Top REIT Investment Corporation
12th Business Report(Semi-Annual Report 12th)

November 1, 2011 – April 30, 2012

I.

Letter from the Executive Officer of the Investment Corporation

Dear Investors,
Thank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
In the twelfth fiscal period (November 1, 2011 – April 30, 2012) of Top REIT, the Japanese
economy, which had shown signs of production activities, personal consumption and certain
other areas recovering from the initial drop caused by the impact of the Great East Japan
Earthquake and other factors, experienced a sharp downfall under the impact of rapid
appreciation of the yen and the fear of this being prolonged due to the European debt problem
and concerns about the slowdown of the U.S. economy. Entering 2012, however, the economy
showed movement toward picking up due to expansion of post-quake reconstruction demandand correction of the strong yen under the European debt problem gaining composure and the
U.S. economy recovering solidly. Having said this, the course of the economy is unpredictable
for the moment, as the European debt problem has come to the fore again.
In the real estate leasing market in Japan, on the other hand, tenants (operating companies andother entities) have become increasingly conscious of further cost reductions as they face moredifficulty in securing corporate earnings due to the yen’s appreciation trend and intensive pricecompetition with emerging countries. As such, bottoming out in the market is yet to be
confirmed.
Under such circumstances, Top REIT conducted acquisitions of new properties in the twelfth
fiscal period while making it almost certain to solicit successor tenants to Akasaka Oji Building,the top priority issue for the moment, thanks to the management capability of Top REIT AssetManagement Co., Ltd., the asset management company of Top REIT, and through collaboration
with sponsor companies. These endeavors have enabled us to anticipate improvement inrevenues and profits in the fourteenth fiscal period and after. Moreover, Top REIT conductedasset replacement – the first such arrangement of its own – by disposing an office building, thesole property it owned in the Osaka area, to a third party and newly acquiring a residential
property located in central Tokyo.
In terms of performance for the twelfth fiscal period, Top REIT achieved operating revenue of
5,693 million yen (period-on-period decrease of 2.1%) and ordinary income of 2,029 million
yen (period-on-period increase of 2.1%), including capital gains on the disposition of the said
property. Net income reached 1,999 million yen (period-on-period increase of 0.7%) as a resultof internally reserving part of the capital gains on the disposition as reserve for reduction entry,
and Top REIT declared a dividend per unit of 12,577 yen for the twelfth fiscal period.

2

Going forward, the real estate market is expected to stay in a severe condition. Nevertheless, weat Top REIT will remain committed to prudent management of portfolio assets as well as work
to steadily expand the asset size. We thank you and ask for your continued support andunderstanding.

Executive Officer
Top REIT, Inc.
Jumpei Norimatsu

II. Special Feature ―On to the NEXT STAGE

Dear Investors,
Thank you very much for your strong support for Top REIT, Inc. (Top REIT) and our activities.
Representing Top REIT Asset Management Co., Ltd. (TRAM), the asset management company,
I would like to explain the overview of the performance of Top REIT in its twelfth fiscal period(November 1, 2011 – April 30, 2012) and its management strategy for the future.
The recovery of the Japanese economy came to a standstill due to temporarily stagnant
domestic demand after the earthquake and a decrease in exports caused by such factors as the
slowdown in overseas economies, rapid appreciation of the yen, the European debt problem andthe flood damage in Thailand. Since entering 2012, the economy has been gradually picking up
thanks to the correction of the strong yen and the expansion in domestic demand in accordancewith post-quake reconstruction demand becoming full-fledged, and is anticipated to show aclear recovery trend going forward. Nevertheless, given concerns about the European debt
problem and other worries not being allayed, the situation may remain unpredictable.
As for the real estate leasing market in central Tokyo, the vacancy rate will continue to rise until
around summer this year due to the large volume of supply of new office buildings, but isafterward expected to improve at a moderate pace. Meanwhile, though the rate of decrease in3

rent levels for office buildings is decelerating, an upturn is likely to require a substantial
amount of time as companies are yet to see a full-on recovery in earnings.
As we managed the assets of Top REIT in the twelfth fiscal period under such circumstances,
we focused on leasing activities to solicit successor tenants for Akasaka Oji Building, which
was the top priority issue in “Implementing the Strategy for Recovery of Dividend Level”
aimed at improving the dividend level. As a result, vacant floors in the property weresuccessfully leased up except for one floor as of June 14, 2012 (when Top REIT announced its
earnings results). Moreover, for the one floor left vacant, we have already received an
application for lease from one of the candidate tenants, and we are now almost certain about theoutcome of the solicitation activities for successor tenants.
The following sections explain the management performance of Top REIT in the Twelfth fiscal
period and its management strategy for the future.

Nobuhito Endo
President and Representative Director

1. Dividend Bottom Line Improves as a Result of Implementing “Strategy for
Recovery of Dividend Level” – Earnings Accumulate Steadily
For the previous fiscal period (the eleventh fiscal period ended October 31, 2011) and thecurrent fiscal period (the twelfth fiscal period ended April 30, 2012), Top REIT had to post a
period-on-period decrease in dividends because of the impact of such factors as a major tenantof Akasaka Oji Building moving out in September 2011 and major rent revisions in April 2011
resulting in reductions in amount. Under such conditions, the “Strategy for Recovery of
Dividend Level” was prepared in the eleventh fiscal period, which was primarily composed of4soliciting successor tenants for Akasaka Oji Building as early as possible and acquiring newproperties by utilizing cash on hand. Top REIT and TRAM endeavored to accumulate earnings
by steadily implementing this strategy.
As for soliciting successor tenants to Akasaka Oji Building, all five of the tenant companies that
concluded lease contracts moved into the property, leaving only one floor vacant as of theannouncement of the earnings results for the twelfth fiscal period (June 14, 2012). Furthermore,in terms of acquiring new properties, Top REIT acquired three properties in total, which areresidential properties comprised primarily of studio units located in central Tokyo andsurrounding areas, in August and October 2011 and in February 2012, while also acquiring an
office building in central Tokyo in March 2012. Moreover, Top REIT conducted asset
replacement for the first time by disposing Nittetsu Honmachi Building, the sole office building
it owned in the Osaka area, and recorded capital gains of 256 million yen for the twelfth fiscal
period. In addition, management and maintenance of portfolio assets were conducted prudently
and effectively. As a result of these efforts, dividend per unit for the twelfth fiscal period was
finalized at 12,577 yen, and the forecast dividend per unit was announced to be 12,400 yen for
the thirteenth fiscal period ending October 2012, to be set as the bottom line, and 13,000 yen for
the fourteenth fiscal period ending April 2013.

（ yen ）

14,000

Increased dividendbottom line with capitalgains from disposition

13,0 00

1 2,809

12 ,577

12,4 00

1,100

Contribution of profits
throughout period fromnewly acquired
properties in 12th FP

11,000Moved out major tenant of
Akasaka Oji Building

Contribution of profits
throughout period from newly
acquired 2 resident properties

Contribution of profits inearnest due to expirationof free rent period at
Akasaka Oji Building

8,000
11th FP（Ended Oct 31,2011）-Results-

12th FP（Ended Apr 30,2012）-Results-

13th FP（Ending Oct 31,2012）-Forecast-

14th FP（Ending Apr 30, 2013）-Forecast-《 STEP２ 》
・ Leasing activities of Akasaka Oji Building《 STEP１ 》
・ Acquisition of newly 2 resident properties

expected to bear fruit

・ Minimize range of rent reduction on rent

・ Replacement of properties

revision・ Acquisition of office building in Central Tokyo5

(1) Overview of Recovery Strategy and Its Progress and Performance
The recovery strategy Top REIT and TRAM have promoted since the previous fiscal period
consists of the following measures.
1) Solicit successor tenants for Akasaka Oji Building
2) Prudently manage the portfolio properties and further strengthen tenant relations as a means
to defend against further tenant relocations
3) Diligently negotiate with tenants on rent revisions4) Acquire new office buildings in central Tokyo and competitive rental apartments withexcellent locations
Based on the above recovery strategy, the following actions were taken in the previous fiscal
period (the eleventh fiscal period).
・Top REIT acquired Impress Musashi-Koganei located in Koganei City, Tokyo and TOP
Residence Yoga located in Setagaya Ward, Tokyo (total acquisition value: 2.38 billion yen) –two residential properties which, comprised primarily of studio units, offer convenient location
and access and are expected to secure stable occupancy and revenues over the medium-to
long-term.
・As for rent revisions, diligent negotiations with Ito-Yokado Co. Ltd., the tenant of Sagamihara
Shopping Center, resulted in agreement to keep the rent unchanged. This helped the rate ofdecrease in total rents, for the rent revisions scheduled in the eleventh fiscal period, to be
reduced significantly from the planned rate.

(2) Solicitation of Successor Tenants for Akasaka Oji Building – the Top Priority
Issue – Becoming Almost Certain to Succeed
Since the formal notice of terminating lease contract from a major tenant of Akasaka Oji
Building was received in March 2011, focus has been placed on soliciting successor tenants as a
top priority issue for Top REIT and TRAM. Given the Japanese economy becoming
increasingly unstable after the Great East Japan Earthquake, the tenant solicitation activities
were conducted under severe market conditions, with vacancy rates hovering at a high leveleven in central Tokyo and rent levels continuing a downward trend despite the contracting rateof decrease. Successor tenants for two and a half floors were determined on the leasing terms
and conditions initially assumed. Since then, however, leasing activities made little progress

6

because of such reasons as heightened consciousness among firms for further cost reductions
due to an opaque future outlook, decreased advertising rents at competing properties inneighboring areas, and candidate tenants requiring more time to make final decisions as they
investigated multiple properties for their relocation destinations. Considering the opaqueness of
future economic conditions and the leasing market situation, Top REIT judged that solicitationof tenants as early as possible should contribute to recover of its earnings, and madeconcessions on leasing terms and conditions and other requirements to a certain degree. As aresult, lease contracts were concluded with successor tenants for seven and a half floors(approximately 1,740 tsubos) out of eight and a half floors (approximately 2,000 tsubos), andthe successor tenants have already moved in.

ChangeChange ofof Akasaka
Akasaka Oji
Oji Building’s
Building’s Occupancy
Occupancy Rate
Rate
（㎡）

Rentable space

Occupancy rate
100%

8,000

85 .8
80%

6,000

63 .6
60%

45 .7

4,000

40%
2,000

23 .6
1 1 .920%

00%End ofJan. 2012

End ofFeb. 2012

End ofMar. 2012

End ofApr. 2012

End ofMay. 2012

However, requests for so-called “free rent,” meaning no rent will be payable for a period ofaround six months from the time of moving into the property and only common service fees arelevied, remained strong, and granting free rent terms and conditions was unavoidable due tocompetition with other candidate buildings. Accordingly, revenues from Akasaka Oji Building
will be rather limited for the thirteenth fiscal period. However, the property will start to make afull contribution to revenues from the fourteenth fiscal period, when the free rent periods
granted to tenants will sequentially expire. Furthermore, some candidates are investigating leaseof the one floor that remains vacant, and an application for lease has been received from one of
the candidates. Top REIT and TRAM will continue to endeavor to achieve full occupancy of theproperty as soon as possible.

7(3) Top REIT Conducts Its First Asset Replacement
Replacement of assets was conducted in the twelfth fiscal period, the first such arrangement for
Top REIT, by disposing Nittetsu Honmachi Building, the sole office building Top REIT ownedin the Osaka area, to a third party on November 25, 2011, and newly acquiring Top Residence
Nihonbashi Kayabacho, a residential property comprised primarily of studio units located incentral Tokyo, on February 1, 2012.
In the areas surrounding Osaka Station, where ongoing redevelopment plans are scheduled to becompleted one after another in March 2013, there is a heightening possibility of vacant spaces
being generated and the rent levels dropping further due to deterioration in supply-demandbalance associated with the resulting large supply of office buildings. Therefore, Nittetsu
Honmachi Building, which inherently had these risks, was transferred and replaced with aresidential property in central Tokyo, which should be expected for more stable occupancy andearnings. This arrangement has enhanced the stability of Top REIT’s portfolio.
Moreover, there were capital gains on the disposition of Nittetsu Honmachi Building of 256
million yen. For the purpose of enhancing Top REIT’s financial strategy, it has been decided to
implement a reduction entry of part of the capital gains on sale by applying special provisions
for taxation. As a result, 78 million yen was internally reserved in the twelfth fiscal period.

(4) Rent Revisions within an Assumed Range
With the domestic economy appearing to be on a recovering trend but lacking momentum andcorporate earnings having yet to recover, firms are heightening consciousness for further cost
reductions. Under these conditions, negotiations with tenants are becoming more challenging as
they continue to request reductions of rent amount upon rent revisions. As such, reductions inamount were anticipated to a certain degree in the rent revisions conducted in the twelfth fiscal
period with 10 tenants of office buildings. Nevertheless, diligent negotiations resulted inagreements being reached for rent reductions within the assumed range, with rents remaining
flat for seven tenants and being reduced for three tenants.
For the rent revisions in the thirteenth fiscal period as well, negotiations with respective tenants
are expected to be severe. However, since there are only eight tenants of office buildings due forrent revisions and the percentage of their rents to the total rents of the portfolio is rather small at
2.5% (as of the end of the twelfth fiscal period), the impact of the rent revisions on the dividend

8will be limited even though the rent amount is anticipated to be reduced to a certain degree.

(5) Acquisition of Office Building in Central Tokyo
In the current real estate sales market, the situation in which it is difficult to close contracts is
continuing as the volume of information on office buildings for disposal in central Tokyo is low
and the gap in the price perspective (level) of properties between sellers and buyers has not been
narrowed. In such a situation, while Top REIT acquired three residential properties located incentral Tokyo and other areas in 2011 through early 2012, efforts were made to collectinformation on properties for disposal by utilizing the various information channels that
TRAM has built to date, with an aim to acquire office buildings in central Tokyo as raised in the“Strategy for Recovery of Dividend Level.” This led to the acquisition of Shinkawa Chuo
Building located in Chuo Ward, Tokyo, on March 30, 2012.
About four minutes’ walk from Kayabacho Station and about six minutes’ walk from
Suitengumae Station on the Tokyo Metro lines, the Shinkawa Chuo Building features goodtraffic convenience and is close to the office areas of Marunouchi, Otemachi, Yaesu andNihonbashi in central Tokyo, allowing expectations for a variety of needs for office spaces. In
addition, the building was sold by a third party and acquired through bidding by only a limited
number of companies. We believe that Top REIT was able to obtain the preferential negotiatingrights as its bidding price was assessed, before being submitted to the seller, on the assumptionthat a lease contract is concluded with a master-lease company, in which rents are guaranteed
and vacancy is compensated for spaces that were left partially vacant so that rents are collectedeven for vacant spaces to help improve revenues from the property. Thanks to this arrangement,
the occupancy rate of the building stood at 100%, and it was eventually acquired at a pricelower than its appraisal value. The property, with a cap rate that significantly surpasses theaverage cap rate of the entire portfolio, is expected to make contributions to Top REIT’s
revenues. Moreover, since the property actually housed eleven tenants as of the end of thetwelfth fiscal period, the impact on dividend is arguably dispersed even if there should be any
tenant move outs.

92. Top REIT’s Management Policy and Strategy Going Forward
As explained above, the steady implementation of the “Strategy for Recovery of Dividend
Level” has helped to accumulate earnings for Top REIT, and allowed for a revision of theforecast dividend per unit for the thirteenth fiscal period upward to 12,400 yen, as well as
announce the forecast dividend per unit of 13,000 yen for the fourteenth fiscal period whenAkasaka Oji Building will make full contribution to revenues after terminating its free rent
periods.
Nevertheless, it is likely to require a considerable amount of time for the real estate leasing
market to recover and, although the range of rent reductions with respective tenants has been
shrinking, Top REIT will be forced to still see negative internal growth. In order to maintain andimprove the dividend levels in such an environment, it is essential for Top REIT to achieve
external growth by acquiring new properties. Top REIT will continue to implement growthstrategy that is “extensively focused on securing the dividend level.”(1) Projected Performance for the Thirteenth and Fourteenth Fiscal Periods
The following are assumptions on which the projections of performance for the thirteenth andfourteenth fiscal periods are based.
1) Portfolio Assets
The forecast is based on 18 properties owned by Top REIT as of June 14, 2012.
2) Operating Revenue
For real estate rent revenue related to existing properties, Top REIT takes into consideration
execution of new agreements, early termination of agreements, etc. that have been finalized asof June 14, 2012, along with current real estate leasing market conditions, and also takes into
account factors that may cause fluctuations in such aspects as risks of reductions in revenue due
to decreased amounts of rent of tenants when they reach their rent revision period hereafter. For
the tenants of Akasaka Oji Building, the forecast only factors in approximately 1,890 tsubos
being leased out of approximately 2,200 tsubos in the property.
3) Interest-Bearing Liabilities
It is assumed that the balance of interest-bearing liabilities will be 96,970 million yen, and thatthe 17,500 million yen in loans payable due for repayment during the thirteenth fiscal period

10(June 29, 2012) will be fully refinanced and the 9,800 million yen and the 9,300 million yen inloans payable due for repayment during the fourteenth fiscal period (November 30, 2012 andMarch 27, 2013, respectively) will be fully refinanced. Moreover, it is assumed that 67 million
yen of long-term loans payable will be paid in each of the thirteenth and fourteenth fiscal
periods as agreed upon.
4) Dividends per Unit
It is assumed that, with regard to the 78 million yen that was internally reserved in the twelfth
fiscal period from capital gains on the sale of Nittetsu Honmachi Building (256 million yen),which was transferred as of November 25, 2011, by applying “Special Provisions for Taxationin the Event of Advance Acquisition of Land, etc. in 2009 and 2010,” Top REIT will not reverse
the internal reserves during the thirteenth and fourteenth fiscal periods.
The earnings forecasts in 13 th FP and 14 th FP based on assumptions described above are as
following tables.
13TH FISCALPERIODFORECAST

14TH FISCALPERIODFORECAST(ANNOUNCED ON
June 14, 2012)(ANNOUNCED ON

182days184days181days

OPERATING REVENUE￥5,693 million￥5,621 million￥5,670 million

OPERATING INCOME￥2,772 million￥2,631 million￥2,663 million

ORDINARY INCOME￥2,029 million￥1,923 million￥2,016 million

NET INCOME￥1,999 million￥1,922 million￥2,015 million

DIVIDEND PER UNIT￥

CATEGORY

12TH FISCALPERIODPERFORMANCEPERIOD OF ASSETMANAGEMENT

12,577￥

12,400June 14, 2012)￥

13,000NUMBER OF INVESTMENT UNITS

155,000 units

155,000 units

155,000 units

PORTFOLIO SIZE

18 properties

18 properties

18 properties(2) Responses to Major Rent Revisions Scheduled for March 2013
Top REIT is scheduled to have major rent revisions, which occur regularly every two years, inthe fourteenth fiscal period. The major rent revisions becoming due at the end of March 2013
include tenants of Harumi Island Triton Square Office Tower Z and Kanda Nishiki-cho 3-chome
Building as well as part of Harumi Island Triton Square Office Tower Y. The monthly rents of
the relevant tenants are equivalent to approximately 25% of the total monthly rents, and the rent
revisions in the fourteenth fiscal period should have a major impact on the dividends afterward.

11As explained above, the recovery of the real estate leasing market in central Tokyo is stunted. It
is forecasted that, by March 2013, rent levels in central Tokyo will have not yet recovered
although the vacancy rate will get on track to improvement. Given this outlook, the coming rent
revisions are also anticipated to be severe. However, TRAM will diligently conduct negotiations
with relevant tenants by taking advantage of its tenant relations fostered through daily
operations, so that agreements can be reached on rent reductions within the assumed range.

Monthly Schedule of Rent Revision（mn yen）*Based on monthly rent

300

200

30

20

Since the ratio of rent revision in
portfolio is small, the impact of rent
revisions will be limited.

Primarily make effort to negotiate large
scale rent revisions in April 2013.

10

0

May
2012

Jun
2012

Jul
2012

Aug
2012

Sep
2012

Oct
2012

13th FP

Nov
2012

Dec
2012

Jan
2013

Feb
2013

Mar
2013

Apr
2013

14th FP(3) Focus on Solicitation of Successor Tenants for Vacant Spaces
As explained above, we are now almost certain about the achievement of soliciting
successor tenants for Akasaka Oji Building, with only one floor left vacant as of theannouncement of earning results for the twelfth fiscal period, and the occupancy rate of Top
REIT’s office buildings recovering to as high as 99.2% as of the end of May 2012. The
vacant spaces in the office buildings that remain in Akasaka Oji Building and Shiba-Koen
Building totaled approximately 380 tsubos as of the same date. TRAM will continue tofocus on soliciting successor tenants for these vacant spaces, in cooperation with thesponsors and work to coordinate with property management companies in order to realize
full occupancy. Moreover, TRAM will work to improve the occupancy rate of residential
properties as well to secure stable earnings.

12

(4) Acquisition of New Properties in View of the Fifteenth Fiscal Period
Transactions of residential properties are relatively stable but tend to overheat, while theacquisition environment of office buildings in central Tokyo continues to be severe. Thus, thereal estate transaction market as a whole still remains inactive. Given these conditions, even if
the major rent revisions in the fourteenth fiscal period are agreed upon for rent reductions within
the assumed range, as explained in the previous section, it will be necessary to accumulate a
new set of earnings through new property acquisitions in order to cover the amounts of rent
reductions, and to maintain and improve the dividend levels for the fifteenth fiscal period andafter.
Top REIT will adopt the growth strategy and the management policy it has implemented to date,
and aim to acquire properties that should contribute to enhanced earnings of the entire portfolio
by collecting information of properties for disposal, centering on blue-chip office buildings incentral Tokyo and residential properties located in central Tokyo and Tokyo metropolitan areasand including office buildings and other properties well located in other major cities.

3. Strategy for the NEXT STAGE
As explained above, efforts were made during the eleventh and the twelfth fiscal periods torecover the dividend levels by covering the decreases in revenues caused by reductions of rent
amounts through major rent revisions and the move-out of a major tenant from Akasaka Oji
Building. The ongoing “Strategy for Recovery of Dividend Level” is being achieved, as provedby the announcement of the forecast dividend per unit of 13,000 yen for the fourteenth fiscal
period.
To achieve the NEXT STAGE (“expand asset size to 210 billion yen” and “maintain a stabledividend level”) , additional acquisitions of approximately 26 billion yen will be needed in the
future. In the current portfolio, the investment ratio stands at approximately 75% for officebuildings and 25% for properties (retail and residential properties, etc.) other than officebuildings. In conducting additional acquisitions in the future, Top REIT will work to acquire
blue-chip properties that have competitiveness and contribute to enhanced earnings of the entire
portfolio, while maintaining the current investment ratios. To do so, TRAM will utilize theinformation network channel that it has established, as well as the sponsors’ network channels.
As the asset manager for Top REIT, TRAM will continue management with “extensive focus”

13

on the dividend level. Top REIT and TRAM are determined to keep striving for prudent
management and growth of Top REIT’s portfolio, by working to accumulate earnings throughacquisitions of new properties, in addition to securing the base earnings through every possible
measure to manage and maintain existing properties. Your continued understanding and support
is greatly appreciated.

Financial Highlight
Adopting a financial policy that is based on stable financial management, Top REIT hascontinued to implement prudent and solid financial operations.
In the current fiscal period (the twelfth fiscal period), the market interest rate remained stable ata low level due to the Bank of Japan maintaining and continuing its monetary easing policy, andfinancial institutions keeping positive lending attitudes. Under such conditions, Top REIT
refinanced 19,040 million yen in loans payable that became due for repayment on November
2011, and additionally procured 3,000 million yen in borrowings on March 2012 for theacquisition of a new property. These were conducted with the aim of reducing interest rate costs
and extending the average remaining period of interest-bearing liabilities, and implemented as
described in (1) and (2) below. As a result, at the end of the twelfth fiscal period, the totalremaining amount of interest-bearing liabilities stands at 96,970 million yen, and the ratio ofinterest-bearing liabilities to total assets (LTV) is 51.5%.
Moreover, after the end of the twelfth fiscal period (April 30, 2012), a total 17.5 billion yen inloans payable became due for repayment at the end of June and Top REIT completed its
refinancing as described in (3) below. This further extended the average remaining period ofinterest-bearing liabilities to three years and four months as of the end of June.
Short-Term(billion yen)

LTV

Changes in Fund Procurement Status (Debt)

Long-Term

60%

100
47.4
80

10.3
37.1

47.3
9.3

47.3

47.3

13.3

13.3

6.7

6.7

50.6

50.5

50.5

50.7

51.5
50%
40%

37.3

60
27.8

28.0
20.9

40

87.5

2.5

72.7

72.7

68.5

87.5

94.1

94.0

97.0

68.5

30%
20%

54.4
20

33.4

Conduct operation with a target ratio of loans to total assets(LTV) of around 50% in contrast to the 60% ceiling

33.4

33.4

IPO

1st FP 2nd FP 3rd FP 4th FP 5th FP

0

10%
0%

6th FP 7th FP 8th FP 9th FP 10th FP 11th FP 12th FP

14

(1) Implemented refinance of 19.04 billion yen in total in long-term loans payable that
became due for repayment
・Repayment date: November 30, 2011
・All amounts refinanced to long-term loans payable of five years (floating interest rate)(2) Implemented additional borrowing of 3 billion yen in association with the acquisitionof a new property
・Borrowing date: March 30, 2012
・All amounts borrowed with a loan period of four years and seven months (floatinginterest rate)(3) Implemented refinance of 17.5 billion yen in total in long-term loans payable that
became due for repayment
・Repayment date: June 29, 2012
・All amounts refinanced to long-term loans payable of five years (fixed interest rate for8.5 billion yen and floating interest rate for 9.0 billion yen)In these financing activities, Top REIT fully exerted its strengths, successfully realizing thefollowing achievements.
●

Maintained stable bank formation
Top REIT implemented borrowings in syndicated loans with three megabanks and major
trust banks with which Top REIT has conducted business since listing, maintaining stable
relation.

●

Extended average remaining periods of interest-bearing liabilities
The average remaining period of interest-bearing liabilities was two years as of the end of
the eleventh fiscal period (October 31, 2011). In order to extend the remaining period, Top
REIT refinanced 19,040 million yen, which became due for repayment on November
2011, by long-term loans payable (with a loan period of five years), resulting in the period
becoming two years and eleven months at the end of the same month. In addition, Top
REIT additionally borrowed 3,000 million yen for the acquisition of a new property, by
long-term loans payable (with a loan period of four years and seven months), resulting in
the average remaining period of interest-bearing liabilities becoming two years and sevenmonths at the end of the twelfth fiscal period.

15

Furthermore, Top REIT also completed refinance of 17,500 million yen, which becamedue for repayment on June 2012, by long-term loans payable (with a loan period of five
years), resulting in the average remaining period becoming three years and four months asof the end of the same month.
●

Reduced financing costs
The 19,040 million yen due for repayment on November 2011, the 3,000 million yen
newly borrowed on March 2012, and 9,000 million yen out of 17,500 million yen due forrepayment on June 2012, were procured with floating interest rates. Top REIT worked toreduce financing costs by taking advantage of the current status of the market interest rate
remaining stable at a low level while maintaining the ratio of fixed interest rates at around50%. Going forward, Top REIT will investigate raising the ratio of fixed interest rates
while considering factors such as the future trends of the Bank of Japan’s monetary policy
and the lending attitude of financial institutions as well as paying attention to the timingof interest rates starting to rise.

Long-Term
Long-Term

Finance Strategies ~ Extending Borrowing Periods(million yen)
25,000*Scheduled repayment of 67.5 million yen each period between 12th FP and 21th FP

6,700

20,0001,670
15,000

4,908
1,273

9,000

9,800
No. 1 Unsecured
Investment
Corporation Bonds

10,00016,700

3,000
5,000

New
Procurementin
12th FP

19,04017,50011,189
8,500

8,500

6,300

4,000

3,000

1,823

21th FP

22th FP

12th FP

13th FP

14th FP

15th FP

16th FP

17th FP

18th FP

19th FP

20th FP

23th FP

Future Financial Strategy
In its financial policy, Top REIT has placed the ceiling of the ratio of interest-bearing liabilities
to total assets (LTV) at 60%, and targets to set the figure at around 50% in ordinary
management. The LTV was 51.5% at the end of the twelfth fiscal period, reaching a relatively
high level. Among means to lower the LTV level, capital increase generally comes first.

16However, the basic stance of Top REIT in planning and implementing capital increase throughpublic offering of investment units is to make investigations after fully considering the market
conditions, cap rates of properties to be newly acquired and other factors, in order to minimize
the impact of dilution. As such, the decision is heavily dependent on the market conditions.
However, under the situation in which the bottoming out of the real estate market condition is
yet to be confirmed and no positive internal growth can be expected, it is essential for Top REIT
to accumulate earnings by acquiring new properties in order to maintain and improve its
dividends. Therefore, in acquiring new properties in the future, Top REIT will consider the
possibility of temporarily raising LTV slightly by borrowing funds from banks, and selectfinancing methods flexibly through discussions with the market, so that Top REIT can keep its
prudent and solid financial management.

17

I.

ASSET MANAGEMENT REPORT【1】Overview of Asset Management Operation
1. Operating Results and Financial Position
Fiscal period
As of/for six months ended

8th

9th

April 30, 2010

October 31,
2010

10th

11th

12th

April 30, 2011

October 31,
2011

April 30, 2012

(1) Operating results
Operating revenue
mn yen
5,814
6,060
5,967
5,812
5,693
(Of which, rental revenue)
mn yen
5,814
6,060
5,967
5,812
5,437
Operating expenses
mn yen
2,964
3,041
2,995
3,033
2,921
(Of which, expenses related to rental
mn yen
2,405
2,451
2,414
2,479
2,383
business)
Operating income
mn yen
2,849
3,019
2,971
2,779
2,772
Ordinary income
mn yen
2,091
2,204
2,194
1,986
2,029
Net income
mn yen
2,090
2,204
2,157
1,985
1,999
(2) Assets, etc. (end of period)
186,336
185,459
188,407
Total assets
mn yen186,296
186,459(Period-on-period variation)
%
(7.8)
(0.1)
(−0.1)(−0.5)（1.6）
Interest-bearing liabilities
mn yen94,24094,172
94,10594,037
96,97084,41884,24584,259Net assets
mn yen84,28984,438(Period-on-period variation)
%
(0.2)
(0.2)
(−0.0)(−0.2)（0.0）
Unitholders’ capitalmn yen82,26082,26082,26082,26082,260(3) Cash distributions
Total cash distributions
mn yen
2,090
2,204
2,157
1,985
1,949
Dividend payout ratio
%
100.0
100.0
100.0
100.0
97.5
(4) Per unit information
Number of units
units
155,000
155,000
155,000
155,000
155,000
Outstanding
Net assets per unit
yen543,805
544,768
544,632
543,520543,610(Note 2)
Dividend per unit
yen
13,484
14,22013,922
12,80912,577(Earnings distribution per unit)
yen
13,484
14,22013,922
12,80912,577(Distribution in excess of earnings
yen
－
－
－
－
－
per unit)(5) Financial indices
Ratio of ordinary income to%1.2(2.3)
1.2 (2.3)
1.2 (2.4)
1.1 (2.1)
1.1（2.2）
total assets (Note 3)
Ratio of net income to%2.5(5.0)
2.6 (5.2)
2.6 (5.2)
2.4 (4.7)
2.4（4.8）
unitholders’ equity (Note 3)
Ratio of unitholders’ equity to total
44.7
45.2
45.3
45.3
45.4
%
assets
(0.1)
(0.0)
(0.0)
（-0.7）(−3.5)(Period-on-period variation)
LTV
%
50.6
50.5
50.5
50.7
51.5
Rental NOI (Note 4)
mn yen
4,535
4,691
4,639
4,393
4,126
(6) Other referential information
Number of properties at end of period
cases
15
15
15
17
18
Number of tenants at end of period
cases
44
46
46
48
40
(Note 5)2
Total rentable area at end of periodm291,647.88
291,627.72
291,627.72
295,215.03
300,294.23
Occupancy rate at end of period
%
99.2
99.5
99.7
97.3
98.5
(Note 6)
Depreciation and amortization at end
mn yen
1,127
1,081
1,086
1,060
1,072
of period
Capital expenditure at end of period
mn yen
544
83
464
234
442
Note 1: Operating revenue, etc. do not include consumption taxes.
Note 2: Net assets per unit have been rounded to the nearest yen.
Note 3: The indices above are calculated using the following formulas. In addition, annualized figures derived from the management period are
indicated in brackets.
Ratio of ordinary income to total assets ＝ Ordinary income /((Total assets at beginning of period＋Total assets at end of period)/2)×100
Ratio of net income to unitholders’ equity ＝Net income/((Net assets at beginning of period＋Net assets at end of period)/2×100
Note 4: Rental NOI (Net Operating Income) ＝Rental revenue－Expenses related to rental business＋Depreciation and amortization.
Note 5: Number of tenants at end of period indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units are in the same
property and as multiple tenants if the units are in multiple properties.
Note 6: Occupancy rate at end of period＝Total leased floor areas at end of period/Total leasable floor areas at end of period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants have been used as the leased
floor area.
Note 7: Unless otherwise mentioned in the report, fractions of figures not indicated are rounded off for monetary amounts and rounded for ratios.

18

2.Overview of Asset Management Operation for the Twelfth Fiscal Period
A. Brief Background of Top REIT
Top REIT, Inc. (Top REIT) was founded on November 2, 2005 based on the Act on Investment Trusts
and Investment Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co.,
Ltd. (Asset Manager) as the incorporator, and listed on the Real Estate Investment Trust Section of theTokyo Stock Exchange (TSE) (Securities Code: 8982) on March 1, 2006 with the number of investment
units issued and outstanding totaling 145,500 units. Later, Top REIT issued additional investment units(9,500 units) through a third-party allotment on March 23, 2006. As of the end of the twelfth fiscal period(April 30, 2012), the total number of investment units issued and outstanding stands at 155,000 units.
Top REIT works to conduct management with the aim of maximizing the investment value for its unit
holders by securing stable revenues over the medium to long term and achieving steady growth of its
portfolio. To do so, Top REIT focuses on the two strategies of “skilled management of a diversified
portfolio” and “optimal application of the sponsors’ strengths.” As of the end of the twelfth fiscal period,
its portfolio consists of 18properties with a total acquisition value of ¥184,345 million.
B. Investment Environment and Management Performance<Investment Environment>(a) Economy in General
The Japanese economy generally continued to be in severe circumstances, with corporate earnings
worsening due to the impact of the European debt problem, stagnant overseas economies and the rapid
appreciation of the yen, although there were signs of production activities and personal consumption
recovering from the drop after the Great East Japan Earthquake. Entering 2012, however, the economy
has been gradually recovering, supported by the correction in the strong yen and the post-quake
reconstruction demand becoming full-fledged, and is now expected to achieve a moderate recovery
going forward. Nevertheless, the business sentiment is likely to remain unpredictable under the situationin which concerns about further downside risks of the Japanese economy not being wiped out due to theimpact of the instability in overseas economies, including the European debt problem that has not yet
shown any signs of calming.
(b) Real Estate Leasing Market[Office Buildings]
After having hovered at a high level, the vacancy rate in the office building leasing market in central
Tokyo started to show signs of improvement due to comparatively inexpensive rents and theearthquake-induced demand for large-scale quality buildings boasting high earthquake resistance
performance or those equipped with emergency power systems, etc. However, the vacancy rate still
remains high, with the large volume of supply of new buildings in the first half of this year causing tosurface the problem of after-relocation vacancy. Moreover, rent levels have remained on the downside,
though the range of decrease in rent levels is gradually decelerating, as companies continue to reduce
costs due to the unpredictability of corporate earnings and the competition of soliciting tenants is
intensifying. Recovery in the rent levels is thus likely to require a substantial amount of time.
[Retail Properties]
The decrease in new supply of large-scale retail properties has helped to improve the supply anddemand balance, and consumer confidence which had dropped after the earthquake is gradually
recovering. Personal consumption has continued to steadily reflect seasonal factors and politicalmeasures. Under such circumstances, large retailers have implemented structural reform of their storesand focused on reforming sales space by utilizing specialty stores inside and outside of their groups, aswell as working to develop private brand products and strengthening sales efforts, in order to improveearnings. On the other hand, the population decline and other factors are expected to cause the domestic
retail market to shrink in size and further intensify competition among retailers. As such, future trendsof major retailers need to be closely monitored.
19

[Residential Properties]
In the rental residential properties market in central Tokyo and surrounding metropolitan areas, thenumber of households has shown an upward trend due to population influx from other areas and theincrease of households comprising singles or married couples alone. In this situation, the number ofhouseholds living in condominiums has increased due to the prevailing preference of focusing onconvenience of living and proximity to central Tokyo. On the supply side, meanwhile, since the numberof housing starts has remained at a low level, the supply and demand conditions in the residence leasing
market in central Tokyo and surrounding metropolitan areas are relatively favorable. In addition, while
such condominiums as those primarily comprising highly convenient studio units have secured
relatively steady occupancy rates and stable rent levels, the rent levels of properties in high rent zones,
such as those for foreign business people, have continued to be adjusted.
(c) Real Estate Transaction Market
J-REITs have continued to implement capital increase through public offerings, and financial
institutions have maintained positive lending attitude, keeping the financing environment comparatively
favorable. Under these conditions, such players as J-REITs and private placement funds show strong
willingness to invest in real estate, creating a trend of gradual recovery in the number of transactions
from the drop after the earthquake. Buyers continue to have severe price perspectives, however,reflecting the current status of the real estate leasing market, while sellers expect the economy and thereal estate market conditions to recover as well as enjoy the favorable financing environment. This has
not allowed the gap in the price perspective between sellers and buyers to narrow, and the supply anddemand situation of blue-chip properties, etc. has remained tight. Accordingly, the recovery in the realestate transaction market is only limited.
<Asset Management Performance >(a) Acquisition and Disposition of Assets
Top REIT began the twelfth fiscal period with 17 properties (total acquisition value: ¥177,435 million)
and, with an aim to acquire highly competitive and highly profitable properties, investigated possible
acquisition of properties based on information collected and carefully selected with a focus on excellent
office buildings located in central Tokyo and residential properties located in central Tokyo and Tokyo
metropolitan areas through not only the “optimal application of sponsors’ strengths,” but also utilizing
established information channels. As a result, Top REIT acquired Shinkawa Chuo Building (acquisition
value: ¥5,610 million) located in Chuo Ward, Tokyo, on March 30, 2012. Moreover, in order to enhance
the stability of its portfolio, Top REIT conducted asset replacement – the first such arrangement of its
own – by disposing Nittetsu Honmachi Building (transfer value: ¥1,300 million), the sole property it
owned in the Osaka area, to a third party on November 25, 2011 and newly acquiring Top Residence
Nihonbashi Kayabacho (acquisition value: ¥2,400 million), located in Chuo Ward, Tokyo, on February 1,
2012. Top Residence Nihonbashi Kayabacho may be expected to have stable occupancy and earnings.
Thus, the number of properties owned by Top REIT expanded to 18 properties (total acquisition value:¥184,345 million) as of the end of the twelfth fiscal period.
(b) Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT centers on sustaining and increasing revenue overthe medium to long term by maintaining and improving tenant satisfaction (the “Tenants First” policy)
and keeping operational management costs at an appropriate level. Top REIT strived to improve tenantsatisfaction by sustaining relationships of trust with tenants and discerning tenant needs via property
management companies in order to maintain and improve high occupancy rates. In particular, Top REIT
placed top priority on soliciting successor tenants to Akasaka Oji Building and focused on tenantsolicitation activities during the fiscal period. Despite the severe real estate leasing market conditions,such activities successfully led to conclusion of lease agreements with new successor tenants. As of theend of the twelfth fiscal period, there is only one floor left vacant in the property, and Top REIT is now
almost certain about its lease-up. As a result of such undertakings, the period-end occupancy rate of Top
REIT’s entire portfolio increased to 98.5% from the 97.3% at the end of the eleventh fiscal period.
20Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of theoperational management conditions and steady implementation of asset management plans for each
property. Top REIT also carried out renewal construction and repair work that contribute to enhancing
the competitiveness of properties and maintaining and improving the functionality of properties basedon asset management plans, took steps to keep relevant costs at an appropriate level, as well as
conducted efficient management of resources.
C. Procurement of Funds
Top REIT procures funds by adopting a financial policy that is based on stable financial management.
In the twelfth fiscal period, ¥19,040 million in borrowings due for repayment on November 30, 2011,
and Top REIT refinanced it by long-term loans (repayment date: November 30, 2016) on the same datein order to extend the remaining period of interest-bearing liabilities. Top REIT also repaid ¥67 million
in the long-term loans payable as agreed upon using cash on hand on December 30, 2011. Moreover,on March 30, 2012, Top REIT newly procured ¥3,000 million through long-term loans payable(repayment date: October 31, 2016) in order to partly fund the acquisition of Shinkawa Chuo Building.
As a result, at the end of the twelfth fiscal period, the total amount of interest-bearing liabilities stands at¥96,970 million (¥88,470 million in long-term loans (including the current portion) and ¥8,500 million
in investment corporation bonds), and the ratio of interest-bearing liabilities to total assets is 51.5%.
Moreover, the ratio of long-term interest-bearing liabilities (including the current portion) is 100%,
while interest-bearing liabilities with fixed interest rates occupy 51.5%.
The credit ratings of Top REIT as of April 30, 2012 are as follows:
Credit rating agency
Moody’s Japan K.K.
(Moody’s)
Rating and Investment Information,
Inc. (R&I)

Rating [Outlook]
Issuer rating: A3 [Negative]
Senior unsecured long-term rating (No 1 Unsecured
Investment Corporation Bonds): A3 [Negative]
Issuer rating: AA– [Stable]
Unsecured investment corporation bond rating: AA–

Note: Moody’s Japan K.K. downgraded the issuer rating and the senior unsecured long-term rating of Top REIT to
Baa1 [rating outlook: Negative] as of May 9, 2012.

Moreover, Top REIT conducted shelf registration for investment corporation bonds, as indicated below,
in order to secure flexible procurement of long-term funds.
[Overview of shelf registration]
Object of shelf registration
Investment(excluding
bonds)

corporation
bonds
short-term corporation

Amountto be issued¥100,000 million

Scheduled period of
issue
From May 20, 2012 to
May 19, 2014

D. Business Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded the asset
management performance during the twelfth fiscal period of ¥5,693 million in operating revenue, ¥2,772
million in operating income and ¥2,029 million in ordinary income after deducting expenses concerning
borrowings, etc. and net income was ¥1,999 million.
As for dividends, Top REIT has the aim of having an amount equivalent to profit dividends deducted as
expenses based on application of the special provision on taxation of investment corporations (Article
67-15 of the Act on Special Measures Concerning Taxation [Act No. 26 of 1957, as amended; hereinafter,
the “Special Taxation Measures Act”]). Moreover, in order to reinforce its financial standings, Top
REIT applied for the Special Measures in Case Land or Other Property is Acquired in Advance in 200921

or 2010 (Special Taxation Measures Act, Article 66-2) to reserve part of its unappropriated retained
earnings as reserve for reduction entry, and decided to distribute nearly all of the unappropriated retained
earnings (excluding fractions of the dividend per investment unit that are less than ¥1) after deducting thesaid reserve for reduction entry. Consequently, Top REIT declared a dividend per investment unit of¥12,577.
3. Balance of Paid-in Capital
There was no change in paid-in capital for the 11th fiscal period. The outline of changes in paid-in capitalfrom the establishment of Top REIT to the end of the current fiscal period is as follows:
Issue date

Remarks

Total number of units
issued and outstanding(units)Increase
Balance

Total paid-in capital(million yen)

Note

Increase
Balance
Incorporation
November 2, 2005
200
200
100
100
Note 1(private)
February 28, 2006
Public offering
145,300
145,500
77,117
77,217Note 2
March 23, 2006
Third party allotment
9,500
155,000
5,042
82,260Note 3Note 1: Top REIT was established with initial capital of ¥500,000 per unit.
Note 2: New investment units were issued at a price of ¥550,000 per unit (issue value of ¥530,750 per unit)
through a public offering in order to raise funds for acquiring new properties.
Note 3: New investment units were issued at a value of ¥530,750 per unit through a third party allocation to raise
funds for acquired properties.

Market Price of Investment Units
The market price of the investment units on Tokyo Stock Exchange REIT Market during respective fiscal
periods is as follows:
Fiscal period
8th
9th
10th
11th
12th
As of the end of fiscal
April, 2010
October, 2010
April, 2011
October, 2011
April, 2012
periodHighest price494,500yen
489,000yen
567,000yen
490,000yen
484,000yen
Lowest price358,000yen
388,000yen
410,000yen
384,000yen
333,000yen

4. Cash Distribution
The dividend per unit for the current period was 12,809yen. Top REIT expects to distribute almost all
unappropriated retained earnings at the current period end to be eligible for special tax treatments (Special
Taxation Measures Law Article 67-15) that allows Top REIT to deduct an amount equivalent to distributions ofretained earnings as expenses from taxable income.
Fiscal period
8th
9th
10th
11th
12th
Units
As the end of fiscal
October,
October,
April, 2010
April, 2011
April, 2012
period2010
2011
Unappropriatedthousand
2,090,112
2,204,126
2,157,918
1,985,468
1,999,419
retained earnings
yen
thousandInternal reserves
92
26
8
73
49,984yen
thousand
Total dividends
2,090,020
2,204,100
2,157,910
1,985,395
1,949,435
yen(Dividend per unit)(yen)(13,484)(14,220)(13,922)(12,809)(12,577)
Of which, dividend of
thousand
2,090,020
2,204,100
2,157,910
1,985,395
1,949,435
accumulated earnings
yen(Per unit)(yen)(13,484)(14,220)(13,922)(12,809)(12,577)
Of which, repayment
thousand－－－－－of paid-in capitalyen(Per unit)
(yen)
－
－
－
－
－

22

5. Management Policy and Future Issues(a) Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction (the“Tenants First” policy) and keeping operational management costs at an appropriate level. Under thisstrategy, Top REIT will focus on sustaining relationships of trust with tenants and leasing vacant spaces,
etc. and striving to maintain stable occupancy rates over the medium to long term. Furthermore, Top
REIT will also work to ensure an appropriate perception of the operational management conditions foreach property while steadily implementing such measures as to sustain and improve revenues and keep
operational management costs at an appropriate level. In addition, Top REIT will carry out systematic
repair work and such to enhance the competitiveness of properties and to maintain and improve thefunctionality of properties, in an aim to secure stable revenues over the medium to long term.
(b) Investment Strategy for New Properties
Top REIT aims to increase its dividends over the medium to long term by realizing external growththrough acquisitions of new properties. Along with continuing to further utilize pipeline support
functions from sponsor companies and utilizing various cultivated information channels, Top REIT willcollect information on new properties from a wide range of sources. Based on this information, Top
REIT will consider investment targets centering on highly competitive office buildings in central Tokyo
including residential properties that are expected to have stable occupancy among office buildings, retailproperties, residential properties and other asset classes. By doing so, Top REIT aims to expand theportfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. For reference,
the acquisition value of the NEC Head Office Building accounts for 22.8% of the total acquisition valueof Top REIT’s properties as of the end of the twelfth fiscal period. Going forward, Top REIT will work
to reduce the risk of concentration on specific properties by steadily advancing further external growth.
(c) Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation or acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk involved in fundprocurement by extending borrowing periods and spreading out the repayment dates. At the same time,
Top REIT will manage the risk of interest rate fluctuations by taking into account the balance ofborrowings at floating and fixed interest rates, as it discerns the interest rate trends. Moreover, financial
soundness will be maintained by keeping the leverage at an appropriate level.
(d) Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager so that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.
6. Significant Subsequent Events
There is non applicable.

23

【2】Outline of Top REIT
1. Status of Unitholders’ Capital
Fiscal period

8th

As of the end of fiscal period

April, 2010

Number of issuable investment units (units)
Number of units issued and outstanding(units)Unitholders’ capital (million yen)
Number of unitholders

2,000,000

9th
October,
2010
2,000,000

10th
2,000,000

11th
October,
2011
2,000,000

12thApril,
2012
2,000,000

155,000

155,000

155,000

155,000

155,000

82,2606,879

82,2606,830

82,2607,090

82,2607,031

82,2606,912

April, 2011

2. Matters Concerning the Investment Units
Major unitholders as of April 30, 2012 were as follows:
Number of units held
(units)Japan Trustee Services Bank (trust account)
30,973
Nomura Trust and Banking (investment trust account)
9,962
The Master Trust Bank of Japan (trust account)
6,181
North Pacific Bank, LTD.
6,139
Trust & Custody Services Bank (securities investment trust account)
6,059
The Senshu Ikeda Bank, Ltd.
4,540
American Life Insurance Company GA Company JPY
4,000
NOMURA BANK (LUXEMBOURG) S.A.
3,634
The Fuji Fire and Marine Insurance Company, Limited
3,465
Sumitomo Mitsui Trust Bank, Limited.
3,176
Nippon Steel City Produce, Inc.
3,162
Oji Real Estate Co., Ltd.
3,162
Trust and Custody Services Bank (money trust tax account)
2,884
The Gibraltar Life Insurance Co., Ltd.
1,780
The Minami Nippon Bank, Ltd.
1,550
Total
90,667
Note: The share of total is calculated by rounding to the second decimal place.
Name

Share of total(%) (Note 1)
19.98
6.43
3.99
3.96
3.91
2.93
2.58
2.34
2.24
2.05
2.04
2.04
1.86
1.15
1.00
58.49

3. Officer and Auditor
A: Name of directors and auditor as of April 30, 2012 were as follows:
Post

Name

Jumpei Norimatsu(Note 1)
Yasuyuki Kuribayashi
Supervisory Director(Note 1)

Major additional post

Total amount of fee paid
during the current period(thousand yen)

Auditor, Sumitomo Mitsui Trust
2,700
General Service Co., Ltd. (Note 2)Partner
Attorney,City-Yuwa
1,800
Partners (Note 3)
Managing
Partner,
Tsuneyama
Certified Public Accountants OfficeKunio Tsuneyama
Supervisory Director
1,800Managing Partner, Tsuneyama Sogo
(Note 1)
Accountants Office(Note 3)
Accounting Auditor KPMG AZSA & Co.
10,000－Note 1: There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
Note 2: The Sumishin Shinko Company Limited merged with CMTB Facilities Company, Limited on April 1,2012 and CMTB Facilities Company, Limited ( surviving company of the absorption-type merger)changed its corporate name to Sumitomo Mitsui Trust General Service Co., Ltd on the same date.
Note 3: Although Supervisory Directors may have additional posts in entities other than those listed above, there
is no conflict of interest between those companies including those listed above and Top REIT.
24
Executive Officer

Note 4: There was no resignation or dismissal of the Officer and Auditor during the current period.

B: Policy on determination of dismissal and denial of reappointment of accounting auditor
The Board of Directors shall decide after taking various factors into consideration.
4. Asset Manager, Asset Custodian and Administrative Agents
Asset manager, etc. as of April 30, 2012 were as follows:Business
Asset manager
Assets custodian services
Administrative agent services (running of theorganization, accounting matters, etc.)
Administrative agent services (unitholders’ register,
special accounts)
Administrative agent services (investment corporation
bonds)

Company name
Top REIT Asset Management Co., Ltd.
Sumitomo Mitsui Trust Bank Limited.
Sumitomo Mitsui Trust Bank Limited.
Sumitomo Mitsui Trust Bank Limited.
Sumitomo Mitsui Trust Bank Limited.

【3】 Status of Investment Assets
1. Composition of Assets

Type ofassetsAsset class

Officebuildings

Area

Central Tokyo
Subtotal
Central Tokyo
Tokyo
Metropolitan
OfficeAreabuildings
KansaiSubtotal
Tokyo
Metropolitan
RetailReal estate facilities
Area
in trust
Subtotal
Central Tokyo
Tokyo
Residential
Metropolitan
Area
Subtotal
Central Tokyo
OthersSubtotal
Subtotal of real estate and real estate in trust
Cash, deposits and other assets
Real estate

11th
As of October 31, 2011
As a
Total amountpercentage of
owned
total assets(million yen)(%)
(Note 1)
(Note 2)
5,890
3.2
5,890
3.2
121,804
65.7

12th
As of April 30, 2012
As a
Total amountpercentage of
owned
total assets(million yen)(%)
(Note 1)
(Note 2)
5,882
3.1
5,882
3.1
127,291
67.6

1,746

0.9

1,712

0.9

1,003
124,554

0.5
67.1

―
129,004―
68.5

23,54012.7

23,406

12.4

23,540―12.7―

23,406
2,478

12.4
1.3

18,057

9.7

17,937

9.6

18,057
9.7
20,415
10.9
2,701
1.5
2,695
1.4
2,701
1.5
2,695
1.4
174,74594.2
181,405
96.3
10,714
5.8
7,001
3.7
185,459
100.0
188,407
100.0
Total assets (Note 3)(174,745)(94.2)(181,405)(96.3)
Note 1: Total amount owned is based on the amounts appropriated on the Balance Sheet at the end of each period.
(Real estate and real estate in trust represent the book values after deducting depreciation). Total Amountfigures were rounded down to the nearest million yen.
Note 2: (Total amount owned) As a percentage of total assets is rounded to first decimal place.
Note 3: Figures in parenthesis of total assets represent the portions of actually owned properties in the object
assets.

25

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

Chiyoda, Chuo, Minato, Shibuya, Shinjuku―
and Shinagawa Wards

Tokyo
Metropolitan
Area

Tokyo
(excluding
centralTokyo),―
Kanagawa, Saitama and Chiba Prefectures

KansaiRegional economic zone centering on Osaka, Kyoto, Hyogo,
Osaka
Wakayama Prefectures

ChukyoMajor cities
Across thecountry

Shiga,

Regional economic zone centering on
Aichi, Gifu and Mie Prefectures
NagoyaCities designated by government ordinanceand other major cities (excluding cities ―
belonging to the above classifications)

26

Nara

and

2. Major Properties Owned
The principal properties (top ten properties by book value) that Top REIT owns as of April 30, 2012 wereas follows:
Property nameBook value

(m2)

(m2)

(%)

43,00072,238.03

72,238.03

100.0

25.2

Office30,997

23,219.46

23,219.46

100.0

23.8

Office19,807

10,914.20

10,914.20

100.0

7.4

Office12,785

8,025.65

8,025.65

100.0

8.1

Office11,411

61,763.28

61,763.28

100.0

7.5

Retailproperty

10,307

11,357.44

10,558.90

93.0

4.3 Residential

9,834

7,301.15

4,643.84

63.6

1.0

Office7,994

51,098.42

51,098.42

100.0

4.3

Retailproperty(Real estate)

5,882

3,060.43

2,836.19

92.7

2.0

Office(Trustbeneficiaryinterest)

5,773

6,032.24

6,032.24

100.0

0.7

Office157,795

255,010.30

251,330.21

98.6

84.4

(million yen)
NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Harumi Island
Triton Square
Office Tower Z
Kanda
Nishiki-cho
3-chome Building
Sagamihara
Shopping Center
Fukasawa House
Towers H&I
Akasaka Oji
Building
Ito-Yokado
Higashi-Narashino StoreShiba-Koen
Building
Shinkawa
Building

Chuo
Total

Leasable floor Leased floor Occupancy Portion of
space
space
rate
rental(Note 1)
(Note 2)
(Note 3)revenue Primary use(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(%)

Note 1: Leasable floor space is total leasable space for each asset as of the end of the current period. Furthermore, in the case ofco-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leasable floor space of thewhole building by the ratio of co-ownership, and rounded to the second decimal place.
Note 2: Leased floor space is floor space based on lease agreements effective as of the end of the current fiscal period.
Furthermore, in the case of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying theleased floor space of the whole building by the ratio of co-ownership, and rounded to the second decimal place. In thecase of contracting the master-lease agreements as pass-through type, the floor space subleased to end-tenants is
calculated as the leased area.
Note 3: Occupancy rate is the figure given by dividing leased floor space as of the end of the current fiscal period by leasable
floor space, and rounded to the first decimal place.

27

3. Details of Portfolio Properties① Details of Properties

Asset class

A. The details of properties owned by Top REIT as of April 30, 2012 were as follows:

Area

Property name

Address

Type of title

Appraisalvalue at endof 12thperiod(million yen)

(Note 1)

Residential

Retail property

Office building

NEC Head Office
Building
Harumi Island Triton
Square Office Tower
Y
AkasakaOji
Building
Kanda Park PlazaCentral Tokyo

Shiba-Koen
Building
Harumi Island Triton
Square Office Tower
Z
Kanda Nishiki-cho
3-chome Building
Shinkawa
Chuo
Building

Tokyo
Metropolitan
Faret East Building
Area
Subtotal (9 Properties)
Sagamihara
Shopping
CenterTokyo
Ito-Yokado
Metropolitan
Higashi-Narashino
Area
Store
Musashiurawa
Shopping Square
Subtotal (3 Properties)
Top
ResidenceCentral Tokyo Nihonbashi
Kayabacho
Fukasawa
House
Towers H&I
Ecology Toyosu
Tokyo
Procentury
Metropolitan
Impress
Area
Musashi-Koganei
Top Residence Yoga

5-7-1 Shiba, Minato Ward,Tokyo
1-8-11 Harumi, Chuo Ward,
Tokyo

Trust
beneficiaryinterest
Trust
beneficiaryinterest

8-1-22 Akasaka, Minato
Ward, Tokyo
2-2-2 Kajicho, Chiyoda
Ward, Tokyo
3-5-5 Shiba, Minato Ward,Tokyo
1-8-12 Harumi, Chuo Ward,
Tokyo

Trust
beneficiaryinterest
Trust
beneficiaryinterest

3-11-1, Kanda Nishiki-cho,
Chiyoda Ward, Tokyo
1-17-24, Shinkawa Chuo
Ward, Tokyo

Trust
beneficiaryinterest
Trust
beneficiaryinterest

2-34-7
Akebonocho,
Tachikawa City, Tokyo

Trust
beneficiaryinterest

3-13-33 Kobuchi, Minami
Ward, Sagamihara City,
Kanagawa
7-3-1 Higashi Narashino,
Narashino City, Chiba

Trustbeneficiaryinterest
Trust
beneficiaryinterest

7-3-1,
Bessho,MinamiWard, Saitama City, Saitama

Trustbeneficiaryinterest

3-4-1,
Nihonbashi
Kayabacho, Chuo Ward,Tokyo
2-1-2 Fukasawa, Setagaya
Ward, Tokyo
4-8-8 Toyosu, Koto Ward,Tokyo
4-14-18 Nakamachi Koganei
City Tokyo,
1-14-12 Tamagawadai,
Setagaya Ward, Tokyo

Other
Total

(18 Properties)OAK PLAZA

2-10-6 Kanda Awajicho,
Chiyoda Ward, Tokyo

Subtotal (1 Property)(million yen)

49,45043,00036,40030,997

9,080

9,834

4,930

5,092

Real estate

3,420

5,882

Trust
beneficiaryinterest

14,30019,807

14,10012,785

5,790

5,773

2,390

1,712

139,860

134,887

10,40011,411

5,620

7,994

Trust
beneficiaryinterest
Trust
interest
Trust
interest
Trust
interest
Trust
interest

beneficiary
beneficiary
beneficiary
beneficiary

Subtotal (5 Properties)
Central Tokyo

Book value
atend of 12th
periodTrustbeneficiaryinterest

3,860

4,000

19,88023,406

2,550

2,478

6,950

10,307

4,880

5,075

1,280

1,307

1,150

1,247

16,81020,415

2,450

2,695

2,450

2,695

179,000

181,405

Note 1: For “Appraisal value at end of period,” Top REIT indicates the assessed value based on the appraisal by real estateappraisers following the asset evaluation method and standards stipulated in Top REIT’s Articles of Incorporation andrules of The Investment Trusts Association, Japan (based on real estate appraisal reports prepared by Tanizawa Sogo
Appraisal Co, Ltd; Japan Real Estate Institute and Daiwa Real Estate Appraisal Co, Ltd) as of April 30, 2012 as the pointsof evaluation.

28

Operating results for each fiscal period of each property owned were as follows:

Area

Asset class

B.

Name of property

Eleventh Fiscal Period

Twelfth Fiscal Period

From May 1, 2011
to October 31, 2011

From November 1, 2011
to April 30, 2012

Number ofOccupancy

tenantsrate- real estaterevenue totenantsrate- real estaterevenue to(end of(end of(for period)

total rental(end of(end of(for period)

total rental

period)period)revenues

period)period)Rent revenue Ratio of rental Number ofOccupancy Rent revenue Ratio of rental

revenues(Note 2)
(Note1)(%)(Note 2)

(million yen)(%)

(Note1)(case)
NEC Head Office
Building(%)(million yen)(%)(case)

1

100.0

1,370

23.6

1

100.0

1,370

25.2

7

100.0

1,296

22.3

7

100.0

1,294

23.8

2

11.9

460

7.9

4

63.6

54

1.0

10

100.0

179

3.1

10

100.0

174

3.2

2

92.7

108

1.8

2

92.7

107

2.0

1

100.0

7.0

1

100.0

7.4

1

100.0

7.7

1

100.0

8.1

―

―

―

―

1

100.0

34

0.7

1

95.0

159

2.8

1

100.0

153

2.8

12

100.0

98

1.7

―

―

13

0.3

4,526

77.9

28

98.0

4,050

74.5

Harumi Island
Triton Square
Office Tower Y

Office building

Central Tokyo

Akasaka Oji
Building
Kanda Park Plaza
Shiba-Koen
Building
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo

KansaiTokyo
Metropolitan
Area

Building

Faret East Building

Nittetsu Honmachi
Building (Note 3)

Tokyo Metropolitan
Area

Retail property

Subtotal (10 properties)
Sagamihara
Shopping Center

37

95.0

2

100.0

407

7.0

2

100.0

407

7.5

1

100.0

236

4.1

1

100.0

236

4.3

3

100.0

129

2.2

3

100.0

129

2.4

6

100.0

772

13.3

6

100.0

772

14.2

―

―

―

―

1

96.8

42

0.8

1

94.3

236

4.1

1

93.0

235

4.3

1

97.6

161

2.8

1

94.4

159

3.0

1

91.8

17

0.3

1

94.5

44

0.8

1

92.0

3

0.0

1

89.2

36

0.7

4

95.0

418

7.2

5

93.8

519

9.6

Ito-Yokado
Higashi-NarashinoStore
Musashiurawa
Shopping Square

CentralTokyo

Top Residence

Residential
Tokyo
Metropolitan
Area

Subtotal (3 properties)

Fukasawa House

Nihonbashi
Kayabacho
Towers H&I
Ecology Toyosu
Procentury
Impress
Musashi-Koganei
Top Residence
Yoga

Subtotal (5 properties)

29

Central
Tokyo

Other

OAK PLAZA

1

100.0

94

1.6

1

100.0

94

1.7

Subtotal (1 property)

1

100.0

94

1.6

1

100.0

94

1.7

48

97.3

5,812

100.0

40

98.5

5,437

100.0

Total (19 properties)

Note 1: Number of tenants indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if theunits are in the same property and as multiple tenants if the units are in multiple properties.
Note 2: Rent revenue for Harumi Island Triton Square Office Tower Z and Kanda Nishiki-cho 3-chome is not disclosed due tobeing unable to obtain the consent of the tenants. Moreover, rental revenue of Nittetsu Honmachi Building does notinclude its capital gains from disposition of the property.
Note 3: This property was disposed to the third party on October 25, 2011.

② Details of Investment Securities
There are none applicable.
4. Contracted Amount and Market Price of Specified Transactions
The contracted amount and market price of the specified transactions of Top REIT as of April 30, 2012were as follows:
Contract amount (Note 1) (Note 2)
Segment

Type of transaction

Longer than a year

Transaction other Than Interest-rate swap
market transaction(receiving floating-rate, Paying fixed-rate)

33,50018,700(Million yen)
Market price(Note 1)
(Note 3)
(313)

Total
33,50018,700(313)
Note 1: The above figures are rounded down to the nearest million yen.
Note 2: Contract amounts of interest-rate swap transactions represent figures based on the estimated principal.
Note 3: Market price is evaluated at the price calculated by the counterparty of the concerned transaction contract based on theprevailing market rate.

5. Status of Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the “3-① Details ofPortfolio Properties.” There were no significant specified assets that are main investment targets of Top
REIT other than those listed above as of April 30, 2012.
6. Status of Assets by Country and Region
There are none applicable.

30

【4】Capital Expenditures for Properties Owned(1) Schedule of Capital Expenditures
The table below lists the estimated amounts of significant capital expenditures for repair andmaintenance work of properties held by Top REIT, planned as of April 30, 2012.
The estimated construction costs shown in the table below include those charged to expenses inaccounting.

Name of property

Location

Scheduled term forconstruction or
maintenancePurpose

Chuo Chuo Ward, Renewal of common
Tokyo
spaceｓChiyodaRenewal of external
OAK PLAZA
Ward, Tokyo wall and ceiling
Shinkawa
Building

May 2012 toJune 2012
June 2012 to
October 2012

Estimated construction cost
(million yen)
Payment Total of
Total
for theadvanceperiodpayment
30

―

―

69

―

―

(2) Capital Expenditures Made During the Period
The following table is an overview of construction work conducted during the fiscal period that fallunder the category of capital expenditures for properties held.
Capital expenditures during the fiscal period amounted to ¥442 million and combined with ¥80
million in repairs and maintenance costs that fall under expenses for the fiscal period, a total of ¥523
million of construction work was implemented.

Name of property

Location

PurposeConstruction ofsnow melting snow
deviceNEC Head Office
Building

Renewal of Gondola

Minato Ward,Tokyo

Renewal of lighting
SystemRenewal of highpressure electric
equipment
Establishment of
power board
electricity meter
Renewal of
feed pump
Renewal ofcooling tower
Renewal ofheat source pump
Renewal of air
Condition facility
Renewal of
Refrigerator
Renewal of central
monitor system
Renewal of
ITV equipment

31

CapitalScheduled term for
expenditures
construction or maintenance(million yen)
May 2011 toMarch 2012
May 2011 toMarch 2012
May 2011 toMarch 2012

33
44
24

May 2011 toMarch 201213

May 2011 toMarch 201214

May 2011 toMarch 2012
May 2011 toMarch 2012
May 2011 toJanuary 2012
May 2011 toJanuary 2012
May 2011 toMarch 2012
May 2011 toMarch 2012
May 2011 toMarch 2012

11
27
20
43
46
42
17

Subtotal
Sagamihara
Shopping Center

Minami Ward,
Renewal of restroom
Sagamihara
Equipment
City, Kanagawa

OthersRenewal of function

337
February 2012 toApril 201230

November 2011 to April
2012

74

Total

442

(3) Funds Reserved for the Long-term Repair and Maintenance Plan
(Million yen)

Fiscal period

Balance of reserved funds at
beginning of current period
Amount reserved during thecurrent period
Amount used from reserved
funds during the current
periodBalance carried forward to
the next period

8th
From
November 1,
2009
to April 30,
2010

9th
From May 1,
2010 to
October 31,
2010

10th
From
November 1,
2010
to April 30,
2011

11th
From May 1,
2011
to October 31,
2011

12th
From
November 1,
2011
to April 30,
2012

647

346

530

330

443

195

197

197

197

197

496

13

396

84

292

346

530

330

443

347

【5】Condition of Expenses and Liabilities(1) Details of Expenses Related to Management(Million yen)

Fiscal period
Item

11th
From May 1, 2011
to October 31, 2011(a) Asset management fees (Note)(b) Asset custodian fees and administrative

12th
From November 1, 2011
to April 30, 2012
424

409

72
71
service fees(c) Directors’ compensation
66(d) Audit fees1010(e) Other expenses
40
41
Total
553
538
Note: In addition to the amounts described above, asset management fees consisted of ¥11 million in 11th fiscal
period and ¥40 million in 12th fiscal period in association with the acquisition of new properties recorded asbook value of the respective properties. Moreover, asset management fees consisted of ¥3 million in 12th
fiscal period in association with the disposition of property recorded as capital gains on disposition.

32

(2) Status of Borrowings
Status of borrowings from respective financial institutions as of April 30, 2012 is as follows.
Category
LenderDateborrowed

Current Portion of Long-Term Loans Payable

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
Corporation
June 29, 2007
No. 4
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
The Bank of Tokyo-Mitsubishi March 27,
2008
Term Loan UFJ, Ltd.
No. 7
Mitsubishi UFJ Trust andBanking Corporation
Development Bank of Japan,
Inc.

Balance at the Balance at the
beginning of theend of thecurrent period current period(million yen)(million yen)

Averageinterest
Repayment Repayment Use of
rate
date
methodproceeds(%)(Note 1)

8,500

8,500

1.95

―

6,300

1.48

Remarks

June 29, 2012

Bulletrepayment on
repayment
date(Note 2)

Unsecured
and without
guarantee

March 27,2013

Bulletrepayment on
repayment
date(Note 3)

Unsecured
and without
guarantee

―

3,000

―

9,300

11,189―

1.24

November30, 2011

Bulletrepayment on
repayment
date(Note 4)

Unsecured
and without
guarantee

1,273

―

1.24

November30, 2011

Bulletrepayment on
repayment
date(Note 2)

Unsecured
and without
guarantee

Mizuho Corporate Bank, Ltd.
Term Loan
November
The Bank of Tokyo-Mitsubishi
No. 1030, 2009
UFJ, Ltd.

4,908

―

1.24

November30, 2011

Bulletrepayment on
repayment
date(Note 2)

Unsecured
and without
guarantee

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
January 13,
The Bank of Tokyo-Mitsubishi
2010
UFJ, Ltd.
Term Loan Mitsubishi UFJ Trust andNo. 11Banking Corporation
Resona Bank, Limited

―

9,800

1.24

November30, 2012

Bulletrepayment on
repayment
date(Note 3)

Unsecured
and without
guarantee

Development Bank of Japan,
Inc.

135

135

2.42

November30, 2016(Note 5)(Note 3)

Unsecured
and without
guarantee

135

9,935

1,670

―

1.24

November30, 2011

Bulletrepayment on
repayment
date(Note 2)

Unsecured
and without
guarantee

9,000

9,000

1.24

June 29, 2012

Bulletrepayment on
repayment
date(Note 4)

Unsecured
and without
guarantee

36,67536,735

Subtotal
Sumitomo Mitsui Trust Bank
Limited.
Sumitomo Mitsui Banking
Term Loan Corporation
March 3,
No. 8
The Bank of Tokyo-Mitsubishi
2009
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Term Loan Sumitomo Mitsui Banking March 27,
No. 9
Corporation
2009
Mitsubishi UFJ Trust andBanking Corporation

January 13,
2010

Subtotal
Sumitomo Mitsui Trust Bank
Term Loan Limited.
February 26,
No. 12
2010
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
March 26,
Corporation
No. 132010
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Total

33

1.53

Sumitomo Mitsui Trust Bank
Limited.
Development Bank of Japan,
June 29, 2007
Term Loan Inc.
No. 5
The Dai-ichi Life InsuranceCo., Ltd.
Subtotal
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Term Loan The Bank of Tokyo-Mitsubishi March 27,
No. 7
2008
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Development Bank of Japan,
Inc.

2,000

2,000

2.27

1,000

1,000

2.40
2.40

1,000

1,000

4,000

4,000

6,300

―

1.48

Bulletrepayment onJune 30, 2014
repayment
date(Note 2)

Unsecured
and without
guarantee

March 27,2013

Bulletrepayment on
repayment
date(Note 3)

Unsecured
and without
guarantee

3,000

―

Subtotal

9,300―

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
January 13,
The Bank of Tokyo-Mitsubishi
2010
UFJ, Ltd.
Term Loan
Mitsubishi UFJ Trust andNo. 11Banking Corporation
Resona Bank, Limited

9,800

―

1.24

November30, 2012

Bulletrepayment on
repayment
date(Note 5)

Unsecured
and without
guarantee

Development Bank of Japan,
Inc.

2,4362

2,295

2.42

November30, 2016(Note 4)(Note 5)

Unsecured
and without
guarantee

12,162

2,295

16,70016,7001.39

BulletFebruary 29, repayment on
2016
repayment
date(Note 4)

Unsecured
and without
guarantee

6,700

6,700

0.84

BulletFebruary 29, repayment on
2016
repayment
date(Note 2)

Unsecured
and without
guarantee

Bulletrepayment on
repayment
date(Note 4)

Unsecured
and without
guarantee(Note 3)

Unsecured
and without
guarantee

January 13,
2010

Subtotal
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan Corporation
No. 14The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation

March 3,2011

Sumitomo Mitsui Trust Bank
Limited..
Term Loan
March 31,
The Bank of Fukuoka, Ltd.
No. 152011
The Hiroshima Bank, Ltd.
The Yamaguchi Bank, Ltd.
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
November
Corporation
No. 1630, 2011
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
March 30,
Corporation
No. 172012
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Subtotal
Total

1.53

―

19,0400.56

November30, 2016

―

3,000

0.66

BulletOctober 31, repayment on
2016
repayment
date

48,86285,53751,73588,470Note 1: The average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance
during the period) and rounded to the second decimal place. Furthermore, the average interest rate related to theborrowing hedged by an interest rate swap transaction for the purpose of reducing interest rate fluctuation risk isweighted by considering the effect of the relevant interest rate swap.
Note 2: The use of borrowings is for repayment of short-term loans payable.
Note 3: The use of borrowings is for acquisition of trust beneficiary interest in real estate.
Note 4: The use of borrowings is for repayment of long-term loans payable.
Note 5: Repayment of ¥67.5 million will be made at the end of June and December each year starting on June 30, 2010, with theremaining payment of ¥1,822.5 million to be repaid on November 30, 2016, the final repayment date.

34

(3) Status of Investment Corporation Bonds
Investment corporation bonds issued and outstanding as of April 30, 2012 are as follows.
Balance as ofthe end of thecurrent
period(million yen)Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

Remark

1.00

June 4,2015

Bulletpayment

Repaymentofborrowing

Unsecured
and without
guarantee

Name of Bonds

Issue Date

Balance as of
the beginningof the current
period(million yen)

No.1
Unsecured Investment
Corporation Bonds(Note)

June 4,
2010

8,500

8,500

8,500

8,500

Total

Note: This bond is equipped with special pari passu conditions among the specified investment corporation bonds.

(4) Status of Short-Term Investment Corporation Bonds
There are none applicable.

【6】Status of Acquisitions and Dispositions During the Period(1) Acquisitions and Dispositions of Real Estate, etc. and Asset Backed Securities
Acquisition
AcquisitionPrice(million yen)
(Note 1)

Disposition

Type ofAssetsName of Property

Trust
BeneficiaryInterest in
Real Estate

Nitetsu Honmachi
Building――

November25, 2011

1,300

1,001

256

Trust
BeneficiaryInterest in
Real Estate

Top Residence
Nihonbashi
Kayabacho

February 1,
2012

2,400

―

―

―

―

Acquisition
Date

Disposition
Date

Disposition
Capital Gain
Book ValuePriceand Loss(million yen)(million yen)(million yen)

Trust
Beneficiary
Shinkawa Chuo
Interest in
March30,2012
5,610
Building
Real Estate(Note 2)
(Note 1) Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as realestate transaction brokerage fees, real estate tax, etc.) required for transaction of the relevant property.
(Note 2) The property described above were trusted beneficiary interest in real estate at the same acquisition date.

(2) Acquisitions and Dispositions of Others Assets
Other major assets besides real estate and asset backed securities stated above consist mostly ofbank deposits or bank deposits within assets held in trust.
(3) Research on Prices of Specified Assets
Transactions during the current period that require research on prices of specified assets stipulated
by Article 201 of the Investment Trusts and Investment Corporations Law are as follows.

35

① Real estate, etc
Research on
Price ofSpecified
Assets(million)(Note 2)Acquisition
or
Disposition

Name of Properties

Transaction Date

AcquisitionPrice(million)(Note 1)

Disposition

Nitetsu Honmachi
Building

November25,2011

1,300

1,430

Acquisition

Top Residence
Nihonbashi
Kayabacho

February 1,2012

2,400

2,550

Appraisal
Institution
Tanizawa Sogo
Appraisal Co,
Ltd;
Japan Real
Estate Institute

Appraised
Date

October
31, 2011
October 1,
2011

Daiwa Real
EstateJanuary 25,
Acquisition
March30,2012
5,610
5,790
2012
Appraisal Co,
Ltd(Note 1) Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as realestate transaction brokerage fees, real estate tax, etc.) required for transaction of the relevant property.
(Note 2) The amended Article 201 of the Investment Trusts and Investment Corporations Law was enforced on November 24,
2011.In the case of acquisition or disposition of the specified assets (limited to land or building. or rights or assets
concerned to these and stipulated by cabinet orders), the real estate appraisals of the concerned specified assets should
be conducted by applying “Real Estate Appraisal Standard Section 3: appraisals concerning prices of real estate
subject to securitization.”
Shinkawa Chuo
Building② Others
There are none applicable(4) Transaction with Interested Parties, etc. and Major Unitholders① Status of Transaction
There are none applicable.
② Amounts of Fees Paid, etc.
Fees paid to interested parties, etc. and major unitholders during the current period are as follows.

Item

Total amount offees paid (A)(thousand yen)

Property management fees

398,124

Brokerage Fees
Trust compensation (disposition)
Trust compensation
Asset custodian fees
Administrative service fees

154,060300
19,2708,348
63,199Other fees paid

13,484

Transactions with interested parties, etc. and major
Ratio against
unitholders
total amountAmount of
B/A
Paid topayment (B)(%)(thousand yen)
Nippon Steel City Produce, Inc.
45,55911.4
Oji Real Estate Co., Ltd.
27,576
6.9
Nippon Steel Community Service Co., Ltd.
7,385
1.9
Sumitomo Mitsui Trust Bank Limited.
1,250
0.3
Sumitomo Mitsui Trust Bank Limited.
39,06025.4
Sumitomo Mitsui Trust Bank Limited.
300
100.0
Sumitomo Mitsui Trust Bank Limited.
16,52485.8
Sumitomo Mitsui Trust Bank Limited.
8,348
100.0
Sumitomo Mitsui Trust Bank Limited.
63,199100.0
Sumitomo Mitsui Trust Bank Limited.
1,374
10.2
Nippon Steel City Produce, Inc.
39
0.3
Oji Real Estate Co., Ltd.
50.0
Sumitomo Mitsui Trust Bank Limited.
48,85034.7

Borrowing related expenses
140,627
Investment corporation bond
5,575 Sumitomo Mitsui Trust Bank Limited.
624
11.2
related expenses
Other non-operating expenses
5,198 Sumitomo Mitsui Trust Bank Limited.
342
6.6
Other expenses related to rent
6,081 Oji Real Estate Co., Ltd.
488
8.0
business
Note 1: Interested parties, etc. and major unitholders means interested parties, etc. of the asset manager which concluded asset

36management entrustment contract with Top REIT as prescribed in Article 123 of the Enforcement Order of theInvestment Trust and Investment Corporations Law and major unitholders of the asset manager as defined in Article
29-4, Paragraph 2 of the Financial Instruments and Exchange Law (Law No. 25, 1948. including the amendments
thereafter). However, the table above also includes transactions with interested parties as provided in the internal rulesof the asset manager (including special purpose companies, etc. to which interested parties, etc. have been entrustedwith asset management). Please note that the parties to which payments were made during the current period were The
Sumitomo Trust and Banking Co., Ltd., Nippon Steel City Produce, Inc., Nippon Steel Community Service Co., Ltd.
and Oji Real Estate Co., Ltd.
Note 2: In addition to the fees paid described above, the amounts paid for repair and maintenance work placed with interested
parties, etc. during the current period are as follows. Furthermore, the concerned payments include construction
management fees.
Oji Real Estate Co., Ltd.:
Nippon Steel City Produce, Inc.:¥33,305 thousand¥58,960 thousand(5) Status of Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd. the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments transaction business, type 2 financial
instruments transaction business, land and building transaction business, or real estate syndication
business, and has no such transactions with Top REIT.

【7】Overview of Accounting(1) Assets, Liabilities, Principal and Profit / Loss
Please refer to accompanying Balance Sheets, Statements of Income and Retained Earnings,
Statements of Unitholders’ Equity, Notes to Financial Statements and Statements of Cash Dividends.
(2) Change in Depreciation Method
There are none applicable.
(3) Change in Valuation Methods of Real Estate, etc.
There are none applicable.
(4) Status of Investment Trust Beneficiary Certificates of Top REIT, etc.
There are none applicable.

【8】Others(1) Notice①Board of Directors
There was no execution or modification of significant agreements approved by the Board of
Directors of the Top REIT during the fiscal period.
(2) Others
Unless otherwise stated, fractions less than the specified unit are rounded down to the nearest
specified unit for monetary amounts and rounded to the nearest specified unit for percentage figures.

37

II. Balance Sheets(Unit: thousand yen)
Eleventh Fiscal Period(as of October 31, 2011)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Income taxes receivable
Consumption taxes receivable
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust(Note 4-1 )Accumulated depreciation
Buildings in trust, net
Structures in trust(Note 4-1 )Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust(Note 4-1 )Total property, plant and equipment
Intangible assets
Assets in trust and other intangible assets
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

38

Twelfth Fiscal Period(as of April 30, 2012)

5,405,178
4,512,649
27,275236,504
21
319
―
1,845
10,183,794

1,669,299
4,299,045
30,250234,094
16
150
608
1,845
6,235,311

1,143,383(145,279)
998,103
4,452(2,732)
1,719
11,436(9,493)
1,943
1,370
(683)
686
4,888,525
59,611,048(10,964,364)
48,646,683
699,737(219,949)
479,788
242,090(92,931)
149,159
227,793(92,531)
135,261
119,440,939
174,742,811

1,145,185(161,620)
983,564
4,452(2,867)
1,584
17,235(9,825)
7,410
2,522
(846)
1,676
4,888,525
61,867,568(11,762,594)
50,104,973
696,187(238,906)
457,281
232,455(92,043)
140,412
237,583(98,037)
139,546
124,678,411
181,403,387

2,343
170
2,513

2,096
148
2,245

10,000304,061
176,125
490,187
175,235,512

10,000537,134
184,406
731,541
182,137,174

40,42040,420185,459,727

34,90834,908
188,407,394

(Unit: thousand yen)
Eleventh Fiscal Period(as of October 31, 2011)

Twelfth Fiscal Period(as of April 30, 2012)

Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Derivatives liabilities
Provision for loss on disaster
Other
Total current liabilities

163,924―
36,675,000
254,070
261,532
512
63,072
941,986
―
747
3,647

225,911―36,735,000
233,949
221,849566―
804,500――
3,877

38,364,493

38,225,655

8,500,000
48,862,500
144,487
5,342,641―
35
62,849,665
101,214,158

8,500,000
51,735,000
144,487
5,513,903
28,827―65,922,219
104,147,874

82,260,100

82,260,100

1,985,468

1,999,419

Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust (Note 4-1 )Deferred tax liabilities
Long-term advances received
Total noncurrent liabilities
Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity

1,985,468

1,999,419

84,245,568

84,259,519―――

Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets(Note 4-2 )Total liabilities and net assets

39―
84,245,568

84,259,519

185,459,727

188,407,394

III. Statements of Income(Unit: thousand yen)
Eleventh Fiscal Period(May 1, 2011 –October 31, 2011)

Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)

Operating revenue
Rent revenue – real estate(Note 5-1)

5,661,876

5,420,035

Other lease business revenue
Gain on sales of real estate properties(Note 5-1)
(Note 5-2)

150,602

17,265―

256,0025,812,479

5,693,303

2,479,757

2,383,013

424,168

409,169

Total operating revenue
Operating expenses
Expenses related to rent business(Note 5-1)

Asset management fee
Asset custody fee

8,358

8,348

Administrative service fees

63,912

63,199Directors’ compensations

6,600

6,300

Audit fee

10,00010,000

Other operating expenses
Total operating expenses
Operating income

40,204

41,222

3,033,001

2,921,252

2,779,477

2,772,050

3,894

2,880

Non-operating income
Interest income
Reversal of dividends payable

686

800

Insurance income

2,195

―

Reversal of provision for loss on disaster

1,672

391

－

119

8,448

4,192

Interest expenses

613,254

553,431

Interest expense on investment corporation bonds
Amortization of investment corporation bond

42,87042,267

5,511

5,511

Borrowing related expenses

136,618

140,627

3,170

5,262

Other
Total non-operating income
Non-operating expenses

Other
Total non-operating expenses
Ordinary income

801,426

747,101

1,986,499

2,029,141

－

－

－

－

－

－

Extraordinary income
Refunded Property taxes
Total extraordinary income
Extraordinary loss
Provision for loss on disaster
Total extraordinary loss－－

Income before income taxes

1,986,499

2,029,141

Income taxes – current

1,041

962

Income taxes – deferred(2)

28,833

Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

40

1,039

29,795

1,985,460

1,999,346

8

73

1,985,468

1,999,419

IV. Statements of Changes in Net Assets (Unitholders’ Equity)(Unit: Thousand yen)
Eleventh Fiscal Period(May 1, 2011 –October 31, 2011)

Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)

Unitholders’ equity
Unitholders’ capital
Balance at the beginning of the period

82,260,100

82,260,100

Changes of items during the period
Total changes of items during the period
Balance at the end of current period―(Note 6)82,260,100

82,260,100

2,157,918

1,985,468

Dividends from surplus(2,157,910)(1,985,395)

Net income

1,985,460

1,999,346

Total changes of items during the period(172,449)

13,951

1,985,468

1,999,419

2,157,918

1,985,468

Dividends from surplus(2,157,910)(1,985,395)

Net income

1,985,460

1,999,346

Total changes of items during the period(172,449)

13,951

1,985,468

1,999,419

84,418,018

84,245,568

Dividends from surplus(2,157,910)(1,985,395)

Net income

1,985,460

1,999,346

Total changes of items during the period(172,449)

13,951

84,245,568

84,259,519－－

Changes of items other than unitholders’ equity (net)－－Total changes of items during the period

－

－

－

－

－

－

Changes of items other than unitholders’ equity (net)－－Total changes of items during the period

－

－

－

－

84,418,018

84,245,568

Dividends from surplus(2,157,910)(1,985,395)

Net income

1,985,460

1,999,346

Surplus
Unappropriated retained earnings (undisposed loss)
Balance at the beginning of the period
Changes of items during the period

Balance at the end of current period
Total surplus
Balance at the beginning of the period
Changes of items during the period

Balance at the end of current period
Total unitholders’ equity
Balance at the beginning of the period
Changes of items during the period

Balance at the end of current period
Valuation and translation adjustments
Deferred gains or losses on hedges
Balance at the beginning of the period
Changes of items during the period

Balance at the end of current period
Total valuation and translation adjustments
Balance at the beginning of the period
Changes of items during the period

Balance at the end of current period
Total net assets
Balance at the beginning of the period
Changes of items during the period

Changes of items other than unitholders’ equity (net)－Total changes of items during the period
Balance at the end of current period

41(172,449)

13,951

84,245,568

84,259,519

V.

Notes to Financial Statements

Note 1. Premise of the Going Concern
Eleventh Fiscal Period (Reference)
For the period
from May 1, 2011
to October 31, 2011
There are none applicable

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012
There are none applicable

Note 2. Significant Accounting Policies

Classification

1.

Eleventh Fiscal Period (Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 30, 2011

For the period
from November 1, 2011
to April 30, 2012

Methodof (1) Property, Plant and Equipment (including trust (1) Property, Plant and Equipment (including trust
Depreciation andassets)assets)Amortization of
Adopts the straight-line method. Further, theAdopts the straight-line method. Further, theProperty, etc.
estimated useful lives of the major property, plant
estimated useful lives of the major property, plantand equipment are as follows.
and equipment are as follows.
Building
Structures
Machinery and equipment
Tools, furniture and fixtures2.

Treatment Methodof Differed Assets

3.

Standard
Posting
Provision

2~59 years
2~54 years
2~15 years
2~12 years

Building
Structures
Machinery and equipment
Tools, furniture and fixtures

2~59 years
2~54 years
2~15 years
2~12 years(2) Intangible Assets
Adopts the straight-line method.

(2) Intangible Assets
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bonds

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bondsfor Provision for Loss on Disasterof
In order to prepare for payments for restoration
expenses for property, plant and equipment damaged
in the Great East Japan Earthquake, the amount thatis reasonably estimated at the end of the current
period is posted.

42

―

4.

Standard
for Method of treatment concerning Taxes on Property Method of treatment concerning Taxes on Property
Posting of Income and Equipment
and Equipment
and Expenses
Top REIT adopts the method of treating property
Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountrelated to the rent business in the amountcorresponding to the management period out ofcorresponding to the management period out of
the assessed and determined taxation amount. In
the assessed and determined taxation amount. In
addition, as for the acquisition of real estate or
addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, thebeneficiary interests in trust in real estate, theadjustments equivalent to property tax for the
adjustments equivalent to property tax for theacquired fiscal year paid to the transferor will beacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
recorded as expenses in the corresponding period.
Furthermore, during the 11th fiscal period, theFurthermore, during the 12th fiscal period, there
was no amount equivalent to the property taxes
amount equivalent to the property taxes included
included as the acquisition costs of real estate thatas the acquisition costs of real estate totaled 2,226
thousand yen.
was applicable.

5.

Treatment Method (lessee)(lessee)for
Lease
Among finance lease transactions other than those Among finance lease transactions other than thoseTransaction
recognized as being a transfer of ownership of the recognized as being a transfer of ownership of theleased property to the lessee, equipment lease leased property to the lessee, equipment leasetransactions with a commencement date which transactions with a commencement date whichfalls under the fiscal period that starts before April falls under the fiscal period that starts before April
1, 2008 are treated by accounting methods in 1, 2008 are treated by accounting methods inaccordance with ordinary rent transactions.
accordance with ordinary rent transactions.

6.

Method of Hedge (1) Method of Hedge Accounting on Deferred
Accounting
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

43(1) Method of Hedge Accounting on Deferred
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

7.

(1) Accounting Treatment Method on Trust
Other Significant (1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Items
Beneficiary Interest in Real Estate as Property in
Trust
Fundamental to
Trust
Preparingthe
For the trust beneficiary interest in owned realFinancial
For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held inStatements
estate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
trust as well as all income generated and expenses
incurred from the trust are recorded in the
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
concerned items accounts on the balance sheet
and statements of income and retained earnings,
and statements of income and retained earnings,
respectively.
respectively.
Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

1.Cash and Deposits in trust
2.Building in trust, Structures in trust,machinery and equipment in trust, Tools,
furniture and fixtures in trust, otherproperties in trust, land in trust, otherintangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

1.Cash and Deposits in trust
2.Building in trust, Structures in trust,machinery and equipment in trust, Tools,
furniture and fixtures in trust, otherproperties in trust, land in trust, otherintangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits intrust(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

44(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

Note 3. Additional Information
Eleventh Fiscal Period (Reference)

Twelfth Fiscal Period

For the period

For the period

from May 1, 2011

from November 1, 2011

to October 31, 2011

to April 30, 2012

Effective from the changes in accounting and revisions of past―errors to be conducted after the beginning of the fiscal period
ended October 31, 2011, Top REIT applied the "AccountingStandard for Accounting Changes and Error Corrections"(Accounting Standards Board of Japan (ASBJ) Statement No.
24 issued on December 4, 2009) and the "Guidance on
Accounting Standard for Accounting Changes and Error
Corrections" (ASBJ Guidance No. 24 issued on December 4,2009).

Note 4. Balance Sheet
Eleventh Fiscal Period (Reference)
As of

Twelfth Fiscal Period

October 31, 2011As of

1. Asset Pledged as Collateral and Secured Liabilities

April 30, 2012

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows.

Assets pledged as collateral are as follows.

(Thousand yen)(Thousand yen)

Building in trust

2,456,506

Building in trust

2,435,871

Structures in trust

86,428Structures in trust

83,755Land in trust

8,892,092

Land in trust

8,892,092

Total

11,435,026

Total

11,411,719

Secured liabilities are as follows.

Secured liabilities are as follows.

(Thousand yen)(Thousand yen)

Tenant leasehold and security

719,800

Tenant leasehold and security

deposits in trust

719,800

deposits in trust

Total

719,800

Total

719,800

2. Minimum Total Net Asset Designated in Article 67-4 in the 2. Minimum Total Net Asset Designated in Article 67-4 in theInvestment Trust and Investment Corporations Law
50,000Investment Trust and Investment Corporations Law

thousand yen

45

50,000thousand yen

Note 5. Statement of Income and Retained Earnings
1. Breakdown of Property Rental Business Revenues and Expenses(Thousand yen)

Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 31, 2011

For the period
From November 1, 2011
to April 30, 2012

A. Revenue related to rent business
Rental and parking revenue

5,304,873

5,097,051

Other lease revenue

357,003322,984

Other lease business revenue

149,523

15,986

Cancellation penalty received

1,079

1,279

5,812,479

5,437,301

Property management costs and fees

389,317

398,124

Utilities expenses

208,408

189,024

Property-related taxes and dues

609,130

608,042

Non-life insurance expenses

9,090

9,094

175,945

80,8871,060,958

1,072,349

26,90625,491

2,479,757

2,383,013

3,332,721

3,054,287

Total revenue related to rent business
B. Expenses related to rent business:

Repair expenses
Depreciation and amortization
Other
Total expenses related to rent business
C. Revenue and expenses of real estate rent business(A − B)
2. Breakdown of capital gains of the disposition of real estate

Breakdown of capital gainsof the disposition of realestateEleventh Fiscal Period (Reference)
For the period
from May 1, 2011
to October 31, 2011

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012－

Capital gains of disposition of Nitetsu
Honmachi Building
(yen)

46

Revenue of disposition:

1,300,000

Disposition costs:

1,001,145

Other expenses for disposition:

42,852

Capital Gains

256,002

Note 6. Unitholders’ Equity(1) Number of units

Number of issuable investment units
Number of investment units issued and outstanding

Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 31, 2011

For the period
from November 1, 2011
to April 30, 2012

2,000,000 units

2,000,000 units

155,000 units

155,000 units

Note 7. Tax Effect Accounting
1. Breakdown of deferred gains or losses by cause(Deferred Tax Assets)(Thousand yen)

Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 31, 2011

For the period
from November 1, 2011
to April 30, 2012

Current assets
Income taxes – current payable

21

16

Total deferred tax assets

21

16(Net deferred tax assets)

21

16(Deferred Tax Liabilities)
Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 31, 2011

For the period
from November 1, 2011
to April 30, 2012

Noncurrent liabilities
Reduction reserves―

28,827

Total deferred tax liabilities―

28,827(Net deferred tax liabilities)―

28,827

2. Breakdown by main items that caused differences between the effective statutory tax rate and the effective tax
rate after applying tax effect accounting.

Effective statutory tax rate

Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period
from May 1, 2011
to October 31, 2011

For the period
from November 1, 2011
to April 30, 201239.33%

39.33%(39.31%)(37.79%)0.03%(0.08%)

0.05%

1.47%

(Adjustment)
Deductible cash distributions
Other
Effective tax rate after applying tax effect accounting

47

3.Content and Impact of Changes in Income Tax, Etc. if Such Changes Were Made after the Settlement Dates

Content and Impact ofChanges in Income Tax,
Etc. if Such Changes Were
Made after the Settlement
Dates

Eleventh Fiscal Period (Reference)
For the period
from May 1, 2011
to October 31, 2011
The Act to Partially Revise the Income Tax

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012
The Act to Partially Revise the Income Tax

Act, etc., in Order to Construct a Tax

Act, etc., in Order to Construct a Tax

SystemSystemAddressing

ChangesintheAddressing

ChangesintheSocio-Economic Structure (Act No. 114 ofSocio-Economic Structure (Act No. 114 of

2011) and the Act on Special Measures for2011) and the Act on Special Measures for

Securing Necessary Financial Resources to

Securing Necessary Financial Resources to

Implement Measures to Rebuild Areas

Implement Measures to Rebuild Areas

Devastated by the Great East Japan

Devastated by the Great East Japan

Earthquake (Act No. 117 of 2011) were

Earthquake (Act No. 117 of 2011) were

promulgated on December 2, 2011. Inpromulgated on December 2, 2011.

accordance with the promulgation, theIn accordance with the promulgation, theeffective statutory tax rate used to calculate

effective statutory tax rate used to calculate

the deferred tax assets and deferred tax

the deferred tax assets and deferred tax

liabilities

liabilities

concerning

differences, etc.

thetemporary

expected to be reversed

concerning

differences, etc.

thetemporary

expected to be reversedin the accounting periods starting on May 1,

in the accounting periods ending October,2012 and after will be changed.

2012 (13th fiscal period)The

to April, 2015change will have no impact on the deferred(18th fiscal period) will be changed to

tax assets and the deferred tax liabilities of

36.59%,Top REIT.

expected to be reserved in the accounting

andtenporarrydifferences

periods ending October, 2015 (19th fiscal
period) and after will be changed to 34.16%
from the historic 39.33%.
Furthermore, the amount of impact from thechanged tax rate may is minimal.

Note 8. Leases
1. Finance lease transactions other than those recognized as being a transfer of ownership of the leased property to
the lessee
As lessee:(1)Amount equivalent to acquisition value, amount equivalent to accumulated depreciation and amortization,
and amount equivalent to the balance at the end of the fiscal period for leased properties
Eleventh Fiscal Period

Machinery and equipment
Total(Thousand yen)
Twelfth Fiscal Period(Reference)

For the period
from May 1, 2011
to October 31, 2011
AmountAmountAmountequivalent toequivalent toequivalent toaccumulatedbalance atacquisition
depreciation
end of period
value
and
amortization
4,950
4,301
648
4,950

4,301

648

For the period
From November 1, 2011
to April 30, 2012
AmountAmountAmountequivalent toequivalent toequivalent toaccumulatedbalance atacquisition
depreciation
end of period
value
and
amortization
4,950
4,655
294
4,950

4,655

(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

48

294

(2) Amount equivalent to the balance of future lease payments at the end of the fiscal period(Thousand yen)

Eleventh Fiscal Period(Reference)
For the period
from May 1, 2011
to October 31, 2011

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012

Due within 1 year

713

326

Due over 1 year

－
713

－
326

Total

(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

(3) Lease fees payable, amount equivalent to depreciation and amortization and amount equivalent to interest
expenses(Thousand yen)

Eleventh Fiscal
Period(Reference)
For the period
from May 1, 2011
to October 31, 2011

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012

Lease fees payable

395

395

Amount equivalent to depreciation andamortization

353

353

Amount equivalent to interest expenses

15

8(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

(4) Method for calculating amount equivalent to depreciation and amortization and amount equivalent tointerest expenses• The amounts are calculated by the straight-line method, with the lease period as the useful life and zero as theresidual value.
• The amount equivalent to interest expenses is calculated as the amount of difference in the total amount oflease fees and amount posted as lease assets, with the method for allocation to the respective fiscal periods
based on the interest method.

Note 9. Financial Instruments
Effective from the fiscal period ended October 31, 2010, Top REIT adopted the revised Accounting Standard,“Accounting Standard for Financial Instruments” (Accounting Standards Board of Japan (“ASBJ”) Statement
No.10 revised on March 10, 2080) and the “Guidance on Disclosures about Fair Value of Financial Instruments”(ASBJ Guidance No.19 revised on March 10, 2080).
Information on financial instruments for the periods ended October 31, 2011 and April 30, 2012 required pursuant
to the revised accounting standards are as follows:
1. Matters Concerning Status of Financial Instruments(1) Policy for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units, with the aim of contributing to steady growth of assets managed and stableearnings from a mid-and long-term view in accordance with the financial policy stated by the asset manager.
Although management of surplus funds by using financial instruments targeting securities, monetary claims,
etc. in accordance with the investment limitations stipulated in the Articles of Incorporation, as a general rule,the surplus funds are managed by placing them in deposit.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.

49

(2) Financial Instruments, Their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (TRAM), the asset management company of Top
REIT, strive for advancing risk management through regular inspection of the adequacy and effectivenessof risk management systems. Top REIT and TRAM adopt the structure that inspects various risks regularly
and reflects the results of inspection on the risk management plan and the management plans. In addition,
Top REIT and TRAM inspect risks and reflect the results of inspection in the decision-making in a timely
manner through various transactions.
Top REIT and TRAM strive for risk management based on the incorporation rules of the asset manager
concerning individual financial instruments and their risks, and risk management system.
① Credit risk concerning deposit and derivative transaction
Deposits, especially time deposits of large amounts, are used for investment of Top REIT’s surplus funds,
these deposits are exposed to credit risk of bankruptcy of the depository financial institutions and others.
Top REIT minimizes the risk through such measures as limiting them to short term deposits and setting
the standard of credit rating for depository financial institutions and establishing rules for the ceilingamounts of deposit. Derivative transactions are exposed to credit risks of transaction parties, Top REIT
limits credit risks by setting the standard of credit rating in transaction financial institutions and putting inplace a structure to monitor deals, the amount of estimated values and credit status of transaction partners.
② Market risk concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and refinance existing loans and bonds.
Loans, especially floating-rate borrowings, are exposed to market risks, Top REIT manages to hedge
against interest-raising risk by fixed-rate interests entered into interest swap transactions and setting thetarget of fixed- rate interest ratios. In addition, when procuring new loans and refinancing, Top REIT
inspects interest-raising risks and studies borrowing methods that minimize risks. For the hedging
instruments and hedged items, hedging policy, method for assessing the effectiveness of hedging, etc. inhedge accounting, please refer to “6. Methods of Hedge Accounting” under “Note 2. Significant
Accounting Policies” above.
➂

Liquidity risk concerning borrowings and tenant leasehold used in cash flow, etc
Borrowings, investment corporation bonds and tenant leasehold are exposed to liquidity risk at the time of
repayment of borrowing, redemption of investment corporation bonds and return of tenant leaseholds, but
Top REIT manages these risks by preparing monthly fund management plans. In addition, Top REIT
has established a management system for identifying liquidity risks regularly and at the time of varioustransactions by calculating the total amount of payments assumed, which is arrived at by taking the total
amount of borrowings and tenant leaseholds, etc. that are to become due for repayment in the fiscal
period and adding forecast dividends, and conducting a comparative inspection with liquidity on handthat factors in the liquidity of portfolio real estate properties and other assets under management.

(3) Supplemental Explanation About the Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. Certain assumptions are used for theestimation of fair value. Accordingly, the result of such estimation may change if different assumptions areused. Furthermore, the contractual amounts of derivative transactions stated in “2. Matters Concerning
Estimated Fair Value, etc. of Financial Instruments” below do not represent the market risk involved inthese derivative transactions.

50

2. Matters Concerning Estimated Fair Value, etc. of Financial Instruments
For the period from May 1, 2011 to October 31, 2011 (11th fiscal period) (Reference)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2011. The financial instruments that are recognized to be extremely difficult to estimate the fair value
for are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of October 31, 2011
Book value

Fair value

Difference(1)

Cash and deposits

5,405,178

5,405,178－(2)

Cash and deposits in trust

4,512,649

4,512,649－

9,917,828

9,917,828－

36,675,000

36,676,430

1,430

8,500,000

8,543,350

43,35048,862,500

49,431,547

569,047

99,79999,799－94,137,299

94,751,127

613,828

－

－

－

－

－

－

Total assets
Current portion of long-term loans
payable(4) Investment corporation bond
(3)

(5)
(6)

Long-term loans payable
Tenant leasehold anddeposits in trust
Total liabilities

security

Derivative transactions
Applied hedge accounting
Total derivative transactions(Note 1) Methods for calculating the fair value of financial instruments and matters related to derivative transactions

Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as
the book value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost
equal to the book value because such loans reflect the market interest rate in a short-term
period and thus are based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated bydiscounting the sum total amount of its principal and interest payment on a rate reasonably
estimated to be applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special
treatment of interest-rate swap (refer to Derivative Transactions below) is the present
value calculated by the discounted sum total of its principal and interest payments net
calculated from the interest-rate swap on a rate reasonably estimated to be applicable tosimilar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference
trading statistics of the Japan Securities Dealers Association.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the sameas the book value and is thus stated at that book value.

51

Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated bycontracts for derivative transactions as of date of settlement for each hedge accounting method applied.
(Thousand yen)Hedge
accounting
methodType of
Hedge item
derivativetransactions
Interest rate
Specialtreatment ofLong-termswapinterest-rateloans payable
Pay fixed /swaps
receive floating

Contract amountMore than
one year

Fair
value

33,500,000 25,000,000

Method of calculating thefair value(*1)(*1) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one
transaction together with long-term loans payable which is the hedged item, the fair value is included in the fairvalue of the long-term loans payable (refer to Note 1(5)).
(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*2)
5,242,841
Total
5,242,841(*2) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value
disclosure because arriving at the fair value is extremely difficult due to the fact that the contract termination
period, which is the repayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or
re-signed even if a lease term is set in the lease contract, making a reasonable estimate of future cash flows
difficult.
(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
5,405,178
4,512,649
9,917,828

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after the end of
the period(Thousand yen)
Due afterthree
to four

Due after
four to fiveyears

Due after
five years

8,500,000－－

4,135,000

135,000

23,535,000

1,822,500

4,135,000

8,635,000

23,535,000

1,822,500

Due within
one year

Due after
one to twoyears

Due after
two to threeyears

Investment
corporation
bonds

－

－

－

Long-term
loans
payable36,675,000

19,235,000

Total

36,675,000

19,235,000

52

For the period from November 1, 2011 to April 30, 2012 (12th fiscal period)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2012. The financial instruments that are recognized to be extremely difficult to estimate the fair value
are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of October 31, 2011
Book value

Fair value

Difference(1)

Cash and deposits

1,669,299

1,669,299－(2)

Cash and deposits in trust

4,299,045

4,299,045－

5,968,345

5,968,345－

36,735,000

36,763,620

28,6208,500,000

8,550,150

50,15051,735,000

52,210,908

475,908

37,00237,002－97,007,002

97,561,681

554,679

－

－

－

－

－

－

Total assets
Current portion of long-term loans
payable(4) Investment corporation bond
(3)

(5)
(6)

Long-term loans payable
Tenant leasehold anddeposits in trust
Total liabilities

security

Derivative transactions
Applied hedge accounting
Total derivative transactions(Note 1) Methods for calculating the fair value of financial instruments and matters related to derivative transactions

Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the sameas the book value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost
equal to the book value because such loans reflect the market interest rate in a short-term
period and thus are based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated bydiscounting the sum total amount of its principal and interest payment on a rate reasonably
estimated to be applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special
treatment of interest-rate swap (refer to Derivative Transactions below) is the present
value calculated by the discounted sum total of its principal and interest payments net
calculated from the interest-rate swap on a rate reasonably estimated to be applicable tosimilar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference
trading statistics of the Japan Securities Dealers Association.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as
the book value and is thus stated at that book value.

53

Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated bycontracts for derivative transactions as of date of settlement for each hedge accounting method applied.
(Thousand yen)Hedge
accounting
methodType of
Hedge item
derivativetransactions
Interest rate
Specialtreatment ofLong-termswapinterest-rateloans payable
Pay fixed /swaps
receive floating

Contract amountMore than
one year

Fair
value

33,500,000 18,700,000

Method of calculating thefair value(*1)(*1) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one
transaction together with long-term loans payable which is the hedged item, the fair value is included in the fairvalue of the said long-term loans payable (refer to Note 1(5)).
(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*2)
5,476,901
Total
5,476,901(*2) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value
disclosure because arriving at the fair value is extremely difficult due to the fact that the contract termination
period, which is the repayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or
re-signed even if a lease term is set in the lease contract, making a reasonable estimate of future cash flows
difficult.
(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
1,669,299
4,299,045
5,968,345

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after the end of
the period(Thousand yen)
Due after
Due after
Due after
Due after
Due after
Due withinthreefour to five
two to three
one to two
five years
one yearto four
years
years
years
Investment
corporation
bonds

－

－

－

8,500,000－－

Long-term
loans
payable36,735,000

135,000

4,135,000

23,535,000

23,930,000

－

Total

36,735,000

135,000

4,135,000

32,035,000

23,930,000－

54Note 10. Investment and Rental Properties
Top REIT owns in the portfolio certain office buildings (including land), etc. located in Tokyo and other areas
which are for lease.
The following table is the amount posted on the balance sheet, amounts of increase (decrease) during the previous
period and fair value of these investment and rental properties as of the settlement date.
For the period from May 1, 2011 to October 31, 2011 (11th fiscal period) (Reference)(Thousand yen)Book value
Balance at the
beginning of the period
172,994,401

Change during the period
1,750,753

Balance at the end of
the period
174,745,154

Fair value at end of theperiod172,310,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of Impress Musashi-Koganei (1,323,817 thousand yen) and TOP
Residence Yoga (1,251,527 thousand yen), and decrease is mainly due to the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser. Furthermore,fair value at the end of the period of Nittetsu Honmachi Building is calculated based on the disposal price(1,300,000 thousand yen) in sales agreement on October 28, 2011.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended October 31, 2011 ispresented in “Note 6. Statement of Income and Retained Earnings.”
For the period from November 1, 2011 to April 30, 2012 (12th fiscal period)(Thousand yen)Book value
Balance at the
beginning of the period
174,745,154

Change during the period
6,660,329

Balance at the end of
the period
181,405,484

Fair value at end of theperiod179,000,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of Top Residence Nihonbashi Kayabacho (2,491,698 thousand yen)and Shinkawa Chuo Building (5,779,255 thousand yen), and decrease is mainly due to the disposition of Nitetsu
Honmachi Building (1,001,145 thousand yen) , and the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended April 30, 2012 ispresented in “Note 5. Statement of Income and Retained Earnings.”

55

Note 11. Transactions with Interested Parties
For the period from May 1, 2011 to October 31, 2011 (11th fiscal period)
Attribution

Company
nameRatio ofBusiness investment
description held among units
totalor
number ofoccupation investment
units

Type oftransaction

Item in balance
sheets63,912 Accounts
payable-other

Trust fees

17,750

Other fees paid

1,369 Operating
accounts
payable1,250

Other operating
expenses

AssetscustodianAmount oftransaction(thousand yen)
(Note)

Administrative
service fee

Property
management
expenses

The
Sumitomo
Trust and Banking
BankingCo., Ltd.

(Reference)

Other
2.05% non-operating
expenses

Borrowing
related expenses

Balance atperiod end(thousand yen)
(Note)
57,382―729 Accounts
payable-other－

Long-term
prepaid
342 expenses

2,220

Prepaid
expenses

720

Long-term
prepaid
51,145 expenses

103,233

Prepaid
expenses

58,601

Accounts
payable-other

Investment
corporationbond related
expenses54

624 Investment
corporation
4,111
bond issuance
expenses(Note) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs.
Furthermore, transaction terms are determined based on prevailing market conditions.

For the period from November 1, 2011 to April 30, 2012 (12th fiscal period)
Ratio ofBusiness investment
description held among units
totalor
number ofoccupation investment
units

Attribution

Company
nameAssetscustodian

Sumitomo Banking
Mitsui
Trust
Bank
Limited.

Type oftransaction

2.05% Administrative
service fee

Amount oftransaction(thousand yen)
(Note)

63,199 Accounts
payable-otherBrokerage fee

39,060Trust
fees(disposition)

300

Trust fee
Other fees paid
Property
management
expensesOther
non-operating
expenses
Borrowing

56

Item in balance
sheetsOperating
16,524 accounts
payable1,374

Balance atperiod end(thousand yen)
(Note)
57,318―1,250
Long-term
prepaid
342 expenses

1,860

Prepaid
expenses

720

Long-term

201,363

48,850prepaid
expensesrelated expenses

Prepaid
expenses

76,730Accounts
payable-other

Investment
corporationbond related
expenses54

624 Investment
corporation
3,550
bond issuance
expenses(Note) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs.
Furthermore, transaction terms are determined based on prevailing market conditions.

Note 12. Per Unit Information
Eleventh Fiscal Period(Reference)

Twelfth Fiscal Period

For the period

For the period

from May 1, 2011

from November 1, 2011

to October 31, 2011

to April 30, 2012

Net Assets per Unit

543,520 yen

Net Assets per Unit

543,610 yen

Net Income per Unit

12,809 yen

Net Income per Unit

12,899 yen

Diluted net income per unit has not been presented since

Diluted net income per unit has not been presented since

there are no outstanding warrants or convertible bonds.

there are no outstanding warrants or convertible bonds.

(Note)The per unit amounts are rounded to the nearest yen.

(Note)

Base of calculation of net income per unit is as follows:
Eleventh Fiscal Period (Reference)

Twelfth Fiscal Period

For the period

For the period

from May 1, 2011

from November 1, 2011

to October 31, 2011

to April 30, 2012

Net Income (thousand yen)Amounts not attributable to ordinary unitholders(thousand yen)
Net income attributable to ordinary investment
unit (thousand yen)
Weighted-average number of units during theperiod (unit)

57

1,985,460

1,999,346――

1,985,460

1,999,346

155,000

155,000

Note 13. Significant Subsequent Events
Eleventh Fiscal Period (Reference)

Twelfth Fiscal Period

For the period

For the period

from May 1, 2011

from November 1, 2011

to October 31, 2011

to April 30, 2012
There are none applicable.

Regarding the Disposition of Assets
Top REIT has disposed the owned property described below
on November 25, 2011, after the end of the eleventh fiscal
period (October 31, 2011). The overview of the dispositionof the property is as follows.
<Overview of Disposition>(i) Disposed Assets: Trust beneficiary interest in real estatein Japan(ii) Name of Property: Nittetsu Honmachi Building(iii) Address: 1-10-24, Utsubohonmachi, Nishi Ward, Osaka
City, Osaka (residential building address)(iv) Disposition Price: ¥1,300 million(v) Book Value: ¥1,003 million (as of October 31, 2011)(vi) Capital Gains: Approximately ¥250 million(vii) Sales Agreement Date: October 28, 2011(viii) Disposition Date: November 25, 2011
(vix)

Purchaser: SK Housing Corporation

58

VI. Statements of Cash Dividend Distributions

Classification

Eleventh Fiscal Period(Reference)
For the period
from May 1, 2011
to October 31, 2011
Amount(yen) (Note 1)

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012
Amount(yen) (Note 2)

I. Unappropriated retained earnings

1,985,468,894

1,999,419,960

II. Total Amount of Dividends(Dividend per unit)

1,985,395,000(12,809)

1,949,435,000(12,577)―

49,958,494

73,894

26,466

III. Voluntary retained earnings
Provision of reserve for reduction
entry
IV. Retained earnings brought
forwardNote 1: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 1,985,395,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of unappropriated retained earnings for the fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.
Note 2: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 1,949,435,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings after deducting thereserve for reduction entry, which was reserved pursuant to Article 66-2 of the Special Taxation Measures Act, for the
fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.

Disclaimer:
The accompanying English financial information, comprising of balance sheets, statements of retained
earnings, statements of changes in unitholders’ capital, notes to financial information and statements of cash
dividends, have been translated from the Japanese financial statements of Top REIT prepared in accordancewith the Law Concerning Investment Trusts and Investment Corporations of Japan.
Under Article 130 of the Law Concerning Investment Trusts and Investment Corporations of Japan, theJapanese financial statements for the fiscal period ended October 31, 2011 have been audited by KPMG
AZUSA, in accordance with auditing standards generally accepted in Japan. However, this English translationof the Japanese language report of independent auditors is not attached herein because the accompanying
English translation of balance sheets, statements of retained earnings, statements of changes in unitholders’capital, notes to financial information and statements of cash dividends are unaudited.
59

VII.

Statements of Cash Flows (Reference Information)(Unit: thousand yen)
Eleventh Fiscal Period(May 1, 2011 –October 31, 2011)

Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of deferred organization expenses
Amortization of right of trademark
Amortization of investment corporation bond issuance costs
Interest income and interest on securities
Interest expenses
Reversal of provision for loss on disaster
Provision for loss on disaster
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in income taxes receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Decrease (increase) due to sale property plant and equivalents in
trust
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
Subtotal

Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)

1,986,499
1,060,958
―
21
5,511
(3,894)
656,125(1,672)
―
831
―
(51)
―
22,560―2,029,141
1,072,349
―
21
5,511
(2,880)595,699(391)―(2,975)
(608)
168
―
2,410
1,001,145(60,823)(16,847)
13,21473,72585,486(85,204)
3,736,441

7,256(11,901)(63,072)(137,486)(233,072)(106,072)
4,155,244

4,396(648,830)(24,323)(1,057)
3,066,626

2,880(635,382)
(355)
(908)
3,521,477

Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Purchase of intangible assets in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities――(26,283)(2,692,868)(2,466)―70,026(720,768)(3,372,360)――(3,190)(8,586,136)――
468,502(297,240)(8,418,065)

Net cash provided by (used in) financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Dividends paid
Net cash provided by (used in) financing activities―――(67,500)(2,157,910)(2,225,410)――
22,040,000(19,107,500)(1,985,395)
947,105

Net increase (decrease) in cash and cash equivalents(2,531,143)(3,949,482)

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

12,448,972
9,917,828

9,917,828
5,968,345

Interest income received
Interest expenses paid
Payment for Loss on disaster
Income taxes paid
Net cash provided by (used in) operating activities(Note)

60

Note Concerning Significant Accounting Policy [Reference Information]

Classification
Scope
of
funds
in
statements ofcash flows

Eleventh Fiscal Period (Reference)
For the period
from May 1, 2011
to October 31, 2011
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Twelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Note Concerning Statements of Cash Flows [Reference Information]*1.

Eleventh Fiscal Period (Reference)
For the period
from May 1, 2011
to October 31, 2011
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheetsTwelfth Fiscal Period
For the period
from November 1, 2011
to April 30, 2012
*1. Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets(as of October 31, 2011)(Unit: thousand yen)
5,405,178
4,512,649
9,917,828

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents(as of April 30, 2012)(Unit: thousand yen)
1,669,299
4,299,045
5,968,345

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

VIII. Stock and Unitholders Information

Unit Price

第10期
（円）
(yen)

第10期

Top REIT Trading Volume

Top REITTES REIT Index

Trading Volume
第10期（口）(Unit)

TOPIX

1,000,000

10,00012th FP

13th FP

900,000
8,000

800,000

700,000
6,000
600,000

500,000
4,000
400,000

300,000

2,000

200,000

100,000

Apr
2006

Oct
2006

Apr
2007

Oct
2007

Apr
2008

Oct
2008

Apr
2009

61

Oct
2009

Apr
2010

Oct
2010

Apr
2011

Oct
2011

Apr
2012

0

No. of Units Held
Individuals / other:
20,592 [13.3%]

10th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Other domestic corporations:
13,475 [8.7%]

Overseas
corporations /individuals:
23,674 [15.3%]

Financial institutions (incl. securities firms):
97,259 [62.7%]
Other domestic corporations:
13,120 [8.5%]

Individuals / other:
20,516 [13.2%]

11th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Overseas
corporations /individuals:
20,427 [13.2%]

Financial institutions (incl. securities firms):
100,937 [65.1%]
Individuals / other:
21,159 [13.7%]

12th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Other domestic corporations:
13,264 [8.6%]

Overseas
corporations /individuals:
19,218 [12.4%]

Financial institutions (incl. securities firms):
101,359 [65.4%]

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No. of Unitholders

10th Fiscal Period
Total number ofunitholders at endof period: 7,090

11th Fiscal Period
Total number ofunitholders at endof period: 7,031

12th Fiscal Period
Total number ofunitholders at endof period: 6,912
0%

Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

113 [1.6%]
145 [2.0%]
114 [1.6%]

Individuals / other 6,718 [94.8%]
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

111 [1.6%]
140 [2.0%]
105 [1.5%]

Individuals / other 6,675 [94.9%]
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

99 [1.4%]
140 [2.0%]
90 [1.3%]

Individuals / other 6,583 [95.2%]

20%

40%

62

60%

80%

100%