Investment Risk

This section details the major factors that may become risk factors with respect to the investments in the Units or the investment corporation bonds (the “Bonds”). The following is not a comprehensive list and there are risks other than those described below.

The Investment Corporation endeavors as much as possible to avoid these risks and to handle the risks if they may occur; however, no assurances can be given that this avoidance and handling is ultimately sufficient. If any of the risks described below arise, the market value of the Units or the Bonds declines or the amount of distribution decreases, potentially resulting in losses for the investors.

Investors are advised to make investment decisions concerning the Units and the Bonds at their own risk after having carefully considering the matters written in this paragraph, as well as matters written in other paragraphs of this material.

Risks Regarding Products Features of the Units and the Bonds

  • (A)Risk Regarding Market Price Fluctuations for the Units and the Bonds
  • (B)Risk Regarding Market Transactions for the Units
  • (C)Risk Regarding Distribution
  • (D)Risk Regarding Fluctuation in Revenue and Expenditure
  • (E)Risk Regarding Dilution in case of the Issuance of the New Units
  • (F)Risk Regarding the Treatment of Investment Corporations Pursuant to Laws, Taxation Systems, and Other Systems

Risks Regarding Investment Corporation’s Investment Management Policy

  • (A)Risk Regarding the Limit on the Type of Use of Investment Properties
  • (B)Risk of Not Receiving Support Pursuant to the Business Partnership Agreement as Expected
  • (C)Risk Regarding Property Management Companies, etc
  • (D)Risk Investment Corporation Unable to Acquire or Dispose Real Estate
  • (E)Risk Regarding Issuance of the New Units, Financing Through Borrowing and the New Bonds

Risks Regarding Investment Corporation’s Interested Parties and Structure

  • (A)Risk Regarding Dependency on the Daiwa Securities Group Inc and Conflicts of Interest
  • (B)Risk Regarding Dependency on Investment Corporation’s Interested Parties and Conflicts of Interest
  • (C)Risk Regarding Dependency on Investment Corporation’s Directors and Asset Manager’s Personnel
  • (D)Risk Regarding Legal Prohibitive Regulations on Insider Trading
  • (E)Risk Regarding Changes on Investment Policy
  • (F)Risk Regarding Bankruptcy of the Investment Corporation or Cancellation of Registration
  • (G)Risk Regarding Security Deposit and Guarantee Deposit

Legal Risks Regarding Real Estate and Trust Beneficial Interests

  • (A)Risk Regarding Real Estate Faults or Defects
  • (B)Risk Regarding Lease Agreement
  • (C)Risk Regarding Disproportionate Geographical Spread of Real Estate
  • (D)Risk Regarding Tenant Concentration
  • (E)Risk of Damaged, Destroyed or Deteriorated Building due to Natural Disaster
  • (F)Risk Regarding Owner Responsibility and Repair and Maintenance Costs for Real Estate
  • (G)Risk Regarding Administrative Regulations and Prefectural or Municipal Ordinances for Real Estate
  • (H)Risk Regarding the Enactment or Amendment of Laws and Regulations
  • (I)Risk Arising from Seller’s Insolvency
  • (J)Risk Regarding Sublease
  • (K)Risk Regarding Master Lease Agreement
  • (L)Risk Regarding Status of Real Estate Usage by Tenants
  • (M)Risk Regarding Unit-Owned Buildings
  • (N)Risk Regarding Co-owned Property
  • (O)Risk Regarding Property on Leased Land
  • (P)Risk Regarding Leased Buildings
  • (Q)Risk Regarding Property Under Development
  • (R)Risk Regarding Harmful Materials
  • (S)Risk Specific to Real Estate Owned as Beneficial Interests
  • (T)Risk Regarding Forward Commitment, etc
  • (U)Risk Regarding Rent Guarantee Companies

Risks Regarding Taxation

  • (A)Risk Regarding Conduit Requirements
  • (B)Risk Regarding Ex-Post Failure to Satisfy the Maintenance of Conduit Requirements due to Correction Orders as a Result of Taxation Investigations, etc
  • (C)Risk of Reduced-Tax Regulation for Acquisition of Real Estate Not Applying
  • (D)Risk Regarding Amendments to General Taxation System

Miscellaneous Risks

  • (A)Risk Regarding Dependency on Professional Opinions
  • (B)Risk that Past Balance of Payments Does not Match the Future Balance of Payments of the Investment Corporation
  • (C)Risk Regarding Investment of Ownership Interests in Silent Partnership (Tokumei-Kumiai)
  • (D)Risk Regarding Investments in Preferred Securities of Specified Purpose Company
  • (E)Risk Regarding Application of Accounting for Impairment of Assets
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