Investment
Invincible Corporation

Audited Financial Statements
for the 30th Fiscal Period(from January 1, 2018 to June 30, 2018)

INDEX TO FINANCIAL STATEMENTS
Page

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

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

Balance Sheet as of June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 4

Statement of Income and Retained Earnings for the six months ended June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 6

Statement of Changes in Net Assets for the six months ended June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 7

Statement of Cash Flows for the six months ended June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 9

Notes to Financial Statements as of and for the six months ended June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 10

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

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

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

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

INVINCIBLE INVESTMENT CORPORATIONBALANCE SHEETAs of June 30, 2018
As ofJune 30,
2018

December 31,
2017

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
ASSETS
Current assets:
Cash and bank deposits (Notes 6 and 18) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust (Notes 6 and 18) ∙∙∙∙∙∙
Accounts receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current assets:
Property and equipment (Notes 7 and 8):
Tools, furniture and fixtures, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Buildings and accompanying
facilities in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Structures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tools, furniture and fixtures in trust, at cost ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Less: Accumulated depreciation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total property and equipment, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Intangible assets:
Leasehold rights in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total intangible assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investments and other assets:
Investment securities (Note 19 and 23)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Guarantee deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Long‐term prepaid expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Derivatives assets (Note 20) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total investments and other assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deferred assets:
Investment corporation bond issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total deferred assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

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

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

77,01059,45458
16,537
3,879
1,354
‐
0
0
158,295

3,192
128,867,905

3,192
133,579,099

28
1,209,407

28,454,395

28,918,145

261,821262,372
1,065,760
167,845,958
326,499,585(15,618,522)
310,881,062

225,353
1,395,339
173,298,062
337,419,193(17,196,907)
320,222,285

2,040
12,633
1,569,018
3,054,949(155,698)
2,899,251

16,828,843
16,828,843

16,712,637
16,712,637

151,314151,314

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

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

161,669
15,224
3,858
838
114
181,705
3,232,270‐‐
371,758,254

24,29524,295374,512,988

225
225
3,390,792¥$4

As ofJune 30,
2018

December 31,
2017

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
LIABILITIESCurrent liabilities:
Accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Short‐term loans payable (Note 10) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable(Note 10) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐current liabilities:
Investment corporation bonds (Note 9) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Long‐term loans payable (Notes 10 and 18) ∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits in trust(Note 18) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Tenant leasehold and security deposits (Note 18) ∙∙∙Asset retirement obligations (Note 21) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐current liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙NET ASSETS (Note 11)
Unitholders’ equity:
Unitholders’ capital ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Surplus:Capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for temporary differences
Adjustment (Note 5) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other deduction of capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total deduction of capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Capital surplus (net)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Voluntary reserve
Retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total unitholders’ equity ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Valuation and translation adjustments:
Deferred gains or losses on hedges ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total valuation and translation adjustments ∙∙∙∙∙∙∙TOTAL NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙TOTAL LIABILITIES AND NET ASSETS ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

254,936
3,068,000¥

598,870
2,000,000$

5,422
18,10728,979,000

46,663,000

422,480

51,836
270,486605‐
600,752
29,19033,254,807

131,783
195,481605
14,902551,506
21,69750,177,846

1,193
1,769
5
134
4,993
196
454,303‐
154,936,000

2,000,000
138,752,000

18,107
1,256,242

2,215,299

2,026,400

18,346‐
31,680157,182,980
190,437,787

1,586
31,891
142,811,878
192,989,724

14288
1,293,000
1,747,303

168,798,455

168,798,455

1,528,279

6,264,432

6,264,432

56,717(46,329)(46,329)(419)(1,022,263)(1,068,593)
5,195,838(1,194,818)(1,241,148)
5,023,283(10,817)(11,237)
45,4807,212,580
12,408,419
181,206,874

7,610,548
12,633,832
181,432,288

68,904
114,385
1,642,664

113,592
113,592
181,320,466
371,758,254

90,97590,975
181,523,263
374,512,988

823
823
1,643,488
3,390,792¥$

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

5

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the six months ended June 30, 2018
For the six months ended
June 30,
2018

December 31,
2017(in thousands of yen)
Operating revenue
Rental revenue－real estate (Note 13) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Gain on sales of properties (Note 14) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Dividend income∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total operating revenue ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating expenses
Property related expenses (Note 13) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Impairment loss (Note 15) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset management fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Directors’ compensation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Asset custody fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Administrative service fees ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Provision of allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating income
Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest on tax refund ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Non‐operating expenses
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuancecosts
Loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other‐non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total non‐operating expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Ordinary income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes (Note 16):
Current ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Retained earnings / losses brought forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Unappropriated retained earnings / losses (Note 12)∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

11,403,236
1,244,033‐
12,647,270¥

11,122,481
1,249,645
732,714
13,104,714

June 30,2018(in thousands of U.S.
dollars)$

100,701
11,314
6,633
118,649

3,962,183
15,677250,000
4,800
15,23037,34789
138,288
4,423,618
8,223,652

4,136,619‐
275,000
4,800
18,162
39,697
2
197,039
4,671,320
8,433,520

37,452
‐
2,489
43
164
359
0
1,783
42,29376,356

54
234
507
796

78
3,086
1,181
4,347

0
27
10
39

445,855‐

479,456
1,216

4,340
11

‐

379

3

304,073
170,817‐920,746
7,303,702
7,303,072

234,197‐64
715,314
7,722,553
7,722,553

2,120
‐
0
6,476
69,91969,919605
605
7,303,097(90,516)
7,212,580

605
605
7,721,948(111,399)
7,610,548

5
5
69,913(1,008)68,904¥$

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

6

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CHANGES IN NET ASSETSFor the six months ended June 30, 2018
Unitholdersʹ equity
SurplusCapital surplus
Deduction of capital surplus

Unitholdersʹ
capitalCapital surplus

Allowance fortemporarydifferences
adjustment¥¥

Other deduction ofcapital surplus

Capital surplus (net)

Deduction ofcapital surplus(in thousands of yen)
Balance as of July 1, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥128,984,946

6,264,432‐¥(987,516)¥(987,516)¥

5,276,915

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

39,813,508

Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions in excess of retained earnings from(46,329)

allowance for temporary differences adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(34,747)(46,329)(46,329)(34,747)(34,747)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

39,813,508

Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥168,798,455‐¥

6,264,432(46,329)¥(46,329)(34,747)¥(1,022,263)(81,077)¥(1,068,593)(81,077)¥

5,195,838

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(172,554)(172,554)(172,554)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐

Balance as of June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥‐168,798,455¥

6,264,432‐¥(46,329)(172,554)¥(1,194,818)

Unitholdersʹ equity
SurplusRetained earnings

Total surplus(172,554)¥(1,241,148)(172,554)¥

5,023,283

Valuation and translation adjustments
Total unitholdersʹ
equityDeferred gains orlosses on hedges

Total valuationand translation
adjustments

Total net assets(in thousands of yen)
Balance as of July 1, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

4,708,487¥

9,985,403¥

138,970,350¥

92,243¥92,243¥139,062,593

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Issuance of new investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(4,799,004)

Distributions in excess of retained earnings fromallowance for temporary differences adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

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

7,303,097

7,303,097

7,303,097

7,303,097

2,504,093

2,423,015

42,236,524

Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

39,813,508(4,799,004)

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of December 31, 2017 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

7,212,580¥

12,408,419¥

181,206,874¥

21,34821,34821,34821,34821,34842,257,873

113,592¥

113,592¥

181,320,466

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(7,323,980)

Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,721,948(7,323,980)(7,323,980)(172,554)(172,554)(7,323,980)(172,554)

7,721,948

7,721,948

7,721,948

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(22,616)

Total changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

397,968¥

7,610,548

225,413¥

12,633,832

225,413¥

181,432,288(22,616)(22,616)¥

90,975(22,616)(22,616)¥

90,975

202,796¥

181,523,263

7

Unitholdersʹ equity
SurplusCapital surplus
Deduction of capital surplus

Unitholdersʹ capital
Allowance fortemporarydifferences
adjustment

Capital surplus

Other deduction ofcapital surplus

Capital surplus (net)

Deduction ofcapital surplus(in thousands of U.S dollars)
Balance as of January 1, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

1,528,279$

56,717

$

(419)

$

(9,255)$(9,674)$47,042

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙(1,562)(1,562)(1,562)

Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐$‐

1,528,279$‐

56,717$(1,562)(419)$(10,817)

Unitholdersʹ equity
SurplusRetained earnings

Total surplus(1,562)$(1,562)(11,237)$

45,480

Valuation and translation adjustments
Total unitholdersʹ
equityTotal valuationand translation
adjustments

Deferred gains orlosses on hedges

Total net assets(in thousands of U.S dollars)
Balance as of January 1, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

65,301$

112,344$

1,640,623

$

1,028

$

1,028

$

1,641,652

Changes during the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Distributions from surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(66,310)

Other distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

69,913(66,310)(66,310)(66,310)(1,562)(1,562)(1,562)

69,913

69,913

69,913

Changes other than unitholders’equity(net) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Total changes during the period∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Balance as of June 30, 2018 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,603
$

68,904

2,040$

114,3852,040$

1,642,664

$

(204)

(204)

(204)

(204)

(204)

1,836

823

$

823

$

1,643,488

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

8

INVINCIBLE INVESTMENT CORPORATIONSTATEMENT OF CASH FLOWSFor the six months ended June 30, 2018
For the six months ended
December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Cash flows from operating activities:
Income before income taxes ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Depreciation and amortization ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Impairment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Investment unit issuance costs∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,303,702
2,567,215
15,677
170,817¥

7,722,553
2,772,510‐‐$

69,91925,101‐‐

Amortization of investment corporation bond issuance costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

379

3

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

304,073

234,1972,120Interest income ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Changes in assets and liabilities
Increase (decrease) in allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in rental receivables ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease (increase) in receivable income taxes∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(54)
445,855(78)
480,672

0
4,351

55
(564,535)2

0
158,132(149,624)

0
1,431(1,354)
5,987

Decrease (increase) in consumption taxes receivable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(640,464)

661,287

Increase (decrease) in accounts payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(7,867)39,752

359

Increase (decrease) in consumption taxes payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

47,721(32,819)(297)

Increase (decrease) in accounts payable‐other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in accrued expenses ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in advances received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in deposits received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease in property and equipment, due to sale∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Decrease in property and equipment, due to sale in trust∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest income received ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Interest expenses paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Income taxes paid ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(67,922)
98,06560,077(7,567)802,750
3,590,653(1,277)
14,116,980
54(439,861)(605)

49,627(75,177)(49,246)(47,348)‐
9,181,866
20,177
20,966,865
78(483,261)
(605)

449
(680)
(445)
(428)
‐
83,131
182
189,8310(4,375)(5)Net cash provided by operating activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

13,676,568

20,483,077

185,451

Cash flows from investing activities:
Purchases of property and equipment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of property and equipment in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Purchases of investment securities∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from tenant leasehold and security deposits in trust∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of tenant leasehold and security deposits∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other, net ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(797)(42,111,738)(17,854,460)(28,663)(139,629)
115,173‐(14,807)‐(20,847,991)(1,927)‐(320,542)
132,593(30,000)
47,201‐(188,755)(17)‐(2,902)
1,200
(271)
427

Net cash used in investing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(60,034,922)(21,020,665)(190,318)

3,068,000‐
19,925,000‐(325,727)(4,776,561)‐(1,068,000)
1,500,000
1,977,436(40,494)(7,280,040)‐(9,669)13,58017,903(366)(65,912)(46,329)‐‐(34,747)
39,644,352(172,554)‐(1,562)‐

Net cash provided by (used in) financing activities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

57,453,986(5,083,652)(46,026)

Net increase (decrease) in cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Cash and cash equivalents at end of period (Note 6) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

11,095,633
9,598,161
20,693,794(5,621,240)
20,693,794
15,072,553(50,893)
187,358
136,464

Cash flows from financing activities:
Proceeds from short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Repayments of short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from issuance of investment corporation bonds∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments for loan‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of distributions of earnings∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of distributions in excess of retained earnings from allowance fortemporary differences adjustment∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Payments of other distributions in excess of retained earnings∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Proceeds from issuance of investment units ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥$

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

9

INVINCIBLE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
As of and for the six months ended June 30, 2018

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 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 in connection withthe 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 25,000 investment 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 in connection withthe acquisition of 14 properties during this fiscal period.
On March 30, 2016, the Company completed its sixth public offering totaling 459,512 new investment units at a price ¥81,217 per unit.
194,144 of such units were issued in connection with a Domestic Public Offering, and the remaining 265,368 units were issued inconnection with an International Offering pursuant Rule 144A and Regulation S under the U.S. Securities Act of 1933. On April 27, 2016,
the Company issued 22,626 investment units domestically in connection with the exercise of an over‐allotment option. Net proceeds ofapproximately ¥37.9 billion were used to repay the Company’s outstanding long term borrowing and in connection with the acquisitionof 6 properties during this fiscal period.
On March 13, 2017, the Company completed its seventh public offering totaling 185,000 new investment units at a price ¥46,897 per unit
in connection with Japanese Primary Offering.

10

On October 12, 2017, the Company completed its eighth public offering totaling 887,959 new investment units at a price ¥44,118 per unit.
515,017 of such units were issued in connection with a Domestic Public Offering, and the remaining 372,942 units were issued inconnection with an International Offering pursuant Rule 144A and Regulation S under the U.S. Securities Act of 1933. On November 1,
2017, the Company issued 44,398 investment units domestically in connection with the exercise of an over‐allotment option. Net
proceeds of approximately ¥39.8 billion were used to repay the Company’s outstanding long term borrowing and in connection with theacquisition of 4 properties and 1 preferred security 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.
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) Valuation standard and method for securities
Other securities without fair market value are recorded at cost being determined by the moving average method.
(d) 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
June 30, 2018

Tools, furniture and fixtures∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

4‐8

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

5‐67

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

2‐33

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

3‐55

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

2‐19(e) Intangible Assets
Intangible assets are amortized on a straight‐line basis. Amortization of a term leasehold interest for business use is calculated by thestraight‐line method over the lease term.
(f)Long‐term Prepaid Expenses

Long‐term prepaid expenses are amortized on a straight‐line basis.

11

(g) Investment Unit Issuance Costs
Investment unit issuance costs are recorded as expenses when incurred.
(h) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the straight‐line method over the period through the redemption of thebonds.
(i)

Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided based on past experience for normal receivables and on a valuation of any receivables fromcompanies and individuals with financial difficulties.
(j)

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.
(k) 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 statementof 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.
(l)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.
(m) 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.
(n) 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.
Tax on property and equipment capitalized as part of the acquisition cost of properties amounted to ¥77,833 (US$704) thousand for thesix months ended June 30, 2018.

3. Notes on Change in Presentation Method“Income taxes receivable” which was included in “Accounts receivable” under “Current assets” in the previous fiscal period, ispresented separately, starting from the fiscal period under review, due to greater quantitative materiality.
As a result, in the Balance sheet for the previous fiscal period, the JPY 8 thousand that was presented in “Accounts receivable” under“Current assets” is reclassified as “Income taxes receivable”.

12Besides this change, in the Statement of cash flows for the previous fiscal period, the minus JPY 1,274 thousand that was presented in“Other, net” under “Cash flows from operating activities” is reclassified as the JPY 2 thousand of “Decrease (increase) in receivable
income taxes” and the minus JPY 1,277 thousand of “Other, net”.

4. 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 ¥110.45 = US$1,
the effective rate of exchange prevailing at June 30, 2018. The inclusion of such U.S. dollar amounts associated with the fiscal six months
ended June 30, 2018 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.

5. Allowance for temporary differences adjustment
For the six months ended December 31, 2017
On the Balance Sheet, there are the increase and decrease of allowance for temporary differences adjustment.
1. Reason, related assets and amounts(in thousands of yen)
Allowance
Related assets,

Reason for

InitialBeginning

set asideetc.

occurrence

amountbalanceduringperiodLeaseholdrights in trust

ReversalEndingduringperiodbalance

Reason for reversal

Amortization ofleasehold rights in
trust

Total

¥ (46,329)‐¥ (46,329)‐¥ (46,329)¥ (46,329)‐¥ (46,329)‐¥ (46,329)‐

2. Method of reversal(1) Leasehold rights in trust
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.

For the six months ended June 30, 2018
On the Balance Sheet, there are the increase and decrease of allowance for temporary differences adjustment.
1. Reason, related assets and amounts(in thousands of yen)
Allowance

Reversal

Related assets,

Reason for

InitialBeginning

set asideetc.

occurrence

amountbalanceduringperiod¥ (46,329)¥ (46,329)‐‐¥ (46,329)¥ (46,329)¥ (46,329)‐‐¥ (46,329)

Leaseholdrights in trust

Total

Endingduringperiodbalance

Reason for reversal

Amortization ofleasehold rights in
trust

‐

13

(in thousands of U.S dollars)
Allowance
Related assets,

Reason for

InitialBeginning

set asideetc.

occurrence

amountbalanceduringperiodLeaseholdrights in trust

ReversalEndingduringperiodReason for reversal

balance

Amortization ofleasehold rights in
trust

Total

$ (419)$ (419)‐‐$ (419)$ (419)$ (419)‐‐$ (419)‐2. Method of reversal(1) Leasehold rights in trust
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.

6. Cash and Cash Equivalents
Cash and cash equivalents shown in the statements of cash flows consist of the following balance sheet items.
As ofDecember 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙

14,367,140
6,326,653¥

8,505,792
6,566,761$

77,01059,454

Cash and cash equivalents ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥20,693,794¥

15,702,553$

136,464

7. Property and Equipment
The following tables show the summary of movement in property and equipment for the six months ended June 30, 2018.
At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Net property andequipment

Depreciation forthe period(in thousands of yen)Tools, furniture and fixtures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

3,192

¥

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

128,867,905

8,355,693

3,644,499

133,579,099

10,479,742

1,647,721

123,099,357

28,454,395

1,296,290

832,540

28,918,145

6,237,852

922,331

22,680,292

262,372

6,108

43,126225,353

86,4985,880

138,854

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

1,065,760

366,058

36,4791,395,339

392,369

80,146

1,002,969

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

167,845,958

11,155,034

5,702,931

173,298,062‐‐

173,298,062

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

17,079,771‐‐

17,079,771

367,133

116,205

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

343,579,356¥‐

21,179,184

¥

¥

‐

10,259,576

¥

¥

3,192

354,498,964

¥

444

¥

17,564,040

¥

¥

225

2,772,510

¥

2,748

16,712,637¥

336,934,923

At costBeginningbalance

Increase

Endingbalance

Decrease

Accumulated
depreciation

Net property andequipment

Depreciation forthe period(in thousands of U.S dollars)
Tools, furniture and fixtures ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$

28

$

‐

$

‐

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

1,166,753

75,651

32,996$

1,209,407

28$

94,882

4$

14,9182$

1,114,525

24

257,622

11,736

7,537

261,82156,4768,350

205,34414

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

2,375

55

390

2,040

783

53

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

9,649

3,314

330

12,633

3,552

725

9,080

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

1,519,655

100,996

51,633

1,569,018‐‐

1,569,018

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

154,638‐‐

154,638

3,323

1,052

151,314

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

3,110,723

191,753$$

92,888$3,209,587

159,022$$

25,101

1,257$

3,050,565

Increases in the net book values are mainly due to the acquisition of 6 properties(￥19,750,000thousand) as shown below and capitalized expenditures.
Acquisition cost(in thousands of yen)

Property name

Property No.

Acquisition cost(in thousands of U.S. dollars)
48,220

D54

Hotel MyStays Yokohama Kannai

5,326,000

D55

Art Hotel Joetsu

2,772,000

25,097

D56

Art Hotel Hirosaki City

2,723,000

24,653

D57

Hotel MyStays Oita

1,604,000

14,522

D58

Hotel MyStays Gotanda

4,068,000

36,831

D59

Hotel MyStays Tachikawa

3,257,000

29,488

Total

19,750,000

178,813

8.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 December 31, 2017 and June 30, 2018.
Residential
As of / For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

93,113,195

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(3,163,531)
89,949,664

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

102,353,000¥

89,949,664$(3,380,554)
86,569,109¥

100,387,000

814,392(30,607)783,785$

908,890

OfficeAs of / For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

8,424,734

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(1,949,803)
6,474,931

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

6,130,000¥

6,474,931$(6,474,931)‐¥‐

58,623(58,623 )‐$‐Retail facilities
As of / For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

5,001,269

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(43,977)
4,957,292

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

6,100,000¥

4,957,292$(44,824)
4,912,468¥

6,170,000

44,882(405)
44,476$55,862

Parking lots
As of / For the six months ended15

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

100,818

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(100,818)‐

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

‐

¥

‐

$

‐

‐
‐
¥

‐
‐

‐

$

‐

Hotel
As of / For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

185,897,957

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

40,430,059
226,328,017

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

285,424,000¥

226,328,017$

2,049,144

19,125,328
245,453,345¥

173,158
2,222,302

304,985,000$

2,761,294

Total
As of / For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Net book value
Balance at the beginning of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

292,537,976

Net increase (decrease) during period ∙∙∙∙∙∙∙∙∙∙
Balance at the end of period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

35,171,929
327,709,905

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

400,007,000¥

327,709,905$

9,225,018
336,934,923¥

2,967,043
83,522
3,050,565

411,542,000$

3,726,047

Notes:
1.Fair value has been determined based on the appraisals or research provided by independent real estate appraisers.
2.For rental revenues and expenses for the six months ended December 31, 2017 and June 30, 2018, please refer to “Note 12: Rent Revenues－Real Estate and Expenses Related toProperty Rental Business“

9.Investment corporation bonds
The following table shows the details of investment corporation bonds for the six months ended June 30, 2018.
For the six months ended June 30, 2018
Beginning

EndingBeginning

EndingInterestbalancebalancebalancebalancerate (%)(in thousands of yen)
1st unsecured investment corporation bond(Issued on May 25, 2018 and due on May 25, 2023)(1)(2)
2nd unsecured investment corporation bond(Issued on May 25, 2018 and due on May 25, 2028) (1)(2)
Total investment corporation bonds(in thousands of U.S. dollars)‐

1,000,000

‐

9,053

‐

1,000,000

‐

9,053

‐

2,000,000‐

18,107

0.400

0.800

Notes:(1)

The bonds were issued with pari passu conditions among specified investment corporation bonds.

(2)

The funds are mainly used to acquire properties in trust.

(3)

Repayment schedule of investment corporation bonds for the next five years after each balance sheet date are as follows:

As of

16

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Within 1 year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

¥

‐

$

‐

1‐2 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

2‐3 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐‐

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

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

1,000,000

9,053

10. Loans Payable
The following table shows the details of loans payable for the six months ended June 30, 2018.
For the six months ended June 30, 2018

Classific
ation

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Short‐term loans
payableLong‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

MizuhoBank, Ltd.

1,023,000‐

356,000

667,000

9,261

‐

3,223

6,038

0.253

13‐Oct‐18

Sumitomo
MitsuiTrust Bank,
Limited

1,022,000‐

356,000

666,000

9,252

‐

3,223

6,029

0.253

13‐Oct‐18

Sumitomo
Mitsui
Banking
Corporation

1,023,000‐

356,000

667,000

9,261

‐

3,223

6,038

0.253

13‐Oct‐18

Total
Short‐termloanspayable3,068,000‐

1,068,000

2,000,000

27,777‐

9,669

18,107

MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

54,250‐‐54,2500.375

16‐Jul‐18

MUFG
Bank,
Ltd.(4)

5,992,000‐‐

5,992,000

54,250‐‐54,2500.375

16‐Jul‐18

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

54,250‐‐54,2500.375

16‐Jul‐18

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

30,149‐‐30,1490.375

16‐Jul‐18

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

27,161‐‐

27,161

0.375

16‐Jul‐18

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

24,173‐‐24,1730.375

16‐Jul‐18

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

12,086‐‐

12,0860.375

16‐Jul‐18

MUFG
Bank,
Ltd.(5)

668,000‐‐

668,000

6,047

‐

‐

6,047

0.375

16‐Jul‐18

MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

54,250‐‐54,2500.480

16‐Jul‐19

MUFG
Bank, Ltd.
(4)5,992,000‐‐

5,992,000

54,250‐‐54,2500.480

16‐Jul‐19

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed(2)

Unsecured andunguaranteed

17

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

54,250‐‐54,2500.480

16‐Jul‐19

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

30,149‐‐30,1490.480

16‐Jul‐19

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

27,161‐‐

27,1610.480

16‐Jul‐19

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

24,173‐‐24,1730.480

16‐Jul‐19

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

12,086‐‐

12,0860.480

16‐Jul‐19

MUFG
Bank, Ltd.
(5)668,000‐‐

668,000

6,047

‐

‐

6,047

0.480

16‐Jul‐19

MizuhoBank, Ltd.

5,992,000‐‐

5,992,000

54,250‐‐54,2500.590

16‐Jul‐20

MUFG
Bank, Ltd.
(4)5,992,000‐‐

5,992,000

54,250‐‐54,2500.590

16‐Jul‐20

Sumitomo
Mitsui
Banking
Corporation

5,992,000‐‐

5,992,000

54,250‐‐54,2500.590

16‐Jul‐20

ShinseiBank,
Limited.

3,330,000‐‐

3,330,000

30,149‐‐30,1490.590

16‐Jul‐20

Citibank,
N.A., Japan
Branches.

3,000,000‐‐

3,000,000

27,161‐‐

27,1610.590

16‐Jul‐20

Sumitomo
MitsuiTrust Bank,
Limited

2,670,000‐‐

2,670,000

24,173‐‐24,1730.590

16‐Jul‐20

ResonaBank,
Limited.

1,335,000‐‐

1,335,000

12,086‐‐

12,0860.590

16‐Jul‐20

MUFG
Bank, Ltd.
(5)668,000‐‐

668,000

6,047

‐

‐

6,047

0.590

16‐Jul‐20

MizuhoBank, Ltd.

3,682,000‐‐

3,682,000

33,336‐‐33,336

0.480

28‐Aug‐19

Sumitomo
MitsuiTrust Bank,
Limited

3,400,000‐‐

3,400,000

30,783‐‐30,7830.343

22‐Jan‐19

MUFG
Bank, Ltd.
(5)850,000‐‐

850,000

7,695

‐

‐

7,695

0.343

22‐Jan‐19

Sumitomo
MitsuiTrust Bank,
Limited

3,400,000‐‐

3,400,000

30,783‐‐30,7830.600

22‐Jan‐21

MUFG
Bank, Ltd.
(5)850,000‐‐

850,000

7,695

‐

‐

7,695

0.600

22‐Jan‐21

MizuhoBank, Ltd.

465,000‐‐

465,000

4,210

‐

‐

4,210

0.453

30‐Mar‐19

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

18

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

MUFG
Bank, Ltd.
(4)

1,125,000‐‐

1,125,000

10,185‐‐

10,1850.453

30‐Mar‐19

Sumitomo
MitsuiTrust Bank,
Limited2,181,000‐‐

2,181,000

19,746‐‐

19,7460.453

30‐Mar‐19

ShinseiBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.453

30‐Mar‐19

ResonaBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.453

30‐Mar‐19

MUFG
Bank, Ltd.
(5)650,000‐‐

650,000

5,885

‐

‐

5,885

0.453

30‐Mar‐19

Japan Post
Bank Co.,Ltd.

2,000,000‐‐

2,000,000

18,107‐‐

18,1070.453

30‐Mar‐19

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.453

30‐Mar‐19

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.453

30‐Mar‐19

The
Shizuoka
Bank, Ltd.

1,270,000‐‐

1,270,000

11,498‐‐

11,4980.453

30‐Mar‐19

The Daishi
Bank, Ltd.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.453

30‐Mar‐19

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,444

‐

‐

2,444

0.453

30‐Mar‐19

MizuhoBank, Ltd.

965,000‐‐

965,000

8,736

‐

‐

8,736

0.553

30‐Mar‐20

MUFG
Bank, Ltd.
(4)

1,125,000‐‐

1,125,000

10,185‐‐

10,1850.553

30‐Mar‐20

Sumitomo
MitsuiTrust Bank,
Limited

2,180,000‐‐

2,180,000

19,737‐‐

19,7370.553

30‐Mar‐20

ShinseiBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.553

30‐Mar‐20

ResonaBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.553

30‐Mar‐20

MUFG
Bank, Ltd.
(5)650,000‐‐

650,000

5,885

‐

‐

5,885

0.553

30‐Mar‐20

Japan Post
Bank Co.,Ltd.

2,000,000‐‐

2,000,000

18,107‐‐

18,1070.553

30‐Mar‐20

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.553

30‐Mar‐20

The
Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,444

‐

‐

2,444

0.553

30‐Mar‐20

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

19Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

The
KagawaBank, Ltd.

500,000‐‐

500,000

4,526

‐

‐

4,526

0.553

30‐Mar‐20

The
Hyakugo
Bank, Ltd.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.553

30‐Mar‐20

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,444

‐

‐

2,444

0.553

30‐Mar‐20

MizuhoBank, Ltd.

1,965,000‐‐

1,965,000

17,790‐‐17,7900.653

30‐Mar‐21

MUFG
Bank, Ltd.
(4)

1,125,000‐‐

1,125,000

10,185‐‐

10,1850.653

30‐Mar‐21

Sumitomo
MitsuiTrust Bank,
Limited

2,180,000‐‐

2,180,000

19,737‐‐

19,7370.653

30‐Mar‐21

ShinseiBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.653

30‐Mar‐21

ResonaBank,
Limited.

570,000‐‐

570,000

5,160

‐

‐

5,160

0.653

30‐Mar‐21

MUFG
Bank, Ltd.
(5)650,000‐‐

650,000

5,885

‐

‐

5,885

0.653

30‐Mar‐21

The Bank ofFukuoka,Ltd.

1,333,000‐‐

1,333,000

12,068‐‐12,0680.653

30‐Mar‐21

The
Shizuoka
Bank, Ltd.

270,000‐‐

270,000

2,444

‐

‐

2,444

0.653

30‐Mar‐21

The
KagawaBank, Ltd.

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

30‐Mar‐21

The
Hiroshima
Bank, Ltd.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.653

30‐Mar‐21

The
NomuraTrust andBankingCo., Ltd.

270,000‐‐

270,000

2,444

‐

‐

2,444

0.653

30‐Mar‐21

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.453

15‐Jun‐19

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.553

15‐Jun‐20

Citibank,
N.A., Japan
Branches.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.653

15‐Jun‐21

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.453

30‐Jun‐19

AEON
Bank, Ltd.

3,000,000‐‐

3,000,000

27,161‐‐

27,1610.653

30‐Jun‐21

The Tokyo
Star Bank,
Limited

700,000‐‐

700,000

6,337

‐

‐

6,337

0.453

20‐Jul‐19

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

20

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

The Tokyo
Star Bank,
Limited

1,600,000‐‐

1,600,000

14,486‐‐

14,4860.553

20‐Jul‐20

The Tokyo
Star Bank,
Limited

1,700,000‐‐

1,700,000

15,391‐‐

15,3910.653

20‐Jul‐21

MizuhoBank, Ltd.

634,000‐‐

634,000

5,740

‐

‐

5,740

0.453

14‐Mar‐20

Developme
nt Bank ofJapan Inc.

1,000,000‐‐

1,000,000

9,053

‐

‐

9,053

0.453

14‐Mar‐20

ResonaBank,
Limited.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.453

14‐Mar‐20

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.453

14‐Mar‐20

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.453

14‐Mar‐20

The Towa
Bank, Ltd.

252,000‐‐

252,000

2,281

‐

‐

2,281

0.453

14‐Mar‐20

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,810

‐

‐

1,810

0.453

14‐Mar‐20

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,493

‐

‐

1,493

0.453

14‐Mar‐20

MizuhoBank, Ltd.

1,633,000‐‐

1,633,000

14,784‐‐

14,7840.553

14‐Mar‐21

ResonaBank,
Limited.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.553

14‐Mar‐21

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.553

14‐Mar‐21

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.553

14‐Mar‐21

The Towa
Bank, Ltd.

253,000‐‐

253,000

2,290

‐

‐

2,290

0.553

14‐Mar‐21

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,810

‐

‐

1,810

0.553

14‐Mar‐21

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,493

‐

‐

1,493

0.553

14‐Mar‐21

MizuhoBank, Ltd.

1,733,000‐‐

1,733,000

15,690‐‐15,6900.653

14‐Mar‐22

ResonaBank,
Limited.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.653

14‐Mar‐22

The Bank ofFukuoka,Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.653

14‐Mar‐22

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

21

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

The
NomuraTrust andBankingCo., Ltd.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.653

14‐Mar‐22

AEON
Bank, Ltd.

900,000‐‐

900,000

8,148

‐

‐

8,148

0.653

14‐Mar‐22

The Towa
Bank, Ltd.

253,000‐‐

253,000

2,290

‐

‐

2,290

0.653

14‐Mar‐22

The
Shizuoka
Bank, Ltd.

200,000‐‐

200,000

1,810

‐

‐

1,810

0.653

14‐Mar‐22The
Dai‐ichi Life
Insurancecompany,
Limited

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

14‐Mar‐22

The
Gunma
Bank, Ltd.

165,000‐‐

165,000

1,493

‐

‐

1,493

0.653

14‐Mar‐22

Sumitomo
Mitsui
Banking
Corporation

3,000,000‐‐

3,000,000

27,161‐‐

27,161

0.503

14‐Sep‐20

MizuhoBank, Ltd.

4,321,000‐‐

4,321,000

39,121‐‐

39,1210.603

29‐Nov‐21

The
Dai‐ichi Life
Insurancecompany,
Limited3,000,000‐‐

3,000,000

27,161‐‐

27,1610.603

29‐Nov‐21

ShinseiBank,
Limited.

355,000‐‐

355,000

3,214

‐

‐

3,214

0.353

13‐Oct‐20

Citibank,
N.A., Japan
Branches

355,000‐‐

355,000

3,214

‐

‐

3,214

0.353

13‐Oct‐20

ResonaBank,
Limited.

334,000‐‐

334,000

3,023

‐

‐

3,023

0.353

13‐Oct‐20

The Bank ofFukuoka,Ltd.

300,000‐‐

300,000

2,716

‐

‐

2,716

0.353

13‐Oct‐20

AEON
Bank, Ltd.

190,000‐‐

190,000

1,720

‐

‐

1,720

0.353

13‐Oct‐20

The
NomuraTrust andBankingCo., Ltd.

167,000‐‐

167,000

1,511

‐

‐

1,511

0.353

13‐Oct‐20

The
Hiroshima
Bank, Ltd.

167,000‐‐

167,000

1,511

‐

‐

1,511

0.353

13‐Oct‐20

ShinseiBank,
Limited.

355,000‐‐

355,000

3,214

‐

‐

3,214

0.453

13‐Oct‐21

Citibank,
N.A., Japan
Branches

355,000‐‐

355,000

3,214

‐

‐

3,214

0.453

13‐Oct‐21

ResonaBank,
Limited.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.453

13‐Oct‐21

The Bank ofFukuoka,Ltd.

300,000‐‐

300,000

2,716

‐

‐

2,716

0.453

13‐Oct‐21

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

22

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance(in thousands of yen)

Long‐term loans
payableIncrease

Endingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturitydate

AEON
Bank, Ltd.

190,000‐‐

190,000

1,720

‐

‐

1,720

0.453

13‐Oct‐21

The
NomuraTrust andBankingCo., Ltd.

167,000‐‐

167,000

1,511

‐

‐

1,511

0.453

13‐Oct‐21

The
Hiroshima
Bank, Ltd.

167,000‐‐

167,000

1,511

‐

‐

1,511

0.453

13‐Oct‐21

MizuhoBank, Ltd.

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

13‐Oct‐22

Sumitomo
MitsuiTrust Bank,
Limited

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

13‐Oct‐22

Sumitomo
Mitsui
Banking
Corporation

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

13‐Oct‐22

ShinseiBank,
Limited.

355,000‐‐

355,000

3,214

‐

‐

3,214

0.653

13‐Oct‐22

Citibank,
N.A., Japan
Branches

355,000‐‐

355,000

3,214

‐

‐

3,214

0.653

13‐Oct‐22

ResonaBank,
Limited.

333,000‐‐

333,000

3,014

‐

‐

3,014

0.653

13‐Oct‐22

Developme
nt Bank ofJapan Inc.

1,500,000‐‐

1,500,000

13,580‐‐13,5800.653

13‐Oct‐22

The Bank ofFukuoka,Ltd.

300,000‐‐

300,000

2,716

‐

‐

2,716

0.653

13‐Oct‐22

AEON
Bank, Ltd.

190,000‐‐

190,000

1,720

‐

‐

1,720

0.653

13‐Oct‐22

The
NomuraTrust andBankingCo., Ltd.

166,000‐‐

166,000

1,502

‐

‐

1,502

0.653

13‐Oct‐22

The
Hiroshima
Bank, Ltd.

166,000‐‐

166,000

1,502

‐

‐

1,502

0.653

13‐Oct‐22The
Dai‐ichi Life
Insurancecompany,
Limited

500,000‐‐

500,000

4,526

‐

‐

4,526

0.653

13‐Oct‐22

MizuhoBank, Ltd.

1,250,000‐‐

1,250,000

11,317‐‐

11,3170.753

13‐Oct‐23

Sumitomo
MitsuiTrust Bank,
Limited

1,065,000‐‐

1,065,000

9,642

‐

‐

9,642

0.753

13‐Oct‐23

Sumitomo
Mitsui
Banking
Corporation

1,250,000‐‐

1,250,000

11,317‐‐

11,3170.753

13‐Oct‐23

MizuhoBank, Ltd.

1,250,000‐‐

1,250,000

11,317‐‐

11,3170.853

11‐Oct‐24

Sumitomo
MitsuiTrust Bank,
Limited

1,060,000‐‐

1,060,000

9,597

‐

‐

9,597

0.853

11‐Oct‐24

Use ofproceeds

Remarks(2)

Unsecured andunguaranteed

23

Classification

Name oflender

Beginningbalance

Increase

Endingbalance

Decrease

Beginningbalance

Increase(in thousands of yen)

Long‐term loans
payableEndingbalance

Decrease(in thousands of U.S. dollars)

Averageinterest
rate (%)(1)

Maturity
date

Sumitomo
Mitsui
Banking
Corporation

1,250,000‐‐

1,250,000

11,317‐‐

11,3170.853

11‐Oct‐24

MizuhoBank, Ltd.

1,850,000‐‐

1,850,000

16,749‐‐16,7490.303

13‐Oct‐19

Sumitomo
Mitsui
Banking
Corporation

1,850,000‐‐

1,850,000

16,749‐‐16,7490.303

13‐Oct‐19

ShinseiBank,
Limited.

‐1,000,000‐

1,000,000

‐

9,053

‐

9,053

0.750

27‐Oct‐23

MUFG
Bank, Ltd.

‐

500,000‐

500,000

‐

4,526

‐

4,526

0.750

27‐Oct‐23

Total
Long‐term
loans
payable183,915,000

1,500,000‐

185,415,000

1,665,142

13,580‐1,678,723‐‐

186,983,000

1,500,000

1,068,000

187,415,000

1,692,919

13,5809,669

1,696,831‐‐

Total loans payable

Use ofproceeds

Remarks(2)

Unsecured andunguara
nteed

‐

‐

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 properties in trust and for repayment of loans payable.

(3)

Long‐term loans payable include current portion.

(4)

MUFG Bank, Ltd. has changed its name from The Bank of Tokyo‐Mitsubishi UFJ, Ltd. on April 1, 2018

(5)

MUFG Bank, Ltd. succeeded Mitsubishi UFJ Trust and Banking Corporation’s position as lender upon the transfer of Mitsubishi UFJ Trust and Banking Corporation’s
corporate‐loan‐related businesses to MUFG Bank, Ltd., effective April 16, 2018.

(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 ofJune 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
1‐2 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

51,744,000$

468,483

2‐3 years∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

57,380,000

519,511

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

15,638,000

141,584

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

6,865,000

62,154

11. Net Assets
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$ 452 thousand) as required by Article 67‐4 of the Investment Trust Act.
The number of investment units authorized was 10,000,000 units as of December 31, 2017 and June 30, 2018.
The number of investment units issued and outstanding were 4,793,181 as of December 31, 2017 and June 30, 2018 respectively.

12.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 December 31, 2017 and June 30, 2018.
For the six months ended

December 31,

June 30,

June 30,

24

2017

2018

2018
(in thousands of
U.S. dollars)(in thousands of yen)
Unappropriated retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥7,212,580¥

7,610,548$

68,904

Distributions in excess of retained earnings ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deduction from unitholders capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(172,554)‐‐

Distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(7,496,535)(6,854,248)(62,057)

Of which, distributions of earnings∙∙ ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(7,323,980)(6,854,248)(62,057)

Of which, deduction from unitholders capital surplus ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(172,554)‐‐

Retained earnings / losses carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥(111,399)¥

756,300$

6,847

The distribution in respect of the six months ended June 30, 2018 of ¥1,430 (US$12.9) per investment unit, amounting to a total
distribution of ¥6,854,248thousand (US$62,057 thousand) was proposed and approved at the Board of Directors meeting on August 22,
2018. These financial statements do not reflect these distributions payable.
Cash distributions per investment unit were ¥1,564and ¥1,430 (US$12.9) for the six months ended December 31, 2017, and June 30, 2018,
respectively.

13. 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 December 31, 2017 and June 30,2018 consist of the following:
For the six months ended

December 31,
2017

June 30,
2018

June 30,2018(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 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥11,060,128
343,107
11,403,236¥

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∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥707,458
470,600
11,4992,567,215
205,408
3,962,183
7,441,052¥(*)Variable rental revenue of hotels ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥3,741,186

10,769,777
352,704
11,122,481

$

$

¥
¥

665,093
470,692
12,8452,772,510
215,476
4,136,619
6,985,862

$
$

6,021
4,261
116
25,101
1,950
37,452
63,249¥3,789,484$

34,309¥$97,508
3,193
100,701

14. Breakdown of Gain on sales of Properties
For the six months ended December 31, 2017
Kindai Kagaku
Sha Building
Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥1,364,791
1,197,764
51,333
115,693

Casa Eremitaggio

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,312,035
948,287
28,743

Times Kanda‐
Sudacho 4th(in thousands of yen)¥
130,217
100,818
3,658¥
25,740
Lexel Mansion Ueno
Matsugaya(in thousands of yen)¥
1,329,240
853,265
26,547

Shinjuku Island¥¥

705,102
701,931
10,228(7,057)
Sun Terrace
Minami‐Ikebukuro¥

934,980
591,335
18,41925

Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥335,004¥

449,428¥

325,224

For the six months ended June 30, 2018
Harmonie
Ochanomizu
Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥1,606,646
1,346,372
38,843
221,430
Cross Square
NAKANO

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥1,357,090
1,125,668
23,268208,153

Growth Maison
Ikebukuro(in thousands of yen)¥
1,059,850
743,659
26,625¥289,565
Ohki Aoba
Building(in thousands of yen)¥
728,446
709,604
11,439¥
7,402

Capital Heights
Kagurazaka¥¥

Lexington Plaza
Nishi‐Gotanda¥¥

Harmonie
Ochanomizu

Growth Maison
Ikebukuro(in thousands of U.S. dollars)
14,546$
9,595$
12,189
6,732
351
241
2,004
$
2,621
$

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $Cross Square
NAKANOOhki Aoba
Building(in thousands of U.S. dollars)
12,286$
6,595$
10,191
6,424
210
103
1,884
$
67
$

Revenue from sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $Cost of properties sold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Other sale‐related costs ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Gain or loss on sales of properties ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ $734,817623,867
20,817
90,132

5,180,003
4,632,693
114,348432,961

Capital Heights
Kagurazaka
6,652
5,648
188
816
Lexington Plaza
Nishi‐Gotanda
46,89941,9431,035
3,919

15. Impairment Loss
For the six months endedDecember 31, 2017
Property name

Ohki Aoba
Building

Use

Commercial
Facility

Location

Sendai, Miyagi

TypeImpairment(in thousands of yen)

Land in trust

15,677For the purpose of calculating impairment loss, the properties’ book value were reduced to the recoverable amount and the difference
was recorded as impairment loss of land in trust under operating expenses. The recoverable amount was measured by the net realizablevalue, calculated by subtracting the expected disposal cost from the actual sales prices.
For the six months ended June 30, 2018
Not Applicable.

16. 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.

26

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

December 31,
2017

June 30,
2018(Rate)
Statutory tax rates ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deductible cash distributions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Increase (decrease) in valuation allowance ∙∙∙∙∙∙∙∙∙∙∙
Other ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

31.74 %
(30.49)(1.25)
0.01

31.74 %
(22.95)(8.79)
0.01

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

0.01 %

0.01 %(b) Deferred tax assets and liabilities consist of the following:
As of

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Deferred tax assets:
Current:
Enterprise tax payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥
Impairment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Allowance for doubtful accounts ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

1,331
2,367
28

¥

1,325
‐
28

$

12
‐
0

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

3,726

1,354

12

Non‐current:
Buildings and other (merger) ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Land (merger)∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙Net loss carried forward ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

730,990
1,918,655
7,200,289

561,751
1,374,216
7,200,289

5,086
12,441
65,190Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Fixed‐term leasehold ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

10,05579,644

10,122
116,52891
1,055

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

9,939,635

9,262,907

83,865

9,797
36,054

9,797
28,875

88
261

Deferred tax liabilities:
Non‐current
Asset retirement obligations ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Deferred gains or losses on hedges∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Subtotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

45,851

38,673350

Valuation allowance ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙(9,893,783)(9,224,234)(83,515)

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙‐Net deferred tax assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

‐

‐
¥

‐

‐
$

‐

17. Leases(a) Lease rental revenues
The future minimum rental revenues pursuant to existing rental contracts as of December 31, 2017 and June 30, 2018 scheduled to bereceived are summarized as follows:
As of

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

7,970,088
56,088,357¥

8,623,053
58,058,083$

78,072525,65027

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

64,058,446¥

66,681,137$

603,722(b) Lease rental expenses
The future minimum rental expenses pursuant to existing rental contracts as of December 31, 2017 and June 30, 2018 scheduled to be
paid are summarized as follows:
As of

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Due within one year ∙∙∙∙∙∙∙∙∙∙∙∙¥
Due over one year ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

312,959
10,247,035¥

312,959
10,090,556

$

2,833
91,358

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

10,559,994¥

10,403,515$

94,192

18. Financial Instruments(a) Qualitative information for financial instruments(i) Policy for financial instrument transactions
The Company raises funds through loans payable , investment corporation bonds, and the issuance of investment units toacquire real estate properties, pay property maintenance expenses and/or repay existing loans payable. Surplus funds aremanaged 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.
(ii) Nature and extent of risks arising from financial instruments and risk management
The funds raised through loans payable and investment corporation bonds are mainly used to acquire real estate properties orproperties in trust and for the repayment of existing loans payable. Liquidity risks relating to loans payable are managed by thefinance department of the Asset 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 notavailable, fair value is estimated using valuation techniques which contain various assumptions. If other valuation models orassumptions 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 December 31, 2017 and June 30, 2018.
As ofDecember 31,
2017
Carrying
amounts

June30,2018

Fair value

Carrying
amounts

Difference

June 30,
2018

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 ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥14,367,140(2) Cash and bank deposits in trust. ∙∙∙∙∙

6,326,653

Total assets ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥20,693,794¥

14,367,140¥

6,326,653¥

20,693,794

‐

¥

‐
¥

‐

8,505,792¥

6,566,761¥

15,072,553

8,505,792¥

6,566,761¥

15,072,553

‐

$

‐
¥

‐

77,010$59,454$

136,464

77,010$‐59,454$

136,464‐$‐

Liabilities:(3)Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,068,000

3,068,000‐

2,000,000

2,000,000‐

18,107

18,107‐(4) Current portion of long‐term loans
payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

28,979,000

28,979,000‐

46,663,000

46,663,000‐

422,480

422,480‐(13)(5) Investment corporation bonds ∙∙∙∙∙∙∙∙

‐

‐

‐

2,000,000

1,998,500(1,500)18,10718,094(6) Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

154,936,000

154,936,000‐

138,752,000

138,752,000‐

1,256,242

1,256,242

Total liabilities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥186,983,000¥

186,983,000

¥

‐

¥

189,415,000¥

189,413,500¥(1,500)$1,714,938$

1,714,925

‐
$

(13)

Notes

28

(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(3)Short‐term loans payable
Because of their short maturities, the carrying amounts approximate their fair value.
(4)Current portion of long‐term loans payable(6)Long‐term loans payable
Long‐term loans payable with floating interest rates reflecting changes in market rates within a short term period are stated at their carrying amounts as their carrying
amounts approximate their fair values.
(5)Investment corporation bonds
The fair values of investment corporate bonds are determined based on the present value of contractual cash flows discounted at current market interest rates which would
be applicable to new investment corporate bonds under the same conditions and terms.

(ii) Financial instruments for which fair value is difficult to determine are as follows:
As of

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Tenant leasehold and security deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙¥

2,215,299¥

2,026,400$

18,346

Investment securities ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥

17,854,460¥

17,856,387$

161,669

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.
Fair values of preferred securities are not subject to disclosure of fair value as they have no market value and their fair values are extremely difficult to recognize.

(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 December 31, 2017:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

14,367,140
6,326,653

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

20,693,794

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

As of June 30, 2018:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙¥Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

8,505,792
6,566,761

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

¥

‐
‐

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

15,072,553

¥

‐

¥

‐

¥

‐

¥

‐

¥

‐

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 June 30, 2018:
Cash and bank deposits ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙$Cash and bank deposits in trust ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

77,01059,454

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

$

‐
‐

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

136,464

$

‐

$

‐

$

‐

$

‐

$

‐

(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 December 31, 2017:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙
Current portion of long‐term loans payable ∙∙∙Long‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

3,068,000
28,979,000‐

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

32,047,000‐‐
54,745,000¥

54,745,000‐‐
50,130,000¥

50,130,000‐‐
32,821,000¥

32,821,000‐‐
10,115,000¥

10,115,000‐‐
7,125,000¥

7,125,000

As of June 30, 2018:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

2,000,000

‐

‐

‐

‐

‐

Current portion of long‐term loans payable ∙∙∙46,663,000

‐

‐

‐

‐

‐

Investment corporation bonds ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

1,000,000

1,000,000

29

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

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

48,663,000

51,744,000¥

Within 1 year

51,744,000

57,380,000¥

1‐2 years

15,638,000

57,380,000¥

2‐3 years

6,865,000

15,638,000¥

3‐4 years

7,125,000

7,865,000¥

4‐5 years

8,125,000

Over 5 years(in thousands of U.S. dollars)
As of June 30, 2018:
Short‐term loans payable ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

18,107‐‐‐

Current portion of long‐term loans payable ∙∙∙422,480

‐

‐

‐

‐

‐

Investment corporation bonds ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

‐

‐

‐

‐

9,053

9,053

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

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

440,588468,483$

468,483

519,511$‐

141,584

519,511$‐

62,154

141,584$

64,50871,208$73,562

19. Investment securities
As of December 31, 2017
Fair values of preferred securities recorded on the Balance Sheet at ¥17,854,460 thousand are not subject to disclosure of fair value as they
have no market value and their fair values are extremely difficult to recognize.
As of June 30, 2018
Fair values of preferred securities recorded on the Balance Sheet at ¥17,856,387 thousand (US$ 161,669 thousand) are not subject todisclosure of fair value as they have no market value and their fair values are extremely difficult to recognize.

20. Derivatives
Information on derivative transactions undertaken by the Company as of December 31, 2017 and June 30, 2018 is as follows. Derivative
instruments are used for hedging purposes only and are subject to hedge accounting.
As of December 31, 2017:
Contract amount(*1)
Method ofhedge
accounting

Type ofderivativetransactionMainhedgeditem

Over 1
year

Total

Fair
Value(*2)(in thousands of yen)

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andFixed rate
payableLong‐term
borrowings¥

99,119,000¥

70,140,000¥

113,592

Total ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥99,119,000¥

70,140,000¥

92,243(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

As of June 30, 2018:
Contract amount(*1)
Method ofhedge
accountingType ofderivativetransaction

Principle
accounting
methodInterest rate
swap
transaction
floating ratereceivable andMainhedgeditem

Contract amount(*1)
Fair
Value
(*2)

Over 1year

Total(in thousands of yen)

Long‐term
borrowings¥

100,619,000¥

67,390,000

Fair
Value
(*2)

Over 1year

Total(in thousands of U.S. dollars)¥

90,975$910,991$

610,140

$

30

823

Fixed rate
payableTotal ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥100,619,000¥

67,390,000¥

90,975$910,991$

610,140$(*1) The contract amount is based on the notional principal amount.
(*2) The fair value is provided by the financial institution.

21. Asset Retirement Obligations
The Company has an obligation under a fixed‐term leasehold agreement to restore its leased land, which represents the land where
COMFORT HOTEL MAEBASHI, owned by the Company, is located upon the termination of agreement. The estimated period of useof property is estimated at 43 years based on the lease period per the agreement. The assets retirement obligation for the restoration isrecognized as a liability using discount rate at 1.342%.
Movements of asset retirement obligations for the six month ended December 31, 2017 and June 30, 2018 are as follows.

For the six month ended

December 31,
2017

June 30,
2018

June 30,2018(in thousands of
U.S. dollars)(in thousands of yen)
Balance at the beginning of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥31,468¥31,680$286

Liabilities incurred due to the acquisition of properties ∙∙∙∙∙∙∙

‐

‐

‐

Accretion expense ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙

212

210

1

Balance at the end of the period ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥31,680¥31,891$288

22. Segment Information
Segment information for the six months ended December 31, 2017 and June 30, 2018 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 December 31, 2017 and June 30, 2018 were as follows:
For the six months ended December 31, 2017

Name of client

Mystays Hotel Management Co.,Ltd.

Operating Revenues(in thousands of yen)
¥4,794,080

Related segment

Real estate investing business

For the six months ended June 30, 2018

31

823

Name of client

Operating Revenues

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

Mystays Hotel Management Co.,Ltd.

5,324,738

Related segment

48,209Real estate investing business

23. Profit or Loss from Equity Method, etc
For the six months ended December 31, 2017
Not Applicable.
For the six months ended June 30, 2018
(in thousands of yen)(in thousands of US dollars)

Investments in affiliates

17,856,387

161,669

Investments, if equity method was adopted

17,845,800

161,573

722,127

6,538

Investment gains (losses), if equity method was adopted

24. Related‐Party Transactions(a) Parent Company and Major Corporate Unitholders
For the six months ended December 31, 2017
Share capital
Type ofrelated‐party

Interested
party of the
Asset
Manager

Transactions for the period

Votinginterest intheCompany

Relationshipwith theCompany¥ 0.1‐

Seller of real estate
trust beneficiaryrightsAcquisition of real estate trust
beneficiary rights(2)(5)

Investment
managementbusiness¥ 0.1‐

Seller of real estate
trust beneficiaryrightsMinato‐ku,
Tokyo

Investment
managementbusiness¥ 0.1‐

Suisei TMK(3)Minato‐ku,
Tokyo

Investment
managementbusiness¥ 0.1

Naqua Hotel &Resorts
Management
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

Mystays HotelManagement
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

Company
nameLocation

HL Investments
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

Septentrio3
TMK(3)

Minato‐ku,
Tokyo

Monza TMK(3)Business

Balance at the end of period

Amounts (1)Amounts(1)Balancesheet
account(in thousands ofyen)¥ 13,068,000‐‐

Acquisition of real estate trust
beneficiary rights(2)(5)¥ 9,781,000‐‐

Seller of real estate
trust beneficiaryrightsAcquisition of real estate trust
beneficiary rights(2)(5)¥ 8,870,000

‐

‐

‐

Seller of real estate
trust beneficiaryrightsAcquisition of real estate trust
beneficiary rights(2)(5)¥ 7,880,000

‐

‐

¥ 10

‐

Lease holder andoperator of hotel

Rental Revenues¥ 1,103,226

Rentalreceivables¥ 130,953

¥ 100

‐

Lease holder andoperator of hotel

Rental Revenues¥ 4,794,080

Rentalreceivables¥ 1,551,920(in millions ofyen)Type of transactions(in thousands ofyen)

Notes:(1)

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

(2)

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

The seller, HL Investments TMK, Septentrio3 TMK, Monza TMK, Suisei TMK, Naqua Hotel & Management Resorts Management Co. Ltd, and Mystays Hotel Management,

Transactions with Sponsor‐related Persons.

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 HL Investments
TMK, Septentrio3 TMK, Monza TMK, Suisei TMK, Naqua Hotel & Management Resorts Management Co., Ltd and Mystays Hotel Management, Co. Ltd as a related party.
(4)

Calliope holds 609,942 units(holding ratio: 12.7%) of the issued investment units of the Company(5)

The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.

For the six months ended June 30, 2018
Share capital
Type ofrelated‐party

Company
nameLocation

Business(inmillionsof yen)(inthousandsof U.S.

Votinginterest intheCompany

Transactions for the period
Relationshipwith theCompany

Type oftransactions

Amounts (1)(inthousands(inthousands

Balance at the end of period
Balancesheet
account

Amounts(1)(inthousands(in thousandsof U.S.

32

dollars)Interested
party of the
Asset
Managerof yen)Ginga
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥ 0.1

$0

‐

Seller of real estate
trust beneficiaryrightsHL
nvestments
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥ 0.1

$0

‐

Seller of real estate
trust beneficiaryrightsMonza
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥ 0.1

$0

‐

Seller of real estate
trust beneficiaryrightsSuisei
TMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥ 0.1

$0

‐

Seller of real estate
trust beneficiaryrightsCalvisTMK(3)

Minato‐ku,
Tokyo

Investment
managementbusiness

¥ 0.1

$0

‐

Seller of real estate
trust beneficiaryrightsNaqua Hotel& Resorts
Management
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

¥ 10

$ 88

‐

Lease holder andoperator of hotel

Mystays
HotelManagement
Co., Ltd.(3)Minato‐ku,
Tokyo

Hotel
managementbusiness

¥ 100

$ 884

‐

Lease holder andoperator of hotel

Acquisition ofreal estate
trust
beneficiaryrights(2)(4)Acquisition ofreal estate
trust
beneficiaryrights(2)(4)Acquisition ofreal estate
trust
beneficiaryrights(2)(4)Acquisition ofreal estate
trust
beneficiaryrights(2)(4)Acquisition ofreal estate
trust
beneficiaryrights(2)(4)of U.S.
dollars)of yen)dollars)¥ 5,326,000$ 48,220‐‐‐¥ 2,772,000$ 25,097‐‐‐¥ 2,723,000$ 24,653‐‐‐¥ 1,604,000$ 14,522‐‐‐¥ 7,325,000$ 66,319‐

RentalRevenues¥ 576,941$ 5,223

RentalRevenues¥ 5,324,738$ 48,209‐‐

Rentalreceivables¥ 221,582$ 2,006

Rentalreceivables¥ 1,387,974$ 12,566

Notes:(1)

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

(2)

Terms and conditions are decided pursuant to the Asset Managerʹs Regulations on Transactions with Sponsor‐related Persons and the Management Manual regarding
Transactions with Sponsor‐related Persons.
The seller, Ginga TMK, HL Investments TMK, Monza TMK, Suisei TMK, Calvis TMK, Naqua Hotel & Management Resorts Management Co. Ltd, and Mystays Hotel(3)

Management, Co. Ltd has no relationship to be stated, but （i）Ginga TMK, HL Investments TMK, Monza TMK, and Suisei TMK used to receive investment through funds
that are managed by FIG, an affiliate of Calliope; a parent company of the asset manager directly owning 100% of issued shares, (ii) Calvis TMK used to receive investment
through funds that are managed by FIG, a subsidiary of Softbank Group; a parent company of the asset manager directly and indirectly owning 100% of issued shares, (iii)
Naqua Hotel & Management Resorts Management Co. Ltd and Mystays Hotel Management, Co. Ltd receive investment through funds that are managed by FIG, an affiliate
of Calliope; a parent company of the asset manager directly owning 100% of issued shares until March 29, 2018, a subsidiary of Softbank Group; a parent company of the asset
manager directly and indirectly owning 100% of issued shares after March 29, 2018.Accordingly, we treat Ginga TMK, HL Investments TMK, Monza TMK, Suisei TMK,
Calvis TMK, Naqua Hotel & Management Resorts Management Co. Ltd, and Mystays Hotel Management, Co. Ltd as a related party.
The transaction amount exclude adjusted amount of real property tax and city planning tax, as well as consumption tax and local consumption tax.

(4)

Acquisition of real estate trust beneficiary rights are relating to below
Acquisition cost(in thousands of yen)

Acquisition cost(in thousands of US dollars)

Property No.

Property nameSellerD54

Hotel MyStays Yokohama Kannai

Ginga TMK

5,326,000

D55

Art Hotel Joetsu

HL Investments TMK

2,772,000

25,09748,220

D56

Art Hotel Hirosaki City

Monza TMK

2,723,000

24,653

D57

Hotel MyStays Oita

Suisei TMK

1,604,000

14,522

D58

Hotel MyStays Gotanda

Calvis TMK

4,068,000

36,831

3,257,000

29,48819,750,000

178,813

D59

Hotel MyStays Tachikawa

Calvis TMK
Total(b) Board of Directors and Major Individual Unitholders
For the six months ended December 31, 2017

Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaBusiness / Occupation

Executive officer of theCompany andmanagement director ofConsonant Investment
Management Co., Ltd.

Votinginterest intheCompany‐

Transactions for the period

Balance at the end of period
Amounts(3)Type of transactions(in thousands of yen)
Payment of the assets management
fee to Consonant Investment
Management Co., Ltd.(1)Payment of institution
management fee to Consonant
Investment Management Co.,
Ltd.(2)

Balance sheet
account

Amounts(3)(in thousands ofyen)¥ 276,823

Accruedexpenses¥159,138¥ 1,100

Accruedexpenses¥ 864

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.

33

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

(3)

For the six months ended June 30, 2018
Transactions for the period
Type ofrelated‐party

Directors
and close
relatives

Name

Naoki
FukudaBusiness /Occupation

Executive officer of
the Company andmanagement
director ofConsonantInvestment
Management Co.,Ltd.

Votinginterest intheCompany‐

Balance at the end of period

Amounts(3)Type of transactions

Payment of the assets
management fee to Consonant
Investment Management Co.,
Ltd.(1)
Payment of institution
management fee to Consonant
Investment Management Co.,
Ltd.(2)

Amounts(3)(inthousandsof yen)(inthousandsof U.S.
dollars)¥ 308,849$ 2,796

¥ 600

$5

(in
thousandsof yen)(inthousandsof U.S.
dollars)

Accruedexpenses¥ 149,291$ 1,351

Accruedexpenses

¥ 324

$2

Balance sheet
account

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.

25. Parent company and/or significant affiliates(a) Information on the parent company
Not Applicable.

(b) Summary of financial statements of the significant affiliates
The significant affiliates in the year ended June 30, 2018 is Kingdom TMK. Summary of financial statements are as follows:
Kingdom TMK(in thousands of yen)
Total specified assets
Total other assets(in thousands of US dollars)

100,422,370

909,211

5,409,900

48,980Total current liabilities

1,436,173

13,002

Total non‐current liabilities

66,480,660

601,907

Total net assets

37,915,436

343,281

Operating revenue

1,957,744

17,725

Income before income taxes

1,496,394

13,548Net income

1,495,336

13,53826. Per Unit Information
The following table shows net asset value per unit as of December 31, 2017 and June 30, 2018 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.
December 31,
2017

As of / For the six months ended
June 30,
2018
(Yen)

June 30,
2018(U.S. dollars)

34

Net asset value per unit ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥37,829¥37,871$

342

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

1,712

¥

1,611

$

14

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

4,266,437

4,793,181‐

27．Subsequent Events(a) Issuance of New Investment Units
The board of directors held on July 17, 2018 and July 25, 2018 approved the issuance of new investment units and secondary distributionof investment units. Payment for the new investment units issued via public offering was completed on August 1, 2018. In addition, withthe respect to the issuance of new investment units through the third‐party allotment in connection with the overallotment for the public
offering, the payment was completed on August 21, 2018. As a result, holders’ capital becomes JPY211,092 million and the number ofinvestment units issued and outstanding become 5,748,181 units.

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

Domestic public offering : 432,024 units
International: 477,500 units

Total:909,524 units

Issue price (offer price): JPY45,776 per unit

Total issue price (total offer price): JPY 41,634,370,624

Amount paid in (issue value): JPY 44,287 per unit

Total amount paid in (total issue value) : JPY 40,280,089,388
Payment date

: August 1, 2018(ii) Secondary offering of investment units (overallotment secondary offering)Number of investment units: 45,476 units

Offer price: JPY 45,776 per unit

Total offer value: JPY 2,081,709,376

Delivery date

: August 2, 2018(iii) Issuance of new investment units through third‐party allotment
Number of investment units: 45,476 units

Amount paid in (issue value): JPY 44,287 per unit

Total amount paid in (total issue value) : JPY 2,013,995,612
Payment date

: August 21, 2018

Allotee: Mizuho Securities Co, Ltd.

(b) New borrowings
In order to raise a part of the funds to be used for the acquisition of the 4 hotel properties acquired on August 2, 2018 and TK interest
with overseas real estate as underlying assets to be acquired on October 31, 2018 or the date separately agreed, the Company decided on
the implementation of the following borrowings at its board of directors’ meeting held on July 17, 2018 and entered into the borrowing
agreement on July 31, 2018.

35

New Syndicate Loan (J)LenderSyndicate formed by Mizuho Bank, Ltd.

Borrowing amountJPY 40,458 million

Interest rate, etc.

Base rate (1‐month JPY TIBOR)(Note 1) + 0.50%, 0.40%, 0.30%, 0.30%, 0.20%

Interest payment date(i) The last Japanese business day of each month before the principal maturity date, beginningwith September 28, 2018, and (ii) the principal maturity date,(i) The last Japanese business day of each month before the principal maturity date, beginningwith October 31, 2018(Note 2), and (ii) the principal maturity datePrincipal repayment method

Lump‐sum repayment

Borrowing method

Unsecured / with no guarantee

Borrowing dateAugust 2, 2018, September 26, 2018 (Note 2)

Maturity dateAugust 2, 2019, August 2, 2021, September 26, 2021(Note 2), September 26, 2022(Note 2),
September 26, 2023(Note 2)(Note 1) The interest rate applicable for the first interest calculation period only will be two‐month JPY TIBOR (Base Rate) + spread (0.50%, 0.40%, 0.30%, 0.30%, 0.20%).
(Note 2) Borrowing Date and Maturity Date is scheduled as of the date of this document, and it may be changed in the future.

(c) Acquisition of assets (properties)
The Company decided to acquire 4 hotel properties as shown in the following table, of which the total acquisition price is JPY 47,745
million, on July 17, 2018 and the acquisitions have been closed on August 2, 2018.
Acquisition
Use

Property
numberConstruction
Property nameLocation

pricecompletion
date

Total
rentable(JPY million)

Sellerarea

Category of
specified asset(Note)

Hotel

D60

Hotel MyStays

Minato‐ku,

Premier Akasaka

Tokyo

Hotel MyStays

Sapporo,Premier Sapporo Park

Hokkaido

Aki Tokutei
June 2016

20,6918,620.69 m2

Mokuteki
KaishaTrust beneficial
interest

RaetiaHotel

D61

March 1998

16,731

21,670.64 m2

Tokutei

Trust beneficial

Mokutekiinterest

Kaisha

HL
Hotel

D62

Hotel MyStays

Taito‐ku,

September

Ueno East

Tokyo

1991

Investments
5,286

4,396.02 m2

2 Tokutei
Mokuteki

Trust beneficial
interest

Kaisha

Dogo
Hotel

D53

Hotel MyStays

Osaka,

Midosuji Honmachi

Osaka

October 2017

5,039

3,429.43 m2

Tokutei

Trust beneficial

Mokutekiinterest

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

(d) Acquisition of an asset (TK interest with overseas real estate as underlying assets)

36

The Company decided to acquire TK interest as shown in the following table on July 17, 2018 and executed the TK agreement on thesame day.

Overview of the acquisition
Asset to be acquired

TK interest in a Cayman Islands special purpose company that plans to acquire
Leasehold Interests in overseas real estate as underlying assets

Anticipated acquisition price

USD 339,836,000 (JPY 37,534 million) (Note 1) for 100.0% of the Cayman Hotel TK

Name of underlying asset

Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort

Interest
Anticipated acquisition date

One business day prior to the acquisition date of the underlying assets, which is
expected to close by October 31, 2018 or the date separately agreed

TK operator

Seven Mile Resort Holdings Ltd.

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

Outline of the Underlying Asset
Property nameWestin Grand Cayman Seven Mile Beach Resort & Spa

Anticipated acquisition price (Note1)(Note2)

USD 255,300,000 (JPY 28,197 million)

Location

Seven Mile Beach Road, Grand Cayman, Cayman Islands

Construction completion date

1994

Total floor area

231,728 ft2 (21,528 m2 )Property nameSunshine Suites Resort

Anticipated acquisition price (Note1)(Note2)

USD 49,700,000 (JPY 5,489 million)

Location

Esterley Tibbetts Highway, Grand Cayman, Cayman Islands

Construction completion date1999

Total floor area

72,367 ft2 (6,723 m2 )(Note 2) This price is not the anticipate acquisition price of the Cayman Hotel TK Interest acquired by INV but the anticipated acquisition price of the Leasehold, etc. of the Underlying
Asset acquired by the Cayman SPC.

37