6th Fiscal Period Semi-Annual Report - invesco-reit.co.jp · Stock Exchange on June 5, ... Invesco...

Invesco Office J-REIT, Inc.

6-10-1, Roppongi, Minato-ku Tokyohttp://www.invesco-reit.co.jp/en/


6th Fiscal Period Semi-Annual ReportFrom November 1, 2016 to April 30, 2017

(Securities Code: 3298)

1,0052,605 2,575 2,697 2,733 2,8793,638

FP1(Actual)

FP2(Actual)

FP3(Actual)

FP4(Actual)

(¥)

01,0002,000

4,000

FP5(Actual)

FP7(Forecast)

FP6(Actual)

3,000

We would first like to extend our sincere gratitude for your continued support and business with Invesco Office J-REIT, Inc. (the “Investment Corporation”).

The Investment Corporation was listed on the Real Estate Investment Trust (REIT) Securities Market of the Tokyo Stock Exchange on June 5, 2014, with the fundamental goal of maximizing investor value by making focused investments in large-scale office buildings located in metropolitan areas.

The Investment Corporation has completed its sixth fiscal period (ended April 30, 2017), and we are pleased to report the following results.

During the sixth fiscal period, with a view to enhance its portfolio value, the Investment Corporation disposed of Harumi Island Triton Square Office Tower Z in December 2016. Net proceeds from the disposition were used to acquire Kinshicho Prime Tower in January 2017. The Investment Corporation also acquired Aqua Dojima East in March 2017 using cash on hand. With these transactions, the Investment Corporation’s portfolio expanded to 14 properties representing a total acquisition price of ¥161.9 billion (up from 13 properties representing a total acquisition price of ¥154.2 billion as of the end of the fifth fiscal period).

Regarding the disposition of Harumi Island Triton Square Office Tower Z, the Investment Corporation recorded a gain on the sale of the property of ¥784 million, all of which was distributed to unitholders.

Furthermore, consistent with its long-term financial strategy, the Investment Corporation issued the first and the second series of its investment corporation bonds. The proceeds of such bonds were then used to repay existing loans and provide operating capital following the successful completion of the Aqua Dojima East acquisition. The issuance of the investment corporation bonds also allowed the Investment Corporation to broaden its source of funding, reduce funding costs, and improve the stability of fund-raising capability in the mid- to long-term by prolonging the funding period. In addition, to further enhance investor value and effectively utilize cash on hand, the Investment Corporation acquired a number of its own investment units, resulting in a return of profits to investors and improved DPU.

On the asset management front, the occupancy rate of the entire portfolio stood at 96.8% as of the end of April 2017 through steady leasing activities for vacant spaces in holding properties. Along with improving the occupancy rate, we are also working to further increase revenues from the entire portfolio and promote internal growth by pursuing the possibility of raising rents when renewing lease contracts.

As a result, operating results for the sixth fiscal period reflected operating revenues of ¥6,543 million, operating income of ¥3,324 million, ordinary profit of ¥2,967 million and net income of ¥2,966 million, all surpassing the forecasts. Distributions per unit were ¥3,638.

With your support, we look forward to continuing to work diligently to build up our portfolio by making focused investments in large-scale office buildings located in metropolitan areas. We aim to maximize investor value by securing stable earnings in the medium and long term and steadily enhancing the value of assets.

We ask for the continued support and encouragement of our investors as we pursue these goals. Yasuyuki TsujiYugo Minemura

Yugo Minemura Yasuyuki TsujiExecutive Director,

Invesco Office J-REIT, Inc.Representative in Japan,

Invesco Global Real Estate Asia Pacific, Inc.

To Our Unitholders FP6 Highlights

As of the end of April 2017

Distributions

Financial Summary

¥2,966 mm ¥115,640Net Income NAV per Unit (Note)

¥6,543 mm

¥3,638

Operating Revenues

FP6 Actual DPU

¥179,894 mm

¥2,879

Total Assets

FP7 DPU Forecast

¥3,324 mm

Operating Income

¥81,935 mm

Net Assets

¥2,967 mm

Ordinary Income

¥100,467Net Asset per Unit

Changes in DPU

(Note1) As for the number of total investment units forecasted for the period, it is based on the assumption of 815,547 units which are issued as of the end of April 2017. For the earnings forecast for the fiscal period ending October 31, 2017 (FP7) in case considering acquiring and cancelling own investment units, please refer to page 9.

(Note2) As the Investment Corporation has not made cash distribution in excess of retained earnings, actual DPU for FP6 and DPU forecast for FP7 described above do not include any portion of the amount that exceeds the profits.

(Note) NAV per unit is calculated dividing net asset value, reflecting the gap between book-value and appraisal value of investment assets, by the number of outstanding investment units.

Table of Contents

To Our Unitholders

FP6 Highlights ·············································· 1

Overview of Invesco Office J-REIT, Inc. ···· 2

External Growth··········································· 3

Further Diversification in the Portfolio ······ 4

New Portfolio Properties in FP6 ··········· 6

Major Initiatives during FP6 and Future Growth Strategy ··························· 8

Internal Growth ········································· 10

Overview of Portfolio Properties ······· 12

Portfolio Properties ································· 14

Financial Information ······························ 20

Investment Unit Information ··············· 21

Asset Management Report ·················· 22

Balance Sheets ········································· 48

Statements of Income ···························· 50

Statements of Changes in Net Assets ···· 51

Statements of Cash Distributions ······ 52

Statements of Cash Flows ···················· 53

Notes to Financial Statements ··········· 54

Independent Auditor’s Report ············ 72

Overview of Invesco Group ·················· 73

1


Aqua Dojima East

The Investment Corporation believes that metropolitan areas—centers for economic ac t i v i t y whe re compan i e s and l abo r concentrate—have relatively large size of office building markets, and consequently, there are abundant investment opportunities and relatively high leasing demand can be expected.

Large-scale office buildings are believed to enjoy relatively high and stable rents paid by quality corporate tenants with ample rent payment capacity.

The Asset Manager has conducted real property investment and asset management in Japan for the past 18 years, has a c u m u l a t i v e i n v e s t m e n t a m o u n t o f app rox ima te l y ¥1 .1 t r i l l i o n , and ha s experience in investment and managing as many as 122 properties.

Invesco Group is one of the world’s leading independent asset managers and provides global management capabilities.

Invesco Real Estate, one business division of the Invesco Group, has accumulated asset management expert ise by engaging in management of global real property direct investment and investment in real estate-related products such as publicly traded real property securities on a world-leading scale.

Focused investment in large-scale office

buildings in metropolitan areas

Asset management by an independent asset

manager with an ample track record

Asset management that leverages the Invesco Group’s high levels of

specialization

1

3

2Aiming to enhance the portfolio quality, the Investment Corporation acquired Kinshicho Prime Tower (purchase price: ¥15.1bn) in January 2017 utilizing funds generated from disposition of Harumi Island Triton Square Office Tower Z in December 2016. In addition, the Investment Corporation acquired Aqua Dojima East (purchase price: ¥1.9bn) in March 2017 by using available cash in hand. Through these acquisitions, the Investment Corporation enhanced property and tenant diversification with steady asset growth.

Overview of Invesco Office J-REIT, Inc. External Growth

FP5(at the end of October 2016)

FP6(at the end of April 2017)

No. of properties 13 properties 14 properties

Total purchase price ¥154.2bn ¥161.9bn

Average building age 18 years 19 years

Average occupancy rate 98.6% 96.8%

NOI yield (Note1) 5.0% 5.1%

NOI yield after depreciation (Note1) 4.0% 4.1%

Diversification by Tenants (Note2)

Diversification in Area (Note3)

LTV 47.7% 49.5%

Change in Portfolio and LTV

Top 10 tenant 43.7%Others 56.3%

Top 10 tenant 38.7%Others 61.3%

23 wards of Tokyo 65.5%Tokyo metropolitan area other than the above 18.8%Other major urban areas 12.4%Other investment target regions 3.2%

23 wards of Tokyo 66.0%Tokyo metropolitan area other than the above 17.9%Other major urban areas 13.0%Other investment target regions 3.1%

Top 10 tenant ratio43.7% (39.1%)

Top 10 tenant ratio38.7% (32.9%)

Investment ratio of Tokyo metropolitan area 84.3%

Investment ratio of Tokyo metropolitan area 83.9%

Total number of tenants

384

Total number of tenants

426

(Note1) For Aqua Dojima East, the ratio is calculated by the following formula: appraisal NOI before depreciation by a direct capitalization method as of the end of FP6/ purchase price. For other managed assets, the ratio is calculated using the following formula: (actual NOI before depreciation during the fiscal period / operating days during the fiscal period*365 days) / total purchase price of the portfolio as of the end of the fiscal period. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses.

(Note2) Tenant ratio based on leased area and the ratio based on rental income is shown in parentheses.(Note3) Investment ratio is based on the purchase price.

2 3


IPO FP1(October 2014)

FP2(April 2015)

FP4(April 2016)

FP3(October 2015)

FP5(October 2016)

FP6(April 2017)

December 2016

1,5421,449

1,619

786

1,049

(¥100mm)Purchase price

0

2,000

1,600

1,200

800

400

Assets acquired at IPO (Initial portfolio properties) Assets newly acquired during FP5 Asset disposed during FP6

Assets newly acquired during FP6

Assets newly acquired during FP3Ebisu Prime Square Harumi Island Triton

Square Office Tower ZCs Tower, Cs Tower Annex

Queen’s Square Yokohama Nagoya Prime Central Tower

Hakata Prime East

Sun Towers Center Building

Akiba CO Building

Sendai Honcho Building

Shinagawa Seaside East Tower

Aqua Dojima EastKinshicho Prime Tower

Harumi Island Triton Square Office Tower Z

Tokyo Nissan Nishi Gotanda Building

ORTO Yokohama Nishi Shinjuku KF Building

3 assets worth ¥26.3 billion5 assets worth ¥78.6 billion 5 assets worth ¥49.2 billion

2 assets worth ¥17.0 billion

Further Diversification in the Portfolio

Expansion of asset under managementThe Investment Corporation has continuously grown in asset under management since its listing. The asset under management has reached ¥161.9bn after new acquisition in March 2017. The Investment Corporation aims to expand asset under management by acquiring quality assets.

4 5


N e w P o r t f o l i o P r o p e r t i e s i n F P 6

KinshichoPrime Tower

Kameido Sta.Kinshicho Sta.

Kinshi Park

Sobu Line

Metropolitan Expressway

Route No.7 Komatsugawa Line

Hanzom

on Subway Line

Keiyo Road

Kuramaebashi-dori St.

KinshichoExit

Watanabebashi Sta. Oebashi Sta.

Yodoyabashi Sta.

Naniwabashi Sta.

Osaka Sta.

Umeda Sta.

Nishi-Umeda Sta. Higashi-Umeda Sta.

Kitashinchi Sta.

Aqua Dojima East

Osaka City Hall

Hanshin Expressway RouteNo.1 Loop Line

Mido-suji Ave.

Tokaido Line

Osaka Loop Line

Yotsubashi-sujiAve.

Residential Address 1-5-7, Kameido, Koto-ku, Tokyo

Date of Building August 31, 1994

Gross Floor Area of the whole building 28,789.18 sqm

Ownership Structure (Land) Ownership

Ownership Structure (Building) Ownership

Nearest station/ Walking distance

9 minutes walking distance from Kameido Station on JR Sobu Line7 minutes walking distance from Kinshicho Station on Tokyo Metro Hanzomon Line8 minutes walking distance from Kinshicho Station on JR Sobu Line

Residential Address 1-4-4, Dojimahama, Kita-ku, Osaka-shi, Osaka

Date of Building April 21, 1993


Ownership Structure (Land) Ownership (sectional ownership) (Note)

Ownership Structure (Building) Co-ownership of sectional ownership

Nearest station/ Walking distance

10 minutes walking distance from Osaka Station on JR Tokaido Main Line or Osaka Loop Line6 minutes walking distance from Nishi Umeda Station on Subway Yotsubashi Line2 minutes walking distance from Watanabebashi Station on Keihan Nakanoshima Line

Kinshicho Prime Tower Aqua Dojima East

The Property is 8 minutes walking distance from the JR Kinshicho station.

It has good access to central business districts, and is approximately 8 minutes to Tokyo station by the JR Sobu Line (Rapid Service). The property is an office tower with 17 stories with 1 basement floor and has a parking lot which can accommodate 113 cars.

Standard floor area is approximately 998 sqm (approximately 302 tsubo) and the regular shaped office floor without pillars provides flexible layout and is highly competitive in terms of size.

The property has high locational competitiveness as it is located 10-minute walk from Osaka station, a major terminal station in Kansai district and has good accessibility from widespread areas.

It has an excellent location and is located in front of Dojima entrance of Hanshin Expressway.

Standard floor area is approximately 630sqm (approx imate ly 191 tsubo) and prov ides a comparably wide standard floor area in the market.

(Note) The land of the property is owned partially by each sectional owner and the sectional owners agree to use other sectional owners’ land each other.

6 7


FP1 FP2 FP3 FP4 FP5 FP6 June 6, 2017

(%)

0.0

0.5

1.0(Year)

0.0

3.0

6.0

3.3

0.74 0.70 0.70 0.700.61 0.59

2.8 2.7 2.2 2.7 2.3 2.7

0.58

Major Initiatives during FP6 and Future Growth Strategy

Amendments to asset management guideline adding rules regarding investment unit buyback

On April 21, 2017, Invesco Global Real Estate Asia Pacific, Inc. (“IGRE” or “Asset Manager”) added provisions regarding the investment unit buyback (“unit buyback”) and retirement to the asset management guidelines as part of its financial and capital management strategy.

Credit Rating Acquisition and Issuance of Investment Corporation BondsAfter acquiring its credit rating in October 2016, the Investment Corporation issued investment corporation bonds in April 2017 for the purpose of diversifying the funding methods, reducing funding cost and prolonging funding period, and simultaneously aiming to improve stability of funding in mid- to long-term. Details of issuance of the investment corporation bonds are as follows.

Effective capital policy to improve investor value

Assuming that net income and the total available dividend remains unchanged, decreasing the number of issued investment units will:

Increase the net income per unit Increase the dividend per unit (DPU)

1. Increase Net Income Per Unit and DPU

Provide returns to investors by efficiently using available cash in hand

D P U i n c r e a s e s i n l i n e w i t h decrease in investment units

NAV per unit increases if IOJ buys its own investment units below NAV per unit

2. Return Profit to Investors

Acquiring investment units might be regarded as an efficient way of utilizing available cash in hand, depending on the state of the real estate market

3. Efficient Use of Available Cash in Hand

Assumed main sources of capital for unit buyback are as follows:

1. Available cash in hand generated from the gap between depreciation expenses and capital expendituresDepreciation expenses are costs by which property and equipment are depreciated over the remaining period of use and recorded as expenses in the income statement. Because depreciation expenses are not funded by cash, the amount of depreciation expenses remains as cash in hand. In contrast, capital expenditures, which are expenses paid to repair property and equipment, are not recorded as profit/loss but are funded by the payment of cash. As a result, the difference between the actual capital expenditure and depreciation expenses remains as cash in hand.

2. Potential excess funds generated from asset dispositionsThe Investment Corporation does not intend to sell its own assets to provide funds to acquire investment units.

Expected Benefits of Unit Buyback

(Note 3) The Investment Corporation will terminate the transaction regarding the unit buyback when either total number of acquired own investment units or total acquisit ion price reaches the maximum amount, or when the acquisition period ends.

Details of Unit Buyback

Total Number of Own Investment Units to be acquired 10,000 units (maximum)

Total Acquisition Price ¥800mm (maximum)

Acquisition Period From June 13, 2017 to July 20, 2017

Unit BuybackBased on the amendments of the asset management guidelines above, the Investment Corporation decided to conduct a buyback of our investment units as the first J-REIT to formally approve such a measure by using the capital source mentioned above at “1. Available cash in hand generated from the gap between depreciation expenses and capital expenditures”, which was an accumulated total of approximately ¥1,487 million at the end of FP6. After the completion of the unit buyback, the Investment Corporation plans to cancel all acquired own units in FP7 ending October 31, 2017.

The Investment Corporation aims to improve investor value by increasing DPU, BPU (Note1) or NAV (Note2) per unit in line with decrease in outstanding investment units.

(Note1) Book-value per unit is calculated by dividing net asset value mentioned in the financial statements by the issued number of investment units.(Note2) NAV per unit is calculated by dividing net asset value, reflecting the gap between book value and appraisal value of investment assets, by issued number of investment units.

Issue Date Amount of Issued Duration Interest rate Redemption date

First Series Bonds April 20, 2017 ¥1.8 bn 5 years 0.320% April 20, 2022

Second Series Bonds April 20, 2017 ¥1.6 bn 7 years 0.520% April 19, 2024

Consideration of Efficient Use of Available Cash in HandIf the Investment Corporation conducts effective use of available cash in hand of ¥800 mm for the following transactions, the impact on DPU is expected to be as follows. The Investment Corporation ultimately decided that unit buyback would be the most effective initiative in terms of DPU improvement.

(Reference Information)Impact on DPU amount from the unit buyback mentioned aboveExpected DPU amount for FP7 ending October 31, 2017 with taking into consideration the unit buyback is as follows. It is expected that the DPU forecast for FP7 would increase by ¥29 compared to the case without taking into account the unit buyback.

1 Unit buyback(See “Reference Information” below)

Impact to DPU: +¥29

2 Prepayment of short-term borrowing

Impact to DPU: +¥2

3 Asset acquisition

* IOJ is not considering buying an asset for ¥800 million

DPU forecast for FP7 with taking into consideration the unit buyback:

Average purchase price: ¥100,900 (closing price of June 9, 2017)

No. of units of unit buyback and retirement: 7,928 units

(Assumption)

Average remaining years (Right scale) Average borrowing rate (Left scale)

¥2,908

By issuing investment corporation bonds and repayment of borrowings which came due on June 2017, it tends to improve the Investment Corporation’s financial stability both in average borrowing rate and average remaining years.

(Note) Each expected number mentioned above is calculated based on certain conditions as the date hereof, and the actual DPU amount may differ in accordance with the changes in such assumed conditions. Also, these figures are not a guarantee of the amount of DPU in the future.

8 9


January 1, 2017 April 30, 2017 June 17, 2017

(%)

80

90

100

85.089.6 92.7

January 1, 2017 April 30, 2017 June 17, 2017

(%)

80

90

100

84.290.0 98.2

Internal Growth

Successful in Leasing and Occupancy ImprovementsIn FP6, the average portfolio occupancy rate resulted a 96.7% because some major tenants vacated from Ebisu Prime Square, Nagoya Prime Central Tower and Sendai Honcho Building.

The Investment Corporation is focusing on leasing activities at Ebisu Prime Square whose several tenants vacated during FP6, Sun Towers Center Building which occupancy rate is expected to decrease and Aqua Dojima East which is a newly acquired asset in March 2017.

The average portfolio occupancy rate in FP7 is expected to improve to 98.1% due to new leases in Nagoya Prime Central Tower, Sendai Honcho Building and Shinagawa Seaside East Tower.

(Note) The number of move-in/move out tenant is only for office tenants (including City/Plaza).

Leasing achievements at Ebisu Prime Square Leasing achievements at Sendai Honcho Building

Proactive Cost Control during FP6 and FP7

• The anchor tenant that occupied a total of 4.25 floors (2,057sqm) vacated at the end of December 2016 and February 2017 resulting in a total of 2,780 sqm of available space.

• Implemented floor space division to further tenant diversification and improve flexibility in leasing. As a result, succeeded in filling 1,657sqm of space through leasing the vacant space to 10 tenants.

• The building was fully renovated including entrance lobby space and common areas at each floor in January 2017. The renovation work was highly evaluated in the market.

• The occupancy rate improved to 98.2% as at June 17, 2017 with successful leasing to 12 new tenants (leased area: 2,233sqm).

Leasing Achievements (Note) Leasing Achievements

6 tenants moved out 6 tenants moved out 10 tenants moved in 12 tenants moved in

Stable demand for rare large vacant spaces in Ebisu sub market. Succeeded in leasing after tenant relocations.

Effective renovation led to successful leasing.

Occupancy rate Occupancy rate

¥28.8 million per period ¥27.2 million per period ¥4.5 million per period

DPU Improvement Approximately ¥74 per unit

Reduction in Building Maintenance Costs

Reduction in Power Supply Contract Costs

Other Income Improvement

Leasing Achievements by Individual AssetThe Investment Corporation was focusing on leasing at Ebisu Prime Square due to the anchor tenant relocation in FP6. In addition, occupancy rate of Sendai Honcho Building was improved because of renewal works at entrance lobby and common areas of each floor.

Cost reduction has contributed to enhanced NOIBy reviewing building maintenance and power supply contracts of each asset as well as a change in vending machine vendor and introduction of sub-leasing for cancelled parking lots, the Investment Corporation succeeded in reducing total expenses of the portfolio. Also, portfolio income was improved by initiatives to increase revenue, such as vending machine installments.

(Note) Figures above are assumed impact of cost reduction through a whole fiscal period.

FP5 (12 assets) FP6 (12 assets)

(¥/tsubo) (%)

14,500

15,000

15,500

16,000

16,500

-3.0

-1.0

1.0

3.0

5.0

15,38415,862

15,41416,020

3.03.8

FP4 FP5 FP6

(%)

0

5069.8%

(44 contracts)

56.2%(46 contracts)

39.3%(19 contracts)

30.2%(14 contracts)

4.5%(2 contracts)

100

79.4%(46 contracts)

0.1%(1 contract)

20.5%(9 contracts)

Summary for Lease Renewal Status and Portfolio Average Rent (Office part)The Investment Corporation renewed 67 contracts in FP6 of which 19 contracts (39.3% of total leased area renewed in FP6) were renewed with upward revisions and the average rent increased by 7.8% from the previous contracted rents. In addition, 46 contracts (56.2% of total leased area renewed in FP6) were renewed with the same rent.

In FP7, it is expected that many lease contract renewals whose in place rent are lower than market rent. Accordingly, the Investment Corporation aims to continuously raise rents in FP7 due to potential for further upward rent revisions for the tenants whose rent is lower than the market price to improve rental revenue.

(%)

85

90

95

100(m2)

0

15,000

12,000

9,000

6,000

3,000

FP4 FP5 2016November December

2017January February March April May June

(Forecast)July

(Forecast)August

(Forecast)September(Forecast)

October(Forecast)

(Month)

FP498.4%

FP598.8%

FP696.7%

FP7 (Forecast)98.1%

Portfolio average occupancy rate during fiscal period

Leasing Achievements and Occupancy

Move-in Move-out Actual occupancy rate Estimated occupancy rate

Lease Renewal Status (Leased Area Basis) Average Rent at the end of Fiscal Period (included CAM) (Note)

Upward revision Flat Downward revision Portfolio average rent Market rent Rent difference

(Note) It is a comparison based on 12 assets which is adjusted by excluding Triton Square Z from the portfolio at the end of FP5 and Kinshicho Prime Tower and Aqua Dojima East from the portfolio at the end of FP6. Market rent above represents contracted rent for a typical floor of assets managed by the Investment Corporation evaluated by CBRE.

10 11


Nagoya City

Osaka City

Fukuoka City5

15

Sendai City12

13

Date as of the end of April 2017

Property Summary

Property name LocationPurchase

price (¥mm)

Appraisal value (Note1)

(¥mm)

Investment ratio (Note2)

(%)

1 Ebisu Prime Square Shibuya-ku, Tokyo 25,014 27,538 15.4

3 CS Tower / CS Tower Annex Taito-ku, Tokyo 13,700 16,300 8.5

4 Queen’s Square Yokohama Yokohama-shi, Kanagawa 16,034 18,200 9.9

5 Nagoya Prime Central Tower Nagoya-shi, Aichi 14,600 18,000 9.0

6 Tokyo Nissan Nishi-Gotanda Building Shinagawa-ku, Tokyo 6,700 7,340 4.1

7 ORTO Yokohama Yokohama-shi, Kanagawa 13,000 14,400 8.0

8 Nishi-Shinjuku KF Building Shinjuku-ku, Tokyo 6,600 7,030 4.1

9 Shinagawa Seaside East Tower Shinagawa-ku, Tokyo 25,066 26,600 15.5

10 Akiba CO Building Chiyoda-ku, Tokyo 8,078 9,330 5.0

11 Sun Towers Center Building Setagaya-ku, Tokyo 6,615 7,070 4.1

12 Sendai Honcho Building Sendai-shi, Miyagi 5,000 5,200 3.1

13 Hakata Prime East Fukuoka-shi, Fukuoka 4,500 4,620 2.8

14 Kinshicho Prime Tower Koto-ku, Tokyo 15,145 15,600 9.4

15 Aqua Dojima East Osaka-shi, Osaka 1,910 2,010 1.2

Total 161,962 179,238 100.0

1

814

4

611

9

310

Yokohama City

TokyoMetropolitan Area

7

Portfolio Map

Overview of Portfolio Properties (As of the end of FP6)

¥161.9bn

Purchase Price

5.1%

Average NOI Yield(Note1)

96.8%

Average Portfolio Occupancy Rate

2.32%

Portfolio PML

¥11.5bn

Average Purchase Price per Property

64,163sqm

Average Gross Floor Area per Property(Note2)

Date as of the end of April 2017

(Note1) For Aqua Dojima East, the ratio is calculated by the following formula: appraisal NOI before depreciation by a direct capitalization method as of the end of FP6/ purchase price. For other managed assets, the ratio is calculated using the following formula: (actual NOI before depreciation during the fiscal period / operating days during the fiscal period*365 days) / total purchase price of the portfolio as of the end of the fiscal period. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses.

(Note2) Average total floor area is the sum of the floor areas of the whole building as indicated in the registry. For each asset’s total floor area, please refer to the information on “Gross Floor Area (a whole building)” in “New Portfolio Properties acquired in FP6” and “Portfolio Properties” sections.

(Note1) The date of value for the asset was April 30, 2017.(Note2) The investment ratio is based on the purchase price. As percentage of investment ratio is rounded to the second decimal place, total of the ratio may not be 100%.

Portfolio Diversification

Diversification in Area

Tokyo 23 wards

66.0%

Tokyo Metropolitan Area other than the above

17.9%

Other Major Urban Areas

13.0%

Other investment target regions

3.1%

Diversification by Size

Gross Floor Area of over

10,000 sqm 88.2%

Gross Floor Area of over

5,000 sqm 11.8%

12 13


Ebisu Prime Square

CS Tower / CS Tower Annex

1

3

Ebisu Sta.JR Ebisu Sta.

Tokyo Metro Hibiya Line

JR Line

Meiji St.

Komazawa St.

Ebisu Prime Square

Shibuya-bashi

Residential Address 1-1-7/39/40, Hiroo, Shibuya-ku, Tokyo

Date of Building January 31, 1997


Ownership Structure (Land)

Ownership rights (quasi-co-ownership interests of the trust beneficial interests: 49%)

Ownership Structure (Building)

Ownership rights (quasi-co-ownership interest of the trust beneficial interests: 49%)

Residential Address 5-20-8/6, Asakusabashi, Taito-ku, Tokyo


Gross Floor Area of the whole building 32,996.92 sqm (Note)

Ownership Structure (Land) Rights to site


Sectional ownership (co-ownership interests of part of the sectional ownership)

Asakusabashi Sta.

Iwamotocho Sta.

Kiyosubashi-dori St.

Akihabara Sta.

JR Akihabara Sta.

Bakurocho Sta.

CS Tower/CS Tower Annex

Kuramaebashi-dori St.

JR Sobu Line

Kanda River

JR Line

Tokyo Metro Hibiya Line

Toei Shinjuku Line

(Note) This section states the structure/ stories and gross floor area of the whole building including this property, inclusive of those corresponding to the interests of the other sectional owners and co-owners.

P o r t f o l i o P r o p e r t i e s

Minatom

irai Line

Minatomirai Sta.

Queen’s Square Yokohama

Kokusai Center Sta.

Nagoya Prime Central Tower

JR Nagoya Sta.

Nagoya Sta.

Meitetsu Nagoya Sta.

Kintetsu Nagoya Sta.

Tokaido ShinkansenMeitetsu Nagoya Main Line

JR Line

Nagoya City Subway

Higashiyama Line

Nagoya City Subway

Sakura-dori Line


4

Residential Address 2-3-2/3/4/5/7/8/9, Minatomirai, Nishi-ku, Yokohama, Kanagawa

Date of Building June 30, 1997


Ownership Structure (Land) Ownership rights (co-ownership interests)

Ownership Structure (Building) Sectional ownership (co-ownership interests)

(Note) The area of the entire building of Queen’s Square Yokohama recorded on the registry is stated here.

(Note) The gross floor area of the whole building for the parking space of Nagoya Prime Central Tower.

Nagoya Prime Central Tower5

Residential Address 2-27-8, Meieki, Nishi-ku, Nagoya, Aichi Prefecture

Date of Building March 18, 2009


Ownership Structure (Land) Ownership rights (co-ownership interests)


(Office) Sectional ownership(Parking lot) Interests acquired for the common spaces

under the regulations and the common spaces of the condominium

14 15



Meguro Sta.

Fudo-Mae Sta.

Gotanda Sta.Central Circular Route

Yamate-dori St.

Metropolitan Expressway

Route No.2 Meguro Line

JR Yamanote

Line

Tokyu Meguro Line

Tokyo Nissan Nishi-Gotanda Building

Toei Asakusa Line

Koyasu Sta.

Shin-Koyasu Sta.

Oguchi Sta.

Keikyu-Shin-Koyasu Sta.

Daiichi Keihin Rd.

Daini Keihin Rd.

Keikyu Line

JR Keihin-Tohoku

Line

JR Yokoham

a Line ORTO Yokohama


ORTO Yokohama

6

7

Residential Address 4-32-1/9, Nishi-Gotanda, Shinagawa-ku, Tokyo

Date of Building April 25, 1990 (completed renewal works in 2010)



Ownership Structure (Building) Sectional ownership

(Note) The structure/number of stories and the gross floor area are stated for the whole building that make up the subject property and the area includes common areas as well as other exclusive use areas of a condominium.

(Note) The structure/number of stories and the gross floor area are stated as total spaces of office building, commercial building, parking Garage and the area includes common areas as well as other exclusive use space of a condominium.

Residential Address 1-2-4/5, Shin-Koyasu, Kanagawa-ku, Yokohama, Kanagawa

Date of Building November 30, 2000




Sectional ownership (co-ownership interests for a portion of the sectional ownership)

JR Shinjuku Sta.

Tochomae Sta.

Shinjuku Nishiguchi Sta.

Nishi-Shinjuku Sta.

Ome Kaido St.

Nishi-Shinjuku KF Building

Toei Oedo Line

Tokyo Metro Marunouchi Line

JR Line

Shinagawa SeasideEast Tower

National Route N

o.357

Daiichi Keihin Rd.

ShinagawaSeaside Sta.

Rinkai Line of theTokyo Waterfront AreaRapid Transit

TokyoMonorail

Oimachi Sta.

Samezu Sta.

Aomono-yokocho Sta.

Metropolitan Expressw

ayRoute N

o.1 Haneda Line

Keikyu Line

Tokaido Line

Nishi-Shinjuku KF Building8

Shinagawa Seaside East Tower9

Residential Address 8-14-24, Nishi-Shinjuku, Shinjuku-ku, Tokyo

Date of Building January 29, 1993



Ownership Structure (Building) Sectional ownership (Note)

Residential Address 4-12-8, Higashi-Shinagawa, Shinagawa-ku, Tokyo





(Note) Although ownership structure for the subject property is sectional ownership, the seller owns the entire sectional ownerships of the subject property though the trustee.

16 17



Akiba CO Building

Kuramaebashi-dori St.Suehirocho Sta.

JR Akihabara Sta.

AkihabaraDai Building

Akihabara UDX

Sobu Line

Ginza Subw

ay Line

Tsukuba Express

Yamanote Line,

Keihin-Tohoku Line

Chuo-dori St.

Sun TowersCenter Building

Sangen-jaya Sta.

Sangen-jaya Sta.

Carrot Tower

Metropolitan ExpresswayRoute No.3 Shibuya Line

Setagaya-dori St.

National Route No.246

National Route No.246

Tokyu Den-en-toshi Line

Tokyu Den-en-toshi Line

Tokyu SetagayaLine

Akiba CO Building10

Sun Towers Center Building11

Residential Address 3-16-12 Soto-Kanda, Chiyoda-ku, Tokyo

Date of Building May 23, 2000




Residential Address 2-11-22, Sangen-jaya, Setagaya-ku, Tokyo

Date of Building June 22, 1992


Ownership Structure (Land) Ownership (sectional ownership)

Ownership Structure (Building) Sectional ownership

(Note) The land of the Property is owned partially by each sectional owner and the sectional owners agree to use other sectional owners' land each other.

Tohoku-ShinkansenTohoku-Main Line

Senseki Line

Subway Tozai Line

Subway Namboku Line

Ekimae-dori St.

Higashi Nibancho-dori St.

Sendai Sta.

Aoba-dori Sta.

Hirose-dori Sta.

Atago

Kamisugi-dori St.

Route 4

Sendai Sta.Aoba-dori Ichibancho Sta.

Sendai HonchoBuilding

Subway Kuko LineNakahie Park Dori St.

Chikushi Dori St.

Hakata Sta.

Hakata Prime EastNakahie Park

Sanyo-Shinkansen LineKyusyu-Shinkansen LineJR Line

Sendai Honcho Building12

Hakata Prime East13

Residential Address 2-3-10, Honcho, Aoba-ku, Sendai, Miyagi

Date of Building November 26, 1984




Residential Address 2-10-35, Hakataeki-Higashi, Hakata-ku, Fukuoka-shi, Fukuoka

Date of Building April 22, 1992



Ownership Structure (Building) Sectional ownership (Note)

(Note) Although ownership structure for the subject property is sectional ownership, the seller owns the entire sectional ownerships of the subject property though the trustee.

18 19


(¥mn)

FP7 FP8 FP9 FP10 FP11 FP12 FP13 FP14 FP15 FP16 FP17 FP18 FP19 FP20 FP210

4,000

8,000

12,000

16,000

0 0 00005,500 5,500

10,6006,600

12,55012,00012,000 13,350

7,500

1,800

1,600

Investment Unit Information

(Note) The bond rating is for the first and second series bonds.

Financial Stability and FlexibilityThe fundamental policy of Investment Corporation is the conduct of stable and sound financial management to ensure stable income over the medium to long term together with steady growth in asset value. In regard to borrowings, the Investment Corporation will seek stable financial management through building diversified bank formation centered on leading Japanese financial institutions.

Diversification of Debt Maturities

Lender’s Diversification

Mitsubishi UFJ Trust and Banking Corporation 4%

Shinsei Bank 3%

Aozora Bank 2%

The Bank of Fukuoka 2%

ORIX Bank Corporation 1%

The Nishi-Nippon City Bank 1%

Sumitomo Mitsui Banking Corporation 28%

The Bank of Tokyo-Mitsubishi UFJ 17%

Mizuho Bank 15%

Sumitomo Mitsui Trust Bank 11%

Resona Bank 11%

Development Bank of Japan 5%

49.5%

LTV

2.7years

Average remaining years

100.0%

Long-term loan ratio

Fixed interest rate ratio

86.6%

¥89bn

Interest bearing debt

Average borrowing rate

0.58%

Details of Credit Rating

Rating Agency Subject Rating Rating Outlook

Japan Credit Rating Agency, Ltd. (JCR)

Long-term Issuer Rating A+ Stable

Bond Rating (Note) A+ —

Borrowings Corporate Bonds

Financial Information (As of June 6, 2017)

Status of Credit RatingCurrent credit rating of the Investment Corporation is as follows.

Trend of Investment Unit PriceThe Investment Corporation’s investment unit price at Tokyo Stock Exchange has trended since June 5, 2014 as follows. The data is as of June 23, 2017.

As of June 6, 2017

As of June 6, 2017

Unitholders Composition

Breakdown by Units (Units) Total 815,547 Breakdown by Unitholders (Unitholders) Total 24,211

Domestic individuals

303,930 (37.27%) Financial institutions

316,395 (38.79%) Domestic corporations

34,693 (4.25%) Foreign corporations and individuals

160,529 (19.68%)

Domestic individuals

23,576 (97.38%) Financial institutions

89 (0.38%) Domestic corporations

394 (1.63%) Foreign corporations and individuals

152 (0.63%)

Investment Unit Price (Closing price: ¥) Trading Volume (No. of units)

As of the end of April 2017

130,000

110,000

90,000

70,000

0

140,000

60,000

40,000

20,000

0June 30,

2015December 30,

2014IPO December 30,

2015June 30,

2016December 30,

2016June 23,

2017

(Note) As percentage of unitholders ratio is rounded to the third decimal place, total of the ratio may not be 100%.

(Note) GRESB (Global Real Estate Sustainability Benchmark) is a benchmark to evaluate sustainability performance of private and listed real estate portfolio from environmental and social perspectives.

Environmental Initiatives and Energy-Saving Measures The Investment Corporation acquired certification for each asset as follows.

Invesco Group has been a Member of GRESB since 2014

Certification for CASBEEfor Real Estate

DBJ Green Building Certification

(Note) CASBEE (The Comprehensive Assessment System for Built Environment Efficiency) is a tool for assessing and rating the environmental performance of buildings built and used in Japan.

(Note) DBJ Green Building Certification is a certification system that Development Bank of Japan selects and evaluates properties with environmental and social awareness, which is necessary in the current real estate market, based on its comprehensive assessment measure.

Nagoya Prime Central Tower Acquired “S Rank” Certification number: HPCAS-15-00001-1

CS Tower Acquired “A Rank” Certification number: HPCAS-14-00016-1

ORTO Yokohama Acquired “A Rank” Certification number: HPCAS-15-00011-1

Tokyo Nissan Nishi-Gotanda Building Acquired “A Rank” Certification number: HPCAS-15-00013-1

Ebisu Prime Square Achieved 3 stars (Properties with excellent environmental and social awareness) as of February 27, 2017

20 21


1. Overview of the asset management performance

(1) Investment performance of the Investment Corporation

Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period

November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016

to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017

Operating revenue (million yen) 3,009 4,003 4,183 5,684 6,543

[Revenues from the real estate rental business] (million yen) [3,009] [4,003] [4,179] [5,678] [5,755]

Operating expenses (million yen) 1,699 2,327 2,453 3,087 3,218

[Expenses for the real estate rental business] (million yen) [1,403] [1,976] [2,041] [2,592] [2,583]

Operating income (million yen) 1,309 1,675 1,730 2,597 3,324

Ordinary income (million yen) 1,128 1,397 1,463 2,230 2,967

Net income (million yen) 1,127 1,396 1,462 2,229 2,966

Total assets (million yen) 89,285 117,757 118,088 172,204 179,894

[Comparison with the previous fiscal period] (%) [-0.1] [+31.9] [+0.3] [+45.8] [+4.5]

Net assets (million yen) 44,134 55,287 55,353 81,183 81,935

[Comparison with the previous fiscal period] (%) [+1.6] [+25.3] [+0.1] [+46.7] [+0.9]

Interest-bearing debt (million yen) 40,200 56,200 56,200 82,100 89,000

Unitholders’ equity (million yen) 43,007 53,891 53,891 78,913 78,913

Total number of investment units issued (units) 432,680 542,210 542,210 815,547 815,547

Net assets per unit (yen) 102,002 101,967 102,088 99,544 100,467

Total distributions (million yen) 1,127 1,396 1,462 2,228 2,966

Distributions per unit (yen) 2,605 2,575 2,697 2,733 3,638

[Profit distributions per unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]

[Distributions in excess of earnings per unit] (yen)

[-]

[-]

[-]

[-]

[-]

Ratio of ordinary income to total assets (Note 4) (%) 1.3 1.3 1.2 1.5 1.7

[Annualized value] (%) [2.5] [2.7] [2.5] [3.0] [3.4]

Return on equity (Note 4) (%) 2.6 2.8 2.6 3.3 3.6

[Annualized value] (%) [5.2] [5.6] [5.3] [6.5] [7.3]

Ratio of unitholders’ equity to total assets at the end of the period (Note 4)

(%) 49.4 47.0 46.9 47.1 45.5

[Change from the previous fiscal period] (%) [+0.8] [-2.5] [-0.1] [+0.3] [-1.6]

Payout ratio (Note 4) (%) 100.0 100.0 100.0 100.0 100.0

Other Reference information

Number of operation days Days 181 184 182 184 181

Number of assets Assets 5 8 8 13 14

Depreciation (million yen) 428 537 561 710 752

Capital expenditure (million yen) 194 236 328 333 648

NOI (Net operating income) (Note 4) (million yen) 2,034 2,564 2,698 3,796 3,924

FFO (Funds from operation)(Note 4) (million yen) 1,556 1,933 2,023 2,939 2,934

FFO per Unit (Note 4) (yen) 3,596 3,566 3,731 3,604 3,598

LTV (Book value basis) (%) 45.0% 47.7% 47.6% 47.7% 49.5%

(Note1) The fiscal period of the Investment Corporation is for six months; from May 1 and to October 31 of each year and from November 1 to April 30 of the following year.

(Note 2) Consumption tax is not included in Operating Income and etc. (Note 3) Unless otherwise mentioned, the amounts of money shown above are rounded down and the percentages are rounded off to one decimal place. (Note 4) Each figure above is calculated by the formula below;

The ratio of ordinary income to total assets Ordinary income / [(Total assets at the beginning of the period + Total assets at the end of the period)/ 2] × 100

Return on equity Net income / [(Net assets at the beginning of the period + Net assets at the end of the period) / 2] × 100

The ratio of unitholders’ equity to total assets at the end of the period

Net assets at the end of the period / Total assets at the end of the period × 100

Payout ratio Distributions per unit (excluding distributions in excess of earnings) / Net income per unit × 100 The payout ratio in the first fiscal period and the third fiscal period and the fifth fiscal period is calculated using the following formula, as the number of investment units during the period changed because of capital increase through public offering during the period. Payout ratio = Total distributions (excluding distributions in excess of earnings) / Net income × 100

Rental business NOI Revenues from the real estate rental business – Expenses for the real estate rental business + Depreciation

FFO Net income + Depreciation – Gains or losses on sales of real estate FFO per unit FFO / Total number of investment units issued

(2) Summary of operating results for the fiscal period ended April 30, 2017 (the “Sixth Fiscal Period”)

a) Historical background of the Investment Corporation

The Investment Corporation was established on February 27, 2014 by Invesco Global Real Estate Asia

Pacific, Inc. as the organizer under the Act on Investment Trusts and Investment Corporations of Japan

(hereinafter referred to as the “Investment Trust Act”). The Investment Corporation was listed on the Real

Estate Investment Trust Securities Market of the Tokyo Stock Exchange (Securities code: 3298) on June 5,

2014.

The Investment Corporation is managed by Invesco Global Real Estate Asia Pacific, Inc. (hereinafter

referred to as the “Asset Management Company”). The Asset Management Company belongs to the Invesco

Group, one of the world’s leading independent asset management companies. The Investment Corporation

aims to provide investors with opportunities to invest in office buildings in Japan with a strong focus on

large-scale office buildings (see Note 1) located in Japan’s major urban areas (see Note 2). These assets will

be selected by experienced investment management specialists belonging to the Asset Management

Company with the view to maximize investor value.

(Note 1) “Large-scale office buildings” refers to real estate related assets (real estate related assets which are defined in Article 28, Paragraph 1

of the Investment Corporation’s Articles of Incorporation (hereinafter referred to as the “Articles of Incorporation”)) are buildings or mortgage-backed securities for which the underlying assets are buildings which have scale that meets the following standards and therefore regarded as “large-scale” and are used primarily as office space. Tokyo Metropolitan Area: Total floor area of 10,000 m2 or greater with a standard exclusive floor area on one floor covering at least 600 m2. Other regions: Total floor area of 7,000 m2 or greater with a standard exclusive floor area on one floor covering at least 400 m2.

(Note 2) The Investment Corporation defines “major metropolitan areas” as the Tokyo Metropolitan Area (Tokyo, Yokohama-shi, Kawasaki-shi, Saitama-shi, and Chiba-shi), Osaka-shi, Nagoya-shi and Fukuoka-shi; and sets this as its focused investment target area.

b) Investment Environment and Business Performance

During the Sixth Fiscal Period, domestic demand in the Japanese economy improved and accordingly,

gradual growth in the domestic economy continued. The appreciation of the Japanese yen from the beginning

of 2016 turned to depreciation after the presidential election of the United States in November 2016 and

supported exports and the earnings of corporations. On the other hand, the future outlook is unclear due to

increased geopolitical risks from the policies of the new administration in the United States and the rapid rise

of protectionism in some developed countries.

Asset Management Report

22 23


As for the domestic office leasing market, demand for office space continued to increase as a result of the

corporate sector’s strong performance. However, the market showed signs of change. Because of the

psychological impact arising from huge supply after 2018, rent increase slowed in the central Tokyo

metropolitan area. In regional areas where the new supply is relatively small, the trend of increasing

occupancy rates and rents still remain stable. With regards to real estate transactions, due to the difficulties in

fund management stemming from the negative interest policy by Bank of Japan, acquisitions by both listed

and private J-REITs increased and transaction volume turned to increase compared to that of last year.

Under these conditions, the Investment Corporation disposed of trust beneficiary interests of Harumi Island

Triton Square Office Tower Z (Chuo-ku, Tokyo, Disposition price: 10,100 million yen) on December 16,

2016. Also, the Investment Corporation acquired trust beneficiary interests of two properties in the Sixth

fiscal period as follows: Kinshicho Prime Tower (Koto-ku, Acquisition price: 15,145 million yen) on

January 20, 2017 and Aqua Dojima East (Osaka-shi, Osaka, Acquisition price: 1,910 million yen) on March

31, 2017. These acquisitions were based on the Investment Corporation’s management philosophy.

The fiscal period under review ended with the ownership of real estate trust beneficiary interests relating to

fourteen (14) properties (total acquisition price: 161,962 million yen) that have a total leasable area of

212,887.94 m2.

Regarding property management the occupancy rate of the entire portfolio was 96.8% as of the end of the

fiscal period under review. Along with this, the Investment Corporation pursued to improve earnings of the

entire portfolio by seeking the possibility to increase rent on lease renewals.

c) Overview of Financing Activities

The fundamental policy of the Investment Corporation is to conduct stable and sound financial management

to secure stable income over the medium to long term together with steady growth in asset value. Financing

activities in the Sixth Fiscal Period are as follows.

The Investment Corporation borrowed 5,500 million yen on January 20, 2017. The loan proceeds were used

for the acquisition of trust beneficiary interests of Kinshicho Prime Tower and payment for related cost. Also,

the Investment Corporation issued the 1st Unsecured Investment Corporation Bonds (Special pari passu

conditions among specified investment corporation bonds) of 1,800 million yen and the 2nd Unsecured

Investment Corporation Bonds (Special pari passu conditions among specified investment corporation

bonds) of 1,600 million yen. The proceeds of issuing these corporate bonds were used for the repayment of

short term loans of 2,000 million yen, which came due on April 28, 2017.

Outstanding loans as of the end of the Sixth Fiscal Period totaled 89,000 million yen. The ratio of total

interest-bearing debt (the total amount of loans and bonds) to total assets (i.e., the loan-to-value or “LTV”)

was at 49.5% at the end of the Sixth Fiscal Period.

(Credit Rating)

As of the end of the Sixth Fiscal Period, credit ratings of the Investment Corporation are as follows.

Rating Agency Rating Rating Outlook

Japan Credit Rating Agency, Ltd.

(JCR)

Long-term Issuer Rating: A+ Stable

Bonds : A+ - (Note) Rating for the 1st Unsecured Investment Corporation Bonds and the 2nd Unsecured Investment Corporation Bonds.

(Shelf Registration Statement regarding investment corporation bonds)

The Investment Corporation filed a shelf registration statement regarding investment corporation bonds

(excluding short-term investment corporation bonds) on February 27, 2017. The details of the statement are

as follows.

Amount to be issued 50,000 million yen

Planned period of issuance From March 7, 2017 to March 6, 2019

Use of proceeds

Acquisition of specific assets (as defined under Paragraph 1,

Article 2 of the Investment Trust Act, as amended), debt

repayment, redemption of investment corporation bonds

(including short-term investment corporation bonds), refund of

tenant security deposit, payment of repairs and maintenance

expenses, working capital, etc.

d) Overview of Financial Results and Cash Distribution

As a result of the above, operating revenue amounted to 6,543 million yen, operating income amounted to

3,324 million yen, ordinary income amounted to 2,967 million yen, and net income amounted to 2,966

million yen for the fiscal period under review.

It was decided that all retained earnings would be distributed, except a fraction of less than one (1) yen per

investment unit, with the aim to maximize the tax deductible expense of the profit distribution that is allowed

under the special provisions for taxation (Article 67-15 of the Act on Special Measures Concerning

Taxation). Consequently, distributions per investment unit amounted to 3,638 yen.

24 25


(3) Status of Issuance of New Investment Units

Changes to Total Unitholders’ Equity, net from the establishment of the Investment Corporation through the end

of the Sixth Fiscal Period are as follows:

(Note 1) At the incorporation of the Investment Corporation, investment units were issued with an issue price per unit of 100,000 yen. (Note 2) New investment units were issued through a public offering with an issue price per unit of 103,000 yen (issue value: 99,395 yen). (Note 3) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price

per unit of 99,395 yen. (Note 4) New investment units were issued through a public offering with an issue price per unit of 102,960 yen (issue value: 99,369 yen). (Note 5) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price

per unit of 99,369 yen. (Note 6) New investment units were issued through a public offering with an issue price per unit of 94,672 yen (issue value: 91,545 yen). (Note 7) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price

per unit of 91,545 yen.

[Changes in Investment Unit Price at the Tokyo Stock Exchange]

Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017

Highest (yen) 126,900 112,800 107,600 101,900 104,400

Lowest (yen) 99,700 87,300 94,200 84,800 81,100

Date Event

Total Number of Investment Units Issued and Outstanding

(units)

Total Unitholders’ Equity, (millions of Yen) Notes

Change Balance Change Balance

February 27, 2014 Incorporation through private placement 1,500 1,500 150 150 (Note1)

June 4, 2014 Capital increase through public offering 411,000 412,500 40,851 41,001 (Note 2)

June 25, 2014 Capital increase through third-party allotment 20,180 432,680 2,005 43,007 (Note 3)

May 26, 2015 Capital increase through public offering 104,300 536,980 10,364 53,371 (Note 4)

June 24, 2015 Capital increase through third-party allotment 5,230 542,210 519 53,891 (Note 5)

May 31, 2016 Capital increase through public offering 261,500 803,710 23,939 77,830 (Note 6)

June 29, 2016 Capital increase through third-party allotment 11,837 815,547 1,083 78,913 (Note 7)

(4) Actual Cash Distribution per Unit

Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the

Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of

profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures

Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution per

unit of 3,638 yen.

(5) Future Management Policy and Other Issues

The pace of recovery of the Japanese economy is expected to be accelerated slightly because of the resurgent

investment in public sector and private sector. However, it is necessary to remain cautious about the global

economy’s future, especially the political administration in the US, the possible outcome of the monetary easing

measures by FRB, economic trends in China, and impact from volatility in exchange rates and natural resource

prices. Also, it will be necessary to pay attention to the monetary easing policy by Bank of Japan.

In the office leasing market, the potential demand from the newly-built offices and corporate expansion remains

steady. However, it is expected that cyclical expansion will slow down. In the central business district in Tokyo

area, the market is expected to be loosened because of the huge and concentrated supply in this area and it is

likely that the rent in a higher price ranges is expected to decrease.

As for the real estate transaction market, in case the investment demand and the favorable financing

Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017

Total net income (thousands of yen) 1,127,368 1,396,523 1,462,617 2,229,474 2,967,250

Retained earnings brought forward

(thousands of yen) 237 332 277 584 290

Total distributions (thousands of yen) 1,127,131 1,396,190 1,462,340 2,228,889 2,966,959

[Distribution per Unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]

Total Profit distribution

(thousands of yen) 1,127,131 1,396,190 1,462,340 2,228,889 2,966,959

[Profit distributions per unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]

Total Return of capital

(thousands of yen) - - - - -

[Return of capital per unit] (yen) [-] [-] [-] [-] [-]

Of total return of capital, total distribution from allowance for temporary difference adjustment


[ Of return of capital per unit, total distribution per unit from allowance for temporary difference adjustment]

(yen) [-] [-] [-] [-] [-]

Of total return of capital, total distribution through reduction in unitholders; capital for tax purpose


[Of total return of capital per unit, total distribution per unit through reduction in unitholders; capital for tax purpose]

(yen) [-] [-] [-] [-] [-]

26 27


environment continue to be steady, it is expected that the transaction volume and price will be likely to increase.

However, in the mid-term, it is necessary to be prepared for the situation that real estate prices head downward

by further adjustments in the capital market.

In view of the market environment described above, the Investment Corporation recognizes that it is crucial to

pursue external growth through the acquisition of properties that will help enhance portfolio quality and

profitability. This will be achieved by making maximum use of the investment expertise the Asset Management

Company has accumulated over the past eighteen (18) years in Japan and the close relationships it has built with

various market players as an independent asset manager. The Investment Corporation also needs to quickly

achieve regional and tenant diversification in relation to the managed assets to secure stable earnings across its

entire portfolio. Furthermore, the Investment Corporation considers it necessary to pursue internal growth

through improvement in the profitability of managed properties, as rents in the office lease market are currently

trending upward.

Based on the recognition of the issues described above, the Investment Corporation has been aiming to provide

stable profit and to enhance the portfolio quality by investing mainly in large-scale office buildings in

metropolitan areas such as the Tokyo area and steadily operating them, and it has been conducting its asset

management for the purpose of improving both DPU amount and investors’ value. However, as the current real

estate investment market is fiercely competitive and it is necessary to sustainably secure and increase

opportunities to acquire assets in order to maximize investor value through external growth, the Investment

Corporation has determined to broaden the type of investable assets which it may invest, into the assets other

than office building subject to certain limitations. By broadening the type of investable assets and assessing

appropriate investment timing to make rigorously selected investments in various assets, the Investment

Corporation aims to realize sustainable external growth. As a result of expanding the size of the portfolio,

diversification of both asset and tenants is expected to be improved. Portfolio sustainability is also expected to

be improved by combining assets having different cash flow characteristics. For these circumstances, upon the

resolution of the General Meeting of Unitholders, which was held on January 31, 2017, the Investment

Corporation amended the part of the Articles of Incorporation and accordingly, the Investment Corporation

amended the Asset Management Guideline.

a) Investment Policy / External Growth Strategy

Japan’s economic activities are extremely concentrated in major urban areas, which serve as the base for

business and consumption. Office buildings located in major urban areas offer a wealth of investment

opportunities and relatively high rental demand can be expected. In addition, due to the concentration of

economic activity, demand for office buildings as the site for economic activity and essential

infrastructure is also likely to increase. Given the potential for growth driven by the scale of economic

activity and population in these districts, office buildings located in major urban areas are likely to remain

attractive investment targets.

Rents of office buildings in the Tokyo Metropolitan Area and other major urban areas show an upward

trend, especially large office buildings. Rents in these areas can expect to rise ahead of other rents in a

recovery phase and that may offer upside revenue potential through increased rents and higher occupancy

rates. In addition, such office buildings are generally occupied by blue-chip companies with strong lease

payment capacity. Depending on the equipment specifications, these office buildings can promise stable

rents that are relatively high compared to other office buildings. Furthermore, relatively strong tenant

demand can be expected in the areas in which such office buildings are located and it may also be possible

to maintain high occupancy rates through tenant diversification and flexibility when setting rents.

From this perspective, the Investment Corporation will continue to place its focus on large-scale office

buildings (investment ratio of 70% or more) located in major metropolitan areas as its investment targets.

At the same time, in the current fiercely competitive real estate investment market, the Investment

Corporation regards it is necessary to sustain and expand the opportunities of acquiring assets, and

therefore, the Investment Corporation plans to invest in investable assets other than large-scale office

buildings are planned to be middle-scale offices, retail facilities, residential properties, hotels, logistics and

others. The investment ratio of these assets is to be limited to less than 30% of the total portfolio. The

Investment Corporation expects this investment policy leads to increase of opportunities to acquire assets

that can improve the quality and profitability of the portfolio, and contribute to continuous external growth.

Furthermore, it is expected that the diversification of both assets and tenants and the profitability of

portfolio can be improved by combing the assets with different types of profit characteristics.

b) Management Policy / Internal Growth Strategy

The Investment Corporation will endeavor to (i) maintain and improve tenant satisfaction through

meticulous property management services, (ii) maintain and improve rental income and occupancy rates,

(iii) perform appropriate management and repairs, and (iv) promote rationalization and efficiency of

management costs.

In its tenant leasing activities, the Investment Corporation will set appropriate rent levels based upon its

assessment and understanding of market trends and consideration of real estate characteristics for each

managed asset. It will also fully utilize property management companies (hereinafter referred to as the

“PM Companies”) to select high-quality tenants. Leasing activities will also be carried out by giving

consideration to the impact of the tenant composition of not only each individual property, but also the

portfolio as a whole.

Since existing tenants are important clients, the Investment Corporation will make regular contact with

them through the PM Companies to quickly identify tenant trends. Such trends include tenants that are

considering increasing or decreasing leased space and tenants who are dissatisfied or are considering

termination. At such time, the Investment Corporation will take appropriate and swift action.

The Investment Corporation will prepare a repair and maintenance plan along with a capital expenditure

plan as part of the annual management review for each managed asset. The Investment Corporation will

systematically carry out necessary repairs, maintenance and capital expenditures to improve the market

competitiveness of the managed assets and to improve tenant satisfaction.

c) Financing Strategy

In line with the fundamental policy of conducting steady and sound financial management to ensure stable

income over the medium-to-long term and to support continuous growth in asset value, the Investment

Corporation, paying careful attention to financial market trends, raises funds as follows.

28 29


Decisions on equity financing will be made on a comprehensive basis taking into account such matters as

(i) the timing of new real property-related asset acquisitions, (ii) the specific LTV on each asset, (iii) the

repayment schedules, (iv) the terms of the interest bearing debt, and (v) the market environment. This will

all be viewed while giving consideration to the possible dilution of the interests of existing investors and

any resulting decrease in the trading price of investment units.

In debt financing, the Investment Corporation aims to keep LTV levels within the range of 40% to 50% to

maintain stable leverage control. However, there may be times when those LTV levels are temporary

exceeded. The Investment Corporation will seek stable financial management through repayment dates,

diversification of lenders and the use of long-term fixed debt. At the same time, the Investment

Corporation will take into account borrowing costs. In regard to lenders, the Investment Corporation will

build a stable bank foundation centered on leading Japanese financial institutions.

Furthermore, for the purpose of improving capital efficiency and returning profit to unitholders, as a part

of financial and capital policy, Investment Corporation will examine acquisition and cancellation of its

own investment units. When such examination, improving investors’ value in mid- to long-term is

prioritized and the decision whether to conduct such acquisition is based on the prudent assessments of

level of investment unit price, situation of cash in hand, financial situation, and market environment.

(6) Significant Events after the Balance Sheet Date

(1) Resolution regarding acquisition of own investment units

The Investment Corporation has decided to acquire own investment units (hereinafter referred to as the

“Acquisition of Own Investment Units”) based on the Article 80-2 of the Investment Trust Act applied by the

reading of terms in the Article 80-5 of the Investment Trust Act at a meeting of the board of directors of the

Investment Corporation held on June 12, 2017. The Investment Corporation plans to cancel all the acquired

units during the fiscal period ending October 31, 2017.

a) Reason for acquisition of own investment units

Considering various facts such as the level of investment unit price, situation of cash in hand, financial

situation and market environment, the Investment Corporation expects that improving capital efficiency

and returning profit to investors through acquiring own investment units will improve the investors’ value

in the mid- to long-term. In case the market price of investment units is below its book-value per unit

(BPU) or NAV per unit, the Investment Corporation believes that acquiring its own investment units and

cancelling them will improve investors’ value. DPU is expected to increase due to the fact that the number

of outstanding investment units decreases.

b) Details of acquisition of own investment units

Total number of own investment units to be acquired 10,000 units (maximum)

Total acquisition price 800 million yen (maximum)

Method of acquisition The Investment Corporation entrusts the market purchase

of its own investment units at Tokyo Stock Exchange to

a securities company by discretionary transaction

contract

Acquisition period From June 13, 2017 to July 20, 2017

(Reference – Subsequent Events)

The Investment Corporation undertook the borrowing of funds for the purpose of refinancing the existing

loan of 13,000 million yen which came due on June 6, 2017.

Classification Lender Date of Borrowing

Borrowing Amount

(millions of yen)

Interest Rate (Notes 1 and 2)

Maturity Date

Purpose of Borrowing Security

Long-

term

Sumitomo Mitsui Banking Corporation

June 6 2017

1,250

Base rate (JBA one-month JPY TIBOR) plus

0.25%

November 30, 2018 (Note 3) Unsecured and

Unguaranteed

The Bank of Tokyo-Mitsubishi UFJ, Ltd.,

1,250

Mizuho Bank, Ltd. 1,000 Sumitomo Mitsui Trust Bank, Ltd. 1,000

Resona Bank, Ltd. 1,000 Sumitomo Mitsui Banking Corporation

June 6 2017

1,250

Base rate (JBA three-month JPY TIBOR) plus 0.45%

(Note 4)

November 30, 2021 (Note 3) Unsecured and

Unguaranteed

The Bank of Tokyo-Mitsubishi UFJ, Ltd.,

1,250

Mizuho Bank, Ltd. 1,000

Sumitomo Mitsui Trust Bank, Ltd. 1,000

Resona Bank, Ltd. 1,000

Development Bank of Japan Inc. 2,000

Total 13,000 - - - - (Note 1) Loan fees and other charges to be paid to the lenders are not included.

(Note 2) “Base Rate” applicable to the period for the calculation of the interest payable on an interest payment date is the one-month or

three-month Japanese yen Tokyo Interbank Offered Rate (TIBOR) published by Japanese Bankers Association (“JBA”) TIBOR

Administration as of a date two (2) business days prior to the most recent interest payment date of each interest payment date. The

base rate will be reviewed on every payment date. However, if there is no base rate that corresponds to the interest calculation

period, the base rate corresponding to the period calculated based on the method defined in the agreements will apply.

(Note 3) “Purpose of Borrowing” is to refinance the existing loan which came due on June 6, 2017.

(Note 4) The interest rate of the borrowing mentioned above is floating. For the purpose of avoiding the interest-rate risk, the Investment

Corporation concluded an interest rate swap agreement and the interest rate are effectively fixed at 0.5375%.

2. Overview of the Investment Corporation

(1) Over view of the unitholders’ equity

Fiscal period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1, 2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30,2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017

Total number of investment units that the Investment Corporation is authorized to issue (unit)

10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

Total number of investment units issued and outstanding (unit)

432,680 542,210 542,210 815,547 815,547

Total unitholders’ equity (millions of yen)

43,007 53,891 53,891 78,913 78,913

Number of unitholders 11,935 15,708 16,640 24,826 24,211

30 31


(2) Overview of the unitholders

Principal unitholders Number of units owned (units)

Ratio of number of units owned to total number of units issued (Note1)(%)

Japan Trustee Services Bank, Ltd. (trust account) 88,357 10.83 The Master Trust Bank of Japan, Ltd. (trust account) 68,188 8.36 Trust & Custody Services Bank, Ltd. (securities investment trust account) 54,747 6.71 The Nomura Trust and Banking Co., Ltd. (investment trust account) 28,076 3.44 HSBC BANK PLC A/C CLIENTS, NON TREATY 1(Note 2) 24,504 3.00 NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NON LENDING 15 PCT, TREATY ACCOUNT 15,087 1.84 GOLDMAN, SACHS & CO. REG 13,550 1.66 Japan Trustee Services Bank, Ltd. (trust account 9) 6,995 0.85 State Street Bank and Trust Company 505001 6,463 0.79 Morgan Stanley & Co. LLC 6,433 0.78

Total 312,400 38.30 (Note 1) Each figures described in “Ratio of number of units owned to total number of units issued” are rounded off to one decimal. (Note2) HSBC BANK PLC A/C CLIENTS, NON TREATY 1 holds 24,504 units as trustee for the benefit of Invesco Investments (Bermuda) Ltd. Invesco

Investments (Bermuda) Ltd. is a subsidiary of Invesco Ltd., the parent company of the Asset Manager.

(3) Overview of the directors

a) The members of the board of directors as of the end of the Sixth Fiscal Period is as follows

Position Name Concurrent post Total fees paid during the sixth fiscal period

(thousands of yen)

Executive Director (Note1), (Note2), (Note 3)

Yugo Minemura Fund Manager at Invesco Global Real Estate Asia Pacific Inc. -

Yoshifumi Matsumoto Head of Business Development at Invesco Global Real Estate Asia Pacific Inc. -

Supervisory Director (Note1), (Note2), (Note 4)

Takashi Shimokado Attorney at law of Shimokado International Law Office 3,900

Eiji Kawasaki - Accounting Auditor (Note2)

Pricewaterhouse Coopers Aarata LLC - 10,500

(Note 1) Executive directors and supervisory directors do not own investment units issued by the Investment Corporation under their name or other third parties’ name. In addition, supervisory directors may be appointed as a director of other companies but such companies are not related parties to the Investment Corporation.

(Note 2) No fee is paid to executive directors. As for supervisory directors, the actual amount paid during the sixth fiscal period is described herein. Regarding the fees for the accounting auditor, the amount described herein is equivalent to the accounting audit fee for the sixth fiscal period and the accounting audit fee for issuing comfort letters for investment corporation bonds.

(Note 3) Executive director Yoshifumi Matsumoto stepped down from his office on January 31, 2017 and Yugo Minemura was newly elected as an executive director at the 3rd general unitholders’ meeting held on the same day.

(Note 4) Supervisory directors of the Investment Corporation were reelected at the 3rd general unitholders’ meeting held on January 31, 2017. (Note 5) At the 3rd general unitholders’ meeting held on January 31, 2017, Yasuyuki Tsuji was elected as a substitute executive director in preparation for

cases where there is vacancy or a shortfall in the number of executive directors as provided by laws and regulation.

b) Policy for Determining Dismissal or refusal of reappointment of auditors

The Board of Directors of the Investment Corporation will determine whether to dismiss an auditor in accordance

with the provisions of the Investment Trusts Act and will determine whether to refuse reappointment by

comprehensively considering the quality of the auditing, the amount of remuneration for the auditing and various

other factors.

(4) Asset manager, Custodian, and General administrators

The asset manager, custodian and general administrators for the Investment Corporation as the end of the sixth fiscal

period are as follows;

Names

Asset manager Invesco Global Real Estate Asia Pacific Inc.

Custodian Sumitomo Mitsui Trust Bank, Limited

General administrator (transfer agent) Mitsubishi UFJ Trust and Banking Corporation

General administrator (operation) Sumitomo Mitsui Trust Bank, Limited

General administrator (accounting) Tokyo Kyodo Accounting Office

General administrator (Financial agent) Sumitomo Mitsui Banking Corporation

3. Overview of Investment Assets

(1) Status of Investment

Type of Assets Region

Fifth Period As of October 31, 2016

Sixth Fiscal Period As of April 30, 2017

Total Amount Held

(millions of yen) (Note 1)

Percentage to Total

Assets (%) (Note 2)

Total Amount Held

(millions of yen) (Note 1)

Percentage to Total Assets

(%) (Note 2)

Entrusted Real

Estate (Note 3)

Major Metropolitan

Areas (Note 4)

Tokyo Metropolitan Area (Note 5)

Tokyo 23 Wards 102,536 59.5 108,605 60.4 Tokyo Metropolitan Area Outside the 23

Wards 28,975 16.8 29,029 16.1

Other Major Metropolitan Areas 19,060 11.1 20,868 11.6

Other Investment Target Regions 5,225 3.0 5,337 3.0

Total Entrusted Real Estate 155,798 90.5 163,841 91.1 Silent Partnership Equity Interest (Note 6) 102 0.1 - -

Deposits and Other Assets 16,303 9.5 16,052 8.9 Total Assets 172,204 100.0 179,894 100.0

(Note 1) Total amount held is based on the balance sheet carrying amount (book value less depreciation in the case of entrusted real estate). (Note 2) Percentage to total assets is rounded to one decimal place. (Note 3) All entrusted real estate is used primarily as offices. (Note 4) “Major Metropolitan Areas” refer to Tokyo Metropolitan Area, Osaka-shi, Nagoya-shi, and Fukuoka-shi. (Note 5) “Tokyo Metropolitan Area” refers to Tokyo, Yokohama-shi, Kawasaki-shi, Saitama-shi, and Chiba-shi. (Note 6) “Silent Partnership Equity Interest “mentioned herein is the total amount of Silent Partnership Equity Interests, which is operated by Godo Kaisha

Condor Property.

32 33


(2) Major Investment Assets

The table below shows the Investment Corporation’s major investment assets as of the end of the Sixth Fiscal

Period.

Name of Property Book Value (millions of

Yen)

Leasable Area (m2)

(Note 1)

Leased Area (m2) (Note 2)

Occupancy Rate (%) (Note 3)

Percentage to Total Real Estate Rental Revenues

(%) (Note 4) Main Usage

Ebisu Prime Square 25,413 17,354.06 15,542.33 89.6 12.8 Office

CS Tower/CS Tower Annex 13,812 19,998.31 19,998.31 100.0 9.5 Office

Queen’s Square Yokohama 16,046 41,954.39 41,445.10 98.8 16.5 Office

Nagoya Prime Central Tower (Note 5) 14,379 17,117.10 14,866.38 86.9 Not disclosed Office

Tokyo Nissan Nishi-Gotanda Building 6,899 8,522.42 8,522.42 100.0 4.3 Office

ORTO Yokohama 12,983 23,593.92 23,582.14 100.0 9.6 Office

Nishi-Shinjuku KF Building 6,845 6,287.78 6,287.78 100.0 3.2 Office

Shinagawa Seaside East Tower 25,260 27,892.63 27,892.63 100.0 15.2 Office

Akiba CO Building 8,316 5,514.42 5,514.42 100.0 Not disclosed Office

Sun Towers Center Building 6,695 7,876.60 7,204.68 91.5 3.9 Office

Sendai Honcho Building 5,337 8,962.47 8,069.17 90.0 3.1 Office

Hakata Prime East 4,535 7,018.05 7,018.05 100.0 2.7 Office

Kinshicho Prime Tower 15,360 17,606.11 17,167.33 97.5 4.9 Office

Aqua Dojima East 1,953 3,189.68 3,059.86 95.9 0.2 Office

Total 163,841 212,887.94 206,170.60 96.8 - - (Note 1) Unless otherwise specified, “Leasable Area” is part of the total area that is available for lease in accordance with the relevant lease agreement or

architectural drawing pertaining to each managed asset as of the end of the Sixth Fiscal Period that is the area equal to the Investment Corporation’s interest.

(Note 2) Unless otherwise specified, “Leased Area” represents the part of the total leased area stated in the relevant lease agreement pertaining to each managed asset as of the end of the Sixth Fiscal Period, which is the area equal to the Investment Corporation’s interest. If a pass-through-type contract is concluded with respect to the managed asset, “Leased Area” represents the part of the total leased area according to the lease agreement with the end tenant which is the area equal to the Investment Corporation’s interest, and if a fixed-type master lease agreement under which the Investment Corporation receives constant rent regardless of fluctuations in end tenant’s rent, “Leased Area” represents the part of the leased area according to the master lease agreement that is the area equal to the Investment Corporation’s interest.

(Note 3) “Occupancy Rate” represents the ratio of leased area to leasable area pertaining to each managed asset as of the last day of the Sixth Fiscal Period unless otherwise specified, rounded to one decimal place. Total section shows the ratio of total leased area to total leasable area pertaining to each managed asset, rounded to one decimal place.

(Note 4) Information is not disclosed for some properties because the tenant’s authorization has not been obtained. (Note 5) Regarding Nagoya Prime Central Tower, the Investment Corporation holds sectional ownership as well as an interest of bylaw common

elements and housing complex common elements, but the master lease agreement stipulates that the master lease company shall add together the rents for the entire office building and parking lot building (office building common areas) so that distributions can be received based exclusively on owned area percentage. Consequently, Leased Area and Leasable Area represent the part of each area of the entire building that is the area equal to the Investment Corporation’s exclusively owned area percentage, and Total Number of Tenants and Occupancy Rate represent the total number of tenants and occupancy rate for the entire building.

(Note 6) “Leased Area” and “Occupancy Rate” represent the leased area and occupancy rate pursuant to the lease agreement that is in effect as of the end of the Sixth Fiscal Period, and does not take into account situations where the lease agreement pertaining to an end tenant is to be cancelled, to be terminated or in the event of non-payment of rents.

(3) Details of investment assets

a) Details of investment in real estate and real estate related assets

The table below shows the Investment Corporation’s entrusted real estate and real estate related assets as of the

end of the Sixth Fiscal Period.

Name of Property Location Holding method Leasable Area

(m2) (Note 1)

Book Value at End of Period

(millions of yen)

Assessed Value at End of Period (millions of yen)

(Note 2)

Ebisu Prime Square Shibuya-ku, Tokyo Trust beneficiary interest 17,354.06 25,413 27,538

CS Tower/CS Tower Annex

Taito-ku, Tokyo Trust beneficiary interest 19,998.31 13,812 16,300


Yokohama-shi, Kanagawa Trust beneficiary interest 41,954.39 16,046 18,200

Nagoya Prime Central Tower

Nagoya-shi, Aichi Trust beneficiary interest 17,117.10 14,379 18,000


Shinagawa-ku, Tokyo Trust beneficiary interest 8,522.42 6,899 7,340

ORTO Yokohama Yokohama-shi, Kanagawa Trust beneficiary interest 23,593.92 12,983 14,400


Shinjuku-ku, Tokyo Trust beneficiary interest 6,287.78 6,845 7,030

Shinagawa Seaside East Tower

Shinagawa-ku Tokyo Trust beneficiary interest 27,892.63 25,260 26,600

Akiba CO Building Chiyoda-ku, Tokyo Trust beneficiary interest 5,514.42 8,316 9,330

Sun Towers Center Building

Setagaya-ku, Tokyo Trust beneficiary interest 7,876.60 6,695 7,070

Sendai Honcho Building Sendai-shi, Miyagi Trust beneficiary interest 8,962.47 5,337 5,200

Hakata Prime East Fukuoka-shi, Fukuoka Trust beneficiary interest 7,018.05 4,535 4,620

Kinshicho Prime Tower Koutou-ku, Tokyo Trust beneficiary interest 17,606.11 15,360 15,600

Aqua Dojima East Osaka-shi, Osaka Trust beneficiary interest 3,189.68 1,953 2,010

Total 212,887.94 163,841 179,238 (Note 1) Unless otherwise specified, “Leasable Area” is part of the total area that is available for lease in accordance with the relevant lease agreement or

architectural drawing pertaining to each managed asset as of the end of the Sixth Fiscal Period that is the area equal to the Investment Corporation’s interest.

(Note 2) “Assessed Value at End of Period” represents the appraisal value shown on the appraisal report of property as of the valuation date of the last day of the Sixth Fiscal Period rounded to the nearest million yen.

34 35


The table below shows the leasing status of the real estate and real estate related assets of the Investment

Corporation as the end of the period.

Name of Property

Fifth Fiscal Period From May 1, 2016 to October 31 ,2016

Sixth Fiscal Period From November 1, 2016 to April 30 ,2017

Total Number of

Tenants (Note 1)


Real Estate Rental Revenues (millions of yen)

(Note 3)

Percentage to Total Real

Estate Rental Revenues

(%) (Note 3)

Total Number of

Tenants (Note 1)


Real Estate Rental Revenues (millions of yen)

(Note 3)

Percentage to Total Real Estate Rental Revenues

(%) (Note 3)

Ebisu Prime Square 92 97.5 798 14.1 94 89.6 738 12.8

Harumi Island Triton Square Office Tower Z (Note 4) 1 100.0 Not disclosed Not disclosed - - Not disclosed Not disclosed

CS Tower/CS Tower Annex 25 99.8 559 9.9 26 100.0 544 9.5

Queen’s Square Yokohama 93 98.8 982 17.3 93 98.8 949 16.5

Nagoya Prime Central Tower 42 92.6 Not disclosed Not disclosed 46 86.9 Not disclosed Not disclosed Tokyo Nissan Nishi-Gotanda Building 8 100.0 251 4.4 8 100.0 247 4.3

ORTO Yokohama 23 100.0 549 9.7 22 100.0 550 9.6

Nishi-Shinjuku KF Building 16 98.7 186 3.3 18 100.0 185 3.2

Shinagawa Seaside East Tower 16 100.0 757 13.3 16 100.0 877 15.2

Akiba CO Building 1 100.0 Not disclosed Not disclosed 1 100.0 Not disclosed Not disclosed

Sun Towers Center Building 13 100.0 195 3.4 12 91.5 223 3.9

Sendai Honcho Building 35 95.1 158 2.8 38 90.0 181 3.1

Hakata Prime East 19 100.0 135 2.4 19 100.0 155 2.7

Kinshicho Prime Tower - - - - 15 97.5 284 4.9

Aqua Dojima East - - - - 18 95.9 12 0.2

Total 384 98.6 5,678 100.0 426 96.8 5,755 100.0 (Note 1) Unless otherwise specified, “Total Number of Tenants” represents the number of tenants under the lease agreement indicated in the relevant

lease agreement pertaining to each managed asset as of the end of the Sixth Fiscal Period. If pass-through-type master lease agreements under which rents from end tenants are received intact, in principle, (hereinafter referred to as “pass-through-type master lease agreement(s)”) are concluded with respect to managed assets, “Total Number of Tenants” represents the total number of end tenants. “Total Number of Tenants” is calculated taking one tenant that leases multiple leased spaces as one tenant if the leased spaces are the same property and as multiple tenants if the leased spaces are spread across multiple properties. With regards to the numbers of tenants at Nagoya Prime Central Tower, please refer to note 5 in “(2) Major investment asset”.

(Note 2) “Occupancy Rate” represents the ratio of leased area to leasable area pertaining to each managed asset as of the last day of the Sixth Fiscal Period unless otherwise specified, rounded to one decimal place. Total section shows the ratio of total leased area to total leasable area pertaining to each managed asset, rounded to one decimal place.

(Note 3) Information is not disclosed for some properties because the tenant’s authorization has not been obtained. (Note 4) Harumi Island Triton Square Office Tower Z was disposed on December 16, 2016.

b) Details of renewable energy power generation facility

Not applicable.

c) Details of right to operate public facility public facilities

Not applicable.

d) Details of securities

Not applicable.

(4) Details of amount of money defined in specified transactions contract derivatives and market value

Details of amount of money defined in specified transactions contract derivatives and market value as the end of sixth

fiscal period is as follows.

category Transaction Amount described in transaction contract

(thousands of yen) (Note 1)

Market value

(thousands of yen)

(Note2) More than 1 year

Transaction other than

market place transaction

Interest rate swap

transaction

55,400,000 55,400,000 -48,499

Total 55,400,000 55,400,000 -48,499 (Note 1) The amount described in transaction contract regarding interest rate swap is based on estimated principal amount. (Note 2) Market value is evaluated by the value which was calculated by using the actual market interest rate of the counterparty of the contract. (Note 3 Special accounting treatment is applied to the interest-rate swaps in accordance with the “Accounting Standard for Financial Instruments”

(issued by the Accounting Standards Board of Japan(ASBJ) on March 10, 2008;ASBJ Statement No.10) and therefore interest rate swaps are not stated at fair value in the balance sheets.

(5) Details of other asset

The details of trust beneficiary interests which the Investment Corporation owns are described in above (3) and there

are no other assets as the end of the sixth fiscal period.

(6) Details of investment asset in overseas

As of the end of the sixth fiscal period, there is no real estate investment asset located outside Japan.

4. Capital Expenditure

(1) Future Plan for Capital Expenditure

The following table summarizes the major capital expenditure plan associated with renovation scheduled as of the

end of the Sixth Fiscal Period for real estate and entrusted real estate held by the Investment Corporation as of the

said date. Estimated construction cost includes the amounts to be expensed for accounting purpose.

Name of Property Location Purpose Planned Period

Estimated Construction Cost (thousands of yen) (Note)

Total Amount Paid During the Period

Total Amount Paid

Ebisu Prime Square Shibuya-ku, Tokyo

Replacement of security system in Tower building (Period II)

From January 2017 to October 2017 27,738 - -

Renewal of rest rooms in Tower building

From July 2017 to October 2017 32,193 - -

Renewal of standard floors in Tower building

From July 2017 to October 2017 14,995 - -

CS Tower/CS Tower Annex Taito-ku, Tokyo

Renewal of common spaces (1 floor) From May 2017 to July 2017 15,200 - -

Repair of external wall (east side) From June 2017 to September 2017 30,350 - -


Yokohama-shi, Kanagawa

Replacement of accounting system From April 2017 to March 2018 26,965 - -

Replacement of automatic fire alarms in office area

From June 2017 to March 2018 24,233 - -

Replacement of broadcast facilities in hotel area

From June 2017 to March 2018 17,770 - -

Replacement of automatic fire alarms in retail area

From April 2018 to March 2019 33,200 - -

Replacement of automatic fire alarms in hotel area


Replacement of broadcast facilities in office and retail area



Shinagawa-ku, Tokyo

Replacement of floor tiles of outdoor structure on the ground floor (Period I)

From August 2017 to October 2017 11,065 - -

36 37


Name of Property Location Purpose Planned Period

Estimated Construction Cost (Thousands of Yen) (Note)

Name of Property Location

Total Amount Paid During the Period

Total Amount Paid

ORTO Yokohama Yokohama-shi, Kanagawa Replacement of air conditioning system From May 2017 to

October 2017 10,000 - -


Shinjuku-ku, Tokyo

Renewal of rest rooms and kitchens (2nd and 3rd floor)

From May 2017 to October 2017 13,786 - -

Kinshicho Prime Tower

Koto-ku, Tokyo

Replacement of steam pipes From May 2017 to October 2017 10,500 - -

Construction of new entrance on the ground floor

From May 2017 to October 2017 12,000 - -

(Note) “Estimated Construction Cost” represents the amount equal to the Investment Corporation’s interest that was actually borne by the Investment

Corporation.

(2) Capital Expenditure Incurred

The following table summarizes the major construction to real estate and entrusted real estate held as of the end of the

Sixth Fiscal Period by the Investment Corporation that resulted in capital expenditures for the current period. Capital

expenditures for the current period amounted to 648,489 thousand yen. The total construction costs amounted to

811,150 thousand yen, including repair and maintenance of 162,661 thousand yen that was accounted for as an

expense in the current period. Name of Property Location Purpose Period Construction Costs

(thousands of yen) (Note)

Ebisu Prime Square

Shibuya-ku, Tokyo

Replacement of air-conditioning system in common spaces (Period II)

From June 2016 to January 2017 12,644

Replacement of security system in Tower building (Period I)

From January 2017 to March 2017 14,376

Replacement of central management system

From September 2016 to March 2017 38,082



Replacement of central management system for equipment information

From February 2015 to February 2017 193,045


Shinagawa-ku, Tokyo

Replacement of high pressure electric power receiving facilities

From December 2016 to January 2017 16,139

ORTO Yokohama


Replacement of parts of co-generation system

From November 2016 to December 2016 11,000


Shinjuku-ku, Tokyo

Renewal of rest rooms (4th, 5th, and 6th floor) and kitchens (4th and 6th floor)

From January 2017 to April 2017 17,826

Sendai Honcho Building

Sendai-shi, Miyagi

Renewal of common spaces (Entrance lobby and 10 standard floors)

From October 2016 to January 2017 124,800

(Note) “Construction Costs” represents the amount equal to the Investment Corporation’s interest that was actually borne by the Investment Corporation.

(3) Reserved Amount for Long-Term Repairs Plan

The Investment Corporation formulates long-term repair plans for each real estate and entrusted real estate, and

allocates a portion of its cash flows generated during the period to a reserve for repairs to meet large-scale repair

projects over the medium-to-long terms. The following amount has been transferred to the reserve from period cash

flows.

(millions of Yen) Second Fiscal

Period November 1, 2014 through

April 30, 2015

Third Fiscal Period

May 1, 2015 through

October 31, 2015

Fourth Fiscal Period

November 1, 2015 through

April 30, 2016

Fifth Fiscal Period

May 1, 2016 through

October 31, 2016

Sixth Fiscal Period

November 1, 2016 thorough April 30, 2017

Reserve at the beginning of the period 29 29 29 34 129

Reserve for the fiscal period under review - - 5 94 -

Reversal of reserve for the fiscal period under review - - - - -

Reserve brought forward to the next period 29 29 34 129 129

5. Expenses and Liabilities

(1) Details of expenses related to asset management

(thousands of Yen)

Item Fifth Fiscal Period From May 1, 2016 to October 31 ,2016

Sixth Fiscal Period From November 1, 2016 to April 30 ,2017

Asset Management Fee

(Note)

410,212 510,620

Fee for general administrator

and custodian

16,472 17,618

Director’s Compensation 4,800 3,900

Other expenses 63,178 102,850

Total 494,663 634,989 (Note) “Asset Management Fee” mentioned above includes the fee regarding asset disposition and acquisition (493,590 thousand yen was recorded for the

fifth fiscal period and 221,050 thousand yen was recorded for the sixth fiscal period)

38 39


(2) Details of the borrowings

Details of the borrowings as the end of the sixth fiscal period are as follows.

Classification Lender Date of the borrowing

Balance at the beginning of the period (millions of

yen)

Balance at the end

of the period (millions of

yen)

Average interest rate

(%)

Payment due date

Payment Method Use Security

Short-term

Loans

The Bank of

Tokyo-Mitsubishi UFJ, Ltd. April 28,

2016

1,000 -

0.33000 (Note1 Bullet

Payment (Note6

Unsecured/

Non-

guaranteed Sumitomo Mitsui

Banking Corporation 1,000 -

Subtotal 2,000 - - - - - -

Current

Portion of

Long-term

Loans

The Bank of

Tokyo-Mitsubishi UFJ, Ltd.

June 6,

2014 2,500 2,500 0.57000

June 6,

2017

Bullet

Payment (Note5

Unsecured/

Non-

guaranteed

Sumitomo Mitsui

Banking Corporation

June 6,

2014

(Note 2)

2,500 2,500

0.45862

Mizuho Bank, Ltd. 2,000 2,000

Sumitomo Mitsui Trust

Bank, Limited 2,000 2,000

Resona Bank, Ltd. 2,000 2,000

Development Bank of

Japan Inc. 2,000 2,000

Sumitomo Mitsui

Banking Corporation January 20,

2017

- 3,100

0.28179 January 31,

2018

Bullet

Payment (Note5

Unsecured/

Non-

guaranteed

Mizuho Bank, Ltd. - 1,600

The Bank of

Tokyo-Mitsubishi UFJ, Ltd. - 800

Subtotal 13,000 18,500 - - - - -



yen)

Balance at the end


yen)


(%)

Payment due date


Long-term

Loans

The Bank of

Tokyo-Mitsubishi UFJ, Ltd.

September 30,

2014 3,000 3,000 0.72150

June 6,

2018

Bullet

Payment

(Note5

Unsecured/

Non-

guaranteed

Sumitomo Mitsui

Banking Corporation

September 30,

2014

(Note 2)

3,000 3,000

0.74150

(Note4)





Development Bank of

Japan Inc. 1,500 1,500

The Bank of

Tokyo-Mitsubishi UFJ, Ltd. June 6, 2014 4,000 4,000 0.91500

June 6,

2019

Bullet

Payment

(Note5

Unsecured/

Non-

guaranteed

Sumitomo Mitsui

Banking Corporation

June 6, 2014

(Note 2)

4,000 4,000

0.93400

(Note4)





Development Bank of

Japan Inc. 1,000 1,000

The Bank of

Tokyo-Mitsubishi UFJ, Ltd. June 1, 2015 3,800 3,800 0.80400

May 31,

2020

Bullet

Payment (Note7

Unsecured/

Non-

guaranteed

Sumitomo Mitsui

Banking Corporation

June 1, 2015

(Note 2)

3,800 3,800

0.81400

(Note4)




Mitsubishi UFJ Trust and

Banking Corporation 1,000 1,000

Sumitomo Mitsui

Banking Corporation June 1, 2016

(Note 3)

600 600 0.45772

November

29, 2019

Bullet

Payment (Note5

Unsecured/

Non-

guaranteed Mizuho Bank, Ltd. 300 300

40 41




yen)

Balance at the end


yen)


(%)

Payment due date


Long-term

Loans

Sumitomo Mitsui

Banking Corporation

June 1, 2016

(Note 3)

2,300 2,300

0.35700

(Note4)

November

29, 2019

Bullet

Payment (Note5

Unsecured/

Non-

guaranteed





Mitsubishi UFJ Trust

and Banking Corporation 700 700

Shinsei Bank, Ltd. 1,250 1,250

Aozora Bank, Ltd. 1,000 1,000

The Bank of Fukuoka 1,000 1,000

ORIX Bank Corporation 500 500

The Nishi-nippon City Bank,

Ltd. 500 500

Sumitomo Mitsui

Banking Corporation

June 1, 2016

(Note 3)

2,550 2,550

0.53700

(Note4)

May 31,

2021

Bullet

Payment (Note5

Unsecured/

Non-

guaranteed






and Banking Corporation 700 700

Shinsei Bank, Ltd. 1,000 1,000

Aozora Bank, Ltd. 1,000 1,000

The Bank of Fukuoka 1,000 1,000

ORIX Bank Corporation 500 500

The Nishi-nippon City Bank,

Ltd. 500 500

Sumitomo Mitsui

Banking Corporation

June 30,

2016

(Note 3)

2,000 2,000

0.44500

(Note4)

November

30, 2020

Bullet

Payment (Note8)

Unsecured/

Non-

guaranteed





and Banking Corporation 1,000 1,000


Subtotal 67,100 67,100 - - - -

Total 82,100 85,600 - - - -

(Note 1) Repayment was made on April 28, 2017. (Note 2) Borrowings from Syndicate Loan with The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation as arranger. (Note 3) Borrowings from Syndicate Loan with Sumitomo Mitsui Banking Corporation as arranger and Mizuho Bank, Ltd. as co-arranger. (Note 4) Borrowings for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk. The interest rates are

effectively fixed through interest rate swap agreement. (Note 5) All borrowings were used to fund acquisition of trust beneficiary interests in real estate and related expenses. (Note 6) All borrowings were used to refinance the short-term loans of 2,000 million yen that were due for repayment on April 28, 2016. (Note 7) All borrowings were used to fund acquisition of trust beneficiary interests in real estate and related expenses and refinance the short-term loans of

3,200 million yen that were due for repayment on June 5, 2015, and refinance the short-term loans of 5,000 million yen on May 11, 2015. (Note 8) All borrowings were used to refinance the short-term loans of 6,600 million yen that were due for repayment on June 30, 2016.

(3) Details of investment corporation bonds

The following table lists bond series, issue amounts, interest rates, issue dates, redemption dates and remarks with

respect to each investment corporation bond issuance we have conducted under such debt registration statement.

Name Issue date

Balance at the beginning of the period

(millions of yen)

Balance at the end

of the period (millions of yen)

Coupon rate

Redemption date

Redemption Method

Use of proceeds Security

First Series Unsecured Investment

Corporation Bonds

April 20, 2017 - 1,800 0.320% April 20,

2022 Bullet

Payment (Note1)

Unsecured/

Non- guarante

ed Note2

Second Series Unsecured Investment

Corporation Bonds

April 20, 2017 - 1,600 0.520% April 19,

2024 Bullet

Payment (Note1)

Unsecured/

Non- guarante

ed (Note2

Total - - 3,400 - - - - -

(Note 1) All investment corporation bonds were used as the funds for repayment of the short-term loans of 2,000 million yen that were due for repayment on

April 28, 2017 and for acquisition of trust beneficiary interests in real estate (Aqua Dojima East) and related expenses of 1,987 million yen.

(Note 2) This investment corporation bonds is equipped with pari passu clause among special investment corporation bonds.

(4) Details of short-term investment corporation bonds

Not applicable

(5) New unit acquisition rights

Not applicable

42 43


6. Status of purchase and disposal of assets during the sixth fiscal period

(1) Purchase and disposals of real estate and etc., asset backed securities, etc., infrastructure asset, etc., infrastructure

related assets

Name of the property

Acquisition Disposition

Date of acquisition Acquisition price

(millions of yen) Date of disposition

Disposition price

(millions of yen) Book value

Profit/Loss

(millions of yen)

Harumi Island Triton Square

Office Tower Z - - December 16, 2016

10,100

(Note) - -

Kinshicho Prime Tower January 20, 2017 15,145 - - - -

Aqua Dojima East March 31, 2017

1,910

(Note) - - - -

Total 17,055 10,100 - -

(Note) “Acquisition price” and “Disposition price” mentioned herein are the price of asset described in each related purchase and sale agreement.

Consumption tax and cost regarding acquisition or disposition are not included.

(2) Purchase and disposals of other assets

Not applicable

Assets other than real estate and etc., asset backed securities, etc., infrastructure asset, etc., infrastructure related

assets are primarily consisted of bank deposit and bank deposit of trust account.

(3) Investigation of the appraisal value of price of specified assets

a) Real estate assets etc.

Acquisition or

disposition Name of the property Transaction date Asset type

Acquisition price or

disposition price

(millions of yen)

Appraisal value

(millions of yen)

Appraiser As of

Acquisition Kinshicho Prime Tower January 20, 2017 Trust beneficiary

interest 15,145 15,600 The Tanizawa S g Appraisal Co., Ltd.

October 31, 2016

Aqua Dojima East March 31, 2017 Trust beneficiary interest 1,910 2,010 Morii Appraisal & Investment

Consulting, Inc. February 28, 2017

Disposition Harumi Island Triton Square Office Tower Z

December 13, 2017

Trust beneficiary interest 10,100 10,900 Japan Real Estate Institute October 31,

2016 Total 27,155 28,510 - -

(Note 1) “Acquisition price” and “Disposition price” mentioned herein are the price of asset described in each related purchase and sale agreement.

Consumption tax and cost regarding acquisition or disposition are not included.

(Note 2) The appraisals of the above-mentioned real estate were conducted by applying “Real Estate Appraisal Standard Section 3: Appraisals Regarding Prices

of Real Estate for Securitization.”

b) Investment securities

Not applicable

c) Others

Not applicable

(4) Transaction involving related parties

Not applicable

(5) Transactions with Asset Management Company regarding subsidiary business managed by such asset management

companies.

As the end of sixth fiscal period, the Asset Management Company conducts type II Financial Instruments Business

and Building Lots and Building Transaction Business as its subsidiary business. However, there are no transactions

with regards to such subsidiary business.

7. Status of Accounting

(1) Assets, liabilities, net assets, and profit/loss etc.

Please refer to “Balance Sheets”, “Statements of Income”, “Statements of Changes in Net Assets”, “Statements of

Cash Distributions” and “Notes to Financial Statements”.

(2) Changes in calculation method of depreciation

Not applicable

(3) Changes in valuation method for reals estate etc. and Infrastructure assets etc.

Not applicable

8. Others

(1) Notices

a) General unitholders meeting

The 3rd general unitholders’ meeting was held on January 31, 2017. Details of the proposals which were passed at

the meeting are as follows.

Approved items Detail

Amendment of the

Articles of

Incorporation

The proposal regarding the amendment of the Articles of Incorporation was passed. The details are as follows (i) Once the Investment Corporation specifies certain date of convocation of the general unitholders

meeting in the Articles of Incorporation, it is allowed to omit the public notice in the procedures for such convocation under the Investment Trust Act and the Articles of Incorporation. Currently, it is stated that certain date is December 25, 2017 and the Investment Corporation changes it to December 25, 2018. In addition, a provision relating to the record date for determining which unitholders may exercise voting rights at the general unitholders meeting will be amended.

(ii) The investment target of the Investment Corporation is mainly office buildings in metropolitan areas such as the Tokyo area. Considering the current real estate market situation, the Investment Corporation stays focus on investment in large scale office buildings in metropolitan areas, but plans to broaden its investable assets to enable selectively invest in other office buildings, retail facilities, residential properties, hotels, logistics and other (including the complex of these assets). The corresponding provisions are amended.

(iii) To ensure the possible option to outsource the operation of the assets under management of the Investment Corporation, the corresponding provisions are amended. In line with the outsourcings, the corresponding provisions regarding the calculation method of Asset Management Fees (2) are amended. As the date hereof, the Investment Corporation does not expect to outsource the operation of any assets under management or any assets considering acquisition.

(iv) A new provision is added to clarify that it is allowed for the Investment Corporation to lease real estate and sublease it to the third party.

(v) To conform the definition of distributable amount which is described in the rules of the Investment Trusts Association, Japan the corresponding provisions are amended.

(vi) Considering the current situation of economic environment, real estate market, real estate leasing market, J-REIT market, the corresponding provisions are made to clarify the standard of distribution in excess of amount of profit.

(vii) Other than mentioned above, respective amendments will be made in line with necessary changes in expressions, clarification, and revision of wording.

44 45


Election of one

executive director

Yugo Minemura was elected as an executive director.

Election of one

substitute executive

director

Yasuyuki Tsuji was elected as a substitute executive director.

Election of two

supervisory directors

Takashi Shimokado and Eiji Kawasaki were elected as supervisory directors.

b) Board of the directors of the Investment Corporation

Details of major agreements that the Board of Directors of the Investment Corporation approved to conclude and

modify during the sixth fiscal period are as follows.

Date of approval Approved items Details

January 27, 2017 Execution of the second

amendment to the Asset

Management Agreement

In accordance with the amendment to the Articles of Incorporation which was

authorized on January 31, 2017, the articles regarding asset management fees

were revised.

February 27, 2017 Execution of the

investment corporation

bond underwriting contract

With regards to issuance of investment corporation bonds which was

approved at the meeting of the board of directors held on the same day, the

Investment Corporation appointed SMBC Nikko Securities Inc., Nomura

Securities Co., Ltd. and Mizuho Securities Co., Ltd. and entrusted operations

regarding offering of investment corporation bonds.

February 27, 2017 Execution of the financial

agent agreement

With regards to issuance of investment corporation bonds which was

approved at the meeting of the board of directors held on the same day, the

Investment Corporation appointed Sumitomo Mitsui Banking Corporation as a

financial agent and entrusted operations regarding administrative work related

to issuing investment corporation bonds, the payment of interest or

redemption money to investment corporation bondholders, the preparation and

keeping of the registry and other administrative work, the reception of offers

from bondholders and other works related to mentioned above.

(2) Disclosure regarding in-house investment trust beneficiary interests

Not applicable

(3) Disclosure regarding affiliated foreign real estate companies and real estate owned by them

Not applicable

(4) Rounding method for amount of money and ratios described in this document

Unless otherwise specified, amount of money are rounded down to the nearest units and ratios are rounded off to

one decimal place.

Financial Statements Balance Sheets Statements of Income Statements of Changes in Net Assets Statements of Cash Distributions Statements of Cash Flows Notes to Financial Statements Independent Auditor’s Report

46 47


Balance Sheets (Unit: Thousands of Yen)

Fifth Fiscal Period As of October 31, 2016


ASSETS Current assets: Cash and cash deposits 3,711,863 4,108,833 Entrusted cash and entrusted cash deposits 10,264,404 10,230,271 Account receivables - operating 438,068 402,022 Consumption tax receivable 648,094 183,882 Income taxes receivable 1,386 2,251 Short-term prepaid expenses 270,814 251,269 Deferred tax assets 21 6 Other current assets 1,518 5,867

Total current assets 15,336,173 15,184,404 Fixed assets: Property and equipment Entrusted buildings 40,348,924 41,543,129

Accumulated depreciation (2,445,998) (2,974,670) Entrusted buildings, net 37,902,926 38,568,458

Entrusted building improvements 370,321 318,568 Accumulated depreciation (70,988) (75,407) Entrusted building improvements, net 299,332 243,161

Entrusted machineries 20,386 19,735 Accumulated depreciation (2,362) (2,935) Entrusted machineries, net 18,024 16,800

Entrusted furniture and equipment 62,847 81,622 Accumulated depreciation (12,451) (18,341) Entrusted furniture and equipment, net 50,396 63,280

Entrusted land 117,507,265 124,928,377 Entrusted construction in progress 20,525 21,603

Total property and equipment 155,798,472 163,841,681 Intangible assets: Other intangible assets 4,738 6,009

Total intangible assets 4,738 6,009 Investment and other assets:

Investment in securities 102,531 - Security deposits and guarantee deposits 10,101 10,088 Long-term prepaid expenses 463,185 384,660 Derivative assets 58,496 79,972 Other investments 430,545 363,971

Total investment and other assets 1,064,859 838,693 Total fixed assets 156,868,069 164,686,384

Differed assets: Investment corporation bond issuance expenses - 23,823

Total differed assets - 23,823 TOTAL ASSETS 172,204,243 179,894,611

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


(Unit: Thousands of Yen)



LIABILITIES Current liabilities: Accounts payable - operating 563,516 371,428 Short-term loans 2,000,000 - Current portion of long-term loans 13,000,000 18,500,000 Accounts payable - other 332,734 412,735 Accrued expenses 82,475 82,938 Income tax payable 738 645 Rent received in advance 678,569 593,832 Other current liabilities 151,203 160,928

Total current liabilities 16,809,237 20,122,508 Non-current liabilities: Investment corporation bonds - 3,400,000 Long-term loans 67,100,000 67,100,000 Entrusted tenant leasehold and security deposits 7,093,376 7,311,222 Deferred tax liabilities 18,478 25,263

Total non-current liabilities 74,211,855 77,836,485 TOTAL LIABILITIES 91,021,093 97,958,994 NET ASSETS

Unitholders' equity: Unitholders' equity 78,913,658 78,913,658 Surplus:

Retained earnings 2,229,474 2,967,250 Total surplus 2,229,474 2,967,250

Total Unitholders' equity 81,143,132 81,880,908 Valuation and translation adjustments: Deferred income on hedges 40,017 54,708

Total valuation and translation adjustments 40,017 54,708 TOTAL NET ASSETS *1 81,183,149 *1 81,935,617 TOTAL LIABILITIES AND NET ASSETS 172,204,243 179,894,611

48 49


Statements of Income (Unit: Thousands of Yen)

Fifth Fiscal Period

From May 1, 2016 to October 31, 2016

Sixth Fiscal Period From November 1, 2016 to

April 30, 2017 Operating revenues

Rental revenues *1 5,151,585 *1 5,239,918 Other rental revenues *1 527,258 *1 515,660 Gain on sales of real estate properties *2 - *2 784,581 Dividend income from investments in securities 5,470 3,142 Total operating revenues 5,684,314 6,543,304

Operating expenses Property-related expenses *1 2,592,499 *1 2,583,389 Asset management fees 410,212 510,620 General administration and Custodian fees 16,472 17,618 Compensation for directors 4,800 3,900 Other operating expenses 63,178 102,850 Total operating expenses 3,087,162 3,218,378

Operating income 2,597,151 3,324,925 Non-operating revenues

Interest income 38 44 Interest income on tax refund - 4,349 Other non-operating revenues 99 238 Total non-operating revenues 138 4,632

Non-operating expenses Interest expense 242,619 252,167 Interest expense on investment corporation bonds - 382 Amortization of investment corporation bonds issuance costs - 344

Public offering costs 25,054 - Financing costs 97,936 107,694 Other non-operating expenses 1,440 1,545 Total non-operating expenses 367,050 362,134 Ordinary income 2,230,238 2,967,423

Net income before income taxes 2,230,238 2,967,423 Current income taxes 1,051 742 Deferred tax expenses (9) 15 Total income taxes 1,042 757 Net income 2,229,196 2,966,666

Retained earnings at beginning of period 277 584 Retained earnings at the end of period 2,229,474 2,967,250 The accompanying notes form an integral part of these financial statements.

Statements of Changes in Net Assets Fifth Fiscal Period: From May 1, 2016 to October 31, 2016


Unitholders' Equity Valuation and translation adjustments

Total Net Assets Unitholders'

Equity

Surplus Total

Unitholders' Equity

Deferred income on

hedges

Total valuation

and translation

adjustments

Retained Earnings

Total Surplus

Balance at the beginning of the period 53,891,022 1,462,617 1,462,617 55,353,640 - - 55,353,640

Changes during the period:

Issuance of new investment units 25,022,635 - - 25,022,635 - - 25,022,635

Cash distribution declared - (1,462,340) (1,462,340) (1,462,340) - - (1,462,340)

Net income - 2,229,196 2,229,196 2,229,196 - - 2,229,196 Net changes of items other than unitholders' equity - - - - 40,017 40,017 40,017

Total changes during the period 25,022,635 766,856 766,856 25,789,491 40,017 40,017 25,829,509

Balance at the end of the period *1

78,913,658 2,229,474 2,229,474 81,143,132 40,017 40,017 81,183,149

Sixth Fiscal Period: From November 1, 2016 to April 30, 2017


Unitholders' Equity Valuation and translation adjustments

Total Net Assets Unitholders'

Equity

Surplus Total

Unitholders' Equity

Deferred income on

hedges

Total valuation

and translation

adjustments

Retained Earnings

Total Surplus

Balance at the beginning of the period 78,913,658 2,229,474 2,229,474 81,143,132 40,017 40,017 81,183,149

Changes during the period:

Cash distribution declared - (2,228,889) (2,228,889) (2,228,889) - - (2,228,889)

Net income - 2,966,666 2,966,666 2,966,666 - - 2,966,666 Net changes of items other than unitholders' equity - - - - 14,691 14,691 14,691

Total changes during the period - 737,776 737,776 737,776 14,691 14,691 752,467

Balance at the end of the period *1

78,913,658 2,967,250 2,967,250 81,880,908 54,708 54,708 81,935,617


50 51


Statements of Cash Distributions

Fifth Fiscal Period From May 1, 2016 to

October 31, 2016


April 30, 2017 I. Unappropriated retained earnings 2,229,474,086 yen 2,967,250,139yen II. Distributions 2,228,889,951 yen 2,966,959,986yen

(Distributions per unit) 2,733 yen 3,638yen III. Retained earnings carried forward 584,135 yen 290,153yen Calculation method of distribution amount

Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution amount of 2,228,889,951 yen, which does not exceed retained earnings and is the greatest value among integral multiples of 815,547 units, which is the number of investment units issued. Note that the Investment Corporation has not paid any portion of the amount that exceeds the profits defined in Article 35, Paragraph 2 of the Articles of Incorporation of the Investment Corporation.

Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution amount of 2,966,959,986 yen, which does not exceed retained earnings and is the greatest value among integral multiples of 815,547 units, which is the number of investment units issued. Note that the Investment Corporation has not paid any portion of the amount that exceeds the profits defined in Article 35, Paragraph 2 of the Articles of Incorporation of the Investment Corporation.


Statements of Cash Flows (Unit: Thousands of Yen)

Fifth Fiscal Period



April 30, 2017 Cash flows from operating activities:

Net income before income taxes 2,230,238 2,967,423 Depreciation expenses 711,158 753,532 Amortization of investment corporation bonds issuance costs - 344 Public offering costs 25,054 - Financing costs 97,936 107,694 Interest income (38) (44) Interest expense 242,619 252,550 (Increase) decrease in account receivables - operating (102,124) 36,046 (Increase) decrease in consumption tax receivable (648,094) 464,212 (Increase) decrease in income taxes receivable (1,386) (864) (Increase) decrease in short-term prepaid expenses (23,066) 6,896 (Increase) decrease in long-term prepaid expenses (17,792) (5,521) (Increase) decrease in other current assets 34,830 62,225 Increase (decrease) in accounts payable - operating 171,753 (73,673) Increase (decrease) in accounts payable - other 78,229 53,795 Increase (decrease) in consumption tax payable (198,012) - Increase (decrease) in rental received in advance 426,505 (84,736) Decrease in property and equipment held in trust due to sale - 9,190,016 Increase (decrease) in other current liabilities 148,091 9,724 Others 1,155 903 Sub-total 3,177,058 13,740,523 Interest received 38 44 Interest expenses paid (219,206) (252,088) Income taxes paid (766) (738)

Net cash provided by (used in) operating activities 2,957,123 13,487,742 Cash flows from Investing activities:

Purchase of entrusted property and equipment (50,526,106) (18,080,298) Payments for purchases of intangible assets - (2,277) Redemption of investment in securities 304,359 101,531 Purchase of investment in securities (102,535) - Payment of entrusted leasehold and security deposits (101) 12

Net cash provided by (used in) investing activities (50,324,382) (17,981,032) Cash flows from Financing activities:

Repayments of short-term borrowings (6,600,000) (2,000,000) Proceeds from long-term borrowings 32,500,000 5,500,000 Payment of financing costs (402,387) (11,000) Proceeds from issuance of investment corporation bonds - 3,400,000 Payment of investment corporation bonds issuance costs - (24,167) Proceeds from issuance of investment units 25,022,635 - Payment of investment units issuance costs (25,054) - Distribution payments (1,461,578) (2,226,551)

Net cash provided by (used in) financing activities 49,033,614 4,638,280 Net change in cash and cash equivalents 1,666,355 144,990 Cash and cash equivalents at the beginning of period 5,216,535 6,882,891 Cash and cash equivalents at the end of period *1 6,882,891 *1 7,027,882


52 53


Notes to Financial Statements 1. Organization Invesco Office J-REIT, Inc. (the “Investment Corporation”) is a real estate investment trust mainly investing in office properties. The Investment Corporation was established on February 27, 2014, with Invesco Global Real Estate Asia Pacific, Inc. as the organizer under the Act on Investment Trusts and Investment Corporations of Japan (the “Investment Trust Act”) and registered with the Kanto Local Finance Bureau on March 20, 2014. On June 5, 2014, the Investment Corporation was listed on the real estate investment trust securities market of Tokyo Stock Exchange. During the Sixth fiscal period, the Investment Corporation disposed trust beneficiary interests of Harumi Island Triton Square Office Tower Z (Chuo-ku, Tokyo, Disposition price: 10,100 million yen) on December 16, 2016. Also, the Investment Corporation acquired trust beneficiary interests in two properties during the Sixth fiscal period as follows: Kinshicho Prime Tower (Koutou-ku, Acquisition price: 15,145 million yen) on January 20, 2017 and Aqua Dojima East (Osaka-shi, Osaka, Acquisition price: 1,910 million yen) on March 31, 2017. As of April 30, 2017, the Investment Corporation held 14 properties, and total acquisition cost of which was 161,962 million yen.

2. Basis of Presentation

The Investment Corporation maintains its books of accounts in accordance with the provisions set forth in the Investment Trust Act, the Financial Instruments and Exchange Act of Japan and other related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America. The accompanying financial statements have been compiled from the financial statements of the Investment Corporation, which were in accordance with Japanese GAAP and were filed with the Director of the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange Act of Japan. In preparing the accompanying financial statements, certain rearrangements have been made to the financial statements issued domestically in order to present them in a form that is more familiar to readers outside Japan. The accompanying financial statements are stated in Japanese yen, the currency of the country in which the Investment Corporation is incorporated and operates. As permitted by the regulation under the Financial Instruments and Exchange Act of Japan, amounts of less than one thousand yen have been omitted. As a result, the totals shown in the accompanying financial statements in yen do not necessarily agree with the sums of the individual amounts. The Investment Corporation does not prepare consolidated financial statements. The Investment Corporation has six-month fiscal periods ending April 30 and October 31 of each calendar year. 3. Summary of Significant Accounting Policies

1. Basis and Method of

Valuation of Assets Securities Other securities Non-marketable securities

The cost method based on the moving-average method is applied to securities with no market price available. The equity method is applied to an investment in silent partnership. The net income from the silent partnership is allocated to the Silent Partnership Equity Interest owned by the Investment Corporation.

2. Method of Depreciation of Fixed Assets

(1) Property and equipment The straight-line method is used. The useful lives of property and equipment are listed below. Entrusted buildings 2 to 46 years Entrusted building improvements Entrusted machineries

4 to 20 years 2 to 17 years

Entrusted furniture and equipment 4 to 15 years (2) Intangible fixed assets

The straight-line method is used. (3) Long-term prepaid expenses

The straight-line method is used.

3. Accounting Method for (1) Public offering costs:

Deferred Assets All public offering costs are expensed when incurred. (2) Investment corporation bonds issuance costs:

Bond issuance costs are amortized by applying the straight-line method for the entire redemption period.

4. Recognition of Revenue and Expenses

Accounting treatment of fixed asset tax and other property-related taxes: For fixed asset tax, city planning tax, depreciable asset tax, etc., the amount of tax levied on real properties held corresponds to the accounting period and is recorded as property-related expenses. The amount equivalent to fixed asset tax to be paid by the Investment Corporation in the first year of acquisition relating to the real properties or trust beneficiary interests in real estate is not recorded as an expense, but included in the acquisition cost for the related properties. The fixed asset tax included in acquisition costs for properties acquired during the Sixth Fiscal Period was 95,606 thousand yen.

5. Method of Hedge Accounting

(1) Method of hedge accounting: Deferred hedge accounting is generally used for interest rate swaps. Special treatment is applied for interest rate swaps which satisfy the requirements for special treatment.

(2) Hedge instruments and hedged items: Hedge instruments: Interest rate swap transactions Hedged items: Interest on borrowings

(3) Hedging policy: The Investment Corporation conducts derivative transactions for the purpose of hedging risks provided for in the Articles of Incorporation of the Investment Corporation pursuant to the regulations that stipulate the basic policy of risk management.

(4) Method of assessing hedge effectiveness: The effectiveness of hedging is measured by comparing the cumulative total cash flow fluctuation of the hedged items and that of the hedging instruments and verifying the ratio of differences in the amount of changes from both the hedged items and the hedging instruments. The assessment of hedge effectiveness is omitted for the interest rate swaps which satisfy the requirements for special treatment.

6. Scope of Cash and Cash Equivalents in the Statements of Cash Flows

Cash and cash equivalents in the statements of cash flows include cash on hand, entrusted cash, demand deposits, entrusted cash deposits, and highly liquid short-term investments that are readily convertible, bear little risk in price fluctuations, and mature within three months from the date of acquisition.

7. Other Significant Information for Preparation of Financial Statements

(1) Accounting policy for trust beneficiary interests in real estate: With regard to trust beneficiary interests in real estate, all assets and liabilities as well as all revenue and expense items associated with all entrusted assets are accounted for under the respective account item of the balance sheet and statements of income and retained earnings. Of the entrusted assets accounted for under the respective account item, the following significant items are separately indicated on the balance sheet:

i) Entrusted cash and entrusted cash deposits; ii) Entrusted buildings, entrusted building improvements, entrusted machineries, entrusted

furniture and equipment, entrusted land and entrusted construction in progress; and iii) Entrusted tenant leasehold and security deposits.

(2) Accounting policy for consumption tax: All amounts in the accompanying financial statements exclude consumption tax.

4. Net Assets *1. Minimum net assets as provided in Article 67, paragraph 4, of the Act on Investment Trusts and Investment

Corporations (Unit: Thousands of Yen)

Fifth Fiscal Period

As of October 31, 2016 Sixth Fiscal Period

As of April 30, 2017

Statutory Minimum Net Assets under Article 67 50,000 50,000

54 55


5. Breakdown of Rental and Other Operating Revenues and

Property-Related Expenses *1. Breakdown of net operating income (loss)

(Unit: Thousands of yen)

Fifth Fiscal Period



April 30, 2017 A. Rental and other operating revenues:

Rental revenues

Rental revenues 4,019,495 4,016,686 Common area service fee 850,859 924,308 Other rental revenues 281,229 298,923 Total rental revenues 5,151,585 5,239,918

Other rental-related revenues Other rental-related revenues 527,258 515,660 Total other rental-related revenues 527,258 515,660

Total rental and other related revenues 5,678,843 5,755,579 B. Property-related expenses:

Property management fees 675,275 667,776 Utility expenses 601,624 526,495 Insurance 15,420 14,521 Repair and maintenance 134,639 162,661 Other taxes 395,728 392,590 Depreciation expenses 710,266 752,526 Other rental-related expenses 59,544 66,817

Total property-related expenses 2,592,499 2,583,389 C. Net operating income (A-B) 3,086,344 3,172,189

6. Breakdown of Gain on Sales of Real Estate Properties *2. Breakdown of gain on sales of real estate properties

Fifth Fiscal Period (From May 1, 2016 to October 31, 2016) Not applicable. Sixth Fiscal Period (From November 1, 2016 to April 30, 2017)

(Unit: Thousands of yen) Harumi Island Triton Square Office Tower Z

Revenue from sales of real estate properties 10,100,000 Cost of property 9,190,016 Other related expenses 125,401 Gain on sales of real estate properties 784,581

7. Unitholders’ Equity *1. Total number of authorized investment units and total number of investment units issued

Fifth Fiscal Period



April 30, 2017

Total number of authorized investment units 10,000,000 units 10,000,000 units Total number of investment units issued 815,547 units 815,547 units

8. Cash and Cash Equivalents *1. Reconciliation between cash and cash equivalents at end of period and relevant amount on the balance sheets

(Units: Thousands of Yen)

Fifth Fiscal Period



April 30, 2017

Cash and deposits 3,711,863 4,108,833 Entrusted cash and entrusted cash deposits 10,264,404 10,230,271 Entrusted cash deposits with restrictions (Note) (7,093,376) (7,311,222) Cash and cash equivalents 6,882,891 7,027,882

(Note) Entrusted cash deposits with restrictions are retained for the refund of tenants’ leasehold and security deposits. 9. Leases The Company leases its properties to tenants. The future minimum lease payments to be received under non-cancelable operating leases of properties as of October 31, 2016 and April 30, 2017 are as follows:

(Units: Thousands of Yen)



Due within 1 year 2,147,214 2,130,672 Due after 1 year 1,813,295 1,800,793 Total 3,960,510 3,931,465

10. Financial Instruments (1) Qualitative information about financial instruments

(a) Policy for financial instruments

The Investment Corporation’s basic policy is to conduct stable and sound financial management to contribute to the continuous growth of assets under management and their efficient and appropriate management. The Investment Corporation procures funds by borrowing, issuing investment corporation bonds (including short-term investment corporation bonds; same shall apply hereinafter), and issuing investment units for the purpose of acquiring assets, paying repair, maintenance and other management expenses, making distributions, and funding the Investment Corporation’s operations including necessary working capital and debt repayments.

Temporary surpluses and entrusted tenant leasehold and security deposits are also invested in bank deposits considering the safety of the investment and convertibility into cash. Derivative transactions are carried out only to hedge the risk of fluctuations in interest rates associated with borrowings and other risks.

56 57


(b) Content and risks of financial instruments and risk management system

Investment in the equity interest in the silent partnership are exposed to credit risks of the issuer of the silent partnership as well as to general price risks of the overall real estate market. The Investment Corporation tries to mitigate such risks by monitoring the financial status of the issuer and environment of overall real estate market. Proceeds from borrowings and issuing investment corporation bonds are received mainly for the purpose of acquiring real estate and trust beneficiary interests in real estate. Proceeds from borrowings and issuing investment corporation bonds are exposed to liquidity risk on due dates. However, the Investment Corporation manages this risk mainly by appropriately managing the LTV (loan-to-value) ratio to limit the impact of higher market interest rates on the Investment Corporation’s operations and endeavoring to maintain and strengthen its ability to raise capital from capital markets through capital increases. Also, management constantly monitors on-hand liquidity by preparing monthly cash flow projections and formulates fund raising plans at an early stage to maintain required capital. Floating-rate loans are exposed to the risk of fluctuations in interest rates. However, the Investment Corporation manages this risk mainly by adjusting the ratio of outstanding floating-rate loans to total borrowing depending on the finance environment. Furthermore, these risks are managed through derivative transactions (interest rate swaps) as hedging instruments in certain floating-rate loans in order to fix interest rate payments and hedge the risk of fluctuations in interest rates. The hedge effectiveness of the interest rate swaps is assessed by comparing the cumulative changes in the cash flows of the hedging instruments and the hedged items and based on the respective amount of changes; provided, however, that the assessment of hedge effectiveness is omitted for those interest rate swaps that satisfy the requirements for special treatment. Derivative transactions are conducted and managed in accordance with the internal regulations that specify the basic policy of risk management. The surplus funds deposited to the financial institutions are exposed to the financial institutions’ credit risk. However, the risks are managed through our selection of financial institutions with certain creditworthiness and by limiting the term of the deposit to short term.

Entrusted tenant leasehold and security deposits are deposits provided by tenants under lease agreements. This is exposed to liquidity risk due to the cancellation of the lease agreement before the original term. The risks are managed by monitoring liquidity on hand.

(c) Supplementary remarks on fair value of financial instruments

The fair value of financial instruments is based on market prices or reasonably calculated value if there is no market price available. As certain assumptions are used in calculating these values, these values may vary in the event different assumptions are used.

(2) Matters regarding fair value of financial instruments

Balance sheet carrying amounts, fair values, and the difference between the two values are shown below. Financial instruments whose fair value is considered to be extremely difficult to determine are not included in the table below (Note 2).

Fifth Fiscal Period (as of October 31, 2016)


Balance Sheet

Carrying Amount (Note1)

Fair Value (Note1)

Difference

(1) Cash and deposits 3,711,863 3,711,863 - (2) Entrusted cash and entrusted cash deposits 10,264,404 10,264,404 - Total assets 13,976,267 13,976,267 - (3) Short-term loans 2,000,000 2,000,000 - (4) Current portion of long-term loans 13,000,000 13,006,247 6,247 (5) Long-term loans 67,100,000 67,532,053 432,053 Total liabilities 82,100,000 82,538,300 438,300 (6) Derivative transactions 58,496 58,496 -

Sixth Fiscal Period (as of April 30, 2017)


Balance Sheet

Carrying Amount (Note1)

Fair Value (Note1)

Difference

(1) Cash and deposits 4,108,833 4,108,833 - (2) Entrusted cash and entrusted cash deposits 10,230,271 10,230,271 - Total assets 14,339,104 14,339,104 - (3) Current portion of long-term loans 18,500,000 18,500,995 995 (4) Investment corporation bonds 3,400,000 3,394,940 (5,060) (5) Long-term loans 67,100,000 67,531,915 431,915 Total liabilities 89,000,000 89,427,850 427,850 (6) Derivative transactions 79,972 79,972 -

(Note 1) Measurement of fair values of financial instruments: (1) Cash and deposits and (2) Entrusted cash and entrusted cash deposits

The book value is used as the fair value of these assets, given that the fair value is equivalent to the amount of the book value, as it is settled in a short time.

(3) Current portion of long-term loans and (5) Long-term loans Because the interest rates of current portion of long-term loans and long-term loans carrying floating interest rates are to be revised periodically and thus their fair value is essentially the same as the book value, the book value is used as the fair value of these liabilities. The fair value of current portion of long-term loans and long-term loans carrying fixed interest rates is calculated by discounting the total of principal and interest at the rate assumed when a new, similar loan corresponding to the remaining period is made. The fair values for interest rate swaps, to which special treatment is applied, are included in the fair value of long-term loans as the hedged item. Some current portion of long-term loans and long-term loans are cancellable loans with a clause on early cancellation through exercise of early cancellation rights (i.e., compounded financial instruments), and these are included in the fair value of the current portion of long-term loans and long-term loans.

(4) Investment corporation bonds The fair value of investment corporation bonds is based on market prices.

(6) Derivative transactions Please refer to “12. Derivative Transactions” described below.

58 59


(Note 2) Balance sheet carrying amounts of financial instruments whose fair value is considered to be extremely difficult to

determine:

(Unit: Thousands of Yen) Fifth Fiscal Period

As of October 31, 2016 Sixth Fiscal Period

As of April 30, 2017 (1)Investment in securities 102,531 - (2)Entrusted tenant leasehold and security deposits 7,093,376 7,311,222

(1) Investment in securities (Silent Partnership Equity Interest) are not subject to fair value disclosure because there are no market prices to compare and it is not possible to reasonably estimate future cash flows. Therefore it is considered to be extremely difficult to determine their fair values.

(2) Entrusted tenant leasehold and security deposits, which are deposited by lessees of rental properties, are not subject to fair value disclosure because there are no market prices to compare. It is not possible to reasonably estimate future cash flows because, even if a lease agreement period is specified, there is the possibility of midterm cancellation, renewal or re-contract and it is impossible to estimate the real deposit term, and therefore it is considered to be extremely difficult to determine their fair values.

(Note 3) Redemption schedule for monetary claims after the balance sheet date

Fifth Fiscal Period (as of October 31, 2016) (Unit: Thousands of Yen)

Due within One (1) Year Cash and deposits 3,711,863 Entrusted cash and entrusted cash deposits 10,264,404 Total 13,976,267

Sixth Fiscal Period (as of April 30, 2017) (Unit: Thousands of Yen)

Due within One (1) Year Cash and deposits 4,108,833 Entrusted cash and entrusted cash deposits 10,230,271 Total 14,339,104

(Note 4) Expected amount of repayments of loans and investment corporation bonds after the balance sheet date

Fifth Fiscal Period (As of October 31, 2016) (Unit: Thousands of Yen)

Due within 1 year

Due after 1 to 2 years




Due after 5 years

Short-term loans 2,000,000 - - - - - Long-term loans 13,000,000 12,000,000 12,000,000 23,950,000 19,150,000 -

Sixth Fiscal Period (As of April 30, 2017)


Due within 1 year





Due after 5 years

Investment corporation bonds

- - - - 1,800,000 1,600,000

Long-term loans 18,500,000 12,000,000 25,350,000 17,200,000 12,550,000 -

11. Securities Fifth Fiscal Period (As of October 31, 2016) Silent partnership equity interest (102,531 thousand yen on the balance sheet amount) are not subject to fair value disclose because there are no market price to compare and it is not possible to reasonably estimate future cash flows. It is considered to be extremely difficult to determine their fair values. Sixth Fiscal Period (As of April 30, 2017) Not applicable.

12. Derivative Transactions (1) Derivative transactions not applying hedge accounting:

Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.

(2) Derivative transactions applying hedge fund accounting:

The following table shows the contracted amount or principal equivalent amount as set forth in the contract as of the balance sheet date for each hedge accounting method.

Fifth Fiscal Period (As of October 31, 2016)


(Note) Fair value for interest rate swaps with this special treatment is included in the fair value of “Long-term loans” in “10. Financial Instruments, (2) Matters regarding fair value of financial instruments” described above, as it is accounted for as a single unit with the hedged long-term loan.

Sixth Fiscal Period (As of April 30, 2017)


Hedge Accounting

Method Type of Derivative Transaction

Major Hedged

Item

Contracted Amount Fair

Value

Measurement Method for Fair Value Portion Due

after 1 Year

Standard method Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans 31,600,000 31,600,000 58,496

The fair value is based on the price

presented by the

correspondent financial

institutions. Special treatment for interest rate swaps

Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans 23,800,000 23,800,000 (Note) -

Total 55,400,000 55,400,000 58,496 -

Hedge Accounting

Method Type of Derivative Transaction

Major Hedged

Item

Contracted Amount Fair

Value

Measurement Method for Fair Value Portion Due

after 1 Year

Standard method Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans 31,600,000 31,600,000 79,972

The fair value is based on the price

presented by 60 61


(Note) Fair value for interest rate swaps with this special treatment is included in the fair value of “Long-term loans” in “10. Financial Instruments, (2) Matters regarding fair value of financial instruments” described above, as it is accounted for as a single unit with the hedged long-term loan.

13. Retirement Benefits


14. Income Taxes (1) Significant components of deferred tax assets and liabilities




Deferred tax assets: Accrued business office taxes, currently not deductible 21 6 Total deferred tax assets 21 6

Deferred tax liabilities: Deferred income on hedges 18,478 25,263 Total deferred tax liabilities 18,478 25,263

Net deferred tax assets (liabilities) (18,457) (25,256) (2) Reconciliation of significant differences between the normal effective statutory tax rate and the effective

tax rate (Unit: %)



Normal effective statutory tax rate 31.74 31.74 Adjustments: Distributions paid included as tax deductible (31.72) (31.74) Other 0.03 0.03 Effective tax rate after application of deferred tax accounting 0.05 0.03

the correspondent

financial institutions.

Special treatment for interest rate swaps

Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate

Long-term loans 23,800,000 23,800,000 (Note) -

Total 55,400,000 55,400,000 79,972 -

15. Profit or Loss of Affiliates Accounted for Under the Equity Method


16. Related Party Transactions (1) Parent Company, major corporate unitholders and other


(2) Affiliated companies and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.

(3) Fellow subsidiary companies and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.

(4) Directors, major individual unitholders and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.

17. Asset Retirement Obligations


62 63


18. Investment and Rental Properties The Investment Corporation holds large office buildings in major metropolitan areas. The balance sheet carrying amounts, changes during the period, and fair values of these rental properties are as follows: (Unit: Thousands of Yen)

Fifth Fiscal Period



April 30, 2017

Balance sheet carrying amounts

Balance at beginning of period 105,937,067 155,798,472 Changes during the period 49,861,404 8,043,209

Balance at end of period 155,798,472 163,841,681 Fair value at end of period 170,478,000 179,238,000

(Note 1) The balance sheet carrying amount is the acquisition cost (including incidental expenses associated with acquisition) less accumulated depreciation. Intangible fixed assets (totaling 4,738 thousand yen at the end of the Fifth Fiscal Period and 6,009 thousand yen at the end of the Sixth Fiscal Period) are not included.

(Note 2) Relating to the changes during the Fifth Fiscal Period, the increase is mainly due to asset acquisitions (50,237,755 thousand yen) and capital expenditures (333,915 thousand yen), while the decrease is principally attributable to depreciation (710,266 thousand yen). In the Sixth Fiscal Period, the increase is mainly due to asset acquisitions (17,337,262 thousand yen) and capital expenditures (648,489 thousand yen), while the decrease is principally attributable to asset disposition (9,190,016 thousand yen) and depreciation (752,526 thousand yen).

(Note 3) The fair value at the end of the period is the appraisal value provided by an independent real estate appraiser. As for the fair value at the end of the Fifth Fiscal Period, the fair value of Harumi Island Triton Square Office Tower Z is the sales price (10,100,000 thousand yen) which was stated in the sales and purchase agreement as of December 7, 2016.

The profit or loss concerning investment and rental properties is indicated under “5. Breakdown of Rental and Other Operating Revenues and Property-Related Expenses” 19. Segment Information (1) Segment Information

Disclosure is omitted as the Investment Corporation is comprised of a single reportable segment engaged in the real estate rental business.

(2) Related information

Fifth Fiscal Period (From May 1, 2016 to October 31, 2016) (a) Information about products and services

Disclosure is omitted as operating revenues from external customers of products and services within a single segment exceeds 90% of operating revenues on the Statements of Income.

(b) Information about geographical area

i) Operating revenues Disclosure is omitted since operating revenues from external customers in Japan exceeds 90% of operating revenues on the Statements of Income.

ii) Property and equipment Disclosure is omitted since the amount of property and equipment located in Japan exceeds 90% of property and equipment on the Balance Sheet.

(c) Information about major customers

Disclosure is omitted as there is no external customer whose operating income accounts for 10 percent or more of total operating revenues on the Statements of Income.

Sixth Fiscal Period (From November 1, 2016 to April 30, 2017) (a) Information about products and services

Disclosure is omitted as operating revenues from external customers of products and services within a single

segment exceeds 90% of operating revenues on the Statements of Income.

(b) Information about geographical area i) Operating revenues

Disclosure is omitted since operating revenues from external customers in Japan exceeds 90% of operating revenues on the Statements of Income.

ii) Property and equipment Disclosure is omitted since the amount of property and equipment located in Japan exceeds 90% of property and equipment on the Balance Sheet.

(c) Information about major customers

(Unit: Thousands of Yen)Name of customer Operating Revenues Related segment

(Note) 784,581 Property rental business

(Note) Name of customer is not disclosed because the customer’s authorization has not been obtained. The customer is not a related or interested parties under the Investment Trust Act.

20. Per Unit Information

Fifth Fiscal Period



April 30, 2017 Net assets per unit 99,544 yen 100,467 yenNet income per unit 2,898 yen 3,637 yen(Note 1) Net income per unit is calculated by dividing net income by the day-weighted average number of investment units for the

period. Fully diluted net income per investment unit is not presented, as there is no potential dilutive investment unit. (Note 2) The basis for calculating net income per unit is as follows:

Fifth Fiscal Period



April 30, 2017 Net income (Thousands of Yen) 2,229,196 2,966,666 Amount not attributable to common unitholders (Thousands of Yen) - - Net income attributable to common investment units (Thousands of Yen) 2,229,196 2,966,666 Average number of investment units for the period (Units) 769,115 815,547

64 65


21. Significant Subsequent Events (1) Resolution regarding acquisition of own investment units

The Investment Corporation has decided the acquisition of own investment units based on the Article 80-2 of Investment Trust Act applied upon reading the terms in the Article 80-5, Paragraph 2 of the Investment Trust Act at a meeting of the board of directors of the Investment Corporation held on June 12, 2017. The Investment Corporation cancelled all the acquired units on August 10, 2017.

(a) Reason for acquisition of own investment units

Considering various facts such as the level of investment unit price, situation of cash in hand, financial situation and market environment, the Investment Corporation expects that improving capital efficiency and returning profit to investors through acquiring own investment units will improve the investors’ value in mid- to long-term. In case the market price of the investment units is below its book-value per unit (BPU) or NAV per unit, the Investment Corporation believes that acquiring own investment units and cancelling them will improve investors’ value. DPU is expected to increase due to the fact that the number of outstanding investment units decreases.

(b) Details of acquisition of own investment units

Total number of own investment units to be acquired 10,000 units (maximum) Total acquisition price 800 million yen (maximum) Method of acquisition The Investment Corporation entrusts

the market purchase of its own investment units at Tokyo Stock Exchange to a securities company by discretionary transaction contract

Acquisition period From June 13, 2017 to July 20, 2017 (2) Result regarding acquisition of own investment units

The Investment Corporation has acquired own investment units based on the above resolution regarding acquisition of own investment units.

Details of acquisition of own investment units Total number of own investment units acquired 7,640 units Total acquisition price 799,984,693 yen Method of acquisition The Investment Corporation entrusts

the market purchase of its own investment units at Tokyo Stock Exchange to a securities company by discretionary transaction contract

Acquisition period From June 13, 2017 to July 10, 2017 (3) Cancellation of own investment units

The Investment Corporation has decided the cancellation of own investment units based on the Article 80-2 and 80-4 of Investment Trust Act at a meeting of the board of directors of the Investment Corporation held on July 27, 2017. The total investment amount of the Investment Corporation is 78,113 million yen, and the total number of outstanding investment units is 807,907 units after the cancellation of own investment units.

Total number of own investment units cancelled 7,640 units Date of cancellation August 10, 2017

22. Contract Amounts and Fair Value of Derivative Transactions


Classification Type Contract Amount

Fair Value

Amount over one year

Transactions other than market transactions

Interest rate swap transactions 55,400,000 55,400,000 48,499 Floating rate receipt, Fixed rate

payment Total 55,400,000 55,400,000 48,499

(Note 1 The contract amount of interest rate swap transactions is based on the notional principals. (Note 2 The fair value is based on the estimation made by the interest rate swap counterparty using the prevailing interest rate. (Note 3 Special accounting treatment is applied to the interest-rate swaps in accordance with the “Accounting Standard for Financial Instruments” (issued by the Accounting Standards Board of Japan(ASBJ) on March 10, 2008;ASBJ Statement No.10) and therefore interest rate swaps are not stated at fair value in the balance sheets.

23. Property, Plant and Equipment Property, plant and equipment consists of the following as of April 30, 2017:


Type of asset Balance at

the beginning of the period

Increase during the

period (Note 1)

Decrease during the

period (Note 2)

Balance at the end of the

period

Depreciation Net balance at the end of the period

Remarks Accumulated depreciation

Depreciation for the period

Property, plant and

equipment

Entrusted buildings 40,348,924 3,093,171 1,898,966 41,543,129 2,974,670 726,672 38,568,458 -

Entrusted building improvements

370,321 3,524 55,276 318,568 75,407 18,619 243,161 -

Entrusted machineries 20,386 1,677 2,328 19,735 2,935 923 16,800 -

Entrusted furniture and equipment

62,847 20,142 1,367 81,622 18,341 6,310 63,280 -

Entrusted land 117,507,265 14,865,052 7,443,940 124,928,377 - - 124,928,377 -

Entrusted construction in progress

20,525 1,077 - 21,603 - - 21,603 -

Subtotal 158,330,272 17,984,644 9,401,879 166,913,037 3,071,355 752,526 163,841,681 -

Intangible assets 8,920 2,277 - 11,197 5,187 1,005 6,009 -

Total 158,339,192 17,986,921 9,401,879 166,924,234 3,076,543 753,532 163,847,690 -

(Note 1 The increase during the period is primarily attributable to the acquisition of Kinshicho Prime Tower and Aqua Dojima East. (Note 2) The decrease during the period is primarily attributable to the disposition of Harumi Island Triton Square Office Tower Z.

66 67


24. Investment Corporation Bonds The following summarizes investment corporation bonds outstanding as of April 30, 2017:


Name Issue date Balance at


Decrease during the

period

Balance at the end

of the period

Coupon rate

Redemption date

Use Security

First Series Unsecured Investment

Corporation Bonds

April 20, 2017

- - 1,800,000 0.320% April 20,

2022 (Note1)

Unsecured/ Non-

guaranteed Note2

Second Series Unsecured Investment

Corporation Bonds

April 20, 2017

- - 1,600,000 0.520% April 19,

2024 (Note1)

Unsecured/ Non-

guaranteed (Note2

Total - - - 3,400,000 - - - -

(Note 1) All investment corporation bonds were used as the funds for repayment of the short-term loans of 2,000 million yen that were due for repayment on April 28, 2017 and for acquisition of trust beneficiary interests in real estate (Aqua Dojima East) and related expenses of 1,987 million yen. (Note 2) This investment corporation bonds is equipped with pari passu clause among special investment corporation bonds. (Note 3) The following is the maturity schedule of investment corporation bonds within five years of the balance sheet date.


Due after 1 year through 2 years

Due after 2 years through 3 years



Investment Corporation Bonds - - - 1,800,000

25. Loans The following summarizes short-term loans, current portion of long-term loans and long-term loans outstanding as of April 30, 2017:


Classification Lender Balance at


Increase during the

period

Decrease during the

period

Balance at the end

of the period

Average interest rate (%)

Payment due date Use Remarks

Short-term Loans

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1,000,000 - 1,000,000 -

0.33000 (Note1 (Note6

Unsecured/ Non-

guaranteed/ Floating

interest rate Sumitomo Mitsui Banking Corporation 1,000,000 - 1,000,000 -

Subtotal 2,000,000 - 2,000,000 - - - - -

Current Portion of Long-term

Loans

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,500,000 - - 2,500,000 0.57000 June 6,

2017 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate Sumitomo Mitsui Banking Corporation 2,500,000 - - 2,500,000

0.45862 (Note2)

June 6, 2017 (Note5

Unsecured/ Non-


interest rate

Mizuho Bank, Ltd. 2,000,000 - - 2,000,000

Sumitomo Mitsui Trust Bank, Limited 2,000,000 - - 2,000,000

Resona Bank, Ltd. 2,000,000 - - 2,000,000

Development Bank of Japan Inc. 2,000,000 - - 2,000,000

Sumitomo Mitsui Banking Corporation - 3,100,000 - 3,100,000

0.28179 January 31, 2018 (Note5

Unsecured/ Non-


interest rate

Mizuho Bank, Ltd. - 1,600,000 - 1,600,000

The Bank of Tokyo-Mitsubishi UFJ, Ltd. - 800,000 - 800,000

Subtotal 13,000,000 5,500,000 - 18,500,000 - - - -

Long-term Loans


2018 (Note5

Unsecured/ Non-

guaranteed/ Fixed


0.74150 (Note2) (Note4)

June 6, 2018

(Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate

Mizuho Bank, Ltd. 1,500,000 - - 1,500,000


Resona Bank, Ltd. 1,500,000 - - 1,500,000



2019 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate

Sumitomo Mitsui Banking Corporation 4,000,000 - - 4,000,000

0.93400 (Note2) (Note4)

June 6, 2019

(Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate 68 69




Increase during the

period

Decrease during the

period

Balance at the end

of the period



Long-term Loans

Mizuho Bank, Ltd. 1,000,000 - - 1,000,000

0.93400 (Note2) (Note4)

June 6, 2019 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate


Resona Bank, Ltd. 1,000,000 - - 1,000,000


The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,800,000 - - 3,800,000 0.80400 May 31,

2020 (Note7

Unsecured/ Non-

guaranteed/ Fixed


0.81400 (Note2) (Note4)

May 31, 2020 (Note7

Unsecured/ Non-

guaranteed/ Fixed

interest rate


Resona Bank, Ltd. 1,000,000 - - 1,000,000

Mitsubishi UFJ Trust and Banking Corporation

1,000,000 - - 1,000,000

Sumitomo Mitsui Banking Corporation 600,000 - - 600,000

0.45772 (Note3)

November 29, 2019 (Note5

Unsecured/ Non-


interest rate Mizuho Bank, Ltd. 300,000 - - 300,000


0.35700 (Note3) (Note4)

November 29, 2019 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate


Resona Bank, Ltd. 1,400,000 - - 1,400,000

Mizuho Bank, Ltd. 2,400,000 - - 2,400,000


700,000 - - 700,000

Shinsei Bank, Ltd. 1,250,000 - - 1,250,000

Aozora Bank, Ltd. 1,000,000 - - 1,000,000

The Bank of Fukuoka 1,000,000 - - 1,000,000

ORIX Bank Corporation 500,000 - - 500,000

The Nishi-nippon City Bank, Ltd. 500,000 - - 500,000


0.53700 (Note3) (Note4)

May 31, 2021 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate


Resona Bank, Ltd. 1,400,000 - - 1,400,000

Mizuho Bank, Ltd. 2,500,000 - - 2,500,000


700,000 - - 700,000

Shinsei Bank, Ltd. 1,000,000 - - 1,000,000

Aozora Bank, Ltd. 1,000,000 - - 1,000,000

The Bank of Fukuoka 1,000,000 - - 1,000,000



Increase during the

period

Decrease during the

period

Balance at the end

of the period



Long-term Loans

ORIX Bank Corporation 500,000 - - 500,000 0.53700 (Note3) (Note4)

May 31, 2021 (Note5

Unsecured/ Non-

guaranteed/ Fixed

interest rate

The Nishi-nippon City Bank, Ltd. 500,000 - - 500,000


0.44500 (Note3) (Note4)

November 30, 2020 (Note8)

Unsecured/ Non-

guaranteed/ Fixed

interest rate


Resona Bank, Ltd. 1,000,000 - - 1,000,000


1,000,000 - - 1,000,000

Mizuho Bank, Ltd. 1,600,000 - - 1,600,000 Subtotal 67,100,000 - - 67,100,000 - - - - Total 82,100,000 5,500,000 2,000,000 85,600,000 - - - -

(Note 1) Repayment was made on April 28, 2017. (Note 2) Borrowings from Syndicate Loan with The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation as arranger. (Note 3) Borrowings from Syndicate Loan with Sumitomo Mitsui Banking Corporation as arranger and Mizuho Bank, Ltd. as co-arranger. (Note 4) Borrowings for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk. The interest rates are effectively fixed through interest rate swap agreement.

(Note 5) All debts were used to fund acquisition of trust beneficiary interests in real estate and related expenses. (Note 6) All debts were used to refinance the short-term loans of 2,000 million yen that were due for repayment on April 28, 2016. (Note 7) All debts were used to fund acquisition of trust beneficiary interests in real estate and related expenses and refinance the short-term loans of 3,200 million yen that were due for repayment on June 5, 2015, and refinance the short-term loans of 5,000 million yen on May 11, 2015. (Note 8) All debts were used to refinance the short-term loans of 6,600 million yen that were due for repayment on June 30, 2016. (Note 9) The following is the maturity schedule of long-term loans within five years of the balance sheet date.


Due after 1 year through 2 years




Long-term loans 12,000,000 25,350,000 17,200,000 12,550,000

70 71


The Invesco Group sets its mission as helping investors worldwide achieve their financial objectives, and is a world-leading independent asset manager that provides global management capabilities. The Invesco Group engages in business on a global scale and has offices in more than 20 countries. As of the end of March 2017, the balance of assets under management of Invesco Group was approximately US$834.8 billion (approximately ¥74.9 trillion).

Invesco Ltd. is publicly traded on the NYSE. The credit rating agencies listed below have assigned the ratings indicated to Invesco Ltd.

Rating Company RatingMoody’s Investors Service A2 Stable

Standard & Poor’s A / Negative

Fitch Ratings A- Stable

Invesco Real Estate, one business division of the Invesco Group, places priority on core asset management, but also has experience with value-added asset management and opportunistic asset management. Having experience with leasing and renewals as well as property sales and acquisitions and leverage control, Invesco Real Estate possesses diverse real estate management know-how.

Invesco Real Estate manages real estate and securities through 21 offices in 16 countries worldwide with assets under management of US$66.1billion (approximately ¥7.4 trillion).(Note) The yen amounts for assets under management presented above have been converted from U.S. dollars using the exchange rate as of the end of March 2017 (US$1 = ¥114.405).

Invesco Real Estate’s Investment Properties

1 Office: Washington DC, USA

2 Retail: Las Vegas, NV, USA

3 Hotel: Paris, France

4 Retail: Seoul, South Korea

5 Residential: New York, NY, USA

6 Office: London, UK

7 Logistics: Melbourne, Australia

1 2

3

4

5 6 7

Overview of Invesco Group

Breakdown of Invesco Real Estate’s Asset Under Management (As of March 31, 2017)

North America

US$28.2bn 42% Europe

US$8.4bn 13% Asia

US$5.1bn 8% Publicly traded real property securities

US$24.4bn 37%

Real property direct investment

US$41.7bn 63% Publicly traded real property securities

US$24.4bn 37%

(Note) As percentage of asset under management is rounded to the first decimal place, total of the ratio may not be 100%.

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