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

Risk Regarding Market Price Fluctuations for the Units and the Bonds
Risk Regarding Market Transactions for the Units
Risk Regarding Distribution
Risk Regarding Fluctuation in Revenue and Expenditure
Risk Regarding Dilution in case of the Issuance of the New Units
Risk Regarding the Treatment of Investment Corporations Pursuant to Laws, Taxation Systems, and Other Systems

Risks Regarding Investment Corporation’s Investment Management Policy

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

Risks Regarding Investment Corporation’s Interested Parties and Structure

Risk Regarding Dependency on the Daiwa Securities Group Inc. and Conflicts of Interest
Risk Regarding Dependency on Investment Corporation’s Interested Parties and Conflicts of Interest
Risk Regarding Dependency on Investment Corporation’s Directors and Asset Manager’s Personnel
Risk Regarding Legal Prohibitive Regulations on Insider Trading
Risk Regarding Changes on Investment Policy
Risk Regarding Bankruptcy of the Investment Corporation or Cancellation of Registration
Risk Regarding Security Deposit and Guarantee Deposit

Legal Risks Regarding Real Estate and Trust Beneficial Interests

Risk Regarding Real Estate Faults or Defects
Risk Regarding Lease Agreement
Risk Regarding Disproportionate Geographical Spread of Real Estate
Risk Regarding Tenant Concentration
Risk of Damaged, Destroyed or Deteriorated Building due to Natural Disaster
Risk Regarding Owner Responsibility and Repair and Maintenance Costs for Real Estate
Risk Regarding Administrative Regulations and Prefectural or Municipal Ordinances for Real Estate
Risk Regarding the Enactment or Amendment of Laws and Regulations
Risk Arising from Seller’s Insolvency
Risk Regarding Sublease
Risk Regarding Master Lease Agreement
Risk Regarding Status of Real Estate Usage by Tenants
Risk Regarding Unit-Owned Buildings
Risk Regarding Co-owned Property
Risk Regarding Property on Leased Land
Risk Regarding Leased Buildings
Risk Regarding Property Under Development
Risk Regarding Harmful Materials
Risk Specific to Real Estate Owned as Beneficial Interests
Risk Regarding Forward Commitment, etc.
Risk Regarding Rent Guarantee Companies

Risks Regarding Taxation

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

Miscellaneous Risks

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