Asset Management Report for 13th Period(Semi-Annual Report for 13th Period)
From July 1, 2012 to December 31, 2012

I. Greetings
To Our Unitholders
We would like to express our sincere appreciation for your continued support of Japan Excellent, Inc. (JEI) and Japan
Excellent Asset Management Co., Ltd.
In the thirteenth period (July 1, 2012 – December 31, 2012), JEI recorded total revenues of 7,599 million yen and net
income of 2,309 million yen. The distribution per unit for the period was 12,242 yen.

During the period, the occupancy rate of the entire portfolio had temporarily dropped to 92.1% due to move-outs of somelarge tenants from our properties. However, we worked in close coordination with our property management companies
to ensure that the vacated spaces were leased as early as possible. Consequently, the occupancy rate of the entire
portfolio successfully recovered to 94.0% as of the end of the period.

Moreover, as stabilization of earnings from existing properties came into sight, JEI raised funds by issuing additional
investment units in January 2013, its first public offering in two years, to newly acquire four office buildings for 24.1
billion yen in total. The acquisition has expanded the portfolio size to 241.1 billion yen.

About Future Asset Management
In the office leasing market, while the ongoing decrease in rents will continue as a whole, some blue-chip buildings incentral Tokyo are anticipated to show signs of rents stopping to drop and even starting to increase along with a decreasein vacancy rates.
With this perspective, JEI will further reinforce coordination with the property management companies and endeavor tosecure stable occupancy and enhance profitability of the portfolio over a medium to long term. At the same time, we will
pursue opportunities to invest in excellent real estate properties for continued growth of the portfolio, working to achieve
our medium- and long-term target of 300 billion yen in asset size.
In terms of finance, we will continue our efforts in conducting stable financial operations by lengthening the remaining
period of debts and converting to fixed-rate debts as well as diversifying maturity dates, among other things.
On top of these, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and other laws
and regulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the status of ouroperations and asset management to our unitholders.

We kindly ask for your continued cooperation and support.

Chifumi Toda
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.
Asset Management Report for 13th period (Semi-Annual Report for 13th Period)2

Ⅱ. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
9th Period 10th Period
July 1, 2010 January 1,
to December 2011 to June
31, 2010
30, 2011

Fiscal period

11th Period 12th Period
July 1, 2011 January 1,
to December 2012 to June
31, 2011
30, 2012

13th Period
July 1, 2012 to
December 31,
2012(Millions of
yen)

7,094

7,337

7,085

7,740

7,599

(Millions of
yen)

7,094

7,034

7,085

7,587

7,597

(Millions of
yen)

4,040

4,117

4,116

4,400

4,427

(Millions of
yen)

3,494

3,555

3,645

3,901

3,950

Operating income(Millions of
yen)

3,053

3,220

2,969

3,340

3,172

Ordinary income(Millions of
yen)

2,219

2,362

2,237

2,435

2,310

Net income(Millions of
yen)

2,218

2,313

2,236

2,434

2,309

Total assets(Millions ofyen)

199,186

209,142

227,249

228,818

228,020

(2.2)

(4.9)

(8.6)

(0.6)

(−0.3)(Millions ofyen)

89,272

104,366

104,338

104,537

104,545(%)(−0.1)(16.9)

(0.0)

(0.1)

(0.0)

(Millions ofyen)

87,083102,052

102,052

102,052

102,052

Outstanding investment units(units)154,550

188,650

188,650

188,650

188,650

Net assets per unit

(yen)

577,629553,227

553,081554,134

554,175

Net income per unit (Note 2)(yen)

14,353

12,677

11,853

12,906

12,241(Millions of
yen)

2,218

2,263

2,236

2,301

2,309

(yen)

14,353

12,00011,854

12,20012,242(yen)

14,353

12,00011,854

12,20012,242

(yen)

(－)

(－)

(－)

(－)

(－)

(%)

1.1

1.2

1.0

1.1

1.0

(Annualized rate)

(%)

(2.2)

(2.3)

(2.0)

(2.1)

(2.0)

Return on equity (Note 4)

(%)

2.5

2.4

2.1

2.3

2.2

(Annualized rate)

(%)

(4.9)

(4.8)

(4.3)

(4.7)

(4.4)

Capital ratio (Note 5)

(%)

44.8

49.9

45.9

45.7

45.8

(%)

(−1.1)(5.1)(−4.0)(−0.2)

(0.1)

(%)

99.9

97.8

100.0

94.5

100.0

(properties)

19

19

23

24

24

(tenants)

Revenues(Rental revenues)
Operating expenses(Property operating
expenses)(Period-on-period change)(Note 1)
Net assets(Period-on-period change)(Note 1)
Unitholders’ capital

Total distribution
Distribution per unit
(Profit distribution per
unit)(Distribution in excess ofearnings per unit)
Return on assets (Note 3)(Period-on-period change)
Payout ratio (Note 6)
Number of investment
properties
Number of tenants

(%)

108

109

124

136

134

Total leasable space

2

(m )

228,177

234,547

262,464

266,981

266,915

Occupancy rate

(%)

91.7

92.4

93.8

94.7

94.0

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)3

Depreciation(Millions of
yen)

993

1,080

1,156

1,260

1,284

Capital expenditure(Millions of
yen)

328

347

357

393

283

(Millions of
yen)

4,593

4,559

4,595

4,946

4,932

(yen)

20,78016,391

17,982

18,78019,050(times)

13.0

12.2

8.4

10.5

12.7

(times)

4.3

4.5

4.3

4.2

4.0

100,400

95,500112,800

113,800

113,300

Net operating income (NOI)(Note 7)
Funds from operation (FFO)
per unit (Note 8)
FFO multiples (Note 9)
Debt service coverage ratio(DSCR) (Note 10)
Interest-bearing debt

(Millions ofyen)

Loan-to-value (Note11)

(%)

50.4

45.7

49.6

49.7

49.7

Number of days in operation(days)

184

181

184

182

184

(Note 1) Period-on-period change of total assets and net assets are rounded down to one decimal place.
(Note 2) Net income per unit is calculated by dividing the net income by the weighted-average number of units
outstanding during the six months period.
(Note 3) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100 (Theratio is rounded to one decimal place.)(Note 4) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100 (The ratio isrounded to one decimal place.)(Note 5) Capital ratio = Period end net assets / Period end total assets × 100 (The ratio is rounded to one decimal place.)(Note 6) Payout ratio = Total distribution / Net income × 100 (The ratio is rounded down to one decimal place.)(Note 7) NOI = Rental revenues – Property operating expenses + Depreciation(Note 8) FFO per unit = (Net income + Depreciation – Gain on sale real estate + Loss on sale of real estate) / Number of
Outstanding investment units (The figure is rounded down to the whole number.)(Note 9) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one
decimal place.)(Note 10) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment corporation
bonds) (The ratio is rounded one first decimal place.)(Note 11) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100 (The ratio is rounded to one
decimal place.)(2) Asset Management Development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006 under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter referred to the “Investment Trust Law”). On March 15, 2006, it
completed the corporate registration to the Kanto Finance Bureau (registration number 52, issued by the Head of the
Kanto Local Finance Bureau) and listed on the Real Estate Investment Trust Section of the Tokyo Stock Exchange(Securities Code: 8987) on June 27, 2006. Since the listing, we have continued investment management primarily in
office buildings with the aim of maintaining sound corporate growth and stable revenues from the medium- to longterm perspectives. On December 31, 2012, we settled our thirteenth period.

1) Business conditions and results
Earlier in the period under review, the Japanese economy had undergone a moderate recovery against the
backdrop of the demand for reconstruction from the Great East Japan Earthquake and the pickup from the drop
caused by the flooding in Thailand in the early autumn of 2011. Heading for the end of the period, however, theeconomy became weaker due to such factors as reductions in exports and production caused by the slowdown ofoverseas economies and resulting adjustments of capital investment.
In the office building leasing market, there had been concerns for a possible rise in vacancy rates in the Tokyo
metropolitan area, stemming from the recent mass supply of office buildings. Nevertheless, demand for officespaces became distinct from well-performing companies, including information and communication-related
Asset Management Report for 13th period (Semi-Annual Report for 13th Period)4

firms, and the vacancy rates remained flat or even started to show an improving trend. In Osaka and Nagoya
areas, in contrast to the market rents having continued to decrease since 2010, the vacancy rates remained stable
as the mass supply of office buildings that had lasted softened.
Under these circumstances, JEI had to face a tough situation in which the occupancy rate of Kawasaki
Nisshincho Building took a large drop with a major tenant moving out of the property. However, JEI worked
more closely with its respective property management companies through the change of the compensation
system (adoption of an incentive fee system) for their services to match the leasing market environment, andfocused on the lease up of the vacant spaces as early as possible, primarily for low-occupancy properties. As aresult, the occupancy rate of the entire portfolio, which had temporarily dropped to 92.1% due to the move-outof the said major tenant, successfully recovered to 94.0% as of the end of the period. This provided JEI with afoothold for increased revenues in the coming period ending June 2013.
In the real estate investment market, transactions of office buildings and other properties were conducted at asolid pace, given IPOs and public offerings of J-REITs and formation of private placement funds continuing one
after another. However, for properties regarded as “large” and “excellent,” many of the transactions conducted
were made between J-REITs and their sponsors. At JEI, we acquired ownership interests in an anonymous
association of an SPC that owns SE Sankyo Building, with an intention of eventually acquiring the underlying
property.
The entire asset portfolio owned by JEI as of the end of the period consisted of 24 properties with theinvestment amount totaling 217 billion yen (on an acquisition price basis) and total leasable space of
266,915.61m2 (80,741.97 tsubo) operating at an occupancy rate of 94.0% (a period-on-period decrease of 0.7
percentage points).

2) Fund raising highlights
We have made efforts consistently since the previous period to raise funds, focusing on conversion of floatingrate debts to fixed-rate debts, diversification of maturity dates and lengthening the remaining period of interestbearing debts.
For refinancing long-term loans of 14 billion yen which matured on July 31, 2012, JEI borrowed long-termloans in the same amount (breakdown: 3 billion yen in 5-year and 4-monhth floating interest loan, 4 billion yen
in 4-year and 6-month floating interest loan, 3 billion yen in 4-year and 6-month fixed interest loan and 4 billion
yen in 3-year and 4-month floating interest loan). As for floating interest loans (11 billion yen in total), weconverted all of them from floating-rate debts to fixed-rate debts through interest rate swaps.
As a result, as of the end of the period, JEI had the average remaining debt maturity of interest-bearing debts at
2.87 years, long-term borrowing ratio at 99.6 percent, fixed rate ratio at 76.2 percent, and weighted averageinterest rate for loans purchased at 1.32 percent. Outstanding interest-bearing debts totaled 113.3 billion yen,comprising 0.5 billion yen in short-term loans, 88.8 billion yen in long-term loans (including 15 billion yen in
long-term loans due within one year) and 24 billion yen in investment corporation bonds. (The loan to value
ratio to the total assets was 49.7 percent as of the end of the period.)
JEI has registered the issuance of investment corporation bonds for the purpose of dynamic arrangement oflong-term funds as follows:(Bond Issuance Registration Highlight)

Type

Estimated amountof issuance

Scheduled period for issuance

Investment
corporation bond

100 billion yen

From February 9, 2012 to February 8, 2014

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
5The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of December 31, 2012)

Issuer rating (outlook)
Individual debt issue rating(Note)

Rating and Investment
Information, Inc. (R&I)
AA- (Negative)AA-

Moody’s Japan
A3 (Stable)-(Note) Ratings for unsecured investment corporation bonds (No.1 through No.4).

3) Financial results and distribution highlights
As a result of the above investments, JEI posted 7,599 million yen in total revenues, 3,172 million yen in operating
income, 2,310 million yen in ordinary income and 2,309 million yen in net income for the period under review.
As for distributions, JEI determined to distribute the whole unappropriated retained earnings (except for the portionof less than one yen per unit) to be eligible for the special tax treatment on investment corporations (Article 67-15
of the Special Taxation Measures Law) that allows JEI to deduct the amount of profit distribution from its taxable
income. Accordingly, distribution per unit for the period was 12,242 yen.

(3) Capital Increase
JEI had no changes in the number of outstanding investment units for the period under review. The outline of thechanges is as follows:
Outstanding investment units
Unitholders’ capital(units)(Millions of yen)
Paid-up Date
Capital transaction
Remarks
ChangeBalance
ChangeBalanceFebruary 20,
2006

Private placement
for incorporation

June 26, 2006

400

400

200

200

(Note 1)

Public offering

128,000

128,400

64,23064,430(Note 2)

July 21, 2006

Allocation of
investment units
to a third party

6,400

134,800

3,211

67,641(Note 3)

July 11, 2007

Public offering

19,000

153,800

18,702

86,344(Note 4)

August 8, 2007

Allocation of
investment units
to a third party

750

154,550738

87,083(Note 5)January 31, 2011

Public offering

31,000185,550

13,608100,691(Note 6)

Allocation of
investment units
3,100
188,650
1,360
102,052(Note 7)
to a third party(Note 1) JEI was incorporated through private placement at a price of 500,000 yen per unit.
(Note 2) New investment units were issued at an offer price of 520,000 yen per unit (issue price of 501,800 yen per unit)
through a public offering in order to fund acquisition of new properties which were acquired at the time of thelisting.
February 28,
2011

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
6

(Note 3) New investment units were issued at an issue price of 501,800 yen per unit through an allocation of investment
units to a third party in order to partially fund new property acquisitions.
(Note 4) New investment units were issued at an offer price of 1,019,200 yen per unit (issue price of 984,360 yen perunit) through a public offering in order to partially repay debts procured to acquire properties in the second
period.
(Note 5) New investment units were issued at an issue price of 984,360 yen per unit through an allocation of investment
units to a third party in order to partially repay debts procured to acquire properties in the second period.
(Note 6) New investment units were issued at an offer price of 454,930 yen per unit (issue price of 438,984 yen per unit)
through a public offering in order to repay short-term loans procured to acquire properties in the ninth period
and to fund acquisition of a new property which was acquired in the tenth period.
(Note 7) New investment units were issued at an issue price of 438,984 yen per unit through an allocation of investment
units to a third party in order to repay short-term loans procured to acquire new properties in the ninth period
and to fund acquisition of a new property which was acquired in the tenth period.
[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listed on theReal Estate Investment Trust Section of the Tokyo Stock Exchange during each period are as follows:
9th period
11th period
13th period
Fiscal period (December
10th period
12th period(December(December(closing date)(June 2011)(June 2012)
2010)
2011)
2012)
Investment unit
market priceHighest (yen)570,000

543,000

408,000

430,000

511,000

Lowest (yen)397,000

363,500

295,500

297,600

371,000(Note) The highest and lowest prices of investment units refer to the closing prices on the Real Estate Investment Trust
Section of the Tokyo Stock Exchange.

(4) Distributions Paid
The distribution per unit for the period (the 13th period) was 12,242 yen per unit, based on JEI’s decision to
distribute the whole unappropriated retained earnings (except for the portion of less than one yen per unit) to beeligible for the special tax treatment on investment corporations (Article 67-15 of the Special Taxation Measures
Law) that allows JEI to deduct the amount of profit distribution from its taxable income.
Fiscal period

Accounting period
Retained earnings at end of
period (Thousands of yen)
Retained income(Thousands of yen)
Total cash distribution
amount (Thousands ofyen)(Cash distributions perunit) (yen)Of which, total profit
distributions (Thousands ofyen)(Profit distribution perunit) (yen)9th period

10th period

11th period

12th period

13th period

July 1, 2010
July 1, 2011
July 1, 2012
to December 31, January 1, 2011 to December 31, January 1, 2012 to December 31,
to June 30, 2011
to June 30, 2012
2010
2011
2012
2,218,333

2,314,032

2,236,262

2,434,824

2,309,504

76

50,232

5

133,29451

2,218,256

2,263,800

2,236,257

2,301,530

2,309,453(14,353)(12,000)(11,854)(12,200)(12,242)

2,218,256

2,263,800

2,236,257

2,301,530

2,309,453(14,353)(12,000)(11,854)(12,200)(12,242)

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
7

Total refund of investment
equity(Refund of investment per
unit)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
Going forward, the Japanese economy will remain weak for some time but is forecast to head for a modest
recovery, with expectations growing for escape from deflation and correction of the strong yen through themonetary policy, financial policy and growth strategy under the new administration, as well as the anticipatedrush demand in the latter half of the fiscal 2013 before the scheduled raise in the consumption tax rate. However,it will take some more time for the economy to show a full-on recovery because of the opaque outlook of the U.S.
government finances and the European economy, among other things.
In the office building leasing market in the Tokyo metropolitan area, we assume that the vacancy rates willremain flat or start to improve, while the rent levels will tend to decrease or stay flat. For large-scale, blue-chipproperties in central Tokyo, however, we anticipate that the rent levels will also gradually start to increase, asvacant spaces are increasingly leased up for the moment. In Osaka and Nagoya areas, although the market looks
activated for the moment, difficulty will continue to stay for some time against the backdrop of the future
prospects of the supply and demand situation for office spaces getting looser.
In the real estate investment market, given the fund procurement environment continuing to show an easing trend
and investment needs of various sectors including J-REITs expected to remain solid, property transactions areprojected to increase. Under such conditions, however, sellers may have little incentive to sell properties bysignificantly reducing prices. As such, the supply of properties that are highly qualified for investment is likely tobe limited. As for JEI, we acquired AKASAKA INTERCITY (Additional Acquisition of Compartmentalized
Ownership), Osaka Kogin Building (Land with Leasehold Interest) and Core City Tachikawa in February 2013using funds procured through the public offering conducted in January 2013, and plan to acquire SE Sankyo
Building in March 2013.

2) Policy and issues on future investment management
Amid a delay in recovery in the office building leasing market, JEI anticipates that its revenues from the existing
portfolio will turn to a period-on-period increase in the next period ending June 2013, as the rent gaps narrowed
early on in a steady manner and an increase in the occupancy rate of low-occupancy properties through leasing up
vacant spaces as early as possible came into sight. Going forward, we will endeavor to maintain and improveearnings of the entire portfolio by keeping and raising the rent levels based on the market trends and further
improving the occupancy rate. Moreover, in order to maintain the asset value of our portfolio and improve
competitive position of our properties over the medium to long term, we will consistently implement additional
strategic investment plans.
For external growth, we will continuously plan and implement well-balanced investments, including asset
replacements, based on the size, profitability and target area to increase asset size and realize stable profitability
in our portfolio over the medium to long term. To this end, we will continue enhancing further interaction andcollaboration with sponsor companies, have our asset management company cultivate and refine property
information sources, and seek business opportunities with efforts to proactively gain access to market
information.
As for the financial operations, the fund-raising environment is generally favorable for enterprises investing inreal estate. Still, we will consistently work on stable and sound financial operation to address uncertainties for the
future in and outside Japan, through endeavoring to convert floating-rate debts to fixed-rate debts, diversify
maturity dates, lengthen the remaining period of debts, ensure liquidity by renewing commitment lines andmaintain appropriate ratio of interest-bearing debts.
Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
8

(6) Subsequent Events
1) Issuance of new investment units through public offering
The board of directors of JEI approved the following issuance of new investment units through public offering at
its meetings held on January 10, 2013 and January 23, 2013. The payment for the offering was completed on
January 30, 2013.
As a result, unitholders’ capital is 116,460,481,400 yen and the number of investment units issued and outstandingis 221,650 as of January 30, 2013.
<Overview of the issuance of new investment units through public offering>(1) Number of new investment units issued

33,000 units(2) Offer price451,425 yen per unit

(3) Total offer price

14,897,025,000 yen(4) Paid-in amount (issue price)

436,609 yen per unit

(5) Total paid-in amount (total issue price)

14,408,097,000 yen(6) Paid-in date

January 30, 2013

2) Issuance of new investment units through third-party allocation (third-party allocation upon
exercise of a greenshoe option)
The board of directors of JEI approved the following issuance of new investment units through third-party
allocation at its meetings held on January 10, 2013 and January 23, 2013. JEI granted Mizuho Securities Co.,
Ltd. an option to receive allocation of new investment units to be issued through third-party allocation(greenshoe option). The exercise period of the option expires on February 22, 2013
<Overview of the issuance of new investment units through third-party allocation>(1) Number of new investment units issued

3,300 units(2) Paid-in amount (issue price)

436,609 yen per unit

(3) Total paid-in amount (total issue price)

1,440,809,700 yen(4) Allocated party

Mizuho Securities Co., Ltd.

(5) Paid-in dateFebruary 27, 2013

3) Asset acquisition (AKASAKA INTERCITY (additional acquisition of compartmentalized
ownership))On January 10, 2013, JEI concluded the following purchase agreement for trust beneficiary interest in real estate.
The property was handed over to JEI on February 5, 2013.
<Overview of the acquired property>(1) Acquired property

Trust beneficiary interest in real estate(2) Property name

AKASAKA INTERCITY (Additional Acquisitionof Compartmentalized Ownership)(3) Location

1-11-44, Akasaka, Minato-ku, Tokyo(4) Acquisition price (Note)

10,289,000,000 yen(5) Date of execution of purchase agreement

January 10, 2013

(6) Delivery dateFebruary 5, 2013(7) Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note) The acquisition price represents the sale price of the trust beneficiary interest excluding costs related to the acquisition, JEI’s share of

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
9the real estate tax and city planning tax, and consumption taxes.

4) Asset acquisition (Osaka Kogin Building (Land with Leasehold Interest))
On January 10, 2013, JEI concluded the following purchase agreement for trust beneficiary interest in realestate. The property was handed over to JEI on February 5, 2013.
<Overview of the acquired property>(1) Acquired property

Trust beneficiary interest in real estate(2) Property name

Osaka Kogin Building (Land with Leasehold
Interest)(3) Location

4-1-1 Koraibashi, Chuo-ku, Osaka(4) Acquisition price (Note)

1,770,000,000 yen

5) Date of execution of purchase agreement

January 10, 2013

(6) Delivery dateFebruary 5, 2013(7) Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note) The acquisition price is calculated as the land purchase price to be specified in the relevant trust beneficiary interest transfer
agreement subject to conditions precedent (¥10,100,000,000), less the amount equivalent to the key money pertaining to the leaseholdinterest in land (¥8,330,000,000), which will be received from the lessee of the land. The acquisition price represents the sale price of thetrust beneficiary interest excluding costs related to the acquisition, JEI’s share of the real estate tax and city planning tax, andconsumption taxes.

5) Asset acquisition (Core City Tachikawa)
On January 10, 2013, JEI concluded the following purchase agreement for trust beneficiary interest in realestate. The property was handed over to JEI on February 5, 2013.
<Overview of the acquired property>(1) Acquired property

Trust beneficiary interest in real estate(2) Property nameCore City Tachikawa(3) Location

2-37-7 Akebono-cho Tachikawa-shi, Tokyo(4) Acquisition price (Note)

6,500,000,000 yen

5) Date of execution of purchase agreement

January 10, 2013

(6) Delivery dateFebruary 5, 2013(7) Seller

Tachikawa Akebono-cho Capital Specific Purpose
Company(Note) The acquisition price represents the sale price of the trust beneficiary interest excluding costs related to the acquisition, JEI’s share of
the real estate tax and city planning tax, and consumption taxes.

6) Asset acquisition (SE Sankyo Building)On January 10, 2013, JEI concluded the following purchase agreement for trust beneficiary interest in real estate.

<Overview of the acquired property>(1) Acquired property

Trust beneficiary interest in real estate(2) Property name

SE Sankyo Building(3) Location

1-1-2 Kitananajonishi, Kita-ku, Sapporo-shi,
Hokkaido(4) Acquisition price (Note)

5,500,000,000 yen

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
10(5) Date of execution of purchase agreement

January 10, 2013(6) Scheduled delivery date

March 1, 2013(7) Seller

Polaire LLC(Note) The acquisition price presents the sale price of the trust beneficiary interest excluding costs related to the acquisition, JEI’s shareof the real estate tax and city planning tax, and consumption taxes.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
117) Debt financing
As of January 31, 2013, JEI concluded an individual loan agreement under the Revolving Credit Facility
Agreement, as described below, in order to fund the acquisition of AKASAKA INTERCITY (Additional
Acquisition of Compartmentalized Ownership), Osaka Kogin Building (Land with Leasehold Interest) andCore City Tachikawa and partially fund various expenses related to the acquisitions.
(1) Lender

Mizuho Corporate Bank, Ltd.

(2) Loan amount

4,500,000,000 yen(3) Interest rate

0.63% (Floating rate)(4) Drawdown dateFebruary 5, 2013(5) Interest payment date

March 1, 2013(6) Principal repayment date

March 1, 2013(7) Principal repayment method

To be repaid in full on the principal repayment date(early repayment permitted)(8) Collateral

Unsecured / Non-guaranteed

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)12

2. Outline of the Investment Corporation(1) Investment unit
Fiscal period

Number of units
authorized
Number of units
issued andoutstanding
Unitholders’ capital
Number ofunitholders

9th
11th
13th
10th
12th
As of December 31,
As of December 31,
As of December 31,
As of June 30, 2011
As of June 30, 2012
2010
2011
2012
2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

units

units

units

units

units

154,550 units

188,650 units

188,650 units

188,650 units

188,650 units

87,083 million yen 102,052 million yen 102,052 million yen 102,052 million yen 102,052 million yen
5,495

7,411

7,875

7,447

6,760

individuals

individuals

individuals

individuals

individuals(2) Unitholders
Major unitholders as of December 31, 2012 are as follows:
Name

Number ofunits held
(Units)Address

Ratio of number ofunits held tooutstanding
investment units (%)

Japan Trustee Services Bank,
Ltd. (Trust Account)

1-8-11 Harumi, Chuo-ku, Tokyo

47,44825.15

NIPPON STEEL KOWA REALESTATE CO., LTD.

1-15-5 Minami Aoyama, Minato-ku, Tokyo

14,312

7.59

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

Harumi Island Toriton Square Office Tower
Z, 1-8-12 Harumi, Chuo-ku, Tokyo

10,426

5.53

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

2-11-3 Hamamatsu-cho, Minato-ku, Tokyo

10,094

5.35

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

2-2-2 Otemachi, Chiyoda-ku, Tokyo

9,388

4.98

NOMURA BANKBATIMENT A, 33, RUE DE GASPERICH,L-(LUXEMBOURG) S.A.

5826, LUXEMBOURG

4,749

2.52

North Pacific Bank, LTD.

3-7 Odori-Nishi,
Hokkaido

4,590

2.43

The Dai-ichi Life Insurance
Company, Limited

1-13-1 Yuraku-cho, Chiyoda-ku, Tokyo

4,132

2.19

The Chugoku Bank, LTD.

1-15-20 Marunouchi, Kita-ku, Okayama-shi,
Okayama

3,405

1.80

STATE STREET BANK AND
TRUST COMPANY 505223

P.O. BOX 351 BOSTON MASSACHUSETTS
02101 U.S.A.

2,493

1.32

111,037

58.86

Chuo-ku,

Sapporo-shi,

Total(Note) Ratio of number of units held to outstanding investment units is rounded to two decimal places.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
13

(3) Officers
1) Directors and accounting auditor
Post

Executive
Director
Supervisory
Director
Supervisory
Director
Supervisory
Director
Accounting
Auditor

Name

Compensation or fee
for the six months
ended December 31,
2012 (Thousands ofyen)

Major additional post

Chifumi Toda

President and Director, Japan Excellent AssetManagement Co., Ltd.

Makoto Sakagami

Makoto Sakagami Certified Public Accounting
OfficeTsuyoshi Nagahana

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai
University

Ernst & Young
ShinNihon LLC

－

－

6,540

13,000(Note 2)

(Note 1) There is no investment unit of JEI held by the Executive Director nor the Supervisory Directors. Although
Supervisory Directors may have additional posts in companies other than those listed above, there is no conflictof interests between those companies, including those listed above, and JEI.
(Note 2) The total amount of compensation is an estimate and includes fees for English financial statement audit.

2) Policy on dismissal and discontinuation of re-election of accounting auditor
The board of directors of JEI shall deliberate dismissal of accounting auditor in accordance with the provisions set
out in the Law Concerning Investment Trusts and Investment Corporations, and deliberate discontinuation of reelection based on circumstances in all respects.

(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
Our asset management company, asset custodian and administrative agents as of December 31, 2012 are as follows:
Classification

Name

Asset management company

Japan Excellent Asset Management Co., Ltd.

Asset custodian

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Transfer agent and other administrative work foraccounting and institution operation)

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Investment corporation bonds)

Mizuho Corporate Bank, Ltd.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
14

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
12th Period(June 30, 2012)
Classification

Use

Area

13th Period(December 31, 2012)

Total
Total
Investment
Investment
acquisitionacquisitionratio
inratio inprice (Millions
price (Millions
portfolio (%)
portfolio (%)
of yen)of yen)(Note 2)
(Note 2)
(Note 1)

Real estate property(Note 1)

Area II(Note 4)

4,480

2.0

4,484

2.0

Area I(Note 4)112,923

49.3

112,568

49.4

Area II(Note 4)

7,443

3.2

7,420

3.3

Area III(Note 4)

74,11932.4

73,616

32.3

Area IV(Note 4)

6,168

2.7

6,096

2.7

Area I(Note 4)

7,044

3.1

6,990

3.1

212,178

92.7

211,177

92.6

－

－

207

0.1

Deposits in bank and other assets

16,6397.3

16,634

7.3

Total assets

228,818100.0

228,020100.0(Note 3)

Trust beneficiaryinterest in realestate (Note 3)

Trust beneficiaryinterest in realestateOfficeOthers
Total

Ownership interests in an anonymous association (Note 5)(Note 1) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date(amounts of real estate property and trust beneficiary interest in real estate are based on the book value after
depreciations).
(Note 2) Investment ratio in portfolio is rounded to one decimal place.
(Note 3) Leasehold rights owned in combination with buildings and other structures are included in real estate property
and trust beneficiary interest in real estate at the combined amount.
(Note 4) Areas are classified as follows:
Area I: Six central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya)
Area II: Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.), central Nagoya(Meieki, Fushimi, Sakae, etc.) and central Fukuoka (Tenjin, Hakata-ekimae, etc.)
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities.
(Note 5) This represents the ownership interests in an anonymous association managed by Polaire LLC.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
15

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of December 31, 2012 are as
follows:
Ratio of rental
Book value Leasable space Leased space Occupancy revenue to total
Name(Millions of
(m2)
(m2)
rate (%) rental revenues Major use(Note 1)
(Note 2)
(Note 3)yen)(%)
(Note 4)

Kowa Kawasaki
Nishiguchi Building

30,19938,332.15

36,281.92

94.7

12.1

OfficeAkasaka Garden City

22,7688,769.53

8,769.53

100.0

5.3

OfficeOmori Bellport D

21,74725,828.29

24,836.79

96.2

12.5

Office17,454

5,622.98

5,546.06

98.6

4.1

Office12,91525,217.28

25,217.28

100.0

10.6

Office10,794

12,122.85

12,122.85

100.0

4.5

Office10,14018,612.72

18,612.72

100.0(Note 5)

OfficeShiba 2-Chome Building

9,164

11,749.30

11,749.30

100.0

4.9

OfficeJEI Hamamatsucho
Building

8,286

6,411.26

6,411.26

100.0

3.4

OfficeNo. 35 Kowa Building

8,281

9,377.16

9,377.16

100.0(Note 5)

OfficeTotal

151,752

162,043.52

158,924.87

98.1

67.1

AKASAKA
INTERCITY
Musashikosugi Tower
Place
Daiba Garden City
Building
Kowa Kawasaki
Higashiguchi Building－(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of December 31,
2012 and is rounded to two decimal places. For properties with joint ownership, the value is obtained bymultiplying the total leasable space of the shared real estate by the percentage of the interest owned by JEI.
(Note 2) Leased space refers to space with lease contracts concluded with end tenants as of December 31, 2012 and isrounded to two decimal places. For properties with joint ownership, the value is obtained by multiplying thetotal leased space of the shared real estate by the percentage of the interest owned by JEI. The leased space ofend tenants who terminated their lease arrangement but not yet removed as of the end of period is included in
the leased space. This also applies to the calculations of occupancy rate in (Note 3) below and the total numberof tenants in (Note 1) in (3) Portfolio Ownership Breakdown.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of December 31, 2012 androunded to one decimal place.
(Note 4) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 5) The values of Kowa Kawasaki Higashiguchi Building and No. 35 Kowa Building are not disclosed as consents
on disclosure from the tenants have not been obtained.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
16

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of December 31, 2012 are as follows:
Property
No.

Property nameLocation (Residential address)

Form of ownershipAppraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note 1)

Ⅰ-1

Omori Bellport D

6-26-3 Minami-Oi, Shinagawa-ku, Tokyo

Trust beneficiaryinterest in realestate23,13021,747

Ⅰ-2

Shiba 2-Chome Building

2-6-1 Shiba, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate10,9009,164

Ⅰ-3

JEI Hamamatsucho Building

2-2-12 Hamamatsu-cho, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

7,470

8,286

Ⅰ-4

No. 32 Kowa Building

5-2-32 Minami-Azabu, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

6,838

7,386

Ⅰ-7

Akasaka Garden City

4-15-1 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate17,70022,768Ⅰ-8AKASAKA INTERCITY

1-11-44 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate12,50017,454

Ⅰ-9

Kowa Shirokanedai Building

3-19-1 Shirokanedai, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

4,960

4,884

Ｉ-10

Daiba Garden City Building

2-3-5 Daiba, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate11,74010,794

Ⅰ-11

No. 35 Kowa Building

1-14-14 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

9,050

8,281

Ⅰ-12

HAMARIKYU INTERCITY

1-9-1 and 15 Kaigan, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

7,560

6,990

Ⅰ-13

Shintomicho Building

3-10-9 Irifune, Chuo-ku, Tokyo

Trust beneficiaryinterest in realestate

1,804

1,799

113,652

119,559

Area I
Ⅱ-1

NHK Nagoya Housou Center
Building

1-13-3 Higashi-Sakura, Higashi-ku, Nagoya-shi,
Aichi

Real estate

4,250

4,484

Ⅱ-2

JEI Nishi-Honmachi Building

1-3-15 Awaza, Nishi-ku, Osaka-shi, Osaka

Trust beneficiaryinterest in realestate

4,220

7,420

Area II

8,470

11,905

16,40012,915

Ⅲ-1

Musashikosugi Tower Place

1-403 Kosugi-machi, Nakahara-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestateⅢ-2

Kowa Kawasaki Higashiguchi
Building

1-53 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate8,350

10,140Ⅲ-3

JEI Hongo Building

2-38-16 Hongo, Bunkyo-ku, Tokyo

Trust beneficiaryinterest in realestate

4,560

5,220

Ⅲ-5

Kawasaki Nisshincho Building

7-1 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate

3,050

4,081

Ⅲ-6

No. 44 Kowa Building

1-2-7 Higashiyama, Meguro-ku, Tokyo

Trust beneficiaryinterest in real

1,530

985

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
17estateⅢ-7

JEI Ryogoku Building

3-25-5 Ryogoku, Sumida-ku, Tokyo

Trust beneficiaryinterest in realestate

2,096

2,365

Ⅲ-8

Ebina Prime Tower

2-9-50 Chuo, Ebina-shi, Kanagawa

Trust beneficiaryinterest in realestate

3,690

6,049

Ⅲ-9

Kowa Kawasaki Nishiguchi Building

66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate24,50030,199

Ⅲ-10

Pacific Square Sengoku

2-29-24 Hon-Komagome, Bunkyo-ku, Tokyo

Trust beneficiaryinterest in realestate

1,626

1,658

65,802

73,616

Area III
Ⅳ-2

JEI Kyobashi Building

Ⅳ-3

Hiroshima Hacchobori
Seimei Building

Dai-ichi

2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,
Osaka

Trust beneficiaryinterest in realestate

3,510

3,314

14-4 Hacchobori,Hiroshima

Trust beneficiaryinterest in realestate

2,770

2,781

Area IV

6,280

6,096

Total

194,204

211,177

Naka-ku,

Hiroshima-shi,(Note 1) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report
prepared by real estate appraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co.,
Ltd., and Japan Valuers Co., Ltd. as of December 31, 2012 pursuant to the articles of incorporation of JEI andthe regulations stipulated by the Investment Trusts Association, Japan. For properties with joint ownership in
the current portfolio, the value is obtained by multiplying the total value of the shared real estate by thepercentage of the interest owned by JEI or the trustee.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
18

Property
No.

12th Period
January 1, 2012 to June 30, 2012

Property name

Total number of Occupancy Rental revenue
tenants (At end rate (At end(Interim)of period)of period)(Millions of(Note 1)(%)yen)

11th Period
July 1, 2012 to December 31, 2012
Ratio ofrentalrevenue tototal rental
revenues(%)

Total number of Occupancy Rental revenue
tenants (At end rate (At end(Interim)of period)of period)(Millions of(Note 1)(%)yen)

(Note 2)

Ratio ofrentalrevenue tototal rental
revenues(%)(Note 2)

Ⅰ-1

Omori Bellport D

1

95.8

989

13.0

1

96.2

947

12.5

Ⅰ-2

Shiba 2-Chome Building

2

100.0

371

4.9

2

100.0

371

4.9

Ⅰ-3

JEI Hamamatsucho
Building

1

100.0

254

3.4

1

100.0

254

3.4

Ⅰ-4

No. 32 Kowa Building

1

98.2

274

3.6

1

92.4

271

3.6

Ⅰ-6

No. 28 Kowa Building(Note 4)

-

-

39

0.5

-

-

-

-

Ⅰ-7

Akasaka Garden City

1

91.1

359

4.7

1

100.0

401

5.3

Ⅰ-8

AKASAKA
INTERCITY

13

100.0

318

4.2

12

98.6

314

4.1

Ⅰ-9

Kowa Shirokanedai
Building

1

80.4

191

2.5

1

94.7

179

2.4

Ｉ-10

Daiba Garden City
Building

1

100.0

338

4.5

1

100.0

338

4.5

Ⅰ-11

No. 35 Kowa Building

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)

Ⅰ-12

HAMARIKYUINTERCITY

7

98.6

260

3.4

6

98.2

275

3.6

Ⅰ-13

Shintomicho Building

9

100.0

37

0.5

9

100.0

72

1.0

38

96.9

-

-

36

98.0

-

-

Area I
Ⅱ-1

NHK Nagoya Housou
Center Building

30

96.0

292

3.9

30

96.8

305

4.0

Ⅱ-2

JEI Nishi-Honmachi
Building

1

90.0

208

2.7

1

95.7

205

2.7

31

92.7

-

-

31

96.2

-

-

Ⅲ-1

Musashikosugi Tower
Place

36

100.0

794

10.5

36

100.0

806

10.6

Ⅲ-2

Kowa Kawasaki
Higashiguchi Building

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)Ⅲ-3

JEI Hongo Building

1

100.0

174

2.3

1

100.0

(Note 3)(Note 3)

Ⅲ-5

Kawasaki Nisshincho
Building

1

96.1

217

2.9

1

66.6

88

1.2

Ⅲ-6

No. 44 Kowa Building

1

100.0

90

1.2

1

100.0

91

1.2

Ⅲ-7

JEI Ryogoku Building

1

100.0

108

1.4

1

84.0

102

1.3

Ⅲ-8

Ebina Prime Tower

17

75.9

324

4.3

17

75.8

338

4.4

Ⅲ-9

Kowa Kawasaki
Nishiguchi Building

1

94.7

913

12.0

1

94.7

916

12.1

Ⅲ-10

Pacific Square Sengoku

6

100.0

80

1.1

6

85.1

82

1.1

65

93.4

-

-

65

90.6

-

-

Area II

Area III
Ⅳ-2

JEI Kyobashi Building

1

96.2

185

2.4

1

96.2

182

2.4

Ⅳ-3

Hiroshima Hacchobori
Dai-ichi Seimei Building

1

90.5

33

0.4

1

89.7

149

2.0

2

93.5

-

-

2

93.2

-

-

136

94.7

7,587

100.0

134

94.0

7,597

100.0

Area IV
Total
th

th

Asset Management Report for 13 period (Semi-Annual Report for 13 Period)
19

(Note 1) Total number of tenants indicates the total number of tenants in each property as of the end of each period. For
properties for which master lease agreements have been concluded, the number of tenants is counted as one perproperty. When a tenant has multiple tenancies in the same property, it is counted as one tenant, and when in
multiple properties, it is counted as multiple tenants.
(Note 2) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 3) The values of Kowa Kawasaki Higashiguchi Building and No. 35 Kowa Building are not disclosed as consents
on disclosure from the tenants have not been obtained.
(Note 4) No. 28 Kowa Building was sold on February 29, 2012.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
20

(4) Securities Portfolio
The following shows the securities owned by JEI in its portfolio as of December 31, 2012

Book value
Securities name

Assessed value (Note 1)

Type of asset Volume

Gain (Loss) on
valuation(Thousands ofyen)Remarks

Unit
value

Amount(Thousands ofyen)

AmountUnit(Thousands of
value
yen)

－

－

207,614－207,614

－

－

－

－

207,614－207,614－－

Ownership
Ownership interests in ananonymous association
managed by Polaire LLC(Note 2)

Interests inananonymous
associatio
n

Total

(Note 1) The assessed value indicates their book value.
(Note 2) The investment portfolio is a trust beneficiary interest in SE Sankyo Building as trust asset.

(5) Other Assets
1) Contract amount and fair value of specified transactions and foreign exchange forwards transactions
Classification

Contract amount (Thousands of yen)(Note 1)
Type
Over one year

Fair value(Thousands of yen)
(Note 2)

Interest rate swap
contracts
Over-the-counter
Fixed interest rate
39,300,000
39,300,000－
transaction
payableFloating interest ratereceivable(Note 1) Contract amount of swap is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation as over-the-counter transactions meet requirements for special accounting
under the Accounting Standard for Financial Instruments.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)21

4. Capital Expenditures for Owned Properties(1) Scheduled Capital Expenditures
The following table shows major items of scheduled capital expenditures for repairs and maintenance planned forthe properties owned by JEI as of December 31, 2012. The values below include portions to be expensed foraccounting purposes.

Property nameKowa Kawasaki
Nishiguchi
Building

JEI
Hamamatsucho
Building
NHK Nagoya
Housou Center
Building

Location

Saiwai-ku,
Kawasaki-shi

Minato-ku, Tokyo

Higashiku, Nagoyashi

Omori Bellport D

Shinagawa-ku, Tokyo

No. 32 Kowa
Building

Minato-ku, Tokyo

Estimated construction costs(Millions of yen)
Payment
for the six Total ofmonthsTotal
ended advancepayment
December31, 2012

PurposeScheduled term

Renewal of canteens foroffice workers

From January 2013
To May 2013

309

－

－

From October 2012
To January 2013

82

－

－

80

－

－

36

－

－

35

－

－

Renewal of airconditioning systems(3rd term)
Renewal of airconditioning systems(5th term)

From June 2012
To January, 2013

Renewal of disaster

From November 2012

prevention systems

To March 2013

Partial renewal of floors

From April 2013
To May 2013

(2) Capital Expenditures for the Six months Ended December 31, 2012
The following table shows constructions conducted by JEI during the period for properties it owned as ofDecember 31, 2012 and expensed as capital expenditures. Capital expenditures for the period ended December
2012 were 283 million yen and, when combined with repairs and maintenance costs of 86 million yen classified as
expenses, the amount of constructions completed totaled 370 million yen.

Name
Kawasaki Nisshincho
Building

NHK Nagoya Housou
Center Building

Location

PurposeKawasaki-ku,
Kawasaki-shi

Utility renovation

Higashi-ku, Nagoya-shi

Renewal of fire prevention
monitoring systems

Other constructions
Total

Scheduled term
From September 2012
To December 2012

Amounts
paid(Millions ofyen)
52

From July 2011
To July 2012

48

－

183
283

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
22

(3) Reserved Funds for Long-term Repairs and Maintenance Plans
Based on our long-term repairs and maintenance plans developed for each property, JEI has set aside the following
cash reserves, derived from depreciation and other excess cash flows, in order to fund large-scale repairs andmaintenance and other constructions.
(Unit: Millions of yen)

Item

Reserved funds at beginning of
period

9th Period
11th Period
13th Period
10th Period
12th Period
July 1, 2010
July 1, 2011
July 1, 2012
January 1, 2011
January 1, 2012
to December 31, to June 30, 2011 to December 31, to June 30, 2012 to December 31,
2010
2011
2012
254

259

251

299

267

Increase

5

5

48

14

14

Decrease

－

13

－

47

－

Reserved funds at the end of
period

259

251

299

267

281

5. Expenses and Liabilities(1) Expenses Associated with Asset Management(Unit: Thousands of yen)Account

12th Period
January 1, 2012
to June 30, 2012

13th Period
July 1, 2012
to December 31, 2012(a) Asset management fees

356,378

358,309(b) Custodian fees

17,207

17,317(c) Administrative service fees

34,19933,712(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other73,29750,021

498,623

476,900

Total

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
23

(2)Borrowings
Borrowings by each financing source as of the end of the 13th period (ended December 31, 2012) are as follows:
Classification
LenderShortterm
loans

Balance atBalance at end
beginning ofof period
Drawdown
period(Thousands ofdate(Thousands of
yen)
yen)

Mizuho Trust & Banking Co., Ltd.

(Note 1)

Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation

July 31,2007

The Norinchukin Bank
Resona Bank, Ltd.
Mizuho Corporate Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Sompo Japan Insurance Inc.

July 31,2007

Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation

October 24,
2008

The Norinchukin Bank
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
Mizuho Trust & Banking Co., Ltd.
Sub Total

June 29,2010

Maturity
date－

October 31,
2012

500,000

0.68000

February28, 2013

1,000,000

500,000

0.68000－

2,300,000－

2,200,000－

2,000,000－

500,000－

2,500,000－

1,500,000－

2,000,000－

1,000,000－

6,000,000

6,000,000

1,000,000

1,000,000－

3,100,000－

1,800,000

500,000－

500,000

May 7, 2012
Mizuho Trust & Banking Co., Ltd.

Sub Total

Longtermloans due
withinone year

Averageinterest rate(%)－

1,800,000－

1,300,000

21,000,000

15,000,000

Repay
ment
methodUse

Remarks

Unsecured andLump- Acquisition
unguarant
sum of real estate
eed
－

－

－

－

July 31,2012－

Lump- Repayment
sum of existing
borrowing

1.02833

June 28,2013

1.05917

December27, 2013

1.04478－－－

Unsecured andunguarant
eed－

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
24Classification
LenderBalance atBalance at end
beginning ofof period
Drawdown
period(Thousands ofdate(Thousands of
yen)
yen)

The Norinchukin Bank
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation

June 29,2010

1,800,000－－－

1,300,000－

2,000,000

2,000,000

2.25875(Note 2)2,000,000

2,000,000

2.28417(Note 2)4,000,000

4,000,000

3,900,000

3,900,000

2,400,000

2,400,000

1,200,000

1,200,000

3,000,000

3,000,000

2,000,000

2,000,000

1,620,000

1,620,000

1,620,000

1,620,000

650,000

650,000

Mizuho Corporate Bank, Ltd.

370,000

370,000

Sumitomo Mitsui Banking
Corporation

280,000

280,000

Mizuho Corporate Bank, Ltd.

500,000

500,000

Mitsubishi UFJ Trust and Banking
Corporation

500,000

500,000

500,000

500,000

Aozora Bank, Ltd.

200,000

200,000

The Bank of Fukuoka

300,000

300,000－

2,000,000－

1,500,000－

500,000

4,600,000

4,600,000

4,400,000

4,400,000

Sumitomo Mitsui Banking
Corporation

4,000,000

4,000,000

Sumitomo Mitsui Trust Bank,
Limited

1,620,000

1,620,000

1,080,000

1,080,000

540,000

540,000

520,000

520,000

2,000,000

2,000,000

The Dai-ichi Life Insurance
Company Limited
Development Bank of Japan Inc.

July 31,2007

Mitsubishi UFJ Trust and Banking
Corporation
Mizuho Corporate Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.

June 29,
2013

Resona Bank, Ltd.
The Dai-ichi Life Insurance
Company Limited
Development Bank of Japan Inc.

October 24,
2008

Mizuho Trust & Banking Co., Ltd.
Aozora Bank, Ltd.
Aozora Bank, Ltd.

3)－

(Note 1)1,800,000

Mizuho Trust & Banking Co., Ltd.

Longtermloans (Note3,100,000

Averageinterest rate(%)

Resona Bank, Ltd.

November29, 2011

January 31,
2012

July 31,
2012

Resona Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
Mizuho Corporate Bank, Ltd.

Sumitomo Mitsui Banking
Corporation
Mitsubishi UFJ Trust and Banking
Corporation

June 29,2011

November29, 2011

Mizuho Corporate Bank, Ltd.
Mizuho Corporate Bank, Ltd.

2.27344(Note 2)

Repay
ment
methodUse

December27, 2013

Repaymentof existing
borrowings

July 31,2014

Acquisitionof real estate

January 31,

Remarks

December29, 2014
Repaymentof existing
borrowings

June 30,2015

1.13750(Note 2)Lump-

Acquisition Unsecureof real estate d andunguaranteedsum

The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

0.95917

Maturity
date

November30, 2015
1.14125(Note 2)

0.97125(Note 2)

1.36375(Note 2)June 29,2016

1.24375(Note 2)

November29, 2016

Repaymentof existing
borrowing

1.24750 January 31,

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)25

Mitsubishi UFJ Trust and Banking
Corporation

2012(Note 2)1,500,000

1,500,000

1,500,000

1,500,000

Mizuho Corporate Bank, Ltd.

－1,500,000

Mitsubishi UFJ Trust and Banking
Corporation－

1,300,000－

1,200,000

Sompo Japan Insurance Inc.

－

2,000,000

Tokio Marine & Nichido Fire
Insurance Co., Ltd.

－

1,000,000(Note 2)6,000,000

6,000,000

1.73875(Note 2)－

1,000,000－

1,000,000－

1,000,000

Sumitomo Mitsui Banking
Corporation

Sumitomo Mitsui Banking
Corporation

July 31,2012

November30, 2010

Development Bank of Japan Inc.
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation

July 31,2012

Sumitomo Mitsui Banking
Corporation

2017

1.03000(Note 2)January 31,
20171.09734

November30, 2017

1.08375(Note 2)

The Dai-ichi Life Insurance
Company Limited

June 29,2011

3,000,000

3,000,000

1.65125(Note 2)June 29,2018

Development Bank of Japan Inc.

January 31,
2012

2,000,000

2,000,000

1.60000 January 31,(Note 2)2020

Sub Total

67,800,000

73,800,000

1.36460

－

－

－

－

Total

89,800,000

89,300,000

1.30705

－

－

－

－

(Note 1) The average interest rates are calculated using a weighted-average of the loan balance at the end of period bymultiplying the interest rate of each loan agreement as of period-end, rounding to five decimal places.
Borrowings hedged by interest rate swaps to avoid interest rate fluctuation risk are calculated using a weightedaverage rate adjusting the effect of the interest rate swaps.
(Note 2) The loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).
(Note 3) The following table shows annual total amount of long-term loans (excluding those due within one year) for
each year after the balance sheet date.
(Unit: Thousands of yen)Classification

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

Due after 5 years

Long-term loans

15,500,000

15,540,000

16,760,000

21,000,000

5,000,000(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of December 31, 2012 are as follows:
Issue

1st series
investmentbonds
2nd series
investment
bonds
3rd series
investment
bonds
4th series
investment
bonds

unsecured
corporation

Balance atBalance at end
beginning ofof period
Issuance dateperiod(Thousands of(Thousands of
yen)
yen)
March 11,2010

Interest rate
(Note 1)Maturity date

Repayment
methodMarch 11,
2014

(%)

Use

Remarks

12,000,000

12,000,000

1.52000

Lump-sum(Note 2)

(Note 4)5,000,000

5,000,000

1.29000 June 26, 2015 Lump-sum(Note 2)

(Note 4)

unsecured
November 4,
corporation2011

5,000,000

5,000,000

1.01000

November 4,
2016

Lump-sum(Note 3)(Note 4)

unsecured
November 4,
corporation2011

2,000,000

2,000,000

1.40000

November 2,
2018

Lump-sum(Note 3)(Note 4)

unsecured
corporation June 28, 2010

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
26

Total

24,000,000

24,000,000

1.35583(Note 1) The interest rate indicated in the total column is calculated using a weighted-average of the balance at the end of
period by multiplying the loan interest rate of each investment corporation bond, rounding to five decimal
places.
(Note 2) The funds were used for repaying existing borrowings.
(Note 3) The funds were used for acquiring new properties.
(Note 4) The bonds are with special pari passu conditions among specified investment corporation bonds.

(4) Short-Term Investment Corporation Bonds
JEI has no outstanding short-term investment corporation bonds as of December 31, 2012.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)27

6. Condition of Investment Transactions(1) Transactions of Property and Asset-Backed Securities, Etc.
(Unit: Millions of yen)
Acquisition
Type of assets

Name of property
Acquisition date

Ownership
interests in ananonymous
association

Ownership
interests in ananonymous
association
managed by
Polaire LLC

Transfer

Acquisition
price(Note 1)

TransferamountTransfer
date(Note 1)

Net book Gain (loss)
value
on transfer

September 26,
2012

200

－

－

－

－

－

200

－

－

－

－

(Note 1) The acquisition price does not include the various expenses required in the acquisition of the ownership interest
in an anonymous association.

(2) Transactions of Other Assets
Other than those described above, major assets transacted are mainly bank deposits and bank deposits in trust.

(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
There were no applicable items during the period.
2) Ownership interests in an anonymous association
Acquisitionor transfer
Acquisition

Name of property

Transaction date

Ownership interests in ananonymous association managed September 26, 2012by Polaire LLC

Acquisition
price
200

(Unit: Millions of yen)
Researched specified
assets value
2003) Others
Of the transactions of JEI that are subject to research for specified assets value and other particulars under
Section 201 of the Investment Trust Law, those other than what are described in 1) Real estate, etc. and 2)
Ownership interests in an anonymous association are researched and reported by Ernst & Young ShinNihon
LLC.
Three interest rate swap contracts were subject to the research during the period from July 1, 2012 to December
31, 2012 and we have received the related research report from Ernst & Young ShinNihon LLC. In the
research, Ernst & Young ShinNihon LLC is requested to report on the name of counterparty, currency,
contractual interest rate, transaction term and other matters pertaining to the subject interest rate swap contracts.

(4) Transactions with Interested Parties or Major Shareholders
1) Transactions
There were no applicable items during the period.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)282) Amounts of fees paid and other expenses

Classification

Total amount paid (A)(Unit: Thousands of yen)
Breakdown of transactions with interested parties
and major shareholders
B/A

Paid to
Property management
costs and fees

Nippon Steel Kowa Real
1,011,380(Note 2)

Total

Estate Co., Ltd.

Sekisui House, Ltd.
1,011,380－

Amount paid (B)369,34236.5%

46,6194.6%

415,961

41.1%(Note 1)Figures indicate fees paid to interested parties and major shareholders of asset management companies with whom JEI had
transactions during the six months ended December 2012.
(Note 2)Property management costs and fees include construction management fees that were not expensed but capitalized in property
management fees and expenses.
(Note 3)The amounts do not include consumption tax and other taxes.

(5) Transactions with Asset Management Company Concerning the Additional Businesses of
the Asset Management Company
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not conduct any additional
business falling under the categories of the type I financial instruments business, type II financial instruments
business, building lots and buildings transaction business, or real estate specified joint enterprise, and had no
applicable transactions.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)29

7. Accounting(1) Assets, Liabilities, Principal, and Profit and Loss
For assets, liabilities, principal, and profit and loss, please refer to the attached Balance Sheets, Statements ofIncome and Retained Earnings, Statements of Changes in Net Assets, Notes to Financial Statements andDistribution Information.

(2) Change in Depreciation Calculation Method
No changes were made during the period.

(3) Change in Asset Valuation Method
No changes were made during the period.

8. Others(1) Investment Trust Beneficiary Certificates Incorporated by JEIThere were no applicable items during the period.

(2) Scheduled Meetings
1) Unitholders’ meeting
There were no applicable items during the period.

2) Board of directors meeting
Major issues related to the execution and modification of major contracts approved by the board of directors of
JEI during the six months ended December 31, 2012 is summarized below.
Approval date

Approved agenda

Description

December 12, 2012

Entering into revised agreementfor ongoing asset managementagreement

Provisions on compensations paid for operationscommissioned to the Asset Management Company
were partially revised.

(3) Other
Unless otherwise stated, monetary amounts have been rounded down and percentage figures have been rounded off
to the nearest indicated unit in this Report.

Asset Management Report for 13th period (Semi-Annual Report for 13th Period)
30

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
December 31, 2012 and June 30, 2012
with Independent Auditor’s ReportJapan Excellent, Inc.
Balance Sheets
As of December 31, 2012 and June 30, 2012

AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 6)
Rental receivables
Other current assets
Total current assets

As of
As of
December 31,
June 30,
2012
2012(Thousands of yen)

As ofDecember 31,
2012(U.S. dollars)(Note 2)

¥ 15,325,266
650,872
161,309
16,137,447¥ 15,383,755
539,343
156,814
16,079,912$ 177,006,995
7,517,583
1,863,124
186,387,702

Property and equipment (Note 8):
Buildings and building improvements
Machinery and equipment
Furniture and fixtures
Construction in progress
Buildings and building improvements for trust
accounts
Machinery and equipment for trust accounts
Furniture and fixtures for trust accounts
Land for trust accounts
Construction in progress for trust accounts
Less: accumulated depreciation
Net property and equipment

3,812,634
265
2,285
9,736

3,755,620
265
2,285
12,23344,035,963
3,062
26,388112,454

82,741,761
431,629
81,727
128,008,244
63,315(12,538,834)
202,612,762

82,573,706
428,169
79,349128,008,244
8,416(11,254,423)
203,613,864

955,668,295
4,985,317
943,950
1,478,496,695
731,289(144,823,675)
2,340,179,738

Investments and other assets:
Leasehold rights
Leasehold rights for trust accounts
Investment securities (Note 5)
Security deposits
Long-term prepaid expenses
Investment corporation bond issuance costs
Other assets
Total investments and other assets
Total assets

1,185,045
7,380,017
207,614
15,181
331,457
66,00484,5099,269,827¥ 228,020,036

1,185,045
7,380,017–
15,182385,828
79,695
79,1489,124,915¥ 228,818,691

13,687,282
85,239,279
2,397,946
175,348
3,828,334
762,344976,077
107,066,610$ 2,633,634,050

The accompanying notes are an integral part of these financial statements.
33

Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 6 and 9)
Long-term debt due within one year (Notes 6
and 9)
Accounts payable – other
Unpaid consumption taxes
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 6 and 10)
Long-term debt (Notes 6 and 9)
Security deposits from tenants (Note 6)
Security deposits from tenants for trust accounts(Note 6)
Total long-term liabilities
Total liabilities
Net assets (Note 11):Unitholders’ equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 188,650 units asof December 31, 2012 and June 30, 2012
Surplus
Voluntary reserve
Reserve for advanced depreciation of
non-current assets
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

As of
As of
December 31,
June 30,
2012
2012(Thousands of yen)

As ofDecember 31,
2012(U.S. dollars)(Note 2)¥$510,686
500,000¥

587,879
1,000,000

5,898,427
5,775,006

15,000,000
329,263
136,379
328,003
16,804,331

21,000,000
381,713155,102328,977
23,453,671

173,250,173
3,802,999
1,575,179
3,788,436
194,090,220

24,000,000
73,800,000
426,974

24,000,000
67,800,000
425,044277,200,277
852,390,853
4,931,556

8,443,474
106,670,448
123,474,779

8,602,586
100,827,630
124,281,301

97,522,218
1,232,044,904
1,426,135,124

102,052,384

102,052,384

1,178,706,218

183,368
2,309,505
2,492,873
104,545,257
104,545,257¥ 228,020,036

50,181
2,434,825
2,485,006
104,537,390
104,537,390¥ 228,818,691

2,117,900
26,674,808
28,792,708
1,207,498,926
1,207,498,926$2,633,634,050

The accompanying notes are an integral part of these financial statements.
34

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from July 1, 2012 to December 31, 2012
and from January 1, 2012 to June 30, 2012

For the period
For the period
from July 1,
from January 1,
2012 to2012 toDecember 31,
June 30,
2012
2012(Thousands of yen)
Revenues:
Rental revenues (Note 14)
Other (Note 14)
Gain on sale of real estate (Note 15)
Dividend income from investment in anonymous
association
Total revenues
Operating expenses:
Property operating expenses (Note 14)
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income
Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Ordinary income
Extraordinary income:Reversal of provision for loss on disaster
Income before income taxes
Income taxes (Note 13):
Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

For the period
from July 1,
2012 toDecember 31,
2012(U.S. dollars)(Note 2)

¥6,944,963
652,843–¥7,046,224
541,770
152,695$80,214,399
7,540,340–

1,524
7,599,330–
7,740,689

17,60987,772,348

3,950,122
358,310
17,31733,712
6,540
61,021
4,427,022
3,172,308

3,901,998
356,379
17,207
34,2006,540
84,2984,400,622
3,340,067

45,623,947
4,138,479
200,015
389,377
75,537704,795
51,132,150
36,640,198

1,551
5,677

1,578
8,207

17,91265,564595,132
96,054
163,993599,796
138,538
161,785

6,873,783
1,109,430
1,894,116

13,692181
2,310,484

13,692180
2,435,861

158,140
2,086
26,686,119

–

56

–

2,310,484

2,435,917

26,686,119

1,088
(1)
2,309,397
108¥2,309,505

1,097
(0)
2,434,820
5¥2,434,825

12,569(14)
26,673,564
1,244$26,674,808

The accompanying notes are an integral part of these financial statements.
35

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from July 1, 2012 to December 31, 2012
and from January 1, 2012 to June 30, 2012

Balance as of December 31, 2011
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of June 30, 2012

Balance as of June 30, 2012
Changes during the fiscal period:
Provision for reserve for
reduction
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31, 2012

Balance as of June 30, 2012
Changes during the fiscal period:
Provision for reserve for
reduction
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31, 2012

For the period from January 1, 2012 to June 30, 2012
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Numberof units
in issueUnitholders’capital188,650¥102,052,384¥50,181¥ 2,236,262¥ 2,286,443¥104,338,827¥104,338,827

–
–

–
–

–
–

(2,236,257)
2,434,820(2,236,257)
2,434,820(2,236,257)
2,434,820(2,236,257)
2,434,820–
188,650–¥102,052,384–¥50,181

198,563¥ 2,434,825

198,563¥ 2,485,006

198,563¥104,537,390

198,563¥104,537,390

Total net assets

For the period from July 1, 2012 to December 31, 2012
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Numberof units
in issueUnitholders’capital188,650¥102,052,384¥ 50,181¥ 2,434,825¥ 2,485,006¥104,537,390¥104,537,390––

133,187(133,187)

–

–

–

–
–

–
–

–
–

(2,301,530)
2,309,397(2,301,530)
2,309,397(2,301,530)
2,309,397(2,301,530)
2,309,397–
188,650–¥102,052,384

133,187¥183,368(125,320)¥ 2,309,505

7,867¥ 2,492,873

7,867¥104,545,257

7,867¥104,545,257

Total net assets

For the period from July 1, 2012 to December 31, 2012
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(U.S. dollars) (Note 2)

Number ofunits inissue

Unitholders’capital188,650$1,178,706,218$ 579,590$ 28,122,252$ 28,701,842$1,207,408,060$1,207,408,060––

1,538,310(1,538,310)

–

–

–

–
–

–
–

–
–

(26,582,698)
26,673,564(26,582,698)
26,673,564(26,582,698)
26,673,564(26,582,698)
26,673,564–
188,650–$1,178,706,218

1,538,310$2,117,900(1,447,444)$ 26,674,808

90,866$ 28,792,708

90,866$1,207,498,926

90,866$1,207,498,926

Total net assets

The accompanying notes are an integral part of these financial statements.
36

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from July 1, 2012 to December 31, 2012
and from January 1, 2012 to June 30, 2012
For the period
For the period
from July 1,
from January 1,
2012 to2012 toDecember 31,
June 30,
2012
2012(Thousands of yen)

For the period
from July 1,
2012 toDecember 31,
2012(U.S. dollars)(Note 2)

¥ 2,310,484
1,284,468¥ 2,435,917
1,260,724$ 26,686,119
14,835,621

13,692–(1,551)
759,125(111,530)–
33,510(76,177)(49,164)(18,723)(3,978)54,371

13,692(56)(1,578)761,582(85,468)
227,659(37,877)
72,874
92,835
155,1026,137(30,588)

158,140–(17,912)8,767,899(1,288,168)–
387,040(879,842)(567,849)(216,249)(45,950)
627,988–(53,588)
4,140,939
1,551(751,221)(1,397)3,389,872

2,798,378(12,016)
7,657,317
1,578(710,751)(1,009)6,947,135–(618,945)
47,827,892
17,912(8,676,609)(16,132)
39,153,063(211,309)
3,695(46,314)(241,650)
4,751(2,822)––(263,348)(4,850,934)
22,853(13,435)(2,440,627)
42,680(534,928)(2,791,066)
54,869(32,579)

327,984

503,7433,788,215(487,096)(652,761)(437,118)(5,038,239)(5,625,969)(7,539,405)

Cash flows from financing activities
Proceeds from short-term loans
Repayment for short-term loans
Proceeds from long-term debt
Repayment for long-term debt
Distributions to unitholders
Net cash used in financing activities–(500,000)
14,000,000(14,000,000)(2,295,600)(2,795,600)

1,000,000(9,000,000)
9,000,000–(2,233,927)(1,233,927)–(5,775,006)
161,700,162(161,700,162)(26,514,208)(32,289,214)

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(58,489)
15,383,755¥ 15,325,266

674,969
14,708,786¥15,383,755(675,556)
177,682,551$ 177,006,995

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuancecosts
Decrease in provision for loss on disaster
Interest income
Interest expense
Increase in rental receivables
Decrease in consumption taxes refundable
Decrease (increase) in prepaid expenses(Decrease) increase in accounts payable – trade(Decrease) increase in accounts payable – other(Decrease) increase in unpaid consumption taxes(Decrease) increase in advances received
Decrease (increase) in long-term prepaid expenses
Decrease in property and equipment for trust accounts
due to sale
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of investment securities
Proceeds from redemption of investment securities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits from tenants for trust
accounts
Payments for security deposits to tenants for trust
accounts
Net cash used in investing activities

The accompanying notes are an integral part of these financial statements.
37

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from July 1, 2012 to December 31, 2012
and from January 1, 2012 to June 30, 2012

1.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM is owned 45% by NIPPON STEEL KOWA REAL ESTATE
CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by Sekisui House,
Ltd. and 20% by other corporations.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of December 31, 2012, JEI
held 24 properties with 266,915 square meters of total leasable space and had leases with 134
tenants excluding residential tenants.

2.

Basis of Presentation

JEI maintains its accounting records and prepares its financial statements in accordance withaccounting principles generally accepted in Japan (“Japanese GAAP”), including provisions
set forth in the Investment Trust Law, the Corporation Law of Japan, the Financial
Instruments and Exchange Law of Japan and related regulations, which are different in certain
respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are a translation of the financial statements of JEI,
which were prepared in accordance with Japanese GAAP and presented in the securities
report of JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying
financial statements, certain reclassifications and modifications have been made for theconvenience of readers outside Japan. In addition, the notes to the financial statements include
information that might not be required under Japanese GAAP but is presented herein as
additional information. Amounts have been rounded to the nearest thousand yen in theaccompanying financial statements and in the notes thereto, whereas amounts were truncatedin the Japanese financial statements prepared in accordance with Japanese GAAP.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The
rate of ¥86.58 = U.S.$1.00, the foreign exchange rate prevailing on December 31, 2012, hasbeen used for translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled into U.S. dollars atthat or any other rate.

38

3.

Summary of Significant Accounting Policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks and short-term
investments which are highly liquid, readily convertible into cash with an insignificant risk ofprice fluctuation and with an original maturity of three months or less.
Investment securities
Non-marketable securities classified as other securities are carried at cost. Cost of securities
sold is determined by the moving average method. For ownership interests in an anonymous
association, JEI adopts the method of factoring in the net amount of anonymous association
income (loss) in proportion to its ownership interests.
Property and equipment including trust accounts and trademark rights
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Buildings
Building improvements
Machinery and equipment
Furniture and fixtures

2 – 60 years
2 – 59 years
7 – 16 years
3 – 10 years

Amortization of trademark rights is computed using the straight-line method over a period of
10 years.
Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
Income taxes
Income taxes are accounted for on the basis of taxable income for financial statement
purposes. The asset and liability method is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
Consumption taxes
Consumption taxes received and paid are not included in the accompanying statements ofincome and retained earnings. Consumption tax related to properties, which has not been
deducted, is included in the cost of the properties.

39

3.

Summary of Significant Accounting Policies (continued)

Property-related taxes
Principally, property-related taxes including property taxes, urban planning taxes anddepreciable property taxes are imposed on a calendar-year basis and are expensed as property
and other taxes (refer to Note 14).
JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at thetime of acquisition of such properties including trust accounts. No property-related taxes were
capitalized for the period from July 1, 2012 to December 31, 2012. The capitalized amountfor the period from January 1, 2012 to June 30, 2012 was ¥37,298 thousand.
Revenue recognition
Rental revenues are generally recognized on an accrual basis over the life of each lease.
Derivatives and hedge accounting
JEI utilizes interest-rate swap agreements as derivative financial instruments solely for the
purpose of hedging its exposure to fluctuation in interest rates. JEI has entered into certain
interest-rate swap contracts to hedge variable rates for its long-term debt obligations.
The corresponding interest-rate swap meets the criteria for the special hedge accounting
treatment under Japanese GAAP, and it is therefore not recorded at fair value.
The amounts paid or received via the swap transaction are recognized as interest adjustments.
An assessment of hedge effectiveness is omitted accordingly.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.

4.

Cash and Cash Equivalents

Cash and cash equivalents including trust accounts in the accompanying balance sheets andcash and cash equivalents in the accompanying statements of cash flows at December 31,
2012 and June 30, 2012 consisted of the following:

Cash and cash deposits
Cash in trust and deposits in trust
Cash and cash equivalents including
trust accounts

As of
As of
December 31,
June 30,
2012
2012(Thousands of yen)

As ofDecember 31,
2012(U.S. dollars)¥ 3,596,805
11,728,461¥ 3,490,795
11,892,960$ 41,543,138
135,463,857¥15,325,266¥15,383,755$177,006,995

40

5.

Investment Securities

Investment securities represent the ownership interests in an anonymous association issued by
Polaire LLC, which are backed by cash flows from real estate properties managed by Polaire
LLC.
These securities do not have a readily available market price. Additionally due to a lack ofclearly identifiable cash flow information from the underlying properties, there is inherent
difficulty in estimating fair value, accordingly they are excluded from fair value disclosures.

6.

Financial Instruments

For the periods from July 1, 2012 to December 31, 2012 and from January 1, 2012 toJune 30, 2012
Overview(1) Policy for Financial Instruments
JEI borrows from banks, issues investment corporation bonds and issues investment units
to procure funds required to grow its assets under management and to repay liabilities,
based on the financial policy set forth by JEAM and the Company’s Annual Funds
Procurement Plan. When procuring funds by means of interest-bearing debt, matters suchas seeking longer durations and maturities, securing fixed interest rates and diversifying
maturity dates are taken into consideration to achieve a more stable financial situation
and avoid the risk of future interest rate hikes. Surplus funds may be invested in deposits
and safe, liquid financial assets and investment securities, but are, in principle, placed indeposits. Derivative transactions are used solely for the purpose of hedging against therisk of fluctuations in interest rates of borrowings and the like.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest Rate Fluctuation Risks)Borrowings and investment corporation bonds are primarily used to acquire
properties or to refinance existing borrowings. Some of such debt are floating rate
instruments and thus are exposed to the risk of interest rate fluctuations. Based oninterest rate forecasts developed through constant monitoring activities, JEI hedges
against the risk of interest rate fluctuations using derivative transactions(interest-rate swaps), which swap a floating interest rate for a fixed interest rate. To
reduce credit risk, derivative transactions (interest-rate swaps) are entered into
exclusively with counterparties that are financial institutions having a high credit
rating. For hedging accounting methods, hedging instruments, hedged items,
hedging policies and methods for evaluation the effectiveness of hedging activities,
see “Derivatives and hedge accounting” under Summary of Significant Accounting
Policies. Investment securities represent equity investments in a special purpose
company as ownership interests in an anonymous association, and are exposed tocredit risk of the issuer and interest rate fluctuation risk. JEI works to reduce suchrisks by regularly evaluating the results of operations and the financial condition of
the issuer, etc.

41

6.

Financial Instruments (continued)(b) Liquidity Risk (the risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced by diversifying maturity dates and funding sources, executing
commitment line agreements (As described in Note 9, “Short-Term Loans andLong-Term Debt,” there is no balance outstanding under the facility agreements asof December 31, 2012), and liquidity risk is managed through the constantmanagement of liquidity on hand.

(3) Supplementary Explanation of the Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.
Fair value of financial instruments
The following are carrying values and fair values as of December 31, 2012 and June 30, 2012of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note 2).
As of December 31, 2012
As of June 30, 2012
Carrying value
Fair value
Difference
Carrying value
Fair value
Difference(Thousands of yen)

As of December 31, 2012
Carrying value
Fair value
Difference(U.S. dollars)(1) Cash and cash deposits(2) Cash in trust anddeposits in trust
Total assets

¥

¥

–

¥

¥

–

$

41,543,138$

41,543,138$–

11,728,461¥ 15,325,266

11,728,461¥ 15,325,266¥––

11,892,960¥ 15,383,755

11,892,960¥ 15,383,755

¥

–
–

$

135,463,857
177,006,995$

135,463,857
177,006,995$––(3) Short-term loans(4) Long-term debt due
within one year(5) Investment corporation
bonds(6) Long-term debt
Total liabilities

¥

¥

¥

–

¥

¥

¥

–

$

5,775,006$

5,775,006$–(7) Derivative transactions *¥3,596,805

500,000¥

3,596,805

500,000

3,490,795

1,000,000¥

3,490,795

1,000,000

15,000,000

15,000,000–

21,000,000

21,006,518

6,518

173,250,173

173,250,173–

24,000,000
73,800,000¥ 113,300,000

24,221,900
75,023,335¥ 114,745,235

221,900
1,223,335¥ 1,445,235

24,000,000
67,800,000¥ 113,800,000

24,209,900
68,602,364¥ 114,818,782

209,900
802,364¥ 1,018,782

277,200,277
852,390,853$ 1,308,616,309

279,763,225
866,520,388$ 1,325,308,792

2,562,948
14,129,535$ 16,692,483

–

¥

–

¥

–

¥

–

¥

–

¥

–

$

–

$

–

$

–

* The value of assets and liabilities arising from derivatives is shown at net value, with the amount inparentheses representing net liability position.

(Note 1)
Methods for calculating the fair value of financial instruments and matters related toderivatives transactions
Assets(1) Cash and cash deposits and(2) Cash in trust and deposits in trust
Carrying value approximates fair value because of the short maturities of these
instruments.

42

6.

Financial Instruments (continued)

Liabilities(3) Short-term loans,(4) Long-term debt due within one year and(6) Long-term debt
Where floating rates apply, fair value is based on book value. The fair value of suchliabilities is considered to be close to book value because floating rates reflect market
interest rates within a short period of time.
If the loan is part of long-term debt, in the case of floating-rate debt hedged by aninterest-rate swap, the fair value is calculated in a similar manner using the total principal
and interest amount, treated in combination with the interest-rate swap, given that theinterest-rate swap is subject to the special treatment of interest-rate swaps under Japanese
GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by discounting the combined value of principal and interest of theapplicable long-term debt by a reasonable rate assuming the same amount were to beborrowed anew.
(5) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(7) Derivative transactions
Please refer to Note 17, “Derivative Transactions.”(Note 2)Financial instruments for which fair value is deemed extremely difficult to determine
As ofDecember 31,
As of
2012
June 30, 2012
(Thousands of yen)

As ofDecember 31,
2012(U.S. dollars)¥ 207,614–$ 2,397,946(2) Security deposits fromtenants (*2)

¥ 426,974¥ 425,044$ 4,931,556(3) Security deposits from tenants
for trust accounts (*2)¥8,443,474¥8,602,586$97,522,218(1) Investment securities (*1)(*1)

Investment securities (ownership interests in an anonymous association) have no available market
price and reasonable estimates of cash flows from underlying properties cannot be made, so the fairvalue is deemed difficult to determine. Accordingly, they are excluded from the disclosure of fairvalue.

(*2)

Security deposits from tenants and security deposits from tenants for trust accounts in leased
properties are not subject to fair value disclosure because such deposits have no market price.
Moreover, it is difficult to calculate the actual period of time on deposit, namely, from the time thetenant moves in until the time the tenant vacates, and it is extremely difficult to rationally estimate
cash flow.

43

6.

Financial Instruments (continued)(Note 3)The scheduled redemption amounts date of financial assets after the balance sheet dateCash and cash deposits
Cash in trust anddeposits in trust
Total

1 year or less

1 to 2 years¥ 3,596,805

¥

–

¥

–

¥

–

¥

–

¥

–

11,728,461¥15,325,266

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

1 year or less

$

–

$

–
–

1 year or less

1 to 2 years¥ 3,490,795

¥

–

¥

–
–

11,892,960¥15,383,755

Total

As of December 31, 2012
2 to 3 years 3 to 4 years(U.S. dollars)

1 to 2 years

Cash and cash deposits $ 41,543,138
Cash in trust and
135,463,857
deposits in trust$177,006,995
Total

Cash and cash deposits
Cash in trust anddeposits in trust

As of December 31, 2012
2 to 3 years 3 to 4 years(Thousands of yen)

$

–

$

–
–

$

–

$

–
–

As of June 30, 2012
2 to 3 years 3 to 4 years(Thousands of yen)
¥

–

¥

–
–

¥

–

¥

–
–

4 to 5 years

4 to 5 years
$

–

$

–
–

4 to 5 years
¥

–

¥

–
–

Over 5 years

Over 5 years
$

–

$

–
–

Over 5 years
¥

–

¥

–
–

(Note 4)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date
As of December 31, 2012
1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years(Thousands of yen)
Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

¥

500,000

¥

–

¥

–

¥

–

¥

–

¥

–

15,000,000

–

–

–

–

–

–
–

12,000,000
15,500,000

5,000,000
15,540,000

5,000,000
16,760,000–
21,000,000

2,000,000
5,000,000¥ 15,500,000¥ 27,500,000¥ 20,540,000¥21,760,000¥ 21,000,000¥ 7,000,000

44

6.

Financial Instruments (continued)
As of December 31, 2012
1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years(U.S. dollars)
Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

$

5,775,006

–

$

–

$

–

$

–

$

–

$

173,250,173

–

–

–

–

–

–
–

138,600,139
179,025,179

57,750,058
179,487,179

57,750,058
193,578,193–
242,550,243

23,100,023
57,750,058$179,025,179$317,625,318$237,237,237$ 251,328,251$ 242,550,243$ 80,850,081

4 to 5 years

Over 5 years

As of June 30, 2012
1 year or less

1 to 2 years

2 to 3 years

3 to 4 years(Thousands of yen)
Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

7.

¥ 1,000,000

–

¥

¥

–

–

¥

¥

–

–

¥

21,000,000

–

–

–

–

–

–
–

12,000,000
8,000,000

5,000,000
20,500,000–
19,540,000

5,000,000
8,760,000

2,000,000
11,000,000¥ 22,000,000¥ 20,000,000¥ 25,500,000¥ 19,540,000¥ 13,760,000¥ 13,000,000

Investment and Rental Property

For the periods from July 1, 2012 to December 31, 2012 and from January 1, 2012 toJune 30, 2012
JEI owns rental office buildings and other properties in Tokyo and other regions for the
purpose of generating rental income. The following is the carrying value and fair value as ofDecember 31, 2012 and June 30, 2012 for such real estate for lease.
As ofJune 30, 2012
¥212,178,926

As ofJune 30, 2012
$2,450,669,045

Carrying value
ChangeAs ofduring period (*1)
December 31, 2012
(Thousands of yen)¥(1,001,103)¥211,177,823

Carrying value
ChangeAs ofduring period (*1)
December 31, 2012
(U.S. dollars)$(11,562,746)$2,439,106,299

Fair value
As ofDecember 31, 2012
¥194,204,000
Fair value
As ofDecember 31, 2012
$2,243,058,443

45

7.

Investment and Rental Property (continued)
Carrying value
ChangeAs of(*2)
during period
June 30, 2012
(Thousands of yen)

As ofDecember 31, 2011
¥211,203,082¥975,844

Fair value
As ofJune 30, 2012

¥212,178,926¥196,410,000(Note 1)
Carrying value represents the acquisition cost less accumulated depreciation.
(Note 2)(*1) Changes during period comprise a decrease of ¥1,284,411 thousand ($14,834,962) for
depreciation costs.
(*2) Changes during period comprise increases of ¥1,820,798 thousand related to theacquisition of Shintomicho Building, ¥2,810,335 thousand related to the acquisition ofHiroshima Hacchobori Dai-ichi Seimei Building and decreases of ¥2,798,378 thousand
related to the disposition of No. 28 Kowa Building and ¥1,260,668 thousand for
depreciation costs.
(Note 3)
Fair value as of December 31, 2012 and June 30, 2012 is appraisal value provided bythird-party real estate appraisers.

8.

Property and Equipment

Property and equipment at December 31, 2012 and June 30, 2012 consisted of the following:
As of December 31, 2012
As of June 30, 2012
Acquisition
Accumulated
Net
Acquisition
AccumulatedNet
cost
depreciation
book value
cost
depreciation
book value(Thousands of yen)
Buildings and building
improvements¥
3,812,634
Machinery andequipment
265
Furniture and fixtures
2,285
Construction in progress
9,736
Buildings and building
improvements for trust
accounts
82,741,761
Machinery andequipment for trust
accounts
431,629
Furniture and fixtures
for trust accounts
81,727
Land for trust accounts
128,008,244
Construction in progress
63,315for trust accounts
Total¥ 215,151,596¥(524,881)¥

3,287,753¥

3,755,620¥(474,436)¥

3,281,184

Acquisition
cost$

As of December 31, 2012
AccumulatedNet
depreciation
book value(U.S. dollars)

44,035,963$(6,062,381)$

37,973,582

(60)
(545)
–

205
1,740
9,736

265
2,285
12,233

(48)
(423)
–

217
1,862
12,233

3,062
26,388112,454(689)(6,299)–2,373
20,089112,454(11,799,079)

70,942,682

82,573,706(10,585,614)

71,988,092

955,668,295(136,279,497)

819,388,798(175,202)

256,427

428,169(160,413)

267,756

4,985,317(2,023,582)

2,961,735(39,067)–

42,660128,008,244

79,349128,008,244(33,489)–

45,860128,008,244

943,950
1,478,496,695(451,227)–

492,723
1,478,496,695–¥ (12,538,834)

63,315¥ 202,612,762

8,416¥ 214,868,287–¥ (11,254,423)

8,416¥ 203,613,864

731,289$ 2,485,003,413–$ (144,823,675)

731,289$ 2,340,179,738

46

9.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of December 31, 2012 and June 30, 2012 consisted of
the following:
As of December 31, 2012
Weighted-averageAmountinterest rate (*1)
(Thousands ofyen)
Short-term loans:
Unsecured loans from a bank due
on October 31, 2012
Unsecured loans from a bank due
on February 28, 2013
SubtotalLong-term debt due within
one year:
Unsecured loans from banks due
on July 31, 2012
Unsecured loans from banks andinsurance companies due on July
31, 2012
Unsecured loans from banks due
on June 28, 2013
Unsecured loans from banks dueon December 27, 2013
SubtotalLong-term debt:
Unsecured loans from banks dueon December 27, 2013
Unsecured loans from aninsurance company due on July
31, 2014
Unsecured loans from a bank due
on July 31, 2014
Unsecured loans from banks dueon December 29, 2014
Unsecured loans from aninsurance company and a bankdue on June 30, 2015
Unsecured loans from banks dueon November 30, 2015
Unsecured loans from banks dueon November 30, 2015
Unsecured loans from banks dueon November 30, 2015
Unsecured loans from banks due
on June 29, 2016
Unsecured loans from banks dueon November 29, 2016
Unsecured loans from banks due
on January 31, 2017
Unsecured loans from banks due
on January 31, 2017
Unsecured loans from insurancecompanies due on January 31,
2017
Unsecured loans from a bank due
on November 30, 2017
Unsecured loans from banks dueon November 30, 2017
Unsecured loans from aninsurance company due on June29, 2018
Unsecured loans from a bank due
on January 31, 2020
Subtotal
Total

¥

–

–

500,000
500,000

0.68000%

As of
December 31,
2012

As of June 30, 2012
Weighted-averageAmountinterest rate (*1)
(Thousands ofyen)¥

Amount(U.S. dollars)$–

500,000

0.68000%

500,000
1,000,000

0.68000%

5,775,006
5,775,006––

7,000,000

0.68615%–––7,000,000

1.96907% (*2)–

7,000,000

1.02833%

7,000,000

1.03615%80,850,081

8,000,000
15,000,000

1.05917%–
21,000,000–

92,400,092
173,250,173–

8,000,000

1.08667%–2,000,000

2.25875% (*2)

2,000,000

2.25875% (*2)

23,100,023

2,000,000

2.28417%(*2)

2,000,000

2.28417%(*2)

23,100,023

11,500,000

0.95917%

11,500,000

0.98667%

5,000,000

2.27344% (*2)

5,000,000

2.27344% (*2)

57,750,058

4,540,000

1.13750%(*2)

4,540,000(*2)

52,437,053

2,000,000

1.14125%(*2)

2,000,000

4,000,000

0.97125% (*2)–

13,000,000

1.36375% (*2)

13,000,000

1.36375% (*2)

150,150,150

3,760,000

1.24375%(*2)

3,760,000

1.24375%(*2)

43,428,043

5,000,000

1.24750%(*2)

5,000,000

1.24750%(*2)

57,750,058

4,000,000

1.03000% (*2)––

3,000,000

1.09734% (*2)––

6,000,000

1.73875%(*2)

6,000,000

1.73875%

3,000,000

1.08375%

(*2)

–

–

3,000,000

1.65125% (*2)

3,000,000

1.65125% (*2)

34,650,035

2,000,000
73,800,000¥ 89,300,000(*2)

2,000,000
67,800,000¥ 89,800,000(*2)

23,100,023
852,390,853$ 1,031,416,032–

1.60000%

1.13750%

132,825,133

1.14125%(*2)

23,100,023–

1.60000%

46,200,046

46,200,046
34,650,035(*2)

69,300,069
34,650,035(*1) The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period
and rounded to the nearest fifth decimal place. As for the borrowings, which were hedged by interest-rate
swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
(*2) These are fixed-rate debt. (Fixed-rate debt by the interest-rate swaps agreement is included.)

47

9.

Short-Term Loans and Long-Term Debt (continued)

The scheduled repayment amounts of long-term debt after the balance sheet date (excluding
the long-term debt due within one year) are as follows:

Long-term debt

Long-term debt

1 to 2 years

2 to 3 years

3 to 4 years
4 to 5 years(Thousands of yen)Over 5 years¥15,500,000¥15,540,000¥16,760,000¥21,000,000¥5,000,000

1 to 2 years

2 to 3 years

3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$179,025,179$179,487,179$193,578,193$242,550,243$57,750,058

JEI has commitment lines of ¥14,000 million ($161,700 thousand) with three financial
institutions to reduce refinancing risk and enhance financial stability. The full amount of suchcommitment lines was unused at December 31, 2012.

10. Investment Corporation Bonds
Details of total investment corporation bonds outstanding as of December 31, 2012 and June30, 2012 are summarized as follows:

Unsecured bond due on
March 11, 2014
Unsecured bond due on
June 26, 2015
Unsecured bond due on
November 4, 2016
Unsecured bond due on
November 2, 2018
Total

As of
December 31,
2012

As of December 31, 2012
WeightedaverageAmountinterest rate
(Thousandsof yen)As of June 30, 2012
WeightedaverageAmountinterest rate
(Thousandsof yen)¥12,000,000

1.52000%¥12,000,000

5,000,000

1.29000%

5,000,000

1.29000%

57,750,058

5,000,000

1.01000%

5,000,000

1.01000%

57,750,058

2,000,000¥24,000,000

1.40000%

2,000,000¥24,000,000

1.40000%

23,100,023$277,200,277

Amount(U.S. dollars)

1.52000% $138,600,138

The scheduled redemption amounts of investment corporation bonds after the balance sheet
date are as follows:

Investment
corporation bonds

Investment
corporation bonds

1 year or less

1 to 2 years

2 to 3 years
3 to 4 years(Thousands of yen)–

¥12,000,000¥5,000,000

1 year or less

1 to 2 years

2 to 3 years
3 to 4 years(U.S. dollars)–$138,600,139 $57,750,058¥5,000,000$57,750,058

4 to 5 years

Over 5 years–¥2,000,000

4 to 5 years

Over 5 years–$23,100,023

48

11. Net Assets
In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50 million.

12. Per Unit Information
Net assets per unit were ¥554,175 ($6,401) as of December 31, 2012 and ¥554,134 as of June30, 2012. Net income per unit was ¥12,241 ($141) for the period from July 1, 2012 to
December 31, 2012 and ¥12,906 for the period from January 1, 2012 to June 30, 2012 andwas computed based on the weighted-average number of units outstanding during therespective periods.

13. Income Taxes
JEI is subject to income taxes in Japan.
JEI’s policy is to make dividend distributions in excess of 90% of distributable income foreach fiscal period in order to meet the condition set forth in the Special Taxation Measures
Law of Japan concerning the deductibility of cash dividends paid for income tax purposes.
Details of significant components of deferred tax assets and liabilities as of December 31,
2012 and June 30, 2012 are summarized as follows:
As of
As of
December 31,
June 30,
2012
2012(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

¥24
24
¥24

¥22
22
¥22

As of
December 31,
2012(U.S. dollars)
$272
272
$272

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from July 1, 2012 to December 31, 2012 and from January 1, 2012 to June 30,
2012 is as follows:
For the period
For the period
from July 1, 2012 from January 1,
to December 31, 2012 to June 30,
2012
2012
Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

36.59%

39.33%(36.57)0.03
0.05%(37.16)(2.13)
0.04%

49

14. Breakdown of Property Rental Business Revenues and Expenses
For the period
For the period
from July 1, 2012 from January 1,
to December 31, 2012 to June 30,
2012
2012
(Thousands of yen)
Rental business revenues:
Rental revenues
Other
Total rental businessrevenues
Property operating expenses:
Property management costs
and fees
Utilities
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating
expensesProfit

For the period
from July 1, 2012
to December 31,
2012(U.S. dollars)¥6,944,963
652,843¥7,046,224
541,770$80,214,399
7,540,340

7,597,806

7,587,994

87,754,739

1,006,078
762,490
613,371
22,19886,1401,284,411
175,434

1,016,241
668,123592,943
25,198
186,950
1,260,668
151,875

11,620,214
8,806,771
7,084,439
256,384
994,917
14,834,962
2,026,260

3,950,122¥3,647,684

3,901,998¥3,685,996

45,623,947$42,130,792

15. Breakdown of Gain on Sale of Real Estate
Gain on sale of real estate for the periods from July 1, 2012 to December 31, 2012 and fromJanuary 1, 2012 to June 30, 2012 is as follows:
For the period
For the period
from July 1, 2012 from January 1,
to December 31, 2012 to June 30,
2012
2012
(Thousands of yen)
No. 28 Kowa Building
Proceeds from sale of realestateCost of sale of real estate
Other related sale expenses
Gain on sale of real estate

¥

¥

–
–
–
–

For the period
from July 1, 2012
to December 31,
2012(U.S. dollars)¥2,960,000
2,798,378
8,927¥ 152,695

$

$

–
–
–
–

16. Leases
JEI leases properties on which rental revenues are earned. At December 31, 2012 and June 30,
2012, future lease revenues under non-cancelable operating leases are summarized as follows:
As of
As of
December 31,
June 30,
2012
2012(Thousands of yen)
Due within one year
Due after one year
Total

¥

8,462
413,670¥422,132¥625,206
156,537¥781,743

As of
December 31,
2012(U.S. dollars)$

97,7304,777,898$4,875,628
50

17. Derivative Transactions
Derivative Transactions as of December 31, 2012
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of December 31, 2012 for each hedge accounting method
applied.
Hedge
accounting
methodType of derivativetransaction

Contract amount
Fair
More thanvalue
one year(Thousands of yen)

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps¥39,300,000¥39,300,000

Method ofcalculating
the fair value*

Contract amount
Fair
More thanvalue
one year(U.S. dollars)$453,915,414$453,915,454

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria, theswap is not recorded at fair value on the accompanying balance sheets, as described in the summary ofsignificant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 6, “Financial Instruments.”

Derivative Transactions as of June 30, 2012
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of June 30, 2012 for each hedge accounting method applied.
Hedge
accounting
methodType of derivativetransaction

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
¥28,300,000¥28,300,000

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria, theswap is not recorded at fair value on the accompanying balance sheets, as described in the summary ofsignificant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 6, “Financial Instruments.”51

18. Related Party Transactions
For the period from July 1, 2012 to December 31, 2012
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

Amount(Thousands(U.S. dollars)of yen)¥358,310$4,138,479

Account
Accounts
payableBalance at the end of period(Thousands(U.S. dollars)of yen)¥226,641$2,617,706

For the period from January 1, 2012 to June 30, 2012
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name
Chifumi Toda

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)
¥356,379

Account
Accounts
payableBalance at the end of period(Thousands of yen)
¥226,5565219. Segment Information
For the periods from July 1, 2012 to December 31, 2012 and from January 1, 2012 toJune 30, 2012
Since JEI has been engaged in the real-estate leasing business as a single segment, segment
information has been omitted.
Information about products and services
Since revenues from external customers for a single segment of similar products and services
accounted for more than 90% of total operating revenues, information about products andservices has been omitted.
Information about geographic area
(1) Revenues
Since 100% of the total operating revenues were generated from external customers
within Japan, geographical breakdown of revenues has been omitted.
(2) Property and equipment
Since 100% of total property and equipment on the balance sheet are located within
Japan, geographical breakdown of such property and equipment has been omitted.
Information about major clients
Since no single external client represents 10% or more of JEI’s total operating revenues,
information about major clients has been omitted.

20. Distribution Information
In accordance with Section 33.1.2 of the bylaws set forth by JEI for distributions of cash
dividends, the amount of dividends payable, which is limited by the amount of unappropriatedretained earnings, shall be in excess of 90% of its distributable income for the fiscal period as
set forth in Section 67.15 of the Special Taxation Measures Law. Consequently, JEI set
income available for distributions of dividends at ¥2,309,453,300 ($26,674,212), which is the
maximum integral multiple of the 188,650 units issued not exceeding unappropriated retained
earnings at December 31, 2012. No cash distribution exceeding the income amount set forthin Section 33.1.4 of the bylaws of JEI shall be made.
On February 14, 2013, the Board of Directors approved a resolution to make a cash
distribution of ¥12,242 ($141) per unit aggregating to ¥2,309,453,300 ($26,674,212) tounitholders of record as of December 31, 2012.

53

21. Significant Subsequent Events(1) Issuance of new units
On January 10, 2013 and January 23, 2013, the Board of Directors approved a resolution
to complete a public offering of new units as outlined below. JEI received payments on
January 30, 2013 and February 27, 2013 for the said units, which were issued inaccordance with the conditions outlined below. As a result of the issuance of new units,
JEI had unitholders’ capital of ¥117,901 million ($1,361,761 thousand) with 224,950
units in issue at February 27, 2013.
A. Issuance of new units through a public offering(i) Method of issuance(ii) Number of units issued(iii) Issue price (offer price)(iv) Total offer price(v) Proceeds per unit(vi) Aggregate proceeds(vii) Payment datePublic offering
33,000 units¥451,425 ($5,214) per unit
¥14,897 million ($172,061 thousand)¥436,609 ($5,043)¥14,408 million ($166,414 thousand)January 30, 2013

B. Issuance of new units through allocation to a third party(i) Method of issuance(ii) Number of units issued(iii) Proceeds per unit(iv) Aggregate proceeds(v) Payment date(vi) Allottee

Allocation to a third party
3,300 units¥436,609 ($5,043) per unit
¥1,441 million ($16,641 thousand)February 27, 2013
Mizuho Securities Co., Ltd.

(2) Acquisition of properties
The following properties were acquired:
A. AKASAKA INTERCITY
1.
2.

Type of asset acquired
Asset

3.
4.
5.
6.
7.

Location
Acquisition priceContract date
Delivery dateSellerTrust property
AKASAKA INTERCITY (Additional acquisition ofcompartmentalized ownership)
1-11-44 Akasaka, Minato-ku, Tokyo¥10,289 million ($118,838 thousand) (Note)
January 10, 2013
February 5, 2013
NIPPON STEEL KOWA REAL ESTATE CO., LTD.

(Note) The acquisition price does not include fees related to the acquisition,
proportional JEI share of the applicable real estate tax and city planning tax,
and consumption tax.

54

21. Significant Subsequent Events (continued)
B. Osaka Kogin Building (Land with leasehold interest)
1.
2.
3.
4.
5.
6.
7.

Type of asset acquired
Asset
Location
Acquisition priceContract date
Delivery dateSellerTrust property
Osaka Kogin Building (Land with leasehold interest)
4-1-1 Koraibashi, Chuo-ku, Osaka-shi, Osaka¥1,770 million ($20,444 thousand) (Note)
January 10, 2013
February 5, 2013
NIPPON STEEL KOWA REAL ESTATE CO., LTD.

(Note) The acquisition price is calculated as the land purchase price to be specified
in the relevant trust beneficiary interest transfer agreement subject toconditions (¥10,100 million ($116,655 thousand), less the amount equivalent
to the key money pertaining to the leasehold interest in land (¥8,330 million($96,212 thousand), which will be received from the lessee of the land. The
acquisition price does not include fees related to the acquisition, proportional
JEI share of the applicable real estate tax and city planning tax, andconsumption tax.
C. Core City Tachikawa
1.
2.
3.
4.
5.
6.
7.

Type of asset acquired
Asset
Location
Acquisition priceContract date
Delivery dateSellerTrust property
Core City Tachikawa
2-37-7 Akebono-cho, Tachikawa-shi, Tokyo¥6,500 million ($75,075 thousand) (Note)
January 13, 2011
February 5, 2013
Tachikawa Akebono-cho Capital Specific Purpose
Company(Note) The acquisition price does not include fees related to the acquisition,
proportional JEI share of the applicable real estate tax and city planning tax,
and consumption tax.
D. SE Sankyo Building
1.
2.
3.

Type of asset acquired
Asset
Location

4.
5.
6.
7.

Acquisition priceContract date
Delivery dateSellerTrust property
SE Sankyo Building
1-1-2 Kitananajonishi, Kita-ku, Sapporo-shi,
Hokkaido¥5,500 million ($63,525 thousand) (Note)
January 10, 2013
March 1, 2013
Polaire LLC(Note) The acquisition price does not include fees related to the acquisition,
proportional JEI share of the applicable real estate tax and city planning tax,
and consumption tax.

55

21. Significant Subsequent Events (continued)(3) Debt financing
A. On January 31, 2013, JEI entered into an individual loan agreement to use as a
portion of the payment (including related expenses) for the acquisition of
AKASAKA INTERCITY (Additional acquisition of compartmentalized ownership)
and Osaka Kogin Building (Land with leasehold interest) and Core City Tachikawa.
1.

LenderMizuho Corporate Bank, Ltd.

2.

Loan amount¥4,500 million ($51,975 thousand)

3.

Interest rate

0.63% (Floating rate)

4.

Scheduled drawdown dateFebruary 5, 2013

5.

Interest payment date

March 1, 2013

6.

Principal repayment date

March 1, 20137

Principal repayment method

To be repaid in full on the principal repayment
date (early repayment permitted)

8.

Collateral

Unsecured/Non-guaranteed

B. On February 26, 2013, JEI entered into an individual loan agreement to use as a
portion of the payment (including related expenses) for the acquisition of SE Sankyo
Building.
1.

Lenders

Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Sumitomo Mitsui Banking Corporation
Mizuho Trust & Banking Co., Ltd.

2.

Loan amount¥8,600 million ($99,330 thousand)

3.

Interest rate

Base interest rate (Japanese Bankers
Association (JBA) one-month Yen-TIBOR) +
0.45%

4.

Scheduled drawdown date

March 1, 2013

5.

Interest payment date(i) The initial interest payment date will be
March 29, 2013, (ii) subsequent interest
payments will be made at the end of every
month, and (iii) the final interest payment date
will be the same day as the principal repayment
date.

6.

Principal repayment dateJune 28, 20137.

Principal repayment method

To be repaid in full on the principal repayment
date (early repayment permitted)

8.

Collateral

Unsecured/Non-guaranteed

56