Disclaimer
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative
Investment Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”)
as implemented in their respective jurisdictions. Accordingly, you should not use thisdocument for any other purpose.
Netherlands
The units of Sekisui House Residential Investment Corporation (the “SHI” or the “AIF”)
are being marketed in the Netherlands under Section 1:13b of the Dutch Financial
Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordance with thisprovision, Sekisui House Asset Management, Ltd. (the “AIFM”) has submitted a
notification with the Dutch Authority for the Financial Markets. The units of SHI will not,directly or indirectly, be offered, sold, transferred or delivered in the Netherlands, except
to or by individuals or entities that are qualified investors (gekwalificeerde beleggers)
within the meaning of Article 1:1 of the Wft, and as a consequence neither the AIFM nor
SHI is subject to the license requirement pursuant to the Wft. Consequently, neither the
AIFM nor SHI is subject to supervision of the Dutch Central Bank (De NederlandscheBank, “DNB”) or the Netherlands Authority for Financial Markets (Autoriteit Financiële
Markten, the “AFM”) and this Article 23 AIFMD prospectus is not subject to approval by
the AFM. No approved prospectus is required to be published in the Netherlands pursuant
to Article 3 of the European Directive 2003/71/EC (the EU Prospectus Directive) as
amended and implemented in Netherlands law. The AIFM is solely subject to limited
ongoing regulatory requirements as referred to in Article 42 of the AIFMD.

United Kingdom
Units of the SHI are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, the AIFM has submitted a notification with the Financial Conduct
Authority (the “FCA”) in the United Kingdom.
For the purposes of the United Kingdom Financial Services and Markets Act 2000(“FSMA”) the SHI is an unregulated collective investment scheme which has not beenauthorized by the FCA.

Accordingly, any communication of an invitation or inducement to invest in the SHI may
be made to persons in the United Kingdom only if the communication falls within one ormore of the categories of exempt financial promotions under the Financial Services andMarkets Act (Financial Promotion) Order 2005 (the “Order”), such as financial
promotions communicated to:(1)(2)

persons who are investment professionals, as defined in article 19 of the Order;
persons who are high net worth companies, unincorporated associations, or otherentities listed in article 49 of the Orderor if the communication is made to persons to whom such an invitation or inducement mayotherwise lawfully be communicated. The distribution of this document to any person in
the United Kingdom in circumstances not falling within one of the above categories is not
permitted and may contravene FSMA. No person falling outside those categories should
treat this document as constituting a promotion to him, or act on it for any purposes
whatever.
European Economic Area
In relation to each Member State of the European Economic Area (the “EEA”) which has
implemented the Prospectus Directive (each, a Relevant Member State), with effect fromand including the date on which the Prospectus Directive is implemented in that Relevant
Member State (the Relevant Implementation Date) no offer of units of the SHI may bemade to the public in that Relevant Member State except in circumstances falling within
Article 3(2) of the Prospectus Directive, provided that no such offer of units shall require
the publication of a prospectus pursuant to Article 3 of the Prospectus Directive, or a
supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression “an offer of units to the public” inrelation to any units in any Relevant Member State means the communication in any formand by any means of sufficient information on the terms of the offer and the units to beoffered so as to enable an investor to decide to purchase or subscribe the units, as the same
may be varied in that Member State by any measure implementing the Prospectus
Directive in that Member State, the expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to theextent implemented in the Relevant Member State), and includes any relevant2implementing measure in the Relevant Member State and the expression “2010 PD
Amending Directive” means Directive 2010/73/EU.
The units of SHI are not intended, from 1 January 2018, to be offered, sold or otherwise
made available to and, with effect from such date, should not be offered, sold or otherwise
made available to any retail investor in the EEA. For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer within themeaning of Directive 2002/92/EC (as amended, “IMD”), where that customer would not
qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii)
not a qualified investor as defined in the Prospectus Directive. Consequently no key
information document required by Regulation (EU) No 1286/2014 (the “PRIIPs
Regulation”) for offering or selling the units of SHI or otherwise making them available toretail investors in the EEA has been prepared and therefore offering or selling the units of
SHI or otherwise making them available to any retail investor in the EEA may be unlawful
under the PRIIPs Regulation.

3

Article 23 (1)(a)Objectives of the AIF

Sekisui House Residential Investment Corporation (the “SHI” or the “AIF”) is a J-REIT thatinvests in residential properties; Sekisui House, Ltd. serves as the sponsor. SHI’s basic
policy is to manage properties with the aim of obtaining stable earnings and steady
growth of assets under management over the medium to long term.

Investment strategy

SHI’s basic strategy is to build a portfolio that focuses on high-quality residential
properties developed by Sekisui House, Ltd., its sponsor, with the aim to maximize its
business value as well as its unitholders’ interest. To achieve earnings based on stabledemand and risk diversification, SHI invests in real estate-related assets that are mainly
used as residence. Residential properties include student dorms, company housing andserviced housing for the elderly. SHI invests in assets located in Greater Tokyo (Tokyo,
Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture) and major cities in Japan,such as government designated cities, and neighboring areas within commuting distancefrom the foregoing locations. The key investment areas in Greater Tokyo are the majorurban areas.

Types of assets the AIF
may invest in

Real estate, real estate leasehold rights, surface rights, trust beneficiary interests in theforegoing assets and other assets.

Techniques it may
employ and all
associated risks

SHI invests in assets located in Greater Tokyo (Tokyo, Kanagawa Prefecture, Chiba
Prefecture and Saitama Prefecture), and major cities in Japan such as government
designated cities and neighboring areas within commuting distance.
The principal risks with respect to investment in SHI are as follows: Any adverse conditions in the Japanese economy could adversely affect SHI; SHI may not be able to acquire properties to execute SHI’s growth andinvestment strategy in a manner that is accretive to earnings;
 SHI’s unit price and investment corporation bond price may fluctuate significantly
due to various market factors, such as supply-demand imbalance, performance ofother assets, interest rates, and macroeconomic conditions; The high geographic concentration of SHI’s real estate portfolio could have amaterial adverse effect on SHI’s business;
 The high concentration of residence in SHI’s real estate portfolio could have amaterial adverse effect on SHI’s business;
 Competition for tenants may adversely affect SHI’s ability to retain SHI’s current
tenants and find new tenants, and to achieve favorable rental rates andoccupancy rates;
 SHI’s reliance on the Sekisui House Group could have a material adverse effect on
SHI’s business;
 SHI may suffer large losses if any of SHI’s properties incur damage from a natural
or man-made disaster or acts of violence;
 SHI may not be able to promptly dispose of properties in SHI’s portfolio on
acceptable terms in response to changing economic, financial or investment
conditions; Any inability to obtain financing for future acquisitions, or any restrictions on SHI’s
activities under SHI’s financing arrangements, could adversely affect SHI;

4






SHI’s success depends on the performances of service providers to which SHI isrequired to assign various key functions;
Conflicts of interest between SHI and parties involved in the operation of SHI
could adversely affect SHI;SHI may not be able to benefit from reductions in certain real estate taxes enjoyedby qualified J-REITs; andChanges in Japanese tax laws may significantly increase SHI’s tax burden.

In addition, SHI is subject to the following risks:
 Risks related to increasing operating costs;
 Risks related to the illiquidity in the real estate market, which may limit the ability
to grow or adjust the portfolio;
 Risks related to the cash distributions; Risks related to the cancellation of the SHI’s registration as an investment
corporation under the Act on Investment Trusts and Investment Corporations (the“ITA”);
 Risks related to SHI’s performance, which depends on the efforts of the directorsof Sekisui House Asset Management Ltd. (the “AIFM”); Risks related to boundary
disputes; Risks that SHI may change its detailed investment policy without an approval of
General Meeting of Unitholders; Risks related to the restrictive covenants under debt financing arrangement; Risks related to entering into forward commitment contracts;
 Risks related to third party leasehold interests in the land underlying SHI’s
properties;
 Risks related to holding the property in the form of compartmentalized ownership(kubun shoyū) interests or co-ownership interests (kyōyū-mochibun); Risks related to holding the property in the form of limited proprietary right ofland (as it called “soko-chi”);
 Risks related to properties not in operation (including properties underdevelopment); Risks related to the defective title, design, construction or other defects or
problems in the properties;
 Risks related to suffering impairment losses relating to the properties;
 Risks related to decreasing tenant leasehold deposits and/or security deposits;
 Risks related to lease agreements with tenants, including the risks of tenants’default as a result of financial difficulty or insolvency;
 Risks related to the status of use of real estate by tenants;
 Risks related to the insolvency of seller of the properties
 Risks related to relying on expert appraisals and engineering, environmental andseismic reports as well as industry and market data; Risks related to the presence of hazardous or toxic substances in the properties,
or the failure to properly remediate such substances;
 Risks related to the amendment of the applicable administrative laws and local
ordinances;
 Risks related to investments in anonymous associations (tokumei kumiai);
 Risks related to investments in trust beneficiary interest;
 Risks related to the tight supervision by the regulatory authorities and compliance5
Any applicable
investment
restrictions

with applicable rules and regulations;Risks related to the tax authority disagreement with the AIFM’s interpretations of
the Japanese tax laws and regulations; andRisk of dilution as a result of further issuances of units.

SHI is subject to investment restrictions under Japanese laws and regulations (e.g., ITA),
the Financial Instruments and Exchange Act (the “FIEA”) as well as its Articles ofIncorporation.
SHI must invest primarily in real estate, etc., which are included in specified assets as
defined in the ITA. Real estate, etc. means real estate, leaseholds of real estate, surface
rights (chijō-ken) (i.e., right to use land for the purpose of having a structure on it) or trust
beneficiary interests in any such assets. SHI also invests in other specified assets. A listed JREIT must invest substantially all of its assets in real estate, real estate-related assets andliquid assets as provided by the listing requirements. Real estate in this context includes,
but is not limited to, real estate, leaseholds of real estate, surface rights, and trust
beneficiary interests for these assets, and real estate-related assets in this context include,
but not limited to, anonymous association (tokumei kumiai) interests for investment inreal estate. Pursuant to the ITA, J-REITs may not independently develop land for housing
or to construct buildings, but may outsource such activities provided that certain
conditions are met.
Investment restrictions that SHI stipulate in its Articles of Incorporation are as follows:(1) Restrictions relating to securities and monetary claims
SHI will not make active investments in securities and monetary claims. Investments
in securities and monetary claims may be made after taking security and liquidity into
consideration. In other cases, investments in securities and monetary claims will bemade after taking into consideration the relevance to specified assets.
(2) Restrictions relating to derivatives
SHI will invest in derivatives only for the purpose of hedging against risks includinginterest rate risk arising from its liabilities and other risks.

Circumstances inwhich the AIF may use
leverage

SHI may take out loans or issue short-term or long-term investment corporation bonds forthe purpose of investing in properties, conducting repairs, paying cash distributions,operations, repaying its obligations (including repayment of tenant leasehold or security
deposits and obligations related to loans or short-term or long-term investment
corporation bonds) and other activities.

The types and sourcesof leverage permitted

Loans or investment corporation bonds.
In the event of an increase in interest rates, to the extent that SHI has any debt with6

and associated risks

unhedged floating rates of interest or SHI incurs new debt, interest payments may
increase, which in turn could reduce the amount of cash available for distributions tounitholders.
Furthermore, SHI may be subject to restrictive covenants in connection with any futureindebtedness that may restrict the operation and limit the ability to make cash
distributions to unitholders.

Any restrictions onleverage

The maximum amount of each loan and investment corporation bond issuance will be ¥1trillion, and the aggregate amount of all such debt will not exceed ¥1 trillion.

Any restrictions on
collateral and asset
reuse arrangements

No applicable arrangements.

Maximum level ofleverage which the
AIFM is entitled to
employ on behalf of
the AIFTo conduct stable financial management, SHI has set an upper limit of 60% as a generalrule for its loan-to-value, or LTV, ratio. SHI may, however, temporarily exceed the 60%
threshold as a result of property acquisitions or other events.

Article 23(1) (b)Procedure by which
the AIF may change its
investment strategy /investment policy

Amendment of the Articles of Incorporation requires a quorum of a majority of the total
issued units and at least a two-thirds vote of the voting rights represented at the meeting.
The approval at a general meeting of unitholders is required for changes in fundamental
matters, such as target investments and investment policies, which are stipulated in the
Articles of Incorporation. However, more detailed policies and operational guidelines of
the AIF, which are prepared by SHI’s or the AIFM’s board of directors based on thefundamental matters stipulated in the Articles of Incorporation, can be modified without
such approval.

Article 23(1) (c)Description of themain legal implicationsof the contractual
relationship enteredinto for the purpose ofinvestment, including
jurisdiction, applicablelaw, and the existenceor not of any legal
instruments providing
for the recognitionand enforcement of
judgments in the
territory where the

The AIFM has entered into pipeline support agreements, governed by Japanese law, with
Sekisui House, LTD., Sekiwa Real Estate, LTD., Sekiwa Real Estate Kanto, Ltd., Sekiwa Real
Estate Tohoku, Ltd., Sekiwa Real Estate Chubu, Ltd., Sekiwa Real Estate Kansai, Ltd.,
Sekiwa Real Estate Chugoku, Ltd., and Sekiwa Real Estate Kyushu, Ltd.
SHI is not involved in or threatened by any legal arbitration, administrative or otherproceedings, the results of which might, individually or in the aggregate, be material.
SHI is a corporate-type investment trust in the form of investment corporation (toshi
hojin) provided for under the ITA. Therefore, the relationship between SHI and its
unitholders is governed by SHI’s articles of incorporation (as opposed to individual
agreements), which can be amended from time to time upon resolution of a generalunitholders’ meeting. SHI’s articles of incorporation stipulate rules relating to generalunitholders’ meetings, including the convocation, setting of record date, exercise of voting
rights, resolutions and election of SHI’s directors.

7

AIF is establishedThe relationship between SHI and its unitholders is also governed by, and is subject to theprovisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid judgment any final and conclusive civil
judgment for monetary claims (which, for this purpose, are limited to those of a purely
civil nature and do not include monetary claims of the nature of criminal or administrative
sanction, such as punitive damages, even though they take the form of civil claims) against
SHI obtained in a foreign court provided that (i) the jurisdiction of such foreign court isadmitted under the laws of Japan, (ii) SHI has received service of process for thecommencement of the relevant proceedings, otherwise than by a public notice or any
method comparable thereto, or has appeared without any reservation before such foreign
court, (iii) neither such judgment nor the relevant proceeding is repugnant to public policy
as applied in Japan, (iv) there exists reciprocity as to the recognition by such foreign courtof a final judgment obtained in a Japanese court and (v) there is no conflicting judgementon the subject matter by any Japanese court.

Article 23(1) (d)The identity of the
AIFM, AIF's depositary,
auditor and any otherservice providers anda description of theirduties and theinvestors' rights
thereto AIFM (Asset Manager): Sekisui House Asset Management, Ltd.
 Independent Auditor: Ernst & Young ShinNihon LLC
 Custodian and Account Administrator: Mizuho Trust & Banking Co., Ltd.
 Administrator (Institutional Management): Sekisui House Asset Management, Ltd.
 Transfer Agent: Mizuho Trust & Banking Co., Ltd.
 Investment Corporation Bond Administrator: The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Service providers owe contractual obligations under their respective agreements with the
AIF or AIFM, as the case may be. In addition, the FIEA provides that the Asset Manager
owes the AIF a fiduciary duty and must conduct its activities as the asset manager in goodfaith. The FIEA also prohibits the Asset Manager from engaging in certain specified
conduct, including entering into transactions outside the ordinary course of business orwith related parties of the Asset Manager that are contrary to or violate the AIF’s
interests. Pursuant to the ITA, the unitholders have the right to approve the execution or
termination of the asset management agreement at a general meeting of unitholders.

Article 23(1) (e)Description of how the
AIFM complies withthe requirements tocover professional
liability risks (ownfunds / professional
indemnity insurance)

Not applicable.

Article 23(1) (f)Description of any

Not applicable.

8

delegatedmanagement function
such as portfolio
management or risk
management and of
any safekeeping
function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest
that may arise fromsuch delegations

There is no delegation of such functions beyond the AIFM, which is responsible for
portfolio and risk management, and the Custodian, which is responsible for safekeeping
activities.

Article 23(1) (g)Description of the
AIF’s valuation
procedure and pricing
methodology,
including the methods
used in valuing hardto-value assets

SHI shall evaluate assets in accordance with its Article of Incorporation. The methods andstandards that SHI uses for the evaluation of assets shall be based on the Regulations
Concerning the Calculations of Investment Corporations, as well as the Regulations
Concerning Real Estate Investment Trusts and Real Estate Investment Corporations andother regulations stipulated by ITA, in addition to Japanese GAAP. J-REITs may only use
the valuation methods prescribed in the rules of the Investment Trusts Association, Japan,
which emphasize market price valuation.

Article 23(1) (h)Description of the
AIF’s liquidity risk
management,
including redemption
rights in normal andexceptional
circumstances andexisting redemption
arrangements withinvestors

SHI seeks to manage the capital resources and liquidity sources to provide adequate funds
for current and future financial obligations and other cash needs and acquisitions. SHI
manages liquidity risk by implementing a strategic cash management plan, varying
repayment terms of its loans and diversifying lenders and financing methods. As SHI is a
closed-end investment corporation, unitholders are not entitled to request theredemption of their investment.

Article 23(1) (i)Description of all fees,
charges and expenses
and a maximum
amount which is
directly / indirectly
borne by the investors

Compensation: The Articles of Incorporation provide that SHI may pay its executive
director up to ¥1 million per month and each of its supervisory directors up to ¥0.5 million
per month. The board of directors is responsible for determining a reasonable
compensation amount for the executive director and each of the supervisory directors.
Asset Manager:
Asset Management Fees: SHI will pay the AIFM an asset management fee, which

9comprises the type (1) asset management fee, type (2) asset management fee,acquisition fee, disposition fee and merger fee as described below.
Type (1) Asset Management Fee – SHI will, within one month after theend of each fiscal period, pay an amount calculated as the sum of (i) total
asset value up to ¥200 billion multiplied by a certain rate agreed with the
AIFM, and (ii) total asset value in excess of ¥200 billion multiplied byanother rate agreed with the AIFM, where the total asset value used will
be as set forth on the balance sheet dated as of the most recent fiscal
period-end ; provided that no such rate will exceed 0.22% p.a. Suchamount calculated is prorated based on the actual number of days in therelevant fiscal period, using 365 days for one year. In addition, if suchamount includes a fraction less than one yen, such fraction shall be
rounded down. The current rates agreed with the AIFM applicable are
0.15% with respect to total asset value up to ¥200 billion and 0.10% withrespect to total asset value in excess of ¥200 billion.
Type (2) Asset Management Fee – SHI will, within one month following
the day of approval of the financial statements for relevant fiscal period,
pay an amount equal rent revenue - real estate after subtracting theexpenses related to rent business, multiplied by a rate agreed with the
AIFM that may not exceed 5.0%. The rent revenue - real estate includes
anonymous association (tokumei kumiai) interests related real estate,
dividends relating to real estate-backed securities or other forms ofincome and the expenses relates to rent business excludes depreciationand loss on retirement of non-current assets. The current rate agreed with
the AIFM is 4.0%.
Acquisition Fee – For each acquisition of an asset, the AIFM receives anacquisition fee in an amount equal to the acquisition price multiplied by arate agreed with the AIFM, where such rate may not exceed 0.8% or, incase of a transaction with an interested party, 0.4%. Acquisition priceexcludes national and local consumption taxes and expenses for theacquisition and means sale price in case of purchase and sale, appraisal
value in case of an asset replacement or investment amount in case of aninvestment. SHI will pay this fee within one month after the end of themonth which includes the day of the relevant acquisition (i.e., the day on
which ownership is transferred). The current rate agreed with the AIFM is
0.8% (or, in case of a transaction with an interested party, 0.4%).
Disposition Fee – For each disposition of an asset, the AIFM receives adisposition fee in an amount equal to the disposition price multiplied by arate agreed with the AIFM, where such rate may not exceed 0.8% or, in10

case of a transaction with an interested party, 0.4%. Disposition priceexcludes national and local consumption taxes and expenses for the
disposition and means sale price in case of purchase and sale or appraisal
value in case of an asset replacement. SHI will pay this fee within one
month after the end of the month which includes the day of the relevant
disposition (i.e., the day on which ownership is transferred). The current
rate agreed with the AIFM is 0.8% (or, in case of a transaction with aninterested party, 0.4%).
Merger Fee – Where SHI succeeds assets pursuant to a merger, SHI will
pay an amount equal to the appraisal value of succeeded assets,
multiplied by a rate agreed with the AIFM that may not exceed 0.8%. SHI
will pay this fee within three months of the end of the month of theeffective day of the relevant merger. The applicable rate for the merger
fee will be determined in the future as needed through discussion as there
is no specific plan for a merger.

Administrator (Institutional Management):

Under the institutional management agreement, SHI will, by the end of the month
immediately following the end of each fiscal period, pay the General
Administrator for such fiscal period, ¥1,400,000 (with the amount of national andlocal consumption taxes) for management of executive committee meeting.
SHI will pay the General Administrator ¥4,700,000 per meeting with the amountof national and local consumption taxes, as a fee of management of general
meetings of unitholders, by the end of the month following the month in which
any general meeting is held.

Account Administrator:


SHI will, by the end of the month following the last day of each fiscal period, pay
fees for the services provided by the Account Administrator, as agreed upon
between SHI and the Account Administrator, up to the semi-annual amount to be
calculated by the formula as shown below, based on the total assets (which must
be real estate and/or trust beneficiary interests in real estate or deposits)
recorded on SHI’s balance sheet as of the last day of the fiscal period immediately
preceding the first day of each fiscal period.
Amount of Total Assets
Calculation Method(semi-annual amount)¥30 billion or less
¥9,000,000
over ¥30 billion
Total assets × 0.0200%

11

o

o

o

If the fees as set out above become inadequate due to a change ineconomic conditions or otherwise, such fees may be revised byagreement between the Account Administrator and SHI.
If assets include any assets other than real estate, trust beneficiaryinterests in real estate or deposits, the Account Administrator and SHI will
discuss good faith change in the fees to take into consideration any
additional work for the Account Administrator.
SHI will bear any national and local consumption taxes.

Transfer Agent:Standard transfer agent fees are for services such as the preparation,
maintenance and storage of SHI’s unitholder register; and preparation ofmaterials concerning end-of-period unitholder statistical data (number ofunitholders, total units held, and distribution per geographic area). Up to monthly
standard fees are determined by calculating one sixth of the total number ofunitholders falling under each section as shown below. There is a minimum
monthly fee of ¥200,000.
Number of Unitholders
first 5,000 unitholders
over 5,000 to 10,000
over 10,000 to 30,000
over 30,000 to 50,000
over 50,000 to 100,000
over 100,000Fees per Unitholder
¥480
¥420
¥360
¥300
¥260
¥225

SHI also pays certain de minimis fees in addition to the Standard Fees inconnection with the administration and handling of distributions (minimum of
350,000 yen per distribution) and other unitholder-related services.

Custodian:

SHI will, by the end of the month following the last day of the previous fiscal
period, pay fees for the services provided by the Custodian, as agreed upon
between SHI and the Custodian, up to the semi-annual amount to be calculated by
the formula as shown below, based on the total assets (which must be real estate
and/or trust beneficiary interests in real estate or deposits) recorded on SHI’sbalance sheet as of the last day of the fiscal period immediately preceding the firstday of each fiscal period.
If the fees as set out above become inadequate due to a change in economic
conditions or otherwise, such fees may be revised by agreement between the
Custodian and SHI.

12





If assets include any assets other than real estate, trust beneficiary interests
entrusting real estate and deposit, the Custodian and SHI discuss change in theamount of the fee in good faith in order to take additional works into account.
SHI will bear national and local consumption taxes.

Amount of Total Assets¥30 billion or lessover ¥30 billion

Calculation Method(semi-annual amount)¥4,500,000
Total assets × 0.0100%

Independent Auditor:

SHI may pay the independent auditor up to ¥15 million per fiscal period. The
board of directors is responsible for determining the actual compensation
amount.

SHI may also incur other miscellaneous fees in connection with:
 Administration for investment corporation bonds; and Property management.
Article 23(1) (j)Description of the
AIFM's procedure toensure fair treatment
of investors anddetails of any
preferential treatment
received by investors,
including detailing thetype of investors andtheir legal or
economic links with
the AIF or AIFM

Under Article 77 paragraph 4 of the ITA, which applies the requirements of Article 109
paragraph 1 of the Companies Act to investment corporations, investment corporations
are required to treat unitholders equally depending on the number and content of units
held. In addition, upon liquidation, the allotment of residual assets to unitholders is
required to be made equally depending on the number units held under Article 77
paragraph 2 item 2 and Article 158 of the ITA.

Article 23(1) (k)The latest annual
report referred to in
Article 22(1)Additional information may be found in our most recent semi-annual report prepared inaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s officelocated at 3-1-31 Minami-Aoyama, Minato-ku, Tokyo.

Article 23(1) (l)13The procedure andconditions for theissue and sale of theunits

SHI is authorized under the Articles of Incorporation to issue up to 10,000,000 units. Itsunits have been listed on the Tokyo Stock Exchange since July 28, 2005. Secondary market
sales and transfers of units will be conducted in accordance with the rules of the Tokyo
Stock Exchange. Unit prices on the Tokyo Stock Exchange are determined on a real-timebasis by the equilibrium between bids and offers. The Tokyo Stock Exchange sets daily
price limits, which limit the maximum range of fluctuation within a single trading day.
Daily price limits are set according to the previous day’s closing price or special quote.

Article 23(1) (m)Latest net asset valueof the AIF or latest
market price of theunit or share of the
AIF

SHI’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromfinancial information vendors (including Reuters, which can be viewed at
http://www.reuters.com/finance/stocks/overview?symbol=8973.T).

Article 23(1) (n)Details of thehistorical performanceof the AIF, whereavailable

The units of SHI were listed on the Tokyo Stock Exchange on July 28, 2005.
The performance of the units for the most recent three fiscal periods is as follows.
Please also see SHI’s “Semi-Annual Report”.

Fiscal period
22nd fiscal period (FromApril 1, 2016 to Sept. 30,
2016)
23rd fiscal period (FromOct. 1, 2016 to Mar. 31,
2017)
24th fiscal period (FromApril 1, 2017 to Sept. 30,
2017)
Article 23(1) (o)Identity of the prime
broker, any material
arrangements of the
AIF with its prime
brokers, how conflictsof interest aremanaged with theprime broker and theprovision in thecontract with thedepositary on the203,257

91,292

Total Net Assets
per unit(base value) (JPY)
89,668210,166

101,318

91,648210,009

101,341

91,669Total Assets(JPY millions)Not applicable.

14

Total Net Assets(JPY millions)possibility of transfer
and reuse of AIF
assets, andinformation about any
transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how
and when periodic
disclosures will bemade in relation toleverage, liquidity andrisk profile of theassets, pursuant to
Articles 23(4) and23(5)The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodicallythrough its Internet website and semi-annual report.

Article 23(2)The AIFM shall informthe investors before
they invest in the AIF
of any arrangement
made by thedepositary tocontractuallydischarge itself ofliability in accordancewith Article 21(13)Not applicable.

The AIFM shall also
inform investors of
any changes withrespect to depositary
liability without delay

Not applicable.

Article 23(4)(a)Percentage of the AIF's There are no assets that are subject to special arrangements arising from their illiquid
assets which arenature.
subject to special
arrangements arisingfrom their illiquid
nature. The
percentage shall be

15

calculated as the net
value of those assets
subject to special
arrangements divided
by the net asset valueof the AIF concerned
Overview of any
special arrangements,
including whether
they relate to side
pockets, gates or otherarrangements
Valuation
methodology applied
to assets which are
subject to sucharrangements
How management andperformance fees
apply to such assets
Article 23(4)(b)Any newarrangements for
managing the liquidityof the AIF
For each AIF that the
AIFM manages that is
not an unleveraged
closed-end AIF, notify
to investors wheneverthey make changes to
its liquidity
management systems(which enable an AIFM
to monitor theliquidity risk of the AIF
and to ensure theliquidity profile of theinvestments of the AIF
complies with its
underlying obligations)that are material inaccordance with

There are no such special arrangements.

There are no such special arrangements.

There are no such special arrangements.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

16Article 106(1) ofRegulation (EU) NO
231/2013 (i.e. there isa substantial likelihoodthat a reasonable
investor, becoming
aware of suchinformation, would
reconsider its
investment in the AIF,
including because suchinformation could
impact an investor’sability to exercise its
rights in relation to its
investment, orotherwise prejudice
the interests of one ormore investors in the
AIF).
Immediately notify
investors where they
activate gates, side
pockets or similar
special arrangements
or where they decideto suspend
redemptions
Overview of changes
to liquidity
arrangements, even if
not special
arrangements
Terms of redemption
and circumstanceswhere management
discretion applies,
where relevant
Also any voting orother restrictions
exercisable, the lengthof any lock-up or any
provision concerning

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

As SHI is a closed-end investment corporation and unitholders are not entitled to request
the redemption of their investment.

There are no voting or other restrictions on the rights attaching to units.

17

‘first in line’ or ‘prorating’ on gates andsuspensions shall be
included
Article 23(4)(c)
The current risk profileof the AIF and the risk
management systems
employed by the AIFM
to manage those risks

Deposits are exposed to risks of failure of the financial institution holding the deposit andother credit risks, but such risks are controlled through diversification of financial
institutions holding the deposits.
The fund proceeds from borrowings and issuance of investment corporation bonds areused for the purpose of investing in properties, conducting repairs, paying cash
distributions, operating the AIF, repaying obligations and other activities. Theseborrowings and investment bonds are exposed to liquidity risks. SHI strives to reduce theliquidity risks and a risk of rising interest rates by diversifying repayment dates, fee, and soforth.
Derivative transactions are also utilized to hedge the interest rate risks arising from any
borrowing or other debts.

Measures to assess
the sensitivity of the
AIF’s portfolio to themost relevant risks towhich the AIF is or
could be exposed
If risk limits set by the
AIFM have been or are
likely to be exceeded
and where these risk
limits have been
exceeded a
description of thecircumstances and theremedial measures
taken
Article 23(5)(a)Any changes to the
maximum amount ofleverage which the
AIFM may employ onbehalf of the AIF,

SHI retains cash and deposits sufficient to response any potential finance needs, including
funds for acquiring asset, paying cash distributions, and so forth.
No such measures have been implemented.

No such situation has occurred.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

18

calculated inaccordance with thegross and commitment
methods. This shall
include the originaland revised maximum
level of leveragecalculated inaccordance with
Articles 7 and 8 ofRegulation (EU) No
231/2013 , whereby
the level of leverage
shall be calculated as
the relevant exposure
divided by the net
asset value of the AIF
Any right of the reuseof collateral or any
guarantee granted
under the leveraging
agreement, including
the nature of therights granted for thereuse of collateral andthe nature of theguarantees granted
Details of any change
in service providers
relating to the above.
Article 23(5)(b)Information on the
total amount ofleverage employed by
the AIF calculated inaccordance with thegross and commitment
methods

To be disclosed in the semi-annual report or on AIF’s homepage, if any such right orguarantee exists.

Any new arrangements or change in applicable arrangements will be disclosed at an
appropriate time.

The aggregate amount of debt with interest is ¥105,532 million as of October 31, 2017.
Please also see SHI’s “Interest-Bearing Debt”.

19