This translation of the original Japanese financial report (kessan tanshin) is provided solely for information purposes.
Should there be any discrepancy between this translation and the Japanese original, the latter shall prevail.

Summary of REIT Financial Report for the 5th Fiscal Period
January 22, 2019
REIT Issuer:
Ooedo Onsen Reit Investment Corporation
Securities Code: 3472
Representative: Fuminori Imanishi, Executive Director
Asset Manager:
Representative:
Inquiries to:

Stock Exchange Listing: TSE
URL: https://oom-reit.com

Ooedo Onsen Asset Management Co. Ltd.
Fuminori Imanishi, Chief Executive Officer
Shinya Ito, General Manager, Planning and Coordination Department+81-3-6262-5200

Scheduled date of submission of periodic securities report (yuka shoken hokokusho):Scheduled date of start of distribution payments:

February 26, 2019
February 15, 2019

Preparing supplementary explanatory materials on financial results:
Holding of brief session on financial results:

Yes
Yes (for institutional investors and analysts)[Amounts are rounded down to the nearest million yen, except for per unit figures]
1. Status of Management and Assets for the 5th Fiscal Period
4th Fiscal Period: Fiscal period ended May 2018 (from December 1, 2017 to May 31, 2018)
5th Fiscal Period: Fiscal period ended November 2018 (from June 1, 2018 to November 30, 2018)(1) Management Status
Fiscalperiod5th
4th

Operatingrevenuemillion yen
1,450
1,442

FiscalperiodProfitper unit

%
0.5
39.7

Operatingprofitmillion yen
714
734[% figures show the period-on-period increase (decrease)]
Ordinary
Profitprofit% million yen% million yen
%
(2.7)
578
1.3
577
1.3
41.5
571
35.7
570
35.7

Ratio of profit tounitholders’ equity
yen
2,454
2,427

5th
4th

%
2.7
3.1

Ratio of ordinary profit tototal assets
%
1.5
1.7

Ratio of ordinary profit tooperating revenue
%
39.9
39.6

(2) Distribution Status
Fiscal period

Distribution
per unit

Total
distribution(excludingexcess cash
distribution)(excludingexcess cash
distribution)

Excess cash
distribution
per unit

Total excess
cash
distribution

Distribution
per unit

Total
distribution(includingexcess cash
distribution)(includingexcess cash
distribution)

Distribution
Ratio of
Payoutdistribution to
net assets
ratio

yen
yen
million yen
yenmillion yen
million yen
%
%
5th
2,454
577
12
2
2,466
580
100.0
2.7
4th
2,423
570
12
2
2,435
573
99.9
2.7
(Note 1) The entire amount of total excess cash distribution is equivalent to the increase amount of allowance for temporary difference
adjustments.
(Note 2) Distribution payout ratio is rounded down to the first decimal place. Distribution payout ratio for the fiscal period ended May
2018 is calculated using the following formula since issuance of new investment units was conducted during the period.
Distribution payout ratio = Total distribution amount (excluding excess cash distribution) / Profit × 100(3) Financial Position
FiscalperiodTotal assets

Net assets

million yen
39,10639,875

million yen
21,224
21,220Net cashprovided by (used in)operating activities
million yen
1,728
531

Net cashprovided by (used in)investing activities
million yen(287)(10,273)

5th
4th

Unitholders’ equity to total
assets
%54.3
53.2

Net assets
per unityen
90,18590,166(4) Cash Flow Status
Fiscalperiod
5th
4th

-1-

Net cashprovided by (used in)financing activities
million yen(1,389)9,567

Cash andcash equivalents
at end of period
million yen
895
843

2. Management Status Forecasts for the 6th Fiscal Period and the 7th Fiscal Period
6th Fiscal Period: Fiscal period ending May 2019 (from December 1, 2018 to May 31, 2019)
7th Fiscal Period: Fiscal period ending November 2019 (from June 1, 2019 to November 30, 2019)

FiscalperiodOperatingrevenue

Operatingprofit[% figures show the period-on-period increase (decrease)]
Distribution
Distribution
Excess cash
per unit
per unit
distribution
Profit(including(excluding excess
excess cash
per unit
cash distribution)

Ordinary
profitdistribution)

millionmillionmillionmillion
%
%
%
%
yen
yen
yen
yen
yen
6th
1,434 (1.1)
695 (2.7)
558 (3.5)557 (3.5)
2,368
7th
1,434
0.0
694 (0.1)558
0.0557 (0.0)
2,368(Reference) Estimated Profit per unit for the 6th Fiscal Period: 2,367 yen; 7th Fiscal Period: 2,367 yen

yen

yen

12
12

2,380
2,380

* Other(1) Changes in Accounting Policies, Changes in Accounting Estimates and Retrospective Restatement(i) Changes in accounting policies accompanying amendments to accounting standards, etc.:
None(ii) Changes in accounting policies other than (i):None(iii) Changes in accounting estimates:None(iv) Retrospective restatement:
None(2) Total Number of Investment Units Issued and Outstanding(i) Total number of investment units issued and outstanding(including own investment units) at end of period:(ii) Number of own investment units at end of period:

5th235,347 units

4th

235,347 units

5th

0 units

4th

0 units* Presentation of the status of implementation of audit procedures
At the time of disclosure of this financial report (kessan tanshin), the audit procedures pursuant to the Financial Instruments andExchange Act have not been completed.
* Explanation of the appropriate use of the management status forecasts, and other matters of special note
The management status outlook and other forward-looking statements contained in this document are based on information thatare currently available and certain assumptions that are deemed reasonable by the Investment Corporation. Accordingly, the actual
management status, etc. may differ materially due to various factors. In addition, the forecast is not a guarantee of the amount ofcash distribution. For the assumptions for the management status forecasts, please refer to “Assumptions Underlying Forecasts of
the Financial Results for the Fiscal Periods Ending May 2019 and November 2019” on page 10.

-2-

1. Affiliated Juridical Persons of the Investment Corporation
Affiliated juridical persons of Ooedo Onsen Reit Investment Corporation (the “Investment Corporation”) thathave changed from those described in the “Structure of the Investment Corporation” in the most recent periodic
securities report (yuka shoken hokokusho) (submitted on August 24, 2018) are as follows.
Ooedo-Onsen Monogatari Hotels & Resorts Co., Ltd., Ooedo Onsen Holdings Japan Co., Ltd. and Ooedo-Onsen
Monogatari Group Co., Ltd. conducted an absorption-type merger in which Ooedo-Onsen Monogatari Hotels &Resorts Co., Ltd. became the surviving company while Ooedo Onsen Holdings Japan Co., Ltd. became thedisappearing company, and an absorption-type merger in which Ooedo-Onsen Monogatari Hotels & Resorts Co.,
Ltd. became the surviving company while Ooedo-Onsen Monogatari Group Co., Ltd. became the disappearing
company, with September 1, 2018 as the effective date (both absorption-type mergers are hereinafter collectively
referred to as the “Absorption-Type Merger”). Associated with this, Ooedo-Onsen Monogatari Hotels & Resorts
Co., Ltd. has succeeded the position as the sponsor of Ooedo-Onsen Monogatari Group Co., Ltd. under the sponsor
support agreement concluded on November 1, 2017 among the Investment Corporation, the Asset Manager, OoedoOnsen Monogatari Co., Ltd. and Ooedo-Onsen Monogatari Group Co., Ltd. As a result, Ooedo-Onsen Monogatari
Hotels & Resorts Co., Ltd. and Ooedo-Onsen Monogatari Co., Ltd. have become the sponsors of the Investment
Corporation after the Absorption-Type Merger. In addition, associated with the Absorption-Type Merger, OoedoOnsen Monogatari Hotels & Resorts Co., Ltd. has succeeded the position as the lessee of some of assets owned by
Ooedo-Onsen Monogatari Group Co., Ltd.

(Note) Ooedo-Onsen Monogatari Co., Ltd., Ooedo-Onsen Monogatari Hotels & Resorts Co., Ltd., Kagawa Prefecture Tourism
Development Ltd. and Reoma Unity Co., Ltd. are each considered a “Specified affiliated corporation” of the AssetManager as set forth in Article 12-3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Regulated
Securities (Ministry of Finance No. 22 of 1993; including subsequent revisions).

2. Management Policy and Management Status
2.1. Management Policy
Disclosure is omitted because there are no significant changes from the “Investment Policy,” “Investment
Targets” and “Distribution Policy” in the most recent periodic securities report (yuka shoken hokokusho)(submitted on August 24, 2018).
2.2. Management Status(1) Overview of the Fiscal Period under Review
a. Brief History of the Investment Corporation
Ooedo Onsen Reit Investment Corporation (the “Investment Corporation”) was established on March 29,
2016 (capital: 200 million yen, issued investment units: 2,000 units) under the Act on Investment Trusts andInvestment Corporations (the “Investment Trust Act”). Registration with the Kanto Local Finance Bureau was-3-completed on May 13, 2016 (registration number 119, filed with the Director of the Kanto Local Finance
Bureau).
Subsequently, pursuant to the basic policy calling for “key investments in onsen and spa-related facilities
under the Ooedo business model (Note 1) that can achieve stable revenues and sustained growth” and “growthstrategy taking maximum advantage of support from the Ooedo-Onsen Monogatari Group (Note 2)”, thesponsor, the Investment Corporation issued new investment units via public offering (174,200 units) with
August 30, 2016 as the payment date and listed on the Real Estate Investment Trust Securities Market of Tokyo
Stock Exchange, Inc. (“Tokyo Stock Exchange”) (Securities Code: 3472) on August 31, 2016. Furthermore,
the Investment Corporation acquired 9 onsen and spa-related facilities (Note 3) (total acquisition price (Note4): 26,844 million yen) on September 1, 2016. At the beginning of the previous fiscal period, the Investment
Corporation issued new investment units via public offering (56,330 units) and additionally acquired 5 onsen
and spa-related facilities (total acquisition price: 9,861 million yen) on December 4, 2017. As a result, the total
number of facilities owned by the Investment Corporation as of the end of the fiscal period under review
increased to 14 facilities (total acquisition price: 36,705 million yen. The total number of investment units
issued and outstanding of the Investment Corporation as of the end of the fiscal period under review stands at
235,347 units.
(Note 1) “Ooedo onsen model” is business expertise introduced in facilities operated by the Ooedo-Onsen Monogatari Groupcapable of maintaining high profitability and stable occupancy, which are possessed by the Ooedo-Onsen MonogatariGroup and believed to be highly competitive.
(Note2 ) “Ooedo-Onsen Monogatari Group” is comprised of the Investment Corporation’s sponsors, namely Ooedo-Onsen
Monogatari Hotels & Resorts Co., Ltd. and Ooedo-Onsen Monogatari Co., Ltd. (hereinafter “Ooedo-Onsen
Monogatari” and may be referred to as “Sponsors” collectively with Ooedo-Onsen Monogatari Hotels & Resorts Co.,
Ltd.) and their consolidated subsidiaries (meaning subsidiaries provided for in Article 8, Paragraph 3 of the Regulationon the Terminology, Forms, and Preparation Methods of Financial Statements (Ordinance of the Ministry of Finance
No. 59 of 1963, as amended), including the Asset Manager). The same applies hereinafter.
(Note 3) “Onsen and spa-related facilities” refers to facilities which provide as a primary function onsen or hot baths, andinclude baths (public bathing facilities which employ onsen or other similar facilities; the same hereinafter), ryokan(lodging of which main structure and facilities are Japanese style), hotels (lodging of which main structure andfacilities are Western style), resort facilities (facilities to provide opportunities for sports or recreational activities
during leisure time), amusement parks, or other leisure facilities (including multi-use facilities that contain theforegoing) that include hot baths as part of their core facilities. Onsen and spa-related facilities also refers to facilities
as a whole, including not only buildings with onsen or hot baths, but also the buildings and sites that are adjacent tosuch buildings or operated as one facility. The same applies hereinafter.
(Note 4) “Acquisition price” indicates the purchase prices of properties stated in the sale and purchase agreements (notincluding expenses, such as consumption tax, local consumption tax, or sale and purchase fees), rounded down to thenearest million yen.

b. Investment Environment and Management Performance
The Japanese economy during the fiscal period under review remained severe, with negative growth of 2.5%
on an annualized quarterly real GDP growth basis (the second preliminary estimates) for the July-September
period of 2018. This reflected a number of temporary factors, such as declining consumer confidence andrestraints on production and transportation associated with a string of natural disasters, in addition to downward
revisions to private-sector corporate capital investment mainly attributable to weak overseas demand. Whileservice consumption declined slightly for the first time in two quarters under such circumstances, mainly
because consumers remained indoors to avoid the heat, the Investment Corporation believes that the underlying
trend in service consumption remains firm.
As to the status of onsen use, the Onsen Use Survey by the Nature Conservation Bureau of the Ministry of
the Environment shows that the number of accommodation facilities and the total number of annual guests ofaccommodation facilities throughout a fiscal year remained stable from fiscal 2013 to fiscal 2016, suggestingthat demand for onsen is stable over the medium to long terms.
In this environment, the occupancy rate (Note 1) of the 14 onsen and spa-related facilities the Investment
Corporation owns as of the end of fiscal period under review (total acquisition price: 36,705 million yen)remained at 100.0% as of the end of the fiscal period under review under a master lease agreement. In addition,
the tenant performance at the owned facilities during the fiscal period under review shows that while theguestroom occupancy rate (Note 2) for the 14 onsen and spa-related facilities owned decreased slightly fromthe previous fiscal period, it remained consistently high at 89.6% on average for the fiscal period under review.
As a result, cumulative totals of ADR (Note 3), RevPAR (Note 4) and sales for the 14 properties owned
exceeded the actual results of the same period of the previous year.
The Investment Corporation believes that, in addition to the operational capability of the Ooedo-Onsen
Monogatari Group, the tenant, the fact that demand for onsen is secured in a relatively stable manner while-4-

short-term consumption trends are changing is the backdrop of the above trends, as estimated from theaforementioned Onsen Use Survey by the Nature Conservation Bureau of the Ministry of the Environment.
Looking at tenant performance by facility, there were differences in profit that have taken the cost of sales
and expenses into consideration, in addition to occupancy rate and sales, depending on the property. The
Investment Corporation believes that it needs to continue communicating with tenants while paying attention
to the competitive environment and the market trends surrounding each facility, as well as the sales andoperation polices of the tenants, monitoring the situation of each facility by observing their performance.
Mainly for the purpose of stabilizing future rent income at owned facilities in light of the situation of eachfacility, the Investment Corporation has decided, on January 22, 2019 after the end of the fiscal period underreview, with Ooedo-Onsen Monogatari Hotels & Resorts Co., Ltd. and Reoma Unity Co., Ltd., the tenants, torevise rents at some properties (for details, please refer to (2) Outlook for the Next Fiscal Period, b. FutureManagement Policy and Challenges to Address, (b) Internal Group Strategy, i. Rent Structure Emphasizing
Stability).
The total appraisal value as of the end of the fiscal period under review increased by 120 million yen fromthat for the 14 facilities acquired and owned as of the end of the previous period (May 31, 2018). As to
unrealized gain/loss (Note 5) of the entire portfolio as of the end of the fiscal period under review, an unrealized
gain of 3,448 million yen was recorded as a result of a decline in book value for the 14 properties due todepreciation.
In addition, the Investment Corporation did not make any new acquisitions of facilities during the fiscal year
under review, but drew up plans for repairs and capital expenditures that take into account the status, features,etc. of the owned properties and implemented necessary repairs and capital expenditures under collaboration
based on the sponsor support agreement with the Ooedo-Onsen Monogatari Group, the operator-cum-tenant.
(Repair expenses are basically borne by tenants based on the lease agreements.)(Note 1) Occupancy rate refers to the ratio of leased area to leasable area.
(Note 2) Guestroom occupancy rate is calculated using the following formula.
Guestroom occupancy rate = number of guestrooms sold during relevant period / number of rooms available for saleduring relevant period ×100 (%)(Note 3) Average daily rate (ADR) is calculated for a given time period by dividing total room revenue by the number of totalrooms sold(Note 4) Revenue per available room (RevPAR) is calculated for a given time period by dividing total room revenue by the
number of total rooms available for sale.
(Note 5) Unrealized gain/loss is calculated using the following formula.
Unrealized gain/loss = Total appraisal value of owned assets as of the end of the fiscal period under review – Totalbalance sheet amount (including equipment attached to buildings, structures, machinery and equipment, tools,
furniture and fixtures as well as leasehold right)

c. Overview of Capital Procurement
In the fiscal period under review, the Investment Corporation prepaid all short-term borrowings of 580
million yen on September 28, 2018 associated with the reception of refund of consumption taxes on acquired
assets, etc. The Investment Corporation also made a scheduled repayment of 93 million yen and 50 million yen
on July 31 and October 31, 2018, respectively, using cash on hand. As a result, the total amount of interestbearing debt stood at 15,991 million yen and the ratio of interest-bearing liabilities to total assets (LTV) at
40.9% as of the end of the fiscal period under review.
d. Overview of Financial Performance and Distributions
As a result of the operations described above, business performance in the fiscal period under review
generated operating revenue of 1,450 million yen, operating profit of 714 million yen, ordinary profit of 578
million yen and profit of 577 million yen.
Concerning cash distribution for the fiscal period under review, pursuant to the cash distribution policies
provided in the Investment Corporation’s articles of incorporation, the amount of distribution was to be inexcess of an amount equivalent to 90% of the Investment Corporation’s earnings available for distribution as
defined in Article 67-15, Paragraph 1 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957,
as amended; the “Special Measures Concerning Taxation Act”). Accordingly, the Investment Corporation
decided to distribute 2,454 yen per unit (excluding excess cash distribution).
Furthermore, in accordance with the policy for “distribution of cash in excess of profit” as stated in theInvestment Corporation’s articles of incorporation, the Investment Corporation made a distribution for the
2,824,164 yen in allowance for temporary difference adjustments (as defined in Article 2, Paragraph 2, item 30of the Ordinance on Accountings of Investment Corporations (Cabinet Office Ordinance No. 47 of 2006, as
amended; the “Investment Corporations Accountings Ordinance”) for the purpose of reflecting the effect on-5-

distributions of the difference between accounting and tax treatment of earnings in association with therecording of interest expenses of asset retirement obligation and recording of depreciation of building bookvalue corresponding to asset retirement obligation (as defined in Article 2, Paragraph 2, item 30 (b) of theInvestment Corporations Accountings Ordinance). This resulted in excess distribution per unit of 12 yen.
As a result, distribution per unit for the fiscal period under review was 2,466 yen (of which, excess
distribution per unit was 12 yen).
(2) Outlook for the Next Fiscal Perioda. Management Environment in the Next Fiscal Period
Looking at the Japanese economy in the next fiscal period onward, attention should continue to be paid tooverseas events that could have an impact on the global economy, such as the still unpredictable future of tradetalks between the United States and China, interest rate hikes in the United States, developments in the Brexit
scenario, economic trends in China and the situation in the Middle East that could affect crude oil prices.
Concerning domestic demand, if an increase in employment compensation can be anticipated in association
with the tightening supply of labor, in addition to the expected fostering of the celebratory mood due to thechange of the name of the era and events stimulating consumption such as 10 consecutive holidays during theGolden Week, a positive effect on personal consumption could be expected. However, it is necessary tocontinue to pay attention to determine the negative effects of the consumption tax hike scheduled for October
2019 on personal consumption and the content of measures planned to be implemented to coincide with theconsumption tax hike.
In this environment, sectors related to onsen and spa-related facilities, which are the key investment targetsof the Investment Corporation, are the representative examples of “intangible goods consumption (experiencebased consumption)” (Note 1). These sectors have been enjoying stable demand for a long time, and demandfor onsen is anticipated from the senior segment—a large and continuously growing segment that is the main
customer base for these facilities—and families, which are the offspring generation of the seniors, as well as
foreign tourists associated with progress in the government policies for the tourism nation. The Investment
Corporation believes that this demand will continue to remain stable overall in the years ahead.
Also with respect to sectors related to leisure facilities (Note 2), another investment target of the Investment
Corporation, given that interest in better QOL (Note 3) continues to grow against the backdrop of increasing
leisure time due to the expansion of active seniors and work style reforms, in addition to the fact that Japan isa mature consumption society, the Investment Corporation believes that intangible goods consumption(experience-based consumption) in leisure, entertainment and amusement is likely to increase as a consequence.
In addition, in the hotel sector, the supply of guestrooms continues to increase backed by the still increasing
number of foreign tourists visiting Japan associated with progress in government policies for the tourism nationand stable demand from Japanese guests, and the Investment Corporation believes that the market will expand.
Under these circumstances, the Investment Corporation believes that the performance of the owned facilities
will remain relatively stable overall, although there will be differences in performance, depending on facilities.
(Note 1) “Intangible goods consumption (experience-based consumption)” refers to consumption activities for providing a“series of experiences” which is a combination of individual events.
(Note 2) “Leisure facilities” refer to facilities that provide consumers with leisure activities and fulfilling time which people
nowadays require, such as “enjoyment,” “communication,” “comfort and relaxation” and “health and intellectual
satisfaction.”(Note 3) “QOL” stands for “Quality Of Life” and refers to the quality of life of people. In a mature consumption society, an
improvement in QOL attracts greater attention as a purpose of consumption activities.

b. Future Management Policy and Challenges to Address(a) External Growth Strategy
i. Utilization of Sponsor Pipeline
Looking at the supply aspect of onsen and spa-related facilities, the number of inquiries for potential deal
information to the Investment Corporation and the Ooedo-Onsen Monogatari Group remains large, as there aremany cases in which ryokans and hotels decide to cease operation and sell hotels for various reasons such as alack of successors and declining competitiveness due to aging of the properties.
In the period of one year from January 2018 to December 2018, the Ooedo-Onsen Monogatari Groupacquired “Ooedo-Onsen Monogatari Hotel Kisoji” (Kisogun, Nagano Prefecture) in April 2018 and “Tarasa
Shima Hotel & Resorts (Note 1)” (Toba City, Mie Prefecture) in October 2018. The Investment Corporation
believes that active acquisition will continue to take place in the future (Note 2).
-6-In accordance with the sponsor support agreement concluded with the Sponsors on November 1, 2017, theInvestment Corporation is granted preferential negotiating rights for the acquisition of onsen and spa-related
facilities owned or developed by the Ooedo-Onsen Monogatari Group, and will also be preferentially provided
with third-party property sales information acquired by the Ooedo-Onsen Monogatari Group. The Investment
Corporation intends to continuously acquire mainly onsen and spa-related facilities with the Ooedo businessmodel owned and operated by the Ooedo-Onsen Monogatari Group by making maximum use of theabovementioned support.
(Note 1) The former name before acquisition by the Ooedo-Onsen Monogatari Group. As of the date of this document, it ispreparing for renovation, and the facility name has not yet been determined.
(Note 2) It is not guaranteed that the Investment Corporation will be able to acquire these properties in the future.

ii. Utilization of Network Unique to the Asset Manager and Acquisition of Properties Other than
Properties Contributed by Sponsor
With regard to onsen and spa-related facilities, the key investment targets, the Investment Corporation will
acquire a variety of onsen and spa-related facilities operated by entities outside the Ooedo-Onsen MonogatariGroup by utilizing a network unique to the Asset Manager, while it has policy of continuing to acquire mainly
facilities operated by the Ooedo-Onsen Monogatari Group as its primary targets. The Investment Corporation
also regards a wide range of leisure facilities that provide consumers with affluent leisure time, as represented
by onsen and spa-related facilities, as investment targets within the scope set forth in its articles of incorporationand investment guidelines. Within this scope, the Investment Corporation will actively seek to acquire
properties other than onsen and spa-related facilities in considering the diversification and balance of its
portfolio. Selective investment with preferential negotiation rights, etc, will be conducted by obtaining
information on urban locations in major cities, locations with a large market scale and many potential users,and commercial real estate undergoing operation in which stable operation in the future is expected, from theperspective of “intangible goods consumption (experience-based consumption), which has gained attention inrecent years, including “onsen/spa.” Moreover, this information on investment targets is brought to the AssetManager in significant volume, the number of projects under consideration is increasing partially due toapproaching potential sellers by means of the company’s unique network, and cases in which preferential
negotiating rights are secured are also increasing in number (Note).
The investment targets of the Investment Corporation stipulated in the articles of incorporation are ryokans,
hotels, bathing facilities, resort facilities, amusement parks and other leisure facilities as well as mixed-use
facilities, all of which can be called leisure facilities. The Investment Corporation believes that it can expand
the scale of the portfolio and diversify risks by conducting acquisition activities across a large area while
focusing on investments in onsen and spa-related facilities, a facility including onsen and spa sections, as oneof the main uses of the facility.
(Note) It is not guaranteed the Investment Corporation will be able to acquire these properties in the future.

(b) Internal Growth Strategy
i. Rent Structure Emphasizing Stability
The Investment Corporation adopts a rent system that comprises primary rent (fixed rent combined with
GOP-linked variable rent) with the addition of secondary rent (amount equivalent to real estate-related costs ofeach facility) in the long-term lease agreements concluded with the Ooedo-Onsen Monogatari Group
companies that are the tenants of the owned assets (Note 1). This along with having tenants pay repair expenses
in principle allows the Investment Corporation to secure stability of cash flow over the long term while pursuingbenefits from the upside of a GOP-linked rent income when facilities are generating favorable operating results.
The Investment Corporation decided with Ooedo-Onsen Monogatari Hotels & Resorts or Reoma Unity Co.,
Ltd. (hereinafter individually or collectively referred to as the “Lessee”) on January 22, 2019 to revise thefixed rent (Note 2) set forth in the fixed-term building lease agreement with precedent condition and building
management service outsourcing agreement (including subsequent changes and hereinafter individually orcollectively referred to as the “Original Agreement”) entered into with the Lessee (hereinafter the “Revision”)
with respect to Ooedo-Onsen Monogatari Reoma Resort, Ooedo-Onsen Monogatari Nagasaki Hotel Seifu,
Kinugawa Kanko Hotel and Ooedo-Onsen Monogatari Kinosaki (the “Four Properties”) and to partially change
the method of calculating the variable rent (Note 3) set forth in the Original Agreement with respect to two
properties of Ooedo-Onsen Monogatari Reoma Resort and Kinugawa Kanko Hotel among the Four Properties(hereinafter the “Change”), with June 1, 2019 as the effective date.

-7-

On the occasion of the Revision, the Investment Corporation discusses with the Lessee the adequacy of the
fixed rent level set at the time of acquiring each property in light of the operating results of the property to dateachieved by the Lessee.
As a result, with respect to Ooedo-Onsen Monogatari Reoma Resort, the Investment Corporation decided toreduce the fixed rent after June 1, 2019 when the fixation period (from June 1, 2017 to May 31, 2019) of thecurrent variable rent portion will end for the purpose of reducing the rent burden of the Lessee, given that theburden of renewal expenses is heavy for the Lessee because the Lessee has set up an amusement park and atheme park on the site and has many game machines and equipment. The Investment Corporation decided that
this revision would stabilize the future rent income of Ooedo-Onsen Monogatari Reoma Resort and help theLessee take steps to increase the value, which would contribute to an increase in the competitiveness of the
facility.
With respect to three properties of Ooedo-Onsen Monogatari Nagasaki Hotel Seifu, Kinugawa Kanko Hoteland Ooedo-Onsen Monogatari Kinosaki, the Investment Corporation decided to increase the fixed rent, giventhat the rent burden ratio to GOP (Note 4) was relatively low and that a rent solvency margin of the Lessee wasrecognized based on the total amount of current rents. As a result, the total amount of fixed rents of the overall
portfolio will be maintained as is, even if the decline in the fixed rent of Ooedo-Onsen Monogatari Reoma
Resort is taken into account. For these three properties, the Investment Corporation believes that the rent burden
ratio will remain within an appropriate range even if the fixed rents are increased, because their rent burden
ratios to GOP are low in comparison with the portfolio average.
While it is stipulated that a variable rent will occur if the amount obtained by multiplying the modified GOP(Note 5) for the most recent one year by a certain coefficient exceeds the annual amount of fixed rent, theChange will revise the coefficient in conjunction with the Revision for Ooedo-Onsen Monogatari Reoma Resort
and Kinugawa Kanko Hotel.
The Investment Corporation believes that the Revision and the Change will have the effect of increasing thestability of future cash flows by encouraging diversification through the reduced percentage of total rent income
represented by Ooedo-Onsen Monogatari Reoma Resort, the largest property in the portfolio, and the levelingof the rent burden ratio of each facility owned, in addition to stabilizing rent income of Ooedo-Onsen
Monogatari Reoma Resort while maintaining the overall amount of rent income received by the Investment
Corporation.
The Investment Corporation will continue to make efforts to increase the long-term unitholder value, as well
as stabilizing cash distribution by actively working to strengthen competitiveness from a medium- to long-term
perspective.
(Note 1) The rent system has been adopted in the lease agreements for the currently owned assets. However, this does notguarantee the same rent system will be adopted in the lease agreements for the facilities that the Investment
Corporation acquires in the future.
(Note 2) “Fixed rent” refers to the monthly amount provided for in each facility’s lease agreement. The same applies
hereinafter.
(Note 3) “Variable rent” refers to the amount obtained by multiplying each facility’s modified GOP for the most recent 1year period (for the 6 months starting from December of each year, this means the 1-year period from March of thatyear to February of the following year; for the 6 months starting from June of each year, this means the 1-year period
from September of the previous year to August of that year) (these 1-year periods are referred to as “modified GOP
Calculation Periods”) regarding each facility by the specific rate provided for in each lease agreement (yearly; themonthly amount is 1/12th thereof). The same applies hereinafter. For Ooedo-Onsen Monogatari Reoma Resort, it willbe 31 million yen until May 2019 and the amount obtained by the above calculation method for June 2019 onward.
(Note 4) “GOP” refers to gross operating profit, which is the amount remaining after deducting expenses arising directly frommanaging each facility, such as labor expenses and general and administrative expenses, from each facility’s sales.
(Note 5) “Modified GOP” is the amount remaining after deducting real estate-related expenses for each facility to be paid by
the tenant (including, but not limited to, taxes and public charges, non-life insurance premiums and land and house
rent, but excluding the total sum of taxes and public charges, non-life insurance premiums and other expenses which
the Investment Corporation should incur for each facility based on each lease contract and the Investment
Corporation’s assets existing in each facility) from the GOP of each facility for the Modified GOP calculation period.

ii. Strategic CAPEX (Note 1) Contributing to the Increase in Income and Enhancement ofCompetitiveness through the Expansion of Capacity
The Investment Corporation proactively implements strategic CAPEX such as increasing the number ofguestrooms through extension and reconstruction for existing properties with value-increasing potential (Note2) and aims to increase rent income by increasing potential earnings that the operator of owned assets aresupposed to receive as well as through the effective use of non-operating buildings and unused land within thefacility.
In addition, the Investment Corporation will also strive to increase variable rents through the expansion oftenant income through forms of cooperation available to an investment corporation, such as holding various
events to attract guests, taking steps to improve operations such as renovating and expanding open-air baths-8-contributing to the enhancement of competitiveness and improving customer flow lines at buffet halls throughcollaboration based on close communication with the Ooedo-Onsen Monogatari Group, which possesses
expertise in adding value to onsen and spa-related facilities, and by becoming actively involved in tenant
initiatives from the position of the facility owner.
(Note 1) CAPEX (Capital Expenditure) does not refer to repair expenses for maintenance of real estate but refers to expenditure
for enhancing value and competitiveness of real estate and its facilities.
(Note 2) “Value-increasing potential” refers to the capability for potential enhancement of asset value that investments, etc.
can bring.

(c) Financial Strategy
The Investment Corporation pursues flexible financial strategies while emphasizing the establishment of aconservative financial base.
Although the Investment Corporation has set the upper limit of LTV at 60% in principle, it plans to maintaina conservative level of around 40% with normal operations for the time being, while paying attention to capitalreserves. As to debt financing, the Investment Corporation aims to maintain and strengthen its favorable
relationship with existing lenders as well as diversify financing sources to secure the necessary funds associatedwith the expansion of asset scale. The Investment Corporation also aims to reduce financing costs by lowering
the risk premium in step with progress in the expansion of the scale of the portfolio and the diversification ofrisk. In addition, the Investment Corporation is taking steps to diversify/level repayment dates of interestbearing debt to reduce refinancing risk.
(3) Significant Subsequent Events
Not applicable-9-Assumptions Underlying Forecasts of the Financial Results
for the Fiscal Periods Ending May 2019 and November 2019
Item

Assumption

Calculation
period・ Fiscal period ending May 2019
(6th fiscal period: from December 1, 2018, to May 31, 2019) (182 days)
・ Fiscal period ending November 2019
(7th fiscal period: from June 1, 2019, to November 30, 2019) (183 days)
・ It is assumed that there will be no change (acquisition or disposition of assets) to the 14
properties, which the Investment Corporation owns as of the date of this document, throughto the end of the fiscal period ending November 2019.
・ The managed assets may actually change due to acquisition of assets other than the owned
properties above, the disposition of assets under management, etc.
・ Lease operations revenue from the owned assets is calculated based on the lease agreements
effective as of the date of this document. Lease operations revenue of certain properties iscalculated for the fiscal period ending November 30, 2019 based on rent revisions to be madein the future, taking into consideration market trends and other factors.
・ Rent is calculated based on the following assumptions:ManagedAssetsOperatingrevenue[Ooedo-Onsen Monogatari Reoma Resort]
Fixed rent: 62,456,896 yen monthly; and will be 52,456,896 yen monthly from June 2019
Variable rent: 5,181,730 yen monthly; and will be calculated using the following calculation
method from June 2019(1) Modified GOP (Note 1) for the most recent one-year period × 5.0% (yearly; themonthly amount is 1/12th thereof)(2) Only if 58.7% of the modified GOP exceeds one year’s fixed rent, variable rent will
apply.
With regard to Ooedo-Onsen Monogatari Reoma Resort, a fixed-term land lease agreement
has been executed with the tenant, and the Investment Corporation receives a separate
monthly land rent of 89,100 yen based on the fixed-term land lease agreement.
[Ooedo-Onsen Monogatari Ise-shima]
Fixed rent: 18,009,399 yen monthly
Variable rent: 962,993 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 4.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 77.0% of the modified GOP exceeds one year’s fixed rent, variable rent will
apply.
[Ito Hotel New Okabe]
Fixed rent: 12,296,799 yen monthly
Variable rent: 1,471,251 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 5.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 52.0% of the modified GOP exceeds one year’s fixed rent, variable rent will
apply.

- 10 -

Operating
revenue[Ooedo-Onsen Monogatari Atami]
Fixed rent: 15,619,380 yen monthly
Variable rent: 939,716 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 4.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 74.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Toi Marine Hotel]
Fixed rent: 9,098,235 yen monthly
Variable rent: 1,016,579 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 7.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 72.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Awara]
Fixed rent: 10,963,033 yen monthly
Variable rent: 608,360 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 3.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 62.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Kamoshika-so]
Fixed rent: 5,953,916 yen monthly
Variable rent: 655,836 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 6.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 62.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Ikaho]
Fixed rent: 6,126,558 yen monthly
Variable rent: 708,097 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 7.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 67.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Kimitsu-no-mori]Fixed rent: 4,098,412 yen monthly
Variable rent: 436,860 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 5.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 52.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Nagasaki Hotel Seifu]
Fixed rent: 9,788,199 yen monthly; and will be 12,496,532 yen monthly from June 2019
Variable rent: 498,384 yen monthly from June 2018; and will be revised every six months
and calculated as follows:(1)
Modified GOP for the most recent one-year period × 2.2% (yearly; the monthly
amount is 1/12th thereof)- 11 -

(2)Only if 44.7% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.

[Ooedo-Onsen Monogatari Kounkaku]
Fixed rent: 7,017,209 yen monthly
Variable rent: 755,005 yen monthly from June 2018; and will be revised every six months
and calculated as follows:(1)
Modified GOP for the most recent one-year period × 4.5% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 45.3% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Kinugawa Kanko Hotel]
Fixed rent: 22,478,074 yen monthly; and will be 29,069,741 yen monthly from June 2019
Variable rent: 1,188,094 yen monthly from June 2018; and will be revised every six months
and calculated as follows:(1)
Modified GOP for the most recent one-year period × 2.4% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 47.5% of the modified GOP (after June 2019, 56.0% of the modified
GOP) exceeds one year’s fixed rent, will variable rent apply.
[Ooedo-Onsen Monogatari Kinosaki]
Fixed rent: 12,447,999 yen monthly; and will be 13,147,999 yen monthly from June 2019
Variable rent: 650,945 yen monthly from June 2018; and will be revised every six months
and calculated as follows:(1)
Modified GOP for the most recent one-year period × 2.4% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 47.7% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Higashiyama Grand Hotel]
Fixed rent: 8,631,767 yen monthly
Variable rent: 940,567 yen monthly from June 2018; and will be revised every six months
and calculated as follows:(1)
Modified GOP for the most recent one-year period × 4.5% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 45.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
Fiscal Period Ending May 2019 (6th fiscal period)(Millions of yen)
Property name
Ooedo-Onsen Monogatari
Reoma Resort
Ooedo-Onsen MonogatariIse-shima

Primary rent (Note 2)
Fixed
Variablerent
rent(Note 3)(Note 4)375
31
(Note 6)

Ito Hotel New Okabe
Ooedo-Onsen Monogatari
Atami
Ooedo-Onsen Monogatari
Toi Marine Hotel- 12 -

Secondary
rent(Note 5)

Total
(Note 7)

32

439

108

7

3

119

73

8

8

90

93

7

3

105

54

6

1

62

Ooedo-Onsen Monogatari
Awara
Ooedo-Onsen Monogatari
Kamoshika-so
Ooedo-Onsen Monogatari
Ikaho
Ooedo-Onsen Monogatari
Kimitsu-no-moriOoedo-Onsen Monogatari
Nagasaki Hotel Seifu
Ooedo-Onsen Monogatari
Kounkaku

65

3

8

78

35

4

6

46

36

4

4

45

24

2

5

32

58

4

4

67

42

-

2

44

Kinugawa Kanko Hotel

134

8

5

148

Ooedo-Onsen Monogatari
KinosakiOoedo-Onsen Monogatari
Higashiyama Grand Hotel

74

4

6

85

51

5

10

67

Total (Note 7)

1,230

98

104

1,433

Fiscal Period Ending November 2019 (7th fiscal period)(Millions of yen)Primary rent (Note 2)

Secondary
rent(Note 5)

Total
(Note 7)

28

32

376

108

7

3

119

Ito Hotel New Okabe

73

8

8

90

Ooedo-Onsen Monogatari
Atami
Ooedo-Onsen Monogatari
Toi Marine Hotel
Ooedo-Onsen Monogatari
Awara
Ooedo-Onsen Monogatari
Kamoshika-so
Ooedo-Onsen Monogatari
Ikaho
Ooedo-Onsen Monogatari
Kimitsu-no-moriOoedo-Onsen Monogatari
Nagasaki Hotel Seifu
Ooedo-Onsen Monogatari
Kounkaku

93

7

3

105

54

6

1

62

65

3

8

78

35

4

6

46

36

4

4

45

24

2

5

32

74

4

4

83

42

4

2

49

Kinugawa Kanko Hotel
Ooedo-Onsen Monogatari
KinosakiOoedo-Onsen Monogatari
Higashiyama Grand Hotel

174

8

5

187

78

4

6

89

51

5

10

67

Total (Note 7)

1,230

99

104

1,433

Property name
Ooedo-Onsen Monogatari
Reoma Resort
Ooedo-Onsen MonogatariIse-shima

Fixed
rent
(Note 3)315
(Note 6)

Variablerent(Note 4)

- 13 -

(Note 1) “GOP” refers to gross operating profit, which is the amount remaining after deducting expenses
arising directly from managing each facility, such as labor expenses and general andadministrative expenses, from each facility’s sales. “Modified GOP” is the amount remaining
after deducting real estate-related expenses for the property to be borne by the tenant (including,but not limited to, taxes and public charges, non-life insurance premiums and land and house
rent, but excluding an amount equivalent to Secondary rent (defined below in Note 5)) from the
GOP of each facility for the Modified GOP Calculation Period (defined below in Note 4). The
same applies hereinafter.
(Note 2) “Primary rent” refers to the sum of the fixed rent and the variable rent. The same applies
hereinafter.
(Note 3) “Fixed rent” refers to the monthly amount provided for in each facility’s lease agreement. The
same applies hereinafter.
(Note 4) “Variable rent” refers to the amount obtained by multiplying each facility’s modified GOP for
the most recent 1-year period (for the 6 months starting from December of each year, this means
the 1-year period from March of that year to February of the following year; for the 6 months
starting from June of each year, this means the 1-year period from September of the previous
year to August of that year) (these 1-year periods are referred to as “modified GOP Calculation
Periods”) regarding each facility by the specific rate provided for in each lease agreement (yearly;
the monthly amount is 1/12th thereof). The same applies hereinafter. For Ooedo-Onsen
Monogatari Reoma Resort, it will be 31 million yen until May 2019 and the amount obtained by
the above calculation method for June 2019 onward.
(Note 5) “Secondary rent” refers to an amount equivalent to the total amount of taxes, public charges,
nonlife insurance premiums, and other expenses (real estate management expenses) to be borneby the Investment Corporation for each facility owned by the Investment Corporation. The same
applies hereinafter.
(Note 6) Land rent based on the fixed-term land lease agreement is included in the fixed rent.
(Note 7) Rents of properties are rounded down to the nearest million yen. Therefore, the total of each
property’s rent, the total of fixed rents, the total of variable rents and the total of secondary rents
may not add up to the figure indicated in the Total column.

OperatingexpensesNon-operating
expenses
Borrowings

Outstanding
Investment
Units

Distribution
per unit

・ Of the expenses related to leasing activities, which are a major component of operating
expenses, the expenses related to leasing activities other than the depreciation arecalculated based on past actual figures and by reflecting factors that cause expenses tofluctuate.
・ As to taxes and public charges, 91 million yen is recorded as expenses for each fiscal
period of the fiscal periods ending May 2019 and November 2019.
・ Building repair expenses are not expected to arise, as these expenses will, in principle, beborne by the tenant based on the lease agreement effective as of the date of this document.
・ Depreciation, which is calculated using the straight-line method inclusive of incidental
expenses and additional capital expenditure in the future, is assumed to be 428 million
yen for the fiscal period ending May 2019, and 434 million yen for the fiscal period ending
November 2019.
・ The total amount of interest expenses and other borrowing-related expenses is expected
to be 136 million yen for the fiscal period ending May 2019, and 136 million yen for the
fiscal period ending November 2019.
・ The balance of loans outstanding as of November 30, 2018 is 15,991 million yen.
・ In the fiscal period ending May 2019 and the fiscal period ending November 2019, it isassumed that the scheduled repayment of 186 million yen will be made separately.
・ In the fiscal period ending May 2019, the current portion of long-term loans (400 million
yen and 6,676 million yen) will be due for repayment on May 31, 2019 but refinancing of
the same amount is assumed.
・ The assumed number of investment units issued and outstanding as of the date of thisdocument is 235,347, and it is assumed that the number of investment units will notchange due to any additional issuance of new investment units or another reason before
November 30, 2019.
・ Distribution per unit is calculated based on the expected number of investment units
issued and outstanding as of the end of the fiscal periods ending May 2019 and November
2019 (235,347 units).
・ Distribution per unit (excluding excess cash distribution) is calculated based on the policy
for cash distributions provided for in the Investment Corporation’s articles ofincorporation.
・ Distribution per unit (excluding excess cash distribution) may change due to various- 14 -

(Excludingexcess cash
distribution)
Excess cash
distribution
per unit

Other

factors, including changes of portfolio, changes in rent revenue due to a relocation oftenant, etc., the occurrence of unexpected capital expenditures, and other reasons.
・ Recording of allowance for temporary difference adjustments of 2,824,164 yen is
expected concerning the difference in accounts for tax and accounting purposes associatedwith recording of asset retirement obligation.
・ Regarding conducting excess cash distribution, the Investment Corporation will have abasic policy of conducting excess cash distribution of which amount will be equivalent to
the increased amount of allowance for temporary difference adjustments. Pursuant to thepolicy, it is assumed that 12 yen of excess distribution per unit will be conducted in eachof the fiscal periods ending May 2019 and ending November 2019.
・ It is assumed that revisions that affect the above forecast figures will not be made to laws
or ordinances, tax systems, accounting standards, listing regulations, or rules or the likeset by The Investment Trusts Association, Japan.
・ It is assumed that unforeseen material changes in general economic trends, in real estatemarket conditions, or in any other factors will not occur.

2.3. Investment Risks
Disclosure is omitted because there are no significant changes from “Investment Risks” set out in the mostrecent periodic securities report (yuka shoken hokokusho) (submitted on August 24, 2018).

- 15 -

3. Financial Statements
3.1. Balance Sheets(Thousands of yen)
As of May 31, 2018
AssetsCurrent assets
Cash and deposits
Prepaid expenses
Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total property, plant and equipment
Intangible assets
Leasehold right
SoftwareTotal intangible assets
Investments and other assets
Deferred tax assets
Long-term prepaid expenses
Lease and guarantee deposits
Total investments and other assets
Total non-current assets
Total assets- 16 -

As of November 30, 2018

2,169,076
148,184
547,941
4,777
2,869,980

2,220,373
127,758－
6,332
2,354,464

25,777,902(1,077,075)
24,700,827
1,259
(95)
1,163
600
(8)
591
1,005
(49)
956
11,988,130
36,691,669

25,982,750(1,498,792)
24,483,958
1,259
(138)
1,120
600
(26)
573
2,620
(268)
2,352
11,988,130
36,476,134

157,802
5,359
163,161

157,802
4,556
162,358

16
141,063
10,089151,170
37,006,001
39,875,981

17
103,787
10,089113,895
36,752,388
39,106,853

(Thousands of yen)
As of May 31, 2018
Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable
Current portion of long-term loans
payableAccounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Tenant leasehold and security deposits
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary
difference adjustments
Total deduction from unitholders'
capitalUnitholders' capital, net
Surplus
Unappropriated retained earnings(undisposed loss)
Total surplus
Total unitholders' equity
Total net assets
Total liabilities and net assets- 17 -

As of November 30, 201855,254580,000

73,130－7,499,250

7,380,750

145,330
12,056954－
261,678
4,882
8,559,406

90,481
10,546972
82,313
258,696
6,438
7,903,329

8,728,500
1,230,724
136,955
10,096,180
18,655,586

8,610,500
1,230,724
137,354
9,978,579
17,881,908

20,653,023

20,653,023(2,995)(5,819)(2,995)(5,819)20,650,027

20,647,203

570,366

577,741

570,366
21,220,394
21,220,394
39,875,981

577,741
21,224,944
21,224,944
39,106,853

3.2. Statements of Income(Thousands of yen)
Fiscal period ended
May 31, 2018
Operating revenue
Lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee
Administrative service fees
Directors' compensations
Other operating expenses
Total operating expenses
Operating profit
Non-operating income
Interest income
Interest on refund
Total non-operating income
Non-operating expenses
Interest expenses
Investment unit issuance expenses
Borrowing related expenses
Other
Total non-operating expenses
Ordinary profit
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitRetained earnings brought forward
Unappropriated retained earnings(undisposed loss)- 18 -

Fiscal period ended
November 30, 2018

1,442,676
1,442,676

1,450,211
1,450,211

522,992
125,606
1,715
14,9333,600
39,522
708,370
734,305

541,878
129,310
1,778
16,9173,600
42,209735,695
714,516

9
9

10
871
882

64,81822,45673,3142,500
163,090571,225571,225955(3)
951
570,27393

64,353－72,451－
136,805
578,593
578,593973(0)
972
577,620120

570,366

577,741

3.3. Statements of Unitholders’ Equity
4th Fiscal Period (from December 1, 2017 to May 31, 2018)(Thousands of yen)
Unitholders' equity
Unitholders' capital

Surplus

Deduction fromunitholders' capital

Total
Unappropriatedretained
unitholders'
Unitholders'
Total
AllowanceTotal
equityearnings
capitalsurplusfor
deduction(undisposed
temporary
from
loss)
difference unitholders'adjustments
capitalUnitholders'
capitalBalance at beginning ofcurrent period
Changes of items during
periodIssuance of new
investment units

15,752,576(1,762)(1,762) 15,750,814

4,900,447(1,233)(1,233)4,900,447

4,900,447(420,237) (420,237) (420,237)(420,237)(1,233)(1,233)(1,233)

ProfitTotal changes of items
during period
Balance at end ofcurrent period

420,330 16,171,144 16,171,144

4,900,447

Dividends of surplus
Excess cash distribution
from allowance fortemporary difference
adjustments

420,330

Total net
assets570,273

570,273

570,273

570,273
5,049,250

4,900,447(1,233)(1,233)

4,899,213

150,036

150,036 5,049,250

20,653,023(2,995)(2,995) 20,650,027

570,366

570,366 21,220,394 21,220,394

5th Fiscal Period (from June 1, 2018 to November 30, 2018)(Thousands of yen)
Unitholders' equity
Unitholders' capital

Surplus

Deduction fromunitholders' capital

UnappropriatedTotal
retained
unitholders'
Unitholders'
Total
AllowanceTotal
equityearnings
capitalsurplusfor
deduction(undisposed
temporary
from
loss)
difference unitholders'adjustments
capitalUnitholders'
capitalBalance at beginning ofcurrent period
Changes of items during
period20,653,023(2,995)(2,995) 20,650,027

Dividends of surplus

570,366 21,220,394 21,220,394(570,245) (570,245)

Excess cash distribution
from allowance fortemporary difference
adjustments(2,824)(2,824)(2,824)

ProfitTotal changes of items
during period
Balance at end ofcurrent period

570,366(570,245)(570,245)(2,824)(2,824)

577,620577,620577,620577,620

7,374

4,550

4,550

-

(2,824)(2,824)(2,824)

7,374

20,653,023(5,819)(5,819) 20,647,203

577,741- 19 -

Total net
assets577,741 21,224,944 21,224,944

3.4. Statements of Cash Distributions
(Yen)
Item

4th Fiscal Period(from December 1, 2017
to May 31, 2018)

5th Fiscal Period(from June 1, 2018
to November 30, 2018)

I. Unappropriated retained earnings
II. Addition of excess distribution
Of which, allowance for temporary
difference adjustments
III. Distribution amount[Distribution amount per unit]
Of which,
Distribution amount from earnings[Of which, excess cash distribution per unit]
Of which,
Allowance for temporary difference
adjustments

570,366,299
2,824,164[Of which, excess cash distribution per unit
(pertaining to allowance for temporary
difference adjustments)]
IV. Retained earnings carried forward

Method of calculating distribution amount

2,824,164577,741,085
2,824,164
2,824,164

573,069,945[2,435]580,365,702[2,466]570,245,781

577,541,538[2,423][2,454]

2,824,164

2,824,164

[12]

[12]

120,518

199,547

As described above, distribution per unit
for the fiscal period under review is 2,435
yen.
Concerning cash distribution (excludingexcess cash distribution), in order to ensurethat the maximum amount of cash
distribution of earnings would be included indeductible expenses based on application of
special provisions for taxation on investment
corporations (Article 67-15, Paragraph 1 of
the Special Measures Concerning Taxation
Act), the Investment Corporation decided to
distribute almost the entire amount of theearnings provided in Article 136, Paragraph
1 of the Act on Investment Trusts andInvestment Corporations, excluding the
portion where cash distribution perinvestment unit would be less than JPY1. As
a result, the Investment Corporation declareda cash distribution per investment unit
(excluding excess cash distribution) of 2,423
yen.
In addition, pursuant to the policy for“distribution of money in excess of profits”
as stated in its articles of incorporation, theInvestment Corporation decided to make a
distribution for the 2,824,164 yen inallowance for temporary difference
adjustments for the purpose of reflecting theeffect on distributions of the difference inaccounts for tax and accounting purposes inassociation with expenses related to asset
retirement obligations (as defined in Article
2, Paragraph 2, item 30 (b) of the Investment
Corporations Accountings Ordinance). This
resulted in distribution of allowance fortemporary difference adjustments of 12 yen
per investment unit.

As described above, distribution per unit
for the fiscal period under review is 2,466
yen.
Concerning cash distribution (excludingexcess cash distribution), in order to ensurethat the maximum amount of cash
distribution of earnings would be included indeductible expenses based on application of
special provisions for taxation on investment
corporations (Article 67-15, Paragraph 1 of
the Special Measures Concerning Taxation
Act), the Investment Corporation decided to
distribute almost the entire amount of theearnings provided in Article 136, Paragraph
1 of the Act on Investment Trusts andInvestment Corporations, excluding the
portion where cash distribution perinvestment unit would be less than JPY1. As
a result, the Investment Corporation declareda cash distribution per investment unit
(excluding excess cash distribution) of 2,454
yen.
In addition, pursuant to the policy for“distribution of money in excess of profits”
as stated in its articles of incorporation, theInvestment Corporation decided to make a
distribution for the 2,824,164 yen inallowance for temporary difference
adjustments for the purpose of reflecting theeffect on distributions of the difference inaccounts for tax and accounting purposes inassociation with expenses related to asset
retirement obligations (as defined in Article
2, Paragraph 2, item 30 (b) of the Investment
Corporations Accountings Ordinance). This
resulted in distribution of allowance fortemporary difference adjustments of 12 yen
per investment unit.

- 20 -

3.5. Statements of Cash Flows(Thousands of yen)
Fiscal period ended
May 31, 2018
Cash flows from operating activities
Profit before income taxes
Depreciation
Investment unit issuance expenses
Borrowing related expenses
Interest income
Interest expenses
Increase (decrease) in operating accounts
payableDecrease (increase) in consumption taxes
refund receivable
Increase (decrease) in accrued consumption
taxes
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid
expenses
Increase (decrease) in accounts payable other
Increase (decrease) in advances received
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating
activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from tenant leasehold and security
deposits
Payments for restricted bank deposits
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Increase in short-term loans payable
Proceeds from long-term loans payable
Decrease in short-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing
activities
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodCash and cash equivalents at end of period- 21 -

Fiscal period ended
November 30, 2018571,225
415,504
22,45673,314(9)64,818578,593422,799－
72,451(10)
64,353(1,103)41,005(547,941)

547,941(20,086)

82,313512(15,873)(74,910)

1,125

11,537

3,388

76,573307
592,1979(60,271)(872)(2,981)399
1,795,505
10(65,863)(955)

531,064

1,728,695(10,241,190)(287,828)

362,454－(394,454)－(10,273,190)(287,828)

810,000
5,217,000(230,000)(686,500)
4,877,990(421,470)－－(580,000)(236,500)－(573,069)

9,567,020(1,389,569)(175,105)

51,297

1,018,957

843,851

843,851

895,148