Investment
Invincible Corporation

Audited Financial Statements
for the 25th Fiscal Period(from July 1, 2015 to December 31, 2015)

INDEX TO FINANCIAL STATEMENTS
Page

Greetings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 1

Independent Auditor’s Report ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 3

Balance Sheet as of December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4

Statement of Income and Retained Earnings for the six months ended December 31, 2015∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 6

Statement of Changes in Net Assets for the six months ended December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7

Statement of Cash Flows for the six months ended December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8

Notes to Financial Statements as of and for the six months ended December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9

Greetings from Naoki Fukuda, Executive Director of Invincible Investment Corporation
and President & CEO of Consonant Investment Management Co., Ltd.
I would like to take this opportunity to express my sincere gratitude and appreciation to all investors
in Invincible Investment Corporation (“INV”) for your continued support.

It is my pleasure to provide you with a report on INV’s asset management and financial results forthe 25th period (covering the period from July 1, 2015 to December 31, 2015; the “Reporting
Period”).

During the Reporting Period, we conducted our second global public offering (the “Capital
Increase”) in two years that raised JPY 29.3 billion in funds.

The proceeds from the Capital

Increase were used together with new loans to acquire 11 hotels and 3 residential properties in July2015.

In August 2015, we acquired 3 hotels by utilizing the excess cash on hand from the Capital

Increase along with new loans.

As of the end of the Reporting Period, our portfolio consisted of

111 properties, and our asset size was JPY 173.8 billion (based on the acquisition price).

With respect to the property operations, the average daily rate (ADR) for hotels increased
substantially, due in large part to the steep increase in the number of international inbound visitors toJapan, which nearly reached 20 million visitors annually.

INV has adopted a variable rent structure

at most of the hotels it owns, under which any increase in hotel revenue directly leads to an increasein INV’s revenue.

INV’s operating revenue increased by JPY 1,889 million, or 38.0%, from theprevious period to JPY 6,863 million due to the revenue contribution of the newly acquired assets
referenced above together with an increase in variable rent revenue.

In regards to financial operations, we refinanced all existing loans in July 2015, and concurrently
converted all debt to unsecured debt, lengthened and diversified the debt maturity periods andfurther reduced the interest rates.

As of the end of the Reporting Period, the average interest rate onloans was 0.63%, substantially lower than 1.06% as of the end of the previous period.

As a result, net income increased by JPY 657 million, or 28.6%, from the previous period to JPY
2,952 million, and DPU (distribution per unit) increased by JPY 327, or 38.0%, from the previous
period to JPY 1,187 (the total of JPY 948 from distribution of earnings per unit and JPY 239 fromexcess profit distribution per unit).

The annual DPU for 2015, the sum of the DPU for the June andDecember 2015 fiscal periods, was JPY 2,047, a considerable increase of JPY 741, or 56.7%, fromthe previous year.

1

2

3

INVINCIBLE INVESTMENT CORPORATIONBALANCE SHEETAs of December 31, 2015
As ofDecember31,
2015

June30,2015

December 31,
2015(in thousands of
U.S. dollars)(in thousands of yen)

ASSETS
Current assets:
Cash and bank deposits (Notes 4, 7 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥2,691,921

Cash and bank deposits in trust (Notes 4, 7 and 14) ∙∙∙∙∙

4,822,622¥

7,885,398
5,933,582$

65,379Accounts receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

190

124

1

Rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

637,813

1,069,352

8,866

49,196

Prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

260,394

241,9312,005

Consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

316,413928,025

7,694

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

0

35

0

Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(2,436)(2,494)(20)

Total current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,726,919

16,055,955

133,122

Buildings, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

85,91485,914712

Buildings and accompanying facilities, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

38,862

38,862322

Structures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,779

2,779

23

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834

711,834

5,901

Buildings in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying
facilities in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

49,657,804

65,882,282

546,242

12,748,349

15,364,500

127,389

Structures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

323,594

327,632

2,716

Tools, furniture and fixtures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

302,397

401,404

3,328

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

69,963,823

88,435,785

733,237

Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Less: Accumulated depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

133,835,359(6,560,529)

171,250,996(7,836,243)

1,419,873(64,971)

Total property and equipment, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

127,274,829

163,414,753

1,354,902

Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

5,836,789

48,393

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45

15

0

Total intangible assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45

5,836,804

48,394

Non‐current assets:
Property and equipment (Notes 5, 6 and 7):

Intangible assets:

Investments and other assets:
Guarantee deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,03539,518327

Long‐term prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

251,697

533,409

4,422

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

36,21838,429318

Total investments and other assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

297,951

611,357

5,068

Total non‐current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

127,572,826

TOTAL ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥136,299,746

169,862,915¥

185,918,871

1,408,365$

1,541,4884

As ofDecember31,
2015

June30,2015

December 31,
2015(in thousands of
U.S. dollars)(in thousands of yen)

LIABILITIESCurrent liabilities:
Accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Short‐term loans payable(Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable(Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable in trust(Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

168,742¥

136,766

$

1,133

‐

1,080,000

8,954

62,341,000‐‐

9,960,000‐‐

Accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

43,75247,597394

Accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

174,711

134,010

1,111

Income taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

542

564

4

Advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

420,660

473,164

3,923

Deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,10823,043

191

Total current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

73,119,517

1,895,146

15,713

Non‐current liabilities:
Long‐term loans payable (Notes 7, 8 and 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits in trust(Note 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

90,619,000

751,339

1,420,014

1,617,867

13,414

Tenant leasehold and security deposits (Note 14) ∙∙∙∙∙

28,663

28,663237

Total non‐current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,448,677

92,265,530

764,990

TOTAL LIABILITIES ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

74,568,195

94,160,677

780,703

Unitholders’ capital ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

53,096,413

82,465,438

683,736

Capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

6,264,432

6,264,432

51,939Retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,370,704

3,028,323

25,108

Total unitholders’ equity ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

61,731,550

91,758,194

760,784

NET ASSETS (Note 9)Unitholders’ equity:

TOTAL NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES AND NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

61,731,550¥

136,299,746

91,758,194¥

185,918,871

760,784$

1,541,488

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

5

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the six months ended December 31, 2015
For the six months ended
June 30,2015

December31,
2015

December31,
2015(in thousands of U.S.
dollars)(in thousands of yen)

Operating revenue
Rental revenue－real estate (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,974,760

Total operating revenue ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,974,760¥

6,863,775

6,863,775$

56,90856,908

1,834,039

2,178,165

18,059Operating expenses
Property related expenses (Note 11) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Directors’ compensation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,800

4,800

39

Asset management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

180,000

180,000

1,492

Asset custody fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

6,342

6,794

56

Administrative service fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

22,05525,170208

Provision of allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

467

58

0

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

116,123

99,677826

Total operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,163,828

2,494,667

20,683Operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,810,931

4,369,108

36,225

Non‐operating income
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,242

814

6

Interest on tax refund∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,098

936

7

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

307

454

3

Total non‐operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,648

2,205

18

Non‐operating expenses
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

379,341

296,892

2,461

Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

140,328

982,261

8,144

Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

138,866

1,151

Total non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

519,670

1,418,020

11,757

Ordinary income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,295,909

2,953,293

24,486

Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,295,909

2,953,293

24,486

Current ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

605

605

5

Deferred ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Total income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

605

605

5

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,295,304

2,952,688

24,481Retained earnings brought forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

75,39975,634

627

Income taxes (Note 12):

Unappropriated retained earnings (Note 10) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,370,704¥

3,028,323$

25,108The accompanying notes are an integral part of these financial statements.

6

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CHANGES IN NET ASSETSFor the six months ended December 31, 2015
Unitholdersʹ equity
SurplusRetainedearnings

Capitalsurplus

Unitholdersʹ
capitalTotal
unitholdersʹ
equityTotal
surplus

Total net assets(in thousands of yen)

Balance as of December 31, 2014¥

53,096,413¥

6,264,432¥

2,031,546¥

8,295,978¥61,392,392¥

61,392,392

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐(1,956,146)(1,956,146)(1,956,146)(1,956,146)
2,295,304

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

2,295,304

2,295,304

2,295,304

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

339,157

339,157

339,157

Balance as of June 30, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

53,096,413¥

6,264,432¥

2,370,704¥

8,635,136¥

61,731,550

339,157¥

61,731,550

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

29,369,025

‐

‐

‐

29,369,025

29,369,025

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐(2,295,069)(2,295,069)(2,295,069)(2,295,069)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

2,952,688

2,952,688

2,952,688

2,952,688

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

29,369,025‐

657,618

657,618

30,026,643

30,026,643

Balance as of December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

82,465,438¥

6,264,432¥

3,028,323¥

9,292,755¥

91,758,194¥

91,758,194

Unitholdersʹ equity
Unitholdersʹ
capitalSurplusRetainedearnings

CapitalsurplusTotal
unitholdersʹ
equityTotal
surplus

Total net assets(in thousands of U.S. dollars)

Balance as of June 30, 2015∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

440,232$

51,939$19,655$71,595$

511,827$

511,827

Changes during the period
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

243,504‐

Dividends from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐‐(19,028)‐(19,028)

243,504(19,028)

243,504(19,028)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

24,481

24,481

24,481

24,481

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

243,504

‐

5,452

5,452

248,956

248,956

Balance as of December 31, 2015 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

683,736$

51,939$25,108$77,047$760,784$

760,784

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

7

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CASH FLOWSFor the six months ended December 31, 2015
For the six months ended
June30,2015

December31,
2015

December 31,
2015(in thousands of
U.S. dollars)(in thousands of yen)

Cash flows from operating activities:
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Depreciation and amortization ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,295,909
986,795

Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

138,866

1,151

Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes in assets and liabilities
Increase (decrease) in allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

140,328(1,242)
379,341

982,261(814)
296,892

8,144
(6)
2,461

467
6,739

58
(431,538)

0(3,577)

Decrease (increase) in consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest income received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,002,839
21,53917,86549,39649,576(13,787)(9,953)
4,925,816
1,242(381,197)(640)(611,612)(25,114)
1,989(9,097)52,504
12,9354,131
4,640,500
814(328,496)(583)(5,070)
(208)
16
(75)
435
107
34
38,475
6(2,723)(4)¥

2,953,293
1,275,744$

24,486
10,577

Net cash provided by operating activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,545,220

4,312,234

35,753

Cash flows from investing activities:
Purchases of property and equipment in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits in trust ∙∙∙∙∙
Proceeds from tenant leasehold and security deposits in trust ∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(13,512,228)‐(95,186)
406,054(1,487)(37,422,498)(5,836,789)
239,098(40,738)(31,694)(310,276)(48,393)
1,982
(337)
(262)

Net cash used in investing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(13,202,847)(43,092,621)(357,288)

Cash flows from financing activities:
Proceeds from short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments for loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distribution payments ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from issuance of investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐
6,241,000(1,200,000)‐(81,398)(1,952,824)‐

1,401,000(321,000)
90,619,000(62,341,000)(9,960,000)(1,250,432)(2,292,901)
29,230,158

11,615(2,661)
751,339(516,880)(82,580)(10,367)(19,010)242,352

Net cash used in financing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,006,776

45,084,824

373,806

Net increase (decrease) in cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(5,650,850)
13,165,393

6,304,437
7,514,543

52,27162,304

Cash and cash equivalents at end of period (Note 4) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,514,543¥

13,818,981$

114,575

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

8

INVINCIBLE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
As of and for the six months ended December 31, 2015

1. Organization
Invincible Investment Corporation (the“Company”), a real estate investment corporation, was incorporated on January 18, 2002, underthe Act on Investment Trusts and Investment Corporations of Japan (the“Investment Trust Act”) with initial capital of ¥200 million.
The Company is externally managed by a registered asset management company, Consonant Investment Management Co., Ltd. (the“Asset Manager”). The Asset Manager is currently owned 100% by Calliope Godo Kaisha (Calliope). The Company was formed toinvest primarily in properties in Japan.
On May 17, 2004, the Company raised ¥3,377,250 thousand through an initial public offering of 9,000 investment units. As a“comprehensive investment REIT focusing on the Tokyo metropolitan area and on residential properties,” the Company was listed on
the Osaka Securities Exchange in May 2004.
On February 7, 2005, the Company completed its second public offering of 10,650 investment units at a price of ¥369,734 per unit inconnection with a public offering in Japan.
On July 31, 2006, the Company completed its third public offering of 25,000 investment units at a price of ¥332,045 per unit in connection
with a public offering in Japan. The Company was listed on the J‐REIT market of the Tokyo Stock Exchange in August 2006 (in order tofocus trading on one securities exchange and reduce administrative tasks and costs accompanying a duplicate listing, the Company
delisted from the Osaka Securities Exchange on October 6, 2007).
Effective on February 1, 2010, the Company executed a five‐to‐one unit split and 215,596 investment units were issued in connection
with the unit split. Effective on the same day, the Company also merged with LCP Investment Corporation (LCP) and allocated 367,200
investment units at a ratio of 4 units (post‐unit split) of the Company per one investment unit of LCP. As a result, investment units
issued and outstanding were 636,695 units as of February 1, 2010.
On July 29, 2011, the Company completed a third party allotment of 711,597 investment units at a price of ¥9,837 per unit.
On December 20, 2013, the Company completed a third party allotment of 224,887 investment units at a price of ¥13,340 per unit.
On July 16, 2014, the Company completed its fourth public offering totaling 1,040,000 new investment units at a price of ¥21,873 per unit.
527,322 of such units were issued in connection with a Domestic Public Offering, and the remaining 512,678 units were issued inconnection with an International Offering pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933. On August 13,
2014, the Company issued an additional 55,507 investment units domestically in connection with the exercise of an over‐allotment
option. Net proceeds of approximately ¥23.9 billion were used to repay the Company’s outstanding short term borrowings and inconnection with the acquisition of 18 properties during this fiscal period.
On July 15, 2015, the Company completed its fifth public offering totaling 500,000 new investment units at a price of ¥57,817 per unit.
211,250 of such units were issued in connection with a Domestic Public Offering, and the remaining 288,750 units were issued inconnection with an International Offering pursuant to Rule 144A and Regulation S under the U.S. Securities Act of 1933. On August 12,
2015, the Company issued an additional 25,000 investments units domestically in connection with the exercise of an over‐allotment
option. Net proceeds of approximately ¥29.3 billion were used to repay the Company’s outstanding long term borrowings and inconnection with the acquisition of 14 properties during this fiscal period.

2. Summary of Significant Accounting Policies(a) Basis of Presentation
The Company maintains its accounts and records in conformity with accounting principles and practices generally accepted in Japan(“Japanese GAAP”), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments
and Exchange Act of Japan, and other related regulations, which are different in certain respects from the application and disclosure
requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America.
9

The financial statements are prepared based on the Japanese audited financial statements of the Company, which were prepared inaccordance with Japanese GAAP and filed with the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange
Act of Japan. In preparing the accompanying financial statements, certain information in the notes has been added and certain
reclassifications have been made from the financial statements issued domestically for the convenience of the readers outside Japan.
The financial statements are not intended to present the financial position and the results of operations in accordance with accounting
principles and practices generally accepted in countries and jurisdictions other than Japan.
The Company’s fiscal period is a six‐month period, which ends at the end of June and December of each year.

Amounts less than ¥1 thousand and US$ 1 thousand have been rounded down. As a result, the totals shown in the financial statements
and notes thereto do not necessarily agree with the sum of the individual amounts.
The Company does not prepare consolidated financial statements as it has no subsidiaries.
(b) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short‐term investments which are highly liquid and readily convertible
to cash, have a low risk of price fluctuation, and mature within three months from the date of acquisition.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation of property and equipment, except for land, is calculated on a straight‐line
basis over the estimated useful lives of the assets as stated below:
For the six months ended
December 31, 2015

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77 years

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8‐24

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7‐18

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2‐67

Buildings and accompanying facilities in trust ∙∙∙∙∙∙∙∙∙∙

2‐32

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4‐55

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2‐15(d) Intangible Assets
Intangible assets are amortized on a straight‐line basis.
(e) Long‐term Prepaid Expenses
Long‐term prepaid expenses are amortized on a straight‐line basis.
(f)

Investment Unit Issuance Costs

Investment unit issuance costs are recorded as expenses when incurred.
(g) Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and a valuation of any receivables fromcompanies and individuals with financial difficulties.
(h) Impairment of Fixed Assets
An assessment for impairment is carried out on an asset or group of assets, such as fixed assets, intangible assets and investments,
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the asset or group of assets isdeemed to be impaired, an impairment loss is recognized for the difference between the carrying amount and the recoverable value ofthe asset or group of assets using the discounted cash flow model.
(i)

Accounting Treatment of Trust Beneficiary Interests in Real Estate Trusts

For trust beneficiary interests in real estate trusts, which are commonly utilized to obtain ownership in investment properties in Japanand through which the Company holds all of its real estate, all assets and liabilities with respect to assets in trust, as well as all income
generated and expenses incurred with respect to assets in trust, are recorded in the relevant accounts of the balance sheet and statement10

of income and retained earnings of the Company in proportion to the percentage that such trust beneficiary interest represents. Certain
material accounts with respect to assets and liabilities in trust are presented separately from other accounts in the balance sheets of theCompany.
(j)

Income Taxes

Deferred tax assets and liabilities are computed based on the temporary differences between the financial statement and income tax
basis of assets and liabilities using the applicable statutory tax rate.
(k) Consumption Taxes
Consumption taxes withheld and consumption taxes paid are not included in the statement of income and retained earnings.
Consumption taxes paid are generally offset against the balance of consumption taxes withheld. As such, the excess of payments overamounts withheld are included in current assets and the excess of amounts withheld over payments are included in current liabilities as
the case may be.
(l)Taxes on Property and Equipment

Property and equipment are subject to various taxes, such as property taxes and urban planning taxes on an annual basis. An owner of aproperty is registered in the record maintained by the local government in each jurisdiction, and such taxes are imposed on the ownerregistered in the record as of January 1 of each year based on the assessment made by the local government.
Under the above tax rules, a seller of a property at the time of disposal is liable for these taxes on the property from the date of disposal tothe end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued tax
liabilities and the amount of settlement reflects this adjustment. For the purchaser, a portion of such taxes calculated from the acquisition
date to the end of the calendar year is capitalized as a cost of the property in accordance with Japanese GAAP. In subsequent calendar
years, half of such taxes on property and equipment for each calendar year are charged as operating expenses in each fiscal period.
Taxes on property and equipment capitalized as part of the acquisition cost of properties amounted to ¥42,497 (US$347) thousand for thesix months ended December31, 2015.

3. U.S. Dollar Amounts
The Company maintains its accounting records in Japanese yen. The U.S. dollar amounts included in the accompanying financial
statements and notes thereto represent the arithmetical result of translating Japanese yen into U.S. dollars at the rate of ¥120.61 = US$1,
the effective rate of exchange prevailing at December 31, 2015. The inclusion of such U.S. dollar amounts associated with the fiscal six
months ended December 31, 2015 is solely for the convenience of readers outside Japan. Such translations should not be construed as
representations that the Japanese yen amounts represent, or have been, or could be converted into, U.S. dollars at that or any other rate.

4. Cash and Cash Equivalents
Cash and cash equivalents shown in the statements of cash flows consist of the following balance sheet items.
As ofJune 30, 2015

December 31, 2015

(in thousands of
U.S. dollars)(in thousands of yen)

Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥2,691,921

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,822,622

Cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥7,514,543¥

December 31, 2015

7,885,398$

65,379$114,575

5,933,582¥

13,818,981

49,196

5. Property and Equipment
The following tables show the summary of movement in property and equipment for the six months ended December 31, 2015.
At costBeginning balance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

Net property andequipment(in thousands of yen)

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

85,914

Buildings and accompanying facilities ∙∙∙∙∙

38,862‐‐

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,779

‐

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834

‐

¥

‐

¥

‐

¥

85,914

¥

9,407

¥

541

¥

76,50738,862

20,593849

18,268

‐

2,779

1,335

65

1,443

‐

711,834‐‐

711,834

11

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities
in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

49,657,804

16,224,478

12,748,349

2,616,151‐‐

65,882,282

4,510,729

784,615

61,371,553

15,364,500

3,006,062

454,252

12,358,438

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

323,594

4,038‐

327,632

138,040

9,693

189,591

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙

302,397

99,007‐401,404

150,073

25,696251,331Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

69,963,823

18,471,961‐

88,435,785‐‐

88,435,785

Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

5,836,789‐

5,836,789‐‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

133,835,359

43,252,426

¥

¥

‐

¥

177,087,786¥

7,836,243¥

1,275,714

5,836,789
169,251,542¥

At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Depreciation forthe period

Net property andequipment(in thousands of U.S. dollars)

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

712‐

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙

322‐

Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

23‐

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,901

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying facilities
in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

$

$

‐

$

712

77

$

$

4

$

634

‐

322

170

7

‐

23

11

0

11

‐

‐

5,901

‐

‐

5,901

411,722

134,520‐546,242

37,3996,505

508,842

105,698

21,690127,389

24,923

3,766

102,466‐

151

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,682

33

‐

2,716

1,144

80

1,571

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,507

820

‐

3,328

1,244

213

2,083
733,237

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

580,083

153,154‐733,237‐‐

Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

48,393‐

48,393‐‐

48,393

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

1,109,653

358,613‐

1,468,267

64,971

10,577

1,403,296

$

$

$

$

$

$

Increases in the net book values are mainly due to the acquisition of 17 properties (¥42,627,000 thousand) as shown below and capitalized expenditures.
Acquisition cost(in thousands of yen)

Property name

Property No.

Acquisition cost(in thousands of U.S. dollars)
64,679D24

Hotel Mystays Haneda

7,801,000

D25

Hotel Mystays Kameido P1

5,594,000

46,380D26

Hotel Mystays Ueno Iriyaguchi

3,821,000

31,680D27

Hotel Mystays Kameido P2

3,742,000

31,025

D28

Hotel Vista Shimizu

2,198,000

18,224

D29

Super Hotel Shinbachi /Karasumoriguchi

1,624,000

13,464

D30

Flexstay Inn Higashi‐Jujo

1,277,000

10,587

D31

Hotel Mystays Utsunomiya

1,237,000

10,256

D32

Flexstay Inn Kawasaki‐Kaizuka

980,000

8,125
8,117

D33

Confort Hotel Toyama Ekimae

979,000

D34

Flexstay Inn Kawasaki‐Ogawacho

906,000

7,511
14,774

A100

City Court Kitaichijo

1,782,000

A101

Lieto Court Mukojima

1,683,000

13,954

A102

Lieto Court Nishi‐Ojima

1,634,000

13,547

D35

Fkexstay Inn Ekoda

5,069,000

42,028

D36Super Hotel Tokyo‐JR Tachikawa Kitaguchi

1,170,000

9,700

D37

Super Hotel JR Ueno‐Iriyaguchi

1,130,000

9,369

42,627,000

353,428

Total

6. Fair Value of Investment and Rental Properties
The following tables show the net book value and the fair value of the investment and rental properties in the aggregate for the six
months ended June 30, 2015 and December 31, 2015.
Residential
As of / For the six months ended
June 30, 2015

December 31, 2015

(in thousands of yen)

December 31, 2015
(in thousands of
U.S. dollars)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

55,569,758 ¥

55,269,403

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙(300,354)

5,036,303$

458,248
41,75612

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

55,269,403

60,305,706

62,209,000 ¥

68,592,000

500,005$

568,709

OfficeAs of / For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

8,551,609

Net increase (decrease) during period ∙∙∙∙∙∙∙(36,906)¥(26,826)(222)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,514,702

8,487,876

70,374

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,181,000¥

8,514,702

7,206,000$

70,596$59,746

Retail facilities
As of / For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,225,394¥

5,178,288$

42,934

Net increase (decrease) during period ∙∙∙∙∙∙∙∙(47,106)(44,205)(366)

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,178,288

5,134,083

42,567

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,820,000¥

5,830,000$

48,33713

Parking lots
As of / For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

100,823

Net increase (decrease) during period ∙∙∙∙∙∙∙∙(1)¥

100,822(1)0Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

100,822

100,821835

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

109,000¥$

112,000

835

$

928

Hotel
As of / For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

45,296,007

Net increase (decrease) during period ∙∙∙∙∙∙∙∙

12,915,605¥

37,011,441

Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

58,211,612

95,223,054

Fair value ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

71,555,000¥

58,211,612$

482,643306,868
789,512133,212,000$

1,104,485

Notes:
Fair value has been determined based on the appraisals or research provided by independent real estate appraisers.
For rental revenues and expenses for the six months ended June 30, 2015 and December 31, 2015, please refer to “Note 11: Rent Revenues－Real Estate and Expenses Related toProperty Rental Business“

7. Collateral
The following table shows the assets pledged as collateral to secure long‐term loans payable and long‐term loans payable in trust.
As ofJune 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

312,245

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,822,622

‐

¥

‐

$

‐

‐

Buildings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77,048‐‐

Buildings and accompanying facilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

19,117‐‐Structures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,509

‐

‐

Land ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

711,834

‐

‐

‐

‐

Buildings in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45,931,690

Buildings and accompanying facilities in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,196,539‐‐

Structures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

195,246‐‐

Tools, furniture and fixtures in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

178,020‐‐

Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

69,963,823‐‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

132,409,697

‐

¥

‐

$

The following table shows the loans payable secured by collateral.
As ofJune 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

62,341,000‐‐

Long‐term loans payable∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Current portion of long‐term loans payable in trust∙∙∙∙∙∙∙∙∙∙∙

9,960,000‐‐

Long‐term loans payable in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

72,301,000

¥

‐

$

‐

14

8. Loans Payable
The following table shows the details of loans payable for the six months ended December 31, 2015.

For the six months ended December 31, 2015
Beginning
Increase
Classification

EndingBeginningbalancebalance

Increase

DecreasebalanceEndingAveragebalanceinterest

Maturity

Use ofrate (%)

date

proceeds

Decrease
Remarks

Name of lender(in thousands of yen)(in thousands of U.S. dollars)(1)

Sumitomo Mitsui
May 16,

Banking‐467,000

107,000

360,000

‐

3,871

887

2,984

0.330
2016

Corporation (3)Unsecured

Short‐term

The Bank of

and

loans

May 16,

Tokyo‐Mitsubishi‐

467,000

107,000

360,000

‐

3,871

887

2,984

(2)
unguarant

0.330

payable2016

UFJ, Ltd. (3)eed

Mizuho Bank, Ltd. (3)May 16,‐

467,000

107,000

360,000

‐

3,871

887

2,984

0.330
2016

Total short‐term loans‐

1,401,000

321,000

1,080,000‐

11,615

2,661

8,954

12,000,000‐

12,000,000‐

99,494‐

99,494‐payableSumitomo Mitsui
July 14,

Banking

0.930
2017

Corporation (4)The Bank ofJuly 14,

Tokyo‐Mitsubishi

12,000,000‐

12,000,000‐

99,494‐

99,494

‐

0.930
2017

UFJ, Ltd. (4)Mizuho Bank, Ltd. (4)July 14,
12,000,000‐

12,000,000‐

99,494‐

99,494‐

Secured

0.930
2017

and
(2)

Shinsei Bank, Limited

July 14,unguarant

(4)

2017

eed

Citibank Japan Ltd. (4)July 14,6,500,000

6,500,000‐‐

6,500,000

6,500,000‐‐

53,89253,892‐‐53,89253,892

‐

‐

0.930

0.930
2017
July 14,

Sumitomo Mitsui
5,000,000‐

5,000,000‐

41,455‐41,455

‐

0.930
2017

Trust Bank, Limited(4)Resona Bank, Limited

July 14,2,100,000

Long‐term
loans‐

2,100,000‐

17,411‐

17,411

‐

0.930

(4)

2017

Sumitomo Mitsui
February

payable (6)Banking

1,357,000‐

1,357,000‐

11,251‐

11,251‐0.930
6, 2018

Corporation (4)The Bank ofFebruary

Tokyo‐Mitsubishi

1,357,000‐

1,357,000‐

11,251‐

11,251‐0.930
6, 2018

UFJ, Ltd. (4)Mizuho Bank, Ltd. (4)February
1,357,000‐

1,357,000‐

11,251‐

11,251‐

0.930

Secured6, 2018
andShinsei Bank, Limited

February
650,000‐

650,000

‐

5,389

‐

5,389

‐

0.930

(2)
unguarant(4)

6, 2018

Citibank Japan Ltd. (4)Februaryeed
650,000‐

650,000

‐

5,389

‐

5,389

‐

0.930
6, 2018

Sumitomo Mitsui
February
Trust Bank, Limited.

470,000‐

470,000

‐

3,896

‐

3,896

‐

0.930
6, 2018(4)
Resona Bank, Limited.

February
400,000(4)‐

400,000

‐

3,316

‐

3,316

‐

0.930
6, 2018

15

Ending

Beginning
Increase

Increasebalancebalance
Classification

EndingBeginning

Decrease

Average

Decreasebalancebalanceinterest

Maturity

Use ofrate (%)

date

proceeds

Remarks

Name of lender(in thousands of yen)(in thousands of U.S. dollars)(1)

Sumitomo Mitsui
July 16,

Banking‐

5,992,000‐

5,992,000‐

49,680‐49,6800.530
2018

Corporation
The Bank ofJuly 16,

Tokyo‐Mitsubishi‐

5,992,000‐

5,992,000‐

49,680‐49,6800.530
2018

UFJ, Ltd.
Mizuho Bank, Ltd.

July 16,‐

5,992,000‐

5,992,000‐

49,680‐49,6800.530
2018
Unsecured

Shinsei Bank, Limited

July 16,‐

3,330,000‐

3,330,000‐

27,609‐27,609

0.530

and
2018

(2)
unguarant

Citibank Japan Ltd.

July 16,‐3,000,000‐

3,000,000‐

24,873‐24,873

eed

0.530
2018

Sumitomo Mitsui

July 16,‐

2,670,000‐

2,670,000‐

22,137‐

22,1370.530

Trust Bank, Limited

2018

Resona Bank, Limited.

July 16,‐

1,335,000‐

1,335,000‐

11,068‐

11,0680.530
2018

Mitsubishi UFJ Trust
July 16,and Banking‐

668,000‐

668,000

‐

5,538

‐

5,538

0.530
2018

Corporation

Sumitomo Mitsui
July 16,

Banking‐

5,992,000‐

5,992,000‐

49,680‐49,6800.630
2019

Corporation
The Bank ofJuly 16,

Tokyo‐Mitsubishi‐

5,992,000‐

5,992,000‐

49,680‐49,6800.630
2019

UFJ, Ltd.
Mizuho Bank, Ltd.

July 16,‐

5,992,000‐

5,992,000‐

49,680‐49,6800.630
2019
Unsecured

Shinsei Bank, Limited

July 16,‐

3,330,000‐

3,330,000‐

27,609‐27,609

0.630

and
2019

(2)
unguarant

Citibank Japan Ltd.

July 16,‐3,000,000‐

3,000,000‐

24,873‐24,873

eed

0.630
2019

Sumitomo Mitsui

July 16,‐

2,670,000‐

2,670,000‐

22,137‐

22,1370.630

Trust Bank, Limited

2019

Resona Bank, Limited.

July 16,‐

1,335,000‐

1,335,000‐

11,068‐

11,0680.630
2019

Mitsubishi UFJ Trust
July 16,and Banking‐

668,000‐

668,000

‐

5,538

‐

5,538

0.630
2019

Corporation

Sumitomo Mitsui
July 16,

Banking‐

5,992,000‐

5,992,000‐

49,680‐49,6800.730
2020

Corporation
The Bank ofJuly 16,

Tokyo‐Mitsubishi‐

5,992,000‐

5,992,000‐

49,680‐49,680Unsecured

0.730
2020

UFJ, Ltd.

and(2)unguarant

Mizuho Bank, Ltd.

July 16,‐

5,992,000‐

5,992,000‐

49,680‐49,680

0.730

eed
2020

Shinsei Bank, Limited

July 16,‐

3,330,000‐

3,330,000‐

27,609‐27,6090.730
2020

Citibank Japan Ltd.

‐

3,000,000‐

3,000,000‐

24,873‐24,8730.730

July 16,16

Ending

Beginning
Increase

Increasebalancebalance
Classification

EndingBeginning

Decrease

Average

Decreasebalancebalanceinterest

Maturity

Use ofrate (%)

date

proceeds

Remarks

Name of lender(in thousands of yen)(in thousands of U.S. dollars)
(1)

2020
Sumitomo Mitsui

July 16,‐

2,670,000‐

2,670,000‐

22,137‐

22,1370.730

Trust Bank, Limited

2020

Resona Bank, Limited.

July 16,‐

1,335,000‐

1,335,000‐

11,068‐

11,0680.730
2020

Mitsubishi UFJ Trust
July 16,and Banking‐

668,000‐

668,000

‐

5,538

‐

5,538

0.730
2020

Corporation
Mizuho Bank, Ltd.

Unsecured
August 28,‐

3,682,000‐

3,682,000‐‐

30,528‐30,528

0.630

and
(2)

2019

unguaranteed

Total long‐term loans
62,341,000

90,619,000

62,341,000

90,619,000

516,880

751,339

516,880

751,339－2,700,000‐

2,700,000‐

22,386‐22,386

‐

1.900

－

－

－

payableMitsubishi UFJ Trust
March 31,
and Banking

2018
Corporation (4)(5)
Mitsubishi UFJ Trust
March 31,
Long‐termand Banking

loans

Corporation (4)(5)2,860,000‐

2,860,000‐

23,712‐

23,712‐

1.900

Secured
2019
and
(2)

payable in

Mitsubishi UFJ Trust

trust

and Banking

unguarant
March 31,
1,830,000‐

1,830,000‐

15,172‐

15,172

‐

eed

1.900
2020

Corporation (4)(5)
Mitsubishi UFJ Trust
March 31,
and Banking

2,570,000

2,570,000‐‐

21,308‐21,308

‐

1.900
2019

Corporation (4)(5)
Total long‐term loans
9,960,000‐

9,960,000‐

82,580‐82,580

‐

‐

‐

‐

‐

72,301,000

92,020,000

72,622,000

91,699,000

599,461

762,954602,122760,293

‐

‐

‐

‐

payable in trust
Total loans payable

Notes:(1)

The average interest rate indicates a weighted average interest rate for each six‐month period, rounded to three decimal places.

(2)

The funds are mainly used to acquire real estate properties or properties in trust and for repayment of loans payable.

(3)

The part of principal (¥321 million) was repaid using the refund of consumption taxes on November 30, 2015.

(4)

The principal of all the secured loans payable were repaid in full on July 16, 2015.

(5)

Mitsubishi UFJ Trust and Banking Corporation (“Mitsubishi UFJ Trust”), the trustee of real estate held in trust for which the Company is the beneficiary, borrows money fromPrudential Mortgage Asset Holdings 1 Japan Investment Business Limited Partnership, a part of the Prudential Financial, Inc. as of September 28, 2012. The Company received
the borrowed funds (after deducting reserves and other proceeds) from Mitsubishi UFJ Trust as payment of the trust principal for the real estate in trust on the same day.

(6)

Repayment schedule of long‐term loans payable (except for the current portion) for the next five years after each balance sheet date are as follows:
As of
December 31,
2015

December 31,
2015(in thousandsof yen)(in thousands of
U.S. dollars)

1‐2 years ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥2‐3 years ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐
28,979,000$‐
240,270

3‐4 years ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

32,661,000

270,798

4‐5 years ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

28,979,000

240,270

9. Net Assets
17

The Company issues only non‐par value units in accordance with the Investment Trust Act, and the entire amount of the issue price of
new investment units is allocated to unitholders’ capital within net assets. The Company is required to maintain net assets of at least¥50,000 thousand (US$ 414 thousand) as required by Article 67‐4 of the Investment Trust Act.
The number of investment units authorized were 10,000,000 units as of June 30, 2015 and December 31, 2015.
The number of investment units issued and outstanding were 2,668,686 units as of June 30, 2015 and 3,193,686 December 31, 2015
respectively.

10. Appropriation of Retained Earnings
In accordance with the distribution policy in Article 17, Paragraph 1, of the Company’s articles of incorporation which stipulates making
distributions in excess of 90% of distributable profit as defined in Article 67‐15, Paragraph 1 of the Special Taxation Measures Act of Japanfor the fiscal period.
The following table shows the appropriation of retained earnings for the six months ended June 30, 2015 and December 31, 2015.
For the six months ended
June 30, 2015

Unappropriated retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥December 31, 2015

December 31, 2015

(in thousands of yen)(in thousands of
U.S. dollars)

2,370,704 ¥$

3,028,323

25,108Distributions in excess of retained earnings
Deduction from capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

763,290

6,328

Distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(2,295,069)(3,790,905)(31,431)

Of which, distributions of earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Of which, distributions in excess ofretained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(2,295,069)(3,027,614)(25,102)‐(763,290)(6,328)Voluntary reserve
Reserve for temporary
difference adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

708

5

Retained earnings carried forward. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥75,634 ¥‐$‐The distributions in respect of the six months ended December 31, 2015 of ¥1,187 (US$9.8) per investment unit, amounting to a total
dividend of ¥3,790,905 thousand (US$31,431 thousand), including distributions in excess of retained earnings (return of capital), wasproposed and approved at the Board of Directors meeting on February 25, 2016. These financial statements do not reflect this dividend
payable.
Cash distributions per investment unit were ¥860 and ¥1,187 (US$9.8) for the six months ended June 30, 2015, and December 31, 2015,
respectively.

11. Rent Revenues － Real Estate and Expenses Related to Property Rental Business
Rent revenue – real estate and expenses related to property rental business for the six months ended June 30, 2015 and December 31,
2015 consist of the following:
For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Rental revenue – real estate:
Rental revenue and common area charges ¥Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total rental revenue – real estate∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Expenses related to property rental business:
Facility management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Property related taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Insurance expense ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total expenses related to property
rental business. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Operating income from property
leasing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥4,738,713
236,047
4,974,760¥

6,652,619
211,156
6,863,775$

468,393
201,860
7,061
986,765
169,957¥

472,597
250,268
9,934
1,275,714
169,651

$

3,918
2,075
82
10,577
1,406

1,834,039¥

2,178,165$

18,0593,140,721¥

4,685,610$

38,849¥$55,1581,750
56,90818

12. Income Taxes
The Company is subject to corporate income taxes in Japan. The Company may deduct from its taxable income the amounts distributed
to its unitholders, provided the requirements are met under the Special Taxation Measures Act of Japan. Under this act, the Company
must meet a number of tax requirements, including a requirement to distribute in excess of 90% of distributable profit for the fiscal
period in order to be able to deduct such amounts. If the Company does not satisfy all of the requirements, the entire taxable income of
the Company will be subject to regular corporate income taxes in Japan.
The Company has a policy of making distributions in excess of 90% of its distributable profit for the fiscal period to qualify for conditions
set forth in the Special Taxation Measures Act of Japan to achieve a deduction of distributions for income tax purpose and it distributes
approximately 100% of distributable profit. Hence, the Company has treated the distributions as a tax allowable deduction as defined in
the Special Taxation Measures Act of Japan.
(a) Reconciliations of the Company’s effective tax rates and statutory tax rates are as follows:
For the six months ended
June30, 2015

December 31, 2015
(Rate)

Statutory tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

34.15 %

32.31 %

Deductible cash distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(33.80)(31.93)

Increase (decrease) in valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

0.63(0.38)

Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(0.95)

0.02

Effective tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

0.03 %

0.02 %(b) Deferred tax assets consist of the following:
As ofJune 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Deferred tax assets:
Current:
Enterprise tax payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

489

Rental receivables (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

186

¥

489

$

186

4
1

Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

787

806

6

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,463

1,482

12

Non‐current:
Buildings and other (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

746,394735,158

6,095

Land (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,129,657

2,129,657

17,657Net loss carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,329,595

7,329,595

60,771

Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,205,647

10,194,411

84,523

Valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(10,207,110)(10,195,894)(84,536)

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

－

－

－

Net deferred tax assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

－

¥

－

$

－

(c) Revision of the amount of deferred tax assets and liabilities by the change of income tax rate
With the “Act for Partial Revision of the Income Tax Act, Etc “(Act No. 9 of 2015) promulgated on March 31, 2015, the effective tax rateused to calculate deferred tax assets and deferred tax liabilities concerning temporary differences, etc. expected to be resolved inaccounting periods beginning on or after July 1, 2015 was changed to 32.31%.
As a result of this change, there is no effect on net deferred tax assets and income taxes.

1913. Leases(a) Lease rental revenues
The future minimum rental revenues pursuant to existing rental contracts as of June 30, 2015 and December 31, 2015 scheduled to bereceived are summarized as follows:
As ofJune 30, 2015

December 31, 2015

December 31, 2015

(in thousands of yen)(in thousands of
U.S. dollars)

Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,413,667$

Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

21,199,677

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

23,613,345¥

3,657,829
31,055,536¥

34,713,366

30,327
257,487$

287,814(b) Lease rental expenses
The future minimum rental expenses pursuant to existing rental contracts as of June 30, 2015 and December 31, 2015 scheduled to be
paid are summarized as follows:
As ofJune 30, 2015

December 31, 2015

(in thousands of
U.S. dollars)(in thousands of yen)

Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

112,249

Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,168,039

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,280,288¥

December 31, 2015

112,249$

2,111,914¥

2,224,164

930
17,510$18,44014. Financial Instruments(a) Qualitative information for financial instrumentsi.

Policy for financial instrument transactions

The Company raises funds through loans payable and the issuance of investment units to acquire real estate properties, pay
property maintenance expenses and/or repay existing loans payable. Surplus funds are managed carefully through investments
in financial instruments taking into account liquidity and safety in light of the current financial market conditions. Derivative
instruments are used only for hedging purposes and not for speculation. The Company did not enter into any derivativetransactions for the six months ended June 30, 2015 and December 31, 2015.
ii.

Nature and extent of risks arising from financial instruments and risk management

The funds raised through loans payable are mainly used to acquire real estate properties or properties in trust and for the
repayment of existing loans payable. Liquidity risks relating to loans payable are managed by the finance department of theAsset Manager by preparing monthly plans for funds, and monitoring the covenants defined in loan agreements.
iii.

Supplemental information for financial instruments

The fair value of financial instruments is based on quoted market prices if available. When quoted market prices are not available, fairvalue is estimated using valuation techniques which contain various assumptions. If other valuation models or assumptions were used,the estimated value may differ.
(b) Quantitative information for financial instruments
The following table shows the carrying amounts, fair values and valuation differences of financial instruments for which fairvalue is available as of June 30, 2015 and December 31, 2015.

20

As ofJune 30, 2015
Carrying
amounts

December 31, 2015

Fair value

Carrying
amounts

Difference

December 31, 2015

Fair value

Carrying
amounts

Difference(in thousands of yen)

Fair value

Difference(in thousands of U.S. dollars)

Assets:Current:(1) Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,691,921(2) Cash and bank deposits in trust. ∙∙∙∙∙

4,822,622

Total assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,514,543¥

2,691,921

－

¥

¥

¥

7,885,398－

4,822,622
7,514,543－¥¥

7,885,398

5,933,582¥

13,818,981¥¥

13,818,981

－

$

－

5,933,582¥－

65,379$49,196$

114,575

65,379

$

－

$

－

－

49,196$

114,575

Liabilities:(3) Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4) Current portion of long‐termloans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(5) Current portion of long‐term loans
payable in trust. ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

－

－

－

1,080,000

1,080,000

－

8,954

8,954

－

62,341,000

62,341,000

－

－

－

－

－

－

－

9,960,000

9,960,000

－

－

－

－

－

－

－

(6) Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

－

－

－

90,619,000

90,619,000－

751,339751,339

Total liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

72,301,000¥

72,301,000

－

¥

¥

91,699,000¥

91,699,000

¥

－

$

760,293$760,293

－
－

$

Notes
i.

The methods and assumptions used to estimate fair value are as follows:(1) Cash and bank deposits and (2) Cash and bank deposits in trust
Because of their short maturities, the carrying amounts approximate their fair value.
(3) Short‐term loans payable, (4) Current portion of long‐term loans payable, (5) Current portion of long‐term loans payable in trust and (6) Long‐term loans payable
in trust
The fair values of long‐term loans payable with fixed interest rates are determined based on the present value of contractual cash flows discounted at current market interest
rates which would be applicable to new loans payable under the same conditions and terms. Long‐term loans payable with floating interest rates reflecting changes inmarket rates within a short term period are stated at their carrying amounts as their carrying amounts approximate their fair values.

ii.

Financial instruments for which fair value is difficult to determine are as follows:
As ofJune 30, 2015

December 31, 2015

December 31, 2015
(in thousands of
U.S. dollars)(in thousands of yen)

Tenant leasehold and security deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

28,663Tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙

1,420,014¥

28,663$

1,617,867

237
13,414

Tenant leasehold and security deposits are not publicly traded, and it is difficult to determine their fair value based on estimated future cash flows because the repayment datesof those deposits are not certain. Therefore, these financial instruments are not included in the above quantitative information.
iii.

Cash flow schedule of financial assets after the balance sheet dateWithin 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)

As of June 30, 2015:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

2,691,921

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4,822,622

¥

‐

¥

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,514,543

¥

‐

¥

‐

¥

‐

¥

Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,885,398

¥

‐

¥

‐

¥

‐

¥

Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

5,933,582

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

13,818,981

‐

¥

‐

‐

¥

‐

‐

¥

‐

‐

¥

‐

‐

¥

‐

¥

‐

‐

‐

As of December 31, 2015:‐¥

Within 1 year‐‐¥

1‐2 years‐‐¥

2‐3 years‐‐¥

3‐4 years‐‐

4‐5 years

Over 5 years(in thousands of U.S. dollars)
As of December 31, 2015:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

65,379Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

49,196

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

114,575

$

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐

$

‐
$

‐

‐
‐

$

‐

21

iv.

Cash flow schedule of financial liabilities after the balance sheet dateWithin 1 year

1‐2 years

2‐3 years

3‐4 years

4‐5 years

Over 5 years(in thousands of yen)
As of June 30, 2015:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

‐

‐

¥

‐

¥

‐

¥

‐

¥

‐

¥

62,341,000‐

Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

‐

Current portion of long‐term loans payable in trust ∙∙∙∙

9,960,000

‐

‐

‐

‐

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

72,301,000

¥

‐

¥

‐

¥

‐

¥

Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

‐

¥

‐

¥

‐

¥

‐

¥

Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

‐

¥

‐

‐

¥

‐

As of December 31, 2015:

Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Current portion of long‐term loans payable in trust ∙∙∙∙‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥‐¥

Within 1 year

‐

‐

‐

‐

‐

‐

28,979,000

32,661,000

28,979,000

‐

‐

‐

‐

‐

‐

‐

¥

1‐2 years

28,979,000¥

2‐3 years

32,661,000¥

3‐4 years

28,979,000¥

4‐5 years‐

Over 5 years(in thousands of U.S. dollars)
As of December 31, 2015:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$‐

Current portion of long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

$

‐
‐

‐

‐

‐

‐

Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

240,270

270,798

240,270‐

Current portion of long‐term loans payable in trust ∙∙∙∙

‐

‐

‐

‐

‐

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

‐

$

‐

$

$

‐

240,270$$‐

270,798$$‐

240,270

$

‐

‐
$

‐

15. Segment Information
Segment information for the six months ended June 30, 2015 and December 31, 2015 is as follows:(a) Operating Segment Information
Disclosure is omitted as the Company is comprised of a single reportable segment engaged in the property rental business.
(b) Enterprise‐wide Disclosures(i) Information about Products and Services
Disclosure is not required as revenues from external customers for the single segment are in excess of 90% of total revenues.
(ii) Information about Geographic Areas(1) Revenues from Overseas Customers:
Disclosure is not required as revenues from external customers located in Japan are in excess of 90% of total revenues.
(2)Tangible Fixed Assets:
Disclosure is not required as tangible fixed assets located in Japan are in excess of 90% of total tangible fixed assets.
(c) Information about Major Customers
Information about major clients for the six‐month periods ended June 30, 2015 and December 31, 2015 were as follows:

For the six months ended June 30, 2015
Operating Revenues
Name of client

Related segment(in thousands of yen)

Mystays Hotel Management Co.,Ltd.

¥1,760,999

Real estate investing business22

For the six months ended December 31, 2015
Operating Revenues

Operating Revenues(in thousands of yen)(in thousands of U.S. dollars)Name of client

Related segment

Mystays Hotel Management Co.,Ltd.

＄25,918¥3,125,985

Real estate investing business16. Related‐Party Transactions(a) Parent Company and Major Corporate Unitholders
For the six months ended June 30, 2015

Type of

Location
related‐party

Voting(in millions of yen)Company

Amounts (1)Relationship with

Balance sheet
the Company

nameType of transactions

Company

Interested party of

Minato‐ku

Investment

TMK(3)

Tokyo

Nishi TMK(3)the Asset

Seller of real estate

Acquisition of real estate

management

trust

trust beneficiarybusinessrightsrights,(2)(5)Seller of real estate

Acquisition of real estate

trust beneficiary

trust beneficiaryrightsrights,(2)(5)

Lease holder andRental Revenues.

Minato‐ku,

Investment

Tokyomanagement

Minato‐ku,

Hotel

Tokyo

management

Manager

¥

¥

0.1

―

0.1

―

business
Mystays

HotelManagement,.
Co.Ltd(3)Amounts(1)interest in theBusiness

Zephyrus

Balance at the end of period

Transactions for the period

Share capital

¥

100

―

beneficiary(in thousands of yen)(in thousands of yen)account¥ 2,792,000――¥ 2,119,000――¥ 1,760,999

Rental receivables¥ 501,272

operator of hotelbusiness

Notes:(1)

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

(2)

Terms and conditions are decided pursuant to the Asset Manager’s Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding(3)

The seller, Zephyrus TMK, Nishi TMK, and Mystays Hotel Management., Co. Ltd has no relationship to be stated, but they receive investment through funds that are(4)

Calliope holds 609,942 units (holding ratio: 22.85%) of the issued investment units of the Company.

Transactions with Sponsor‐related Persons.

managed by FIG, an affiliate of Calliope. Accordingly, we treat Zephyrus TMK, Nishi TMK, and Mystays Hotel Management., Co. Ltd as a related party.

(5)

The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.
Acquisition of real estate trust beneficiary rights are relating to below
Property nameSellerD22

Hotel Nets Hakodate

Zephyrus TMK

2,792,000

Acquisition cost(in thousands of U.S. dollars)
22,801

D23

Flexstayinn Shirogane

Nishi TMK

2,119,000

17,305

4,911,000

40,106

Property No.

Acquisition cost(in thousands of yen)Total

For the six months ended December 31, 2015

Type ofCompany

related‐party

nameLocation

Business

Balance at the end of period

Transactions for the period

Share capital
Voting(in(inmillions

thousanof yen)ds of U.S.

Amounts(1)Amounts (1)interest
Relationship with(in thousandsin thethe Company

Type of transactions

Compa

dollars)of yen)(inthousands of U.S.

ny

Balancesheet(in thousands(inof yen)thousandaccounts of U.S.
dollars)

dollars)
Interested party of
the Asset
ManagerSkye TMK(3)Minato‐ku

Investment

Tokyo

¥

0.1

$

0

‐

Seller of real estate

Acquisition of real estate

management

trust

trust beneficiarybusinessrightsbeneficiary¥ 7,801,000$ 64,679‐‐‐

rights,(2)(5)23

Nishi TMK(3)Minato‐ku

nvestment

Tokyo

Seller of real estate

Acquisition of real estate

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)Seller of real estate

Acquisition of real estate

trust beneficiary

trust beneficiary

RannochMinato‐ku

nvestment

TMK(3)

Tokyo

management

Wakusei TMK(3)Minato‐ku

nvestment

Tokyo

¥

¥

0.1

0.1

$

$

0

0

‐

‐

business

Suisei TMK(3)rightsrights,(2)(5)Seller of real estate

Acquisition of real estate

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)Seller of real estate

Acquisition of real estate

trust beneficiary

trust beneficiary

Minato‐ku

nvestmentTokyo

management

¥

¥

0.1

0.1

$

$

0

0

‐

‐

business
Aki TMK(3)rightsrights,(2)(5)Seller of real estate

Acquisition of real estate

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)Minato‐ku

nvestment

Tokyo

¥

Minato‐ku

nvestment

Seller of real estate

Acquisition of real estate

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)Mystays

HotelManagement,.
Co.Ltd(3)nvestment

Seller of real estate

Acquisition of real estateTokyo

management

trust beneficiary

trust beneficiarybusinessrightsrights,(2)(5)

Lease holder andRental Revenues.

Hotel

¥

Tokyo

management

100

$

0

‐

Minato‐ku

Minato‐ku,

$

0

‐

Tokyo

0.1

$

0

TMK(3)¥

0.1$

Zephyrus

GK Valletta(3)

¥

0.1

0

‐

‐

¥ 14,405,000$ 119,434‐‐‐¥ 5,707,000$ 47,317‐‐‐¥ 2,198,000$ 18,224‐‐‐¥ 2,603,000$ 21,581‐‐‐¥ 1,277,000$ 10,587‐‐‐¥ 1,237,000$ 10,256‐‐‐¥ 5,099,000$ 42,276‐‐‐¥ 3,125,985$ 25,918

Rental

¥ 920,391$ 7,631

operator of hotel

receivables

business

Notes:(1)(2)

Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.
Terms and conditions are decided pursuant to the Asset Manager’s Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.

(3)

The seller, Skye TMK, Nishi TMK, Rannoch TMK, Wakusei TMK, Suisei TMK , Aki TMK, Zephyrus TMK, GK Valletta and Mystays Hotel Management., Co. Ltd has no
relationship to be stated, but they receive investment through funds that are managed by FIG, an affiliate of Calliope. Accordingly, we treat Skye TMK, Nishi TMK, Rannoch
TMK, Wakusei TMK, Suisei TMK , Aki TMK, Zephyrus TMK, GK Valletta and Mystays Hotel Management., Co. Ltd as a related party.

(4)
(5)

Calliope holds 609,942 units (holding ratio: 19.09%) of the issued investment units of the Company.
The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.
Acquisition of real estate trust beneficiary rights are relating to below
Acquisition cost(in thousands of yen)

Acquisition cost(in thousands of U.S. dollars)

Property nameSeller

A100

City Court Kitaichijo

GK Valletta

1,782,000

A101

Lieto Court Mukojima

GK Valletta

1,683,000

13,954

A102

Lieto Court Nishi‐Ojima

GK Valletta

1,634,000

13,547

Property No.

14,774

D24

Hotel MyStays Haneda

Skye TMK

7,801,000

64,679D25

Hotel MyStays Kameido P1

Nishi TMK

5,594,000

46,380D26

Hotel MyStays Ueno Iriyaguchi

Rannoch TMK

3,821,000

31,680D27

Hotel MyStays Kameido P2

Nishi TMK

3,742,000

31,025

D28

Hotel Vista Shimizu

Wakusei TMK

2,198,000

18,224

D29

Super Hotel Shinbashi/Karasumoriguchi

Suisei TMK

1,624000

13,464

D30

Flexstay Inn Higashi‐Jujo

Aki TMK

1,277,000

10,587

D31

Hotel MyStays Utsunomiya

Zephyrus TMK

1,237,000

10,256

D32

Flexstay Inn Kawasaki‐Kaizuka

Rannoch TMK

980,000

8,125

D33

Comfort Hotel Toyama

Suisei TMK

979,000

8,117

D34

Flexstay Inn Kawasaki‐Ogawacho

Rannoch TMK

906,000

7,511

D35

Flexstay Inn Ekoda

Nishi TMK

5,069,000

42,02840,327,000

334,358

Total(b) Board of Directors and Major Individual Unitholders
For the six months ended June 30, 201524

VotingType ofTransactions for the periodinterest in
Name

Balance at the end of period
Amounts (3)BalanceAmounts (3)Business / Occupation

related‐party

theType of transactions

sheet(in thousands of yen)Company
Directors andNaoki

Executive officer of the Company―

Payment of the assets management

close relatives

Fukudaand management director offee to Consonant Investment

Consonant Investment

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

Payment of institution management¥(in thousands of yen)account

180,000

Accrued¥97,200¥864

expenses¥600

fee to Consonant Investment

Accruedexpenses

Management Co., Ltd.(2)Notes:(1)

Naoki Fukuda serves as a representative of the Asset Manager and the asset management fee is established in the Articles of Incorporation of the Company.

(2)

Naoki Fukuda serves as a representative of Asset Manager and the fee is established in the “Administrative Agency Agreement for Organizational Management” which wasagreed between the Asset Manager and the Company.

(3)

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

For the six months ended December 31, 2015
Transactions for the period
Amounts (3)VotingType of

Balance at the end of period
Amounts (3)interest in
Name

BalanceBusiness / Occupation

related‐party

theType of transactions(in thousands(in thousandsof U.S.

Company

accountof yen)

(in
(in

sheet

thousands
thousandsof U.S.

dollars)of yen)dollars)

Directors andNaoki

Executive officer of the Company―

Payment of the assets management

close relatives

Fukudaand management director offee to Consonant Investment

Consonant Investment

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

Payment of institution management¥

180,000$

1, 492

Accrued¥97,200

$

805

¥

864

$

7

expenses¥

1,100

fee to Consonant Investment$

9

Accruedexpenses

Management Co., Ltd.(2)Notes:(1)

Naoki Fukuda serves as a representative of the Asset Manager and the asset management fee is established in the Articles of Incorporation of the Company.

(2)

Naoki Fukuda serves as a representative of Asset Manager and the fee is established in the “Administrative Agency Agreement for Organizational Management” which was(3)Consumption taxes are not included in the transaction amount, but are included in the balance at the end of period.

agreed between the Asset Manager and the Company.

25

17. Per Unit Information
The following table shows net asset value per unit as of June 30, 2015 and December 31, 2015, and net income per unit for the six months
then ended. Net income per unit is calculated by dividing the net income attributable to unitholders by the weighted average number ofunits outstanding during the six‐month period. The Company has no potentially dilutive units.
As of / For the six months ended
June 30, 2015

December 31, 2015

December 31, 2015

(Yen)
Net asset value per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

23,132(U.S. dollars)¥

28,731$

238

Net income per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

860

937

7

Weighted average number of units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,668,686

3,149,936－

18．Subsequent Events(a) Issuance of New Investment Units
The board of directors held on March 10, 2016 and March 23, 2016 respectively approved the issuance of new investment units
and secondary distribution of investment units. Payment for the new investment units issued via public offering was completed
on March 30, 2016. In addition, with respect to the issuance of new investment units through the third‐party allotment inconnection with the overallotment for the public offering, the payment date is April 27, 2016. In the case that the application andpayment are completed for all allocated investment units through the third party allotment, holdersʹ capital becomes JPY 118,588
million and the number of investment units issued and outstanding become 3,653,198 units.

(i) Issuance of new investment units through public offering:(a) Number of investment units

459,512 units
Domestic public offering : 194,144 units
International offering(b) Issue price (offer price):: 265,368 units

JPY 81,217 per unit(c) Total issue price (total offer price)

JPY 37,320,186,104(d) Amount paid in (issue value)

JPY 78,612 per unit(e) Total amount paid in (total issue value)

JPY 36,123,157,344(f) Payment date

March 30, 2016(ii) Secondary offering of investment units (overallotment secondary offering)(a) Number of investment units:

22,976 units(b) Offer price:

JPY 81,217 per unit(c) Total offer value

JPY 1,866,041,792(d) Delivery date

March 31, 2016(iii) Issuance of new investment units through third‐party allotment(a) Number of new investment units:(b) Amount paid in (issue value):

22,976 units
JPY 78,612 per unit(c) Total amount paid in (total issue value)

JPY 1,806,189,312(d) Payment date

April 27, 2016(e) Allotee

Mizuho Securities Co., Ltd.

(b) New borrowings
The Company borrowed a portion of the consideration on January 22, 2016 for the acquisition of 5 hotel properties and 1
residential property.
Term Loan (B)(a) Lender:

Sumitomo Mitsui Trust Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation

26

(b) Borrowing amount:JPY 8,998million(c) Interest rate:

One‐month JPY TIBOR + spread (0.20, 0.40, 0.60 %)(Note)(d) Interest payment date:

Last business day of each month from borrowing date through principal maturity date,(e) Method of principal repayment:

with the first interest payment date set on February 29, 2016.
To be repaid in full on the principal maturity date(f) Borrowing method:

No secured / with no guarantee(g) Borrowingdate:

January 22, 2016(h) Principal maturity date:

January 22, 2017, January 22, 2019, January 22, 2021

(Note) The interest rate applicable for the first interest calculation period only will be two‐month JPY TIBOR (Base Rate) + spread (0.20, 0.40, 0.60 %).

Furthermore, the Company borrowed a portion of the consideration on March 31, 2016 for the acquisition of 4 hotel properties
and 1 residential property.
New Syndicate Loan (F)(a) Lender:

Mizuho Bank, Ltd.
The Bank of Tokyo‐Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Shinsei Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
Fukuoka Bank, Limited
Shizuoka Bank, Limited
Nomura Trust Bank, Limited(b) Borrowing amount:JPY 34,418 million(c) Interest rate:

One‐month JPY TIBOR + spread (0.20,0.40, 0.50, 0.60 %)(d) Interest payment date:

Last business day of each month from borrowing date through principal maturity date,(e) Method of principal repayment:

To be repaid in full on each principal maturity datewith the first interest payment date set on April 30, 2016.

(f) Borrowing method:

No secured / with no guarantee(g) Borrowingdate:

March 31, 2016(h) Principal maturity date:

March 30, 2017,March30,2019,March30,2020,March30,2021(c) Acquisition of Assets
The Company decided to acquire 6 properties as shown in the following table, of which the total acquisition price is JPY 10,207
million, on January 20, 2016 and acquired the 6 properties on January 22, 2016.
The overview of the 6 properties is as follows,

Use

Hotel

Property
Number

Property Name

D38

Hotel MyStays Shinsaibashi

D39

Comfort Hotel Kurosaki

D40

Comfort Hotel Maebashi

Location

Acquisition
Price(JPY million)(Note 1)

Total rentablearea

Osaka, Osaka

3,160

1,942.01 ㎡

1,148

3,207.60 ㎡

1,128

3,360.96 ㎡

Kitakyushu,
Fukuoka

Maebashi, Gunma

SellerCategory ofSpecified Assets

Aki Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

27

Use

Resident
ial

Location

Acquisition
Price(JPY million)(Note 1)

Total rentable
area

Comfort Hotel Tsubamesanjo

Sanjo, Nigata

1,010

3,099.90 ㎡

D42

Comfort Hotel Kitami

Kitami, Hokkaido

851

3,009.50 ㎡

A103Royal Parks Momozaka

Osaka, Osaka

2,910

8,776.26 ㎡

10,20723,396.23 ㎡

Property
Number

Property Name

D41

Total

SellerCategory ofSpecified Assets

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Momo Tokutei Mokuteki

Trust Beneficial

KaishaInterest(Note 1) Acquisition prices do not include adjustments for property taxes or city planning taxes, or national or local consumption taxes; hereinafter the same.

Furthermore, the Company decided to acquire 5 properties as shown in the following table, of which the total acquisition price is
JPY 66,697 million, on March 10, 2016 and acquired the 5 properties on March 31, 2016.
The overview of the 5 properties is as follows,

Property
NumberUse

D43

Property Name

Location

Hotel Mystays Gotanda

Shinagawa‐ku,

StationTokyo

Acquisition
Price(JPY million)(Note 1)

Total rentablearea

24,6748,752.42 ㎡

SellerCategory ofSpecified Assets

Tsuki Tokutei Mokuteki

Trust Beneficial

KaishaInterest

・Septentrio Tokutei
Mokuteki Kaisha
D44

Hotel Epinard Nasu

Nasu‐gun, Tochigi

20,98137,702.33 ㎡

Hotel・Septentrio 2 Tokutei

Trust Beneficial

Mokuteki Kaisha

Interest

・Septentrio 3 Tokutei
Mokuteki Kaisha

D45

D46

Hotel MyStays

Fukuoka, Fukuoka

8,059

5,083.06 ㎡

Minato‐ku, Tokyo

7,959

1,951.90 ㎡

61,67353,489.71 ㎡

5,024

15,797.29 ㎡

Subtotal

5,024

15,797.29 ㎡

Total

66,697

69,287.00 ㎡

Fukuoka‐Tenjin

Hotel MyStays
Hamamatsucho

Subtotal

Residential

A104

Royal Parks Shinden

Adachi‐ku, Tokyo

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Navaro Tokutei Mokuteki

Trust Beneficial

KaishaInterest

Momo Tokutei Mokuteki

Trust Beneficial

KaishaInterest(Note 1) Acquisition prices do not include adjustments for property taxes or city planning taxes, or national or local consumption taxes; hereinafter the same.

(d) Interest Rate Swap Agreements
28

The company has executed the following interest rate swap agreements on March 4, 2016.
(i)

Reason for Executing Interest Rate Swap Agreements
In order to hedge the risk of interest rate fluctuation(ii)

Details of the Interest Rate Swap Agreements
Counterparty

Notional Principal(JPY million)

Citigroup Global
Markets Japan Inc.

28,979(Note 1)

Citigroup Global
Markets Japan Inc.

28,979(Note 1)

Citigroup Global
Markets Japan Inc.

28,979(Note 1)

Citigroup Global
Markets Japan Inc.

3,682
(Note 2)

NomuraSecurities Co., Ltd

4,250(Note 3)

Citigroup Global
Markets Japan Inc.

4,250
(Note 3)

Interest Rate
(Upper: fixed rate payable)(Lower: floating ratereceivable)

Agreement Date

Applicable Period

March 4, 2016

From March 8, 2016
to July 16, 2018

March 4, 2016

From March 8, 2016
to July 16, 2019

March 4, 2016

From March 8, 2016
to July 16, 2020

March 4, 2016

From March 8, 2016
to August 28, 2019

March 4, 2016

From March 8, 2016
to January 22, 2019

March 4, 2016

From March 8, 2016
to January 22, 2021

0.375%
One‐month JPY
TIBOR+0.40%
0.480%
One‐month JPY
TIBOR+0.50%
0.590%
One‐month JPY
TIBOR+0.60%
0.480%
One‐month JPY
TIBOR+0.50%
0.343%
One‐month JPY
TIBOR+0.40%
0.600%
One‐month JPY
TIBOR+0.60%

Interest Payment Date
The last Japanese business
day of each month and thelast day of the agreement
periodThe last Japanese business
day of each month and thelast day of the agreement
periodThe last Japanese business
day of each month and thelast day of the agreement
periodThe last Japanese business
day of each month and thelast day of the agreement
periodThe last Japanese business
day of each month and thelast day of the agreement
periodThe last Japanese business
day of each month and thelast day of the agreement
period(Note 1) Corresponding to New Syndicate Loan (E)(Note 2) Corresponding to Term Loan (A)(Note 3) Corresponding to Term Loan (B)(Note 4) The initial interest calculation period is from February 29, 2016 (inclusive of the date) to March 31, 2016 (one day prior), and the interest calculation period thereafter will befrom the immediately preceding interest payment date (inclusive of the date) to the interest payment date (one day prior).

19．Other Notes
In the calculation of Appropriation of Retained Earnings, we booked JPY 708 thousands as a ‘reserve for temporary difference
adjustment’ which is reserved for the negative goodwill that was incurred in a prior period.
All ‘reserve for temporary difference adjustment’ are going to be utilized in following fiscal period.

29