http://nud-reit.co.jp/en

Forward Stroke Inc.

Forward Stroke Inc.

th39
Semiannual Report
Fiscal Period
Ended April 30, 2022

1-5-1 Otemachi, Chiyoda Ward, Tokyo
http://nud-reit.co.jp/en
Securities Code: 8956

FEATURES OF
NTT UD REIT INVESTMENT CORPORATION

1Comprehensive Support from NTT Urban Development,2

the Sole Comprehensive Real Estate Company in the NTT Group

Since May 2010, when NTT Urban Development (NTT UD) participated as its sponsor, NTT UD REIT Investment
Corporation (NUD) has received a broad range of support from NTT UD, including such pipeline support services as
supply and information provision of new properties, as well as support for leasing activities and provision of property
management operations.

Compound Portfolio with Office Buildings and Residential Properties as Main
Investment Targets

 itigates the impact of economic fluctuations by combining asset types that have low correlation to each otherMin terms of market rent fluctuations
Diversifies the tenant base into different types such as corporations and individuals
Portfolio Distribution by Asset Type
(April 2022)

Residence

OfficeStability

Profitability

Stable demands even in areceding economy

Exerts strengths when theeconomy is recovering

28.6%

71.4%

Abundant track record of development and pipelines
for office buildings
Operating capability in real estate rental businessFund-raising capability based on its high credibility

3 Portfolio Focused in the Tokyo Economic Bloc ocuses investments in the Tokyo Economic Bloc, which enjoys an established economic base due to a highF
concentration of population and industry
Partially expands the target investment area to Major Regional Cities (strengthening ties with NTT UD)

Results of Property Acquisitions through NTT UD's Pipelines

Portfolio Distribution by Geographical Area

(April 2022)(April 2022)

Other

9.0%

17.5

NTT Urban Development

18.1 bn yen
bn yen81.7%

Other sponsors

4.0%
Urban Areas Surrounding Tokyo

9.3%

Total acquisition pricesince May 2010158.6
bn yen1

Major Regional Cities

194.2 billion yen

5 Central Wards of Tokyo(Chiyoda Ward, Chuo Ward, Minato Ward,
Shinjuku Ward and Shibuya Ward)

71.5%

3.7%
Other 18 Wards of Tokyo

20.7%
2

39TH FISCAL PERIODPERFORMANCE HIGHLIGHTSMESSAGE TO OUR UNITHOLDERS

Financial Results Highlights
Distribution per Unit (Note 1)

Yuichi Kato

Yutaka Torigoe

Executive Director

President and CEO

38th Fiscal Period (ended October 2021)

NTT UD REIT Investment Corporation(NUD)(Asset management company)
NTT Urban Development Asset Management Corporation(UDAM)

39th Fiscal Period (ended April 2022)

On behalf of NTT UD REIT Investment Corporation (NUD)
I would like to express our sincere gratitude for the loyal patronage of our unitholders.

¥ 3,130

With NTT Urban Development Corporation becoming its sole sponsor in October 2020, the Investment Corporation changed
its name to NTT UD REIT Investment Corporation in April 2021. Since then, we have continued to ensure steady growth of theportfolio and secure stable earnings by further leveraging support from the sponsor.

As the property transfer in the asset replacement also contributed, NUD posted operating revenues of 12,589 million yen and net
income of 5,681 million yen for the 39th Fiscal Period. Distribution per unit came to 4,054 yen, which surpassed the forecast of
3,975 yen for the period announced in “Financial Report for the 38th Fiscal Period Ended October 31, 2021 (May 1, 2021 – October
31, 2021)” dated December 15, 2021.
The occupancy rate at the end of the fiscal period was 96.3%, up 2.5 percentage points period-on-period, due to progress infilling vacated spaces at NUD’s owned properties amid the vacancy rate of offices in Central Tokyo ceasing to rise for the moment.
Looking ahead, we at NUD will continue our utmost efforts to meet the expectations of our unitholders by realizing steady growthof assets and stable management over the medium to long term in line with the growth strategy of the NTT Group. We appreciate
and request your continued support and encouragement.

38th Fiscal Period: 1,316,995 units
39th Fiscal Period: 1,401,635 units
40th Fiscal Period: 1,401,635 units (forecast)¥ 4,054

40th Fiscal Period (ending October 2022) (Note 2)

In the 39th Fiscal Period that ended April 2022, NUD issued new investment units through public offering, the first such arrangement
in approximately six and a half years, to raise capital by 12.3 billion yen. Using the proceeds, we conducted an asset replacementtransaction, acquiring Tokyo Opera City Building and transferring Sphere Tower Tennozu. Taking advantage of the leveragecapacity, which had expanded as we lowered LTV through the public offering, we acquired interests in Urbannet Uchisaiwaicho
Building, located in Minato Ward, Tokyo, from the sponsor in March 2022. Consequently, NUD’s owned assets as of April 30, 2022,
comprise 59 properties with 27 office buildings and 32 residential properties amounting to 272.6 billion yen in total.

(Note 1) Number of outstanding investment units at endof period:¥ 2,730 (forecast)(Note 2) The figure is based on what was announced in
the Financial Report for the 39th Fiscal Period
Ended April 30, 2022 (November 1, 2021 –April 30, 2022) dated June 16, 2022.

38th Fiscal Period

39th Fiscal Period(as of October 31, 2021)(as of April 30, 2022)

Operating Revenues

10,738 million yen

12,589 million yen

Operating Income

4,910 million yen

6,128 million yen

Ordinary Income

4,473 million yen

5,682 million yen

Net Income

4,470 million yen

5,681 million yen

Total Assets

266,706 million yen

280,999 million yen

Net Assets

125,583 million yen

139,431 million yen

47.1%

49.6%

95,356 yen

99,477 yen

Total assets basis

47.4%

45.5%

Market value basis

42.0%

39.9%

Net Assets Ratio
Net Assets per Unit
LTV (Note)(Note) LTV (Total assets basis) = interest-bearing liabilities / total assets × 100
LTV (Market value basis) = interest-bearing liabilities / (appraisal value of owned properties and beneficiary interests in trust + book value of preferred securities) × 100

Monthly Occupancy Rate for the 39th Fiscal Period
(%)
100

Table
of
Contents

Features of NTT UD REIT Investment Corporation 
Message to Our Unitholders 
39th Fiscal Period Performance Highlights 
Status of External Growth Collaboration with the NTT Group 
Initiatives on ESG Awareness Management Status in the 39th Fiscal Period 
Financial Status in the 39th Fiscal Period Property Portfolio Organization of NUD 
Overview of Properties Owned(as of the end of the 39th Fiscal Period) Information for Unitholders 

1
3
4
6
8
9
11
13
15
18
19
27

<Financial Section>
Independent Auditor’s Report 
Balance Sheets Profit and Loss Statements Statements of Changes in Unitholders’ Equity 
Cash Flow Statements Notes to Financial Statements 
Other Information (Unaudited) 

28
31
33
34
35
36
51

Strategic Policies 

55

98

96.3%
96

94

95.1%
94.6%
94.3%

95.5%

95.3%

94.5%

94.5%

94.0%

End of Dec. 2021

96.6%

94.9%

95.1%

94.1%

94.2%

94.3%

End of Jan. 2022

End of Feb. 2022

End of Mar. 2022

96.6% Residential properties
96.3% Total
96.2% Office buildings

92

90

End of Nov. 2021

End of Apr. 2022

(Note) The value related to the property backing the preferred securities of an SPC is not included in the calculation of the occupancy rate.

3

4

(39th FISCAL PERIOD PERFORMANCE HIGHLIGHTS)

STATUS OF EXTERNAL GROWTH

Portfolio Status

Property Replacement (39th Fiscal Period)
38th Fiscal Period

39th Fiscal Period(as of October 31, 2021)(as of April 30, 2022)

No. of properties

58 properties

59 properties

Acquisition price260.0 billion yen

272.6 billion yen

23.2 years

23.1 years

Occupancy rate at end of period

93.8%

96.3%

No. of tenants

3,841

3,958

NOI yield (Note 2)

4.9%

4.9%

Yield after depreciation (Note 3)

3.7%

3.7%

Average building age (Note 1)

Distribution by asset type

30.0%

Distribution by geographical area

70.0%

3.9%

27.5%

71.4%

Sphere Tower Tennozu

Tokyo Opera City Building(Transferred on December 10, 2021)(Acquired on November 2, 2021)

Urbannet
Uchisaiwaicho Building(Acquired on March 28, 2022)

Transferredproperty

Acquiredproperties

64.4%

20.7%

Forward Stroke Inc.

71.5%

Location

Higashishinagawa, Shinagawa Ward,
Tokyo

Buyer

Domestic corporation

Urban Areas Surrounding Tokyo

Use

Office and store

Major Regional Cities

Transfer price

18,000 million yen

Appraisal value upontransfer

17,600 million yen

Gain on sale2,231 million yen(Note 1) Averagebuilding age is calculated by adding the building age of Akihabara UDX (that backs the preferred securities in which NUD holds 19.0% ownership).
(Note 2) NOI
yield is calculated by using the following formulas.
NOI yield = annualized rental NOI* / investment value***A nnualized rental NOI = sum total of [(real estate rental income + depreciation + dividend income from preferred securities) x 2] of owned assets (including preferred securities) for
each fiscal period** Investment value = sum total of book value as of the end of each fiscal period of owned assets (including preferred securities) for each fiscal period(Note 3) Yield after depreciation is calculated by using the following formulas.
Yield after depreciation = annualized real estate rental income* / investment value*** Annualized real estate rental income = sum total of [(real estate rental income + dividend income from preferred securities) x 2] for owned assets (including preferred securities) for
each fiscal period** Investment value = sum total of book value as of the end of each fiscal period of owned assets (including preferred securities) for each fiscal period

5Transactions Conducted upon Announcement of Public Offering

3.7% 4.0%

4.2%

5 Central Wards of Tokyo
Other 18 Wards of Tokyo

March 2022:
Acquired Urbannet Uchisaiwaicho Building from NTT UD by utilizing the acquisition capacity created by the capitalincrease through public offering.

28.6%

Office Buildings
Residential Properties

November to December 2021:
Acquired Tokyo Opera City Building from NTT UD by utilizing the proceeds from a public offering and transfer of Sphere
Tower Tennozu.

NOI (annual) (Note 1)

672 million yen

Location

Nishishinjuku, Shinjuku Ward,Tokyo

Shimbashi, Minato Ward,Tokyo

SellerNTT Urban Development Corporation

NTT Urban Development Corporation

Use

Office, store, concert hall, museum,
exhibition hall

OfficeAcquisition price

22,000 million yen

5,640 million yen

Appraisal value uponacquisition

23,100 million yen

6,156 million yen

Appraisal NOI (annual)

1,186 million yen

168 million yen

5.4%

3.0%

4.3%

Appraisal NOI yield

Building age (Note 2)

28.6 years

Building age (Note 2)

25.3 years

2.7 years

Occupancy rate (Note3)

98.6%

Occupancy rate (Note 3)

95.2%

98.9%

NOI yield (Note 1)(Note 1) The NOI and NOI yield of the transferred property are calculated on the basis of the annualized actual NOI and period-end book value of the fiscal period immediately preceding the
fiscal period in which the property was transferred.
(Note 2) The building age is calculated with the conclusion date of the respective transaction agreements set as the base date.
(Note 3) The occupancy rate is calculated with the date at the end of the month in which the conclusion date of the respective transaction agreements belong as the base date.

6

(STATUS OF EXTERNAL GROWTH)COLLABORATIONWITH THE NTT GROUP

Overview of Urbannet Uchisaiwaicho Building

Changes in Asset Size cquired a relatively new, complex building located in Central Tokyo and developed by NTT UD, as part of strengtheningA
ties with the sponsor.
 o-owns the interests in the property’s office areas with NTT UD, with an aim to enhance NUD’s presence in the Hibiya
Carea where a redevelopment project (Note) by the NTT Group is underway.

Location Characteristics

NUD has steadily expanded its asset size since NTT UD became its sponsor.
(bn yen)Acquisition, brokerage, information provision, etc.

May 2010
NTT UD took an equity stakein the REIT’s Asset Manager

 ultiple train lines including 4 JR lines, 3 subway lines and the New Transit
M
Yurikamome line are available, providing the property with good access to major city
centers, the Shinkansen, and airports.

196.5 196.5 196.5 199.4 44.4
165.8 165.8 44.4

L ocated in close proximity to the Uchisaiwaicho 1-chome district, which is scheduled
for redevelopment going forward, the property is in an area with potential for future
growth.

139.3
46.9

 n eco-friendly building that adopts the latest environmental technologies, 100%A
utilizing renewable energy.

92.4

e
Lin

re
e
ri
do

OfficeCompartmentalized ownership

za
-

yo

44.4

44.4

243.7 243.7 243.7 246.7

46.9

59.4

60.2

60.2

60.2

60.2

60.2

60.2

60.2

44.4

89.2

44.4

46.9
110.5

46.9

102.3

96.1

96.1

96.1

96.1

96.1

96.1

96.1

91.0

91.0

91.0

91.0

88.9

92.5

95.3

95.3

93.4

93.4

90.1

90.1

92.4

92.4

92.4

95.4

69.4

17th

14.3
18th

41.5
19th

41.5
20th

41.5
21st

89.2

102.3

110.5

99.1

16th

45.2
60.2

110.6 110.6 138.2

69.4

44.4
22nd

23rd

24th

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

39th

periodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodApr. 2010

Oct. 2010

Apr. 2011

Oct. 2011

Apr. 2012

Oct. 2012

Apr. 2013

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Oct. 2015

Apr. 2016

Oct. 2016

Apr. 2017

Oct. 2017

Apr. 2018

Oct. 2018

Apr. 2019

Oct. 2019

Apr. 2020

Oct. 2020

Apr. 2021

Oct. 2021 Apr. 2022

Top 10 Tenants Occupying NUD’s Office Buildings (as of April 30, 2022)
NTT Groupa LineRank

Tenant nameLeased floor space

Ratio (Note)

Property

1

NTT Facilities, Inc.

10,994m²

5.9%

Urban Ace Higobashi Building, etc.

2

DOCOMO CS, Inc.

10,525m²

5.7%

Urbannet Ikebukuro Building

3

NTT Business Associe East Co., Ltd.

7,488m²

4.0%

Urbannet Omori Building

4

Sumitomo Osaka Cement Co., Ltd.

6,872m²

3.7%

Rokubancho Building

5

NTT Finance Corporation

6,248m²

3.4%

Urbannet Ikebukuro Building, etc.

6

MIRAIT Corporation

5,325m²

2.9%

Urbannet Gotanda NN Building, etc.

7

Nippon Telegraph and Telephone East Corporation

5,159m²

2.8%

Tokyo Opera City Building

8

NTT Learning Systems Corporation

4,801m²

2.6%

Urbannet Azabu Building

9

NTT DATA Corporation

3,552m²

1.9%

Urbannet Mita Building

10

NTT Communications Corporation

2,998m²

1.6%

Granpark, etc.

63,967m²

34.4%

t	Portion is co-owned with NTT UD(NUD owning 12.0% interest)

in
ig
ish

Tok

44.4

272.6

Forward Stroke Inc.

Office portion
Ownership (right of site)N

Yokosuk

Shimbashi
Station

7

Urbannet
Uchisaiwaicho
Buildinge/
JR Yamanote Lin
Line
Keihin-Tohoku

ibiy
a-d

T
o
e
i Mi
ta L
H
ine
ori S
tree
t

Tok
yo
Gin Metr
o
za L
ine
Sot
obo
Stre ri-dori
et

St

eet

Uchisaiwaicho
Station

Nanou
Park

sen

kan

Str

15th

Hotel
Compartmentalized ownership(third party)

hin

ori

44.4

Other

261.8 260.0

91.0

14.3

Facility Overview of Urbannet Uchisaiwaicho Building

Tok
aid
oS

i-d

“Uchisaiwaicho
1-chome District”
redevelopment
project site

44.4

249.0 246.4 246.4

Other sponsors

104.6 104.6

 chieving four-sided daylighting full of natural light and a high level of BCP
A
considerations, including a seismic damping structure and a dual-circuit powerreceiving system using different power lines, the property provides comfortableoffice spaces good at intellectual productivity and business continuity.

kka

44.4

110.5 110.5 110.5

 27-story large-scale office/hotel complex with a total floor space of 36,100 m² andAa standard floor area of 330 tsubos. A piloti full of greenery has been established on
1F to provide a relaxing space for people in the surrounding area.

Ko

44.4

216.3

146.0

Property Characteristics

Hibiya Park

224.4

235.8 233.2 235.9 235.9 234.0

NTT Urban Development Corporation

Exp

res

Hotel portion(Owned by a third party)swa

yForward Stroke Inc.

Toei Asakusa
LineS
St him
at ba
ion s
h

i

Forward Stroke Inc.

(Note) NTT Group’s Hibiya area redevelopment:“Announcement of TOKYO CROSS PARK Concept, Unparalleled Urban Solutions
Combined with Hibiya Park and among the Largest in Tokyo with a Total Floor Space ofApprox. 1.1 Million Square Meters” (dated March 24, 2022) by NTT Urban Solutions

Total(Note) The ratio represents the percentage of the leased floor space of the relevant tenants to the gross area under lease of floors practically used for offices.

https://www.ntt-us.com/news/2022/03/news-220324-01.html(in Japanese)

8INITIATIVES ON ESG AWARENESS
Environment

SocietyInitiatives on Climate ChangeContribution to Urban Solutions of Regions

 TT Urban Development Asset Management Corporation, the Asset Manager of NUD, declared support for theN
TCFD (Task Force on Climate-related Financial Disclosures) Recommendations, and newly established the “Policy
on Adaptation to Climate Change and Resilience.”

 he NTT Urban Solutions Group aims to contribute to solving social issues through new urban solutions, which areTunique to the NTT Group and not limited to conventional real estate development. NUD will contribute to newurban solutions of the NTT Group by further strengthening ties with NTT UD, the core company of the NTT Urban
Solutions Group.

* TCFD (Task Force on Climate-related Financial Disclosures):
An international initiative established by the Financial Stability
Board (FSB) at the request of the G20 for the purpose of discussing the disclosures of climate-related information and the responses by financial institutions.

Plans to disclose information on qualitative aspects in accordance with the TCFD Recommendations going forward.

Improvement of brand power (value)

NTT Group companies(2)
Supply of developed
properties

CRE strategy

GRESB Real Estate Assessment (Fiscal 2021 Assessment)(Diversified - Office/Residential)
in Asia

GRESB Rating

GRESB Public Disclosure“Sector Leader”“4 Stars”“A” assessment (highest rank)

Promote new and unique urban solutions by the
NTT Group, leveraging on its comprehensive
strengths
 ontact for the NTT Group's urban solutions
Cbusiness
Centralized management of information onurban solutions
Coordination of products by the NTT Group andits partner companies(1)

Other real estate fund business

Sale of developed
properties(development for sale)

R E A LE S T A T E

Governancesector leader 2021

Basic Policy on Customer-Oriented Business Conduct
Acquisition of Environmental Certifications
 ewly acquired Certification for CASBEE for Real Estate for 1 property (Ueno Tosei Building/Rank S) and DBJ GreenN
Building Certification for 8 properties (3 Stars: Park Axis Yotsuya Stage, Cabin Arena Akasaka, Premier Stage HonjoAzumabashi, Premier Stage Komagome and Premier Stage Uchikanda; 2 Stars: Premier Garden Hongo, Park Axis MeijiJingumae and Premier Stage Sasazuka) in the 39th Fiscal Period.

 TT Urban Development Asset Management Corporation, the Asset Manager of NUD, adopted
N
the Principles for Customer-Oriented Business Conduct, announced by the Financial Services
Agency on March 30, 2017.
 ositioning the unitholders as customers, it formulated and publicized the policy to realizePcustomer-oriented business conduct, while disclosing the status of such initiatives at any time.
 pdated the status of the initiatives (for fiscal 2021) in April 2022, and will continue to implementUbusiness conduct earnestly and justly, putting the unitholder interest first, as the “sole asset
management company of the NTT UD Group” entrusted for asset management of listed/private
REITs and funds.
<Details of the Basic Policy and Status of Initiatives> http://www.nttud-am.co.jp/en/fiduciary-duty/index.html

Properties withexcellent environmental & social awareness9

Properties withhigh environmental & social awareness<List of Financial Business Operators that Announced Policies Based on the “Principles for Customer-Oriented Business Conduct”, etc. (as of December
31, 2021) (website of the Financial Services Agency)> https://www.fsa.go.jp/news/r3/kokyakuhoni/202202/fd_2021.html(in Japanese)

10

MANAGEMENT STATUS
IN THE 39TH FISCAL PERIOD
Changes in Occupancy Rates

Changes in Asset Size

(%)
100

Office buildings

100

97.9%

97.8%

96.8%
97.4%

98.8%

98.4%

98.6%

Residential properties

300

98.2%

96.1%

97.2%

249.0

96.6%

96.4%
95

60

properties

96.8%

97.6%

Office buildings(bn yen)

94.7%

250

bn yenResidential properties
59

59

60

60

properties

properties

246.4

246.4

bn yenbn yen59

59

59

properties

243.7

246.7

bn yenbn yenbn yenEnd of35th period

End of36th period

End of37th period

59

properties

properties

properties

243.7

243.7

End of
33rd period

End of34th periodbn yenbn yenproperties

58

properties

260.0

bn yen272.6

properties

261.8

bn yen

96.2%
200

95.1%

94.5%
93.4%

93.4%

150

90

100

50

85

85

End of30th period

End of
31st period

End of32nd period

End of
33rd period

End of34th period

End of35th period

End of36th period

End of37th period

End of38th period

End of39th period0

End of30th period

End of
31st period

End of32nd period

End of38th period

End of39th period(Note) T he occupancy rate at the end of the 37th Fiscal Period is calculated by excluding Bureau Kioicho, for which a transfer agreement was concluded on March 31, 2021.

Changes in Unrealized Gains or Losses

Changes in NOI and NOI Yields
Rental NOI for office buildings (right axis)

(%)
6
4.9%

3

5,785

mm yen

5.1%

5,855

mm yen

5.2%

5,969

mm yen

5.1%

5,867

mm yen

5.4%

6,093

mm yenRental NOI for residential properties (right axis)
5.5%

6,199

mm yen

5.3%

6,134

mm yen4.9%
6,035

mm yenNOI yield (Note) (left axis)
4.9%
5,964

(mm yen)
8,000

Unrealized gains or losses (left axis)(bn yen)70

Unrealized gains or losses as % of total value (right axis)
65.1

bn yen

4.9%
60

6,286

52.7

mm yenmm yen

(%)
70

6,000

48.1

50

bn yen54.3

57.1

bn yen58.3

60

bn yenbn yen50

bn yen40.2

bn yen

40
0

4,000

40

29.4

bn yen

30
21.2

30

23.6

bn yenbn yen

2,000

20

23.2%

9.9%
End of
31st period

End of32nd period

End of
33rd period

End of34th period

End of35th period

End of36th period

End of37th period

End of38th period

End of39th period

0

25.8%

25.4%

26.2%

27.7%
20

19.3%
10

End of30th period

25.4%

0

End of30th period

11.2%

End of
31st period

14.0%

End of32nd period10

End of
33rd period

End of34th period

End of35th period

End of36th period

End of37th period

End of38th period

End of39th period0(Note) NOI yield = annualized rental NOI* / investment value*** Annualized rental NOI = sum total of [(real estate rental income + depreciation + dividend income from preferred securities) x 2] of owned assets (including preferred securities) for eachfiscal period** Investment value = sum total of book value as of the end of each fiscal period of owned assets (including preferred securities) for each fiscal period

1112FINANCIAL STATUS
IN THE 39TH FISCAL PERIOD
Status of Interest-Bearing Liabilities (as of April 30, 2022)
Ratios of Long-Term and Short-Term Borrowings (Note)

Changes in the Average Interest Rate and Average Remaining Period to Maturity
Average remaining period to maturity (left axis)

Ratios of Fixed and Floating Interest Rate Borrowings

Average interest rate on debt financing (right axis)(year)
5

Floating interest rate

4.8

years

4.3%

4.7

4.6

years

years

4.2

4.1

years

years

3.9

4.0

years

4

4.0

years

3.7

years

3.7

years

years

3
0.69%

0.64%

0.63%

0.61%

0.61%

0.60%

2
Fixed interest rate

100%

95.7%

1.2

0.9
0.71%

Long-terminterest-bearing liabilities

(%)
1.5

0.58%

0.58%

0.57%

1

0.6

0.3

(Note) C lassification is made by using the periods from the drawdown dates for loans and from the issue dates for corporate bonds.

0Breakdown of Lenders

End of
31st period

End of32nd period

End of
33rd period

End of34th period

End of35th period

End of36th period

End of37th period

End of38th period

End of39th period

0.0(Note) Average interest rate is an average weighted by balances outstanding as of the end of the period for each nominal interest rate

Others15.9%

Sumitomo Mitsui Trust Bank

24.6%

Resona Bank

5.5%

Total Loans

116.5

9.7%

Repayment Schedule of Interest-Bearing Liabilities
NUD works to reduce the refinancing risk by diversifying repayment dates of interest-bearing liabilities.

As of April 30, 2022

MUFG Bank

Mizuho Bank

Borrowings(bn yen)20

Sumitomo Mitsui
Banking Corporation

NTT Finance Corporation

11.9%

Corporate bonds

Green bonds

17.6

20.1%

billion yen

bn yen15

14.5

bn yen

12.3%(mm yen)
Lenders

Long-term

Short-term

Total

Sumitomo Mitsui Trust Bank, Limited

28,640028,640Mizuho Bank, Ltd.

23,390023,390Sumitomo Mitsui Banking Corporation

14,350014,350NTT Finance Corporation

13,900013,900MUFG Bank, Ltd.

11,270011,270Resona Bank, Limited

6,450

0

6,450

Aozora Bank, Ltd.

5,550

0

5,550

Development Bank of Japan Inc.

5,000

0

5,000

The Norinchukin Bank

2,500

0

2,500

The Bank of Fukuoka, Ltd.

2,000

0

2,000

Mitsui Sumitomo Insurance Company, Limited

1,000

0

1,000

The 77 Bank, Ltd.

1,000

0

1,000

The Nomura Trust and Banking Co., Ltd.

1,000

0

1,000

500

0

500

116,550

0

116,550HIGASHI-NIPPON BANK, Ltd.
Total

13

End of30th period

9.7

bn yen

10

9.0

8.3

6.2

5.2

bn yenbn yen7.6

bn yen6.4

6.0

bn yenbn yenbn yen5

8.7

bn yenbn yen

4.2

5.2

4.4

bn yenbn yenbn yen3.3

bn yen3.8

3.2

bn yen1.8

bn yen0

40thperiod41st

period42nd
period43rd

period44th

period45th

period46th

period47th

period48th

period49th

period50th

period51st

period52nd
period53rd

period54th

period55th

period56th

period2.4

bn yenbn yen57th

period58th

periodCredit Rating Status
NUD has been granted an issuer rating of AA- by Japan Credit
Rating Agency, Ltd. (JCR).

Japan Credit Rating Agency, Ltd. (JCR)

AA- Stable
14

PROPERTY PORTFOLIO (as of April 30, 2022)(cont.)
No.

Area

Property Name (Note 1)

AcquisitionPrice(mm yen)(Note 2)

Share(%)
(Note 3)

Real Estate Rental Income
Period End
Occupancy
Revenues
Expenses Income
Rate (%)(mm yen) (mm yen) (mm yen)

PML
Value
(%)

No.

5 Central
Wards of
Tokyo

(Note 2)

6,341

2.3

100.0

208

94

114

10.6

D01

Landic Shimbashi 2 Building

7,045

2.6

100.0

240

82

157

12.9

D02

A03

Premier Dogenzaka Building

1,727

0.6

100.0

88

28

60

5.5

A04

KN Shibuya No.3

5,348

2.0

100.0

229

110

119

10.6

A05

Takadanobaba Center Building

5,118

1.9

100.0

264

132

132

A06

Rokubancho Building

7,860

2.9

100.0

(Note 5)(Note 5)195

A10

Urbannet Mita Building

10,300

3.8

87.1

267

176

90

A11

Urbannet Azabu Building

5,000

1.8

100.0

(Note 5)(Note 5)71

A15

Granpark

11,490

4.2

95.8

460

255

204

A17

Otemachi Financial City Grand Cube

4,680

1.7

95.6

(Note 6)(Note 6)

59

A18

Shinagawa Season Terrace

18,6876.9

93.5(Note 6)(Note 6)

A19

Tokyo Opera City Building

22,0008.1

95.8(Note 6)(Note 6)

Urbannet Uchisaiwaicho Building

5,640

2.1

98.9

(Note 6)(Note 6)

A20
Other 18
Wards of
Tokyo

Share
(%)
(Note 3)

Real Estate Rental Income
Period End
Occupancy
Revenues
Expenses Income
Rate (%)(mm yen) (mm yen) (mm yen)

PML
Value
(%)
(Note 4)

Residential Properties

Landic Shimbashi Building

A02

Property Name (Note 1)(Note 4)

Office Buildings
A01

Area

AcquisitionPrice(mm yen)

5 Central
Wards of
Tokyo

Park Axis Yotsuya Stage

5,208

1.9

92.7

162

70

91

7.4

Park Axis Meiji-Jingumae

2,604

1.0

94.6

56

19

37

9.9

D04

Cabin Arena Akasaka

1,330

0.5

100.0

39

17

22

10.1

D05

Cabin Arena Minami-Aoyama

1,070

0.4

97.9

33

18

14

11.2

2.0

D08

Roppongi Green Terrace

4,678

1.7

97.1

135

68

66

10.3

10.8

D09

Premier Stage Shibakoen II

2,181

0.8

95.5

56

27

29

11.5

7.2

D11

Langue Tower Kyobashi

927

0.3

98.2

36

14

21

12.5

10.5

D12

Premier Stage MitaKeidaimae

1,580

0.6

98.4

51

17

34

14.3

12.0

D13

Premier Rosso

1,662

0.6

93.4

59

57

1

14.0

8.6

D14

Premier Blanc Yoyogikouen

2,330

0.9

96.7

70

44

26

13.1

169

4.7

D15

Premier Stage Uchikanda

1,723

0.6

98.0

59

21

37

13.8

686

9.0

D16

Premier Stage Ichigayakawadacho

1,460

0.5

100.0

47

22

25

13.1

14

8.5

D17

Walk Akasaka

2,043

0.7

96.6

53

28

24

13.9

Premier Stage Shibakoen

1,585

0.6

97.9

46

18

27

16.1

Premier Toyocho Building

4,310

1.6

100.0

79

49

29

16.2

D18

Ueno TH Building

4,380

1.6

100.0

130

73

56

12.8

D19

MEW

1,556

0.6

100.0

38

21

16

13.9

B04

Gotanda NT Building

4,100

1.5

100.0

96

57

38

14.3

D20

Shibaura Island Air Tower

7,590

2.8

96.9

361

272

89

11.2

B05

Ueno Tosei Building

5,900

2.2

100.0

172

89

83

10.7

D21

Storia Akasaka

3,930

1.4

92.9

93

47

46

11.7

B06

Urbannet Ikebukuro Building

13,600

5.0

96.1

744

373

370

13.0

D22

Renai Shinjuku-Gyoen Tower

6,500

2.4

96.7

187

129

57

7.2

B07

Urbannet Omori Building

4,800

1.8

100.0

249

159

89

6.8

D23

Shibaura Island Bloom Tower

5,500

2.0

96.7

290

183

107

10.0

Urbannet Gotanda NN Building

5,250

1.9

92.4

65

107

-41

9.7

D24

Questcourt Harajuku

4,500

1.7

100.0

153

62

91

12.7

Premier Yokohama Nishiguchi Building

3,558

1.3

100.0

148

95

52

10.2

D25

Urbancourt Ichigaya

1,385

0.5

100.0

64

27

37

12.0

The Kanagawa Science Park R&D Building

6,556

2.4

90.9

405

398

6

10.4

D26

Premier Stage Azabu-Juban

1,420

0.5

97.2

38

17

20

14.6

NTT CRED Okayama Building

3,600

1.3

88.2

276

233

42

14.4

D27

Premier Stage Sasazuka

1,080

0.4

96.5

31

16

14

10.5

Urbannet Shizuoka Ote-machi Building

1,628

0.6

100.0

109

47

61

9.0

E01

Premier Stage Osaki

1,072

0.4

96.9

28

30

-1

12.1

Premier Garden Hongo

975

0.4

100.0

33

10

22

12.1

B02
B03

B09
C01
C02
G02
G03

Urban Areas
Surrounding
Tokyo
Major
Regional
CitiesOther 18
Wards of
Tokyo

G04

Urbannet Shizuoka Building

1,119

0.4

100.0

77

33

43

9.0

E02

G05

Urban Ace Higobashi Building

4,600

1.7

100.0

247

122

124

6.3

E03

Premier Grande Magome

1,560

0.6

97.0

45

17

27

15.7

174,637

64.1

96.2

7,119

4,083

3,036

-

E04

Premier Nozze Yutenji

1,525

0.6

100.0

42

18

23

13.6

(continued on next page)E05

Premier Stage Yushima

1,803

0.7

92.0

51

27

24

17.2

E06

Premier Stage Komagome

1,830

0.7

94.2

54

38

15

18.0

E07

Premier Stage Otsuka

1,310

0.5

97.0

43

23

19

22.5

E08

Premier Stage Honjo-Azumabashi

2,640

1.0

95.8

84

44

39

14.7

E09

Premier Stage Ryogoku

1,496

0.5

94.3

48

24

24

12.8

78,054

28.6

96.6

2,601

1,461

1,139

-

Subtotal

26 properties

Subtotal

32 properties(continued on next page)

15

16

ORGANIZATION OF NUD(PROPERTY PORTFOLIO)(cont.)
No.

Area

Property Name (Note 1)

AcquisitionPrice(mm yen)(Note 2)

Share(%)
(Note 3)

Real Estate Rental Income
Period End
Occupancy
Revenues
Expenses Income
Rate (%)(mm yen) (mm yen) (mm yen)

Structure of NUD (as of April 30, 2022)

PML
Value
(%)
(Note 4)

NTT Urban Development AssetManagement Corporation

Preferred Securities (Office Building)
Z01

5 Central
Wards ofTokyo

• Consignment of asset
management
operations• Consignment ofgeneral administration
on operation of
institutions

NTT UD REIT Investment
Corporation

UDX Special Purpose Company Preferred
Securities (Akihabara UDX)
(Note 7)

19,940Subtotal

1 property

19,940

7.3

-

-

-

-

-

(Securities)

59 properties

272,632

100.0

96.3

9,721

5,544

4,176

8.4

Principal andinterest repayment
Lending

Total

7.3

-

-

-

-

-

Investment(Note 1) N UD owns properties in the form of either beneficiary interests in real estate trust or preferred securities.

Liabilities(Note 2) T he acquisition price represents the transaction price before taxes, not including various expenses required for the acquisition of the property.

(Loans)(Note 3) T he indicated shares represent the ratio of the acquisition price of respective properties to the total acquisition price of all properties.
(Note 4) NUD acquired earthquake risk reports for real estate and real estate in trust in which NUD invests from Takenaka Corporation. However, the earthquake risk reports are only the expressionof opinions, and do not guarantee the correctness of the statements. The Probable Maximum Loss (PML) values of individual properties are defined as the loss rate from earthquake
damage for individual properties, evaluated based on the strength of a probable earthquake of maximum magnitude that could cause the greatest damage to buildings and is assumed
to happen once every 475 years. However, the PML values do not consider damage to equipment, furniture or inventories, damage by water or fire, compensation to victims, or losses
due to work closures.
In assessing the PML of the portfolio, the correlation of damages to multiple properties is considered. As such, the loss rates as a whole (total damage/price to reacquire all buildings) are
obtained from the sum of the damage generated simultaneously among buildings that comprise the portfolio when an earthquake that happens once every 475 years occurs at a certain
epicenter, and the maximum figure of the values has been set as the PML value of the portfolio.
(Note 5) The rental revenues from a leasing contract with a single major tenant constitute more than 80% of the total rental revenues for this property, and the major tenant has not agreed todisclose the rental revenues. Accordingly, NUD does not indicate these figures due to this unavoidable reason.
(Note 6) D etailed information on revenues and expenses is not indicated as no consent to disclosure has been obtained from co-ownership holders, etc.
(Note 7) T he property owned by UDX Special Purpose Company, the issuer of the preferred securities, comprises an entire office building and its site, and the property name is Akihabara UDX.

Principal andinterest repayment

AssetsEquity investment

Unitholders’capitalDistribution• Consignment of asset custodyoperations• Consignment of general administrationon accounting and transfer agent
operations• Consignment of operations related tocorporate bonds

Investment

Sumitomo Mitsui
Trust Bank and others

Rental revenues

Corporate bondinvestors

Financial
institutions, etc.

Tokyo
Stock Exchange
Unitholders

Unitholders

Real estate(Note) The above chart shows the major part of NUD’s structure

Overview of Asset Manager (as of April 30, 2022)
Trade name

NTT Urban Development Asset Management Corporation

Paid-in capital

100 million yen

Line of business

Investment management business in accordance with the Financial Instruments and Exchange Act

Shareholder composition

NTT Urban Development Corporation (100.0%)

Unitholders' Meeting
Statutory Auditors
Board of Directors
Investment Committee

Compliance Committee
President and CEO

Sustainability Promotion Committee

Compliance OfficeInternal Audit OfficeAcquisition Priority Review Meeting

Investment Marketing
Department

17

Operation I
Department

Operation II
Department

Operation III
Department

Finance
Department

Corporate Strategy
Department

Administration
Department

18

OVERVIEW OF PROPERTIES OWNED(AS OF THE END OF THE 39TH FISCAL PERIOD)
Distribution of Portfolio Properties
5 Central Wards of Tokyo
Arakawa Ward

B06

Toshima Ward

E06

E07

E02
B05

Bunkyo Ward

Taito Ward

Nakano Ward

B03

A05
Shinjuku Ward

Z01
D25

D16

Shinjuku
Station

D22

D01

Chiyoda Ward

A06

A19
D27

Tokyo
StationShibuya Ward

D13

D24
D02

D14

A03

E08

E05

D17

ShibuyaStation

D04
D21

Akihabara
StationSumida Ward

D08

A11

Setagaya Ward

Minato
Ward

D26
D12
A10

A15

E04
Meguro Ward

D18
D09

A02 Landic Shimbashi 2 Building

D01 Park Axis Yotsuya Stage

D18 Premier Stage Shibakoen

A03 Premier Dogenzaka Building

D02 Park Axis Meiji-Jingumae

D19 MEW

A04 KN Shibuya No.3

D04 Cabin Arena Akasaka

D20 Shibaura Island Air Tower

A05 Takadanobaba Center Building

D05 Cabin Arena Minami-Aoyama

D21 Storia Akasaka

A06 Rokubancho Building

D08 Roppongi Green Terrace

D22 Renai Shinjuku-Gyoen Tower

A10 Urbannet Mita Building

D09 Premier Stage Shibakoen II

D23 Shibaura Island Bloom Tower

A11 Urbannet Azabu Building

D11 Langue Tower Kyobashi

D24 Questcourt Harajuku

A15 Granpark

D12 Premier Stage MitaKeidaimae

D25 Urbancourt Ichigaya

A17 Otemachi Financial City Grand Cube

D13 Premier Rosso

D26 Premier Stage Azabu-Juban

A18 Shinagawa Season Terrace

D14 Premier Blanc Yoyogikouen

D27 Premier Stage Sasazuka

A19 Tokyo Opera City Building

D15 Premier Stage Uchikanda

Z01 UDX Special Purpose Company

Other 18 Wards of Tokyo
D11

Koto Ward

B02
Chuo Ward

Hamamatsucho
StationB02 Premier Toyocho Building

B09 Urbannet Gotanda NN Building

B03 Ueno TH Building

E01 Premier Stage Osaki

E07 Premier Stage Otsuka

B04 Gotanda NT Building

E02 Premier Garden Hongo

E08 Premier Stage Honjo-Azumabashi

B05 Ueno Tosei Building

E03 Premier Grande Magome

E09 Premier Stage Ryogoku

B06 Urbannet Ikebukuro Building

E04 Premier Nozze Yutenji

B07 Urbannet Omori Building

E05 Premier Stage Yushima

Urban Areas Surrounding Tokyo

D20
D23
D19

Tokyo

Kawasaki
City

A18
B09

Shinagawa
Station

B04
E01

Preferred Securities (Akihabara UDX)

E09

D15
A17

D05

A04

D17 Walk Akasaka

D16 Premier Stage Ichigayakawadacho

A20
A02 A01A20 Urbannet Uchisaiwaicho Building

A01 Landic Shimbashi Building

Kanagawa

C02

C01

E06 Premier Stage Komagome

Major Regional Cities
Hyogo

Okayama

G05

G02

Osaka

Yokohama
City

Shinagawa WardAichi

JR lines

G03 G04
Shizuoka

Ginza Line
Marunouchi Line
E03

Hibiya Line
Hanzomon Line
Ota Ward

B07

Nanboku Line

G01 Premier Yokohama Nishiguchi Building
G02 The Kanagawa Science Park R&D Building

G02 NTT CRED Okayama Building
G03 Urbannet Shizuoka Ote-machi Building
G04 Urbannet Shizuoka Building
G05 Urban Ace Higobashi Building

19

20

(Overview of Properties Owned (as of the end of the 39th Fiscal Period))

Preferred Securities (Office Building)

5 Central Wardsof Tokyo

UDX Special Purpose Company
Preferred Securities(Akihabara UDX) (Note)

Z01

Office Buildings

5 Central Wards of Tokyo

A01

A02

5 Central Wards of Tokyo
A18

A19

A20

(Chiyoda Ward, Tokyo)(Note) T h e p r o p e r t y o w n e d b y U DX
Special Pur pose Company, theissuer of the preferred securities,
comprises an entire office building
and its site, and the property nameis Akihabara UDX.

Forward Stroke Inc.

Landic Shimbashi Building

Photo by Kawasumi Architectural Office(Minato Ward, Tokyo)

Landic Shimbashi 2 Building

Shinagawa Season Terrace

5 Central Wards of Tokyo

Office Buildings(Minato Ward, Tokyo)(Minato Ward, Tokyo)

Tokyo Opera City Building(Shinjuku Ward, Tokyo)

Urbannet Uchisaiwaicho Building(Minato Ward, Tokyo)

Other 18 Wards of Tokyo

A03

A04

A05

A06

B02

B03

B04

B05

Premier Dogenzaka Building

KN Shibuya No.3

Takadanobaba Center Building

Rokubancho Building

Premier Toyocho Building

Ueno TH Building

Gotanda NT Building

Ueno Tosei Building(Shibuya Ward, Tokyo)(Shibuya Ward, Tokyo)(Shinjuku Ward, Tokyo)(Chiyoda Ward, Tokyo)(Koto Ward, Tokyo)(Bunkyo Ward, Tokyo)(Shinagawa Ward, Tokyo)

Other 18 Wards of Tokyo

5 Central Wards of Tokyo
A10

A11

Urbannet Mita Building

Urbannet Azabu Building(Minato Ward, Tokyo)

21(Minato Ward, Tokyo)

A15

A17

B06

B07

B09

Granpark

Otemachi Financial City Grand CubeUrbannet Ikebukuro Building

Urbannet Omori Building

Urbannet Gotanda NN Building(Minato Ward, Tokyo)(Chiyoda Ward, Tokyo)(Taito Ward, Tokyo)(Toshima Ward, Tokyo)(Ota Ward, Tokyo)(Shinagawa Ward, Tokyo)

22

(Overview of Properties Owned (as of the end of the 39th Fiscal Period))

Office Buildings

Urban Areas Surrounding Tokyo

5 Central Wards of Tokyo

C01

C02

D08

D09

D11

D12

Premier Yokohama Nishiguchi Building

The Kanagawa Science Park R&D Building

Roppongi Green Terrace

Premier Stage Shibakoen II

Langue Tower Kyobashi

Premier Stage MitaKeidaimae(Yokohama City, Kanagawa)(Kawasaki City, Kanagawa)(Minato Ward, Tokyo)

Office Buildings(Minato Ward, Tokyo)(Chuo Ward, Tokyo)

Major Regional Cities(Minato Ward, Tokyo)

5 Central Wards of Tokyo

G02

G03

G04

G05

D13

D14

D15

D16

NTT CRED Okayama Building

Urbannet Shizuoka Ote-machi Building

Urbannet Shizuoka Building

Urban Ace Higobashi Building

Premier Rosso

Premier Blanc Yoyogikouen

Premier Stage Uchikanda

Premier Stage Ichigayakawadacho(Okayama City, Okayama)(Shizuoka City, Shizuoka)(Shizuoka City, Shizuoka)

Residential Properties(Osaka City, Osaka)(Shibuya Ward, Tokyo)(Shibuya Ward, Tokyo)(Chiyoda Ward, Tokyo)(Shinjuku Ward, Tokyo)

5 Central Wards of Tokyo

5 Central Wards of Tokyo

D01

D02

D04

D05

D17

D18

D19

D20

Park Axis Yotsuya Stage

Park Axis Meiji-Jingumae

Cabin Arena Akasaka

Cabin Arena Minami-Aoyama

Walk Akasaka

Premier Stage Shibakoen

MEW

Shibaura Island Air Tower(Shinjuku Ward, Tokyo)

23

Residential Properties(Shibuya Ward, Tokyo)(Minato Ward, Tokyo)(Minato Ward, Tokyo)(Minato Ward, Tokyo)(Minato Ward, Tokyo)(Minato Ward, Tokyo)(Minato Ward, Tokyo)

24

(Overview of Properties Owned (as of the end of the 39th Fiscal Period))

Residential Properties

5 Central Wards of Tokyo

Other 18 Wards of Tokyo

D21

D22

D23

D24

E05

E06

E07

E08

Storia Akasaka

Renai Shinjuku-Gyoen Tower

Shibaura Island Bloom Tower

Questcourt Harajuku

Premier Stage Yushima

Premier Stage Komagome

Premier Stage Otsuka

Premier Stage Honjo-Azumabashi(Minato Ward, Tokyo)(Shinjuku Ward, Tokyo)(Minato Ward, Tokyo)(Shibuya Ward, Tokyo)(Bunkyo Ward, Tokyo)

5 Central Wards of Tokyo
D26

D27

E09

Urbancourt Ichigaya

Premier Stage Azabu-Juban

Premier Stage Sasazuka

Premier Stage Ryogoku(Minato Ward, Tokyo)(Shibuya Ward, Tokyo)

Residential Properties

25(Sumida Ward, Tokyo)(Sumida Ward, Tokyo)

Other 18 Wards of Tokyo

E01

E02

E03

E04

Premier Stage Osaki

Premier Garden Hongo

Premier Grande Magome

Premier Nozze Yutenji(Shinagawa Ward, Tokyo)(Toshima Ward, Tokyo)

Other 18 Wards of Tokyo

D25(Shinjuku Ward, Tokyo)(Toshima Ward, Tokyo)(Bunkyo Ward, Tokyo)(Ota Ward, Tokyo)(Setagaya Ward, Tokyo)

26

INFORMATION FOR UNITHOLDERS
Changes in Investment Unit Price of NUD

Market capitalization: 210,385 million yen
Investment unit price at the end of the 39th Fiscal Period: 150,100 yen(as of April 30, 2022)

Investment unit price (yen) (left axis)(yen)

35th Fiscal Period

36th Fiscal Period

37th Fiscal Period

Transaction volume (units) (right axis)

38th Fiscal Period(units)39th Fiscal Period

80,000150,000

60,000100,000
40,00050,00020,00000

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
Nov. Dec. Jan. Feb. Mar. Apr. May Jun.
Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun.
Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr.
2019

2020

2021

2022

Number of Investment Units by Unitholders and Number of Unitholders (as of April 30, 2022)
Foreign corporations, etc.

Individuals and others

16.1%
Other
domestic corporations

6.4%

11.6%

Other domestic corporations

Foreign corporations, etc.

2.0%

1.5%

Financial institutions(including securities companies)

Number ofinvestment units
by unitholders

1.0%

Total

Total

1,401,635
Units

Number ofUnitholders

14,908Financial institutions(including securities companies)

Individuals and others

65.7%

95.3%

(Note) The investment unit ratio has been rounded down to the first decimal place.

Annual Schedule
Apr.

May

Settlement month forthe fiscal periods ending April

Oct.
Settlement month forthe fiscal periods ending October

27

Nov.

Jun.

Jul.

Announce financial
results for the fiscal
periods ending April

Start payment of distributions forthe fiscal periods ending April
Send out asset management reportfor the fiscal periods ending April

Dec.

Jan.

Announce financial
results for the fiscal
periods ending October

Aug.

Sep.

Feb.

Mar.

Start payment of distributions forthe fiscal periods ending October
Send out asset management reportfor the fiscal periods ending October

28

(Independent Auditor’s Report cont.)

29

30

BALANCE SHEETS
as of October 31, 2021 and April 30, 2022
Thousands of yen
October 31, 2021

Thousands of yen

April 30, 2022

October 31, 2021

ASSETSLIABILITIESCURRENT ASSETSCURRENT LIABILITIESCash and depositsCash and deposits held in trust
Tenant receivables
Prepaid expenses
Income taxes refund receivables
Consumption taxes refund receivables
Other current assets(Note-5)¥(Note-5)

TOTAL CURRENT ASSETS

7,058,973
14,583,472
705,909150,809
102,643508¥

22,602,316

9,116,039
14,104,665
799,125
172,586
102,384
385,085
4,424

Accounts payable

24,684,311

Consumption taxes payable
Business office taxes payable

5,989

11,1451,800,000-

1,114,511

1,107,382

100,385

138,180

TOTAL CURRENT LIABILITIES

28,605,405

35,965,857

Long-term loans payable

(Note-9) (Note-16)

92,650,000

84,450,000

Corporate bonds

(Note-8) (Note-16)

11,200,000

11,200,000-

1,526,402

8,666,629

8,425,984

TOTAL LONG-TERM LIABILITIES

112,516,629

105,602,387

TOTAL LIABILITIES

141,122,034

141,568,244

120,350,148

132,637,845

762,316

1,111,640

4,471,518

5,681,712

TOTAL UNITHOLDERS’ EQUITY

125,583,983

139,431,198

TOTAL NET ASSETS

125,583,983

139,431,198

LONG-TERM ASSETS
Property and equipment
Buildings
StructuresLandConstruction in progress
Buildings held in trust
Structures held in trust
Tools, furniture and fixtures held in trustLand held in trustConstruction in progress held in trustLess accumulated depreciation

¥Short-term loans payable

(Note-6)

95,357,554
2,190,563
812,066
135,082,735(36,246,595)

Total property and equipment, net

207,744,937

219,992,022(Note-6)

15,031,048
284
5,975

14,998,573
261
7,407

Total intangible fixed assets

15,037,309

15,006,242(Note-16) (Note-17)

20,035,175
1,884
10,000819,166
410,533

20,035,175
3,665
17,252
819,166
379,792

Total investment and other assets

21,276,759

21,255,051

TOTAL LONG-TERM ASSETS

244,059,006

256,253,316

44,69422,08739,72644,694

61,814(Note-6)(Note-6)(Note-6)(Note-6)(Note-6)(Note-6)(Note-6)(Note-6)

Intangible fixed assets
Leasehold held in trust
Other intangible fixed assets held in trust
Other intangible fixed assets

(Note-6)(Note-6)

Investments and other assets
Investment securities
Deferred tax assets
Other deposits
Other deposits held in trust
Long-term prepaid expenses(Note-12)

DEFERRED ASSETS
New investment unit issuance costs
Corporate bond issuance costs
TOTAL DEFERRED ASSETSTOTAL ASSETS¥

266,706,018¥

2,417,369¥

2,481,786(Note-9)

3,200,000-(Note-9) (Note-16)

19,450,000

32,100,000

Accrued expenses

120,979

114,874

Distributions payable

11,917

11,065605

1,422

383,649-

Long-term loans payable due within one year

Income taxes payable

Contract liabilities
6,499,752
19,76016,273,040
3,144

97,922,603
2,170,496
753,395
142,114,509
505(35,216,572)(Note-6)

April 30, 2022

(Note-4)

Rents received in advance
Deposits received
LONG-TERM LIABILITIESTenant security deposits
Tenant security deposits held in trust

NET ASSETSUNITHOLDERS' EQUITY

(Note-7)

Unitholders’ capital
Units authorized – 10,000,000 units as of October 31, 2021
– 10,000,000 units as of April 30, 2022
Units issued and outstanding – 1,316,995 units as of October 31, 2021
– 1,401,635 units as of April 30, 2022
SurplusReserve for reduction entry
Unappropriated retained earnings

TOTAL LIABILITIES AND NET ASSETS¥

266,706,018¥

280,999,443

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

280,999,443

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

31

32

PROFIT AND LOSS STATEMENTS

STATEMENTS OF CHANGES IN
UNITHOLDERS’ EQUITY

For the six months ended October 31, 2021 and April 30, 2022

For the six months ended October 31, 2021 and April 30, 2022
Thousands of yen
October 31, 2021

Thousands of yen

April 30, 2022

Unitholders’ Equity

OPERATING REVENUES AND EXPENSES

SurplusOperating revenues
Rental revenues

(Note-10)

Other rental revenues

(Note-10)

936,729

1,022,667

Gains from sale of properties

(Note-11)

1,163,393

2,231,845

502,592

508,698¥

Dividend income

8,135,355¥

Unitholders’Capital(Note-1)

8,826,310

Operating expenses

BALANCE AT APRIL 30, 2021

(828,757)(828,757)(828,757)(828,757)

5,233,834¥ 125,583,983¥ 125,583,983

Total changes during the period

Directors' compensation

4,200

4,200

BALANCE AT OCTOBER 31, 2021

Custodian fees

12,13912,680Changes during the period

Administration fees

89,964

93,146

Audit fees

8,500

8,925

161,816

189,574

4,910,317

6,128,750

Issuance of new investment
units
Provision of reserve for
reduction entry

40

Interest expenses

409,810

400,994

Interest expenses on corporate bonds

22,80722,544

Amortization of corporate bond issuance costs

4,968

4,968

-

4,417

¥ 120,350,148¥¥

762,316¥

4,471,518

¥

-

-

-

12,287,696

12,287,696

349,323

349,323(349,323)---

Cash distributions paid

(4,122,194)(4,122,194)(4,122,194)(4,122,194)

Net income

5,681,712

5,681,712

5,681,712

5,681,712

1,210,194

1,559,518

13,847,215

13,847,215

6,793,352¥ 139,431,198¥ 139,431,198

BALANCE AT APRIL 30, 2022

12,287,696

762,316--

Total changes during the period

1,063¥ 126,412,740

4,470,830

475,247

Other non-operating revenues¥ 126,412,740

4,470,830

413,325773

6,062,592

4,470,830

Asset management fees

1,760

¥

4,470,830

15,199Return of unclaimed distribution

5,300,276

Net income

-

113

¥

(5,299,587)(Note-11)

94762,316(5,299,587)

Losses from sale of properties

Interest income¥

762,316(5,299,587)

5,661,797

Non-operating revenues¥

UnappropriatedRetained
Total Surplus
Earnings(5,299,587)

5,137,808

NON-OPERATING REVENUES AND EXPENSES

Total Voluntary
Retained
Earnings

Total
Net Assets

Cash distributions paid

(Note-10)

Operating income¥ 120,350,148

Reserve for
Reduction
Entry

Total
Unitholders'EquityChanges during the period

Property operating expenses

Other expenses

Voluntary Retained Earnings

12,287,696¥ 132,637,845

349,323¥

1,111,640

349,323¥

1,111,640¥

5,681,712¥

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

Non-operating expenses

Amortization of new investment unit issuance costs
Public listing related costs of new investment units-

11,410

2,502

2,479

4,473,146

5,682,862

4,473,146

5,682,862

Current

605

2,931

Deferred

1,711(1,781)

Net income

4,470,830

5,681,712

688-

Other non-operating expenses
Ordinary income
Income before income taxes
Income taxes

(Note-12)

Income carried forward
UNAPPROPRIATED RETAINED EARNINGS¥

4,471,518¥

5,681,712

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

33

34

CASH FLOW STATEMENTSNOTES TO FINANCIAL STATEMENTS

For the six months ended October 31, 2021 and April 30, 2022

For the six months ended October 31, 2021 and April 30, 2022
Thousands of yen
October 31, 2021

CASH FLOW FROM OPERATING ACTIVITIESIncome before income taxes
Depreciation
Amortization of corporate bond issuance costs
Amortization of new investment unit issuance costs
Interest income
Return of unclaimed distributions
Interest expenses
Decrease (increase) in tenant receivables
Increase (decrease) in accounts payable
Decrease (increase) in consumption taxes refund receivables
Increase (decrease) in consumption taxes payable
Increase (decrease) in rents received in advance
Increase (decrease) in contract liabilities
Increase (decrease) in deposits received
Decrease in carrying amounts of property and equipment held in trust due to sale
Decrease in intangible fixed assets held in trust due to sale
Other

¥

4,473,146
1,528,623
4,968
(94)
(1,760)432,618(153,745)
374,363391,606
383,649
25,9071,800,000(352,459)
1,590,909
48,873

April 30, 2022¥

5,682,862
1,590,929
4,968
4,417
(113)
(773)
423,539(93,215)
333,899(385,085)(383,649)(7,128)(1,800,000)
37,795
15,551,444
32,475(16,026)

10,546,606

20,976,340

94(441,743)
1,238
10,106,196

113(403,430)(1,855)
20,571,167(650,534)(8,828)383,096(714,111)(990,377)(22,795,083)(6,865,267)(7,252)
1,565,554(39,151)
717,865(958,493)(28,381,827)

Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Payments of corporate bond issuance costs
Payments of distributions
Proceeds from issuance of new investment unitsPayments of new investment unit issuance costs
Net cash provided by (used in) financing activities

2,000,000(2,000,000)
7,400,000(7,400,000)(3,343)(5,302,708)(5,306,052)

11,000,000(14,200,000)
9,400,000(4,950,000)(4,122,273)
12,287,696(26,505)
9,388,918

NET CHANGE IN CASH AND CASH EQUIVALENTS

3,809,766

1,578,258

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

17,832,679

21,642,445

SUBTOTAL
Interest received
Interest paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIESPayments for purchases of property and equipmentPayments for purchases of property and equipment held in trust
Payments of other deposits
Payments of other deposits in trust
Proceeds from tenant security deposits
Payments of tenant security deposits
Proceeds from tenant security deposits held in trust
Payments of tenant security deposits held in trust
Net cash provided by (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIESCASH AND CASH EQUIVALENTS AT END OF PERIODThe accompanying notes are an integral part of these financial statements.

35(Note-5)¥

21,642,445¥

23,220,704

Note-1. Organization and basis of presentation(a) Organization - NTT UD REIT Investment Corporation (hereinafter, “NUD”) is an investment corporation established in May 2002 under the
Act on Investment Trusts and Investment Corporations (hereinafter, “Investment Trusts Act”) with an initial capital of 200,000 thousand yen(400 units), and it is listed on the Tokyo Stock Exchange. NTT Urban Development Asset Management Corporation (hereinafter, “UDAM”) is
the asset manager of NUD.
For the six months ended April 30, 2022, NUD resolved on the issuance of new investment units at the board of directors’ meetings heldon October 18, 2021 and October 25, 2021. Payment was completed on November 1, 2021 for new investment units issued through public
offering, and on November 29, 2021 for new investment units issued through third-party allotment. Furthermore, equity financing NUD madein the past five years through the end of the 39th fiscal period (April 30, 2022) is summarized below.

Date

Description

Total Number of Investment Units
Issued and Outstanding(units)Increase (Decrease)

BalanceUnitholders' Capital(millions of yen)
Increase (Decrease)

BalanceNovember 1, 2021

Public offering

80,6001,397,595

11,701132,051

November 29, 2021

Third-party allotment

4,040

1,401,635

586

132,637

As of April 30, 2022, NUD had total unitholders’ capital of 132,637,845 thousand yen with 1,401,635 units outstanding.
As of April 30, 2022, NUD owned a portfolio of 26 office buildings, 32 residential properties and preferred securities of an SPC (59 properties
in total).
Total acquisition costs of those properties were 272,632 million yen, with the investment ratio by asset type standing at 64.1% for officebuildings, 28.6% for residential properties and 7.3% for others (preferred securities).
(b) Basis of presentation - The financial statements of NUD have been prepared in accordance with the provisions set forth in the Financial Instruments
and Exchange Act and other related regulations of Japan and in conformity with accounting principles and practices generally accepted in Japan,
which are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements are a translation of the audited financial statements that were prepared for Japanese domestic
purposes from the accounts and records maintained by NUD and were filed with the Kanto Local Finance Bureau of the Ministry of Financeas required by the Financial Instruments and Exchange Act. Certain items presented in the financial statements have been reclassified for theconvenience of readers outside Japan. NUD does not prepare consolidated financial statements as NUD has no subsidiaries.
NUD's fiscal period is six months, which respectively ends in April and October of each year.
Amounts less than 1 thousand yen have been omitted. As a result, the total shown in the financial statements and notes thereto do notnecessarily agree with the sum of the individual account balances.

Note-2. Summary of significant accounting policies(a) Cash and cash equivalents - Cash and cash equivalents consist of cash, demand deposits, cash and deposits held in trust, and short-term
investments. Short-term investments are highly liquid, readily convertible to cash, have an insignificant risk of change in value, and an original
maturity of three months or less.
(b) V aluation standard and method for securities Available-for-sale investment securities - Stocks and other securities with no market prices are stated at cost being determined by the moving
average method.
(c) D epreciation and amortization Property and equipment (including those held in trust) - Property and equipment are carried at cost, less accumulated depreciation. Depreciationof property and equipment, except for land, is computed by using the straight-line method at rates based on estimated useful lives.
The ranges of useful lives used in the computation of depreciation are generally as follows:
Buildings ............................................... 3-68 years
Structures ............................................... 3-58 years
Tools, furniture and fixtures ................... 3-15 years
In accordance with the amended Japanese tax law, properties and equipment acquired on or after April 1, 2007 are depreciated with theresidual value of 1 yen recognized at the end of the useful lives.

36

(Notes to Financial Statements cont.)

Properties and equipment acquired before March 31, 2007 are depreciated with the residual value of 5% of acquisition costs over useful
lives based on the tax law at that time. However, in accordance with the amended Japanese tax law, such properties and equipment are
depreciated with the residual value of 1 yen over five years from the following fiscal years after they are depreciated to the residual value of
5% of acquisition costs.
Long-term prepaid expenses - Prepaid expenses are amortized using the straight-line method.
New investment unit issuance costs - New investment unit issuance costs are amortized using the straight-line method over three years.
Corporate bond issuance costs - Corporate bond issuance costs are amortized using the straight-line method over the period through theredemption of the bonds.
(d) Income taxes - Income taxes are accounted for financial reporting purposes. The tax effect of temporary differences for the carrying amountof assets and liabilities between accounting basis and tax basis is recognized as deferred taxes.
(e) R evenue recognition Sale of properties - NUD recognizes revenues from sale of properties when the purchaser who is a customer obtains control of the relevant
property following the seller fulfilling its delivery obligations stipulated in the transaction agreement of the property. On the profit and loss
statements, the amount obtained by deducting cost of properties, which is the book value of sold properties, and other expenses for sale,
which are expenses directly related to the sale, from revenues from sale of properties, which are the proceeds from the sale of the properties,
is indicated as gains (losses) from sale of properties.
Lease of properties - NUD owns and operates office buildings and residential properties that are rented to tenants. Revenues from leasing theoffice and residential spaces are recognized on an accrual basis based on the lease agreements. Rental revenues include fixed rental revenues,
recoveries of utility charges, and other income.
(f) Property-related taxes - Property-related taxes (i.e., property tax, city planning tax and depreciable property tax) are imposed on properties
on a calendar year basis. The amount of taxes paid in the period is charged to income as property operating expenses. In accordance withJapanese business practice, at the time of disposal, the seller of the property is generally liable for property-related taxes on the property fromthe date of disposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaserof the property for the accrued property-related tax liabilities, and the amount of the settlement reflects this adjustment. NUD is allocatedthe portion of the property-related taxes for the period from the purchase date of each property through the end of the calendar year.
The amounts of those allocated portions of the property-related taxes are capitalized as part of the acquisition costs of those properties.
Capitalized property-related taxes totaled 8,536 thousand yen for the six months ended October 31, 2021 and 54,805 thousand yen for thesix months ended April 30, 2022.
(g) Method of hedge accounting - Special accounting is applied for interest rate swap transactions that satisfy the requirements for special
accounting.
Hedging instruments and hedged items - Hedging instruments: interest rate swap transactions, Hedged items: interest expenses on loans
payable.
Hedging policy - NUD conducts derivative transactions to hedge interest rate fluctuation risks for loans payable with floating interest rates
based on the “Asset Management Target and Policy” provided in its Articles of Incorporation and the risk management regulations onderivative transactions.
Method for assessing the effectiveness of hedging - Assessment of the effectiveness of hedging is omitted as requirements are satisfied forspecial accounting for interest rate swap transactions.
(h) Accounting treatment of beneficiary interest in trust accounts, including real estate - For beneficiary interests in real estate trust, which arecommonly utilized in the ownership of commercial properties in Japan and through which NUD holds all of its properties, all accounts of assets
and liabilities held in trust, as well as all income generated and expenses incurred from assets in trust, are recognized in the relevant balance
sheet and profit and loss statement.
Furthermore, the following material accounts are separately stated on the balance sheet for assets in trust recognized in relevant accounts.
(1) Cash and deposits held in trust(2) Buildings held in trust, structures held in trust, tools, furniture and fixtures held in trust, land held in trust, and construction inprogress held in trust(3) Leasehold held in trust(4) Other intangible fixed assets held in trust(5) Other deposits held in trust(6) Tenant security deposits held in trust37(i) Accounting for consumption taxes - Non-deductible consumption taxes on property acquisitions are capitalized with the acquisition costs of
the individual properties.

Note-3. Significant accounting estimates
Impairment of long-term assets(1) A mounts recorded on the financial statements

Thousands of yen
October 31, 2021
Property and equipment
Intangible fixed assets¥

207,744,431
15,031,333

April 30, 2022¥

219,988,877
14,998,835(2) Information on the details of the significant accounting estimates for identified items
In accordance with the Accounting Standard for Impairment of Fixed Assets, NUD has adopted the accounting treatment to reduce the bookvalue of long-term assets to a recoverable amount when the invested amount is deemed to be unrecoverable due to lowered profitability.
In adopting the accounting treatment, the respective properties owned by NUD are regarded as a single asset group, and judgment is madewhether it is required to recognize impairment losses when indications of impairment are deemed to exist for the group due to continuous
operating losses, a significant drop in the market value and significant deterioration of the business environment, etc.
Future cash flow estimates are used to determine whether or not to recognize impairment losses. When it is determined that impairment
losses should be recognized, the book value is reduced to the recoverable amount based on the real estate appraisal values by external
appraisers, and the reduced amount is recorded as impairment losses.
In calculating the future cash flow, the underlying rent, occupancy rate and real estate rental expenses, etc. are determined by comprehensively
taking into account the market trends and transaction cases of similar properties, etc.
The performance and the market value of each property may be affected by the trends in the real estate rental market and real estatetransaction market. Accordingly, when changes arise to the assumptions of the estimate, they may affect the financial position and results ofoperation of NUD in the following fiscal period.

Note-4. Revenue recognition
Six months ended October 31, 2021 [May 1, 2021 - October 31, 2021]
1. Breakdown information on revenues from contracts with customers:
For the breakdown information on revenues from contracts with customers, refer to Note-10 and Note-11.
Note that Note-10 includes revenues in accordance with the Accounting Standard for Lease Transactions (ASBJ Statement No.13).
Moreover, revenues generated from contracts with major customers comprise of gains from sale of properties and utilities income.
2. Information on relationship between fulfillment of performance obligations based on contracts with customers and cash flow generated fromsaid contracts, and on amount and period of revenues expected to be recognized in the following fiscal period or thereafter from contracts
with customers existing at the end of the 38th fiscal period:(1) Balance of contract liabilities, etc.
Contract liabilities represent the advance received (balance at end of period: 1,800,000 thousand yen) including deposits received fromthe buyer upon sale of properties based on the real estate transaction agreement. Contract liabilities are reversed when the amount isrecognized as revenues.
Six months ended April 30, 2022 [November 1, 2021 - April 30, 2022]
1. Breakdown information on revenues from contracts with customers:
For the breakdown information on revenues from contracts with customers, refer to Note-10 and Note-11.
Note that Note-10 includes revenues in accordance with the Accounting Standard for Lease Transactions (ASBJ Statement No.13).
Moreover, revenues generated from contracts with major customers comprise of gains from sale of properties and utilities income.
2. Information on relationship between fulfillment of performance obligations based on contracts with customers and cash flow generated fromsaid contracts, and on amount and period of revenues expected to be recognized in the following fiscal period or thereafter from contracts
with customers existing at the end of the 39th fiscal period:38

(Notes to Financial Statements cont.)(1) Balance of contract liabilities, etc.
Contract liabilities represent the advance received (balance at beginning of period: 1,800,000 thousand yen) including deposits received
from the buyer upon sale of properties based on the real estate transaction agreement. Contract liabilities are reversed when the amountis recognized as revenues.
Of the revenues recognized in the six months period ended April 30, 2022, the amount included in the contract liabilities at the beginningof the period is 1,800,000 thousand yen.

Note-5. Cash and cash equivalents

Note-7. Unitholders’ equity
NUD issues investment units in accordance with the Investment Trusts Act. All the proceeds from the issuance of new units are designated asstated capital. NUD maintains minimum net assets of at least 50,000 thousand yen as required by the Investment Trusts Act.

Note-8. Corporate bonds
Corporate bonds for the six months ended October 31, 2021 and April 30, 2022 were as follows:

Thousands of yen

Cash and cash equivalents as of October 31, 2021 and April 30, 2022 consisted of the following:

October 31, 2021
(Amount)

Thousands of yen
October 31, 2021
Cash and deposits¥

7,058,973

Cash and deposits held in trust

April 30, 2022¥

14,583,472

CASH AND CASH EQUIVALENTS¥

21,642,445

Unsecured bond No.7 (issued on July 24, 2018 and due on July 24, 2023)

9,116,039
14,104,665¥

23,220,704

0.58

Unsecured bond No.9 (issued on April 27, 2021 and due on April 26, 2024) (green bond)

2,000,000

2,000,000

0.06

Unsecured bond No.10 (issued on April 27, 2021 and due on April 25, 2031) (green bond)

3,200,000

3,200,000

0.50

11,200,000-¥

April 30, 2022
Accumulated
depreciation¥

11,200,000¥-

More than two years and three
years or lessMore than three years and four
years or less--

4,000,000(thousands of yen)More than four years and five years
or less-

Book value

Note-9. Short-term and long-term loans

Property and equipment

Short-term and long-term loans as of October 31, 2021 and April 30, 2022 consisted of the following:

Buildings and structures
Buildings¥

Structures

-

¥

-

¥

-

¥

6,499,752¥

91,033¥

6,408,719---

19,760276

19,483

Land

-

-

-

16,273,040-

16,273,040

Construction in progress

-

-

-

3,144

-

3,144

Property and equipment held in trust
Buildings and structures
Buildings¥

Structures
Tools, furniture and fixtures
Land
Construction in progress
SUBTOTAL

97,922,603¥

33,509,899¥

64,412,704¥

95,357,554¥

34,360,025¥

60,997,528

2,170,496

1,288,437

882,059

2,190,563

1,324,615

865,947

753,395

418,235

335,159

812,066

470,643

341,422

142,114,509-

142,114,509

135,082,735-

135,082,735

505

-

505

-

-

-

242,961,510

35,216,572

207,744,937

256,238,617

36,246,595

219,992,022

15,031,048-

15,031,048

14,998,573-

14,998,573

Intangible fixed assets held in trust
Leasehold
Other intangible fixed assets

6,469

6,184

284

6,469

6,207

261

41,60435,628

5,975

43,71336,305

7,407

SUBTOTAL

15,079,123

41,813

15,037,309

15,048,756

42,51315,006,242

TOTAL¥ 258,040,633

35,258,386¥ 222,782,247¥ 271,287,373

36,289,108¥ 234,998,265

Other

¥

¥

A government subsidy of 19,834 thousand yen, granted for the capital expenditures at The Kanagawa Science Park R&D Building in 2006, hasbeen deducted from the acquisition cost of the building held in trust.

39

More than one year and two years
or less

One year or lessAcquisition
costs

0.25

4,000,000

Thousands of yen

Book value

2,000,000* The anticipated maturities of corporate bonds for the following five years beginning May 1, starting in 2022 are as follows:

Property and equipment and intangible fixed assets as of October 31, 2021 and April 30, 2022 consisted of the following:

Accumulated
depreciation¥

4,000,000

TOTAL

October 31, 2021

2,000,000

Unsecured bond No.8 (issued on July 24, 2018 and due on July 24, 2028)

Note-6. Schedule of property and equipment and intangible fixed assets

Acquisition
costs

¥

April 30, 2022
(Amount)

Interest
rate(%)

Thousands of yen
LenderOctober 31,
2021(Amount)

Increase

Averageinterest Repayrate *1
ment
(%)

April 30,
2022
(Amount)

Decrease

Use
of
funds

Remarks

SHORT-TERM LOANS
Sumitomo Mitsui Trust Bank, Limited

700,000-

700,000-

Mizuho Bank, Ltd.

500,000-

500,000-

Mizuho Bank, Ltd.

2,000,000-

2,000,000--

11,000,000

11,000,000-

3,200,000

11,000,000

14,200,000-

Sumitomo Mitsui Trust Bank, Limited

1,050,000-

1,050,000-

Sumitomo Mitsui Trust Bank, Limited

1,950,000-

1,950,000-

Sumitomo Mitsui Banking Corporation

1,950,000-

1,950,000-

Sumitomo Mitsui Trust Bank, Limited

3,500,000--

3,500,000

MUFG Bank, Ltd.

1,800,000--

1,800,000

Sumitomo Mitsui Banking Corporation

1,200,000--

1,200,000

Sumitomo Mitsui Trust Bank, Limited
SUBTOTAL

0.23545

Mar. 31,2022*2

Unsecured andnon-guaranteed Floating rate

Jul. 29,2022
13,0.21545 Dec.
2021

Unsecured andnon-guaranteed Floating rate

0.87000

Mar. 31,2022

Unsecured andnon-guaranteed Fixed rate

0.91375

Apr. 28,2022

0.23545

Unsecured andnon-guaranteed Floating rate

LONG-TERM LOANS*3 *4

0.86625

Jul. 29,2022*2

Unsecured andnon-guaranteed Fixed rate

Unsecured andnon-guaranteed Fixed rate(continued on next page)40

(Notes to Financial Statements cont.)(cont.)(cont.)
Thousands of yen
LenderOctober 31,
2021(Amount)

Increase

April 30,
2022
(Amount)

Decrease

MUFG Bank, Ltd.

3,000,000--

3,000,000

The Norinchukin Bank

2,500,000--

2,500,000

Mizuho Bank, Ltd.

2,500,000--

2,500,000

Aozora Bank, Ltd.

3,000,000--

3,000,000

NTT Finance Corporation*53,000,000--

3,000,000

Resona Bank, Limited.

3,000,000--

3,000,000

Mitsui Sumitomo Insurance Company,
Limited1,000,000--

1,000,000

Sumitomo Mitsui Trust Bank, Limited

1,000,000--

1,000,000

Sumitomo Mitsui Banking Corporation

1,000,000--

1,000,000

Sumitomo Mitsui Trust Bank, Limited

550,000--

550,000

Aozora Bank, Ltd.

700,000--

700,000

Mizuho Bank, Ltd.

2,040,000--

2,040,000

Sumitomo Mitsui Trust Bank, Limited

1,140,000--

1,140,000

MUFG Bank, Ltd.

1,220,000--

1,220,000

Sumitomo Mitsui Trust Bank, Limited

4,000,000--

4,000,000

Averageinterest Repayrate *1
ment
(%)

Thousands of yen
Remarks31,
0.80125 Aug.
2022

Unsecured andnon-guaranteed Fixed rate

30,
0.73875 Nov.
2022

Unsecured andnon-guaranteed Fixed rate30,
0.72875 Nov.
2022

Unsecured andnon-guaranteed Fixed rate30,
0.52380 Aug.
2024

Unsecured andnon-guaranteed Fixed rate30,
0.52380 Aug.
2024

Unsecured andnon-guaranteed Fixed rate

0.623800.62380

Oct. 30,
2026

Unsecured andnon-guaranteed Fixed rate

Oct. 30,
2026

Unsecured andnon-guaranteed Fixed rate30,
0.73500 Nov.
2026

Sumitomo Mitsui Banking Corporation

3,000,000--

3,000,000

Mizuho Bank, Ltd.

2,000,000--

2,000,000

Mizuho Bank, Ltd.

2,700,000--

2,700,000

0.42875

NTT Finance Corporation*54,000,000--

4,000,000

0.53250

Sumitomo Mitsui Trust Bank, Limited

3,300,000--

3,300,000

0.59880

The Bank of Fukuoka

2,000,000--

2,000,000

The 77 Bank, Ltd.

1,000,000--

1,000,000

The Nomura Trust and Banking Co., Ltd.

1,000,000--

1,000,000

HIGASHI-NIPPON BANK, Ltd.

500,000--

Sumitomo Mitsui Trust Bank, Limited

500,000-

Aozora Bank, Ltd.

1,100,000

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited

Unsecured andnon-guaranteed Fixed rate

LenderOctober 31,
2021(Amount)

Increase

April 30,
2022
(Amount)

Decrease

Unsecured andnon-guaranteed Fixed rate

0.23375

Mar. 29,2024

Unsecured andnon-guaranteed Fixed rate

0.65125

Mar. 30,
2029

Unsecured andnon-guaranteed Fixed rate

1,000,000

0.19520

Unsecured andnon-guaranteed Fixed rate-

2,000,000

0.37880--

1,200,000

0.45065

Mar. 29,
2024
Sep. 30,2026
Mar. 31,2028

2,000,000--

2,000,000

MUFG Bank, Ltd.

2,000,000--

2,000,000

0.45065

Mar. 31,2028

Unsecured andnon-guaranteed Fixed rate

Sumitomo Mitsui Trust Bank, Limited

3,000,000--

3,000,000

Unsecured andnon-guaranteed Fixed rate

Sumitomo Mitsui Trust Bank, Limited

1,000,000--

1,000,000

Mizuho Bank, Ltd.

3,000,000--

3,000,00029,0.29755 Nov.
2024
30,
0.46500 Nov.
2028
30,
0.49755 Nov.
2029
30,
0.51755 Nov.
2029
31,
0.61304 Aug.
2029
31,
0.28380 Mar.
2025
28,
0.55943 Sep.
2029
29,
0.61005 Mar.
2030
31,
0.41505 May2028
31,
0.52375 May
2030
30,
0.57250 Sep.
2031-

750,000

MUFG Bank, Ltd.

1,250,000--

1,250,000

Mizuho Bank, Ltd.

1,500,000--

1,500,000

Resona Bank, Limited

1,500,000--

1,500,000

Sumitomo Mitsui Trust Bank, Limited

1,500,000--

1,500,000

Mizuho Bank, Ltd.

750,000--

750,000

Resona Bank, Limited

750,000--

750,000

Sumitomo Mitsui Trust Bank, Limited

1,000,000--

Sumitomo Mitsui Banking Corporation

2,000,000-

NTT Finance Corporation*5

1,200,000

Development Bank of Japan Inc.

-

2,000,000

NTT Finance Corporation*52,500,000--

2,500,000

Unsecured andnon-guaranteed Fixed rate

Sumitomo Mitsui Trust Bank, Limited

1,500,000--

1,500,000

Unsecured andnon-guaranteed Fixed rate

Mizuho Bank, Ltd.

1,300,000--

1,300,000

Unsecured andnon-guaranteed Fixed rate

NTT Finance Corporation*5

700,000--

700,000

Sumitomo Mitsui Banking Corporation

3,200,000--

3,200,000

Mizuho Bank, Ltd.

1,800,000--

1,800,000

Mizuho Bank, Ltd.

2,400,000--

2,400,000

500,000

Mizuho Bank, Ltd.

-2,400,000-

2,400,000-

500,000

Sumitomo Mitsui Trust Bank, Limited-

1,600,000-

1,600,000--

1,100,000

0.40005

1,500,000--

1,500,000

2,600,000--

2,600,000

31,0.28875 Aug.
2023

NTT Finance Corporation*5-500,000-

500,000

Mar. 27,
2026

Unsecured andnon-guaranteed Fixed rate

MUFG Bank, Ltd.

-

500,000-

500,000

0.61125

Sumitomo Mitsui Trust Bank, Limited-

1,950,000-

1,950,000

0.78500

Unsecured andnon-guaranteed Fixed rate

Sumitomo Mitsui Banking Corporation-

1,950,000-

1,950,000

0.71625

Unsecured andnon-guaranteed Fixed rate

SUBTOTAL

112,100,000

9,400,000

4,950,000

116,550,000

115,300,000 ¥

20,400,000 ¥

19,150,000 ¥

116,550,000

Unsecured andnon-guaranteed Fixed rate

0.61125

Development Bank of Japan Inc.

3,000,000--

3,000,000

0.66649

Mar. 27,2026
Apr. 30,2026

Mizuho Bank, Ltd.

1,000,000--

1,000,000
0.76755

Jul. 24,2028-

500,000

TOTAL¥

Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate
Unsecured andnon-guaranteed Fixed rate

Unsecured andnon-guaranteed Fixed rate

Unsecured andnon-guaranteed Fixed rate

1,500,000

Unsecured andnon-guaranteed Fixed rate

Apr. 30,
2030
Apr. 27,2029

0.54505-

Unsecured andnon-guaranteed Fixed rate

Unsecured andnon-guaranteed Floating rate

500,000-*2

Mar. 31,2023-

1,500,000

Unsecured andnon-guaranteed Fixed rate

0.24486

500,000

MUFG Bank, Ltd.

Unsecured andnon-guaranteed Fixed rate

Unsecured andnon-guaranteed Floating rate-

1,200,000

Unsecured andnon-guaranteed Fixed rate

Mar. 31,2023

Sumitomo Mitsui Banking Corporation-

Unsecured andnon-guaranteed Fixed rate

0.22486

Unsecured andnon-guaranteed Fixed rate--

0.49877

Mar. 27,2023
Mar. 27,2025

1,200,000

500,000

Unsecured andnon-guaranteed Fixed rate

Remarks

31,
0.76880 Aug.
2027

-

-

May 31,
2023
May 31,
2024
May 30,
2025

Use
of
funds

Unsecured andnon-guaranteed Fixed rate

750,000

2,000,000*2Averageinterest Repayrate *1
ment(%)
Feb. 29,2024
31,0.76880 Aug.
2027

Aozora Bank, Ltd.

NTT Finance Corporation*5

Resona Bank, Limited

Sumitomo Mitsui Trust Bank, Limited

Use
of
funds

Unsecured andnon-guaranteed Fixed rate

*1	Floating interest rates in the table above represent the weighted average interest rates for the period. For loans for which NUD conducted interest rate swap transactions in order to reducethe interest rate fluctuation risk, the fixed rate interests obtained by taking into account the effect of the interest rate swaps are indicated.

(continued on next page)41

42

(Notes to Financial Statements cont.)*2	All the loans are used for such purposes as purchasing beneficiary interests in real estate trust, repaying existing borrowings and redeeming corporate bonds.
*3	Long-term loans payable due within one year on the balance sheets are included in long-term loans in the table above for the purpose of indicating the loans in accordance with respective
loan agreements.
*4	The anticipated maturities of long-term loans for the following five years beginning May 1, starting in 2022 are as follows:

Note-11. Gains and losses from sale of properties
Gains from sale of properties for the six months ended October 31, 2021 were as follows:

Thousands of yen(thousands of yen)
One year or less¥More than one year and two years
or less

32,100,000

More than two years and three
years or lessMore than three years and four
years or less

12,250,000

11,600,000

10,950,000

More than four years and five years
or less

October 31, 2021

15,400,000*5	Pursuant to the loan claim transfer agreement concluded on June 28, 2022 between NTT Finance Corporation and NTT TC Leasing Co., Ltd., NTT Finance Corporation transferred all of its
loan claims based on the relevant loan agreement and all of its contractual position, rights and obligations under the said loan agreement as the transferor, to NTT TC Leasing Co., Ltd. as ofJune 30, 2022.

Bureau Kioicho
Revenues from sale of properties¥

Cost of properties

1,590,909

Other expenses for saleNote-10. Rental revenues and expenses

GAINS FROM SALE OF PROPERTIES

2,850,000

95,696¥

1,163,393

Rental revenues and expenses for the six months ended October 31, 2021 and April 30, 2022 were as follows:
Gains and losses from sale of properties for the six months ended April 30, 2022 were as follows:

Thousands of yen
October 31, 2021

Thousands of yen

April 30, 2022

April 30, 2022

REAL ESTATE RENTAL REVENUES

Sphere Tower Tennozu

Rental revenues¥

Rents
Common area charges
Subtotal

6,982,724¥

7,569,695

Revenues from sale of properties

1,152,631

1,256,615

Cost of properties

8,135,355

8,826,310

Other expenses for sale
GAINS FROM SALE OF PROPERTIESOther rental revenues
Utilities income

493,187471,749

Parking fees

229,917249,133

Facility fees

57,515

123,576

Other incidental revenues

45,883

51,336

Miscellaneous income

110,226

126,872

Subtotal

936,729

1,022,667

TOTAL REAL ESTATE RENTAL REVENUES

9,072,085

9,848,978¥18,000,000
15,551,444
216,710¥2,231,845

Shinagawa Season Terrace
Revenues from sale of properties¥

Cost of properties

17,27532,475

Other expenses for sale
LOSSES FROM SALE OF PROPERTIES¥

15,199* The losses from sale of properties for Shinagawa Season Terrace are due to its partial sale in accordance with the expropriation of leasehold held in trust for the property.

REAL ESTATE RENTAL EXPENSES

Note-12. Income taxes

Property operating expenses
1,109,987

1,308,530

Utilities

565,652

672,964

Real estate taxes

624,230

615,344

Insurance

14,495

16,558Maintenance and repairs

699,234

821,894

Statutory tax rate

Trust fees

29,63031,430Adjustments

Depreciation

1,527,946

1,590,252

Rent expenses

482,427475,321

Miscellaneous expenses

84,202

129,500

5,137,808

5,661,797

Property management fees

TOTAL REAL ESTATE RENTAL EXPENSES
REAL ESTATE RENTAL INCOME

43¥

3,934,277¥

Income taxes in Japan applicable to NUD consist of corporate income tax, enterprise tax, and inhabitant tax. The following is reconciliation
between the statutory income tax rate in Japan and the effective tax rate reflected in the accompanying financial statements for the six months
ended October 31, 2021 and April 30, 2022:

October 31, 2021

April 30, 2022

31.46%

31.46%

Deductible cash distributions(28.97)(31.46)Other(2.44)

0.02

0.05%

0.02%

EFFECTIVE TAX RATE

4,187,180

44

(Notes to Financial Statements cont.)

Under NUD’s distribution policy, cash distributions are made in excess of 90% of distributable income as defined in the Special Taxation
Measures Law of Japan for the fiscal period to qualify for conditions as set forth in the Special Taxation Measures Law to achieve a deductionof cash distributions for income tax purposes. Based on such policy, NUD treated the cash distributions as tax deductions allowed in theSpecial Taxation Measures Law.
The tax effects of significant temporary differences that resulted in net deferred tax assets or liabilities as of October 31, 2021 and April 30,
2022 were as follows:

Operating leases (as lessor)

Thousands of yen
October 31, 2021
Due within one year
Due after one year

Thousands of yen
October 31, 2021¥

April 30, 2022

1,210,735¥

4,037,952
TOTAL¥

5,248,688

2,047,485
5,175,527¥

7,223,012

April 30, 2022

Deferred tax assets
Enterprise taxes¥

Total of deferred tax assets

1,884

¥

3,665

1,884

NET DEFERRED TAX ASSETS

¥

1,884

3,665
¥

3,665

Note-13. Per unit information
The following table summarizes the net assets per unit as of October 31, 2021 and April 30, 2022 and the net income per unit for the six
months ended October 31, 2021 and April 30, 2022:

October 31, 2021
Net assets per unit¥

Net income per unit

April 30, 2022

95,356¥99,477

3,394

4,055

*1	The net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding for the respective six-month period. Diluted net income per unit
is not presented since no warrants and convertible bonds were outstanding during the six months ended October 31, 2021 and April 30, 2022.

Note-15. Distribution information
Pursuant to the distribution policy set forth in Article 13, Paragraph 1 of NUD’s Article of Incorporation, the maximum distribution amount cannot
exceed the unappropriated retained earnings, and this amount must exceed 90% of the “distributable income” which is defined in Article 67-15
of the Special Taxation Measures Law of Japan. No cash distributions exceeding the unappropriated retained earnings as set forth in Article 13,
Paragraph 2 of the NUD’s Article of Incorporation were made.
[October 31, 2021]
In accordance with this policy, NUD declared a total distribution of 4,122,194,350 yen as distribution of income for the 38th fiscal period (payment
to start on January 20, 2022), which was the maximum value of unappropriated retained earnings after deducting provision of reserve for
reduction entry, in application of the Special Provisions for Taxation in Cases of Repurchase of Specified Assets (Article 65-7 of the Special
Taxation Measures Law of Japan), arrived at when the number of units outstanding (1,316,995 units) was multiplied by an integer.
[April 30, 2022]
In accordance with this policy, NUD declared a total distribution of 5,682,228,290 yen as distribution of income for the 39th fiscal period (payment
to start on July 15, 2022), which was the maximum value of unappropriated retained earnings after adding reversal of existing reserve for
reduction entry, arrived at when the number of units outstanding (1,401,635 units) was multiplied by an integer.
Income carried forward after the distributions for the six months ended October 31, 2021 and April 30, 2022 were as follows:*2	The basis for calculating net income per unit was as follows:

October 31, 2021
Thousands of yen
October 31, 2021

Net income¥

4,470,830

Amount not attributable to ordinary unitholders
Net income related to ordinary units
Average number of units during the period

Unappropriated retained earnings

April 30, 2022¥

5,681,712--

4,470,830

5,681,712

1,316,995 units

1,401,010 units¥(Reversal of reserve for reduction entry)
Cash distributions declared(Cash distribution declared per unit)

Operating leases (as lessee)

Thousands of yen
October 31, 2021
Due within one year¥

Due after one year¥

12,558,098
TOTAL

45

562,302

April 30, 2022¥

13,120,401

550,264
12,014,113¥

12,564,377¥

5,681,712,731-

855,968

4,122,194,350

5,682,228,290(3,130)(4,054)349,323,935-

Voluntary retained earnings

INCOME CARRIED FORWARD

NUD leases some properties to tenants under non-cancellable operating leases. As of October 31, 2021 and April 30, 2022, the future lease
expenses and revenues under the non-cancellable operating leases were as follows:

4,471,518,285

Voluntary retained earnings(Provision of reserve for reduction entry)

Note-14. Leases

April 30, 2022

¥

0

¥

340,409

Note-16. Financial instruments(a) Items concerning the current status of financial instruments
Policies on financial instruments - NUD procures funds for acquiring properties, conducting maintenance and repairs, repaying interest-bearing
liabilities and for other purposes primarily through borrowings from financial institutions, issuing corporate bonds or issuing new investment
units.
With regard to temporary surplus funds, tenant security deposits held in trust, etc., NUD manages them as bank deposits in consideration ofsuch factors as safety and liquidity.
Moreover, NUD owns investment securities (preferred securities backed by the cash flow gained from real estate) as part of its real estate
investment.

46

(Notes to Financial Statements cont.)

As for derivative transactions, NUD may use them only to hedge against interest rate fluctuation risks arising from liabilities.
Description of financial instruments, their respective risks and risk management structure - Short-term loans, long-term loans and corporate
bonds are means of fund procurement primarily for acquiring trust beneficiary interests and repaying interest-bearing liabilities. Although loans
and corporate bonds are exposed to liquidity risk upon the arrival of repayment dates, NUD manages the risk by such measures as working tomaintain and enhance its ability to procure funds from the capital market through issuing investment units, by controlling the ratio of interestbearing liabilities to total assets within a range considered appropriate, creating fund procurement plans as early as possible by regularly
checking liquidity on hand through making monthly cash payment schedules, etc., and preparing necessary funds based on such plans.
In addition, although loans with floating interest rates are exposed to interest rate fluctuation risk, NUD manages the risk by adjusting the ratioof the balance of loans with floating interest rates to the entire loans in accordance with the financing environment, as well as utilizing derivativetransactions (interest rate swap transactions) as hedging instruments.
The investment securities (preferred securities backed by the cash flow gained from real estate) are exposed to liquidity risk, credit risk of theissuer, etc., in addition to investment risks specific to real estate. However, NUD will manage such risks by maintaining the ratio of the investment
securities to its total assets at a certain level, and by employing such measures as assessing the financial status on a regular basis.
Supplemental explanation on items concerning fair value of financial instruments - Since calculation of the fair value of financial instruments
uses certain assumptions and conditions, the calculated prices may differ if different assumptions and conditions are used. As for the contract
amount and other conditions of derivative transactions indicated in “(b) Items concerning fair value of financial instruments” below, the contract
amount is not an indicator of the market risks related to such derivative transactions.
(b) Items concerning fair value of financial instruments - The book values recorded on the balance sheet, fair values and their difference as of
October 31, 2021 and April 30, 2022 were as follows. Furthermore, notes on "Cash and deposits," "Cash and deposits held in trust" and"Short-term loans payable" are omitted as these are settled with cash and within a short period of time and thus the fair value approximates
the book value.

Thousands of yen
October 31, 2021

April 30, 2022

Book value

Fair value(1) Long-term loans payable due within one year

19,450,000

19,550,070

100,070(2) Long-term loans payable

92,650,000

92,920,622

270,622(3) Corporate bonds

11,200,000(4) Derivative Transactions¥-

Difference Book value

11,174,840¥-(25,160)¥-

Fair value

Difference

32,100,000

32,187,737

87,73784,450,000

84,060,879(389,120)

11,200,000¥-

11,117,680
¥

-

¥

-

*2 Stocks and other securities with no market prices:
Investment securities - The preferred securities (recorded on the Balance Sheets at 20,035,175 thousand yen as of October 31, 2021 and April 30, 2022, respectively) are excluded from thedisclosure of fair value of financial instruments in accordance with Paragraph 5 of Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19(revised 2020) issued on March 31, 2020).
*3 Planned repayment and redemption amounts of loans and corporate bonds as of October 31, 2021 and April 30, 2022 are as follows:

Thousands of yen

Long-term loans payable¥

Corporate bonds

¥

TOTAL

47

19,450,000¥

19,450,000

19,800,000

More than two years More than three years
and three years or less and four years or less¥

2,000,000¥

21,800,000

9,500,000¥

2,000,000¥

11,500,000

9,300,000

More than four years
and five years or lessMore than five years

¥

¥

¥

Within one year
Long-term loans payable¥

32,100,000

Corporate bonds

¥

TOTAL

¥

32,100,000

More than two years More than three years
and three years or less and four years or less

10,950,000¥

4,000,000¥

14,950,000

12,250,000¥¥

12,250,000

11,600,000

More than four years
and five years or lessMore than five years¥¥

15,400,000¥

11,600,000¥

15,400,000

34,250,000
7,200,000¥

41,450,000

Note-17. Investment securities
Investment securities represent the preferred securities issued by UDX Special Purpose Company, which are backed by cash flows from Real
Estate Property managed by UDX Special Purpose Company. NUD owns 53,580 units (19.0% equity) of the preferred securities (282,000 units intotal) as of October 31, 2021 and April 30, 2022, respectively.
These securities are excluded from the disclosure of fair value in accordance with Paragraph 5 of Implementation Guidance on Disclosures about
Fair Value of Financial Instruments (ASBJ Guidance No. 19 (revised 2020) issued on March 31, 2020).

Note-18. Derivative transactions(a) D erivatives to which hedge accounting is not applied - Not applicable for the six months ended October 31, 2021 and April 30, 2022.
(b) Derivatives to which hedge accounting is applied - For the six months ended October 31, 2021 and April 30, 2022, the following table shows
the contract amount or amount equivalent to the principal provided in the contract as of the closing date for each method of hedge
accounting.
Thousands of yen
October 31, 2021
Type of hedge
accounting

Type of derivativetransactions, etc.

Major
hedged item

Special accounting forinterest rate swaps

Interest rate swap transaction
Receivable floating; payable fixedLong-termloans payable

Contract
amount, etc.

¥ 87,080,000

Of which,exceeding one year

Fair value

Calculation
method for thefair value¥ 67,630,000*-

Thousands of yen
April 30, 2022
Type of hedge
accounting

Special accounting forinterest rate swaps

Type of derivativetransactions, etc.

Interest rate swap transaction
Receivable floating; payable fixedMajor
hedged item

Long-termloans payable

Contract
amount, etc.

¥ 82,130,000

Of which,exceeding one year

Fair value

Calculation
method for thefair value¥ 59,630,000*-* Transactions for which special accounting for interest rate swaps is applied are combined with long-term loans payable for accounting purposes. Accordingly, their fair value is included in thefair value of the relevant long-term loans payable.

October 31, 2021
Within one year

April 30, 2022
More than one year
and two years or less(82,320)*1 The following methods are used to estimate the fair value of financial instruments:(1) Long-term loans payable due within one year and (2) long-term loans payable - For long-term loans payable with floating interest rates, book values are used to determine their fair values
as the fair values are considered to approximate the book values because these instruments reflect market interest rates over the short term. However, fair values of certain long-term loans
payable with floating interest rates that qualify for the special accounting of interest rate swaps (refer to Note-18. Derivative Transactions below) are based on the method of calculatingby discounting the sum of their principal and interest payments net of any cash flows from the interest-rate swap by estimated rates assumed in the event that NUD borrows new loans
corresponding to the remaining periods. Moreover, fair values of long-term loans payable with fixed interest rates are based on the method of calculating by discounting the sum of theirprincipal and interest by the rates assumed in the event that NUD borrows new loans corresponding to the remaining periods.
(3) Corporate bonds - Fair values of these instruments are calculated based on their market prices.
(4) Derivative Transactions - Refer to Note-18. Derivative Transactions below.

More than one year
and two years or lessThousands of yen

9,300,000

14,700,000-¥

14,700,000

39,350,000
7,200,000¥

46,550,000

48

(Notes to Financial Statements cont.)

Note-19. Rental property
NUD owns office buildings and residential properties for rental purposes mainly in the 23 wards of Tokyo. The book values of these rental
properties recorded on the balance sheets as of October 31, 2021 and April 30, 2022, the changes during the fiscal period and their fair values
are as follows:
Thousands of yen
April 30, 2022

October 31, 2021
*1

*2

*1

Book value at Increase and Book value at
May 1,
Decrease during October 31
2021
the period
2021
Office buildings¥ 157,559,053 ¥Residential properties
TOTAL

67,396,196¥ 224,955,250 ¥*3*4

Fair value at
October 31
2021

*1

(246,038) ¥ 157,313,015 ¥ 194,604,000 ¥ 157,313,015 ¥(1,933,445)

65,462,750*2*1Book value at Increase and Book value atNovember 1, Decrease during
April 302021
the period
2022

86,890,000

65,462,750(2,179,484) ¥ 222,775,765 ¥ 281,494,000 ¥ 222,775,765 ¥*3Fair value atApril 302022

Six months ended April 30, 2022 [November 1, 2021 - April 30, 2022](i)	Information by product/service category - Description has been omitted because operating revenues from external customers in asingle product/service category account for over 90% of the operating revenues on the profit and loss statements.
(ii)	Information on geographical area Operating revenues - Description has been omitted because operating revenues from external customers in Japan account for over
90% of the operating revenues on the profit and loss statements.
Property and equipment - Description has been omitted because the amount of property and equipment located in Japan accounts
for over 90% of the amount of property and equipment on the balance sheets.
(iii)	Information by major customer Customer's name12,569,513 ¥ 169,882,528 ¥ 210,334,000(357,566)

65,105,184

89,840,000

Not disclosed *Operating revenues(thousands of yen)
¥ 2,231,845

Related segment
Real estate rental business* The name, etc. of the customer, which is a domestic corporation, are not disclosed as no consent to disclosure has been obtained from the buyer.
Note that the customer does not fall under the category of related parties of NUD.

12,211,947 ¥ 234,987,712 ¥ 300,174,000*1	The book values recorded on the balance sheets represent the amounts obtained by deducting the accumulated depreciation from the acquisition prices (including incidental expenses
accompanying the acquisitions). Note that construction in progress and construction in progress held in trust are not included.
*2	Of the increases and decreases in rental properties during the period, major increases in the six months ended October 31, 2021 are due to the capital expenditures (939,822 thousand yen)for owned properties, and major decreases are due to the sale of Bureau Kioicho (1,590,909 thousand yen) and the depreciation (1,527,946 thousand yen). Major increases in the six months
ended April 30, 2022 are due to the acquisition of Tokyo Opera City Building and Urbannet Uchisaiwaicho Building (28,188,122 thousand yen) and the capital expenditures (1,174,519
thousand yen) for owned properties, and major decreases are due to the sale of Sphere Tower Tennozu and the partial sale of Shinagawa Season Terrace in accordance with the expropriationof leasehold held in trust for the property (15,583,920 thousand yen) and the depreciation (1,590,252 thousand yen).
*3	The fair values at the end of the fiscal periods in the above table are appraisal values based on external real estate appraisers.
*4	The appraisal value of Sphere Tower Tennozu, which NUD sold as of December 10, 2021, for the fair value at October 31, 2021 in the above table uses the sale price indicated in the trust
beneficiary interests transaction agreement for the property.

Note-21. Subsequent events
Not applicable

In addition, the operating revenues and expenses of the rental properties for the six months ended October 31, 2021 and April 30, 2022 are as
follows:
Thousands of yen
October 31, 2021

Office buildings

Real estate
rental revenues

Real estate
rental expenses¥¥

Residential properties
TOTAL

6,525,803
2,546,281¥

9,072,085

3,633,849

April 30, 2022
Real estate
rental income¥

1,503,958¥

5,137,808

2,891,954

Real estate
rental revenues

Real estate
rental expenses¥¥

1,042,322¥

3,934,277

7,247,298
2,601,679¥

9,848,9784,200,010

Real estate
rental income¥

1,461,786¥

5,661,797

3,047,288
1,139,892¥

4,187,180*	The real estate rental revenues and real estate rental expenses are rental revenues and corresponding expenses (depreciation, property management fees, utilities, etc.), and are recorded in“Operating revenues” and “Operating expense,” respectively.

Note-20. Segment information(a) Segment information - Description has been omitted because the real estate business constitutes NUD’s sole business segment.
(b) Related information Six months ended October 31, 2021 [May 1, 2021 - October 31, 2021](i)	Information by product/service category - Description has been omitted because operating revenues from external customers in asingle product/service category account for over 90% of the operating revenues on the profit and loss statements.
(ii)	Information on geographical area Operating revenues - Description has been omitted because operating revenues from external customers in Japan account for over
90% of the operating revenues on the profit and loss statements.
Property and equipment - Description has been omitted because the amount of property and equipment located in Japan accounts
for over 90% of the amount of property and equipment on the balance sheets.
(iii)	Information by major customer - Description has been omitted because the operating revenues from a single external customer
accounts for less than 10% of the operating revenues on the profit and loss statements.

49

50

OTHER INFORMATION (UNAUDITED)For the six months ended October 31, 2021 and April 30, 2022
(cont.)CAPITAL EXPENDITURES
1. Capital Expenditures
NUD plans to incur capital expenditures for scheduled renovations, etc. of the portfolio it owns, including the following material expenditures.
Please note that the planned construction expenditures shown below may include portions that will be recorded as expenses for accounting
purposes.

Name

Address

Planned Construction Expenditures(thousands of yen)

Scheduled
PeriodPurposeTotal

Amount Paid
Amount Paid
during the 39th before the 39th
Fiscal Period
Fiscal Period

PeriodAmount Paid
(thousands of yen)

Renovation of elevator equipment

November 2021 - February 2022

37,469Minato Ward, Tokyo

Renovation of air-conditioning systems

November 2021 - March 2022

28,983

Shinagawa Ward, Tokyo

Renovation of substation facilities

December 2021 - April 2022

28,938

Urbannet Mita Building Minato Ward, Tokyo

Renovation of sanitary facilities

February 2022 - March 2022

27,324

The Kanagawa Science
Park R&D Building

Takatsu Ward, Kawasaki
City, Kanagawa

Renovation of sanitary facilities

November 2021 - February 2022

26,899December 2021 - January 2022

26,642January 2022 - March 2022

26,575

November 2021 - March 2022

26,114Name

Address

The Kanagawa Science
Park R&D Building

Takatsu Ward, Kawasaki
City, Kanagawa

Granpark
Urbannet Gotanda NN
Building

PurposeUrbannet Ikebukuro
Building

Toshima Ward,Tokyo

Renovation ofelevator equipment

June 2022 –March 2023

60,119--

Tokyo Opera City
Building

Shinjuku Ward, Tokyo

Renovation of rooftop gondola

Urbannet Ikebukuro
Building

Toshima Ward,Tokyo

Renovation ofelevator equipment

March 2022 –October 2022

60,042--

Tokyo Opera City
Building

Shinjuku Ward, Tokyo

Renovation of air-conditioning systems

Urban Ace Higobashi
Building

Nishi Ward,
Renovation of
Osaka City, Osaka air-conditioning systems

June 2022 –October 2022

39,041--

Tokyo Opera City
Building

Shinjuku Ward, Tokyo

Renovation of drainage pipes

Renai
Shinjuku-Gyoen Tower

Shinjuku Ward,Tokyo

Renovation of
security equipment

June 2022 –October 2022

31,050--Tokyo Opera City
Building

Shinjuku Ward, Tokyo

Renovation of soundproofing equipment

October 2021 - March 2022

23,269Granpark

Minato Ward,Tokyo

Renovation of
air-conditioning systems

June 2022 –March 2023

29,677--

KN Shibuya No.3

Shibuya Ward, Tokyo

Renovation of blinds for exclusive areas

February 2022 - March 2022

22,246

Storia Akasaka

Minato Ward, Tokyo

Renovation of security equipment

November 2021 - March 2022

20,559Other construction

2. Capital Expenditures during the 39th Fiscal Period
The following is an overview of major construction classified as capital expenditures during the 39th fiscal period (November 1, 2021 - April 30,2022) for the portfolio owned by NUD. Capital expenditures during the period totaled 1,174,519 thousand yen. This amount, combined withmaintenance and repair expenditures of 821,894 thousand yen, was classified as operating expenses for the period, aggregating a total of
1,996,413 thousand yen representing renovation expenditures.
Name

Address

PurposeAmount Paid
(thousands of yen)

PeriodTokyo Opera City
Building

Shinjuku Ward, Tokyo

Renovation of fire alarm systems

January 2022 - March 2022

97,714

Urbannet Ikebukuro
Building

Toshima Ward, Tokyo

Renovation of elevator equipment

November 2021 - March 2022

59,196

Urban Ace Higobashi
Building

Nishi Ward, Osaka City,
Osaka

Renovation of air-conditioning systems

October 2021 - April 2022

53,625

KN Shibuya No.3

Shibuya Ward, Tokyo

Renovation of elevator equipment

February 2022 - April 2022

49,487

Premier Yokohama
Nishiguchi Building

Nishi Ward, Yokohama
City, Kanagawa

Renovation of sanitary facilities

December 2021 - March 2022

47,394

The Kanagawa Science
Park R&D Building

Takatsu Ward, Kawasaki
City, Kanagawa

Renovation of air-conditioning systems

November 2021 - February 2022

46,782The Kanagawa Science
Park R&D Building

Takatsu Ward, Kawasaki
City, Kanagawa

Renovation of air-conditioning systems

November 2021 - February 2022

44,197

481,098

TOTAL

1,174,519

3. Amounts Reserved for Long-Term Maintenance and Repair Plans

Thousands of yen

Fiscal Period

38th Fiscal Period(May 1, 2021 – October 31, 2021)

39th Fiscal Period(November 1, 2021 – April 30, 2022)

Deposits at end of the preceding period

637,763

650,886

Deposits made during the period

14,323

18,883

Amounts used from deposits during the period

1,200

47,545650,886

622,224

Item

Deposits carried forward to the next period(continued on next page)51

52

(Other Information (Unaudited) cont.)

OVERVIEW OF FUND PROCUREMENT
1. Issuance of New Investment Units[Issuance of new investment units through public offering]
In the 39th fiscal period, NUD issued new investment units through public offering as described below and procured funds totaling approximately 11,701 million yen.
NUD used the proceeds as part of the funds to acquire a new property (Tokyo Opera City Building), in combination with a short-term loans payable (refer to 2. Borrowing of Funds, etc. (1) below).
Total number of units issued................................. 80,600 units
Issue price (offer price).......................................... 150,023 yen per unit
(Paid-in amount (issue amount)............................. 145,176 yen per unit)
Payment date........................................................ November 1, 2021
Total paid-in amount (total issue amount)............. 11,701,185,600 yen
Starting date of calculating cash distributions...... November 1, 2021
Use of funds.......................................................... To partially fund acquisition of a new property[Issuance of new investment units through third-party allotment]
In the 39th fiscal period, NUD issued new investment units through third-party allotment with SMBC Nikko Securities Inc. as the allottee, as described below, and procured funds totaling approximately 586 million yen.
NUD used the proceeds to make scheduled repayment (12,050 million yen) and early repayment (3,200 million yen) of loans (refer to 2. Borrowing of Funds, etc. (2) below), in combination with part of the proceeds from the sale of an office building (Sphere Tower Tennozu) NUD transferredon December 10, 2021 and cash on hand.
Total number of units issued................................. 4,040 units
Paid-in amount (issue amount).............................. 145,176 yen per unit
Payment date........................................................ November 29, 2021
Total paid-in amount (total issue amount)............. 586,511,040 yen
Allottee.................................................................. SMBC Nikko Securities Inc.
Starting date of calculating cash distributions...... November 1, 2021
Use of funds.......................................................... To partially fund repayment of loans[Breakdown of repayment of loans]• Early repayment of the 1,200 million yen in a short-term loan borrowed on March 30, 2021 (repayment date: December 30, 2021)• Early repayment of the 2,000 million yen in a short-term loan borrowed on July 30, 2021 (repayment date: December 30, 2021)• Scheduled repayment of the 11,000 million yen in a short-term loan borrowed on November 2, 2021 (repayment date: December 13, 2021)• Scheduled repayment of the 1,050 million yen in a long-term loan borrowed on March 31, 2015 (repayment date: March 31, 2022)(3)	NUD borrowed 5,500 million yen in total in long-term loans to partly fund the acquisition of the beneficiary interest in a real estate trust for
Urbannet Uchisaiwaicho Building, which NUD acquired as of March 28, 2022.
The breakdown of lenders, etc. of the 5,500 million yen in these long-term loans is as follows:
Lenders

Mizuho Bank, Ltd.

Sumitomo Mitsui
Trust Bank, Limited

Sumitomo Mitsui
Banking Corporation

NTT FinanceCorporation*

MUFG Bank, Ltd.

Amount of Debt Finance

2,400 million yen

1,600 million yen

500 million yen

500 million yen

500 million yen

Drawdown Date

March 28, 2022

Principal Repayment Date

March 31, 2023

Principal Repayment Method

Lump-sum repayment upon maturity
Floating rate:(1-month TIBOR + 0.14%)

Interest Rate
Collateral/Guarantee

Unsecured and non-guaranteed* Pursuant to the loan claim transfer agreement concluded on June 28, 2022 between NTT Finance Corporation and NTT TC Leasing Co., Ltd., NTT Finance Corporation transferred all of
its loan claims based on the relevant loan agreement and all of its contractual position, rights and obligations under the said loan agreement as the transferor, to NTT TC Leasing Co., Ltd.
as of June 30, 2022.

(4)	NUD refinanced the 3,900 million yen in total in long-term loans borrowed on May 14, 2015 into long-term loans on April 28, 2022. The
breakdown of lenders, etc. of the 3,900 million yen in these long-term loans is as follows:
Lenders

Sumitomo Mitsui Trust Bank, Limited

Sumitomo Mitsui Banking Corporation

1,950 million yen

1,950 million yen

Amount of Debt Finance
Drawdown Date
Principal Repayment Date
Principal Repayment Method

2. Borrowing of Funds, etc.

Interest Rate(1)	NUD borrowed 11,000 million yen in total in a short-term loan to partly fund the acquisition of Tokyo Opera City Building, which NUD acquired as of November 2, 2021. The following table shows the overview, including the lender, of the 11,000 million yen in the short-term loan:
LenderSumitomo Mitsui Trust Bank, Limited

Amount of Debt Finance

11,000 million yen

Drawdown Date

November 2, 2021

Principal Repayment Date

December 13, 2021

Principal Repayment Method Lump-sum repayment upon maturity
Interest Rate
Collateral/Guarantee

Floating rate:(1-month TIBOR + 0.14%)
Unsecured and non-guaranteed(2)	NUD repaid 15,250 million yen in loans by using the proceeds from issuance of new investment units through third-party allotment (refer to
1. Issuance of New Investment Units above), part of the proceeds from the sale of an office building (Sphere Tower Tennozu) NUD transferredon December 10, 2021 and cash on hand.

53

Floating rate:(1-month TIBOR + 0.16%)

Collateral/Guarantee

April 28, 2022
April 30, 2030

April 27, 2029

Lump-sum repayment upon maturity
Fixed rate:(0.78500%)

Fixed rate:(0.71625%)
Unsecured and non-guaranteed

As a result of the above, NUD’s interest-bearing liabilities totaled 127,750 million yen as of April 30, 2022. The breakdown is as follows: 116,550
million yen in long-term loans (including long-term loans due within one year) and 11,200 million yen in corporate bonds. Of the total interestbearing liabilities, long-term interest-bearing liabilities accounted for 100.0%* Ratio of long-term interest-bearing liabilities = total long-term interest-bearing liabilities/total interest-bearing liabilities x 100%

3. Credit Ratings
NUD has been granted the following issuer and bond credit ratings.
Rating Agency
Japan Credit Rating Agency, Ltd. (JCR)

RatingIssuer rating (Rating outlook)

Bond rating

AA- (Stable)

AA- **The bond rating has been granted to the 7th Unsecured Corporate Bonds, the 8th Unsecured Corporate Bonds, the 9th Unsecured Corporate Bonds (with pari passu conditions among specified
investment corporation bonds) (green bonds) (total issue price: 2,000 million yen) and the 10th Unsecured Corporate Bonds (with pari passu conditions among specified investment corporation
bonds) (green bonds) (total issue price: 3,200 million yen).

54

STRATEGIC POLICIESI. INVESTMENT POLICY
1. Basic Policy
NTT UD REIT Investment Corporation (NUD)
shall invest in real estate located primarily
in the Tokyo metropolitan area, comprisingbuildings and land which are primarily for office and residential uses, as well as in securities and other assets that are backed by such
real estate. NUD shall conduct managementwith an aim to ensure solid growth of its assets and to secure stable earnings from medium- to long-term perspectives.
NTT Urban Development Asset Management(UDAM), the asset manager of NUD, has established Asset Management Guidelines as
its internal rules for conducting asset management of NUD.
UDAM has established such Asset Management Guidelines based on the belief thatthey should be most suited to the basic policy
for managing the assets of NUD in light of theexisting market environment and economic
conditions. The following is a summary of the
Guidelines:

2. Portfolio Management
Standards Based on Basic Policy
1. Holding Period
In principle, all investment assets are held forthe medium to long term. No assets will beacquired solely for the purpose of divestiture
after a short period of time.

2. Acquisition Standards
A) Acquisition Standards
In acquiring investment assets in which NUD
invests, UDAM shall comprehensively investigate the real estate market situation over the
medium to long term, the investment returns
assumed from the acquisition prices of andthe expected income from relevant investment assets, fluctuations in asset values andtheir forecasted fluctuations, prospects andstability of areas where the properties arelocated, building size, building and facility
specifications, earthquake resistance performance, status of rights, tenants, property
management conditions, environment andsoil quality, current responses to deteriora-

55

tion or obsolescence of real estate, projected
future capital expenditures thereof, status of
insurance and other factors, and select investments after considering the importanceof these assets in the portfolio structure. In
doing so, steps shall be taken to construct a
portfolio that clearly classifies the strategic
position of these investment assets.
B) Usesee table on page 56

a. NUD shall invest in real estate, its leasehold interest or surface rights (chijo-ken),real estate in trust underlying its beneficial
interests, its leasehold interest or surface
rights, and real estate underlying equity investments in real estate backed securities
or anonymous partnerships (hereinafter,“Real Estate Backed Securities, etc.”), itsleasehold interests or surface rights (collectively referred to as “Investment Real
Estate”), all of which shall be primarily for
office and residential uses. However, suchproperties may in some cases be used partially for retail or other purposes. Consequently, the office buildings and residential
properties acquired by NUD may include
properties that are partially used for retailor other purposes.
b. 
In consideration of the characteristics ofeach real estate use indicated in the tableon page 56, NUD works to ensure diversification of property uses by investing primarily in both office buildings and residential properties while assigning a relatively
high importance to office buildings, aiming to minimize the effects of changes in
economic and social conditions on NUD's
earnings and ensure creation of stable
cash flow over the medium to long term.
C) Areas

see table on page 57

a. 
As noted earlier, NUD's investments arefocused primarily in the Tokyo Economic
Bloc, which is characterized by high concentrations of people and industries andan established economic foundation, andin Major Regional Cities.
b. Specifically, by dividing the investment target areas into the categories of the 5 Central Wards of Tokyo, the Other 18 Wards ofTokyo, the Urban Areas Surrounding Tokyoand the Major Regional Cities, and by con-sidering the balance between those categories while concentrating on the 5 Central Wards of Tokyo, NUD seeks to achievea portfolio diversified by asset type comprising office buildings and residential
properties. The targeted ratio of officebuildings to residential properties is stated in the table on page 57. Based on theabovementioned basic policy, NUD diversifies its investment targeting to achieve ageographical split as indicated in the tableon page 57 for both office buildings andresidential properties (each of which is set
at 100% in the table).
D) Asset Size per Property

Use

provided for other uses, and therefore may be considered relatively superior with respect to market scale and liquidity. For these reasons, NUD
has positioned office buildings as its primary investment target.

OfficeBuildings

b. Demand from tenants (lessees) for office buildings may fluctuate, due to business cycles and other economic trends. Consequently, this might
adversely affect NUD's profitability with regard to its office buildings. However, compared to real estate for other uses, office buildings are
generally expected to generate relatively higher levels of profitability.
c. NUD will consider acquisition of large-scale office buildings with great care, after thoroughly investigating future supply and demand trends
and location characteristics.
a. N
 UD invests in Japanese rental residential properties commanding relatively high quality in terms of designs of exteriors, entrances and otherareas, specifications of story height, exterior walls and other items, total floor space, floor plans and other aspects.
b. R ental residential properties are relatively resistant to adverse changes in economic and social conditions compared to real estate for otheruses, and thus are expected to yield relatively stable earnings. Due to such characteristics, NUD has positioned rental residential properties aspart of the main investment target for the purpose of stabilizing cash flow and diversifying investment assets.

Residential
Propertiesc. A
 s of the date of this document, UDAM expects that the market for rental residential properties in the Tokyo Economic Bloc will expand anddiversify over the medium to long term due to the effects of the recent demand for returning to city centers and lifestyle changes. However, if
UDAM determines that the aforementioned characteristics have been damaged due to changes in the market or other reasons, different investment decisions may be made.
d. S ince tenants of rental residential properties are particularly selective about geographical areas, and different markets are formed for different
types of residential properties, NUD invests in said properties based on the following analyses and understandings of the future supply anddemand trends and other factors in accordance with the characteristics of respective property types.
c. T his type refers to residential properties specially planned and designed for expatriates (i.e., persons dispatched or set off from abroad to offices established in the Tokyo Economic Bloc by Western and multinational companies) under limited location conditions in accordance with

their lifestyles.
(Classification
by type ofb. R ecently, the tenant demand for these properties has increased among wealthy Japanese families as well. Like those described in a. above,
residential
these tenants have higher creditworthiness than those of other types of residences, and the risk of delinquent rent and similar problems withproperties)
regard to such tenants appears to be low.

Wide

c. B
 ecause the properties with this type of units are in shorter supply than office buildings, residential properties intended for Japanese residents
and real estate for other uses, stable income is expected due to its scarcity and other features. Also, depending on the quality of management
performance, differences in profitability may arise regarding investments in these properties.
a. T his type refers to residential properties intended for mean-income Japanese families (especially families with three or more members, includ-

see table on page 58

NUD decides on whether or not it will acquire investment assets in a comprehensive
manner after conducting economic, physicaland legal inspections of the assets. The tableon page 58 lists the items that are, in principle, investigated in conducting such economic, physical and legal inspections. However, since the importance of each item listed
in the table in deciding on the acquisition of
investment assets may differ depending on
the use of the Investment Real Estate or thetype and nature of the investment assets,
NUD will not necessarily examine all of thesaid items before acquiring the investment
assets. In addition, the investment assets
acquired by NUD may not in the end satisfy

Key Investment Points (Note 1)a. In the real estate market of Japan, office buildings are relatively less individualized and are available in a greater stock compared to real estate

see table on page 57

a. Office buildings
In principle, office buildings with leasable
floor space of approximately 2,000m2 (approximately 700 tsubos) or more, and standard floor sizes of approximately 300m2(approximately 90 tsubos) or more, are theinvestment targets.
b. Residential properties
In principle, residential properties of thesizes indicated in the table on page 57 are
the investment targets (in accordance withthe classifications by unit type).
For both office buildings and residential
properties, NUD will determine the appropriate size of each property based on the standards above and by considering the regional
characteristics of the location and the compatibility of asset size with the location.
E) Due Diligence

Use

Familying children), and are designed to meet their lifestyles.
b. G enerally, these families tend to place emphasis on neighborhood scenes and living environments; thus, they tend to prefer locations awayfrom the center of Tokyo. These properties are expected to yield relatively high levels of profitability.
a. T his type refers to residential properties intended for young households (without children) where both partners work, and are designed to meettheir lifestyles. (DINK is the acronym for "Double Income, No Kids.")

DINKs

b. D
 emand of these tenants tends to focus on areas with convenient commuter access to the center of Tokyo. Since those properties appear to
be in short supply in such areas and said households of DINKs earn high levels of income, these properties have a scarcity value, and are expected to yield relatively high profitability.
a. T his type refers to residential properties intended for persons living alone, and are designed to meet their lifestyles.
b. T ogether with diversifying lifestyles, the market for more spacious and higher-quality residential properties targeting singles is growing steadi-

Singlely, and such properties are expected to continue yielding stable profitability going forward.
c. S ince the 5 Central Wards of Tokyo (Note 2), especially Minato, Shinjuku and Shibuya Wards, enjoy higher average rents and more stable demandwith respect to these properties compared to other areas, investments in properties located in these wards may increase cash flow.

(Note 1) The “Key Investment Points” in the table above reflect the current views of UDAM as of the date of this document. These points may change due to future economic and real estatemarket trends. Moreover, they provide no guarantee of future trends regarding the degree of importance of properties for different uses, future earnings yield thereon or otherconsiderations.
(Note 2) The 5 Central Wards of Tokyo in this Semiannual Report refer to Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (hereinafter the same).

56

(Strategic Policies cont.)

all of the standards of such items, which areintended for the inspections and investigations for deciding on the acquisition of theinvestment assets.
F) Standards for Tenant Selection

see table belowa. 
Credit, as well as other information, ischecked regarding prospective tenants inline with the attribute classifications indicated in the table below. With respect tochecks of corporate tenants, when their
credit status cannot be determined fromthe materials obtained or when otherwise
deemed necessary, databases of outside
research agencies and other materials
will be used. When examination results ofcredit checks and other matters are recognized to be satisfactory, judgment will
be made on the appropriateness of executing a lease agreement after comprehensively considering rent level, term oflease, amount of deposit, type of tenantbusiness, balance with other tenants in thesubject property, size and configuration ofdesired space, and other matters.

b. Concerning current tenants and new tenants with whom lease agreements havebeen concluded, NUD as a rule intends
to maintain long-term relationships to thefullest extent possible. However, in Japan,
the term of a lease agreement for both office buildings and residential properties isusually two years. Moreover, many agreements include provisions that allow tenants
to cancel the agreement by providing notice in advance for a certain period of time.
Such provisions are also included in manyof the lease agreements for the investment
assets of NUD.
G) Amount of Investmenta. From the standpoint of increasing the efficiency of asset and real estate management, the smallest amount of investment
in each investment asset will be one billion
yen (¥1,000,000,000) (which only covers
the purchase price and excludes taxes, acquisition expenses, etc.) as a rule.
b. On the other hand, the maximum ratio of
the investment amount of a single invest-

Areas

ment asset will, in principle, be 25% of thetotal amount invested in the investment assets after investing in that single asset, andan investment decision shall be made after
considering the overall portfolio structureand effects of diversification investments.

3. S ales PolicyA) The basic policy is to hold the investment
assets acquired by NUD over the medium tolong term. In principle, NUD does not plan tosell the acquired investment assets over the
short term.
B) Considered in the medium to long term,
however, NUD may investigate sales of its investment assets after the portfolio structureis strategically classified, comprehensively
taking into consideration such factors as realestate market conditions, projected future
earnings, current fluctuations and forecasted
fluctuations in asset values, future prospects
and stability of areas where the properties arelocated, and projected capital expenditures,etc. arising from the deterioration or obsolescence of the real estate. Moreover, while

Due Diligence
Item

Economic
Inspection

PhysicalInspection

Asset Size per Property
Urban Areas
Surrounding Tokyo

Major
Regional Cities(Note 1)

(Note 2)

5 Central Wardsof Tokyo

Other 18 Wardsof Tokyo

Office buildings

50% or more

0% - 20%0% - 40%0% - 20%

Residential properties

50% or more

0% - 40%0% - 20%0% - 20%

Area(Note 1) The Urban Areas Surrounding Tokyo refers to Tokyo Prefecture excluding the 23 wards of Tokyo, Kanagawa
Prefecture (Yokohama City, Kawasaki City and other cities), Saitama Prefecture (Saitama City and other cities) andChiba Prefecture (Chiba City and other cities) (hereinafter the same).
(Note 2) The Major Regional Cities refers to such cities as Sapporo, Sendai, Shizuoka, Nagoya, Osaka, Kyoto, Kobe,
Hiroshima, Okayama and Fukuoka, etc. (hereinafter the same).
(Note 3) Diversification ratios by area show the respective ratios of office buildings and residential properties. Since thefigures in the table represent ranges, the total of such figures is not necessarily 100%. Although NUD makes
investments by aiming to achieve the ratios above, the actual ratios may differ in the course of acquiring theinvestment assets.

Dedicated Use Area
per Rental Unit

Number of
Rental Units

Wide

80m2 or more

10 or more

Family60m2 or more

20 or more

DINKs

40-80m2

20 or more

Single25-40m2

30 or moreClassification

Tenantinspection

1. Financial credibility, status of rent collection, etc. of tenants
2. Tenants' business types, number of tenants, purposes of use, etc. (including household conditions for residential properties)
3. Past occupancy rates, rent trends and future expectations
4. Proportion occupied by each tenant, diversification of tenants, etc.

Market research

1. Market rents, occupancy rates, trends in competing properties and tenant demand, etc.

Income-related

1. Inspection of competitive strength, including ability to attract tenants and resale potential
2. Lease agreement levels, lease agreement structures, and possibility of renewal of such agreements
3. Expense levels, structures of agreements related to expenses, and possibility of renewal of such agreements
4. Inspection of appropriate levels of rents and expenses, and possibility of projected future expense burdens
5. Comparison of maintenance and repair plans with actual funds accumulated

Location

1. Condition of roadways, access to primary means of transport (e.g., passenger trains), numbers of users of primary means of transport
2. Location and accessibility of convenience facilities, commercial facilities, public offices, and recreational facilities, status of usage of neighboring and nearby
land, and future indicators (all of which are specific to residential properties)
3. Status of sunlight, vistas, views, noise, etc. (all of which are specific to residential properties)
4. Area's name value, reputation, scale, etc.

1. For both office buildings and residential properties: Design, primary structure, building age, construction companies, etc.
2. Conditions of interior and exterior components
Office buildings: Configuration of rental floors, free-access floors (e.g., OA floors), subdivision measures, ceiling heights, electrical capacity, air-conditioning
Construction, facilities
and specifications
system, floor load, illuminance, security measures, water supply and drainage facilities, elevator facilities, parking, other common facilities, etc.
Residential properties: Configuration of rental rooms, floor plans, ceiling heights, security measures, broadcast reception equipment, water supply anddrainage facilities, elevator facilities, parking for cars and bicycles, assembly rooms, other common facilities, etc.

Earthquake resistance

1. Achievement of abilities in line with new earthquake-resistant construction standards (the earthquake-resistant construction standards based on the BuildingStandards Act revised in 1981) or equivalent or higher standards
2. In principle, the probable maximum loss (PML (Note)) value caused by an earthquake should be less than 20%. Reinforcement work for earthquake resistanceor other similar measures must be taken for a property with a PML of 20% or more for acquiring the property.

Property
management

1. Compliance with applicable laws and regulations (specifically, the Fire Service Act, City Planning Act and other building-related laws and regulations), etc.
2. Estimates of future maintenance and repair expenses (for the next ten years or so) based on building condition reports
3. Quality of property management, existence or non-existence of and terms of management bylaws, and the quality and financial credibility of a property
management company

Environment, groundcharacteristics, etc.

1. Status of use and management of hazardous materials such as asbestos, chlorofluorocarbons, and PCBs
2. Soil quality, land use history, status of soil contamination, etc.
Matters relating to rights in a property, including the following items, will be carefully investigated, considering the reliability of titles of former owners and otherparties. Particularly careful investigations are required with regard to properties with complex title arrangements such as those for which NUD does not holdany ownership or not hold ownership independently (e.g., properties for which NUD holds co-ownership or compartmentalized ownership or leased land).

Title, etc.

Standards for Tenant Selection

Legal
Inspection

Check Items (Details)
1. Business types, business history, financial details (i.e., financial soundness), etc.

Corporations

2. Purpose of lease (e.g., purpose of use, period)
3. Existence or non-existence of joint and several guarantors and attributes of such guarantors

Individuals

3. Purpose of lease (e.g., purpose of use, period and number of residents)
4. Existence or non-existence of joint and several guarantors and attributes of such guarantors (e.g., relationship with such individuals)
5. Age, gender, family structure, etc.

57

1. Completion or incompletion of the perfection of a leasehold interest and review of other interests or rights superseding the leasehold interest
2. Existence or non-existence of registration of rights for a site where the building is located, existence or non-existence of (i) restrictions on separate disposition of a building and the right for a site where a property is located and (ii) registrations thereof, and (iii) proportions of ownership shares
3. Measures for securing the repayment of deposit money, and policies and measures concerning reserve funds accumulated for long-term maintenance andrepair plans
4. Existence or non-existence of (i) special agreements prohibiting separation of co-ownership interest and (ii) registration thereof, appropriate measuresconcerning such matters as requests for separation of co-ownership interest and sales of said co-ownership interests, and obligations and rights between
such owners
5. Compartmentability of compartmentalized ownership6. Status of collateral established before acquisition of the property by NUD, terms of such collateral agreement, and whether any such collateral agreement
is to be succeeded
7. Terms of agreements, special agreements, etc. which are executed with lessors of leasehold interests, compartmentalized owners, co-owners and otherrelated parties (particularly, existence or non-existence of first refusal right, and details of such right)
8. Attributes of lessors of leasehold interests, compartmentalized owners, co-owners and other related parties (including whether they are corporations or
individuals)
9. Terms of trust agreements in the case of trust beneficial interests of real estate in trust

Property line
inspection

1. Status of confirmation of boundaries, existence or non-existence of any assets extending beyond boundaries, and related circumstances

Tenant attributes

1. Purpose of use by tenants, and formats of agreements with tenants
2. Existence or non-existence of any disputes with tenants

1. Office and details of employment, service years, etc.
2. Annual income (and the proportion of the total amount of rent to annual income, etc.)

Details(Note) Probable Maximum Loss (PML) refers to the maximum estimated rate of loss resulting from an earthquake. Although there is no single precise definition of PML, as used here, PML refers
to the ratio (in terms of percentage) of projected construction costs to restore the damaged building to the state before suffering damage to total reconstruction work costs (replacement
price) for the said building when there occurs the strongest earthquake (Probable Maximum Earthquake (PME): a major earthquake occurring once every 475 years with a 10% probabilityof occurrence during every fifty-year period) expected to occur in the area where the building is located. Furthermore, the PML value does not consider the impact of destruction ofneighboring buildings or damages by water, fire or other causes.

58

(Strategic Policies cont.)

the sales policy for each investment asset willbasically be determined in the annual asset
management plan, this plan may be revised
as necessary.
a. S trategic classifications
Classification

Strategic SignificanceCore Assets

Assets with respect to which the basic
policy is to carry over in the long term
for the purpose of ensuring medium- tolong-term stability of earnings.

The investment assets with higher liquidity, from which earnings based
mainly on medium- to long-term rent
income (income gains) are obtained,
provided that the total returns (income
Active Assets gains plus capital gains) including earnings from sale (capital gains) based on
the increased asset values (value enhancement) from the increase in the income gains after acquisition, are also
intentionally and proactively sought.

1) The targets of the investment assets classified by NUD as active assets
are as follows: The amount of investment per investment asset is four billion yen (¥4,000,000,000) or less for
an office building and two billion yen(¥2,000,000,000) or less for a residential
property.
2) The upper limit on active assets as a proportion of the portfolio shall be 20% as arule.
b. Specific cases where sale will be considered
1) When a strategic sale would contributeto earnings of NUD:
[Example] When the property value increases through improved profitability
resulting from measures such as lower
vacancy rates, higher rent income, or reduced expenses.
2) When an investor offers an attractive
purchase price:[Example] When the prospective purchaser indicates a strong intent to purchase, for instance, by making an attractive bid that exceeds appraisal value by
10% or more or otherwise exceeds theestimated value in the surrounding area
due to such prospective purchaser's special circumstances.
3) When the property has lost strategic importance:[Example 1] When the age of the property reduces its profitability, and it is determined that the targeted earnings will59

not be achieved even with additional allocation of capital.
[Example 2] When another investment
asset with higher profitability has beenacquired in the same area, or the factthat the marketability in the surroundingarea has remarkably declined or othercircumstances are judged to have led
the asset to lose importance in the portfolio structure.
4) When the property is sold from a financial viewpoint:[Example] When a reduction in the interest-bearing liabilities ratio is intended.
C) The Investment Real Estate related to theinvestment assets to be sold will be soldthrough measures such as the acceptance ofcompetitive bids over a limited period anduse of competitive real estate brokers andspecialized agents, so that sales at high prices can be realized.

4. Policy for Investment in Development Projects
NUD shall, in principle, acquire investment
assets that provide or promise stable rental
income or similar earnings. NUD does notintend to acquire undeveloped land andconstruct buildings thereon. However, withregard to an investment property being constructed by a third party, NUD may decide
on investing in it even before completion if,
for example, it is determined that such property under construction is capable enoughto securely attract tenants after completion
and risks regarding completion and delivery have been minimized. In this case, theinvestment determination shall be made bycomparing the benefits of acquiring such aninvestment asset with the negative impact of
not earning rental income over the period
until the asset begins to generate such income, as well as other risks possibly borne
by NUD in connection with acquiring the investment asset.

5. Investment Policy for Real Estate
Backed Securities, etc.
When NUD invests in the Real Estate Backed
Securities, etc., the investment decision shallbe made after additionally investigating thefollowing items.

A) The Investment Real Estate underlying theReal Estate Backed Securities, etc. shall be
assets compliant with the Targets and Policies of Asset Management stipulated in the
Attachment to the Articles of Incorporation
of NUD.
B) In principle, NUD shall be given an opportunity to acquire the underling Investment
Real Estate when it is being sold.
C) The same policy as indicated in the above
subparagraph 5 shall be followed when NUD
invests in the Real Estate Backed Securities,
etc. of which the underlying Investment Real
Estate is development properties.

6. Insurance Policy
Determination as to whether or not the investment assets should be insured against
earthquake damage will be made by comparing the effects of such a disaster with the costof casualty insurance premiums, using the
PML value of the entire portfolio as a basis. If
any individual property has a high PML value,
taking out an earthquake insurance policy onsuch individual property will be considered.

7. Investment Policy for Healthcare
Facilities
A) Investment Policy for Healthcare Facilities
When NUD invests in “serviced apartments
for the elderly” as defined in the Act on Securement of Stable Supply of Elderly Persons'
Housing (Act No. 26 of 2001, as amended)and “fee-based homes for the elderly” and“group homes for the elderly with dementia” as defined in the Act on Social Welfare
for the Elderly (Act No. 133 of 1963, as
amended) (hereinafter, collectively referred
to as “healthcare facilities”), it shall refer tothe “Guideline related to the utilization ofhealthcare REITs targeting housing for theelderly, etc.” announced by the Ministry ofLand, Infrastructure, Transport and Tourism
on June 27, 2014; receive advice from outside experts who, based on their experience
in investment, financing, due diligence, realestate appraisal and operations of healthcare
facilities, fully understand the business characteristics of healthcare facilities where living
services and nursing services are provided(hereinafter, the “outside experts”); and pay
attention to the following points.

a. D
 ue diligence in consideration of thebusiness characteristics
When acquiring relevant healthcare facilities, business due diligence (including investigations on the operational ability ofthe operators for the facilities and the stability of their business management, tours
to the facilities conducted as needed, andhearing from the facility heads) shall be
implemented to analyze the durability andstability of their business in considerationof the business characteristics of healthcare facilities, either by receiving advice
from the outside experts or consign therelevant operations to the outside experts.
b. P
 ublicity of the healthcare REIT scheme
NUD shall encourage the operators to
let the facility users fully understand thescheme of the investment corporation system and performance results and initiatives
by investment corporations, etc. Whennecessary, UDAM shall also work to makethe users familiar with these matters.
c. C onfirmation of appropriate operations ofhealthcare facilities
In order to ensure that facility users feelsecure, confirmation shall be made as tolegal compliance and responses to notifications, etc. from local governments regarding such matters as the conditions anduse fees of the facilities and contract details. For fee-based homes for the elderly(excluding those registered as serviced
apartments for the elderly), in particular, it
shall be noted that local governments have
prepared guidelines for guiding principles
that suit the local situations, in reference to
the Standard Guidelines for the Establishment and Operation of Fee-Based Homes
for the Elderly (Rouhatsu 0718003, Noticeby the Director of Health and Welfare Bureau for the Elderly dated July 18, 2002),
and conduct administrative guidance
based on the principles.
d. S ecuring appropriate operations ofhealthcare facilities
In order to ensure that facility users feel secure, NUD shall request the operators to
express in the lease contracts or alternative
agreements and memorandums between
NUD and the operators that, with regard

to the use fees and contract details, they
will comply with relevant laws and regulations that are applicable to the healthcare
facilities that may be managed by NUD
and that they will operate such facilities in
response to the administrative guidance.
e. Other
With regard to a through d above, regulations on real estate investment trusts andreal estate investment corporations designated by The Investment Trusts Association, Japan (“Investment Trusts Association”), etc. shall be abided by so that theusers do not feel uneasy.

8. Financial PolicyA) Loans and Corporate Bonds
a. In order to achieve the steady growth ofmanagement assets and efficient and stable operation of investments, NUD may
borrow funds or issue corporate bonds
to raise funds to acquire or repair assets,
pay distributions, fund NUD’s operation,or repay debts (including repayment ofdeposit money, loans and obligations of
its corporate bonds (including short-term
corporate bonds; hereinafter referred toas “Corporate Bonds”). However, the respective maximum limit of the loans andbond issuances shall be one trillion yen(¥1,000,000,000,000) and the combined
amount shall not exceed one trillion yen(¥1,000,000,000,000) (Articles 14-1 and14-3 of the Articles of Incorporation).
b. In the case of borrowing funds in accordance with above a., NUD shall selecteffective means of funding from the perspective of the term of the loan and thefixed or floating interest rate structures,
and aim to raise funds at low costs after
comprehensively considering the capital
market and the financial environment, andafter making projections concerning futurechanges in economic and social climates.
Moreover, in order to flexibly respond tothe capital needs for the acquisition of new
investment assets, repayment of security
deposits or other monies in custody for
tenants, or other events, NUD may enter
into agreements (e.g., commitment line
agreements) by which a credit line will beestablished in advance or NUD may conclude agreements on the reservation ofloans at any time it requires.
c. When borrowing funds in accordance withabove a., the said funds shall only be borrowed from qualified institutional investors
designated by the Financial Instruments
and Exchange Act (hereinafter referred toas “FIEA”) (on the condition, however, thatthey are the institutional investors designated in the “Special Tax Measures for an
Investment Corporation” under the Act on
Special Measures Concerning Taxation).
d. NUD may offer its investment assets as collateral for borrowed funds or the issuanceof corporate bonds.
e. NUD shall aim to maintain the ratio of thebalance of loans and issued corporate
bonds to total assets (Note) at 60% or less.
However, in connection with the acquisition of new investment assets and othercircumstances, this ratio may tentatively
exceed 60% for a short period of time.
(Note) Total assets shall be the amount obtained by adding the book value of the preferred securities asof the end of the most recent fiscal period to thevalue of the beneficial interests calculated on thebasis of the appraisals by real estate appraisers asof end of the said fiscal period.

B) Issuance of Investment Units for Subscription
a. To raise funds, NUD may, upon approvalof the Board of Directors, issue investment
units for subscription.
b. Issuance of investment units for subscription shall be determined by considering
NUD's financial situation, including theloan-to-value ratio, and the dilution of theinvestment units.

3. Property Management PolicyA) In managing real estate, NUD intends tomaintain and enhance the value and competitiveness of its assets through continuous capital expenditures made from a medium to long-term perspective, and aims toachieve steady growth in investment returns
through higher earnings (e.g., increases inrents, decreases in vacancy rates, and prolonging and fixing the terms of agreements)
and reduced expenses (e.g., reduction in
outsourcing fees, utility expenses and otherfees and expenses).

60

(Strategic Policies cont.)

B) UDAM shall select an appropriate party
to contract with for the provision of property management services for each acquired
investment property by considering thedetails of the items listed below. If such aparty falls under the category of interested
parties as stipulated in the Regulations on
Transactions with Interested Parties, UDAM
shall consign the property management
services to the party only when the standards and procedures stipulated in the said
Regulations are satisfied, on top of the following requirements.
In renewing the property management agreement, NUD shall consider the details of thefollowing items, in addition to (1) through (7)listed below, to make comprehensive judgment. Furthermore, UDAM will periodicallycheck the quality of the services provided by
the consigned property management companies, not limited to the time of renewing
the contract.

A. No material breach of the property management agreement is made by theconsigned party during the consigned
period.
B. No inappropriate fact must occur during theconsigned period as to reporting of important matters and settlement of monies.
C. The party must be recognized to have thestructure and capability to appropriately
implement the services.
C) NUD may accumulate a long-term maintenance and repair reserve, a reserve for payments, a reserve for distributions and othersimilar reserves and allowances as deemednecessary to maintain the investment assets
or enhance their value.
D) NUD will endeavor to take measures suchas maintaining appropriate allocation rates ofinvestments and taking out insurance against
losses (e.g., fire and general liability insurance) in order to avoid major declines andfluctuations in earnings caused by disasters,

move-outs of tenants and other factors.
E) To secure stable earnings over the medium
to long term, NUD shall, in principle, lease
all of its Investment Real Estate (including facilities such as parking lots and signage). At
the time of leasing, NUD may collect deposits and guarantees and other similar monies.
The said monies shall be invested pursuant to
the provisions of the Targets and Policies ofAsset Management stipulated in the Attachment to the Articles of Incorporation of NUD.
The occurrence of unforeseen events, such as
drastic changes in funding conditions, general market conditions, and real estate market
conditions, may prevent the operations described above.

4. Disclosure PolicyA) NUD shall make efforts to provide appropriate information for making investment
decisions at all times by disclosing, to thegreatest extent possible, information that isStandards for Selection of Property Manager
Item

61

Details(1) Business history

1. Deemed to be capable of appropriately implementing operations due to such reasons
as having been engaged in property management services for at least three years or
having been in charge of property management services for the relevant individual
properties or facilities and residences for the elderly so as to have a thorough knowledge of the situation and characteristics of such properties.

(2) Financial standing

1. Not generating net loss continuously for the most recent three fiscal periods
2. Not in a state of insolvency in any of the most recent three fiscal periods(3) Organizational structure

1. Preparation of internal regulations
2. Number of employees
3. Establishment of compliance structure and business audit system
4. Track record related to the subject investment assets, feasibility of implementing operations in accordance with management plans, and continuity of management operations
5. Establishment of a system to avoid conflicts of interests(4) Level of knowledge and experience regarding
the relevant properties and relationship withthe tenants (or operators of the facilities andresidences for the elderly)

1. Consigned period for the relevant properties
2. Any trouble with the tenants or operators(5) Ability to report on the relevant properties

1. Capable of preparing management plans and monthly reports(6) Level of compensation and fees

1. Level of compensation to be in the scope of market levels(7) Social attributes

1. No fact of conducting material breach of laws and regulations or causing misconduct,
etc. in the most recent three years, and no problem found in the legal compliancestructure
2. Not belonging to or having a relationship with any anti-social forcesconsidered useful for unitholders/investors tounderstand NUD.
B) NUD shall make efforts to establish a system which enables prompt transmission of
accurate and unbiased information to unitholders/investors.
C) NUD shall disclose information in accordance with the contents and the formats required by the Act on Investment Trusts andInvestment Corporations, the Financial Instruments and Exchange Act, the Tokyo Stock
Exchange, the Investment Trusts Association,etc.

sheet of NUD; hereinafter the same) shallbe calculated based on the Investment
Trusts Act, corporate accounting standards
generally accepted in Japan and othercorporate accounting practices.
2) Where it is approved by tax-related laws
and regulations in Japan to include the
cash distributions to unitholders of NUD in
deductible expenses under certain conditions, NUD must make cash distributions
to its unitholders in a way that meets therequirements provided by the tax-related
laws and regulations in Japan for approving the inclusion in deductible expenses.

II. C
 ASH DISTRIBUTION
POLICY2. Distributions in Excess of
Earnings

1. Distribution of Profits
In principle, NUD shall make distributions
based on the following policies (Article 13-1of the Articles of Incorporation):1) Of the total cash amount to be distributed
to unitholders, profits (the amount obtained by subtracting the sum total of unitholders’ capital and surplus from the net
assets amount appearing on the balance

When it is possible to reduce imposition of
corporate tax and other taxes for NUD or isotherwise determined by the Board of Directors as appropriate, NUD shall be able to
make cash distributions in excess of earnings
based on the Statements of Cash Distributions approved by the Board of Directors,
pursuant to the provisions of the Investment
Trusts Act, on the condition that, however,the distribution amount shall not exceed theamount designated by the rules of the Invest-

ment Trusts Association, etc. (Article 13-2 ofthe Articles of Incorporation).

3. Distribution Method
Distributions provided in 1. and 2. above shallbe paid in cash and, in principle, distributed
within three months from the settlement dateto the unitholders or registered investment
unit pledgees who are listed or registered orrecorded in the latest unitholders registry asof the settlement date, in accordance with
the number of investment units held by theunitholders or the number of investment units
subject to the registered pledges of investment units (Article 13-3 of the Articles of Incorporation).

4. Limitation on CashDistributions
If the distributions specified in 1. and 2.
above are unclaimed for a period of three fullyears after the date on which such distributions first became payable, NUD shall be discharged from its payment obligation thereof.
Furthermore, any distributions remaining unpaid shall bear no interest (Article 13-4 of the
Articles of Incorporation).

62

MEMO

DISCLAIMER
This English document contains selected information including a partial
translation of certain documents originally prepared in accordancewith the Financial Instruments and Exchange Act of Japan or the Law
Concerning Investment Trusts and Investments Corporation of Japan.
This document was prepared solely for the convenience of readers
outside Japan, and the content of this document does not constitutean offer to sell, or a solicitation of an offer to buy or sell, any securities
of NUD or otherwise, nor is it advice or the recommendation of NUD
to enter into any transaction.
Unless otherwise specified, the information contained herein does notconstitute disclosure documents or management reports stipulatedby the Financial Instruments and Exchange Act or Law Concerning
Investment Trusts and Investments Corporation, or requested by thelisting regulations of the Tokyo Stock Exchange or other related rules
and regulations. When purchasing investment units of NUD, investors
are kindly requested to make investment decisions based on their own
judgment and responsibility.
English terms for Japanese legal, accounting, tax and businessconcepts used herein may not be precisely identical to the conceptof the equivalent Japanese terms. With respect to any and allterms herein, if there exist any discrepancies in the meaning orinterpretation thereof between the original Japanese documents andEnglish translation contained herein, the Japanese documents will
always govern the meaning and interpretation. Neither NUD, UDAM
nor any of their respective directors, officers, employees, partners,
shareholders, agents, affiliates or their advisors will be responsible or
liable for the completeness, appropriateness or accuracy of English
translations contained herein. No person has been authorized togive any information or make any representations, other than thosecontained in this document, in relation to the matters set out in thisdocument, and if such information is given or representations are
made, such information or representations must not be relied upon
as having been authorized by NUD, UDAM or any of their respective
directors, officers, employees, partners, shareholders, agents, affiliatesor their advisors.
The financial statements of NUD have been prepared in accordancewith generally accepted accounting principles in Japan (Japanese63GAAP), which may differ materially, in certain respects, from generally
accepted accounting principles in other jurisdictions.
This document contains forward-looking statements. In some cases,
readers of this document can identify forward-looking statements byterms such as "may," "will," "should," "would," "expect," "plan,""anticipate," "believe," "estimate," "potential," or the negative of
these terms or other similar terminology. These statements discuss
expectations, indicate our intent or belief, identify strategies, containprojections of results of operations or of NUD’s financial condition,or state other forward-looking information. These statements are notguarantees of future performance and are subject to various risks anduncertainties. Actual results, performance or achievements, or thoseof the industries in which we operate, may differ materially from any
future results, performance or achievements expressed or implied bythese forward-looking statements. In addition, these forward-looking
statements are necessarily dependent upon assumptions, estimatesand data that may be incorrect or imprecise and involve known andunknown risks and uncertainties. Accordingly, readers of this document
should not interpret the forward-looking statements included herein
as predictions or representations of future events or circumstances.
NUD and UDAM do not intend and disclaim any duty or obligation
to update or revise any forward-looking statements contained in thisdocument to reflect new information, future events or otherwise.
NUD takes the utmost care to ensure that the information provided
herein has no errors or omissions. However, this document has been
prepared for the convenience of quick and easy reference, andthe information provided may include inaccurate descriptions or
typographical errors. In addition, the information provided is subject
to change without notice. NUD shall not be liable for the accuracy,completeness, appropriateness and fairness of the information
contained herein.
Use and perusal of this document shall be made at the responsibility of
the reader. NUD and other related parties involved in the preparationand disclosure, etc. of this document shall not be liable for any
damages (regardless of whether direct or indirect, or by whatevercause) that arise from the use of this document.

64