21st

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2015 – May 31, 2016

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 21st Fiscal Period, DOI posted operating revenues of 12,363 million yen and operating income of 6,108 million yen. Our
distribution per unit for the 21st Fiscal Period is 10,508 yen, an increase by 820 yen from the 20th Fiscal Period.
See page 4 for financial and management highlights
Average contract rent at the end of the 21st Fiscal Period increased 367 yen from the end of the previous fiscal period to 19,105
yen, indicating an increase for the third consecutive fiscal period. Rent revisions contributed to 13 million yen increase in monthly
contracted rents from the end of the previous fiscal period, which was a 7.2% rate of increase for average monthly rent. Tenants
moving in/out led to 9 million yen of net increase in monthly contracted rents from the end of the previous fiscal period, and the rateof increase for average monthly rent increased 2.6% due to replacement of tenants. Occupancy rate improved 0.4 percentage points
from the end of the previous fiscal period to 98.7%. We will realize sustainable internal growth through the thorough implementationof the hands-on approach that continuously applies “Bonji-Tettei” as the code of conduct.
See page 8 for details of internal growth
During the 21st Fiscal Period, DOI acquired 2 properties of Nikko Building, Kirin Nihonbashi Building (total acquisition price: 21,890
million yen) and sold 2 properties of Daiwa Shibuya Dougenzaka and Daiwa Minami-Senba (total sale price: 9,720 million yen).
Through such asset replacement, DOI improved the quality of its portfolio. In addition, DOI acquired Heiwa Higashi-nihonbashi
Building, Square Daikanyama Building, Shinjuku West Building and Ogikubo TM Building (totalacquisition price: 13,392 million yen) using funds obtained through the public offering
conducted in July 2016. DOI will continue to selectively acquire office properties centeringon the five central wards of Tokyo in an effort to further improve the value of its portfolio.
See page 12 for details of external growthIn financial matters, DOI promoted diversification of repayment dates by taking out longterm borrowings. DOI will continue striving to further strengthen financial structure whileworking to reduce future refinancing risks.
See page 16 for details of financial condition
DOI will continue to increase the competitiveness of its properties and aim
to achieve its medium- to long-term goal of continuous growth through theutilization of investment capacity from capital increase, etc., while increasing
long-term EPS (net income after deducting gain on sales of properties). We
wish for the continued success of our unitholders and ask for your continued
support of DOI.

Nobuaki Omura Executive Director of Daiwa Office Investment Corporation
Contents

I. Overview of Daiwa Office Investment Corporation
To Our Investors……………………………………………… 2

II. Asset Management Report…………………………… 17
III. Balance Sheets… ……………………………………… 22

Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3

IV. Statements of Income and Retained Earnings…… 24

Financial and Management Highlights………………………… 4

V. Statements of Changes in Net Assets……………… 25

Overview of Portfolio (portfolio list)…………………………… 5

VI. Statements of Cash Flows… ………………………… 26

Overview of Portfolio (portfolio distribution)…………………… 6
Internal Growth Measures… ………………………………… 82VII. Notes to Financial Statements……………………… 27

External Growth Measures…………………………………… 12

VIII. Independent Auditor’s Report… …………………… 40

Financial Conditions… ……………………………………… 16

IX. Investor Information…………………………………… 41

Characteristics and Strategies of Daiwa Office Investment Corporation

Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT Focused on the Five
Central Wards of Tokyo

Effective application of operational knowhow specialized in officebuildings

Places priority on owning office buildings in favorable locations forwhich there is high demand

Office buildings 100.0%

Major Regional Cities 3.2%
Greater Tokyo

Five Central
Wards of Tokyo

88.5%

8.3%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of July 21, 2016.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 500 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%(billion yen)
500

400

Investment inselectively chosencompetitive properties

364.0

387.5

413.2

445.7

500.0
467.7
458.3

300

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Thorough implementation of hands-on
approach
Further strengthen relations with tenants

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals and lease-up activities

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

200

100

0
Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period After public Medium-term
ended
ended
ended
ended
ended
offeringgoal
May 2014 November 2014 May 2015 November 2015 May 2016

Fiscal period ending May 2016
(21st Fiscal Period)

Fiscal period ending November 2016
(Note) The forecasts on distribution are calculated based(22nd Fiscal Period)on certain assumptions and may vary due tochanges in the status and other factors. Moreover,the forecasts set forth herein should not be
construed as a guarantee of distribution amounts.

Fiscal period ending May 2017
(23rd Fiscal Period)

10,508 yen
10,550 yen
10,560 yen(actual)(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation

3

Financial and Management Highlights
Steady increase of distributions due to progress in internal growth■ Operating Revenues■ Operating Income■ Net Income(million yen)
13,000(million yen)
7,000

(million yen)
6,000

12,363

11,837

10,0009,763

10,387

5,614

5,000

8,587

7,000

5,250

6,108

4,770

4,438

3,641

3,760

3,000

4,688

4,000

4,031

3,016

2,000

4,000

0

0

0

17th Period 18th Period 19th Period 20th Period 21st Period

17th Period 18th Period 19th Period 20th Period 21st Period

17th Period 18th Period 19th Period 20th Period 21st Period■ Changes in Rent Revenue(million yen)
11,000External growth (acquisition/full contribution from properties sold) (Note 1)
External growth (acquisition/during-the-period contribution from properties sold) (Note 2)

10,000Internal growth (increase/decrease of rents of existing properties)

9,000

77

7,000
6,000

261

511

6

347
190

282

148
215

349

8,000

154

839

176

27

115

267

64

–55

0
16th Period

17th Period

18th Period

19th Period

20th Period

21st Period■ Distribution Per Unit(yen)
12,000

Forecast from one year earlier

Forecast from six months earlier

10,000
8,000
6,000

5,350
5,500
5,986

4,850
4,850
5,107

5,500
6,250
6,542

Actual dividends

6,550
7,200
7,478

7,300
7,540
7,621

16th Period

17th Period

7,570
7,820
8,256

9,750
9,850
10,508

9,000
9,350
9,688

8,328
8,700
9,142

(Note 1) Amount obtained by subtracting rents andcommon area fees income in the previous
fiscal period of properties sold in theprevious fiscal period from the amount ofrents and common area fees income
increased compared to the previous period
due to full year contribution from properties
acquired in the previous fiscal period.
(Note 2) Amount obtained by subtracting rents andcommon area fees income decreased in
the current fiscal period due to sales ofproperties in the current fiscal period fromthe amount of rents and common area fees
income increased in the current fiscal
period due to acquisition of properties in
the current fiscal period.

9,900
10,55010,560

4,000
2,000
0
13th Period

14th Period

15th Period

18th Period

19th Period

20th Period

21st Period

22nd Period 23rd Period

21st Period

20th Period

19th Period

18th Period

17th Period(May 2016)(November 2015)(May 2015)(November 2014)(May 2014)

Operating revenues (million yen)

12,363

11,837

10,387

9,763

8,587

Operating income (million yen)

6,108

5,614

4,770

4,438

3,760

Ordinary income (million yen)

5,326

4,689

4,032

3,642

3,005

Net income (million yen)

5,250

4,688

4,031

3,641

3,016

Total number of units issued (units)

484,000

484,000

441,000

441,000

395,798
509,490

Net assets per unit (yen)511,818

511,777

505,566

504,746

Distribution per unit (yen)10,508

9,688

9,142

8,256

7,621

Total assets (million ye)

476,690

460,705432,232

399,555

380,723

43.3

41.7

44.3

40.2

43.0

50

50

47

46

44

4,583

4,457

4,132

3,875

3,640

328,027.44

325,313.01

288,833.07

286,088.89

259,381.62

98.7

98.3

97.3

97.2

96.4

Loan-to-value (LTV) (based on total asset value) (%)
Number of investment properties
Asset size (billion yen)
Total rentable area (m2)Occupancy rate (%)(Note) Distribution per unit for the 21st fiscal period is calculated by dividing the amount obtained by subtracting provision for reserve for reduction entry (164 million yen) from unappropriated retained earnings by the
total number of investment units issued.

4Overview of Portfolio (portfolio list)(as of July 21, 2016)
Property Name

Address

Acquisition
Appraisal
Execution
Rentable Structure andValue at End
Price
Area (m2) No. of Floors Completion of Major
of Period(Note 2)
(Note 3)
Repairs mm yen Share (mm yen)(%)

(Note 4)

Ownership TypeLand

Building

PML (%)(Note 5)

Five Central Wards of Tokyo (Note 1)
Ginza, Chuo-ku, Tokyo
1 Daiwa Ginza
Ginza, Chuo-ku, Tokyo
2 Daiwa Ginza Annex
Shibaura, Minato-ku, Tokyo
3 Daiwa Shibaura
Minami Aoyama, Minato-ku, Tokyo
4 Daiwa Minami-Aoyama
Sarugakucho, Chiyoda-ku, Tokyo
5 Daiwa Sarugakucho
Hamamatsucho, Minato-ku, Tokyo
6 Daiwa A Hamamatsucho
Jingumae, Shibuya-ku, Tokyo
7 Daiwa Jingumae
Shibadaimon, Minato-ku, Tokyo
8 Daiwa Shibadaimon
Misakicho, Chiyoda-ku, Tokyo
9 Daiwa Misakicho
Shinbashi, Minato-ku, Tokyo
10 Daiwa Shimbashi 510
Tsukiji, Chuo-ku, Tokyo
11 Daiwa Tsukijiekimae
Tsukiji, Chuo-ku, Tokyo
12 Daiwa Tsukiji
Tsukishima, Chuo-ku, Tokyo
13 Daiwa Tsukishima
14 Daiwa Nihonbashi Horidomecho Nihombashi-Horidomecho, Chuo-ku, Tokyo
Azabudai, Minato-ku, Tokyo
15 Daiwa Azabudai
Hatchobori, Chuo-ku, Tokyo
16 Daiwa Kyobashi
Kojimachi, Chiyoda-ku, Tokyo
17 Daiwa Kojimachi 4-chome
Shinbashi, Minato-ku, Tokyo
18 Daiwa Onarimon
19 Shinjuku Maynds Tower (Note 5) Yoyogi, Shibuya-ku, Tokyo
Udagawacho, Shibuya-ku, Tokyo
20 SHIBUYA EDGE
Nihombashi-Odenmacho, Chuo-ku, Tokyo
21 Daiwa Kodenmacho
Kanda-Jimbocho, Chiyoda-ku, Tokyo
22 Daiwa Jimbocho
Nishi-Shimbashi, Minato-ku, Tokyo
23 Daiwa Nishi-Shimbashi
Nihombashi-Kayabacho, Chuo-ku, Tokyo
24 Daiwa Kayabacho Building
Kanda-Jimbocho, Chiyoda-ku, Tokyo
25 Daiwa Jinbocho 3-chome
Maruyamacho, Shibuya-ku, Tokyo
26 E SPACE TOWER
27 Daiwa Nihonbashi Hongokucho Nihombashi Hongokucho, Chuo-ku, Tokyo
Shinjuku, Shinjuku-ku, Tokyo
28 shinyon curumu
Akasaka, Minato-ku, Tokyo
29 Daiwa Akasaka
Shibuya, Shibuya-ku, Tokyo
30 Daiwa Shibuya Miyamasuzaka
Minami Azabu, Minato-ku, Tokyo
31 Azabu Green Terrace
Ebisu, Shibuya-ku, Tokyo
32 Daiwa Ebisu 4-chome
Okubo, Shinjuku-ku, Tokyo
33 LAQUAS Higashi Shinjuku
Jingumae, Shibuya-ku, Tokyo
34 Concept Aoyama
Shinsen-cho, Shibuya-ku, Tokyo
35 Shinsen Place
Nanpeidaicho, Shibuya-ku, Tokyo
36 Glass City Shibuya
Nihonbashi Hakozakicho, Chuo-ku, Tokyo
37 River Gate
Hatchobori, Chuo-ku, Tokyo
38 Daiwa Hatchobori ekimae
39 Daiwa Hatchobori ekimae West Hatchobori, Chuo-ku, Tokyo
Nishishinjuku, Shinjuku-ku, Tokyo
40 Nikko Building
Nihonbashi Koami-cho,Chuo-ku, Tokyo
41 Kirin Nihonbashi Building
42 Heiwa Higashi-nihonbashi Building Higashi Nihonbashi,Chuo-ku, Tokyo
Daikanyamacho, Shibuya-ku, Tokyo
43 Square Daikanyama Building
Nishishinjuku, Shinjuku-ku, Tokyo
44 Shinjuku West Building

8,175.26 SRC B3/12F July 1963
2,032.11 SRC B3/8F Aug. 1972
9,619.67 SRC B1/12F Oct. 1987
2,715.54 S SRC B2/5F Sept. 1990
3,657.43
SRC 8F
June 1985
3,663.38 SRC B2/10F July 1993
2,198.61 RC B1/4F
Dec. 1997
2,386.48 SRC RC B1/7F Nov. 1996
2,137.53
S 8F
July 1996
2,641.56 SRC B1/8F
Apr. 1974
2,659.59
SRC 10F
Jan. 1996
1,487.82 SRC B1/7F Jan. 1990
8,426.85
S 5F
July 1996
2,850.81 SRC B2/7F
Apr. 1993
1,697.88 SRC B2/9F
Apr. 1984
3,265.83 SRC B1/8F Oct. 1974
2,690.90 SRC B2/9F Oct. 1987
11,614.92
SRC 9F
Apr. 1973
45,543.97 S SRC B3/34F Sept. 1995
2,480.65 RC B1/9F
Aug. 2006
2,379.31
SRC 8F
Mar. 1985
3,164.26
S B1/8F
Mar. 1997
4,815.84 SRC B1/10F July 1993
5,899.11 S SRC B1/8F Apr. 2010
2,889.34
S 9F
Feb. 2010
13,960.87 S SRC B1/15F Oct. 2002
2,143.08
S 8F
May 2010
6,751.31 S RC B2/11F Jan. 2012
8,739.17 SRC B2/7F Sept. 1990
6,327.95 S B1/12F
Dec. 1988
13,234.39 S RC B1/6F Sept. 2009
2,885.64 SRC B1/9F Dec. 1997
7,498.33
S10F
Aug. 2010
4,421.79 S RC B1/7F Nov. 2001
2,811.35 RC B1/9F
Sept. 2001
8,566.73 S SRC B1/11F Feb. 2004
32,063.06 S SRC RC B2/20F Feb. 1994
2,622.42 S SRC B1/10F Feb. 2006
1,723.15 SRC B1/9F Feb. 1996
6,967.61 SRC RC S B2/11F Aug. 1991
5,630.17 S SRC 7F
Feb. 1999
5,015.88
S 7F
Mar. 2008
1,588.35
S 6F
Mar. 2001
1,196.89
RC 4F
Mar. 1989
275,242.79

Subtotal
Greater Tokyo Area (Note 1)
Higashi-Ikebukuro, Toshima-ku, Tokyo
4,461.47 SRC S B1/9F June 199345 Daiwa Higashi-Ikebukuro
Kita-Shinagawa, Shinagawa-ku, Tokyo
6,548.17 SRC B1/11F July 1991
46 Daiwa Shinagawa North
Osaki, Shinagawa-ku, Tokyo
1,786.06 S RC B1/6F Sept. 2007
47 Daiwa Osaki 3-chome
Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa 2,630.30 S SRC B3/7F May 201148 Daiwa Kamiooka
Kamiogi, Suginami-ku, Tokyo
17,778.14 S SRC B2/18F June 1993
49 Integral Tower
Meguro, Meguro-ku, Tokyo
3,519.50 S SRC B2/14F July 2009
50 Meguro Place Tower
Ogikubo, Suginami-ku, Tokyo
3,849.63 SRC B1/7F Nov. 1990
51 Ogikubo TM Building
Subtotal
40,573.27
Major Regional Cities (Note 1)
Meieki-Minami, Nakamura-ku, Nagoya City, Aichi
7,461.90
S 12F
Dec. 200752 Daiwa Meieki
Awaji-cho, Chuo-ku, Osaka City, Osaka
13,517.62 S SRC B1/16F Feb. 2008
53 Kitahama Grand Building
Subtotal
20,979.52
Total
336,795.58

simple and16,300 Feeleasehold
Fee simple
3,440 Fee simple
Fee simple
7,520 Fee simple
Fee simple
4,360 Fee simple
Fee simple
3,340 Fee simple
Fee simple
3,320 Fee simple Compartmentalized
ownership
2,290 Fee simple
Fee simple
2,900 Fee simple
Fee simple
2,680 Fee simple
Fee simple
2,430 Fee simple
Fee simple
1,590 Fee simple
Fee simple
1,390 Fee simple
Fee simple
9,170 Fee simple
Fee simple
2,510 Fee simple
Fee simple
1,830 Fee simple
Fee simple
3,270 Fee simple Compartmentalized
ownership (100%)
2,690 Fee simple Compartmentalized
ownership (100%)
13,100 Fee simple Compartmentalized
ownership (100%)
119,000 Co-ownership Co-ownership
4,750 Fee simple
Fee simple
simple and2,110 Feeleasehold
Fee simple
3,340 Fee simple
Fee simple
5,510 Fee simple
Fee simple
7,570 Fee simple
Fee simple
4,500 Fee simple
Fee simple
32,500 Fee simple
Fee simple
2,190 Fee simple
Fee simple
12,600 Right of site Compartmentalized
ownership (100%)
12,500 Fee simple
Fee simple
8,580 Fee simple
Fee simple
15,700 Fee simple
Fee simple
5,300 Fee simple
Fee simple
10,100 Fee simple Compartmentalized
ownership (100%)
11,400 Fee simple
Fee simple
6,150 Fee simple
Fee simple
17,500 Fee simple
Fee simple
29,900 Fee simple
Fee simple
3,130 Fee simple
Fee simple
1,750 Fee simple
Fee simple
14,400 Fee simple
Fee simple
8,220 Fee simple
Fee simple
6,450 Fee simple
Fee simple
2,420 Fee simple
Fee simple
1,140 Fee simple
Fee simple
432,840

4.53
3.97
3.82
9.19
7.14
3.79
13.33
3.72
4.24
5.51
4.23
4.98
4.87
4.68
6.64
4.51
6.19
3.89
2.03
1.56
4.19
5.05
3.76
4.50
5.33
3.11
3.80
4.44
7.14
5.64
2.67
2.44
4.46
4.42
6.21
1.61
1.76
5.89
7.03
4.32
5.76
4.37
6.21
8.28

0.6
1.6
0.4
0.4
3.3
1.2
0.8
8.3

3,580
5,870
2,270
2,470
18,1006,290
4,230
42,810Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple

Compartmentalized
ownership (100%)

3.55
7.19
6.14
6.29
1.18
1.68
6.41

5,300 1.1
9,481 2.0
14,781 3.2
467,749 100.0

7,320
11,30018,620494,270

Fee simple
Fee simple

Fee simple
Fee simple

10.31
3.48

2003
2003

14,100 3.0
3,050 0.7
8,265 1.8
4,550 1.0
3,190 0.7
2,865 0.62,800 0.6
2,578 0.6
2,346 0.5
2006
2,080 0.4
1,560 0.3
1,240 0.3
7,840 1.7
2,520 0.51,600 0.3
2005
3,460 0.7
2,910 0.6
2003 13,860 3.0
133,800 28.6
5,900 1.3
2,460 0.5
4,150 0.95,000 1.1
5,600 1.2
3,550 0.8
24,000 5.1
1,721 0.4
9,650 2.1
9,200 2.0
7,000 1.5
14,000 3.0
4,135 0.98,450 1.89,800 2.1
4,800 1.0
16,000 3.4
28,000 6.0
2,871 0.6
1,647 0.4
13,710 2.9
8,180 1.7
6,370 1.4
2,280 0.5
942 0.2
414,030 88.5
2,958
7,710
1,650
2,000
15,2205,600
3,800
38,938

Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.
(Note 2) The Rentable Area is indicated as of May 31, 2016 (end of 21st Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of April 30, 2016 for Heiwa Higashi-nihonbashi Building, ofJune 1, 2016 for Square Daikanyama Building, of July 1, 2016 for Shinjuku West Building and Ogikubo TM Building and of May 31, 2016 (end of 21st Fiscal Period) for other properties.
(Note 5) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. The figure shown for theRentable Area is figure equivalent to 6/7 of the total rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation

5Overview of Portfolio (portfolio distribution)
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)
Shibuya-ku

7 Daiwa Jingumae

20 SHIBUYA EDGE

30 Daiwa Shibuya Miyamasuzaka

32 Daiwa Ebisu 4-chome

45 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

45

Toshima-ku
19 Shinjuku Maynds Tower

26 E SPACE TOWER

49

34 Concept Aoyama

35 Shinsen Place

Suginami-ku

36 Glass City Shibuya

43 Square Daikanyama Building

Nakano Sta.

51 Ogikubo Sta.
49 Integral Tower

33
HigashiShinjuku Sta.

Shinjuku-ku

Shinjuku-ku
44
40

Shinjuku Sta.
28

19

Yotsuya Sta.

Honancho Sta.
51 Ogikubo TM Building

Tokyo Metro
Ginza Line
Marunouchi Line
Hibiya Line
Tozai Line
Chiyoda Line
Yurakucho Line
Hanzomon Line
Namboku Line
Fukutoshin Line

Toei Subway

28 shinyon curumu

33 LAQUAS Higashi Shinjuku

40 Nikko Building

44 Shinjuku West Building

Shibuya-ku

Minato-ku

34

20
26
3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

35

6 Daiwa A Hamamatsucho

36

ine
hi L
Tos
n
e
Den
yu
Tok

Lin
e
To
kyu
To
yok
o

JR

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

30
Shibuya Sta.
43

Naka-meguro Sta.

6

32
Ebisu Sta.

15 Daiwa Azabudai

50

Main investment area:
Five Central Wards ofTokyo
Focused investmentarea: Greater Tokyo
Major Regional Cities

Gaienmae Sta.

4

Omotesando Sta.

Oedo Line
Asakusa Line
Mita Line
Shinjuku Line
Yamanote Line
Saikyo Line
Chuo Line
Sobu Line
Keiyo Line
Yokosuka Lineand
Sobu Rapid Line

Aoyamaitchome Sta.

7

18 Daiwa Onarimon

23 Daiwa Nishi-Shimbashi

29 Daiwa Akasaka

31 Azabu Green Terrace

50 Meguro Place Tower

Meguro Sta.

Osaki Sta.
47

(as of July 21, 2016)

Chuo-ku

1 Daiwa Ginza

37 River Gate

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukishima

14 Daiwa Nihonbashi Horidomecho

16 Daiwa Kyobashi

21 Daiwa Kodenmacho

24 Daiwa Kayabacho Building

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.

9

Akihabara Sta.

5

Kinshicho Sta.

25 22

Kudanshita Sta.

27 Daiwa Nihonbashi Hongokucho 38 Daiwa Hatchobori ekimae

39 Daiwa Hatchobori ekimae West

42
27

21

14

Otemachi Sta.

Ningyocho Sta.

Chiyoda-ku

17

Nihombashi Sta.

Tokyo Sta.
Akasakamitsuke Sta.

Hibiya Sta.

Akasaka Sta.

12

Toranomon Sta.

29

6

15
Shibakoen Sta.

Chuo-ku

41

16

39 38

Ginza Sta.

Shimbashi Sta.
23
10
18

24 Suitengumae37

12

41 Kirin Nihonbashi Building 42 Heiwa Higashi-nihonbashi Building

Sta.

Chiyoda-ku

Hatchobori
Sta.

11

Tsukishima Sta.

13
5 Daiwa Sarugakucho

9 Daiwa Misakicho

17 Daiwa Kojimachi 4-chome

22 Daiwa Jimbocho

25 Daiwa Jinbocho 3-chome

52 Daiwa Meieki

53 Kitahama Grand Building

8

Minato-ku
31

3

ShinagawaSta.

46

Shinagawaku

46 Daiwa Shinagawa North

47 Daiwa Osaki 3-chome

53 52

48

48 Daiwa Kamiooka

I. Overview of Daiwa Office Investment Corporation

7

Internal Growth Measures
Realizing rent increases upon contract renewal and tenant replacement while working to heighten tenant satisfaction

Office Market Trends
Further improvements in vacancy rate are observed and rent levels are showing signs of recovery.

■ Office Building Rental Market of Tokyo■ Office Building Rental Market of 23 Wards of Tokyo
(%)
10.0

(yen/tsubo)
24,000
Average rents of existing buildings (left axis)
Vacancy rate of existing buildings (right axis)

22,000(tsubo)400,000

6.0

18,00017,881 4.0
3.66

16,00014,000Predicted figures

300,000

8.0

20,000

(%)
9.0

2.0

6.0

100,000

4.5

0

3.0

-100,000

1.5
Floor area of new supplies
Floor area of new demands-200,000

0.0

Vacancy rate (right axis)(Source) Miki Shoji(Source) CBRE “Mid-term Office Market Outlook 2014~2020”■ Occupancy Rate

■ Rate of New Leases and Cancellations*

(%)
100.0

(%)
20.0

97.7
95.0

0.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

95.9

96.3 96.4

96.4

95.4

97.2 97.3

98.3 98.7
98.3

95.0

97.5
96.5

13.4
10.0

97.3

9.8

7.2 7.4
3.9

94.3

3.2 3.3

8.2

5.7

4.4

6.1

6.2
2.0

4.3

0.0

92.8
92.4
90.0

85.7

85.0

7.5

200,000-3.4 -3.9-3.9

Occupancy rate (actual)
Occupancy rate (forecast)Occupancy rate (forecast)(as of disclosure in January 2016)

-10.0

-5.9

-5.3
-7.3 -6.3-12.0-6.1 -5.7

2.3

2.1

-2.4 -1.7 -1.6 -3.4 -2.3

Rate of new leases
Rate of cancellations

-14.7

-20.0

-2.8

1.8

Expected rate of new leases
Expected rate of cancellations

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period*Transition of rate of new leases and cancellations areas to the total rentable area.

Rental Business Status■ Average Contract Rent and Market Rent

■ Attribution Analysis / Monthly Contract Rent*(yen/tsubo)
30,000(Million Yen)

100

1,950

27,000

90

1,900

80
78.85
79.53
78.52

24,00078.06

21,00070

18,67418,00017,79915,00019,10518,738Average contract rents*
Unit rent index(Period-on-period comparison, right axis)**

1,850
1,800
1,750

1,803 +13

Decrease by +36
Rent Revisions

Increase byRent Revisions–0

Increase by
New Leases

–26

–37
1,863

Decrease by
Transfer
Increase by
New Acquisition

60
1,700

50
1,650

40

12,000End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) Average contract rent of the existing 48 properties at the end of May 2016 is 19,132 yen (amount ofchange from the previous period: +193 yen)
* Average contract rents are average monthly contracted rents with tenants at the end of each fiscal period.
** Unit rent index is the earning rates of unit rent of individual properties indexed with the 7th Fiscal Period
as 100.

8

Decrease by
Tenants’ +75
Cancellations

1,600
End of 20th FP
Monthly Contract Rent

End of 21st FP
Monthly Contract Rent

* Monthly Contact Rent is a total of final rent from tenants contracting at the end of the Fiscal Period. Monthly
Contract Rent for Shinjuku Maynds Tower was adjusted to 6/7 of the total.

Status of Contract Renewal■ Monthly Rent Increase Due to Contract Renewal/New Lease
Increased rent (6-month conversion)
Contract Renewal
New Lease (Note 2)
Total(Note 1)
as percentage of rents and common(thousand yen / months) (thousand yen / month)(thousand yen / months)
area fees income (Note 3)

Increased rent (6-month conversion)as percentage of net income (Note 4)

19th Fiscal Period (ended May 2015)

5,862

3,157

9,020

0.7%

1.5%

20th Fiscal Period (ended November 2015)

7,938

6,438

14,3761.0%

2.1%

21st Fiscal Period (ended May 2016)

13,479766

14,2460.8%

1.8%(Note 1) “Contract renewal” indicates, for the portion of which lease contract was renewed during each fiscal period, the total of net increase in monthly rent calculated by subtracting the total of monthly rents before renewal fromthe total of monthly rents at the end of the relevant fiscal period.
(Note 2) “New lease” indicates, for the portion for which a lease contract was concluded with a new tenant in each fiscal period, the total of net increase in monthly rent calculated by subtracting the total of monthly rents under thelease contract with the immediately preceding tenant from the total of monthly rents at the end of the relevant fiscal period.
(Note 3) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by rents and common area fees income in the immediately
prior fiscal period, rounded to the first decimal place.
(Note 4) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by net income in the immediately prior fiscal period, rounded
to the first decimal place.

■ Changes in ratios of areas with rent increase/decrease/unchanged and cancellation upon contract renewal■ Changes in Rent Increase/Decrease Rate of Contract
Renewal Tenants (sections)
(%)

0.2

21st Period

49.0

50.1

0.7

15.0

1.4

10.0

0.0

20th Period

37.5

61.1

0.0

19th Period

70.8

26.5

18th Period 4.8

8.6

2.7

66.7

5.0

19.9
0.0

17th Period

8.5

7.9*

14.1*

57.4

9.0

0.0

12.1

-5.2

-5.0

16th Period

10.0 4.6

77.1

8.2

15th Period

14.4

70.3

12.3

67.3

13.8

14th Period

3.1

18.9

0.0

4.5

-7.0
-10.0

2.5

9.8
4.3

5.0
1.0

5.2
5.2
0.0

-6.5

-7.0

9.0

7.3
7.2

0.0

-4.9

-5.1

-10.2

-15.0
Increase rate

13th Period

40.6

0.8

20.0

40.0

0.0
Decrease

Increase

54.6
60.0

80.0

Unchanged

Cancellation

4.0

-20.0

100.0
(%)

-25.0

Decrease rate

-22.7
-22.7
14th
PeriodRent increase / decrease rate

15th
Period16th
Period17th
Period18th
Period19th
Period20th
Period21stPeriod* Of the increase in the 17th FP, 14.1% is due to some tenants switching from sublease agreements tomaster lease agreements and 7.9% is due to negotiations with tenants.

(Note 1) “Increase rate” and “Decrease rate” indicate the simple average of rent increase/decrease against
contract rents before renewals for lease contracts whose contract renewal periods have arrived in
the above periods and whose rent renewals have been agreed, rounded to the first decimal place.
(Note 2) “Rent increase / decrease rate” are obtained by dividing the total of contract rents after renewal forlease contracts whose contract renewals have been agreed by the total of contract rents before
renewal, rounded to the fist decimal place.

■ Increase/decrease in monthly rent due to new lease andincrease/decrease rate (compared to the previous tenant
for the same section)■ Area of which contract ended/will end in and after
the fiscal period ended May 2016 (the 21st fiscal period)(based on rentable area)(Thousand yen)
60,00050,000(%)
22.5
New tenant (left axis)
Previous tenant (left axis)

(%)
30.0

Increase/decrease rate (right axis)

52,580

Scheduled
24.0

25.0

46,14240,00030,00032,18835,34515.0

14.0

20,000

19.1

18.6

16.9

29,203 29,970

9.8

20.0

19.8

15.0

7.5

10,000

10.0

5.0

2.6
0

0.0

19th Period

20th Period

21st Period(Note) “New tenant” refers to the tenant who concluded a new lease contract in the respective fiscal period,and “Previous tenant” refers to the tenant, for the same section for which the new tenant concluded alease contract, which had been under a lease contract immediately before the new tenant.

0.0

21st Period

22nd Period

23rd Period

24th Period

25th Period(Note) For the 21st fiscal period, the ratio of areas which had contract renewal in the 21st fiscal period to thetotal rentable area (319,855.26m2) as of the end of November 2015 is indicated. For the 22nd fiscal
period and onward, the ratio of areas of which lease contracts are scheduled to end in each fiscal
period to the total rentable area (323,776.16m2) as of the end of May 2016 is indicated.

I. Overview of Daiwa Office Investment Corporation

9

Internal Growth Measures“Bonji-Tettei”
Continuous internal growth and maximization of asset value through “Bonji-Tettei”
Code of
Conduct“Bonji-Tettei”

OfficeManagement Team

Asset Management Department

Residential
Management Team

Healthcare
Management Team

Investment
Planning Team

7 members

Construction
Management Team

3 members

・Leasing: Gathering broad and correct leasing information
・Tenant relationship: Focusing on communication with tenants・Engineering: Verifying construction plans, responding to environmental measures

・Middle office work:
Budget and performance
management for the portfolios

2 members
・Engineering:
Formulation and implementation of
construction planning of the assets(Note) The structure of the Asset Management Department is as of May 31, 2016.

Diversified internal growth strategies
DOI aims for further internal growth drawing on diversified internal growth strategies.

Extracting properties’ potential
Realize value enhancement through strategically acquiringproperties with low occupancy rates but with potential for
future improvement and raising occupancy rates in a shortperiod of time.

Value enhancement through strategic
renewalConduct strategic renewal that will lead to improvement intenants’ convenience and satisfaction on top of regular
repairs.

Effective tenant attraction
Improve asset value of properties by attracting tenants while
taking into account conditions of each property, such as
location, size, equipment and existing tenants.

Realize rent increase
Realize rent increase by negotiating with accurate
understanding of the needs of new tenant candidates against
the backdrop of favorable office market.

10

shinyon curumu
Occupancy rate at the time of acquisition: 52.6%(as of September 12, 2013)▼

Most recent occupancy rate (Note): 100.0%(Note) as of May 31, 2016

Daiwa Akasaka

etro

M
okyo

▼

Line

T

In addition to the former entrance which required
office workers and visitors to pass through thebustling area, a new entrance was installed offering
them more quiet business environment.
Distance from the station was further shortened to
1-minute walk. With this improved convenience,tenant satisfaction was enhanced and occupancy
rate was stabilized.

oda

Chiy

Daiwa Akasaka
KokusaiShinAkasaka
East Building

Formerentrance
2-minute
walk

New entrance
1-minute walkDaiwa Ginza
By attracting a shop-visit type tenant tosuit the location facing Ginza Miyuki Doriand Ginza Corridor, achieved an increasein the number of customers due tosynergy effect among shops.

Mon Loire
Premium chocolate brand which is opening stores
mainly in Hyogo (Kobe in particular) and Osaka

Between the fiscal periods ended May 2011 (the11th Fiscal Period) and the fiscal period ended May
2016 (the 21st Fiscal Period), realized rent increase
for lease contracts with new tenants of 26
properties on the right among properties owned by
DOI.

Daiwa Ginza

Office Management Team and Construction
Management Team

This team aims at maximizing asset value by assigning specialist group personnel in charge toeach of the properties in the investment corporation’s portfolio.

Office Management Team

Hiroshi Udagawa Takafumi Ushiku

Kotaro Ishii

Jun Arai

Construction Management Team

Tsuyoshi Bando

Chie Kamimura

Yuuki Kobatake

Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
work history:
work history:
work history:
work history:
work history:
work history:
work history:
9 years 11 months
11 years 8 months
10 years 1 month
10 years 1 month
3 years 1 month
3 years 7 months
9 years 10 months

Shigeyoshi Naito

Naoki Murayama

Asset management
Asset management
work history:
work history: 11 months
15 years 2 months(Note) “Asset management work history” is the number of years engaged in the asset management work, acquisition work and construction management work (as of May 31, 2016) and does not indicate the numberof years employed at the asset management company.

Daiwa Ebisu 4-chome

River Gate

Occupancy rate at the time of acquisition: 100.0%

Occupancy rate at the time ofacquisition: 80.1%

Entire building leased to a tenant which is scheduled to move out
4 months after the acquisition(as of December 1, 2014)(as of June 2, 2015)

Occupancy rate after the scheduled move-out of the tenant: 0.0%

Most recent occupancy rate (Note):

▼

▼

▼

98.6%

Most recent occupancy rate (Note): 100.0%(Note) As of May 31, 2016

(Note) As of May 31, 2016

Shinjuku Maynds Tower
Upon renewal due to aged deterioration,measures leading to enhancement ofadded value, such as energy conservation,
BCP measures and CS improvement, weretaken instead of simple replacement.

Introduction of individual heat sources
Energy conservation by introducing individual
heat sourcesLong-term earthquake countermeasureconstruction
BCP measures by conducting long-term
earthquake countermeasure construction

Renewal of underground floors
Renewal of underground floors and shops that
leads to improvement in tenant satisfaction

shinyon curumu
Improved awareness of theproperty through the increase in
the number of customers
resulting from attracting
shop-visit type tenants withstrong customer attraction
capability.

•Daiwa Ginza•Daiwa Minami-Aoyama•Daiwa Shimbashi 510•Daiwa Higashi-Ikebukuro•Daiwa Tsukiji•Daiwa Nihonbashi Horidomecho•Daiwa Azabudai•Daiwa Kojimachi 4-chome•Daiwa Onarimon

Daiwa Azabudai
LIME
Caffice
Shinjuku’s largest private
A new type of cafe by thecompany that operates the SNS aquarium dining kitchen
app LINE

Shinjuku Maynds Tower•Shinjuku Maynds Tower•SHIBUYA EDGE
•Daiwa Shinagawa North•Daiwa Kodenmacho•Daiwa Nishi-Shimbashi•E SPACE TOWER•Daiwa Osaki 3-chome•shinyon curumu•Daiwa Meieki

Improved property value by attracting awell-recognized tenant to suit the characteristics(area, type of rental rooms) of the property.
MITSUOKA Azabu

Showroom/GALLERY Azabu
A new concept showroom witha gallery

E SPACE TOWER•Daiwa Kamiooka•Daiwa Akasaka•Daiwa Shibuya Miyamasuzaka•Azabu Green Terrace•Daiwa Ebisu 4-chome•Glass City Shibuya•Meguro Place Tower•Daiwa Hatchobori ekimae WestI. Overview of Daiwa Office Investment Corporation

11

External Growth Measures
Investment in selectively chosen high quality competitive properties even in harsher acquisition environment

Overview and Content of Public Offering■ Overview of
Public Offering

Issuance type
Number of investment units offered
Issue price
Paid-in priceTotal paid-in amount (scheduled)Public offering (Domestic offering)
Total: 14,000 units, Primary offering: 12,700 units, Third-party allotment: 1,300 units (scheduled)
607,425 yen
587,489 yen
8,224 million yen (including third-party allotment of 1,300 units (maximum))■ Changes in Major Indices Due to Public Offering

50 properties

Properties
Acquired in
21st FP
2 properties

2 properties

50 properties

Properties
Acquired in
22nd FP
4 properties

445,777
3.84

21,8909,310

458,357

13,392

4,000

467,749

4.15

3.23

3.91

4.54

3.77

3.93

87.7

100.0

48.3

89.1

71.6

100.0

88.5

545,661
20.2

22.0

29.0

569,585
20.6

15.8

29.3

572,31120.5

End of the 20th FP

Major Indices(Ended November 2015)

Number of properties
Total assets (total acquisition
price) (million yen)
NOI yield (Annualized) (%)
Ratio of properties in the Five
Central Wards of Tokyo (baseon acquisition prices) (%)
NAV per unit (yen)Average building age (years)
Average distance from thenearest station (minutes on foot)Occupancy rate (%)
Loan-to-value (LTV) ratio (%)

Properties Sold End of the 21st FP(Ended May 2016)
in 21st FP

Properties Soldin 22nd FP

After Public
Offering

1 properties

53 properties

3.5

3.9

3.3

3.6

2.9

1.3

3.6

98.3
41.7

99.6

96.6

98.7
43.3

100.0

100.0

98.7
42.3

(Note 1) NOI yield for properties acquired in the 21st FP and the 22nd FP is obtained using expected NOI at the time of acquisition.
(Note 2) NAV per unit = (Total assets + Total appraisal value at the end of the period - Total book value at the end of the period) / Number of investment units issued.
(Note 3) Figures for after the public offering are calculated based on actual figures at the end of the fiscal period ended May 2016. LTV is calculated using the following formula.
(Interest-bearing liabilities at the end of the fiscal period ended May 2016+ Interest-bearing liabilities financed between June 1, 2016 and July 15, 2016 - Interest-bearing liabilities to be repaid as scheduledon August 31, 2016 + Interest-bearing liabilities for the loans to be taken out on August 31, 2016 - Loans planned to be repaid with part of proceeds from the public offering, etc. and cash on hand) / (Total
assets at the end of the fiscal period ended May 2016 + Interest-bearing liabilities financed between June 1, 2016 and July 15, 2016 - Interest-bearing liabilities to be repaid as scheduled on August 31,
2016 + Interest-bearing liabilities for the loans to be taken out on August 31, 2016 + Total unitholders’ capital from the public offering, etc. - Loans planned to be repaid with part of proceeds from the public
offering, etc. and cash on hand)■ Improvement of Portfolio’s Quality through Asset Replacements in 21st FP (ended May 2016) and 22nd FP (ending November 2016)

Sold Properties

Acquired properties
・Increase in the ratio of
properties in the Five
Central Wards of Tokyo・Rejuvenated building age
・Improved NOI yield

21st FP

Ratio of the Five
Central Wards of Tokyo

Major Regional Cities

Five Central Wards of Tokyo

Ratio of the Five
Central Wards of Tokyo

48.3%

100.0%

Average distance fromthe nearest station

Average distance fromthe nearest station

3.3 minutes

3.9 minutes

Daiwa Minami-Senba Daiwa Shibuya Dougenzaka

Average building age

Average building age

Book value: 4,679 million yen Book value: 4,489 million yen

29.0 years

22.0 years

Average NOI yield

Average NOI yield

3.23%

4.15%

Total sold price: 9,720 million yen

21st FP

22nd FP

Five Central Wards of Tokyo Five Central Wards of Tokyo

Nikko Building

Kirin Nihonbashi Building

Acquisition price: 13,710 million yen Acquisition price: 8,180 million yen

Total acquisition price: 21,890 million yen

22nd FP・Rejuvenated building age
・Improved NOI yield
Ratio of the Five
Central Wards of Tokyo

71.6%

Average distance fromthe nearest station

Average distance fromthe nearest station

Five Central Wards of Tokyo

1.3 minutes

2.9 minutes

Daiwa Kudan

Average building age

Average building age

Book value: 3,803 million yen

Total sold price: 4,040 million yen

Total sold price: 3 properties

12

Ratio of the Five
Central Wards of Tokyo

100.0%

29.3 years

15.8 years

Average NOI yield

Average NOI yield

3.77%

4.54%

13,760 million yen

Five Central Wards of Tokyo Five Central Wards of Tokyo Five Central Wards of Tokyo

Tokyo Metropolitan Area as afocused investment area

Heiwa Higashi-nihonbashi Square Daikanyama Building Shinjuku West Building Ogikubo TM Building
Acquisition price: 6,370 million yen Acquisition price: 2,280 million yen Acquisition price: 942 million yen Acquisition price: 3,800 million yen

Total acquisition price: 13,392 million yen

Total acquisition price: 6 properties

35,282 million yen

Properties Newly Acquired■ 21st Fiscal Period

Nikko Building [Acquired on March 29, 2016]
HALK

Shinjuku Sta.

Odakyu dept.

Toei Oedo Line

Tochomae Sta.

Keio dept.

LUMINE

Nikko Building

Shinjuku Sta.
u Oda
Odaky

Shinjuku Sta.

Shinjuku Sta.

e

Lin

Line
wara

Keio

Shinjuku Washington Hotel

Nishishinjuku, Shinjuku-ku, Tokyo

Site Area

958.08m2

Structure/Floor

SRC RC S B2/11F

Total Floor Area

10,313.79m2

Acquisition Price

13,710 million yen

Appraisal Value

13,900 million yen (as of March 1, 2016)

Construction Date

August 1991

Occupancy Rate

99.4% (as of March 29, 2016)

Shinjuku Sta.

KEIO PLAZA HotelTokyo Metropolitan Government

Location

Number of Tenants 7 (as of March 29, 2016)

Shinjuku
Maynds Tower

Kirin Nihonbashi Building [Acquired on May 26, 2016]o e
etr Lino M onky m
To anzo
H

yo

Tok

tro

Me

a
ibiy

H

Kirin Nihonbashi Building

Kayabacho Sta.

kyo

Kayabacho Sta.

Me

tro

To

zai

Nihonbashi Koami-cho, Chuo-ku, Tokyo

Site Area

1,413.80m2

Structure/Floor

S SRC 7F

Total Floor Area

7,106.85m2

Acquisition Price

8,180 million yen

Appraisal Value

8,220 million yen (as of March 1, 2016)

Construction Date

February 1999

Occupancy Rate

100.0% (as of May 26, 2016)eLin

Daiwa Kayabacho
Building

To

LocationLineSuitengumae Sta.

Number of Tenants 1 (as of May 26, 2016)■ 22nd Fiscal Period

Heiwa Higashi-nihonbashi Building [Acquired on June 1, 2016]
Location

Higashi-nihonbashi, Chuo-ku, Tokyo

Site Area

1,213.24m2

Structure/Floor S 7F
Total Floor Area 6,724.10m2
Acquisition Price 6,370 million yen
Appraisal Value 6,450 million yen (as of April 30, 2016)

Square Daikanyama Building [Acquired on June 29, 2016]
Location
Daikanyama-chome Shibuya-ku, Tokyo
Site Area
503.72m2
Structure/Floor S 6F
Total Floor Area 1,989.40m2
Acquisition Price 2,280 million yen
Appraisal Value 2,420 million yen (as of June 1, 2016)

Construction Date March 2008

Construction Date March 2001

Occupancy Rate 100.0% (as of May 31, 2016)

Occupancy Rate 100.0% (as of May 31, 2016)

Number of Tenants 5 (as of May 31, 2016)

Number of Tenants 1 (as of May 31, 2016)

Shinjuku West Building [Acquired on July 21, 2016]

Ogikubo TM Building [Acquired on July 21, 2016]

Location
Nishishinjuku, Shinjuku-ku, Tokyo
Site Area
623.78m2
Structure/Floor RC 4F
Total Floor Area 1,438.16 m2
Acquisition Price 942 million yen

Location
Ogikubo, Suginami-ku, Tokyo
Site Area
970.53m2
Structure/Floor SRC B1/7F
Total Floor Area 5,116.78m2
Acquisition Price 3,800 million yen

Appraisal Value 1,140 million yen (as of July 1, 2016)

Appraisal Value 4,230 million yen (as of July 1, 2016)

Construction Date March 1989

Construction Date November 1990

Occupancy Rate 100.0% (as of May 31, 2016)

Occupancy Rate 100.0% (as of May 31, 2016)

Number of Tenants 7 (as of May 31, 2016)

Number of Tenants 11 (as of May 31, 2016)

I. Overview of Daiwa Office Investment Corporation

13

External Growth Measures

Changes in Asset Size and Trading Performance
Aim to achieve medium-term goal of asset size of 500 billion yen by utilizing acquisition capability earned through capital increase
80.0 (%)(billion yen) 550
Total Acquisition Price

LTV (based on total assets) (right axis)

500

Investment for competitive
properties after thorough selection

450
400
350
300
250

269.1

265.0

278.1

287.3

314.9

313.2

311.3

37.5

34.4

34.2

34.0

332.0

458.3

60.0

44.3

40.2

43.3

41.7

Acquisition properties

42.3

Acquisition properties

28.9

40.0

Acquisition properties• River Gate
• Heiwa Higashinihonbashi Building• Azabu Green Terrace • Daiwa Hatchobori ekimae• Daiwa Hatchobori ekimae • Square Daikanyama• Kitahama
25.5
25.3
Acquisition properties
Building
West
Grand Building
Acquisition property• Shinjuku West Building150• Daiwa Shibuya Dougenzaka• Ogikubo TM Building• Daiwa Akasaka
Acquisition properties
Acquisition property• Daiwa Osaki• Daiwa Shibuya Miyamasuzaka
Acquisition properties
3-chome• Daiwa Nishi-Shimbashi • E SPACE TOWER
100• Daiwa Ebisu 4-chome• Daiwa Kudan• LAQUAS Higashi Shinjuku Acquisition properties• Nikko Building• Concept Aoyama
Acquisition properties
Acquisition property• Kirin Nihonbashi• Shinsen Place50
Acquisition property
Acquisition properties
Acquisition property• shinyon curumu• Integral Tower
Building• Glass City Shibuya• Daiwa Jimbocho• Daiwa Kayabacho• Daiwa Nihonbashi • Daiwa Meieki•
MeguroPlace
Tower• Daiwa Kamiooka• Daiwa Jinbocho 3-chome
Hongokucho

28.1

200

70.0

50.0

43.0

40.6

445.7

413.2

387.5

364.0

352.7

500.0
467.7

0

30.0

20.0

10.0

0.0

8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
After Public MediumFiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Offeringterm goal

Current Portfolio and Acquisition Policy
DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among the vast information on properties obtained
through diverse sourcing.
■ Acquisition Policy■ Distribution Chart of Portfolio Properties* Distance to station is indicated by calculating 80m as
one minute

Building age (years)
60• Places priority in the Five Central Wards of Tokyo and equivalent area.
• Thoroughly select properties in view of actual demand toward location (distance tostation, station power, crowd attraction, surrounding environment), building specs, etc.

is for properties acquired in the 22nd FP
is for properties acquired in the 21st FP
is for properties acquired after the sponsor change
is for properties acquired before the sponsor change
is for properties sold in the 22nd FP
is for properties sold in the 21st FP

55• Target properties to improve stability and profitability of our existing portfolio.

50• Invest in buildings less than 25 years of building age.

45

■ Sale Policy

40
35• Consider replacement of properties if necessary by sales in light of properties’ futurecompetitiveness, profitability, etc.

Daiwa Kudan

30■ Number of Properties Reviewed for Acquisition(cases)500
400

Number of properties reviewed (left axis)
Number of properties reviewed in detail (right axis) 416

300
200

221
30

100
0

14

25

* Number of gross proposals (cases)

13th
FiscalPeriod

268
25

14th
FiscalPeriod

300
28

15th
FiscalPeriod

264

356

393

296

17

15

16th
FiscalPeriod17th
FiscalPeriod

289
26

18th
FiscalPeriod23
19th
FiscalPeriod80

1560

Shinjuku West Building

Nikko Building

Kirin Nihonbashi Building
Square Daikanyama Building
Heiwa Higashi-nihonbashi Building

10

40

31
12
20th
FiscalPeriod100

20Daiwa Minami-Senba
Daiwa Shibuya Dougenzaka

OgikuboTM Building

21st
FiscalPeriod

20
0

5
0

0

1

2

3

4

5

6

7

11
8
9
10
Distance to station (minutes)

Acquisition of Properties after Sponsor Change

Total acquisition price: 242,607 million yen

Daiwa Jimbocho

10th Period
Daiwa
Daiwa Kudan
Nishi-Shimbashi

E SPACE TOWER

13th Period
Daiwa Nihonbashi
Hongokucho

14th Period
Daiwa
Osaki 3-chome

Acquisition price

Chiyoda Ward, Tokyo
4,150 million yen

Minato Ward, Tokyo
5,000 million yen

Chiyoda Ward, Tokyo
4,000 million yen

Chuo Ward, Tokyo
5,600 million yen

Chiyoda Ward, Tokyo
3,550 million yen

Shibuya Ward, Tokyo
24,000 million yen

Chuo Ward, Tokyo
1,721 million yen

Shinagawa Ward, Tokyo
1,650 million yen

Seller

ORIX JREIT Inc.

Japan Core Asset 2 YK
(Note 1)

Shining Nova No. 5 B(SPC)

Daiwa Property Co.,Ltd.

Realty Fund
Tokyu Land Corporation Endeavor
YK (Note 1)

Tosei Corporation

MCR Six GK

Acquisition
dateMar. 10, 2010

Aug. 13, 2010

Sept. 2, 2010

Mar. 25, 2011

Mar. 29, 2011

July 8, 2011

May 11, 2012

Sept. 18, 2012

shinyon curumu

Daiwa Meieki

Daiwa Kamiooka

Daiwa Shibuya
Dougenzaka

17th Period

18th Period

Daiwa Akasaka

Daiwa Shibuya
Miyamasuzaka

Integral Tower

Azabu Green Terrace

Shinjuku Ward, Tokyo
9,650 million yen

Nagoya City, Aichi
5,300 million yen

Yokohama City, Kanagawa
2,000 million yen

Shibuya Ward, Tokyo
4,500 million yen

Minato Ward, Tokyo
9,200 million yen

Shibuya Ward, Tokyo
7,000 million yen

Suginami Ward, Tokyo
15,220 million yen

Minato Ward, Tokyo
14,000 million yen

SellerTwo domestic industrial
companies

Domestic special
purpose company

Shimizu Corporation

Domestic special
purpose company

Hakuba Capital 1 TMK(Note 1)E Buildings Limited
Liability Company

Ogikubo Building YK(Note 1)

Azabu Green Terrace
GK

Acquisition
dateDec. 3, 2012
Apr. 12, 2013

Feb. 1, 2013

Mar. 1, 2013

July 3, 2013

Aug. 9, 2013

Sept. 27, 2013

May 29, 2014

July 4, 2014

Acquisition timing

18th Period
Kitahama Grand
Building

Daiwa
Ebisu 4-chome

LAQUAS Higashi
Shinjuku

Concept Aoyama

Shinsen Place

Glass City Shibuya

Meguro Place Tower

River Gate

Acquisition price

Osaka City, Osaka
9,481 million yen

Shibuya Ward, Tokyo
4,135 million yen

Shinjuku Ward, Tokyo
8,450 million yen

Shibuya Ward, Tokyo
9,800 million yen

Shibuya Ward, Tokyo
4,800 million yen

Shibuya Ward, Tokyo
16,000 million yen

Meguro Ward, Tokyo
5,600 million yen

Chuo Ward, Tokyo
28,000 million yen

Seller

GK North Beach

Domestic industrial
company

Higashi Shinjuku
Building TMK (Note 1)

Domestic special
purpose company

Domestic special
purpose company

Glass City TMK (Note 1)

Meguro Place TMK(Note 1)Thames TMK (Note 1)

Acquisition
dateAug. 1, 2014

Dec. 1, 2014

Dec. 3, 2014

Mar. 2, 2015

Mar. 2, 2015

May 1, 2015

May 1, 2015

June 2, 2015

Acquisition timing

9th Period

11th Period
Daiwa
Daiwa
Kayabacho Building Jinbocho 3-chome

12th Period

Property
name

Area

15th Period

Acquisition timing

16th Period

Property
nameArea
Acquisition price19th Period

20th Period

Property
name

Area

Acquisition timing

20th Period
Daiwa
Daiwa Hatchobori
Hatchobori ekimaeekimae West

21st Period
Kirin Nihonbashi
Building

Nikko Building

22nd Period
Heiwa HigashiSquare Daikanyama
Shinjuku Westnihonbashi Building
Building
Building

Property
name

Ogikubo TM Building

Shinjuku Ward,Tokyo

Chuo Ward, Tokyo
2,871 million yen

Chuo Ward, Tokyo
1,647 million yen

Shinjuku Ward, Tokyo
13,710 million yen

Chuo Ward, Tokyo
8,180 million yen

Chuo Ward, Tokyo
6,370 million yen

Shibuya Ward, Tokyo
2,280 million yen

Shinjuku Ward, Tokyo
942 million yen

Suginami Ward, Tokyo
3,800 million yen

SellerDomestic industrial
company

Domestic industrial
company

Overseas company

Kirin Beer Marketing

Domestic special
purpose company

Hulic

GK TC1GK TC1

Acquisition
date

Sept. 11, 2015

Sept. 11, 2015

Mar. 24, 2016

May 26, 2016

June 1, 2016

June 29, 2016

July 21, 2016

July 21, 2016

Area
Acquisition price(Note 1) "YK" stands for limited liability company and TMK (tokutei mokuteki kaisha) stands for special purpose company.
(Note 2) The sum of i) the total acquisition price from the time of the above sponsor change on July 21, 2016 and i ) prices for additional acquisition of owned properties or of the site in owned properties during the same period, is 243,027 milion yen.
(Note 3) The total acquisition price above includes acquisition prices of Daiwa Shibuya Dougenzaka divested in the 21st fiscal period and Daiwa Kudan divested in the 22nd fiscal period.

I. Overview of Daiwa Office Investment Corporation

15

Financial Conditions
Reduce refinancing risk by extending borrowing periods and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of May 31, 2016)
During the 21st Fiscal Period, DOI repaid existing loans of 7.7 billion yen in total and also conducted new debt financing of 21.7 billion
yen in total to refinance the part of aforementioned existing loans (2.2 billion yen) and to raise funds for the acquisition of new
properties. DOI was able to diversify repayment dates for long-term borrowings. DOI will continue to focus on stable financial
management.
■ Interest-Bearing Liabilities■ Change in Remaining Years at the Time of
Procurement of Interest-Bearing Liabilities

70.0(%) (year)10.0(billion yen) 280
Interest-bearing liabilities (left axis)

240

60.0

LTV (based on acquisition price) (Note) (right axis)

200

50.0

Medium-to-long term, upper-limit LTV target range

160

40.0

9.0
8.0

Average year remaining at the period end (right axis)

4.7 4.6

Average remaining years at the time ofprocurement during the 21st Fiscal Period (left axis)

8.1

7.0
6.0

6.4

4.5 4.5
4.0

7.1 3.5
7.0 7.1
3.0
2.5

5.0
120
80

4.0

20.0

3.0

1.5

2.0

1.0

1.0

0.5

10.0

0

0.0

(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties■ Diversification of Repayment Dates

5.0

30.0

40

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
7th
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

0.0

0.0
8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st
Period Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) Dotted line indicates average remaining years at the time of procurement
during the 21st Fiscal Period excluding short-term borrowings

Financial institution
Investment Corporation Bond

20,00015,00010,0005,000

022nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th 37th 38th 39th 40th 41st
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Fixed- to
Floating-Rate Borrowings■ Ratio of Long- to
Short-Term Liabilities

End of 21st
Fiscal Period

End of 21st
Fiscal Period

10.3
%

70.8%

89.7%

Fixed interest rates

Long-term loans payable, etc.

Floating interest rates

Short-term loans payable, etc.

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank
Development Bank of Japan
Mizuho Bank
The Bank of Tokyo-Mitsubishi UFJ
Shinsei Bank
Resona Bank
Mitsubishi UFJ Trust and Banking
Mizuho Trust and Banking
The Bank of Fukuoka
Kansai Urban Banking Corporation
Aozora Bank
Nishi-Nippon City BankORIX Bank Corporation
The Gunma Bank
The 77 Bank
The Musashino Bank
Tokio Marine & Nichido Fire Insurance
The Higashi-Nippon Bank
Nippon Life Insurance Company
The Kagawa Bank
The Hiroshima BankThe Yamaguchi Bank
Taiyo Life Insurance Company
Fukoku Mutual Life Insurance
Investment Corporation Bonds
Total

Balance (mm yen)

41,90026,35021,75019,40016,00014,00012,500
8,500
6,000
5,500
5,000
4,500
3,000
2,500
2,500
2,000
2,000
2,000
1,500
1,300
1,000
1,000
500
300
200
5,100
206,300■ Status of Rating
Rating agency

Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

16

2.0

■ Balance of Borrowings by Financial Institution(million yen)
25,00029.2%

5.0(year)Target rating

RatingRating outlook

Issuer rating

A+

StableLong-term issuer rating

AA−

Stable

Share

20.3%
12.8%
10.5%
9.4%
7.8%
6.8%
6.1%
4.1%
2.9%
2.7%
2.4%
2.2%
1.5%
1.2%
1.2%
1.0%
1.0%
1.0%
0.7%
0.6%
0.5%
0.5%
0.2%
0.1%
0.1%
2.5%
100.0%

II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

21st Period 20th Period 19th Period 18th Period 17th Period

Dec. 1, 2015 From June 1, 2015 From Dec. 1, 2014 From June 1, 2014 From Dec. 1, 2013
( FromTo May 31, 2016 )( To Nov. 30, 2015 )( To May 31, 2015 )( To Nov. 30, 2014 )( To May 31, 2014 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
12,363
11,838
10,387
9,764
8,588
Rental revenues
11,948
11,777
10,112
9,693
8,491
Operating expenses
6,255
6,223
5,617
5,325
4,827
Property-related expenses
5,014
5,026
4,487
4,325
3,931
Operating income
6,108
5,615
4,770
4,439
3,761
Ordinary income
5,327
4,690
4,032
3,642
3,006
Net income
5,250
4,689
4,032
3,641
3,016
(2) Properties, etc. (as of end of period)
Total assets
476,690
460,706
432,233
399,555
380,723[period-on-period percentage changes][+3.5%][+6.6%][+8.2%][+4.9%][+4.7%]
Interest-bearing liabilities
206,300
192,300
191,300
160,800
163,700
Net assets
247,720
247,700
222,955
222,593
201,655[period-on-period percentage changes][+0.0%][+11.1%][+0.2%][+10.4%][−0.0%]
Unitholders’ capital
243,404
243,404
219,156
219,156
198,781(3) Distributions
Total distribution amount
5,086
4,689
4,032
3,641
3,016
Dividend payout
96.9%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)
484,000
484,000
441,000
441,000
395,798
Net assets per unit (yen)511,819
511,778505,566
504,746
509,490
Distribution per unit (yen)10,508
9,688
9,142
8,256
7,621
Distribution amount from earnings per unit (yen)10,508
9,688
9,142
8,256
7,621
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
1.1%
1.1%
1.0%
0.9%
0.8%
ROA
Notes 2and3[annual rate][2.3%][2.1%][1.9%][1.9%][1.6%]
2.1%
2.0%
1.8%
1.7%
1.5%
ROE
Notes 3and 4[annual rate][4.2%][4.0%][3.6%][3.4%][3.0%]
Capital ratio
52.0%
53.8%
51.6%
55.7%
53.0%
[period-on-period percentage changes][−1.8%][+2.2%][−4.1%][+2.7%][−2.5%]LTV (loan to value)
43.3%
41.7%
44.3%
40.2%
43.0%
Note 5
Property leasing cash flows (NOI)
8,660
8,455
7,180
6,866
5,916
(6) Other Referential Information
Number of investment properties
50
50
47
46
44
Note 6
543
558
450
479
458
Number of tenants
328,027.44 325,313.01 288,833.07 286,088.89 259,381.62
Total rentable area (m2)
Note
7
98.7%
98.3%
97.3%
97.2%
96.4%
Occupancy rate
Depreciation
1,726
1,704
1,554
1,497
1,356
Capital expenditures
517
1,087
905
570
454
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 17th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 18th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 19th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 20th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 21st Fiscal Period are the annualized figures calculated based on 183 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred
to as “DOI”) was established on July 11, 2005 in accordance with the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951; including amendments thereto) with Daiwa Real Estate AssetManagement Co., Ltd. (former name K.K. daVinci Select) (the “Asset Manager”) as the organizer. After its
establishment, DOI implemented an additional issuance of investment units through a public offering (99,600
units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (TSE) Real Estate Investment
Trust Section (stock code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition price),
subsequent activities, such as additional acquisition of properties and replacement of portfolio properties,
resulted in the assets under management amounting to 458,357 million yen as of the last day of May 2016.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on
investment in a total floor area of more than about 2,000m2 situated in downtown Tokyo, as well as throughdedicated efforts to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from December 2015 to May 2016)
The Japanese economy during the fiscal period under review saw a modest recovery against the
backdrop of the improving employment and income environments, the improvement in corporate
performance and increase in capital investment boosted by the continuous yen depreciation from the
Bank of Japan’s monetary easing measures as well as the depression of prices due to low crude oil
prices.
In the office building leasing market in central Tokyo, with new supply having settled down, the vacancy
rate took a turn after peaking in June 2013, dropping to 4.05% at the end of May 2016. Led by
improvement in the vacancy rate for large buildings, the overall vacancy rate that includes small- to
medium-sized buildings also continues to be on an improving trend. The drop in the vacancy rate has led
to an increase in office rent in some areas, and the market as a whole continues to see increase in rent,
albeit slight.
For the office building transaction market, an appetite for property acquisitions continued to be strong
among real estate companies, funds (including J-REITs) and oversea investors with the continuing
proactive lending attitude by financial institutions backed by the forecast of an increase in property prices
in accordance with expectations for economic recovery.
(B) Management Performance
In view of increasing the long-term EPS (EPS (net income per unit) after deducting gain on sales ofproperties) over the medium to long term, DOI continued to work on “external growth,” which aims toboost revenue through acquisition of properties, and “internal growth,” which aims to maximize income
generating from existing properties.
Concerning external growth, DOI acquired “Nikko Building” (acquisition price: 13,710 million yen) in
March 2016, “Kirin Nihonbashi Building” (acquisition price: 8,180 million yen) in May 2016. In addition,
DOI sold 2 properties (Daiwa Shibuya Dougenzaka and Daiwa Minami-Senba). As a result, DOI’s assets
under management as of the end of the 21st Fiscal Period (May 31, 2016) totaled 50 properties, the sum
total of acquisition prices of which amounted to 458,357 million yen.
Concerning internal growth, while the office leasing market weakened, DOI conducted proactive
leasing, such as capturing needs for floor expansion within the same property through strengthening
relationships with existing tenants and reinforcing collaboration with leasing brokers and property
managers. As a result, the occupancy rate as of the end of the 21st Fiscal Period (May 31, 2016) was
98.7%.

18

(3) Overview of Capital Procurement(A) Procurement of Capital for New Property Acquisitions(a) In the 21st Fiscal Period, DOI made the following borrowings to fund the acquisition of new properties.
・A total of 12,000 million yen was borrowed from Mitsubishi UFJ Trust and Banking Corporation, The
Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui Banking Corporation, Development Bank ofJapan Inc., Shinsei Bank, Limited, The Nishi-Nippon City Bank, Ltd., Resona Bank, Ltd., Mizuho
Trust & Banking Co., Ltd. and Mizuho Bank, Ltd. on March 29, 2016 to fund the acquisition of anew property (Nikko Building) acquired on the same day.
・A total of 7,500 million yen was borrowed from Sumitomo Mitsui Trust Bank, Ltd., Sumitomo Mitsui
Banking Corporation and Mizuho Bank, Ltd. on May 26, 2016 to fund the acquisition of a newproperty (Kirin Nihonbashi Building) acquired on the same day.
(B) Procurement of Capital for Repayment of Borrowings
In the 21st Fiscal Period, DOI made the following borrowings to fund the repayment of borrowings thatwere due for repayment.
・A total amount of 2,200 million yen was borrowed from Shinsei Bank, Limited and Fukoku MutualLife Insurance Company on May 31, 2016 to fund the repayment of the same amounts borrowed
from the same banks that were due for repayment on the same day.
An early repayment for total of 5,500 million yen of short-term loans borrowed from Sumitomo Mitsui
Banking Corporation, Sumitomo Mitsui Trust Bank, Ltd. and Mizuho Bank, Ltd. on July 31, 2015 was madeon April 28, 2016.
(C) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 21st
Fiscal Period (May 31, 2016) stood at 206,300 million yen (long-term debt: 201,200 million yen; investment
corporation bonds: 5,100 million yen). The balance of the current portion of long-term debt stood at 21,200
million yen.
During the 21st Fiscal Period, DOI made borrowings centering on periods of between 7 years and9.5years with the maximum being10 years, and the average remaining period of interest-bearing liabilities
as of the end of the 21st Fiscal Period stands at 4.54 years.
(4) Capital Expenditures during the 21st Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures implemented
during the 21st Fiscal Period. Capital expenditures for the 21st Fiscal Period amounted to 517 million yen
and, when combined with the 403 million yen in repair expenses charged to the 21st Fiscal Period expenses,
totals 920 million yen in construction work were implemented.
Name of real estate
properties (Location)
Shinjuku Maynds Tower(Shibuya-ku, Tokyo)
River Gate
(Chuo-ku, Tokyo)
Daiwa Kojimachi 4-chome(Chiyoda-ku, Tokyo)

PurposeReplacement of hot-water coil
Additional installment of special high voltage
electric substation bank and MCB board
Renewal work of elevators

Other
Total

Period
From:
To:
From:
To:
From:
To:
From:
To:

Mar. 2016
May 2016
Jan. 2016
May 2016
Apr. 2016
May 2016
Dec. 2015
May 2016

Construction
amount paid
(millions of yen)
123
85
22
287
517

II. Asset Management Report19(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 21st Fiscal Periodof 12,363million yen in operating revenue, 6,108 million yen in operating income, 5,327million yen in ordinary
income and 5,250 million yen in net income.
Concerning distributions, to ensure that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation of
corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)), DOI decided to distribute almost all of
the entire amount (excluding fractions of the distribution amount per unit that are less than 1 yen ) remained
after deducting provision of reserve for reduction entry as stipulated in “Special Provisions on Taxation in thecase of advance acquisition of land and such in 2009 and 2010” (Article 66-2 of the Special Taxation MeasuresAct). Accordingly, DOI declared a distribution amount per unit of 10,508 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment
The Japanese economy going forward is expected to see a moderate economic recovery through recovery
in personal spending against the backdrop of favorable employment environment and the improved income
environment while various economic measures, centering on the public works projects and financial policies
promoted by the Abe administration and the monetary easing policy implemented by Bank of Japan continue.
However, factors, such as downward swing of the Chinese economy, upset in emerging markets
accompanying the U.S. exit strategy, drop in stock prices around the world due to geopolitical risks,
downturn of the Eurozone economy and concerns over losing fiscal discipline in the postponement ofconsumption tax increase, pose potential risks of disrupting the Japanese real economy and financial
environment, and are thus thought to require attention.
In the Tokyo office building leasing market, while new supply is on a low note, factors such as improvement
in employment are stimulating demand, resulting in the vacancy rate dropping. Improvement in corporate
performance is forecast to increase demand for office floor space and rent is expected to improve as aconsequence. In the office building transaction market, backed by the favorable financing environment andexpectations of rent rising, among other factors, property acquisition appetite among investors overseas, realestate companies and funds (including J-REITs) is thought to grow even stronger.
(2) Future Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the office leasing market conditions described above, the tenant side is also expected to become
more selective with properties. Consequently, DOI will carry out operational management under thefollowing policy with an aim to enhance the competitiveness of existing properties and thereby increase
the long-term EPS over the medium to long term.
(a) Maintain and raise occupancy rates
Concerning existing tenants, strive to reduce vacancy risks by improving the quality of buildings,
equipment and management system. In addition, concerning new tenants, strive to maintain and raiseoccupancy rates through the provision of services that are of higher satisfaction levels than competing
properties through proactive participation in the market.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining office environments of hightenant satisfaction levels by implementing efficient operational management and reviewing systematicconstruction work by optimally leveraging the economies of scale achieved from proactively realizing
external growth.

20(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on various
external growth strategies, while maintaining a balance with the asset acquisition environment andfinancing situation. In principle, considerations will focus on Tokyo as the investment target area, but DOI
will also consider investing in competitive properties in cities other than Tokyo from a viewpoint ofterritorially-distributed investments.
As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue tosearch for properties that meet its investment criteria by proactively gathering real estate transaction
market information through greater collaboration with the Asset Manager and Sponsor Group and utilizing
the Group’s extensive network of clients, partners, etc.
In the 21st Fiscal Period, DOI acquired “Nikko Building” and “Kirin Nihonbashi Building” which is locatedin Tokyo. DOI believes that acquisition of these properties will contribute to further stabilization andenhancement of the portfolio. DOI will continue to strive to acquire properties in line with the investment
strategy described above.
(C) Financial Strategy
DOI will conduct disciplined financial management of the following basic content.
(a) Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within the rangeof 40% to 50% at maximum, taking into consideration also the real LTV, etc., as a principle.
(b) Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period as a principle.
(c) Aim to have long-term loans account for at least 70% of total loans as a principle.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount equivalent to distributions paid, separately from working capital.
(D) Schedule of Capital Expenditures
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the expected construction amountincludes portions that are expensed as a separate account item of accounting costs.
Expected construction amount(millions of yen)
Name of real estate
properties(Location)

PurposeScheduled
implementation
periodTotalamountAmountpaid
duringcurrent
periodTotalamountalready
paid

Shinjuku Maynds Tower Additional installment of security(Shibuya-ku, Tokyo)
camerasFrom: Aug. 2016
To: Nov. 2016

77

–

–

Daiwa Tsukishima(Chuo-ku, Tokyo)

Renovation work of toilets

From: Apr. 2016
To: Aug. 2016

75

–

–

Shinjuku Maynds Tower Repair work of mechanical(Shibuya-ku, Tokyo)
parking equipment

From: Jul. 2016
To: Nov. 2016

74

–

–

Daiwa Shibaura(Minato-ku, Tokyo)

Upgrading of elevators

From: Apr. 2016
To: Nov. 2016

63

–

–

Daiwa Jingumae(Shibuya-ku, Tokyo)

Upgrading of individual airconditioning equipment

From: Jun. 2016
To: Jul. 2016

57

–

–

II. Asset Management Report21III. Balance Sheets
As of November 30, 2015 and May 31, 2016

(Thousands of yen)

As ofNovember 30, 2015

As of
May 31, 2016

AssetsCurrent Assets:
Cash and cash equivalents (Notes 3 and 4)

18,700,270

23,038,218

Tenant receivables

238,836

174,843

Consumption taxes receivable

515,291－

Prepaid expenses

386,625

427,960

551

307

Other current assets

157,031

188,383

Total Current Assets

19,998,604

23,829,711

Land

12,302,227

12,302,227

Buildings and structures

3,139,196

3,146,315

Tools, furniture and fixtures

18,95818,958Construction in progress

3,573

3,449

Land in trust accounts

338,450,955

351,272,600

Buildings and structures in trust accounts

102,144,615

102,387,897

Machinery and equipment in trust accounts

777,674

756,802

Tools, furniture and fixtures in trust accounts

175,565

187,063

Construction in progress in trust accounts

27,452

42,086

Other tangible fixed assets in trust accounts

4,337

4,337

(20,603,805)(21,675,860)

2,407,102

2,407,102

306,884

306,884

439,154,733

451,159,860

695

596

113,684

113,685

Long-term prepaid expenses

1,206,054

1,189,162

Deferred tax assets (Note 13)

186,816355,230

Deferred investment corporation bond issuance costs

32,39029,436

Others12,761

12,353

1,552,400

1,700,462

460,705,737

476,690,033

Deferred tax assets (Note 13)

Investment Properties, at cost (Notes 5 and 6):

Less: accumulated depreciation
Leasehold rights
Leasehold rights in trust accounts
Total Investment Properties, net
Other Assets:
TrademarkLease and guarantee deposits in trust

Total Other Assets
Total Assets
The accompanying notes are an integral part of these financial statements.

22

(Thousands of yen)

As ofNovember 30, 2015

As of
May 31, 2016

Liabilities
Current Liabilities:
Accounts payable

844,893988,221

Short-term debt (Notes 4 and 9)

5,500,000－

Long-term debt due within one year (Notes 4 and 9)

3,700,000

21,200,000

541,568

494,490776

970

Accrued consumption taxes

57,157534,191

Rent received in advance

1,941,024

2,051,728

Other current liabilities

204,480

365,653

Total Current Liabilities

12,789,898

25,635,253

5,100,000

5,100,000

Long-term debt (Notes 4 and 9)

178,000,000

180,000,000

Tenant security deposits including trust accounts (Note 4)

16,537,258

16,870,266

Derivative liabilities (Note 4)

578,198

1,364,329

Total Long-Term Liabilities

200,215,456

203,334,595

213,005,354

228,969,848

243,403,874

243,403,874

4,689,024

5,250,226

248,092,898

248,654,100

Deferred gains or losses on hedges(392,515)(933,915)

Total valuation and translation adjustments(392,515)(933,915)

Total Net Assets

247,700,383

247,720,185

Total Liabilities and Net Assets

460,705,737

476,690,033

Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bonds (Notes 4 and 9)

Total Liabilities

Net Assets (Notes 8 and 14)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 484,000 units as ofNovember 30, 2015 and May 31, 2016
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments

The accompanying notes are an integral part of these financial statements.

III. Balance Sheets

23

IV. Statements of Income and Retained Earnings
For the fiscal periods ended November 30, 2015 and May 31, 2016

(Thousands of yen)

For the fiscal periods
ended November 30, 2015
Operating Revenues:
Rental revenues (Note 7)
Other revenues related to property leasing (Note 7)
Gain on sale of investment properties (Note 11)
Total Operating Revenues
Operating Expenses:
Property-related expenses (Note 7)
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
New investment units issuance costs
Other non-operating expenses
Total Non-Operating Expenses

11,777,301
60,695－
11,837,996

For the fiscal periods
ended May 31, 2016
11,947,802
91,981
323,700
12,363,483

5,026,334
968,318
22,617
72,7905,014,202
994,954
23,18373,682

21,821
5,400
106,129

19,7205,400
123,887

6,223,409
5,614,587

6,255,028
6,108,455

772
805
11,998

132
689
4,902

13,575

5,723

591,940
16,708
162,633
160,735
6,521

597,307
16,892
166,855－
6,154

938,537

787,208

Ordinary Income
Income Before Income Taxes
Income taxes – current
Income taxes – deferred

4,689,625
4,689,625

5,326,970
5,326,970

806
3

978
75,798

Total Income Taxes (Note 13)
Net Income
Retained Earnings Brought Forward

809
4,688,816
208
4,689,024

76,776
5,250,19432
5,250,226

Retained Earnings at End of Period

The accompanying notes are an integral part of these financial statements.

24

IV. Statements of Income and Retained Earnings

V. Statements of Changes in Net Assets
For the fiscal periods ended November 30, 2015 and May 31, 2016

(Thousands of yen)

Unitholders’ Equity

Number of
Units(Units)Unitholders’CapitalRetained
Earnings

Deferred Gains
or Losses on
HedgesTotal Net
AssetsBalance as of May 31, 2015

441,000

219,155,572

4,031,830(232,601)

222,954,801

Issuance of new investment units

43,00024,248,302－－

24,248,302

Cash distributions declared－－(4,031,622)－(4,031,622)

Net income－－

4,688,816－

4,688,816

Net changes of items other thanunitholders’ equity

－

－

－

(159,914)(159,914)

484,000

243,403,874

4,689,024(392,515)

247,700,383

Cash distributions declared－－(4,688,992)－(4,688,992)

Net income－－

5,250,194－

5,250,194

Net changes of items other thanunitholders’ equity

－

－

－

(541,400)(541,400)

484,000

243,403,874

5,250,226(933,915)

247,720,185

Balance as of November 30, 2015

Balance as of May 31, 2016

The accompanying notes are an integral part of these financial statements.

V. Statements of Changes in Net Assets

25VI. Statements of Cash Flows
For the fiscal periods ended November 30, 2015 and May 31, 2016

(Thousands of yen)

For the fiscal periods
ended
November 30, 2015

For the fiscal periods
ended
May 31, 2016

Income before income taxes

4,689,625

5,326,970

Depreciation and amortization

1,704,770

1,726,590

Amortization of bond issuance costs

2,954

2,954

New investment units issuance costs

160,735－

Interest expense

608,648

614,199

Decrease in tenant receivables

36,95663,993

Increase (decrease) in accounts payable

219,183(93,048)

Increase in rent received in advance642,252

110,704－

9,127,507

Interest payments(617,859)(614,107)(Increase) decrease in consumption taxes receivable(515,291)

515,291

Other, net(401,246)

582,0026,530,727

17,363,055(34,102,121)(22,669,418)

Proceeds from tenant security deposits

2,689,304

882,544

Refunds of tenant security deposits(264,843)(549,537)

Net Cash Used in Investing Activities(31,677,660)(22,336,411)

Proceeds from short-term debt

5,500,000－

Repayment of short-term debt

(9,500,000)(5,500,000)

Proceeds from long-term debt

11,100,000

21,700,000

Repayments of long-term debt

(6,100,000)(2,200,000)

Proceeds from issuance of new investment units

24,087,567－

Distributions paid

(4,031,178)(4,688,696)

Net Cash Provided by Financing Activities

21,056,389

9,311,304

Net Change in Cash and Cash Equivalents(4,090,544)

4,337,948

Cash and Cash Equivalents at Beginning of Period

22,790,814

18,700,270

Cash and Cash Equivalents at End of Period (Note 3)

18,700,270

23,038,218

Cash Flows from Operating Activities:

Decrease in investment properties due to sale

Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties

Cash Flows from Financing Activities:

The accompanying notes are an integral part of these financial statements.

26

VI. Statements of Cash Flows

VII. Notes to Financial Statements
For the fiscal periods ended November 30, 2015 and May 31, 2016

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as“DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the“Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management(hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager,
as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating officeproperties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2016, DOI had ownership or trust beneficiary interests in 50 office properties with approximately
328,027m2 of rentable office space and had leased office space to 543 tenants engaged in a variety ofbusinesses. The occupancy rate for the office properties was approximately 98.7%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
DOI maintains its accounting records in Japanese yen.
DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

VII. Notes to Financial Statements

27

Note 2 – Summary of Significant Accounting Policies(a) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
(b) Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the trust beneficiary interests in trust. Investment property
balances are depreciated using the straight-line method over the estimated useful lives as follows:
Buildings and structures
2-64 years
Machinery and equipment
4-23 years
Tools, furniture and fixtures
5-18 years
Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs andmaintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.
(c) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective
terms of the bonds.
(d) New Investment Units Issuance Costs
The issuance costs of new investment units are expensed when incurred.
(e) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements andincome tax bases of assets and liabilities using the statutory rate.
(f) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of theproperties are registered by records maintained in each jurisdiction by the local government. The taxes are imposedon the registered record owner as of January 1 of each year, based on an assessment made by the local government.
When a property is purchased within the calendar year, the taxes for corresponding calendar year are imposed on
the seller. DOI pays the seller the corresponding amount of the taxes for the period from property acquisition date to
December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property, rather than
expensing them. In subsequent calendar years, such taxes on investment properties are charged as operating
expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.

(Thousands of yen)

Capitalized real estate taxes

For the fiscal periods ended
November 30, 2015
125,634

For the fiscal periods ended
May 31, 2016
53,870(g) Consumption Taxes
Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset against thebalance of consumption taxes withheld. As such, the excess of payments over amounts withheld is included in thecurrent assets while the excess of amounts withheld over payments is included in the current liabilities. Non-deductible
consumption taxes relating to investment properties are amortized equally over five years.
(h) Hedge Accounting
DOI enters into derivative transactions for the purpose of hedging risks in the Articles of Incorporation of DOI in
accordance with its general risk management policy. DOI uses interest-rate swaps as hedging instruments in order tohedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DOI applies the special
accounting treatment to interest-rate swaps which qualify for hedge accounting and meet specific criteria. Under the
special accounting treatment, the related differentials paid or received under such swap contracts can be recognized
and included in interest expense or income of the hedged assets or liabilities, and the interest-rate swaps are notrequired to be measured at fair value separately. The assessment of hedge effectiveness has been made each fiscal
period except for interest-rate swaps which meet the special criteria.

28

(i) Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating
revenues such as utility charge reimbursements, parking space rental revenues and other income. Rental revenues
are generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognizedwhen earned and their amounts can be reasonably estimated.
(j) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, all assets and liabilities with respect to assets in trust, as well as all
income generated and expenses incurred with respect to assets in trust, are recorded in the relevant balance sheet
and income statement accounts of the accompanying financial statements.

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as ofNovember 30, 2015 and May 31, 2016 consisted of the following:(Thousands of yen)

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

As of November 30, 2015
16,618,093
2,082,177
18,700,270

As of May 31, 2016
20,940,425
2,097,793
23,038,218

Note 4 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units
for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bankborrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and welldiversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets and securities(in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties andrepay or redeem outstanding borrowings and bonds. These borrowings and bonds are exposed to liquidity risk. Suchrisk is managed in ways such as maintaining the LTV ratio at low levels, diversifying maturities, keeping the ratio of
long-term debt to total debt at high levels, and diversifying lenders. For the floating-rate borrowings exposed to therisk of future interest rate fluctuations, DOI uses derivative transactions (interest-rate swap) as hedging instruments, inorder to avoid interest rate fluctuations and to fix the amount of interest payments for floating-rate borrowings.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash
flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The
assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the
special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in the risk
management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits in theevent of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds.
Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term deposit andsetting a minimum credit rating requirement for the depository financial institutions (excluding deposits for settlement
purposes).
Supplemental Explanation regarding Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price. When there is no quoted market priceavailable, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in a different value. Also, the contractual amounts of derivativetransactions do not represent the market risk involved in these derivative transactions.
VII. Notes to Financial Statements

29

(b) Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of November 30, 2015 and May 31, 2016 were as follows:(Thousands of yen)

As of November 30, 2015

As of May 31, 2016

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents
Total

18,700,270

18,700,270–

23,038,218

23,038,218–

18,700,270

18,700,270–

23,038,218

23,038,218–

5,500,000

5,500,000

–

–

–

–

3,700,000

3,702,740

2,740

21,200,000

21,292,250

92,2505,100,000

5,149,380

49,3805,100,000

5,221,170

121,170

178,000,000

178,318,165

318,165

180,000,000

180,362,802

362,802

192,300,000

192,670,285

370,285

206,300,000

206,876,222

576,222(579,872)(579,872)–(1,365,242)(1,365,242)–

Liabilities
Short-term debt
Long-term debt
due within one
year
Investment
corporation bondLong-term debt
Total
Derivativetransactions (*)(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parenthesis indicating the net liability
position.

The financial instruments whose fair value is deemed extremely difficult to determine are excluded from theabove table (See Note 2 below).
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets:(1) Cash and cash equivalents
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of the fairvalue.
Liabilities:(1) Short-term debt, long-term debt due within one year and long-term debt
For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly
identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items, theirbook value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, theirfair value is calculated based on the present value of principle and interest cash flows discounted at the current
interest rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain
floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is calculated based on
the present value of principle and interest cash flows which are processed as a single unit with the interest-rate
swap.
(2) Investment corporation bond
The fair value of investment corporation bond is based on their quoted market price.

30

Derivative Transactions:
The Company applies the hedge accounting for all derivative transactions. Contractual amount and fair value
were as follows:(Thousands of yen)Hedge
accounting method

Type ofderivativetransaction

Hedged item

As of November 30, 2015
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

82,800,000

81,300,000(579,872)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

30,350,000

28,350,000– (*2)

113,150,000

109,650,000(579,872)(Thousands of yen)Hedge
accounting method

Type ofderivativetransaction

Hedged item

As of May 31, 2016
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

82,800,000

81,300,000(1,365,242)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

28,350,000

19,850,000– (*2)

111,150,000

101,150,000(1,365,242)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps areprocessed as single unit with the hedged long-term debt.

2. Financial instruments whose fair value is deemed extremely difficult to determine
Tenant security deposits including trust accounts (with a book value of 16,537,258 thousand yen as ofNovember 30, 2015 and 16,870,266 thousand yen as of May 31, 2016) that have been deposited by tenants
were excluded from the scope of fair value disclosure because they are not marketable, and the actual deposit
period is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.
3. Redemption schedule for monetary claims(Thousands of yen)

As of May 31, 2015

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
18,700,270––––
18,700,270––––
Due within
one year

Due after
five years––(Thousands of yen)

As of May 31, 2016

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
23,038,218––––
23,038,218––––
Due within
one year

Due after
five years

VII. Notes to Financial Statements

–
–

31

4. Redemption schedule for short-term debt, investment corporation bond and long-term debt
(Thousands of yen)

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due within
one year

As of November 30, 2015

Short-term debt
Investment corporation bondLong-term debt
Total

Due after
five years

5,500,000
–
–
–
–
–
–
–
– 3,000,000– 2,100,000
3,700,000 28,250,000 17,350,000 22,000,000 31,600,000 78,800,000
9,200,000 28,250,000 17,350,000 25,000,000 31,600,000 80,900,000(Thousands of yen)

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due within
one year

As of May 31, 2016

Investment corporation bondLong-term debt
Total

Due after
five years––– 3,000,000– 2,100,000
21,200,000 19,400,000 21,500,000 25,000,000 33,300,000 80,800,000
21,200,000 19,400,000 21,500,000 28,000,000 33,300,000 82,900,000

Note 5 – Tangible Assets of Investment Properties
Investment properties as of November 30, 2015 and May 31, 2016 consisted of the following:
As of November 30, 2015

As of May 31, 2016

Acquisition
cost

Accumulated
depreciation

Book value

Acquisition
cost

Accumulated
depreciation

Book valueLand

12,302,227–

12,302,227

12,302,227–

12,302,227

Buildings andstructures

3,139,196(1,720,162)

1,419,034

3,146,315(1,807,702)

1,338,613

Tools, furnitureand fixtures

18,958(8,508)10,45018,958(9,261)

9,697

Construction inprogress

3,573

–

3,573

3,448

–

3,448

Land in trust
accounts

338,450,955–

338,450,955

351,272,600–

351,272,600

Buildings andstructuresin trust accounts

102,144,615(18,405,782)

83,738,833

102,387,898(19,378,467)

83,009,430

Machinery andequipmentin trust accounts

777,674(388,194)

389,480

756,802(389,890)

366,912Tools, furnitureand fixturesin trust accounts

175,565(76,822)

98,743

187,063(86,203)

100,860

Construction inprogressin trust accounts

27,452–

27,452

42,086–42,086

Other tangible
fixed assets
in trust accounts

4,337(4,337)–

4,337(4,337)–457,044,552(20,603,805)

436,440,747

470,121,734(21,675,860)

448,445,873

Total

32

(Thousands of yen)

Note 6 – Fair Value of Investment and Rental Properties
The book value, net changes in the book value and the fair value of the investment and rental properties wereas follows:(Thousands of yen)

For the fiscal periods ended
November 30, 2015

For the fiscal periods ended
May 31, 2016

Balance at beginning of period

406,699,107

439,123,699

Change during the period (Note 2)

32,424,592

11,990,626

Balance at end of period

439,123,699

451,114,325

Fair value (Note 3)459,820,000

483,390,000

Book value: (Note 1)(Notes)1. The book value represents the acquisition cost less accumulated depreciation.
2. Significant changes
For the fiscal period ended November 30, 2015, the major reasons of increase are acquisitions of three assets (32,518,000 thousand yen). The
major reason of decrease is depreciation (1,703,686 thousand yen).
For the fiscal period ended May 31, 2016, the major reasons of increase are acquisitions of two assets (21,890,000 thousand yen).
The major reason of decrease is sale of two assets (9,127,507 thousand yen) and depreciation (1,726,073 thousand yen).
3. The fair values as of November 30, 2015 and May 31, 2016 were determined by the sum of appraisal values provided by external real estateappraisers.

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended November 30, 2015 and May 31, 2016 were as
follows:(Thousands of yen)

For the fiscal periods ended
November 30, 2015

For the fiscal periods ended
May 31, 2016

11,777,301

11,947,802

60,69591,981

11,837,996

12,039,783

889,598

868,700

Utilities expenses

1,159,084

1,051,127

Taxes and dues

883,294

895,930

Insurance expenses

16,633

17,250

Repair expenses

320,997403,759

1,703,686

1,726,073

53,04251,363

Total rental expenses

5,026,334

5,014,202

Income from property leasing

6,811,662

7,025,581

Revenues from property leasing:
Rental revenues
Other revenues related to property leasing
Total revenues from property leasing
Rental expenses:
Consignment expenses

Depreciation
Other

VII. Notes to Financial Statements

33

Note 8 – Net Assets
DOI issues non-par value units in accordance with the Investment Trust Act and all of the amounts issued aredesignated as stated capital. DOI maintains a minimum of 50 million yen of net assets as required by theInvestment Trust Act.

Note 9 – Short-Term Debt, Long-Term Debt and Investment Corporation Bonds
Short-term debt, long-term debt and investment corporation bonds as of November 30, 2015 and May 31,
2016 consisted of the following:(Thousands of yen)

As of November 30, 2015
Unsecured loans due 2016 to 2026, principallyfrom banks and insurance companies with interest
rates mainly ranging from 0.3% to 1.0%

As of May 31, 2016

187,200,000

201,200,000

0.4% unsecured bond due 2019

3,000,000

3,000,000

1.0% unsecured bond due 2024

2,100,000

2,100,000

192,300,000

206,300,000

Total(Notes) The interest rates presented are daily weighted average interest rates. As for long-term debts which were hedged by interest-rate swaps forthe purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to calculate daily weighted average interest rates.

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of May 31, 2016
were as follows:(Thousands of yen)

Due within
one year

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due after
five years

short-term debt, long-term debt
21,200,000 19,400,000 21,500,000 28,000,000 33,300,000 82,900,000
and investment corporation bonds

Note 10 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of November 30, 2015
and May 31, 2016 were as follows:(Thousands of yen)

As of November 30, 201534

As of May 31, 2016

Due within one year

9,657,806

10,461,097

Due after one year

14,628,732

17,018,806

Total

24,286,538

27,479,903

Note 11 – Gain on Sale of Investment Properties
No investment properties were sold during the fiscal period ended November 30, 2015.
Gain on sale of investment properties for the fiscal period ended May 31, 2016 was as follows:(Thousands of yen)

For the fiscal period
ended May 31, 2016
Daiwa Shibuya Dougenzaka Building:
Proceeds from sale of investment property

6,400,000

Cost of selling investment property(4,474,587)

Other expenses related to sale(225,505)

Gain on sale of investment property

1,699,908

Daiwa Minami-Senba Building:
Proceeds from sale of investment property

3,335,062

Cost of selling investment property(4,652,920)

Other expenses related to sale

(58,350)

Loss on sale of investment property(1,376,208)

Note 12 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings intrust as of November 30, 2015 and May 31, 2016.

Note 13 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement
to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation
Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable
income of DOI will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able
to deduct such amount from taxable income.
The following table summarizes the significant difference between the statutory tax rate and DOI’s effective tax
rate for financial statement purposes.
(%)

For the fiscal periods ended
November 30, 2015

For the fiscal periods ended
May 31, 2016

Statutory tax rate

32.31%

32.31%

Deductible cash distributions(32.31)(30.85)

Others0.02(0.02)

Effective tax rate

0.02%

1.44%

VII. Notes to Financial Statements

35

The significant components of deferred tax assets and liabilities as of November 30, 2015 and May 31, 2016
were as follows:(Thousands of yen)

As of November 30, 2015

As of May 31, 2016

Deferred tax assets:
Accrued enterprise tax

10

17

187,357

431,326

187,367

431,343

Reserve for reduction entry–

75,806

Total deferred tax liabilities–

75,806

187,367

355,537

Deferred losses on hedges
Total deferred tax assets
Deferred tax liabilities:

Net deferred tax assets

Correction of deferred tax assets and deferred tax liabilities due to the changes in the corporate tax rates, etc.
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial
Amendment of the Local Tax Act, etc.” (Act No. 13 of 2016) were enacted in the Diet session on March 29, 2016,
and as a result, the corporate tax rates have been changed from fiscal periods beginning on or after April 1,
2016. Accordingly, the statutory tax rate used to calculate deferred tax assets and liabilities has been changed to
31.74% for temporary differences expected to be reversed in the fiscal periods ending November 30, 2016 andMay 31, 2017, and to 31.82% for temporary differences expected to be reversed in the fiscal periods ending
November 30, 2017 and May 31, 2018, and to 31.59% for the fiscal periods ending November 30, 2018 andthereafter.
The effect of these changes were immaterial

Note 14 – Per Unit Information
Information about earnings per unit for the fiscal periods ended November 30, 2015 and May 31, 2016 and net
assets per unit as of November 30, 2015 and May 31, 2016 were as follows:(Yen)

For the fiscal periods ended
November 30, 2015

For the fiscal periods ended
May 31, 2016

Net income per unit

9,692.56

10,847.51

Weighted average number of units outstanding (units)

483,754484,000

Earnings per Unit:(Yen)

As of November 30, 2015
Net Assets per Unit

511,778

As of May 31, 2016
511,819

The computation of earnings per unit is based on the weighted average number of units outstanding during theperiod. The computation of net assets per unit is based on the number of units outstanding at each period end
as stated on the balance sheets.
The diluted net income per unit is not stated as there are no diluted investment units.
There is no amount that is not available to ordinary unitholders.

36Note 15 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, thetotal amount of dividends that DOI has determined to pay out is 4,688,992,000 yen for the fiscal period ended
November 30, 2015 and 5,085,872,000 yen for the fiscal period ended May 31, 2016 that are the largest integral
multiple of 484,000, the number of units outstanding as of November 30, 2015 and May 31, 2016, after deducting
provision of reserve for reduction entry as stipulated in Article 66-2 of the Special Taxation Measure Act ofJapan. Furthermore, DOI does not pay out dividends that exceed accounting profits as outlined in Article 32-2 of
DOI’s Articles of Incorporation.
(Yen)

Ⅰ Unappropriated retained earnings
Ⅱ Cash distributions declared
Ⅲ Voluntary Retained Earnings
Provision of reserve for reduction entry
Ⅳ Retained earnings brought forward

For the fiscal periods ended
November 30, 2015
4,689,024,142

For the fiscal period ended
May 31, 2016
5,250,225,912

4,688,992,000

5,085,872,000–
32,142

164,162,797
191,115

Cash distributions are declared by the board of directors after the end of each period. Such distributions arepayable to unitholders of record at the end of each period. Information of cash distributions per unit and theboard of directors meeting dates when the distributions were proposed and approved were as follows:(Yen)

Cash distributions per unit
Board of directors meeting dates

For the fiscal periods ended
November 30, 2015
9,688

For the fiscal periods ended
May 31, 2016
10,508January 20, 2016

July 15, 2016

Note 16 – Related-Party Transactions
Not applicable.

Note 17 – Segment Information
For the fiscal periods ended November 30, 2015 and May 31, 2016
Segment Information
Segment information has been omitted as DOI has only one segment, which is property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements of income
and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for more than 90% of
total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for more than 90%of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of theoperating revenues recorded in the statements of income and retained earnings.

VII. Notes to Financial Statements

37

Note 18 – Significant Subsequent Events(a) Issuance of New Investment Units
At the meeting of the board of directors held on July 15 and 26, 2016, DOI resolved on the issuance of new
investment units as described below. The payments for the issuance of new investment units through public
offering (general issue) were completed on August 2, 2016.
(1) Issuance of new investment units through public offering (general issue)i) Number of investment units issued: 12,700 unitsii) Paid-in amount (issue price):￥587,489 per unitiii) Total paid-in amount (issue price): ￥7,461,110,300iv) Payment date:August 2, 2016v) Use of proceeds:
Together with the funds obtained by (2) issuance of new investment
units through third-party allotment, 6,000 million yen will be used for
repayment of a part of borrowings for specified assets of Heiwa
Higashi-Nihonbashi Building acquired on June 1, 2016 and Square
Daikanyama Building acquired on June 29, 2016. The remainder will
be used to fill out decrease in working funds allocated to a fund forand various expenses associated with the acquisition of Ogikubo TM
Building and Shinjuku West Building on July 21, 2016. The proceeds
will be deposited with financial institutions and will be allocated to apart of funds for acquisition of specified assets or a part of repaymentof borrowings.
(2) Issuance of new investment units through third-party allotmenti) Number of investment units issued(upper limit):
1,300 unitsii) Paid-in amount (issue price):￥587,489 per unitiii) Total paid-in amount (issue price)(upper limit):￥763,735,700iv) Allottee and number of units allotted(upper limit):
1,300 units allotted to Daiwa Securities Co., Ltd.
v) Payment date:August 31, 2016vi) Use of proceeds:
Together with the funds obtained by (1) issuance of new investment
units through public offering (general issue), 6,000 million yen will be
used for repayment of a part of borrowings for specified assets of
Heiwa Higashi-Nihonbashi Building acquired on June 1, 2016 andSquare Daikanyama Building acquired on June 29, 2016. The
remainder will be used to fill out decrease in working funds allocatedto a fund for and various expenses associated with the acquisition of
Ogikubo TM Building and Shinjuku West Building on July 21, 2016.
The proceeds will be deposited with financial institutions and will beallocated to a part of funds for acquisition of specified assets or a partof repayment of borrowings.
(Note) All or part of offering through third-party allotment may not be subscribed, and as a result, the final number of investment units to be issued
through third-party allotment may be decreased within a decreased number of units or the issuance through third-party allotment may becancelled.

(b) Acquisition of Assets(1) DOI acquired the trust beneficial interest in real estate on June 1, 2016 as described below.
Overview of the asset
Asset type
Trust beneficial interest in domestic real estate
Property nameHeiwa Higashi-Nihonbashi Building
Location
3-10-6 Higashi-Nihonbashi, Chuo-ku, Tokyo
Acquisition price 6,370,000 thousand yen (excluding acquisition-related costs, consumption taxes, etc.)
Agreement date
May 26, 2016
Acquisition dateJune 1, 2016
SellerNon-disclosed (Note)(Note) The seller is a domestic special purpose company. Its information is not disclosed since consent for disclosure has not been obtained from theseller.

38

(2) DOI acquired the trust beneficial interest in real estate on June 29, 2016 as described below.
Overview of the asset
Asset type
Trust beneficial interest in domestic real estate
Property nameSquare Daikanyama Building
Location
8-7 Daikanyama, Shibuya-ku, Tokyo
Acquisition price 2,280,000 thousand yen (excluding acquisition-related costs, consumption taxes, etc.)
Agreement dateJune 21, 2016
Acquisition dateJune 29, 2016
SellerHulic Co., Ltd.
(3) DOI acquired the trust beneficial interest in real estate on July 21, 2016 as described below.
Overview of the asset
Trust beneficial interest in domestic real
Asset typeestateProperty nameShinjuku West Building
Location
8-2-5 Nishi-Shinjuku, Shinjuku-ku, Tokyo
942,000 thousand yen (excluding
Acquisition price acquisition-related costs, consumption
taxes, etc.)
Agreement dateJuly 15, 2016
Acquisition dateJuly 21, 2016
SellerGodo Kaisha TC1

Trust beneficial interest in domestic realestateOgikubo TM Building
5-26-13 Ogikubo, Suginami-ku, Tokyo
3,800,000 thousand yen (excluding
acquisition-related costs, consumption
taxes, etc.)
July 15, 2016
July 21, 2016
Godo Kaisha TC1(c) Sale of Assets
DOI sold the trust beneficial interest in real estate on July 7, 2016 as described below.
Overview of the Asset
Asset type
Trust beneficial interest in domestic real estate
Property nameDaiwa Kudan Building
4,040,000 thousand yen (excluding settlement amounts of fixed assets tax and city
Sale priceplanning tax, as well as consumption tax, etc.)
Agreement dateJuly 7, 2016
Date of sale
July 7, 2016
Purchaser
Non-disclosed (Note)(Note) The purchaser is a domestic company. Its information is not disclosed since consent for disclosure has not been obtained from the purchaser.

(d) Borrowing of Funds(1) DOI borrowed funds on June 1, 2016 as described below. The funds were allocated for the acquisition of theproperty described in “(b) Acquisition of Assets (1)” and its related costs.
Details of the borrowings
LenderBorrowing
Balancedate(yen in thousands)

Sumitomo Mitsui
Banking Corporation
June 1,
Mizuho Bank, Ltd.
2016
The Bank ofTokyo-Mitsubishi UFJ, Ltd.

2,000,000
2,000,000
2,000,000

Interest rate
1 monthJapanese yen
TIBOR +0.25% (Note)maturity Repayment
methodMay 31,2017

Note

Bullet Unsecured
payment(Note) Interest payments shall be paid at the end of every month (if any such date is not a business day, it will be the following business day, if suchdate falls within the next month, the preceding business day of the month will be the payment day) and the repayment date. Interest rate is
calculated based on the 1 month Japanese yen TIBOR which Japanese Bankers Association (“JBA”) announces two business days prior to thefirst day of the applicable period.

(2) DOI borrowed funds on June 29, 2016 as described below. The funds were allocated for the acquisition of theproperty described in “(b) Acquisition of Assets (2)” and its related costs.
Details of the borrowing
LenderSumitomo Mitsui
Banking Corporation

Borrowing
Balancedate(yen in thousands)
June 29,2016

2,000,000

Interest rate
1 monthJapanese yen
TIBOR +0.25% (Note)maturity Repayment
methodMay 31,2017

Note

Bulletpayment Unsecured(Note) Interest payments shall be paid at the end of every month (if any such date is not a business day, it will be the following business day, if suchdate falls within the next month, the preceding business day of the month will be the payment day) and the repayment date. Interest rate is
calculated based on the 1 month Japanese yen TIBOR which Japanese Bankers Association (“JBA”) announces two business days prior to thefirst day of the applicable period.

VII. Notes to Financial Statements

39

VIII. Independent Auditor’s Report40

VIII. Independent Auditor’s Report

IX. Investor Information
Organization of Asset Manager (as of July 1, 2016)■ Description■ Directors and Auditors

Company Name

Daiwa Real Estate Asset Management Co., Ltd

President and Representative Director

Akira Yamanouchi

Address

6-2-1 Ginza, Chuo-ku, Tokyo

Established

October 21, 2004

Vice President and Representative
Director

Yuji Shinotsuka

Paid-in Capital

200 million yen
Akira Yamanouchi

Vice President and Representative
Director

Yoshiki Nishigaki

President

9
Executive directors: 4 / Executive auditors: 1
Non-executive directors: 2 / Non-executive auditors: 2

Director

Naoyuki Owa

Board of Directors

Director (non-executive)

Mikita Komatsu

Director (non-executive)

Akihiko Ogino

AuditorTamaki Shibayama

Auditor (non-executive)

Morimasa Matsuda

Auditor (non-executive)

Shinji Kiso

No. of Employees

66 (excluding dispatched employees)

Registration of Financial
Instruments Business Operator

Registration No. 355 (Financial Instruments), Director-General,
Kanto Local Finance Bureau (Kinsho)

Building Lots and Buildings
Transaction Business License

License No. (3)-83920, Governor of Tokyo

Discretionary Agent for Real
Estate Transaction Approval

License No. 34, Minister of Land, Infrastructure, Transport andTourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association■ Organizational Chart

Shareholders’ Meeting
Corporate Auditors
Compliance Committee

Board of Directors

Investment Committee（*）
Valuation Committee

Acquisition
Department
Office Investment
Team

Origination
Department

Asset Management
Department
Office Management
Team

Compliance Officer
President andRepresentative Director

Private FundManagement Department

Internal Control Office

Customer Relations
Department

Finance Department

Administration
Department

Corporate Planning
Department

Finance Team

Residential
Investment Team

Residential
Management Team

Accounting Team

Healthcare
Investment Team

Healthcare
Management TeamManagement Team

Infrastructure
Investment Team

Investment
Planning Team
Construction
Management Team

*Set up separately for each investment corporation

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd④①

Investment Corporation②

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers
Executive Director: Nobuaki Omura
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

KPMG AZSA LLC① Asset management contract / General administration affairs contract related to operationof administrative instruments② General administrative affairs contract / Asset custodian contract③ Unitholder register, etc. management contract / Special account management contract③⑤

Manager of Unitholder
Registry, etc.
Special Account Management
Institution
Sumitomo Mitsui Trust Bank, Limited

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation
Resona Bank, Ltd.

④ Sponsor support agreement⑤ Fiscal agency agreement(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified
Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc. Daiwa Securities Group Inc. is the Asset Management Company’s parent
company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance
No. 59 of 1963; including amendments thereto))

IX. Investor Information

41

History of Investment Unit Price(yen) 800,000

16,000 (units)
Investment unit price (left axis)

700,000

Trading volume (right axis)

14,000600,000

12,000500,000

10,000400,000

8,000

300,000

6,000

200,000

4,000

100,000

2,000
0

0

2014
June July

Aug. Sept. Oct.

Nov.

2015
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2016
Dec. Jan.

Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2016)■ No. of investment units by investor type
21st
Fiscal Period

Individuals/others
20,292 units (4.2%)

Financial institutions
212,202 units (43.8%)■ No. of unitholders
by investor type
Foreigners 53,390 units (11.0%)

Total: 484,000 units
Other domestic corporations 191,340 units (39.5%)

20th
Fiscal Period

Individuals/others
22,957 units (4.7%)

Financial institutions
215,414 units (44.5%)

Securities firms 6,776 units (1.4%)

Foreigners 46,728 units (9.7%)

Total: 484,000 units
Other domestic corporations 192,037 units (39.7%)

Financial institutions

81(0.9%)

Other domestic
corporations

153(1.8%)

Foreigners

207(2.4%)

Securities firms

18(0.2%)

Total

8,534

IR Calendar

Name of Investor

Number ofPercentage
Units Owned
Share(units)1. Daiwa Investment Management Inc.

128,905 26.63%

2. Japan Trustee Services Bank, Ltd. (Trust Account)

79,220 16.37%

3. Daiwa Securities Group Inc.

59,321 12.26%

Trust & Custody Services Bank, Ltd.
4.
(Securities Investment Trust Account)

48,441 10.01%

5. The Master Trust Bank of Japan, Ltd. (Trust Account)

48,330

9.99%

The Nomura Trust and Banking Co., Ltd.
6.
(Investment Trust Account)

17,306

3.58%

BNP Paribas Securities Services Sydney/
Jasdec/Australian Residents

4,552

0.94%

8. Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

3,523

0.73%

9. State Street Bank -West Pension Fund Clients- Exempt 505233

3,382

0.70%

10. State Street Bank and Trust Company 505223

3,184

0.66%

July 15, 2016 : Announcement of financial results
21st Fiscal Period
August 10, 2016 : Sending of Japanese version Business
Report for 21st Fiscal Period(Statement of Financial Performance)
August 12, 2016 : Start paying distributions for21st Fiscal Period
August 19, 2016 : 9th General Meeting of Unitholders

May(Note) The percentage share figures are rounded to the second decimal place.

42

8,075
(94.6%)

Securities firms 6,864 units (1.4%)

Top Ten Unitholders (as of May 31, 2016)7.

Individuals/others

End offiscal period

Feb.
Jan.

July
End offiscal period

Aug.

Nov.
January 2017 : Announcement of financial results for22nd Fiscal Period
February 2017 : Sending of Japanese version Business
Report for 22nd Fiscal Period(Statement of Financial Performance)
February 2017 : Start paying distributions for22nd Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

Held at least once every two years

Date for finalizing Unitholders with voting rights
for the General Meeting of Unitholders

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

May 31 and November 30 of each year
(distributions are paid within three months of this reference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted

Nikkei Inc.

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi, Suginamiku, Tokyo 168-0063 Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and All branches of the Sumitomo Mitsui Trust Bank nationwide

Provision of Information via Website
Daiwa Office Investment Corporation conducts information distribution via its website as an important tool for IR activities. DOI also provides an
e-mail delivery service, “IR mail Delivery Service,” which informs the subscribers of updates in website content such as press releaseannouncements via e-mail free of charge. The website will be continually enhanced and enriched so that the current situation and future
strategies of DOI are clearly communicated.

Daiwa Office Investment Corporation

http://www.daiwa-of_ce.co.jp/en/

Important information is
distributed via e-mail. Please
access and follow the simple
steps if you wish to receive
our IR mail Delivery Service.

IX. Investor Information

43

The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a brightand open investment corporation. We will continue to aim to be a highly-transparent investment corporation that isfurther cherished and trusted by our investors and tenants.