Translation INDUSTRIAL & INFRASTRUCTURE FUND INVESTMENT CORPORATION SUMMARY OF FINANCIAL RESULTS FOR THE SIX MONTHS ENDED JULY 31, 2018

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1 Translation INDUSTRIAL & INFRASTRUCTURE FUND INVESTMENT CORPORATION SUMMARY OF FINANCIAL RESULTS FOR THE SIX MONTHS ENDED JULY 31, 2018 September 20, 2018 Name of issuer: Stock exchange listing: Securities code: Website: Representative of the Investment Corporation: Name of asset manager: Representative of the asset manager: Contact: Scheduled date for filing of securities report: Scheduled date for distributions payment: Supplementary materials for financial results: Analyst meeting: Industrial & Infrastructure Fund Investment Corporation ( the Investment Corporation ) Tokyo Stock Exchange Yasuyuki Kuratsu, Executive Director Mitsubishi Corp.-UBS Realty Inc. Katsuhisa Sakai, President & CEO Hidehiko Ueda, Executive Officer Head of Industrial Division Tel: (03) October 25, 2018 October 15, 2018 Otherwise prepared Scheduled 1. Financial results for the six months ended July 31, 2018 (February 1, 2018 to July 31, 2018) (Amounts of less than one million yen are rounded down) (1) Operating results (Percentages show period-on-period changes) For the six months ended Millions of yen % Millions of yen % Millions of yen % Millions of yen % July 31, , , , , January 31, , , , , For the six months ended Yen % % % July 31, , January 31, , Note : The Investment Corporation executed a four-for-one unit split (the Unit Split ) on February 1, 2018 as the effective date. Net income per unit in the above table shows pro forma per unit information which has been adjusted to reflect the Unit Split as if it had been effective on August 1, (2) Distributions Operating revenues Operating income Ordinary income Net income Net income per unit Return on unitholders equity Ratio of ordinary income to total assets Ratio of ordinary income For the six months ended Yen Yen Yen Millions of yen Millions of yen Millions of yen % % July 31, ,716 2, ,613 4, January 31, ,282 10, ,083 4, Note 1: Distribution per unit in excess of profit consist only of allowance for temporary difference adjustment. Note 2: Payout ratio for the six months ended July 31, 2018 is calculated by following formula, as new investment units were issued during the period. Payout ratio = Total distributions (excluding distributions in excess of profit) Net income 100 (3) Financial position Distribution per unit (including distributions in excess of profit) Total assets Distribution per unit (excluding distributions in excess of profit) Distribution per unit in excess of profit Net assets Total distributions (including distributions in excess of profit) Total distributions (excluding distributions in excess of profit) Total distributions in excess of Ratio of net assets to total assets Payout ratio Ratio of distributions to net assets Net asset value per unit As of Millions of yen Millions of yen % Yen July 31, , , ,385 January 31, , , ,321 Note : The Investment Corporation executed a four-for-one unit split (the Unit Split ) on February 1, 2018 as the effective date. Net asset value per unit in the above table shows pro forma per unit information which has been adjusted to reflect the Unit Split as if it had been effective on August 1, profit 1

2 (4) Cash flows Net cash provided by (used in) Operating activities Investing activities Financing activities Cash and cash equivalents at end of period For the six months ended Millions of yen Millions of yen Millions of yen Millions of yen July 31, ,108 (28,671) 21,780 13,864 January 31, ,082 (607) (4,639) 15, Outlook for the six months ending January 31, 2019 (August 1, 2018 to January 31, 2019) (Percentages show period-on-period changes) Operating revenues Operating income Ordinary income Net income For the six months ending Millions of yen % Millions of yen % Millions of yen % Millions of yen % January 31, , , , , Net income per unit Distribution per unit (including distributions in excess of profit) Distributions per unit (excluding distributions in excess of profit) Distributions in excess of profit per unit For the six months ending Yen Yen Yen Yen January 31, ,679 2,680 2, Others (1) Changes in accounting policies and accounting estimates or restatements Changes in accounting policies due to accounting standards revision: None Changes in accounting policies due to other reasons: None Changes in accounting estimates: None Restatements: None (2) Number of investment units issued Number of investment units issued at the end of period (including own investment units): As of July 31, ,698,816 units As of January 31, ,164 units Number of own investment units at the end of period: As of July 31, 2018 As of January 31, units 0 units Note: For the number of unit as a basis of calculation of net income per unit, please refer to per unit information on page 24. Forward-looking Statements and Other Notes Forward-looking statements in this presentation are based on the information currently available and certain assumptions we believe reasonable. Actual results may differ materially from the forward-looking statements in this presentation due to various factors. Furthermore, those statements do not guarantee the amount of future distributions. For further information and assumptions regarding the forward-looking statements, please refer to 2. Management policy and results of operation, (2) Operations, B. Outlook for the next period on page 6 to 8. 2

3 1. Summary of related corporations of the Investment Corporation There have been no significant changes to the structure of the investment corporation since the most recent securities report (submitted on April 26, 2018), and hence, description of these matters is omitted. 2. Management policy and results of operation (1) Management policies There are no material changes to Investment Policy, Investment Targets, or Distribution Policies in the most recent securities report (submitted on April 26, 2018), and accordingly, disclosure is omitted. (2) Operations A. Operations during the period i. Major developments and management performance of IIF IIF was established on March 26, 2007 based on Act on Investment Trust and Investment Corporation (hereinafter referred to as Investment Trust Law ) and became listed on the J-REIT market of the Tokyo Stock Exchange on October 18, 2007 (ticker code: 3249). Based on the principle of aiming to invest in social infrastructure as a source of power for the Japanese economy and support Japan s industrial activities from a perspective of real estate, IIF invests and manages logistics facilities, manufacturing and research and development (R&D) facilities, and infrastructure facilities which play a vital role in various industrial activities as the only listed J-REIT specializing in industrial properties. IIF has continued to mark steady growth since it began investment operations in 2007 when it acquired nine properties for the total acquisition price of 66,000 million yen. IIF owned 66 properties whose total acquisition price amounted to 274,764 million yen as of July 31, ii. Investment environment and management performance During this fiscal period (February to July 2018), the Japanese economy performed well. Gross domestic product (GDP), which had maintained positive growth for eight consecutive quarters, recorded negative growth for January to March 2018 for the first time in nine quarters, but despite this, returned to positive growth for April to June 2018 (second preliminary release of September 10, 2018). Amid strong performance of the corporate sector, increases in capital investment contributed to the positive growth. In addition, consumer spending has also turned positive due to an improvement in consumer confidence. In the J-REIT market, although the start of the period was weak, in part affected by a decline in global stock markets due to concerns of an interest rate rise in the U.S., financing and property acquisitions were both active. During the first quarter of 2018 (January March), funds raised through public offerings totaled approximately 280 billion yen, exceeding the amount for the same period of the previous year. From April onwards, concerns about such risks as the North Korea problem and the US- China trade war made the stock markets and foreign exchange markets more volatile. The J-REIT market, though, was recognized for its defensiveness and sense of being undervalued, and so funds flowed in and the market remained strong. In the second half of July toward the end of this period, as yields on 10-year Japanese government bonds (JGBs) started to rise amid speculation that the Bank of Japan (BOJ) might adjust its monetary policy to address the side effects of its prolonged monetary easing, the Tokyo Stock 3

4 Exchange (TSE) REIT Index pointed to a downward trend. However, as a result of the Monetary Policy Meeting of July 31, it was announced that monetary easing would be maintained, and the BOJ intervened with a buying operation against the rising 10-year JGB yields. This has worked to placate concerns about rising JGB yields, and the TSE REIT Index also appears to be recovering. Under this environment, IIF has continued to pursue property-sourcing activities based on a Corporate Real Estate (CRE) proposal, an approach in which IIF has strengths. During this fiscal period, IIF acquired the following 10 properties with a public offering: IIF Itabashi Logistics Center (acquisition price: 686 million yen / 40% co-ownership interest), IIF Osaka Suminoe Logistics Center I (acquisition price: 3,025 million yen / 25% co-ownership interest), IIF Osaka Suminoe Logistics Center II (acquisition price: 635 million yen / 25% co-ownership interest), IIF Sapporo Logistics Center (acquisition price: 2,480 million yen), IIF Hiroshima Manufacturing Center (land with leasehold interest) (acquisition price: 1,608 million yen), IIF Totsuka Manufacturing Center (land with leasehold interest) (acquisition price: 2,300 million yen), IIF Hitachinaka Port Logistics Center (land with leasehold interest) (acquisition price: 1,145 million yen), IIF Koriyama Logistics Center (acquisition price: 2,585 million yen), IIF Kobe Nishi Logistics Center (land with leasehold interest) (acquisition price: 1,960 million yen), and IIF Atsugi Manufacturing Center (land with leasehold interest) (acquisition price: 4,940 million yen). In addition, IIF acquired: IIF Fukuoka Hakozaki Logistics Center I (acquisition price: 2,055 million yen / 40% coownership interest), IIF Fukuoka Hakozaki Logistics Center II (acquisition price: 3,593 million yen / 40% co-ownership interest), and IIF Fukuoka Hakozaki Logistics Center II (Extension Building) (acquisition price: 1,135 million yen), bringing the total for the period to 13 properties (total acquisition price: 28,147 million yen). As a result, the properties IIF owned as of July 31, 2018 consisted of 43 logistics facilities, 14 manufacturing, R&D and other facilities and nine infrastructure facilities, whose total acquisition price amounted to 274,764 million yen. The total leasable area as of July 31, 2018 was 1,469, m 2, and the average occupancy rate was 99.8%. iii. Funding IIF s fundamental policy is to plan and implement a stable and efficient financial strategy to secure a stable profit and achieve sustainable growth of the properties owned. a) Equity Financing Continuing on from last year, IIF announced a public offering in February 2018, issuing 110,160 new investment units (including third-party allotment in conjunction with a secondary offering through over-allotment) and procuring 12,725 million yen with the aim of financing to acquire new properties. As a result, the number of issued investment units reached 1,698,816 as of the end of this fiscal period. 4

5 b) Debt Financing As for funding for interest-bearing debt for this fiscal period, IIF obtained new long-term loans of 6.0 billion yen (average term to maturity: 9.1 years) in February and 7.3 billion yen (average term to maturity: 8.1 years) in March 2018, each at fixed interest rates, with the aim of acquiring new properties. Furthermore, IIF obtained new long-term loans of 5.0 billion yen in February and 8.5 billion yen in March 2018, totaling 13.5 billion yen (average term to maturity: 9.3 years) at fixed interest rates, and repaid long-term loans for the same amount that came due on the same day. Through new loans and refinancing, IIF is shifting to longer-term, fixed rate loans and, in effect, reducing its interest costs, in order to establish a financial position that will provide stable distributions over the long-term. As a result, as of July 31, 2018, IIF s total interest-bearing debt was 144,800 million yen, which was comprised of 134,800 million yen in long-term loans (including long-term loans to be repaid within one year), and 10,000 million yen in investment corporation bonds. iv. Overview of financial results and distributions As a result of the above management activities, IIF recorded operating revenue of 9,686 million yen, operating income of 5,553 million yen, ordinary income of 4,614 million yen and net income of 4,612 million yen for this fiscal period. For distributions, IIF includes profit distributions in deductible expenses in accordance with Article 67-15, Paragraph 1 of the Act on Special Taxation Measures Law, and profit distributions declared for this fiscal period were 4,612,285,440 yen, which was all profit as defined in Article 136, Paragraph 1 of the Act on Investment Trusts and Investment Corporations of Japan after deducting the provision of an allowance for temporary difference adjustments and excluding fractional distributions of less than one yen per unit. In addition, the Investment Corporation makes distributions in excess of profit in amounts determined by the Investment Corporation considering the effects of taxable income in excess of accounting income and items deducted from net assets on distribution amounts. For this fiscal period, distributions related to the allowance for temporary difference adjustments stood at 1,698,816 yen, the amount calculated as the taxable income in excess of accounting income excluding fractional distributions per unit in excess of profit less than one yen. As a result, the distribution per unit for the period is 2,716 yen. 5

6 B. Outlook for the next fiscal period i. Outlook for the overall management The Japanese economy is expected to remain on track for recovery. Despite concerns about a US- China trade war and geopolitical risks, against a backdrop of strong economic conditions worldwide, the employment environment and corporate performance are expected to remain strong, and moderate upward trends are also expected in consumer spending and capital investment. The J-REIT market is also expected to remain strong. Despite the adverse effects of fund outflows from monthly distribution-type domestic investment trusts from the second quarter of 2017, products in the market are recognized for their stable and relatively high returns. Also in the real estate market, properties have continued to be actively traded amid good conditions for capital procurement. Even for logistics facilities, despite signs of temporary increases in vacancy rates seen in some areas due to an increase in new supply, there is a balance between supply and demand centered on the Tokyo metropolitan area, and occupancy rates remain high. In the greater Osaka area, although vacancy rates rose temporarily due to the effects of a surge in supply, signs of improvement in the balance of supply and demand are beginning to emerge, buoyed by brisk demand. Properties managed by IIF are also likely to see stable occupancy, given their high versatility and excellent locations. On the other hand, in addition to the need for automation utilizing AI and other technologies to deal with the shortage of labor, business companies also need to keep pace with changes in technology brought on by advances in IT. Consequently, capital investment is expected to continue trending upward. Amid such an environment, it is expected that there will be an increase in the off-balance-sheet needs of business companies to sell their properties, and IIF also expects to see a rise in investment opportunities through its proposal-based acquisition activities in the area of corporate real estate (CRE), which is a strength of IIF. ii. Issues to be solved and management policy going forward Under the situation described above, IIF will seek to create and maintain a portfolio that generates stable income to achieve sustainable growth of unitholder s value through the strategies described below. a) External growth IIF will continue to demonstrate its strength in proposal-based acquisition activities in the areas of both CRE (Corporate Real Estate) and PRE (Public Real Estate), where growth potential is apparent, and pursue stable property acquisition opportunities that contribute to improving profitability and unitholder value. In doing so, IIF will aim to further expand the size of its portfolio. IIF will continue to pioneer new asset category, while avoiding price competition using our experience, expertise, and networks in both CRE and PRE sectors. By aiming to further increase the property acquisitions of new asset category properties and the development of CRE needs, we will evolve our unique CRE proposal-based business model. IIF will strive to expand the portfolio through acquisitions of prime properties, leveraging its 6

7 unique strengths as the only listed J-REIT specializing in industrial properties, creating a flexible property acquisition structure by collecting property information through its information channels including sponsor companies or by using bridge scheme structure. b) Internal growth As of July 31, 2018, IIF s portfolio consisted of 66 properties for a total acquisition price of 274,764 million yen. The average occupancy rate as of the end of the period stands at 99.8%. The properties are managed under long-term lease contracts with an average remaining lease period of 9.0 years, generating stable cash flows. IIF continues to conduct 3C Management Cycle portfolio management in order to achieve internal growth; that is to realize long-term stable management and enhanced profitability as well as asset value by providing value to tenants. 3C Management Cycle is a portfolio management method of (i) grasping tenants true needs through close communication (Communicate); (ii) strategically making custom-made proposals to meet tenants individual needs (Customize); and (iii) creating unitholder value through long-term stable management coupled with enhanced profitability and asset value (Create). As a result, during this fiscal period, IIF succeeded in securing tenants and improving profitability at IIF Fukuoka Hakozaki Logistics Center II through its development project for the Extension Building, which captured the relocation and aggregation needs of local logistics firms. IIF will work to maintain the quality of its portfolio and further improve profitability through efforts based on 3C Management Cycle and by implementing the required management tasks to maintain and improve the functionality, safety and comfort of the buildings it manages and by carrying out suitable repair work as necessary. At the same time, in order to maintain and improve the rent level and prevent cancellations, IIF will continue to exert efforts in building favorable relationships with lessees by continuously making close communications. c) Financial strategy In consideration of IIF s portfolio that generates long-term stable cash flows based on longterm lease contracts, IIF s basic strategy in raising funds is to fix liabilities in the long term. In accordance with this policy, IIF will continue to pursue ALM (Asset Liability Management) that matches up the long-term stable cash flows of properties with the long-term fixed-rate borrowings. IIF will also proceed with reducing fund-raising costs, lengthening borrowing periods, standardizing repayment amounts and diversifying repayment dates through effective refinancing of existing loans. Furthermore, IIF will continue to diversify lenders and procurement methods in the aim of enhancing its fund-raising base. 7

8 iii. Earnings forecast for the next fiscal period The forecasts of operating results for the fiscal period ending January 31, 2019 (August 1, 2018 to January 31, 2019) are operating revenue of 9,789 million yen, ordinary income of 4,553 million yen, net income of 4,552 million yen and distributions per unit of 2,680 yen (including a distribution per unit in excess of profit of 1 yen). For the assumptions regarding these forecasts, refer to the following Earnings Forecast Assumptions for the 23rd Fiscal Period (August 1, 2018 to January 31, 2019). The main changes from the 22nd Fiscal Period (February 1, 2018 to July 31, 2018) include the following. Operating revenue (increase of 103 million yen from the previous fiscal period) Increase in rental revenue from the 13 properties acquired in the fiscal period ending July 31, 2018 (February 1, 2018 to July 31, 2018) Operating expense (increase of 163 million yen from the previous fiscal period) Increase in property management fees for the 13 properties acquired in the fiscal period ending July 31, 2018 (February 1, 2018 to July 31, 2018) Taxes and public charges expensed on the 11 properties acquired in the fiscal period ended July 31, 2017 (January 1, 2017 to July 31, 2017) and in the fiscal period ended January 31, 2018 (August 1, 2017 to January 31, 2018) Note: The forecasts mentioned above are calculated based on certain assumptions as of the time of this reporting. Actual net income and distribution may fluctuate due to changes in the circumstances. The forecasts do not guarantee the amount of distribution. 8

9 Attachment Earnings Forecast Assumptions for the 23 rd Fiscal Period (August 1, 2018 to January 31, 2019) Item Accounting period Assets owned Interest-bearing debt Operating revenues Operating expenses Non-operating expenses Extraordinary gain or loss Assumption 23 rd Fiscal Period From August 1, 2018 to January 31, 2019 (184 days) It is assumed that IIF owns the real estate and trust beneficial interest in real property for the 66 properties that it holds as of July 31, While it is assumed that there will be no further transfer of property until January 31, 2019, changes may in fact occur due to other property acquisitions, disposals or similar activities. The total amount of interest-bearing debt as of July 31, 2018 was JPY 144,800 million, consisting of long-term debt (including those loans that will become due within one year) of JPY 134,800 million and investment corporation bonds of JPY 10,000 million. No interest-bearing debts will come due during the 23 rd period. We have estimated the rent revenue based on lease agreements we expect to be effective during the 23 rd fiscal period, as well as, among others, market environment, characteristic of individual property, competitiveness of properties and status of individual tenant (including a plan for evacuation). We assume the properties are owned as described in Assets owned above and that there will be no arrears or non-payments of rent by the leaseholders for the 23 rd fiscal period. Fixed property tax, city planning tax and depreciable property tax in the 23 rd period is forecast to be approximately 788 million yen. Repair costs are forecast to be approximately 98 million yen. Depreciation (including ancillary expenses) is calculated based on the straight-line method and is estimated to be approximately JPY 1,365 million for the 23 rd fiscal period. Calculation of external outsourcing expenses (property management fees, building management fees, etc.) is based on actual results thus far. Based on the assumptions of Interest-bearing debt above, we estimate the interest expenses, other debt-related expenses, interest expenses on investment corporation bonds and amortization of investment corporation bond issuance costs will be JPY 882 million for the 23 rd fiscal period. We estimate the amortization of the cost concerning the issuance of new investment units will be approximately JPY 56 million for the 23 rd fiscal period. No extraordinary gain or loss is expected for the 23 rd fiscal period. Total number of units issued Distributions per unit (excluding distributions in excess of retained earnings per unit) Distribution in excess of retained earnings per unit (allowance for temporary difference adjustments) Distributions in excess of retained earnings per unit (distributions under tax law resulting in a decrease of investment capital) It is assumed that the total number of issued investment units as of September 20, 2018 is 1,698,816. It is assumed that net income excluding amounts less than 1 yen per unit will be distributed in its entirety. The calculations of distributions per unit for the 23 rd fiscal period were based on the assumption that fluctuations in the fair value of interest rate swaps will not have any impact on distributions per unit. For IIF Kazo Logistics Center, which we acquired on September 1, 2016 and IIF Hamura Logistics Center, which we acquired on December 22, 2016, we are recording asset retirement obligations related to asbestos removal, and we expect to record an allowance for temporary difference adjustment for tax accounting discrepancies related to interest costs on such asset retirement obligations and depreciation expenses relating to buildings, etc. During the 23 rd fiscal period, we assume that we will make a distribution in excess of retained earnings of 1 yen per unit (allowance for temporary difference adjustments). There is no plan at present to make distributions under tax law resulting in a decrease of investment capital. 9

10 3. Financial information (1) Balance sheets As of ASSETS Current assets: Cash and bank deposits 12,976,836 10,585,048 Cash and bank deposits in trust 2,669,286 3,278,971 Rental receivables 182, ,575 Prepaid expenses 470,787 1,095,471 Consumption taxes refundable - 278,892 Other Total current assets 16,299,908 15,534,196 Noncurrent assets: Property, plant and equipment: Buildings, at cost 33,277,719 33,452,100 Less: Accumulated depreciation (5,993,602) (6,368,372) Buildings, net 27,284,116 27,083,728 Structures, at cost 93,211 93,211 Less: Accumulated depreciation (22,669) (25,639) Structures, net 70,542 67,572 Machinery and equipment, at cost 11,892 11,892 Less: Accumulated depreciation (11,892) (11,892) Machinery and equipment, net 0 0 Tools, furniture and fixtures, at cost 13,575 13,575 Less: Accumulated depreciation (5,031) (5,877) Tools, furniture and fixtures, net 8,544 7,698 Land 18,937,009 20,125,318 Construction in progress 1,433 1,433 Buildings in trust, at cost 64,881,829 70,861,106 Less: Accumulated depreciation (9,873,951) (10,809,798) Buildings in trust, net 55,007,877 60,051,307 Structures in trust, at cost 495, ,738 Less: Accumulated depreciation (380,091) (389,148) Structures in trust, net 115, ,589 Machinery and equipment in trust, at cost 68, ,809 Less: Accumulated depreciation (8,365) (14,133) Machinery and equipment in trust, net 60,342 92,676 Tools, furniture and fixtures in trust, at cost 24,742 36,020 Less: Accumulated depreciation (7,526) (9,648) Tools, furniture and fixtures in trust, net 17,216 26,372 Land in trust 122,358, ,470,488 Construction in progress in trust 4,040 1,969 Total net property, plant and equipment 223,864, ,103,156 Intangible assets: Leasehold right (Note 1) 19,833,966 19,833,966 Other 1,912 1,724 Total intangible assets 19,835,879 19,835,690 Investments and other assets: Lease and guarantee deposits 10,200 10,200 Long-term prepaid expenses 1,307,216 1,456,164 Other 6,783 6,586 Total investments and other assets 1,324,199 1,472,950 Total noncurrent assets 245,024, ,411,797 Deferred assets: Investment unit issuance costs 125, ,782 Investment corporation bonds issuance costs 50,400 46,592 Total deferred assets 175, ,374 TO TAL ASSETS 261,500, ,221,369 The accompanying notes in sections (6), (7) and (8) below are an integral part of these statements. 10

11 As of LIABILITIES Current liabilities: Operating accounts payable 299, ,067 Current portion of long-term loans payable 13,500,000 4,000,000 Accounts payable other 479, ,264 Accrued expenses 138, ,581 Income taxes payable 908 1,691 Consumption taxes payable 451,795 - Advances received 1,484,895 2,032,200 Other 3,845 68,756 Total current liabilities 16,359,078 7,453,562 Noncurrent liabilities: Investment corporation bonds unsecured 10,000,000 10,000,000 Long-term loans payable 108,000, ,800,000 Tenant leasehold and security deposits 2,418,564 2,448,564 Tenant leasehold and security deposits in trust 7,816,815 8,358,515 Asset retirement obligations 172, ,430 Derivatives liabilities 249, ,519 Other Total noncurrent liabilities 128,658, ,002,185 TO TAL LIABILITIES 145,017, ,455,747 NET ASSTES Unitholders equity: Unitholders capital 112,651, ,376,568 Capital deduction: Allowance for temporary difference adjustment (Note 3) (279,803) (251,547) Total capital deduction (279,803) (251,547) Unitholders capital, net 112,371, ,125,021 Surplus: Retained earnings 4,357,510 4,858,533 Total surplus 4,357,510 4,858,533 Total unitholders equity 116,728, ,983,554 Valuation and translation adjustments: Deferred gains or (losses) on hedges (245,581) (217,933) Total valuation and translation adjustments (245,581) (217,933) TO TAL NET ASSETS (Note 2) 116,483, ,765,621 TO TAL LIABILITIES AND NET ASSETS 261,500, ,221,369 The accompanying notes in sections (6), (7) and (8) below are an integral part of these statements. 11

12 (2) Statements of income and retained earnings For the six months ended O perating revenue Rent revenue-real estate (Note 4) 8,976,411 9,686,144 Total operating revenue 8,976,411 9,686,144 O perating expenses Expenses related to property rental business (Note 4) 2,976,970 3,135,629 Asset management fees 791, ,157 Directors compensations 5,820 5,820 Asset custody fees 5,879 6,294 Administrative service fees 29,305 31,373 Other 95,521 92,468 Total operating expenses 3,905,200 4,132,742 O perating income 5,071,211 5,553,402 Non-operating income Interest income Interest on refund 1,782 - Reversal of distribution payable Total non-operating income 2, Non-operating expenses Interest expenses 690, ,410 Interest expenses on investment corporation bonds 50,173 49,626 Amortization of investment corporation bonds issuance costs 3,807 3,807 Borrowing related expenses 186, ,176 Amortization of investment unit issuance costs 58,448 57,181 Other 2,508 4,043 Total non-operating expenses 991, ,245 O rdinary income 4,082,046 4,614,622 Income before income taxes 4,082,046 4,614,622 Income taxes Current 919 1,702 Total income taxes 919 1,702 Net income 4,081,126 4,612,919 Retained earnings brought forward 276, ,613 Unappropriated retained earnings 4,357,510 4,858,533 The accompanying notes in sections (6), (7) and (8) below are an integral part of these statements. 12

13 (3) Statements of changes in net assets Unitholders capital (Note 2) Unitholders capital Capital deduction Allowance for temporary difference adjustment Total capital deduction Unitholders equity Unitholders capital, net Retained earnings Surplus Total surplus Total unitholders equity Valuation and translation adjustments Deferred gains or (losses) on hedges Total valuation and translation adjustments Balance as of July 31, ,651,215 (307,535) (307,535) 112,343,680 4,940,608 4,940, ,284,288 (276,221) (276,221) 117,008,066 Changes during the period Dividends from surplus (4,633,712) (4,633,712) (4,633,712) - - (4,633,712) Reversal of allowance for temporary difference adjustment - 30,512 30,512 30,512 (30,512) (30,512) Dividend in excess of profit from allowance for temporary difference adjustment - (2,780) (2,780) (2,780) - - (2,780) - - (2,780) Net income ,081,126 4,081,126 4,081, ,081,126 Net changes of items other than unitholders' equity ,639 30,639 30,639 Total changes during the period - 27,731 27,731 27,731 (583,097) (583,097) (555,365) 30,639 30,639 (524,725) Balance as of January 31, ,651,215 (279,803) (279,803) 112,371,412 4,357,510 4,357, ,728,922 (245,581) (245,581) 116,483,340 Changes during the period Issuance of new investment units 12,725, ,725, ,725, ,725,352 Dividends from surplus (4,081,257) (4,081,257) (4,081,257) - - (4,081,257) Reversal of allowance for temporary difference adjustment - 30,639 30,639 30,639 (30,639) (30,639) Dividend in excess of profit from allowance for temporary difference adjustment - (2,382) (2,382) (2,382) - - (2,382) - - (2,382) Net income ,612,919 4,612,919 4,612, ,612,919 Net changes of items other than unitholders' equity ,648 27,648 27,648 Total changes during the period 12,725,352 28,256 28,256 12,753, , ,022 13,254,632 27,648 27,648 13,282,280 Balance as of July 31, ,376,568 (251,547) (251,547) 125,125,021 4,858,533 4,858, ,983,554 (217,933) (217,933) 129,765,621 Total net assets The accompanying notes in sections (6), (7) and (8) below are an integral part of these statements. 13

14 (4) Statements of cash distributions For the six months ended Ⅰ Unappropriated retained earnings 4,357,510,597 4,858,533,120 Ⅱ Distributions in excess of profit 2,382,984 1,698,816 Allowance for temporary difference adjustment 2,382,984 1,698,816 Ⅲ Capitalization 30,639,769 27,648,569 Reversal of allowance for temporary difference adjustment 30,639,769 27,648,569 Ⅳ Cash distribution declared 4,083,640,248 4,613,984,256 (Cash distribution declared per unit) (10,282) (2,716) Profit distributions 4,081,257,264 4,612,285,440 (Profit distributions per unit) (10,276) (2,715) Allowance for temporary difference adjustment 2,382,984 1,698,816 (Distribution per unit in excess of profit from allowance for temporary difference adjustment) (6) (1) Ⅴ Retained earnings carried forward 245,613, ,599,111 Note: For the six months ended January 31, 2018: Cash distributions declared for the six months ended January 31, 2018 were 4,083,640,248. In accordance with the distribution policy in Article 25, Paragraph 1, Item 2 of the Investment Corporation s articles of incorporation which stipulates making distributions in excess of 90% of distributable profit as defined in Article 67-15, Paragraph 1 of the Special Taxation Measures Act of Japan for the fiscal period, profit distributions (do not include distributions in excess of profit) declared for the six months ended January 31, 2018 were 4,081,257,264 which were all of profit as defined in Article 136, Paragraph 1 of the Act on Investment Trusts and Investment Corporations of Japan after deduction of reversal of allowance for temporary difference adjustment (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan), except for fractional distribution per unit less than one yen. In addition, the Investment Corporation makes distributions in excess of profit considering an effect of differences between net income and taxable income (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan) and items deducted from net assets (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan) in accordance with the policy for the distributions in excess of profit prescribed in the article of incorporation 25, Paragraph 2.Distributions in excess of profit for the six months ended January 31, 2018 were amounting to 2,382,984 which were corresponding to differences between net income and taxable income for the period, except for fractional distribution per unit in excess of profit less than one yen. All of the distributions in excess of profit for the six months ended January 31, 2018 were amounting to 2,382,984 consist only of allowance for temporary difference adjustment (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan). Unitcapital refund from deduction of unitcapital under tax rules is not included. For the six months ended July 31, 2018: Cash distributions declared for the six months ended July 31, 2018 were 4,613,984,256. In accordance with the distribution policy in Article 25, Paragraph 1, Item 2 of the Investment Corporation s articles of incorporation which stipulates making distributions in excess of 90% of distributable profit as defined in Article 67-15, Paragraph 1 of the Special Taxation Measures Act of Japan for the fiscal period, profit distributions (do not include distributions in excess of profit) declared for the six months ended July 31, 2018 were 4,612,285,440 which were all of profit as defined in Article 136, Paragraph 1 of the Act on Investment Trusts and Investment Corporations of Japan after deduction of reversal of allowance for temporary difference adjustment (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan), except for fractional distribution per unit less than one yen. In addition, the Investment Corporation makes distributions in excess of profit considering an effect of differences between net income and taxable income (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan) and items deducted from net assets (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan) in accordance with the policy for the distributions in excess of profit prescribed in the article of incorporation 25, Paragraph 2.Distributions in excess of profit for the six months ended July 31, 2018 were amounting to 1,698,816 which were corresponding to differences between net income and taxable income for the period, except for fractional distribution per unit in excess of profit less than one yen. All of the distributions in excess of profit for the six months ended July 31, 2018 were amounting to 1,698,816 consist only of allowance for temporary difference adjustment (as defined in Article 2, Paragraph 2, Item 30 of the Ordinance on Accountings of Investment Corporations of Japan). Unitcapital refund from deduction of unitcapital under tax rules is not included. 14 (Yen)

15 (5) Statements of cash flows For the six months ended Net cash provided by (used in) operating activities: Income before income taxes 4,082,046 4,614,622 Depreciation and amortization 1,263,195 1,331,908 Amortization of investment corporation bonds issuance costs 3,807 3,807 Amortization of investment unit issuance costs 58,448 57,181 Interest income (72) (73) Interest expenses 740, ,036 Changes in assets and liabilities: Decrease (increase) in operating accounts receivable (18,015) (112,906) Decrease (increase) in consumption taxes refundable 420,083 (278,892) Decrease (increase) in prepaid expenses 519,532 (624,684) Decrease (increase) in long-term prepaid expenses (163,189) (148,948) Increase (decrease) in operating accounts payable 22,606 65,343 Increase (decrease) in accounts payable - other (152,204) 51,336 Increase (decrease) in accrued expenses 434 (82) Increase (decrease) in consumption taxes payable 451,795 (451,795) Increase (decrease) in advances received (411,554) 547,305 Increase (decrease) in other noncurrent liabilities 55 (162) Other, net 5,531 65,359 Subtotal 6,822,944 5,811,355 Interest income received Interest expenses paid (739,415) (701,681) Income taxes paid (1,217) (919) Net cash provided by operating activities 6,082,385 5,108,827 Net cash provided by (used in) investing activities: Purchases of property, plant and equipment (188,275) (1,311,319) Purchases of property, plant and equipment in trust (544,908) (27,932,212) Proceeds from tenant leasehold and security deposits 16,946 30,000 Payments of tenant leasehold and security deposits (90) - Proceeds from tenant leasehold and security deposits in trust 113, ,281 Payments of tenant leasehold and security deposits in trust (7,500) (200,581) Proceeds from lease and guarantee deposits 2,545 - Payments for lease and guarantee deposits (90) - Net cash used in investing activities (607,898) (28,671,831) Net cash provided by (used in) financing activities: Proceeds from long-term loans payable 11,600,000 26,800,000 Repayments of long-term loans payable (11,600,000) (13,500,000) Proceeds from issuance of investment units - 12,564,746 Dividends paid (4,636,779) (4,083,844) Other (3,170) - Net cash provided by (used in) financing activities (4,639,949) 21,780,901 Net change in cash and cash equivalents 834,537 (1,782,102) Cash and cash equivalents at beginning of period 14,811,585 15,646,122 Cash and cash equivalents at end of period (Note 5) 15,646,122 13,864,019 The accompanying notes in sections (6), (7) and (8) below are an integral part of these statements. 15

16 (6) Note relating to going concern assumption Nothing to be noted. (7) Summary of significant accounting policies (a) Property and equipment Property, plant and equipment is recorded at cost. Depreciation of property, plant and equipment, except for land, is calculated on a straight-line basis over the estimated useful lives of the assets as stated below: Buildings Structures Machinery and equipment Tools, furniture and fixtures years 3-45 years 3-10 years 6-15 years Depreciation policy for depreciable leased assets under finance lease transactions that transfer ownership of the leased property to the lessee is consistent with that for depreciable assets that are owned. Such finance leased properties are mainly machinery and equipment. (b) Other intangible assets Other intangible assets are amortized on a straight-line basis. (c) Long-term prepaid expenses Long-term prepaid expenses are amortized on a straight-line basis. (d) Investment unit issuance costs Investment unit issuance costs are capitalized and amortized on a straight-line basis over three years. (e) Investment corporation bonds issuance costs Investment corporation bonds issuance costs are capitalized and amortized on a straight-line basis over the maturity period of the investment corporation bonds. (f) Taxes on property, plant and equipment Property, plant and equipment are annually subject to various taxes, such as property taxes and urban planning taxes. An owner of a property is registered in the record maintained by the local government in each jurisdiction, and such taxes are imposed on the owner registered in the record as of January 1 of each year based on the assessment made by the local government. Under the above tax rules, a seller of a property at the time of disposal is liable for these taxes on the property from the date of disposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued tax liabilities and the amount of settlement reflects this adjustment. For the purchaser, a portion of such taxes calculated from the acquisition date to the end of the calendar year is capitalized as a cost of the property in accordance with accounting principles and practices generally accepted in Japan ( Japanese GAAP ). In subsequent calendar years, half of such taxes on property, plant and equipment for each calendar year are charged as operating expenses in each fiscal period. Taxes on property, plant and equipment capitalized as part of the acquisition cost of properties amounted to 120,818 thousand for the six months ended July 31, No taxes on property and equipment were capitalized for the six months ended January 31, (g) Hedge accounting In accordance with the Investment Corporation s risk management policy and its internal rules, the Investment Corporation uses derivative instruments for the purpose of hedging risks that are prescribed in the Investment Corporation s articles of incorporation. The Investment Corporation hedges fluctuations in interest rates of loans payable through the use of interest rate swaps as hedging instruments and deferred hedge accounting is generally applied. The hedge effectiveness of the interest rate swaps is assessed by comparing the cumulative changes in the cash flows of the hedging instruments with those of the hedged items. The Investment Corporation applies, however, the special treatment provided under Japanese GAAP for the interest rate swaps which qualify for hedge accounting and meet specific criteria, under which only the interest received or paid under such swap contracts can be recognized and added to or reduced from any interest earned or incurred on the hedged asset or liability, as appropriate, and the fair value of the interest rate swap is not required to be evaluated separately. An assessment of hedge effectiveness is not performed when the interest rate swaps meet the specific criteria required for such special treatment. 16

17 (h) Cash and cash equivalents Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly liquid and readily convertible to cash, have a low risk of price fluctuation, and mature within three months from the date of acquisition. (i) Accounting treatment of trust beneficiary interests in real estate trusts For the trust beneficiary interests in real estate trusts, which are commonly utilized to obtain ownership in investment properties in Japan and through which the Investment Corporation holds all of its real estate, all assets and liabilities with respect to assets in trust, as well as all income generated and expenses incurred with respect to assets in trust, are recorded in the relevant balance sheet and income statement accounts of the Investment Corporation in proportion to the percentage interest that such trust beneficiary interest represents. Certain material accounts with respect to assets and liabilities in trust are presented separately from other accounts in the balance sheet of the Investment Corporation. (j) Consumption taxes Consumption taxes withheld and consumption taxes paid are not included in the statement of income and retained earnings. The consumption taxes paid are generally offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld are included in current assets and the excess of amounts withheld over payments are included in current liabilities as the case may be. (8) Notes to financial information Note 1 - Leasehold right Leasehold right is right to use nationally-owned land on which IIF Haneda Airport Maintenance Center is located with approval of the authorities under Article 18-6 and 19 of the National Property Act of Japan. Note 2 - Unitholders equity (1) Number of units As of Authorized Issued and outstanding 8,000,000 units 397,164 units 32,000,000 units 1,698,816 units (2) The Investment Corporation is required to maintain net assets of at least 50,000 thousand as required by Article 67-4 of the Act on Investment Trusts and Investment Corporations of Japan. 17

18 Note 3 - Allowance for temporary difference adjustment Movements of allowance for temporary difference adjustment for the six months ended January 31, 2018 and July 31, 2018 are as follows: For the six months ended January 31, 2018: Content of temporary difference Balance at Item Reason for the difference Initial amount beginning of the period Buildings in trust Excess of depreciation allowance 3,837 1,057 Allowance for temporary difference adjustment Balance at end of Allowance Reversal Note the period 2,780-3,837 (i) Deferred gains or (losses) on hedges Valuation losses on interest rate swaps 405, ,478 - (30,512) 275,965 (ii) Total 409, ,535 2,780 (30,512) 279,803 For the six months ended July 31, 2018: Content of temporary difference Allowance for temporary difference adjustment Item Reason for the difference Initial amount Balance at Balance at end of beginning of the Allowance Reversal the period period Excess of depreciation Buildings in trust 6,220 3,837 2,382-6,220 (i) allowance Note Deferred gains or (losses) on hedges Valuation losses on interest rate swaps 405, ,965 - (30,639) 245,326 (ii) Total 411, ,803 2,382 (30,639) 251,547 Note (i): The allowance will be reversed corresponding to disposal of the buildings in the future. Note (ii): The allowance will be reversed corresponding to future change in values of the hedging derivatives. Note 4 - Rent revenue-real estate and expenses related to property rental business Rent revenue-real estate and expenses related to property rental business for the six months ended January 31, 2018 and July 31, 2018 consist of the following: Rent revenue-real estate: Rental and parking revenue Common area charges Other Total rent revenue-real estate Expenses related to property rental business: Property management fees Facility management fees Utilities Property-related taxes Insurance Repair and maintenance Depreciation Trust fees Leasehold rents Other Total expenses related to property rental business Operating income from property leasing activities For the six months ended 8,588,805 9,239, , ,605 86, ,648 8,976,411 9,686,144 66,935 61, , , , , , ,124 23,323 22,956 79,843 97,740 1,263,195 1,331,908 16,581 15, , ,571 7,375 2,336 2,976,970 3,135,629 5,999,441 6,550,515 18