0.93% Unsecured loan, payable in a lump-sum at maturity
0.95% Unsecured loan, payable in a lump-sum at maturity
1.07% Unsecured loan, payable in a lump-sum at maturity
1.07% Unsecured loan, payable in a lump-sum at maturity
0.77% Unsecured loan, payable in a lump-sum at maturity
0.77% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity
0.66% Unsecured loan, payable in a lump-sum at maturity
0.57% Unsecured loan, payable in a lump-sum at maturity
0.74% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
0.56% Unsecured loan, payable in a lump-sum at maturity
0.59% Unsecured loan, payable in a lump-sum at maturity
0.71% Unsecured loan, payable in a lump-sum at maturity
0.47% Unsecured loan, payable in a lump-sum at maturity
0.85% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity
0.75% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity
0.65% Unsecured loan, payable in a lump-sum at maturity
0.57% Unsecured loan, payable in a lump-sum at maturity
0.65% Unsecured loan, payable in a lump-sum at maturity
0.42% Unsecured loan, payable in a lump-sum at maturity
0.42% Unsecured loan, payable in a lump-sum at maturity
0.52% Unsecured loan, payable in a lump-sum at maturity
0.55% Unsecured loan, payable in a lump-sum at maturity
0.95% Unsecured loan, payable in a lump-sum at maturity
0.38% Unsecured loan, payable in a lump-sum at maturity
0.72% Unsecured loan, payable in a lump-sum at maturity
0.82% Unsecured loan, payable in a lump-sum at maturity
0.23% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity
Sub-total
Total of short-term and long-term loans payable

Millions of yen
As of December As of December
31, 2022
31, 2021
AmountMarch 31, 2022
September 30, 2022
December 16, 2022
January 31, 2023
March 31, 2023
June 30, 2023
September 29, 2023
October 20, 2023

¥

5,511
8,300
1,000
15,702
4,600
35,113¥6,800
15,702
1,500
24,002January 31, 2022
March 31, 2022
June 30, 2022
September 29, 2023
September 29, 2023
March 29, 2024
March 29, 2024
March 31, 2023
March 29, 2024
March 29, 2024
September 30, 2025
September 30, 2024
September 30, 2024
September 30, 2024
September 30, 2024
June 30, 2023
September 30, 2026
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
March 31, 2025
March 29, 2024
March 31, 2025
March 31, 2023
March 31, 2023
March 31, 2023
September 29, 2023
September 30, 2027
March 29, 2024
March 31, 2027
March 31, 2028
September 30, 2024
September 30, 2027

¥

2,880
892
2,100
2,536
4,088
800
500
9,500
1,300
2,000
700
500
2,250
4,250
1,000
700
500
500
500
1,000
300
2,550
4,000
2,450
1,700
2,680
454
488
3,900
2,500
7,500
18,0001,600
5,600
92,218
127,331

¥

5,511
1,500
1,423
2,880
892
2,100
2,536
4,088
800
500
9,500
1,300
2,000
700
500
2,250
4,250
1,000
700
500
500
500
1,000
300
2,550
4,000
2,450
1,700
2,680
454
488
3,900
2,500
7,500
18,0001,600
5,600
100,652
124,654¥¥

Stated interest rate, which is a rate per annum, represents the weighted average rate during the year ended December 31, 2022, or the most recent year, based on
the number of days and outstanding balance of the loans payable. The interest rate is rounded off to the nearest second decimal place. As JHR has conducted interest
rate swap transactions in order to hedge against interest rate fluctuation risks, the interest rate of loans subject to such interest rate swap transactions is presented
as the rate obtained by taking into account the effect of interest rate swaps (interest rate fixation), rounded off to second decimal places.

55

8. Investment Corporation Bonds
Investment corporation bonds as of December 31, 2022 and 2021 consisted of the following:
Millions of yen
As of
As of
December 31,
December 31,
2022
2021
Unsecured 5th investment corporation bond at interest rate of 0.82%, dueon October 21, 2022
Unsecured 6th investment corporation bond at interest rate of 0.935%, dueon March 19, 2026
Unsecured 7th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 8th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 9th investment corporation bond at interest rate of 0.53%, dueon November 22, 2024
Unsecured 10th investment corporation bond at interest rate of 0.84%, due
on February 21, 2028
Unsecured 11th investment corporation bond at interest rate of 0.854%, dueon June 14, 2029
Unsecured 12th investment corporation bond (green bonds) at interest rateof 0.40%, due on July 31, 2024
Unsecured 13th investment corporation bond at interest rateof 1.00%, due on September 19, 2025

¥

¥

Total

-

¥

6,000

3,000

3,000

9,000

9,000

1,100

1,100

1,000

1,000

10,00010,000

8,000

8,000

2,000

2,000

2,800

-

36,900¥40,1009. Asset Retirement Obligationsa.

Outline of the asset retirement obligations
JHR recognized asset retirement obligations as it is obliged to restore the land of Oriental Hotel Fukuoka Hakata Station(former Hotel Centraza Hakata), acquired on April 1, 2016, to the original state in accordance with the fixed-term landleasehold agreements.

b.

Calculation method of the asset retirement obligations
JHR calculated the amount of asset retirement obligations by estimating the expected periods of use of 34 years basedon the remaining useful lives of the related buildings and using the discount rates of 0.484%.

c.

Changes in the total amount of the asset retirement obligations

Thousands of yen
For the year ended
For the year ended
December 31, 2022
December 31, 2021

Balance at beginning of year
Adjustment due to accretion expense
Balance at end of year¥¥

336,783
1,630
338,413¥¥335,161
1,622
336,783

10. Net Assets
JHR maintains at least ¥50,000 thousand as the minimum net assets as required by the Investment Trust Act.
Dividends and other movements in unappropriated retained earnings related to each period that were decided after thebalance sheet date are summarized as follows:

56

Yen

I

Unappropriated retained
earnings¥
II Reversal of voluntary reserve
Reversal of reserve fortemporary difference adjustment(*1)¥¥
III Dividends
IV Retained earnings carried¥forward (I+II-III)

For the year ended
December 31, 2022
Total
Per unit
2,672,927,976

376,501,098
3,046,498,092

¥
¥

84
682

2,930,982

For the year ended
December 31, 2021
Total
Per unit¥

1,300,724,473¥¥

335,371,387 ¥
1,634,924,196 ¥¥1,171,664

75
366

Notes:(*1) JHR applied the transitional measures of Paragraph 3 of the Supplementary Provisions of the “Ordinance on Accounting ofInvestment Corporations” (Cabinet Office Ordinance No. 27 of 2015) from the fiscal period ended December 31, 2016. As
a result, ¥13,127,153,216 of the dividend reserve, representing the remaining balance of the gain on negative goodwill
recorded in a prior fiscal period, was transferred to the “Reserve for temporary difference adjustment” account through theappropriation of profit for the year ended December 31, 2016. Starting from the year ended December 31, 2017, JHR plans toreverse the reserve every year in an amount that shall be at least 2% of the transferred amount (¥262,543,065) but notexceeding the remaining amount of the reserve at that point in conformity with applicable rules and regulations.
For the year ended December 31, 2021, reversal of reserve for temporary difference adjustment of ¥335,371,387 was decided,
which was the amount calculated by adding ¥16,682,237, equivalent to loss on retirement of noncurrent assets and¥56,089,150, equivalent to amortization of trademark rights to ¥262,600,000 of the basic reversal.
For the year ended December 31, 2022, reversal of reserve for temporary difference adjustment of ¥376,501,098 has been
decided, which is the amount calculated by adding ¥57,811,948, equivalent to loss on retirement of noncurrent assets and¥56,089,150, equivalent to amortization of trademark rights to ¥262,600,000 of the basic reversal.

11. Provision and Reversal of Reserve for Temporary Difference Adjustment
Changes in the balance of reserve for temporary difference adjustment during the years ended December 31, 2022 and2021 consisted of the following (thousands of yen):

SourceOriginal
amountDividend
reserve

Balance asof January
1, 2022

13,127,153

10,311,886

SourceOriginal
amountDividend
reserve

Balance asof January
1, 2021

13,127,153

10,617,580

Provision
during theyear
Provision
during theyear-

Reversalduring theyear

Balance as ofDecember31, 2022

Rationale for provision orreversal

335,371

9,976,515

Allocation for dividend

Reversalduring theyear

Balance as ofDecember31, 2021

Rationale for provision orreversal

305,694

10,311,886

Allocation for dividend(Note) See (*1) of Note 10 above for further descriptions.

57

12. Real Estate Operating Revenue and Costs
The components of “Real estate operating revenue” and “Real estate operating costs” for the years ended December 31,
2022 and 2021 were as follows:
Thousands of yen
For the year ended For the year ended
December 31,
December 31,
2022
2021
Operating revenue:
Real estate operating revenue:
Fixed rent
Variable rent
Income from management contract (*1)
Sub-total
Other real estate operating revenue:
Parking lots
Other incidental revenue
Utilities
Other
Sub-total
Total operating revenue
Real estate operating costs:
Land lease and other rent expenses
Property taxes
Outsourcing expenses (*2)
Nonlife insurance
Depreciation and amortization
Loss on retirement of noncurrent assets
Repairs
Utilities
Trust fees
Other
Total real estate operating costs
Net real estate operating income¥¥

6,279,169
7,304,059
342,758
13,925,987¥

6,413,988
3,054,524
33,926
9,502,439

141,741
69,068643,154
133,020986,984
14,912,972

116,270
66,395483,341
206,216
872,223
10,374,662

845,567
1,923,806
352,400
70,695
4,787,822
57,811
21,378683,346
39,783
14,267
8,796,879
6,116,092

857,819
1,947,316
494,005
73,031
4,804,111
16,68230,176498,283
43,55865,3698,830,354
1,544,308¥

Notes:(*1) Pursuant to management contracts with a certain hotel operator, JHR receives revenue in the amount equivalent to the properties’
gross operating profit, or GOP, while it pays management contract fees to the operator. In the event a property’s GOP for the
relevant period is a negative number, then JHR is required to pay an amount equal to such negative number to the operator.
Even though some of the revenue JHR receives under management contracts is variable, it recognizes such revenue as income
from management contracts and not as variable rent.
(*2) Outsourcing expenses include management contract fees of ¥ 40,786 thousand for the year ended December 31, 2022 and¥148,088 thousand for the year ended December 31, 2021.

5813. Gain on Sale of Real Estate Properties
The components of “Gain on sale of real estate properties” for the year ended December 31, 2022 were as follows:
Not Applicable
The components of “Gain on sale of real estate properties” for the year ended December 31, 2021 were as follows:

Proceeds from sale of properties
Costs of sale of properties
Other selling expenses
Gain on sale of real estate properties

Thousands of yen
For the year ended December
31, 2021
ibis Tokyo Shinjuku¥
11,300,000
7,809,052
231,996¥
3,258,950

14. Advanced Depreciation of Property and Equipment
The accumulated advanced depreciation of property and equipment deducted from acquisition costs due to government
subsidies received as of December 31, 2022 and 2021 were as follows:
Thousands of yen
As of
As of
December 31, 2022
December 31, 2021¥
24,921¥
24,921

Buildings in trust5915. Income Taxes
Significant components of deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows:

Deferred tax assets
Valuation difference on assets acquired by merger
Amortization of fixed-term leasehold rights
Asset retirement obligations
Amortization of trademark rights
Deferred losses on hedges
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets

Deferred tax liabilities
Deferred gains on hedges
Total deferred tax liabilities

Thousands of yen
As of December
As of December
31, 2022
31, 2021¥¥

1,667,655
291,223
25,57047,0552,447
2,033,953(2,033,953)-¥¥

1,681,502
248,687
19,131
29,40961,0452,039,776(2,039,776)-¥

375,207375,207

¥

3,812
3,812

Reconciliation between the effective statutory tax rate and the actual effective tax rate reflected in the accompanying
statements of income for the years ended December 31, 2022 and 2021 was as follows:
For the year
ended December
31, 2022
31.46%(33.44)
1.97
0.05
0.05%

Effective statutory tax rate
Deduction for dividends paid
Change in valuation allowance
Other – net
Actual effective tax rate

For the year
ended December
31, 2021
31.46%(35.22)
3.76
0.09
0.09%

16. Amounts per Unit
Net income per unit for the years ended December 31, 2022 and 2021 were as follows:
Thousandsof yenNet
incomeNumber ofunits
Weightedaverage units¥

2,671,756

4,467,006

¥

598

¥

1,296,801

4,466,061¥

290

For the year ended December 31, 2022
Basic net income per unit - Net income attributable tocommon unitholders

Yen
Net income
per unit

For the year ended December 31, 2021
Basic net income per unit - Net income attributable tocommon unitholders
Notes:(1) The computation of net income per unit is based on the weighted-average number of units outstanding during the year.
(2) Diluted net income per unit is not presented since there are no potentially dilutive units for the years ended December 31,
2022 and 2021.

60

Net assets per unit as of December 31, 2022 and 2021 were as follows:
Yen

As of December
31, 2022¥
50,050Net assets per unit

As of December
31, 2021¥
49,595

17. Leases
As Lessor:
JHR leases its real estate properties to third parties under non-cancellable operating leases. Minimum rental revenue
under the non-cancellable operating leases as of December 31, 2022 and 2021 were as follows:
Thousands of yen
As of December
As of December
31, 2022
31, 2021
Due within one year¥
1,152,214¥
1,293,157
4,054,288
4,979,488
Due after one year¥
5,206,502 ¥6,272,645
Total
18. Derivatives and Hedging Activitiesa.

Derivative transactions to which hedge accounting is not applied
Derivative transactions to which hedge accounting was not applied as of December 31, 2022 and 2021 were as follows:

As of December 31, 2022
Interest rate swaps(fixed rate payment,
floating rate receipt)

As of December 31, 2021
Interest rate swaps(fixed rate payment,
floating rate receipt)

Classification
Transactions
other thanmarkettransactions

Classification
Transactions
other thanmarkettransactions

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 3,494,000¥ 1,750,000

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 3,494,000¥ 3,494,000

61

Fair value
(*2)
¥

(696)

Fair value(*2)¥(13,924)

b.

Derivative transactions to which hedge accounting is applied
Derivative transactions to which hedge accounting was applied as of December 31, 2022 and 2021 were as follows:

As of December 31, 2022
Interest rate swaps(fixed rate payment,
floating rate receipt)

As of December 31, 2021
Interest rate swaps(fixed rate payment,
floating rate receipt)

Method of hedge
accounting
Deferral method

Hedged item
Long-termloans payable

Method of hedge
accounting
Deferral method

Hedged item
Long-termloans payable¥

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year

78,460,000¥

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 89,660,000¥

70,600,000

Fair value(*2)¥

78,460,000

1,184,868

Fair value(*2)¥(181,921)

Notes:(*1) The contract amounts of the interest rate swap are presented based on the contracted amount or notional principal
amounts on the contract, etc. as of the end of the fiscal period. Also, the contract amounts of derivative transactions
do not indicate market risk exposure related to derivative transactions.
(*2) The fair value is measured at the quoted price obtained from the counterparty financial institutions.

19. Investment and Rental PropertiesJHR owns rental properties for hotels to earn lease income and income from management contracts. The
carrying amounts, changes in such balances, and fair values of such properties were as follows:

HotelsJanuary 1,
2022¥
358,819,865

Thousands of yen
Carrying amount
Net increase
December 31,
2022(decrease) (*1)¥(341,052)¥
358,478,812

Fair value (*2)
December 31,
2022¥
483,110,000

Notes:(*1) Decrease during 2022 principally represents the recording of depreciation.
(*2) Fair value of properties as of December 31, 2022 is generally the appraisal value determined by outside licensed
real estate appraisers.

HotelsJanuary 1,
2021¥
367,283,696

Thousands of yen
Carrying amount
Net increase
December 31,
2021(decrease) (*1)¥
(8,463,831) ¥358,819,865

Fair value (*2)
December 31,
2021¥
485,480,000

Notes:(*1) Decrease during 2021 principally represents the sale of ibis Tokyo Shinjuku (¥7,809 million) and recording of depreciation.
(*2) Fair value of properties as of December 31, 2021 is generally the appraisal value determined by outside licensed
real estate appraisers.

62

Real estate operating revenue and costs for the years ended December 31, 2022 and 2021 related to therental properties were as follows:

HotelsThousands of yen
For the year ended December 31, 2022
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income¥ 14,912,972¥ 8,796,879¥ 6,116,092

HotelsThousands of yen
For the year ended December 31, 2021
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income¥ 10,374,662¥ 8,830,354¥ 1,544,308

Note:(*) “Real estate operating revenue” and “Real estate operating costs” are income from real estate operation (including
other real estate operating revenue) and corresponding expenses (such as depreciation, property taxes, trust fees, andrepairs and maintenance expenses), and are included in “Operating revenue” and “Real estate operating costs,”
respectively.

20. Revenue from Contracts with Customers
For the year ended December 31, 2022
Breakdown information on revenue from contracts with customers
For the breakdown information on revenue from contracts with customers, please refer to Note 12, "RealEstate Operating Revenue and Costs."
Note that the revenues described in the Note 12 include revenues recognized under the "AccountingStandard for Lease Transactions" (ASBJ Statement No. 13). The revenues from contracts with customers
mainly consists of utilities income.
21. Segment Informationa.

Segment information
The segment information has been omitted because JHR has only one segment, which is the investment
and management business of hotel real estate.

b. Related information(1) Information about products and services for the years ended December 31, 2022 and 2021
Information about products and services has been omitted because operating revenue from externalcustomers in a single product/service category accounted for more than 90% of total operating revenue.
(2) Information about geographical areas for the years ended December 31, 2022 and 2021
(i) Operating revenue
Information about geographical areas has been omitted because operating revenue in Japanaccounted for more than 90% of total operating revenue.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property andequipment located in Japan accounted for more than 90% of net property and equipment.

63

(2) Information about major customers<For the year ended December 31, 2022>
Name of customer

Segment

Hotel Management Japan Co., Ltd. (*1)
THE DAI-ICHI BUILDING CO., LTD.

Hotel real estate
investment and management
Hotel real estate
investment and management

Undisclosed (*2)

Segment

Thousands of yen
Operating revenue<For the year ended December 31, 2021>
Name of customer

Hotel real estate
investment and management
Hotel real estate
investment and management

Hotel Management Japan Co., Ltd. (*1)
THE DAI-ICHI BUILDING CO., LTD.

Thousands of yen
Operating revenue¥¥

6,862,661

2,524,020

Undisclosed (*2)Note:(*1) Operating revenue includes the operating revenue from customers belonging to the business groupof the said customer.
(*2) Undisclosed as the consent on disclosure has not been obtained from the lessee.
22. Subsequent Events
Acquisition of assets

JHR acquired two properties as follows:

Name of acquired asset
Type of specified asset
Asset type

Location (displayed address)
Acquisition dateSellerAcquisition price (*1)
Name of acquired asset
Type of specified asset
Asset type

Location (displayed address)
Acquisition dateSellerAcquisition price (*1)

UAN kanazawa
Beneficial interest of real estate in trust and movable asset attached tothe hotel
Hotel6-30 Oyama-machi, Kanazawa-shi, Ishikawa
January 31, 2023
GK Esquilino Investment¥2,050 million
Sotetsu Fresa Inn Shimbashi-Karasumoriguchi
Beneficial interest of real estate in trustHotel
10-2 Shimbashi 4-chome, Minato-ku, Tokyo
March 24, 2023
Not disclosed (*2)
¥8,400 million

Note:(*1) The acquisition price does not include expenses for acquisition, settlement of property tax, city planningtax, etc., and consumption tax and local consumption tax.
(*2) Not disclosed because the approval of the seller has not been obtained.

64Independent auditor’s report
To the Board of Directors of Japan Hotel REIT Investment Corporation:
OpinionWe have audited the accompanying financial statements of Japan Hotel REIT Investment Corporation(“the Company”), which comprise the balance sheets as at December 31, 2022 and 2021, the statements
of income, changes in net assets and cash flows for the years then ended, and notes, comprising asummary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as at December 31, 2022 and 2021, and its financial performanceand its cash flows for the years then ended in accordance with accounting principles generally acceptedin Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company inaccordance with the ethical requirements that are relevant to our audit of the financial statements inJapan, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.
Emphasis of Matter
We draw attention to Note 22 (Subsequent Events) to the financial statements, which states that theCompany acquired assets. Our opinion is not modified in respect of this matter.
Other Information
The other information comprises the information included in the Asset Management Report, but does
not include the financial statements and our auditor’s report thereon. Management is responsible for the
preparation and presentation of the other information. Supervisory directors are responsible foroverseeing the executive director’s performance of his duties with regard to the design, implementationand maintenance of the reporting process for the other information.
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with thefinancial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Supervisory Directors for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern and disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
Supervisory directors are responsible for overseeing the executive director’s performance of his duties
with regard to the design, implementation and maintenance of the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with auditing standards generally accepted in Japan will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the overrideof internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the financial statements are in accordancewith accounting standards generally accepted in Japan, the overall presentation, structure andcontent of the financial statements, including the disclosures, and whether the financial statements

represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the executive director regarding, among other matters, the planned scope andtiming of the audit, significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the executive director with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with him all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Company which is required to be disclosed pursuant to theprovisions of the Certified Public Accountants Act of Japan.

/S/ Atsunori Sadahiro
Designated Engagement Partner
Certified Public Accountant/S/ Hironori Hashizume
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
April 21, 2023
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.