December 15, 2022

Financial Report for the Fiscal Period Ended October 31, 2022
(For the Reporting Period from May 1, 2022 to October 31, 2022)
Name of REIT issuer:

Sekisui House Reit, Inc. (“SHR”)

Stock exchange listing:
Securities code:
URL:
Representative:

Tokyo Stock Exchange3309
https://sekisuihouse-reit.co.jp/en/
Atsuhiro Kida, Executive Director

Asset management company:
Representative:
Inquiries:

Sekisui House Asset Management, Ltd.
Toru Abe, President & Representative Director
Koichi Saito, Investor Relations Department Chief Manager
TEL: +81-3-6447-4870

Scheduled date to file securities report:
Scheduled date to commence distribution payment:
Preparation of supplementary material on financial report:
Holding of financial report presentation meeting:January 30, 2023
January 20, 2023
Yes
Yes (for institutional investors and analysts)(Amounts truncated to the nearest million yen)

1. Summary of financial results for the fiscal period ended October 31, 2022
(May 1, 2022 – October 31, 2022)(1) Operating results(Percentages show changes from the previous period)
Operating Revenue
Fiscal period ended
October 31, 2022
April 30, 2022

Operating Income

Ordinary Income

Net Income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

15,797
14,7567.0(14.7)

8,078
7,625

5.9
(19.0)

7,205
6,746

6.8
(20.8)

7,204
6,745

6.8
(20.8)Net Income per Unit
Fiscal period ended
October 31, 2022
April 30, 2022

Ordinary Income toTotal Assets

Return on Equity

Yen

%

1,636
1,522

Ordinary Income toOperating Revenue
%

2.4
2.3

%

1.3
1.2

45.6
45.7

(Note) Net income per unit is calculated by dividing net income by the day-weighted average number of investment units outstanding
during the period.

(2) Distributions
Distributions
per Unit

Total
Distributions

Distributions in
Excess of(excluding(excluding
Earnings
Distributions inDistributions in
per Unit
Excess of Earnings) Excess of Earnings)
Fiscal period ended

Yen

Millions of yen

October 31, 2022

1,714

7,509

－

April 30, 2022

1,698

7,524

－

Yen

Total
Distributions in
Excess ofEarnings
Millions of yen

Distributions to
Net Assets

Payout Ratio
%

%

－

104.8

2.5

－

111.6

2.5

(Note 1) Total distribution for the fiscal period ended October 31, 2022 is the amount obtained by adding 222 million yen of reversal ofreserve for temporary difference adjustment (“RTA”) and 82 million yen of reversal of reserve for reduction entry to theunappropriated retained earnings.
(Note 2) Total distribution for the fiscal period ended April 30, 2022 is the amount obtained by adding 187 million yen of reversal of
RTA and 590 million yen of reversal of reserve for reduction entry to the unappropriated retained earnings.

(3) Financial position
Total Assets
As of
October 31, 2022
April 30, 2022

Net Assets

Equity Ratio

Millions of yen

Millions of yen

570,999
579,931294,484
298,782

51.6
51.5

Net Cash
Provided by (Used in)Operating Activities

Net Cash
Provided by (Used in)Investing Activities

Net Cash
Provided by (Used in)
Financing Activities

Net Assets per Unit%

Yen

67,211
67,428(4) Cash flows

Fiscal period ended
October 31, 2022
April 30, 2022

Cash and Cash
Equivalents
at End of Period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

33,187
7,938(15,694)(36,833)(16,922)
17,99027,757
27,187

2. Forecasts of performance for the fiscal period ending April 30, 2023 (November 1, 2022 – April 30, 2023)
and the fiscal period ending October 31, 2023 (May 1, 2023 – October 31, 2023)

Operating
Revenue
Fiscal period ending
April 30, 2023
October 31, 2023

Millionsof yenOrdinary
IncomeOperating Income%

Millionsof yen15,224 (3.6)
15,541 2.1%(Percentages show changes from the previous period)
Distributions
Distributions in
per Unit
Excess of
Net Income(excluding
Earnings
Distributions in
per Unit
Excess of Earnings)

Millionsof yen7,233 (10.5)
7,387
2.1

%

6,346 (11.9)
6,426
1.3

Millionsof yen

%

Yen

Yen

6,345 (11.9)
6,425
1.3

1,701
1,466

13
215

(Reference) Forecasted net income per unit (Forecasted net income / Forecasted number of investment units at end of period)
For the fiscal period ending April 30, 2023:
1,448 yen
For the fiscal period ending October 31, 2023:
1,466 yen
(Note) Forecasted distribution for the fiscal period ending April 30, 2023 is the amount added 58 million yen of allowance for temporary
difference adjustment (“ATA”) and added 194 million yen of reversal of RTA and 911 million yen of reversal of reserve for
reduction entry to the unappropriated retained earnings and forecasted distribution for the fiscal period ending October 31, 2023
is the amount added 940 million yen of ATA to the unappropriated retained earnings.

* Other(1) Changes in accounting policies, changes in accounting estimates, and retrospective restatementa. Changes in accounting policies due to revisions to accounting standards and other regulations:b. Changes in accounting policies due to reasons other than a. above:c. Changes in accounting estimates:
d. Retrospective restatement:

None
None
None
None

(2) Number of investment units issued
a. Number of investment units issued at end of period (including treasury investment units)
As of October 31, 2022:
4,381,482 units
As of April 30, 2022:
4,431,133 units
b. Number of treasury investment units at end of period
As of October 31, 2022:– units
As of April 30, 2022:– units* Status of audit proceduresThis financial report is not subject to audit procedures by public accountants or audit corporations.

* Remarks on appropriate use of forecasts of performance and other special notes
・ Forward-looking statements presented in this financial report, including forecasts of performance, are based on
information currently available to SHR and on certain assumptions it deems to be reasonable. As such, actual
operating and other results may differ materially from these forecasts as a consequence of numerous factors. These
forecasts do not guarantee the distribution amount.

2. Financial Statements（1） Balance Sheet

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Vehicles in trust
Accumulated depreciation
Vehicles in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment
Intangible assets
Leasehold rights in trust
Other
Total intangible assets
Investments and other assets
Investment securities
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance costs
Total deferred assets
Total assets

15th Fiscal Period(Thousands of yen)
16th Fiscal Period(As of April 30, 2022)(As of October 31, 2022)

11,154,608
16,033,132
188,420
259,778
159,040（1,022 ）27,793,958

11,416,266
16,340,838
198,066
300,452
58,286（2,653 ）28,311,256

180,182,133（21,399,288 ）
158,782,845
1,587,002（302,079 ）
1,284,922
2,424,138（385,167 ）2,038,970
153（153 ）
0774,779（218,587 ）
556,192
385,124,884
12,859547,800,674

184,641,536（23,440,710 ）
161,200,826
1,620,073（333,254 ）
1,286,818
2,387,047（433,368 ）
1,953,678－－－
870,024（276,299 ）
593,724
368,656,815
17,859533,709,723

2,348,619
4,876
2,353,495

6,034,763
3,622
6,038,385－
801,516
641,322369,782
1,812,621
551,966,791

486,179
1,530,346
625,332
157,179
2,799,038
542,547,147

121,255
49,105
170,361
579,931,111

107,395
33,602140,997
570,999,401

(Thousands of yen)
15th Fiscal Period

16th Fiscal Period(As of April 30, 2022)(As of October 31, 2022)

Liabilities
Current liabilities
Operating accounts payable

835,543

1,116,383

Short-term loans payable

13,700,000

Current portion of investment corporation bonds

3,000,000

7,700,000－

Current portion of long-term loans payable

23,500,000

31,310,000

Accounts payable – other

1,043,814

1,169,452

190,432

217,054580－

584
678,924

Advances received

697,331712,064

Derivatives liabilities

26,04910,052

Other34,121

12,75843,027,874

42,927,275

Accrued expenses
Income taxes payable
Accrued consumption taxes

Total current liabilities
Non-current liabilities
Investment corporation bonds

31,500,000

31,500,000

Long-term loans payable

191,942,000

187,732,000

Tenant leasehold and security deposits in trust

14,669,870

14,353,152

7,847

Derivatives liabilities

871

2,149
－

238,120,589

233,587,302

281,148,463

276,514,577

161,283,304

161,283,304

Deduction from capital surplus

128,598,415－

128,598,415（3,999,964 ）Capital surplus, net

128,598,415

124,598,450

388,798

993,722－

Other
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
SurplusCapital surplus*3

Voluntary reserve
Reserve for reduction entry
Reserve for special account for reduction entry
Reserve for temporary difference adjustments

1,195,848*4

Total voluntary reserve604,535*42,189,182

Unappropriated retained earnings
Total surplus
Total unitholders’ equity

417,038
1,410,761

6,745,643

7,204,510

137,533,240

133,213,722

298,816,545

294,497,026

Valuation and translation adjustments
Deferred gains or losses on hedges（33,897 ）（12,202 ）Total valuation and translation adjustments（33,897 ）（12,202 ）Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

*1

298,782,647
579,931,111*1

294,484,824
570,999,401

(2) Statement of Income and Retained Earnings(Thousands of yen)
15th Fiscal Period

16th Fiscal Period(From November 1, 2021
to April 30, 2022)(From May 1, 2022
to October 31, 2022)

Operating revenue
Rent revenue – real estate*1

14,355,305*1

14,623,738

Other lease business revenue*1

401,481*1

459,098

Gain on sale of real estate properties－*2

710,583

Gain on investments in silent partnership

－

3,650

14,756,787

15,797,070

Total operating revenue
Operating expenses
Expenses related to rent business*1

5,892,357*1

6,275,960

Asset management fees

910,076

1,021,403

Asset custody fees

10,387

10,679Administrative service fees

48,10049,974

Directors’ compensation

3,600

3,600

Provision of allowance for doubtful accounts

－

1,693

Bad debt expenses

154－

Other operating expenses

266,172

355,107

Total operating expenses

7,130,848

7,718,418

7,625,938

8,078,652

Interest income

160

131

Reversal of distribution payable

693

588

Interest on refund－

539

Reversal of allowance for doubtful accounts

892

－

1,745

1,258

Interest expenses

609,966

639,740

Interest expenses on investment corporation bonds

77,431

76,266

Borrowing related expenses

124,916

122,424

Amortization of investment unit issuance costs

51,013

15,502

Amortization of investment corporation bond issuance costs

15,183

13,860

Other

2,924

7,001

881,435

874,796

Ordinary income

6,746,248

7,205,115

Income before income taxes

6,746,248

7,205,115

Income taxes – current

605

605

Total income taxes

605

605

Net income

6,745,643

7,204,510

Unappropriated retained earnings

6,745,643

7,204,510

Operating income
Non-operating income

Total non-operating income
Non-operating expenses

Total non-operating expenses

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

(3) Statement of Changes in Net Assets
15th Fiscal Period (From November 1, 2021 to April 30, 2022)(Thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at beginning of period

Voluntary reserve
CapitalsurplusReserve forReserve for special accountreduction entry for reduction
entry

149,210,081 128,598,415

726,488－

Reserve fortemporarydifference
adjustments

Total voluntary
reserve

675,138

1,401,626

Changes of items during period
Issuance of new investment units

12,073,223

Reversal of reserve for reduction
entry
Provision of reserve for special
account for reduction entry
Reversal of reserve for temporary
difference adjustments(337,690)(337,690)
1,195,848

1,195,848(70,602)(70,602)

Distribution from surplus
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during
periodBalance at end of period

12,073,223－(337,690)

1,195,848(70,602)787,555*161,283,304 128,598,415

388,798

1,195,848

604,535

2,189,182(Thousands of yen)
Valuation and translation
adjustments

Unitholders’ equity
Surplus
Unappropriatedretainedearnings
Balance at beginning of period

Total
surplus8,520,020 138,520,062

Total
unitholders’equity287,730,143

Total valuation
Deferred gains
and translation
or losses on
adjustments
hedges(87,376)(87,376)

Total
net assets

287,642,766

Changes of items during period
Issuance of new investment units
Reversal of reserve for reduction
entry
Provision of reserve for special
account for reduction entry
Reversal of reserve for temporary
difference adjustments
Distribution from surplus
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during
periodBalance at end of period

12,073,223

12,073,223

337,690－－－(1,195,848)

－

－

－

70,602－－－(7,732,464) (7,732,464)(7,732,464)(7,732,464)

6,745,643

6,745,643

6,745,643(1,774,377)

6,745,643

53,47953,47953,479(986,821)

11,086,401

53,47953,479

11,139,880

6,745,643 137,533,240

298,816,545(33,897)(33,897)298,782,647

16th Fiscal Period (From May 1, 2022 to October 31, 2022)(Thousands of yen)
Unitholders’ equity
SurplusCapitalsurplus
Unitholders’capitalBalance at beginning of period

Capitalsurplus

Voluntary reserve

Deduction
Reserve for
Capital surplus,
from capital
reductionnet
surplusentry

Reserve for
specialaccount for
reduction
entry

128,598,415

1,195,848

161,283,304 128,598,415－

Changes of items during period
Reversal of reserve for special
account for reduction entry
Provision of reserve for
reduction entry
Reversal of reserve for
reduction entry
Reversal of reserve fortemporary difference
adjustments
Distribution from surplus

388,798

604,535(1,195,848)
1,195,848(590,923)(187,497)

Net income
Acquisition of own investment
units
Cancellation of own
investment units
Net changes of items other thanunitholders’ equity
Total changes of items during－－
periodBalance at end of period*161,283,304 128,598,415(3,999,964)(3,999,964)(3,999,964)(3,999,964)

604,924(1,195,848)(187,497)(3,999,964)

124,598,450

993,722－417,038

Valuation and translation
adjustments

Unitholders’ equity

Balance at beginning of period
Changes of items during period
Reversal of reserve for special
account for reduction entry
Provision of reserve for
reduction entry
Reversal of reserve for
reduction entry
Reversal of reserve fortemporary difference
adjustments
Distribution from surplus
Net income
Acquisition of own investment
units
Cancellation of own
investment units
Net changes of items other thanunitholders’ equity
Total changes of items during
periodBalance at end of period

Reserve fortemporarydifference
adjustments

Surplus
Voluntary
reserve
UnappropriatedTotal
surplus
Total voluntary retained earnings
reserve
2,189,182
6,745,643 137,533,240

Own
investment
units

Total
unitholders’equity－298,816,545(1,195,848)

1,195,848－－

1,195,848(1,195,848)－－(590,923)

590,923－－(187,497)

187,497－－(7,524,063)
7,204,510(7,524,063)
7,204,510(7,524,063)
7,204,510(3,999,964)(3,999,964)(3,999,964)

3,999,964－

Deferred
Total valuation
gains
and translation
or losses
adjustmentson hedges(33,897)(33,897)

21,695

21,695(778,420)

458,867(4,319,518)－(4,319,518)

21,695

21,6951,410,761

7,204,510

133,213,722－

294,497,026(12,202)(12,202)(Thousands of yen)Total
net assets
Balance at beginning of period
Changes of items during period
Reversal of reserve for special
account for reduction entry
Provision of reserve for reduction
entry
Reversal of reserve for
reduction entry
Reversal of reserve fortemporary difference
adjustments
Distribution from surplus
Net income
Acquisition of own investment
units
Cancellation of own investment
units
Net changes of items other thanunitholders’ equity
Total changes of items during
periodBalance at end of period

298,782,647－－－－(7,524,063)
7,204,510(3,999,964)－
21,695(4,297,823)
294,484,824

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

(4) Statement of Cash Distributions
15th Fiscal Period
Item
Ⅰ. Unappropriated retained earnings
Ⅱ. Reversal of voluntary reserve
Reversal of reserve for reduction entry
Reversal of reserve for temporary difference
adjustments
Ⅲ. Cash distributions(From November 1, 2021
to April 30, 2022)*

to October 31, 2022)

6,745,643,069yen

7,204,510,234yen

590,923,444yen

82,441,009yen

187,497,321yen*

222,908,905yen

7,524,063,834yen

7,509,860,148yen[1,698yen]－yen[1,714yen]

The basic policy is to distribute inexcess of an amount equivalent to

The basic policy is to distribute inexcess of an amount equivalent to

90% of the amount of earnings
available for distribution of SHR

90% of the amount of earnings
available for distribution of SHR

provided in Article 67-15,
Paragraph 1 of the Act on Special

provided in Article 67-15,
Paragraph 1 of the Act on Special

Measures Concerning Taxation as
set forth in Article 46, Paragraph 1,

Measures Concerning Taxation as
set forth in Article 46, Paragraph 1,

Item 2 of the Articles ofIncorporation of SHR.

Item 2 of the Articles ofIncorporation of SHR.

Based on such policy, SHR

Based on such policy, SHR

decided to distribute
7,524,063,834 yen, which is

decided to distribute7,509,860,148yen, which is

obtained by adding a reversal of thereserve for temporary difference

obtained by adding a reversal of thereserve for temporary difference

adjustments (187,497,321yen) and areversal of the reserve for reduction

adjustments (222,908,905yen) and areversal of the reserve for reduction

entry (590,923,444 yen) tounappropriated retained earnings, as

entry (82,441,009yen) tounappropriated retained earnings, as

distribution of earnings.

distribution of earnings.

SHR will not distribute cash inexcess of earnings as set forth in
Article 46, Paragraph 2 of the
Articles of Incorporation of SHR.

SHR will not distribute cash inexcess of earnings as set forth in
Article 46, Paragraph 2 of the
Articles of Incorporation of SHR.

[Cash distributions per unit]
Ⅳ. Retained earnings carried forward
Method for calculating cash distributions

16th Fiscal Period(From May 1, 2022,－yen(5) Statement of Cash Flows(Thousands of yen)

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Interest income
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease due to sale of property, plant and equipment in trust
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment in trust
Purchase of intangible assets in trust
Purchase of intangible assets
Purchases of investment securities
Payments for lease and guarantee deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Decrease (increase) in other investments
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of investment corporation bonds
Proceeds from issuance of investment units
Purchase of own 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 period
Cash and cash equivalents at end of period
The accompanying notes are an integral part of these financial statements.

15th Fiscal Period

16th Fiscal Period(From November 1, 2021
to April 30, 2022)(From May 1, 2022
to October 31, 2022)*

6,746,248
2,490,587
15,18351,013（160）
687,397（24,399）（156,161）（24,812）（76,433）（128,589）（459,575）（492,221）
8,972－
33,9238,670,970
160（731,910）（606）
7,938,613

7,205,115
2,574,622
13,86015,502(131 ）
716,007(9,646 ）156,161(40,674 ）
15,990181,951
124,450
678,924
14,73322,309,047(61,136 ）
33,894,779
131(707,296 ）(600 ）
33,187,013（37,539,645）－（2,472）－－
1,027,185（307,660）（10,811）（36,833,404）(10,421,309 ）(3,726,416 ）(420 ）(482,529 ）(728,830 ）
344,981(661,699 ）(18,585 ）(15,694,808 ）

13,700,000－
26,830,000（26,830,000）－
12,022,819－（7,731,990）
17,990,829（10,903,961）
38,091,702
27,187,740－(6,000,000 ）
16,000,000(12,400,000 ）(3,000,000 ）－(3,999,964 ）(7,522,876 ）(16,922,840 ）
569,364
27,187,740
27,757,104*

(6) Notes on Assumption of Going Concern
Not applicable(7) Summary of Significant Accounting Policies
1. Standards and methods forvaluation of assets

2.

3.

4.

5.

Securities
Other securities
Silent partnership equity interests
The amount equivalent to the share of the net profit or loss of the silent partnershipwill be incorporated.
Method of depreciation and(1) Property, plant and equipment (including assets in trust)
amortization of non-current assets
Depreciation is calculated using the straight-line method.
The useful lives of principal property, plant and equipment are as follows:
Buildings
3-69 years
Structures
6-52 years
Machinery and equipment
8-61 years
Tools, furniture and fixtures 2-15 years(2) Intangible assets
Intangible assets are amortized utilizing the straight-line method.
Leasehold rights in trust are amortized on a straight-line basis over the remaining life of each
fixed-term land lease contract.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.
Accounting for deferred assets(1) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized utilizing the straight-line method
over the redemption periods.
(2) Investment unit issuance costs
Investment unit issuance costs are amortized utilizing the straight-line method (over 3 years).
Standards for recording allowance Allowance for doubtful accounts
To prepare for possible losses arising from default on receivables, the estimateduncollectable amount is recorded by examining collectability on a case-by-case basis for
doubtful and other specific receivables.
Standards for revenue and expense (1)Revenue recognition
The details of the main performance obligations relating to revenue arising from contracts
recognition
with customers and the timing (usual timing of revenue recognition) when such performanceobligations are satisfied areas follows.
1) Sale of real estate, etc.
With regard to the sale of real estate, etc., income is calculated based on when the buyer
gains control over the real estate, etc., at the point in time the delivery obligation stipulated
in the contract relating to the sale of the real estate is satisfied.
2) Utilities revenue
Utilities revenue mainly represents water utility revenue. With regard to water utility
revenue, revenue is calculated based on the provision of electricity, water, etc. to lessees,as customers, under lease contracts for real estate, etc., and the agreements that are
attached to the contracts.
As for the water utility revenue when SHR is deemed to be acting as an agent in thetransaction, revenue is recognized at the net amount after deducting the amount to be paid
to other parties from the amount received as the payment for electricity, gas, etc. suppliedby those other parties.
Rent revenue

Other lease business

SHR generally recognizes rent revenue, including fixed rent
revenues, variable rent revenues and common area charges, onan accrual basis over the term of each lease agreement.
Other lease business revenue is recognized in accordance withJapanese GAAP, typically as the amounts under the relevant
agreements become due.

(2)Accounting for property taxes
In accounting for property tax, city planning tax, depreciable asset tax, etc. on real estate,etc., of the tax amount assessed and determined, the amount corresponding to the applicablecalculation period is expensed as expenses related to rent business.
Reimbursement of property tax, paid to the seller upon the acquisition of real estate or trust
beneficiary interests of real estate as assets in trust, is not recognized as expenses related torent business in the corresponding fiscal period but included in the acquisition cost of theproperty.
Property taxes capitalized as a part of the acquisition cost amounted to 54,790 thousand yen
for the 16th fiscal period and 12,201 thousand yen for the 15th fiscal period.
6. Method of hedge accounting

7.

8.

(1) Method of hedge accounting
Deferral hedge accounting is applied. However, the special accounting treatment is applied
to interest rate swaps that meet the criteria for the special accounting treatment.
(2) Hedging instruments and hedged items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Interest on loans(3) Hedging policy
SHR conducts derivative transactions for the purpose of hedging the risks set forth in its
Articles of Incorporation based on its basic risk management policy.
(4) Method for assessing the effectiveness of hedging
Interest rate swaps meet the criteria for the special accounting treatment and an assessmentof the effectiveness is thus omitted.
(5)Special accounting treatment
Under the special accounting treatment, interest rate swaps are not measured at fair value,
but the differential paid or received under the swap agreements is recognized and included
in or deducted from interest expense. Any amounts received under interest rate swaps subject
to such accounting treatment are not recognized as income on the accompanying statements
of income and retained earnings but rather have the effect of decreasing interest expenses.
Scope of funds in the statement of The funds (cash and cash equivalents) in the statement of cash flows consist of cash on hand andcash in trust; deposits that can be withdrawn at any time and deposits in trust; and short-term
cash flows
investments with a maturity of three months or less from the date of acquisition, which are readily
convertible to cash and bear only an insignificant risk of price fluctuation.
Other significant matters serving
as basis for preparationof financial statements(1) Accounting for trust beneficiary interests of real estate, etc. as assets in trust
Concerning trust beneficiary interests of real estate, etc. as assets in trust, all accounts ofassets and liabilities within assets in trust as well as all accounts of revenue and expenses
from the assets in trust are recognized in the relevant account items on the balance sheet andthe statement of income and retained earnings.
The following material items of the assets in trust recognized in the relevant account items
are separately listed on the balance sheet.
1) Cash and deposits in trust2) Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furnitureand fixtures in trust; Land in trust; Construction in progress in trust; Leasehold rights intrust3) Tenant leasehold and security deposits in trust

(8) Notes to Financial Statements(Notes to Balance Sheet)*1. Minimum net assets designated in Article 67-4 of the Investment Trust Act(Thousands of yen)
15th Fiscal Period(As of April 30, 2022)

16th Fiscal Period(As of October 31, 2022)
50,00050,0002. Commitment line agreement
SHR has entered into a commitment line agreement with three financial institutions in order to secure flexible
and stable financing.
(Thousands of yen)
15th Fiscal Period(As of April 30, 2022)
Total amount of commitment line

15,000,000

15,000,000－－

15,000,000

15,000,000

Balance executed as loans
Unused line of credit

16th Fiscal Period(As of October 31, 2022)*3. Status of cancellation of own investment units
15th Fiscal Period(As of April 30, 2022)

16th Fiscal Period(As of October 31, 2022)

Total number of units cancelled－

49,651units

Total amount cancelled－

3,999,964thousand yen*4. Matters concerning accounting for reserve and reversal of reserve for temporary difference adjustments(Thousands of yen)
15th Fiscal Period(As of April 30, 2022)

16th Fiscal Period(As of October 31, 2022)

Gain on negative goodwill (*)
Initial amount

1,556,827

1,556,827

Balance at beginning of period

675,138

604,535

Reserve amount during period－－

Reversal amount during period

70,602

187,497

Balance at end of period

604,535

417,038

Appropriated for
distributions

Appropriated for
distributions

Reason for reserve and reversal(*) Reserve of a part of gain on negative goodwill that arose in the previous fiscal period; SHR plans to drawdown at least 1% of
the reserve for each fiscal period (corresponding to the amount of the reserve expensed equally over 50 years) and appropriate
the amount for cash distributions, starting from the fiscal period following the fiscal period in which the reserve was made.

(Notes to Statement of Income and Retained Earnings)*1. Breakdown of property-related operating revenue and expenses(Thousands of yen)
15th Fiscal Period(From November 1, 2021
to April 30, 2022)
A.

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

Property-related operating revenue
Rent revenue – real estate
Rental income
Other

14,008,141
347,164

14,355,305

14,263,700
360,038

401,481

241,565
217,532

14,623,738

Other lease business revenue
Utilities revenue
Other

180,119
221,361

Total property-related operating revenueB.

459,098
15,082,836

Property-related operating expenses
Expenses related to rent businessSubcontract expenses
Property management fees

569,716
468,688

597,696
470,667

Trust fees
Utilities expenses

44,248311,649

43,221
391,838

Property and other taxes
Insurance expenses

1,017,039
17,407

1,065,322
18,820

Repair expenses
Depreciation

336,792
2,489,720

390,295
2,573,621

Other expenses related to rent businessC.

14,756,787

637,094

5,892,357

724,475

6,275,960

Total property-related operating expenses

5,892,357

6,275,960

Property-related operating income [A − B]

8,864,429

8,806,876*2. Breakdown of gain on sale of real estate properties
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
Not applicable.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)(Thousands of yen)
The Ritz-Carlton, Kyoto
Proceeds from sale of real estate property

23,000,000

Cost of real estate property

22,288,419

Other sales expenses
Gain on sale of real estate property

996
710,583(Notes to Statement of Changes in Net Assets)*Total number of authorized investment units and total number of investment units issued
15th Fiscal Period(From November 1, 2021
to April 30, 2022)

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

Total number of authorized investment units

20,000,000units

20,000,000units

Total number of investment units issued

4,431,133units

4,381,482units

(Notes to Statement of Cash Distributions)*Reserve for temporary difference adjustments
15th Fiscal Period(From November 1, 2021
to April 30, 2022)

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

With regard to the reserve for temporary difference
adjustments, SHR plans to drawdown at least 1% of theWith regard to the reserve for temporary difference
adjustments, SHR plans to drawdown at least 1% of thereserve for each fiscal period (corresponding to the amountof the reserve expensed equally over 50 years) andreserve for each fiscal period (corresponding to the amountof the reserve expensed equally over 50 years) andappropriate the amount for cash distributions, starting fromthe fiscal period following the fiscal period in which theappropriate the amount for cash distributions, starting fromthe fiscal period following the fiscal period in which thereserve was made. SHR decided to drawdown 187,497,321
yen for the 15th fiscal period.

reserve was made. SHR decided to drawdown 222,908,905
yen for the 16th fiscal period.

(Notes to Statement of Cash Flows)*Reconciliation of cash and cash equivalents at end of period to the corresponding balance sheet items(Thousands of yen)
15th Fiscal Period(From November 1, 2021
to April 30, 2022)

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

Cash and deposits

11,154,608

11,416,266

Cash and deposits in trust

16,033,132

16,340,838

Cash and cash equivalents

27,187,740

27,757,104(Transactions with Related Parties)
1. Parent company and major corporate unitholders.
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
Not applicable.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)
Not applicable.
2. Subsidiaries and affiliates.
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
Not applicable.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)
Not applicable.
3. Sister companies.
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
Not applicable.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)
Not applicable.
4. Directors and major individual unitholders.
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
Not applicable.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)
Not applicable.

(Revenue Recognition)
1. Breakdown of revenue from contracts with customers
15th Fiscal Period (From November 1, 2021 to April 30, 2022)(Thousands of yen)
Revenue from contracts
with customers *1

Net sales to external customers－

Sale of real estate, etc.
Utilities revenue－*2

180,119

180,119－

14,576,667

Other

180,119
14,756,787
Total*1 Rental revenue, etc. subject to ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” is not included in“Revenue from Contracts with Customers” because such revenue is excluded from the application of the revenue recognition
standard. Revenues from contracts with major customers consist of revenues from the sale of real estate and other assets andutilities revenue.
*2 Regarding the sale of real estate, etc., in accordance with Article 48, Paragraph 2 of the Regulations on Accounting ofInvestment Corporations (Cabinet Office Ordinance No. 47, 2006), gain on the sale of real estate properties, etc. is shown inthe statement of income and retained earnings after deducting cost of real estate property and direct sales expenses from theproceeds from the sale of real estate, etc.
16th Fiscal Period (From May 1, 2022 to October 31, 2022)(Thousands of yen)
Revenue from contracts
with customers *1
Sale of real estate, etc.
Utilities revenue
Other

Net sales to external customers

23,000,000*2710,583

241,565

241,565－

14,844,921

23,241,565
15,797,070
Total*1 Rental revenue, etc. subject to ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” is not included in“Revenue from Contracts with Customers” because such revenue is excluded from the application of the revenue recognition
standard. Revenues from contracts with major customers consist of revenues from the sale of real estate and other assets andutilities revenue.
*2 Regarding the sale of real estate, etc., in accordance with Article 48, Paragraph 2 of the Regulations on Accounting ofInvestment Corporations (Cabinet Office Ordinance No. 47, 2006), gain on the sale of real estate properties, etc. is shown inthe statement of income and retained earnings after deducting cost of real estate property and direct sales expenses from theproceeds from the sale of real estate, etc.
2. Information to understand revenue from contracts with customers
15th Fiscal Period (From November 1, 2021 to April 30, 2022)
As stated in (7) Summary of Significant Accounting Policies”
16th Fiscal Period (From May 1, 2022 to October 31, 2022)
As stated in (7) Summary of Significant Accounting Policies”
3. Information on the relationship between performance obligations under contracts with customers and cash flows resulting fromsuch contracts, and the amount and timing of proceeds expected to be recognized in the next fiscal period or thereafter fromcontracts with customers existing at the end of this fiscal period

(1) Balance of contract assets and contract liabilities, etc.
15th Fiscal Period(From November 1, 2021
to April 30, 2022)(Thousands of yen)
16th Fiscal Period(From May 1, 2022
to October 31, 2022)

40,544

43,843

43,84355,312

－

－

－

－

－

－

－

－

Claims arising from contracts with customers(Balance at beginning of period)
Claims arising from contracts with customers(Balance at end of period)
Contract assets(Balance at beginning of period)
Contract assets(Balance at end of period)
Contract liabilities(Balance at beginning of period)
Contract liabilities(Balance at end of period)(2) Transaction prices allocated to the remaining performance obligations
With regard to utilities revenue, SHR recognizes proceeds in the amount that SHR has the right to claim in accordancewith Clause 19 of the Accounting Standard for Revenue Recognition, because SHR has the right to receive from the lessee,as the customer, an amount of compensation directly corresponding to the value of the items provided up to the end of the
fiscal period.
Accordingly, SHR applies the provisions of Clause 80-22(2) of Accounting Standard for Revenue Recognition and does
not include related information in the notes on transaction prices allocated to the remaining performance obligations.

The property-related operating income in the 15th and 16th fiscal periods for investment and rental properties is presented in “ (2)Statement of Income and Retained Earnings”.

(Segment Information)
1. Segment information
Segment information is omitted because SHR operates a single segment, which is the real estate leasing business.
2. Related information
15th Fiscal Period (From November 1, 2021 to April 30, 2022)(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single products andservices category are in excess of 90% of operating revenue on the statement of income and retained earnings.
(2) Information about geographic areas
1) Operating revenue
Information about net sales is omitted because net sales to external customers in Japan are in excess of 90% of operating
revenue on the statement of income and retained earnings.
2) Property, plant and equipment
Information about property, plant and equipment is omitted because the property, plant and equipment located in Japanis in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)
Name of customer
Sekisui House, Ltd.

Operating revenue
1,363,547

Name of related segment
Real estate leasing business16th Fiscal Period (From May 1, 2022 to October 31, 2022)(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single products andservices category are in excess of 90% of operating revenue on the statement of income and retained earnings.
(2) Information about geographic areas
1) Operating revenue
Information about net sales is omitted because net sales to external customers in Japan are in excess of 90% of operating
revenue on the statement of income and retained earnings.
2) Property, plant and equipment
Information about property, plant and equipment is omitted because the property, plant and equipment located in Japanis in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)
Name of customer
Sekisui House, Ltd.

Operating revenue

Name of related segment

1,363,547

Real estate leasing business(Per Unit Information)
15th Fiscal Period(From November 1, 2021
to April 30, 2022)

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

Net assets per unit

67,428yen

67,211yen

Net income per unit

1,522yen

1,636yen(Note 1) Net income per unit is calculated by dividing net income by the daily weighted average number of investment units.
In addition, diluted net income per unit is not stated because there are no dilutive investment units.
The following is the basis for calculating net income per unit.
15th Fiscal Period(From November 1, 2021
to April 30, 2022)
Net income (Thousands of yen)Amount not attributable to common unitholders(Thousands of yen)
Net income attributable to common investment units(Thousands of yen)
Average number of investment units during period (Units)(Significant Subsequent Events)
Not Applicable

16th Fiscal Period(From May 1, 2022
to October 31, 2022)

6,745,643

7,204,510－－

6,745,643

7,204,510

4,430,365

4,402,287