Daiwa Securities Living Investment : Financial Report

33 rd

Fiscal Period Business Report

(Statement of Financial Performance)

April 1,2022 - September 30,2022

https://www.daiwa-securities-living.co.jp/en/

Stock 8986

Code

6-2-1 Ginza, Chuo Ward, Tokyo https://www.daiwa-securities-living.co.jp/en/

I. Outline of the Investment Corporation

To Our Unitholders

Financial Highlights

I would like to express my sincere appreciation for your

size as of November 1, 2022 stands at 247 properties worth

Distributions per Unit

continued support of Daiwa Securities Living Investment Corporation (hereinafter the "Investment Corporation"). I would also like to offer my condolences to all those who suffered as a result of the COVID-19 pandemic and my heartfelt prayers for an early recovery.

The Investment Corporation has reached the end of another successful year, the fiscal period ended September 30, 2022 (33rd fiscal period). We take this opportunity to

JPY 361.7 billion. The Investment Corporation will continue to seek asset size growth that will contribute to further improvement in unitholder value.

As for the operation status of the properties that it owns, a high occupancy rate has been maintained with an average occupancy rate of 97.9% during the period and a term-end occupancy rate of 98.3% (for rental housing only in both cases) through careful operations using the Daily Occupancy

33rd period (ending September 2022) results

2,180 yen

Fluctuations in distributions

(yen)

2,500

34th period (ending March 2023) forecast		35th period (ending September 2023) forecast
2,200 yen			2,200 yen
Distribution		(Distribution per unit÷Number of days under manage
yield	3.79 % ment×365) ÷Investment unit price (as of September 30,2022)

Actual distribution per unit

Forecast of distribution per unit

extend our deepest gratitude to our valued unitholders for their support.

Allow me to report on the Investment Corporation's financial results and provide an overview of our operations for the fiscal period ended September 30, 2022. In the fiscal period ended September 30, 2022, the Investment Corporation posted an operating revenue of JPY 11,436 million, operating profit of JPY 5,341 million, ordinary profit of JPY 4,653 million, and a profit of JPY 4,652 million, with a distribution of JPY 2,180 per unit, unchanged from the period ended March 31, 2022 (32nd fiscal period).

During the fiscal period, the Investment Corporation acquired one rental housing property worth JPY 1.7 billion, located in Koto-ku, Tokyo (Gran Casa Kiyosumishirakawa). On September 9, 2022, the Investment Corporation announced that it would implement a public offering, its third in three consecutive years since it merged with Nippon Healthcare Investment Corporation in April 2020, and on October 4, 2022 it acquired seven properties worth JPY 16.0 billion (six rental housing properties and one healthcare facility). Consequently, the Investment Corporation's asset

Rates Forecasting System, which is a proprietary system of the Investment Corporation's asset management company. Rental housing properties had shown a negative trend in the percentage change in rents at the time of replacement until the previous fiscal period due to the impact of the COVID-19 pandemic. However, indications of recovery were apparent during the fiscal period ended September 30, 2022, with an increase of 1.5% in rents at the time of replacement. For healthcare facilities, we maintained stable asset management despite the COVID-19 crisis, against the backdrop of long-termfixed-rent agreements with operators.

Daiwa Securities Group Inc., which is also the Investment Corporation's sponsor, will demonstrate strong sponsor commitment and will support the sustainable growth of the Investment Corporation as it seeks to further reinforce the real estate asset management business.

The Investment Corporation remains committed to maximizing returns for all of its unitholders. We would therefore like to ask our unitholders for their continued support and encouragement.

CONTENTS

Ⅰ . Outline of the Investment Corporation ‥‥‥‥‥‥ 2 Ⅱ. Asset Management Report ‥‥‥‥‥‥‥‥‥‥‥ 5

• Balance Sheets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ 50

2,040

2,028

2,190

2,160

2,160

2,180

2,180

2,200

2,200

2,000

1,901

1,920

1,967

1,964

1,990

1,617

1,761

1,680

1,747

1,722

1,700

1,471

1,471

1,500

1,325

1,263

1,000

500

0

13th period

14th period

15th period

16th period

17th period

18th period

19th period

20th period

21st period

22nd period

23rd period

24th period

25th period

26th period

27th period

28th period

29th period

30th period

31st period

32nd period 33rd period

34th period

35th period

12th period

(Mar. 2012)

(Sep. 2012)

(Mar. 2013)

(Sep. 2013)

(Mar. 2014)

(Sep. 2014)

(Mar. 2015)

(Sep. 2015)

(Mar. 2016)

(Sep. 2016)

(Mar. 2017)

(Sep. 2017)

(Mar. 2018)

(Sep. 2018)

(Mar. 2019)

(Sep. 2019)

(Mar. 2020)

(Sep. 2020)

(Mar. 2021)

(Sep. 2021)

(Mar.2022)

(Sep.2022)

(Mar.2023)

(Sep.2023)

Investment highlight - The 33rd fiscal period (ended March 2022)

	28th period	29th period	30th period	31st period	32nd period	33rd period
	(ended March 2020)	(ended September 2020)	(ended March 2021)	(ended September 2021)	(ended March 2022)	(ended September 2022)
Operating revenues(million yen)	8,262	11,645	10,487	10,811	11,263	11,436
Operating income(million yen)	3,762	4,860	5,101	5,090	5,324	5,341
Ordinary income (million yen)	3,259	5,031	4,457	4,433	4,622	4,653
Net income(million yen)	3,258	6,133	4,457	4,432	4,621	4,652
Total assets(million yen)	226,860	310,207	335,601	336,301	350,956	353,676
Net assets(million yen)	108,369	151,117	157,466	157,295	165,372	165,218
Net assets per unit(yen)	66,076	73,502	73,874	73,793	75,002	74,932
Capital adequacy ratio at the end of the period (%)	47.8	48.7	46.9	46.8	47.1	46.7

• Statements of Operations ‥‥‥‥‥‥‥‥‥‥‥‥ 52 Ⅴ. Statements of Changes in Net Assets‥‥‥‥‥‥‥ 53
  Ⅵ. Notes ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ 55
  Ⅶ. Statement of Cash Distributions ‥‥‥‥‥‥‥‥‥ 73 Ⅷ. Independent Auditors' Report ‥‥‥‥‥‥‥‥‥‥ 75 Ⅸ. Statements of Cash Flow (Reference Information)‥‥ 79 Ⅹ. Unitholder Information ‥‥‥‥‥‥‥‥‥‥‥‥‥ 81

Portfolio status	Use

Number of properties
240 properties	Healthcare
Scale of assets	29.5%
Studio
345.6 billion yen
47.5%
Occupancy rate at the end of the period	23.1%
98.9%
	Family

Area ratio

Hokkaido4.9% Tohoku2.1%

Kyushu3.1%Shinetsu0.3%

Shikoku0.7%

Chugoku1.4%

Kinki
25.3%	Kanto
	54.9%
Tokai
7.3%

Age ratio

5-10years
11.5%	10-15years
		16.0%
Under 5years
15.5%	Average
	building age
Over 20years	13.8 year
12.7%		15-20years
		44.4%

Daiwa Securities Living Investment Corporation

Executive Director Yoshio Urata

2

Occupancy rate trends (rental housing only)

100%			97.85	98.05	98.46	97.95		97.82	98.04	98.00	98.32
97.19	97.34	97.59	97.45

95%	Nov.	Dec.	Jan.	Feb.	Mar.	Apr.	May	Jun.	Jul.	Aug.	Sep.
Oct.2022

Occupancy rate (rental housing)

*The occupancy rate for healthcare facilities is 100% due to long-termfixed-rent agreements.

3

I. Outline of the Investment Corporation

Overview of Public Offering (Announced on September 9, 2022)

The Investment Corporation announced on September 9, 2022 that it had resolved to implement a public offering. We used the procured funds to acquire six rental housing properties and one healthcare facility at a total of JPY 16.0 billion).

Ⅱ. Asset Management Report

Ⅱ. Asset Management Report

Resolution date

Pricing date

Number of new investment units issued

Offer price

Purchase price

Total issuance price

September 9, 2022

September 14, 2022

Public offering: 53,333 units

Third-party allotment: 2,667 units

JPY 114,387 per unit

JPY 110,632 per unit

Public offering: JPY 5,900,336,456

Third-party allotment: JPY 295,055,544

Funds Procurement through Social Loans

Of the funds borrowed on October 4, 2022, JPY

4.15 billion was procured through social loans. We used the money to fund the acquisition of Sunny Life Shibaura and associated costs.

Gran Casa Minami-Senju

Asset	Rental housing
Location	Arakawa-ku, Tokyo
Acquisition Price	JPY 1,159 million

Completion Date Dec 2021

Occupancy Rate 100%

Overview of Asset Management

1. Changes in Management Status of the Investment Corporation

		29th period	30th period	31st period	32nd period	33rd period
		From April 1,	From October 1,	From April 1,	From October 1,	From April 1,
		2020	2020	2021	2021	2022
		to September 30,	to March 31,	to September 30,	to March 31, to September 30,
		2020	2021	2021	2022	2022
Operating revenues	Million yen	11,645	10,487	10,811	11,263	11,436
(Of the above, rental revenues)	Million yen	(10,173)	(10,487)	(10,811)	(11,263)	(11,436)
Operating expenses	Million yen	6,784	5,386	5,721	5,938	6,094

Gran Casa Hikifune	Gran Casa Oji	Gran Casa Tabata
Asset	Rental housing	Asset	Rental housing	Asset	Rental housing
Location	Sumida-ku, Tokyo	Location	Kita-ku, Tokyo	Location	Kita-ku, Tokyo
Acquisition Price JPY 2,760 million	Acquisition Price JPY 1,150 million	Acquisition Price JPY 825 million
Completion Date May 2021	Completion Date Sep 2021	Completion Date Aug 2021
Occupancy Rate 98.6%	Occupancy Rate 95.9%	Occupancy Rate 100%

Serenite Namba Plie	Gran Casa Ryogoku East	Sunny Life Shibaura
Asset	Rental housing	Asset	Rental housing	Asset	Healthcare facility
Location	Osaka, Osaka	Location	Sumida-ku, Tokyo	Location	Minato-ku, Tokyo
Acquisition Price JPY 2,739 million	Acquisition Price JPY 1,120 million	Acquisition Price JPY 6,280 million
Completion Date Nov 2021	Completion Date Feb 2021	Completion Date Apr 2020
Occupancy Rate 96.6%	Occupancy Rate 100%	Operator
						Kawashima Corporation
Note: "Occupancy" rate is the value as of the end of October 2022.

ESG Initiatives

(Of the above, property-related expenses)	Million yen		(4,580)		(4,222)		(4,524)		(4,696)	(4,806)
Operating income	Million yen		4,860		5,101		5,090		5,324		5,341
Ordinary income	Million yen		5,031		4,457		4,433		4,622		4,653
Net income	Million yen		6,133		4,457		4,432		4,621		4,652
Total assets	Million yen	310,207	335,601	336,301	350,956	353,676
(Period-over-period)	%		(36.7)		(8.2)		(0.2)		(4.4)		(0.8)
Net assets	Million yen	151,117	157,466	157,295	165,372	165,218
(Period-over-period)	%		(39.4)		(4.2)		(-0.1)		(5.1)	(		0.1)
Total amount of investment	Million yen	117,715	124,110	124,110	132,170	132,170
									△
Number of units issued	Units	2,055,946	2,131,546	2,131,546	2,204,890	2,204,890
Net assets per unit	Yen		73,502		73,874		73,793		75,002	74,932
Total distributions	Million yen		4,502		4,604		4,604		4,806		4,806
Distribution per unit	Yen		2,190		2,160		2,160		2,180		2,180
(Of the above, distribution of profits per unit)	Yen		(2,190)		(2,160)		(2,160)		(2,180)	(2,180)
(Of the above, excess-profit distribution per unit)	Yen		(－)		(－)		(－)		(－)			(－)
Ratio of ordinary income to total assets (Note 2)	%	1.9	(3.7)	1.4	(2.8)	1.3	(2.6)	1.3	(2.7)	1.3		(2.6)
Return on equity (ROE) (Note 2)	%	4.7	(9.4)	2.9	(5.8)	2.8	(5.6)	2.9	(5.7)	2.8		(5.6)
Capital adequacy ratio at the end of the period	%		48.7		46.9		46.8		47.1		46.7
(Period-over-period)	%		(0.9)		(-1.8)		(-0.1)		(0.3)		(-0.4)
Payout ratio	%		73.4		103.3		103.9		104.0		103.3
[Other reference information]
Number of investment properties	Properties		218		226		232		239			240

Evaluation and Certification by External Organizations

GRESB2022

Support for TCFD

DBJ Green Building Certification

Digitization of Prospectus

We electronically delivered the prospectus for the public offering described above to

Depreciation for the period	Million yen	2,288	2,366	2,408	2,497	2,509
Capital expenditure for the period	Million yen	806	684	476	607	573
Rental NOI (Net Operating Income) (Note 2)	Million yen	7,881	8,632	8,696	9,064	9,139

We have been participating in GRESB Real Estate Assessment since 2018. We a c q u i r e d a n o v e r a l l evaluation of "2 Stars."

In December 2021, the Asset M a n a g e m e n t C o m p a n y announced its support for the TCFD and in January 2022, the company joined the TCFD Consortium, an organization of domestic supporting company.

We have obtained DBJ Green Building certification for a total of four properties.

Chijikoukanmae Tower	The Residence Honmoku
Residence	Yokohama Bayside

Certification ratio: 8.9%

(As of November 1, 2022)

(Based on total floor area for rental housing)

reduce the environmental impact through a reduction in the use of paper, ink, and other materials.

Achieved a reduction of

approximately 320,000 sheets

of A4 paper

FFO (Funds from Operation) per unit	Yen	3,211	3,260	3,268	3,288	3,307
(Note 2)(Note3)
FFO (Funds from Operation) multiple (Note	Times	17.0	16.6	17.2	17.5	17.4
2)(Note3)
Debt service coverage ratio (Note 2)(Note 3)	Times	15.8	15.6	14.5	14.6	14.6
Interest-bearing debt	Million yen	152,687	171,737	172,687	178,887	181,687
Period-endinterest-bearing debt to period-end	%	49.2	51.2	51.3	51.0	51.4
total assets ratio (Note 2)

(Note 1) The amount is rounded down to the nearest unit shown in each column, and the ratio is rounded to the first decimal place.

(Note 2) The indicators are calculated using the formulas shown below. Annualized figures based on the number of days under management are shown in parentheses.

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 (ROE)	Net income / {(net assets at the beginning of the period + net assets at the end of the period) / 2} × 100

Publication of the Sustainability Report and Expansion of the Investment Corporation Website

The Sustainability Initiatives page on the Investment Corporation website was expanded and the S u s t a i n a b i l i t y R e p o r t w a s published to enhance disclosure on the sustainability initiatives of the Investment Corporation.

Issuance of the Sustainability Report

Expansion of the Investment Corporation website

Initiatives for Environmental Conservation

The Investment Corporation is progressively introducing facilities and devices that contribute to protecting the environment.

[33rd period (September 30, 2022)]

LED lighting	650 units
Air conditioners	574 units
Shower	176 units
Toilet	28 units

Rental NOI	Rental revenues - property-related expenses + depreciation
FFO per unit	FFO (= net income - gain from negative goodwill+ depreciation + amortization - gain or loss on disposition of
real estate + impairment loss) / number of investment units issued at the end of the period
FFO multiple	Investment unit price at the end of the period / annualized FFO per unit
	(Net income before interest, depreciation and amortization- gain from negative goodwill - gain or loss on
Debt service coverage ratio	disposition of real estate +impairment loss) / interest expenses (including interest on investment corporation
	bonds)
Period-endinterest-bearing debt to	Interest-bearing debt at the end of the period / total assets at the end of the period × 100
period-end total assets ratio

(Note 3) For the 29th fiscal period, net income used to calculate FFO and debt service coverage ratio includes ¥1,102 million of gain from negative goodwill.

4

5

Ⅱ. Asset Management Report

2. Progress of Asset Management in the Period under Review

(a) Profile of the Investment Corporation

The Investment Corporation was established on October 7, 2005, based on the provisions of the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended), and listed as a "housing- specific REIT" on the Tokyo Stock Exchange Real Estate Investment Trust market (stock code 8986) on June 22, 2006. The Investment Corporation merged with Prospect Reit Investment Corporation in an absorption-type merger on July 1, 2010, and since then it has been seeking to steadily enhance distributions primarily by improving the quality of its portfolio through the replacement of properties (acquiring new properties and disposing of existing properties), strengthening overall operations by improving occupancy rates and other factors, and reducing costs by decreasing expenses for interest-bearing debt and other items. Furthermore, as a result of an absorption-type merger (hereinafter the "Merger") whereby the Investment Corporation is the surviving corporation and Nippon Healthcare Investment Corporation (hereinafter "NHI") is the absorbed corporation on April 1, 2020, upon which the trade name was changed from "Japan Rental Housing Investments Inc." to "Daiwa Securities Living Investment Corporation" and healthcare facilities added to the portfolio, the Investment Corporation is now managed as a "REIT that comprehensively provides comfortable living spaces that 'support life and lifestyle of everyone' suited to each life stage."

The properties under management at the end of September 2022 consisted of 240 properties with a total acquisition price of ¥345,699 million and a total rentable floor area of 746,387.63 square meters.

1. Investment Environment
   Although the Japanese economy was still in a severe condition in the fiscal period under review due to the effects of the COVID-19 pandemic, a recovery trend began to appear, such as real GDP growth of 3.5% (annualized) in the April-June 2022 quarter. Meanwhile, it is necessary to continue to monitor trends in the global economy, such as soaring resource prices due to the impact of the situation in Ukraine and interest rate hikes by the Federal Reserve Board.
   Amid such, rental residential properties owned by listed residential REITs enjoyed a relatively stable management environment as seen in their maintenance of stable occupancy rates when compared with other sectors. On the other hand, in the real estate investment market, the stable cash flows of rental residential properties attracted the enduring interests of investors and the low-interest-rate environment also continued in Japan, and competition for property acquisition by domestic and foreign investors continues to be severe. Furthermore, for healthcare facilities, social demand for private nursing homes and other facilities for the elderly is increasing year by year as the proportion of the elderly population in the total population increases.
2. Management Performance
   To enhance investment unit value, focus was placed on a. External growth through the acquisition of new properties; b. Continuing to strengthen overall operations (the maintenance of high occupancy rates, the maximization of rent and other income, and the reduction of expenses related to leasing business); c. Strengthening of financing (the extension of borrowing periods and the diversification of due dates, etc.); and d. Sustainability initiatives.

a. External growth through acquisition of new properties

In the fiscal period under review, amid an increasingly severe property acquisition environment, Gran Casa Kiyosumi Shirakawa was acquired for ¥1,775 million (appraisal value: ¥1,830 million). This property contributed to the revenues of the Investment Corporation in the fiscal period under review and is expected to make a contribution toward expanding revenues in the next fiscal period onward.

			Acquisition
Property name	Property type	Acquisition date	price
(thousand yen)
			(Note 1)
Gran Casa Kiyosumi Shirakawa (Note 2)	Rental housing	April 1, 2022	1,775,609
Total			1,775,609

(Note 1) Acquisition price does not include acquisition expenses, adjustments to property tax and city planning tax, and consumption tax and local consumption tax.

(Note 2) The property name of "Vienna Style Kiyosumi Shirakawa" was changed to "Gran Casa Kiyosumi Shirakawa" on May 1, 2022. The same applies hereinafter.

6

1. Continuing to strengthen overall operations i. Strategy for managing rental housing
   As a result of use of the Daily Occupancy Forecasting System and the continued focus on a range of existing initiatives and other measures by the Asset Manager, the average occupancy rate during the period stood at 97.9% (97.7% in the previous fiscal period). In addition, as a result of continuing to focus on also increasing the rent at the time of replacement (Note), an increase in rent from the previous rent was achieved for 797 contracts out of 1,308 (the total number of new contracts) in the fiscal period under review. The percentage of contracts with higher rent (based on the number of contracts) was 60.9%. The percentage of change in rent at tenant turnover (based on rent) rose by 1.5% (an increase of 0.6% in the previous fiscal period), continuing an upward trend and contributing to higher revenues as in the previous fiscal period.
   As for expenses related to leasing business, the Asset Manager focused on a range of existing initiatives, including the reduction of repair expenses and expenses for work to restore properties to their original state through the High-Cost Construction Approval Committee.
   In the fiscal period under review, in consideration of the trend in the rental market with shifting to post- pandemic lifestyles due to changes in economic conditions, campaigns to conclude contracts and revision of terms and conditions of contracts were carried out, resulting in occupancy rates improving from the previous period.

(Note) The rent at the time of replacement is calculated by excluding properties for which the previous rent is unknown due to newly acquired properties and the cancellation of the sublease contract and rooms for rent whose use is other than as a residence.

(Existing initiatives)

• "Daily Occupancy Forecasting System" (an IT system independently self-developed by the Asset Manager, the system predicts occupancy rates at the end of every month on a daily basis, helps understand dynamic information regarding individual vacancies, and shortens the cycle for identifying individual vacancies, conducting onsite inspections, investigating causes, taking action, and verifying effects; introduced in October 2011). With the commencement of the operation of the IT system that was upgraded to a new version in May 2015, a mechanism that is able to ascertain various types of information including occupancy rates on the Internet in real time has been set in place.
• "Three-weekRule" (minimizing opportunity losses by fully enforcing a rule to fully restore properties to their original state within three weeks of tenants vacating; introduced in October 2010)
• "Downtime 60 days" (a policy to conclude a new contract within 60 days of tenants vacating; introduced in October 2012)
• "Action 30 days" (focused response to achieve the best rent at the earliest in the first 30 days after beginning to seek tenants; focused response to vacancies of 30 days after beginning to seek tenants, which was introduced in October 2013, has been changed to a more aggressive initiative based on the "Management Policy by Property" newly introduced in April 2016) to further improve occupancy rates and profitability by shortening vacancy periods
• Taking stronger action on "Key Focus Properties (introduced in April 2011)" and "Long-term Vacancies" (vacancies over 60 days; introduced in October 2010)
• "High-CostConstruction Approval Committee" (a committee conducting a detailed, systematic examination of the content and amount of construction work for ¥100 million or more when orders are placed, to optimize expenses for high-priced construction work; introduced in April 2012)
• "Formulation of Standard Specifications for Work to Restore Properties to their Original State" (managing expenses and construction schedules and building better rooms by setting unique construction specifications for work to restore properties to their original state after tenants vacate, regarding it as a re-commercialization measure; introduced in April 2012)
• "Management to Increase the Number of Properties with Full Occupancy" (further improving occupancy rates through the management of the number of properties with full occupancy; introduced in April 2014)
• "Management Policy by Property" (a policy of managing properties by drafting a basic policy for each property based on an analysis of past contract data (rent, downtime, comparison with the previous rent, key money, etc.) of each property and focusing on increasing revenue by simultaneously raising rents and shortening the downtime for each room newly contracted after cancellation through implementation in conjunction with "Action 30 days," one of the existing initiatives above; introduced in April 2016)

7

Ⅱ. Asset Management Report

ii. Strategy for managing healthcare facilities

In order for healthcare facilities to earn stable revenue and serve to maintain and enhance unitholder value, the Asset Manager monitors operators as it regards the creditworthiness, operational capabilities, etc. of the operators operating the facilities as important factors in realizing stable occupancy. In the fiscal period under review, while monitoring the impact of COVID-19, interviews and such were conducted by visiting facilities and in the form of meetings with facility managers and head office staff using an online conferencing system. COVID-19 has had no impact on the performance of the Investment Corporation as of the end of the fiscal period under review. In addition, there are no changes to the terms and conditions of contracts, such as mid-term cancellation of lease agreements with operators, rent reduction/exemption and postponement of payment.

As a result of the above, the average occupancy rate of healthcare facilities during the period was 100.0%.

c. Strengthening of financing (the extension of borrowing periods and diversification of due dates, etc.)

In the fiscal period under review, the Investment Corporation conducted the following borrowing of funds to fund the acquisition of new properties and repayment of borrowings.

• As part of the funds for acquisition of the properties acquired on February 1, 2022 and on April 1, 2022, the Investment Corporation borrowed a total of ¥2,800 million on April 28, 2022.
• On April 28, 2022, the Investment Corporation refinanced ¥500 million of the bank borrowings from existing transaction banks as the funds for repayment of the same amount in total for long-term borrowings due on the same day.
• On June 30, 2022, the Investment Corporation refinanced ¥1,500 million of the bank borrowings from existing transaction banks as the funds for repayment of the same amount for a total of long-term borrowings due on the same day.
• On September 22, 2022, the Investment Corporation refinanced ¥8,000 million of the bank borrowings from existing transaction banks as the funds for repayment of the same amount in total for long-term

borrowings due on the same day.

As a result of the above, the Investment Corporation achieved extension of borrowing periods, in addition to diversification of due dates. Furthermore, the ratio of interest-bearing debt to total assets at the end of the fiscal period under review came to 51.4%, the ratio of long-terminterest-bearing debt (excluding interest- bearing debt to be repaid within a year) came to 90.0%, and the ratio of fixed interest rates came to 76.5% on a contract basis.

d. Sustainability initiatives

Based on the recognition that the emphasis on environmental, social and corporate governance practices (collectively called "ESG") in asset management contributes to the improvement of corporate value over the medium to long term, the Investment Corporation established its Policy Regarding ESG in 2016, and the former Asset Manager of the Investment Corporation established the Sustainability Promotion Committee in 2017. In addition, the Investment Corporation has systematically promoted sustainability initiatives, such as establishing the Sustainability Promotion Office at the Asset Manager in June 2021 with the aim of further strengthening its sustainability initiatives.

As for its environmental initiatives, the Investment Corporation is working to reduce the environmental impact of its portfolio through energy conservation and greenhouse gas emissions reduction by installing LEDs and others with high energy-saving performance, as well as effective utilization of limited resources such as water conservation. Furthermore, a total of 4 properties owned by the Investment Corporation as of the filing date of this document have obtained environmental certification, and the ratio of certification is 6.3% (based on the total floor area of the entire portfolio).

Regarding social initiatives, the Investment Corporation is making efforts to improve tenant satisfaction and contribute to the sustainable development of local communities by building good relationships with external stakeholders related to its real estate held to collaborate with them. In order to further promote supply of excellent healthcare facilities in Japan, as of the date of submission of this document, the Investment Corporation borrowed through social loans (¥4,920 million) and issued social bonds (¥2,000 million) based on the Social Finance Framework formulated in May 2021.

As part of our governance initiatives, the Asset Manager ensures prevention of conflicts of interest, management of risks, and compliance with laws and regulations, and has introduced an asset management fee system linked to the results of management, emphasizing the linkage with unitholder interests.

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The Asset Manager formulated a "Climate Change Resilience Policy" in December 2021 and expressed support for the TCFD (Task Force on Climate-related Financial Disclosures) (Note) recommendations to promote clarification of the policy on initiatives to address climate-related issues and the enhancement of disclosure of the content of such initiatives. Furthermore, in January 2022, the Asset Manager joined the TCFD Consortium, an organization formed by companies in Japan expressing support for the recommendations.

In addition, the Investment Corporation has been continuously participating in GRESB Real Estate Assessment since 2018, and received two stars in five-level the GRESB rating based on the global ranking of overall scores in the 2022 GRESB Real Estate Assessment. The Investment Corporation received the "Green Star" assessment given to participants with excellent scores in the "Management Component" assessing policies and organizational structures for ESG promotion and the "Performance Component" assessing environmental performance and initiatives with tenants in properties owned. Furthermore, the Investment Corporation received the highest rank of "A" in the 2022 GRESB disclosure assessment measuring the level of ESG disclosure in recognition of its excellent disclosure related to environmental consideration and sustainability initiatives.

(Note) TCFD (Task Force on Climate-related Financial Disclosures) is an international initiative established by the Financial Stability Board (FSB) at the request of the G20 regarding how climate-related information should be disclosed and addressed by financial institutions.

1. Summary of Results and Distributions
   As a result of the management initiatives described above, the Investment Corporation recorded operating revenue of ¥11,436 million, operating income of ¥5,341 million, ordinary income of ¥4,653 million and net income of ¥4,652 million.
   As for distributions, the Investment Corporation will distribute the amount of unappropriated retained earnings after adding reversal of reserve for temporary difference adjustments of ¥153 million according to the existing policy.
   As a result, total distributions came to ¥4,806 million in the fiscal period under review, and the distribution per unit was ¥2,180 (no change from the previous fiscal period).

(Note) With respect to distributions, based on the plan that the maximum amount of distribution of earnings shall be included in deductible expenses upon the application of Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including amendments thereto; hereinafter the "Special Taxation Measures Act"), the full amount of unappropriated retained earnings except for fractions of less than one (1) yen of cash distribution per investment unit will be distributed.

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