Asset Management Report for 9th Period(Semi-Annual Report for 9th Period)
From July 1, 2010 to December 31, 2010

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.
We have announced our financial results for the ninth period started July 1, 2010 and ended December 31,
2010.
JEI recorded total revenues of 7,094 million yen and net income of 2,218 million yen. Distribution perunit marked 14,353 yen, an increase of 353 yen from our forecast at the beginning of the period.
During the period, JEI shifted significantly to external growth. We resumed property acquisitions andacquired two properties from Kowa Real Estate Co., Ltd., one of our sponsors.
In January 2011, after the closing of the ninth period, JEI implemented the public offering for the firsttime in three and a half years and acquired an office building from Sekisui House Ltd., one of oursponsors.

About Future Asset Management
With the general improvement of corporate earnings, tenant needs are surfacing particularly for large,
quality buildings in central Tokyo as companies require a more prestigious location or larger floor area.
Therefore, we expect that occupancy rates will gradually hit bottom starting from quality properties.
Based on the recognition that the current market environment justifies asset acquisition, Japan Excellent,
Inc. (JEI) will start to pursue new investment opportunities more aggressively than before.
In financing, we will continue to ensure stable and sound financial operation in due consideration of thediversification of sources of financing and maturity dates.
Amid drastic changes in the market environment surrounding the REIT business, JEI will continue, as
before, to promote our compliance system through strict conformance with the Financial Instruments andExchange Act and other applicable laws and regulations. In addition, we will be always paying attention
to provide information about our financial conditions and asset management performance to ourunitholders in an accurate and straightforward manner.

Chifumi Toda
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
2II. Asset Management Report
1. Outline of Asset Management Operation(1) Operating results and financial position of the Investment Corporation
Fiscal period
Accounting term

5th period
From July 1, 2008
to December 31, 2008

6th period
From January 1, 2009
to June 30, 2009

7th period
From July 1, 2009
to December 31, 2009

8th period
From January 1, 2010
to June 30, 2010

9th period
From July 1, 2010
to December 31, 2010

Revenues(Millions of yen)

8,501

7,544

7,494

7,302

7,094

(Rental revenues)(Millions of yen)

7,647

7,544

7,494

7,302

7,094

Operating expenses(Millions of yen)

4,500

4,266

4,145

4,050

4,040

(Property operating expenses)(Millions of yen)

3,910

3,720

3,577

3,516

3,494

Operating income(Millions of yen)

4,000

3,278

3,349

3,252

3,053

Ordinary income(Millions of yen)

3,156

2,443

2,486

2,367

2,219

Net income(Millions of yen)

3,155

2,442

2,485

2,366

2,218

Total assets(Period-on-period change)(Millions of yen)(%)

195,929(–4.9)

195,145(–0.4)

195,040(–0.1)

194,710(–0.1)

199,186(2.2)

Net assets(Period-on-period change)(Millions of yen)(%)

90,019(0.4)

89,363(–0.7)

89,450(0.1)

89,389(0.0)

89,272(–0.1)

Unitholders’ capital(Millions of yen)

87,08387,08387,08387,08387,083

Outstanding investment units(Units)154,550

154,550

154,550

154,550

154,550

Net assets per unit

(Yen)

582,458

578,215

578,780

578,387

577,629

Net income per unit (Note 1)(Yen)

20,41715,802

16,084

15,314

14,353

Total distribution(Millions of yen)

3,155

2,442

2,485

2,366

2,218

Distribution per unit

(Yen)

20,41815,802

16,085

15,315

14,353(Profit distribution per unit)(Yen)

20,41815,802

16,085

15,315

14,353(Distribution in excess of earnings
per unit)

(Yen)

(–)

(–)

(–)

(–)

(–)

Return on assets (Note 2)(Annualized rate)

(%)

1.6
(3.1)

1.2
(2.5)

1.3
(2.5)

1.2
(2.5)

1.1
(2.2)

Return on equity (Note 3)(Annualized rate)

(%)

3.5
(7.0)

2.7
(5.5)

2.8
(5.5)

2.6
(5.3)

2.5
(4.9)

Capital ratio (Note 4)(Period-on-period change)

(%)
(%)

45.9
(2.4)

45.8
(–0.1)

45.9
(0.1)

45.9
(0.0)

44.8
(–1.1)

Payout ratio (Note 5)

(%)

100.0

99.9

100.0

100.0

99.9

Number of investment properties(Properties)

18

18

18

18

19

Number of tenants(Tenants)

127

126

126

124

108

Total leasable space(m2)

220,521220,521220,521220,474

228,177

Occupancy rate

(%)

95.2

98.5

97.0

97.4

91.7

Depreciation(Millions of yen)

995

990

990

992

993

Capital expenditure(Millions of yen)

799

267

134

248

328

Net operating income (NOI)(Note 6)

(Millions of yen)

4,732

4,814

4,907

4,778

4,593

Funds from operation (FFO) per
unit (Note 7)(Yen)

21,331

22,211

22,494

21,737

20,780

FFO multiples (Note 8)(Times)

9.0

9.1

9.2

9.6

13.0

Debt service coverage ratio(DSCR) (Note 9)(Times)

5.5

4.5

4.5

4.4

4.3

Interest-bearing debt

(Millions of yen)

95,50095,50095,50095,500100,400

Loan-to-value (Note 10)

(%)

48.7

48.9

49.0

49.0

50.4

Number of days in operation(Days)

184

181

184

181

184

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)3

(Note 1) Net income per unit is calculated by dividing net income by the weighted-average number of units outstanding during thesix months period.
(Note 2) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2]  100 (The ratio isrounded to one decimal place.)(Note 3) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets) / 2]  100 (The ratio is rounded
to one decimal place.)(Note 4) Capital ratio = Period end net assets / Period end total assets  100 (The ratio is rounded to one decimal place.)(Note 5) The ratio is rounded down to one decimal place.
(Note 6) NOI = Rental revenues – Property operating expenses + Depreciation(Note 7) FFO per unit = (Net income + Depreciation – Gain on sale of real estate + Loss on sale of real estate) / Number ofoutstanding investment units (The figure is rounded down to the whole number.)(Note 8) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one decimal
place.)(Note 9) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment corporation bonds)(The ratio is rounded to one decimal place.)(Note 10) 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 in accordance with the Law
Concerning Investment Trusts and Investment Corporations of Japan (hereinafter referred to as 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) andlisted 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 theaim to maintain sound corporate growth and stable revenues based on the medium- and long-term
perspectives. On December 31, 2010, we settled our ninth period.

1) Business Conditions and Results
The domestic economy is slightly in a pick-up trend on the back of strong growth in China andemerging markets in the Asian region.
While recent economic condition shows a slowdown in the pace of recovery given the
progressive strong yen and a slow move in the export and productivity, private companies
maintain momentum for profitability, driving for a slight rebound in capital investments.
In the office leasing market, the trend for reduced floor areas has been settled and some buyers
show their demand for better locations and additional floor areas. Whilst the Tokyo metropolitan
area continues to be a renters’ market, exposing a persistently low rent levels, the vacancy rates inlarge and centrally-located buildings in Tokyo has improved and a favorable sign towards a
recovery in the rent level at certain areas started to appear. Osaka and Nagoya areas underwent a
series of tenant reductions and relocations and decreased floor areas, suffering a decline indemand for office space and continued slide in the rent level in the market.
Under these difficult circumstances, JEI stimulated leasing activities, worked on refilling vacant

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)4

tenants and managed to maintain the average occupancy rate at 94.0 percent for the entire holding
properties during the period. In the property operation and management, we were committed to
improving building functionalities in conjunction with the renewal of facilities and worked on
implementing measures for improving tenant satisfaction and our service level.
In the property trading market, there were signs of recovery in the investors’ buying motive on
the back of improved fund-raising conditions, indicating a sign of active trading.
JEI determined that the investment environment has been improved and shifted significantly to
external growth. Precisely, it acquired No. 32 Kowa Building (a 30 percent equity) on October 29,
2010 and Kowa Shirokanedai Building on December 24, 2010 with the support of sponsor
companies, to earn stable revenues from our portfolio.

2) Fund Raising Highlight
During the period, in order to achieve conversion of floating-rate debts to fixed-rate debts andlengthen the borrowing span of these debts as well as to diversify maturity dates, JEI managed toenter into a long-term loan of 6 billion yen (7 year with fixed interest rate) on November 11, 2010and made advance payment in the amount of 6 billion yen, a part of 13 billion yen of long-termloan with the maturity of less than one year (due on November 29, 2011 with floating interestrate).
On December 24, 2010, JEI entered into a short-term loan of 4.9 billion yen on a revolving credit
line basis to raise funds for new property acquisitions.
As a result, the average debt maturity of interest bearing debts became 2.23 years, long-termborrowing ratio was 95.1 percent, fixed rate ratio was 48.1 percent, and weighted average interest
rate for loans purchased recorded 1.36 percent. Outstanding interest bearing debts totaled 100.4
billion yen, of which 4.9 billion yen was for short-term loans, 78.5 billion yen was for long-termloans (including those of 34.5 billion yen with the maturity of less than one year) and 17 billion
yen was for investment corporation bonds (loan to value ratio for the total assets was 50.4 percent
as of the end of the period).
JEI has registered the issuance of investment corporation bonds for the purpose of dynamic
arrangement of long-term funds as follows:(Bond Issuance Registration Highlight)
EstimatedType

amount of

Scheduled period for issuanceissuance
Investment
corporation

100 billion yen

From January 7, 2010 to January 6, 2012bond
The balance of the estimated amount of issuance is 83 billion yen. [(Estimated amount of issuance:
100 billion yen) – (Total amount issued: 17 billion yen) = Balance: 83 billion yen]

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
5The ratings for JEI provided by the following rating agencies are shown below:(Ratings as of December 31, 2010)
Rating and Investment
Moody’s Japan

Information, Inc.
(R&I)

Issuer rating (outlook)

A3 (Negative)

AA- (Stable)

Individual debt issue rating*-AA-* Rating for unsecured investment corporation bonds (No.1 and No.2).

3) Financial Results and Distribution Highlight
As a result of the above investments, JEI recorded 7,094 million yen in total revenues, 3,053
million yen in operating income, 2,219 million yen in ordinary income and 2,218 million yen in
net income for the period under review.
As for distributions, JEI determined to distribute all retained earnings at the end of period,
rounding down the portion less than 1 yen of distribution per investment unit, with the intent toinclude the amount of profit distributions in deductible expenses by applying Special Measure
Concerning Taxation for Corporation Tax (Section 67-15 of the Act on Special Measures
Concerning Taxation). As a result, JEI determined the amount of distribution per unit to be 14,353
yen.

(3) Capital increase
JEI had no changes in the number of outstanding investment units for the period under review. The
outline of the changes is as follows:
Outstanding investment units(Units)ChangeBalanceUnitholders’ capital(Millions of yen)
ChangeBalancePaid-up date

Capital transaction

February 20, 2006

Private placement
for corporation

400

400

200

200

(Note 1)

June 26, 2006

Public offering

128,000

128,400

64,23064,430(Note 2)6,400

134,800

3,211

67,641(Note 3)19,000

153,800

18,702

86,344(Note 4)

750

154,550738

87,083(Note 5)

July 21, 2006
July 11, 2007
August 8, 2007

Allocation of
investment units to athird party
Public offering
Allocation of
investment units to athird party

Remarks(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 a price of 520,000 yen per unit (subscription price of 501,800 yen per unit)
through a public offering in order to raise funds for purchasing new properties which were acquired at the time of
the listing.
(Note 3) New investment units were issued at a price of 501,800 yen per unit through an allocation of investment units to athird party in order to apply to certain part of funds for new property acquisitions.
(Note 4) New investment units were issued at a price of 1,019,200 yen per unit (subscription price of 984,360 yen per unit)
through a public offering in order to refund certain part of debts procured to acquire properties in the second period.
(Note 5) New investment units were issued at a price of 984,360 yen per unit through an allocation of investment units to athird party in order to refund certain part of debts procured to acquire properties in the second period.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
6

[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 the Real Estate Investment Trust Section of the Tokyo Stock Exchange during each period
are as follows:
Investment unit
market priceHighest (Yen)

5th period(December 2008)
535,000

Lowest (Yen)

254,000

Fiscal period(Closing date)

6th period
7th period(June 2009)(December 2009)
413,000
490,000
298,000

8th period
9th period(June 2010)(December 2010)
496,500
570,000

388,000

386,500

397,000(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 distributions for the ninth fiscal period were determined to be 14,353 yen per unit. The
Investment Corporation has determined to distribute all retained earnings at the end of period,
rounding down the portion less than 1 yen of distribution per investment unit, with the intent toapply the special treatment of income taxes under the Special Taxation Measures Law (Section 67.15
of the Special Taxation Measures Law) in which the amount equivalent to distributions from profits
is deducted from taxable corporate income as a deductible expense.
Fiscal period

5th period

6th period

7th period

8th period

9th period

Accounting term

From July 1, 2008
to December 31, 2008

From January 1, 2009
to June 30, 2009

From July 1, 2009
to December 31, 2009

From January 1, 2010
to June 30, 2010

From July 1, 2010
to December 31, 2010

3,155,635

2,442,271

2,486,006

2,366,962

2,218,333

33

72

69

29

76

3,155,601

2,442,199

2,485,936

2,366,933

2,218,256(20,418)(15,802)(16,085)(15,315)(14,353)

3,155,601

2,442,199

2,485,936

2,366,933

2,218,256(20,418)(15,802)(16,085)(15,315)(14,353)

–

–

–

–

–

(–)

(–)

(–)

(–)

(–)

Retained earnings at the end of
period (Thousands of yen)
Retained earnings (Thousandsof yen)Total profit distributions(Thousands of yen)(Distributions per unit) (Yen)
Total profit distributions(Thousands of yen)
(Profit distribution per unit)(Yen)
Total refund of investment
equity(Refund of investment per unit)

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
7(5) Outlook
1) Investment Environment Outlook
Looking at the first half of fiscal year 2011, whilst the pace of turnaround may be slowed for awhile, the domestic economy is anticipated to get back on track little by little with a slightincrease in capital investments on the back of recovery in the overseas economy primarily led byemerging markets in the Asian region which will revitalize Japan’s export gradually, amid a pickup trend in enterprise profits.
In the office leasing market in the Tokyo metropolitan area, the rent level is likely to keep
bottoming out in the coming months. However, with the anticipated improvement in company
profits, demand in offices including relocation to wider space and floor expansion can be
expected, leading to an increase in both occupancy rate and rent level little by little.
In Osaka and Nagoya areas, a drastic recovery in office demand cannot be expected soon and the
supply and demand may persist as weak as ever.
In the real estate investment market, easing trend of fund-raising conditions and revived investor
needs are likely to continue and may gradually pick up trading, if further revitalization in theoffice leasing market is successfully developed.

2) Policy and Issues on Future Investment Management
Amid a consistently softened office leasing market, in order to hold back a potential decline in
the profits from our overall portfolio to the minimum level JEI will strive to maintain stable
occupancy and rent level in a medium- to long-term perspective through promoting closer
relationship with our property management companies, proactively acting to fill vacancies as
early as possible, retaining tenancies, and further reinforcing effective building management
operation that enhances existing tenant satisfactions. We will consistently implement additional
strategic investment plans to maintain the asset value and improve competitive position of ourproperties on a medium- to long-term period.
As for the external growth, JEI divested No. 36 Kowa Building and acquired Daiba Garden City
Building on February 4, 2011 with the support of our sponsor companies. We will continue toproactively seek for investment opportunities as the environment for revitalizing the real estate
trading market is on the mend.
As for the financial environment, we recognize that the fund-raising conditions in the real estate
investment industry are generally favorable. Based on this perspective, we will consistently workon stable financial operation through diversifying financing sources including issuance ofinvestment corporation bonds, diversifying maturity dates, lengthening borrowing spans, andconverting floating-rate debts to fixed-rate debts.

Asset Management Report for 9th Period (Semi-Annual Report for 9th 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 throughpublic offering at its meetings held on January 13, 2011 and January 24, 2011. The payment forthe offering was completed on January 31, 2011.
As a result, unitholders’ capital is 100,691,534,000 yen and the number of investment units
issued and outstanding is 185,550 as of January 31, 2011.
<Overview of the issuance of new investment units through public offering>(1) Number of new investment units issued

31,000 units(2) Issue price454,930 yen per unit

(3) Total issue price

14,102,830,000 yen(4) Paid-in amount (issue amount)

438,984 yen per unit

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

13,608,504,000 yen(6) Payment date

January 31, 2011

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 throughthird-party allocation at its meetings held on January 13, 2011 and January 24, 2011. 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 23, 2011.
<Overview of the issuance of new investment units through third-party allocation>(1) Number of new investment units issued

3,100 units(2) Paid-in amount (issue amount)

438,984 yen per unit

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

1,360,850,400 yen(4) Allocated party

Mizuho Securities Co., Ltd.

(5) Payment dateFebruary 28, 2011

3) Asset acquisition (Daiba Garden City Building)On January 13, 2011, JEI concluded the following purchase agreement for trust beneficiaryinterest in real estate. The property was handed over to JEI on February 4, 2011.
<Overview of the acquired property>(1) Acquired property

Trust beneficiary interest in real estate(2) Property nameDaiba Garden City Building(3) Location

2-3-5 Daiba, Minato-ku, Tokyo(4) Acquisition price (Note)

11,000,000,000 yen(5) Date of execution of purchase agreement

January 13, 2011(6) Handover dateFebruary 4, 2011(7) Seller

Sekisui House, Ltd.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)9(Note) The acquisition price for the sale and purchase of trust beneficiary interest, which does not include costs related
to the acquisition, JEI’s share of the real estate tax and city planning tax, and consumption taxes.

4) Asset transfer
On January 13, 2011, JEI concluded the following transfer agreement for trust beneficiaryinterest in real estate. JEI handed over the property to the buyer on February 4, 2011.
<Overview of the transferred property>(1) Transferred property

Trust beneficiary interest in real estate(2) Property nameNo. 36 Kowa Building(3) Location

5-19 Sanbancho, Chiyoda-ku, Tokyo(4) Transfer Price (Note)

4,300,000,000 yen(5) Date of execution of transfer agreement

January 13, 2011(6) Handover dateFebruary 4, 2011(7) Buyer

Kowa Real Estate Co., Ltd.

(Note) The transfer price for the sale and purchase of trust beneficiary interest, which does not include costs related
to the transfer, JEI’s share of the real estate tax and city planning tax, and consumption taxes.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)10

2. Outline of the Investment Corporation(1) Investment unit
6th period
As of June 30, 2009

7th period
As of December 31, 2009

8th period
As of June 30, 2010

2,000,000 Units

2,000,000 units

2,000,000 units

2,000,000 units

2,000,000 units

Number of units issued
and outstanding

154,550 Units

154,550 units

154,550 units

154,550 units

154,550 units

Unitholders’ capital

87,083 million yen

87,083 million yen

87,083 million yen

87,083 million yen

87,083 million yen

Number of unitholders

4,515 individuals

4,817 individuals

4,734 individuals

5,469 individuals

5,495 individuals

Fiscal period
Number of units
authorized

5th period
As of December 31, 2008

9th period
As of December 31, 2010

(2) Unitholders
Major unitholders as of December 31, 2010 are as follows:
Name

Address

Number ofunits owned(Units)Ratio of number ofunits owned to
outstanding
investment units (%)

24,17815.64

15,001

9.71

Japan Trustee Services Bank, Ltd. (Trust
Account)

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

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

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

Kowa Real Estate Co., Ltd.

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

14,312

9.26

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

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

11,104

7.18

The Master Trust Bank of Japan, Ltd. (Trust 2-11-3 Hamamatsu-cho, Minato-ku, Tokyo
Account)

8,334

5.39

4,590

2.97

4,132

2.67

North Pacific Bank, LTD.

3-11 Odori-Nishi, Chuo-ku, Sapporo-shi,
Hokkaido

The Dai-ichi Life Insurance Company,
Limited

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

The Senshu Ikeda Bank, Ltd.

18-14 Chayamachi, Kita-ku, Osaka-shi,
Osaka

2,711

1.75

The Chugoku Bank, LTD.

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

2,521

1.63

Nomura Bank (Luxembourg) S.A.

BATIMENT A, 33, RUE DE GASPERICH,
L-5826, LUXEMBOURG

2,179

1.41

89,062

57.63

Total

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

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
11

(3) Officers
1) Directors and accounting auditor
Post

Name

Executive
Director
Supervisory
Director

Chifumi Toda

Makoto Sakagami

Compensation or fee forthe six months ended
December 31, 2010
(Thousands of yen)

Major additional post

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

–

Makoto Sakagami Certified Public Accounting Office

Supervisory
Director

Tsuyoshi Nagahama

Advisor, Anderson, Mori & Tomotsune

Supervisory
Director

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai University

Accounting
AuditorErnst & Young ShinNihon
LLC

–

6,540

13,700(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 post in other company than listed above, there is no conflict of interests
between those companies including listed above and JEI.
(Note 2) The total compensation shown above is an estimated amount and includes fees for English financial statement audit.

2) Policy on dismissal and discontinuation of re-election of accounting auditor
The board of directors deliberate dismissal of accounting auditor in accordance with theprovisions set out in the Investment Trust Law and deliberate discontinuation of re-election
based on circumstances in all respects.

(4) Name of asset management company, asset custodian and administrative
agentsOur asset management company, asset custodian and administrative agents as of December 31,
2010 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 for accounting andinstitution operation)

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Investment corporation bonds)

Mizuho Corporate Bank, Ltd.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)12

3. Investment Portfolio of the Investment Corporation(1) Investment portfolio by area
8th period(As of June 30, 2010)

9th period(As of December 31, 2010)

Acquisition price(Millions of yen)
(Note 1)

Investment ratio
in portfolio (%)(Note 2)Acquisition price(Millions of yen)
(Note 1)

Investment
ratio inportfolio (%)(Note 2)

Area II (Note 4)

4,222

2.2

4,221

2.1

Area I (Note 4)

92,33547.4

99,323

49.9

Area II (Note 4)

7,592

3.9

7,548

3.8

Area III (Note 4)

74,28338.2

73,961

37.1

Total

178,434

91.6

185,05492.9

Deposits in bank and other assets

16,276

8.4

14,132

7.1

Total assets

194,710100.0

199,186

100.0Classification

Use

Real estate property(Note3)
Offices
Trust beneficiaryinterest in real estate(Note 3)Area

(Note 1) Acquisition price is based on the amounts accounted for in the balance sheets as of the closing date (amounts ofreal estate and trust beneficiary interest in real estate are based on the book value after adjusting depreciations).
(Note 2) Investment ratio in portfolio is rounded to one decimal place.
(Note 3) Leasehold rights held combined with buildings and other structures are indicated 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(2) Major property
The principal properties (top ten properties in net book value) held by JEI as of December 31, 2010
are as follows:
Name of real property

Leasable space(m2)(Note 1)

Kowa Kawasaki Nishiguchi
Building

31,01338,332.15

32,487.47

84.8

14.1

OfficesAkasaka Garden City

22,9888,769.53

8,769.53

100.0

8.0

Offices

Omori Bellport D

22,15425,828.29

24,516.12

94.9

14.4

Offices

AKASAKA INTERCITY

17,6155,622.98

5,169.39

91.9

4.6

OfficesMusashikosugi Tower Place

13,281

25,217.28

25,217.28

100.0

11.7

Offices

Kowa Kawasaki Higashiguchi
Building

10,481

18,612.72

18,612.72

100.0(Note 5)

Offices

Shiba 2-Chome Building

9,256

11,749.30

11,654.49

99.2

5.2

Offices

JEI Hamamatsucho Building

8,232

6,411.26

6,411.26

100.0

4.2

OfficesJEI Nishi-Honmachi Building

7,548

10,601.70

10,024.44

94.6

3.4

OfficesNo. 32 Kowa Building

7,392

7,570.95

6,365.99

84.1

3.3

Offices

149,963

158,716.16

149,228.69

94.0

76.2

Total

Leased floor
space (m2)(Note 2)

Ratio of rental
Occupancy
revenue to total
rate (%)
rental revenues (%)(Note 3)(Note 4)

Net book value(Millions of yen)

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
13

Major use(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of December 31, 2010
and is rounded to two decimal places. If the property is a joint ownership property, the value is obtained after
multiplying the total leasable space of the shared real estate by the percentage of the interest owned by JEI.
(Note 2) Leased floor space refers to space with lease agreements with end tenants as of December 31, 2010 and is rounded
to two decimal places. If the property is a joint ownership property, the value is obtained after multiplying the totalleased floor space of the shared real estate by the percentage of the interest owned by JEI. The leased floor space ofend tenants who terminated their lease agreement but not yet removed as of the end of period is included in the leased floor
space. This also applies to the calculations of occupancy rate in (Note 3) below and the total number of tenants in (Note 1)
in (3) Portfolio ownership breakdown.

(Note 3) Occupancy rate is a percentage of total leased floor space to total leasable space as of December 31, 2010 androunded to one decimal place.
(Note 4) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 5) The value of this property is undisclosed because the consent from the end tenants has not been obtained.

(3) Portfolio ownership breakdown
Real estate properties and their forms of ownership as of December 31, 2010 are as follows:
PropertyNo.

Name of real property

Location (Displayed address)

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

I-1

Omori Bellport D

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

Trust beneficiary interest in real estate

24,79022,154

I-2

Shiba 2-Chome Building

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

Trust beneficiary interest in real estate

11,4009,256

I-3

JEI Hamamatsucho Building

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

Trust beneficiary interest in real estate

8,370

8,232

I-4

No. 32 Kowa Building

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

Trust beneficiary interest in real estate

7,445

7,392

I-5

No. 36 Kowa Building

5-19 Sanbancho, Chiyoda-ku, Tokyo

Trust beneficiary interest in real estate

3,953

3,999

I-6

No. 28 Kowa Building

2-20-1 Nishi-Gotanda, Shinagawa-ku, Tokyo

Trust beneficiary interest in real estate

2,880

2,824

I-7

Akasaka Garden City

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

Trust beneficiary interest in real estate

18,60022,988I-8AKASAKA INTERCITY

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

Trust beneficiary interest in real estate

13,10017,615

I-9

Kowa Shirokanedai Building

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

Trust beneficiary interest in real estate

4,950

4,860

95,48899,323

Area I
II-1

NHK Nagoya Housou Center
Building

1-13-3 Higashi-Sakura, Higashi-ku, Nagoyashi, Aichi

Real estate

4,640

4,221

II-2

JEI Nishi-Honmachi Building

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

Trust beneficiary interest in real estate

4,540

7,548

9,180

11,769Trust beneficiary interest in real estate

16,20013,281

Area II
III-1

Musashikosugi Tower Place

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

Nakahara-ku,

III-2

Kowa Kawasaki Higashiguchi
Building

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

Trust beneficiary interest in real estate

9,250

10,481

III-3

JEI Hongo Building

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

Trust beneficiary interest in real estate

4,990

5,271

III-5

Kawasaki Nisshincho Building

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

Trust beneficiary interest in real estate

5,230

4,148

III-6

No. 44 Kowa Building

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

Trust beneficiary interest in real estate

1,520

1,014

III-7

JEI Ryogoku Building

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

Trust beneficiary interest in real estate

2,132

2,428

III-8

Ebina Prime Tower

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

Trust beneficiary interest in real estate

4,090

6,321

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
14III-9Kowa Kawasaki
Building

Nishiguchi 66-2 Horikawa-cho, Saiwai-ku, Kawasakishi, Kanagawa

Trust beneficiary interest in real estate

25,70031,013

Area III

69,11273,961

Total

173,780

185,054(Note) Appraisal value at the end of period indicates the appraisal value described in the real estate appraisal report
prepared by a real estate appraiser belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd.,and Japan Valuers Co., Ltd. as of December 31, 2010 based on the articles of incorporation of JEI and theregulations stipulated by the Investment Trusts Association, Japan. When there is a joint ownership property inthe current portfolio, its value is obtained after multiplying the total value of the shared real estate by thepercentage of the interest owned by JEI or the trustee.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
15

8th period
From January 1, 2010
to June 30, 2010
PropertyNo.

Name of real property

9th period
From July 1, 2010
to December 31, 2010

Total numberof tenants (Atthe end of
period)(Note 1)

Occupancy rate
(At the end of
period)(%)

Rental revenues(For the period)(Millions ofyen)

Ratio of rental
revenue to total
rental revenues(%)(Note 2)

Total number oftenants (At theend of period)(Note 1)

Occupancy rate
(At the end of
period)(%)

Rental revenues(For the period)(Millions ofyen)

Ratio of rental
revenue to total
rental revenues(%)(Note 2)

I-1

Omori Bellport D

1

100.0

1,081

14.8

1

94.9

1,024

14.4

I-2

Shiba 2-Chome Building

2

96.0

371

5.1

2

99.2

368

5.2

I-3

JEI Hamamatsucho Building

1

100.0

295

4.1

1

100.0

297

4.2

I-4

No. 32 Kowa Building

13

81.2

207

2.8

1

84.1

235

3.3

I-5

No. 36 Kowa Building

1

100.0

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

I-6

No. 28 Kowa Building

1

89.6

147

2.0

1

89.6

148

2.1

I-7

Akasaka Garden City

1

100.0

555

7.6

1

100.0

565

8.0

I-8

AKASAKA INTERCITY

13

91.9

333

4.6

13

91.9

326

4.6

I-9

Kowa Shirokanedai Building

–

–

–

–

1

100.0

8

0.1

95.7

3,183

44.9

33

96.8

3,196

43.8

22

II-1

NHK Nagoya Housou Center
Building

35

93.0

319

4.4

33

90.6

307

4.3

II-2

JEI Nishi-Honmachi Building

1

100.0

247

3.4

1

94.6

240

3.4

92.7

548

7.7

Area I

Area II

36

96.8

567

7.8

34

III-1

Musashikosugi Tower Place

34

100.0

802

11.0

34

100.0

827

11.7

III-2

Kowa Kawasaki Higashiguchi
Building

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

JEI Hongo Building

1

100.0

173

2.4

1

100.0

177

2.5

III-5

Kawasaki Nisshincho Building

1

100.0

229

3.1

1

100.0

225

3.2

III-6

No. 44 Kowa Building

1

100.0

93

1.3

1

99.1

93

1.3

III-7

JEI Ryogoku Building

1

98.0

109

1.5

1

100.0

111

1.6

III-8

Ebina Prime Tower

15

97.2

513

7.0

12

67.7

406

5.7

III-9

Kowa Kawasaki Nishiguchi
Building

1

95.0

1,083

14.8

1

84.8

999

14.1

55

97.9

3,538

48.5

52

88.9

3,362

47.4

100.0

108

91.7

7,094

100.0

Area III
Total

124

97.4

7,302

(Note 1) Total number of tenants indicates total number of tenants in each property as of the end of each period. A property
entered into a master lease agreement is counted as one tenant. A tenant who has multiple tenancies in one property
is counted as one tenant. A tenant who has tenancies in multiple properties is counted as one tenant for each
property.
(Note 2) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 3) The value of this property is undisclosed because the consent from the end tenants has not been obtained.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
16

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

Type

Over-the-countertransaction

Interest
rate
swap
contracts with floatingrate to fixed-rate interest

Contract amount (Thousands of yen)
(Note 1)More than one year
(Note 1)
6,250,000

Fair value(Thousands ofyen) (Note 2)––28,770(Note 1) Contract amount of swap is calculated based on notional principal.
(Note 2) Fair value is measured at an amount calculated by the other party to said contracts based on the current market
interest rates and other relevant factors.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)17

4. Capital Expenditures for Holding Properties(1) Scheduled capital expenditures
The following table shows major planned capital expenditures associated with planned maintenanceand repair for the properties held by JEI as of December 31, 2010. The values below include those to
be expensed for accounting purposes.

Name of real
property

Location

PurposeScheduled term

Kowa Kawasaki
Nishiguchi Building

Saiwai-ku,
Kawasaki-shi,
Kanagawa

NHK Nagoya
Housou Center
Building

Higashi-ku,
Nagoya-shi

Fire prevention andmonitoring system
renewal construction
Air-conditioning system
renewal construction(2nd term)

From September
2010
to May 2011
From October
2010
to May 2011

Crime prevention andmonitoring system
renewal construction

From July 2010
to June 2011

Estimated construction costs(Millions of yen)
Payment forthe six months
Total of
Total
ended
advance
December 31,
payment
2010
98

–

–

68

–

–

35

–

–

(2) Capital expenditures for the six months ended December 31, 2010
The following table shows constructions completed during the period and to be expensed as capital
expenditure pertaining to our portfolio held as of December 31, 2010. During the period, theamount of constructions completed totaled 437 million yen, composed of 328 million yen of capital
expenditure and 108 million yen of maintenance and repair classified as an expense for the six
months ended December 31, 2010.
Name of real property
Kawasaki Nisshincho
Building
Kowa Kawasaki
Higashiguchi Building
NHK Nagoya Housou
Center Building

Scheduled term

Amounts paid
(Millions ofyen)

Heat source system renewal
construction

From July 2010
to December 2010

62

Central monitoring system
renewal construction

From August 2010
to December 2010

65

Air-conditioning system
renewal construction (1st term)

From September 2010
to December 2010

36

–

164

Location
Kawasaki-ku,
Kawasaki-shi,
Kanagawa
Kawasaki-ku,
Kawasaki-shi,
Kanagawa
Higashi-ku, Nagoya-shi

PurposeOther constructions
Total

328

(3) Reserved funds for long-term maintenance and repair plan
JEI has reserved funds for maintenance and repair as below to appropriate for future expenditureson large-scale maintenance and repair, taking out from depreciation and other excess cash flow
based on our long-term maintenance and repair plan developed for each property.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)18

(Millions of yen)Item

5th period
From July 1, 2008
to December 31, 2008

6th period
From January 1, 2009
to June 30, 2009

7th period
From July 1, 2009
to December 31, 2009

8th period
From January 1, 2010
to June 30, 2010

9th period
From July 1, 2010
to December 31, 2010

Reserved funds at the end of
the previous period

282

254

254

254

254

Increase

–

–

–

–

5

Decrease

28

–

–

–

–

Reserved funds at the end of
the current period

254

254

254

254

259

5. Expenses and Liabilities(1) Expenses associated with asset management(Thousands of yen)th

Account

5 period
From July 1, 2008
to December 31, 2008th

6 period
From January 1, 2009
to June 30, 2009th

7 period
From July 1, 2009
to December 31, 2009th

8 period
From January 1, 2010
to June 30, 2010

9th period
From July 1, 2010
to December 31, 2010(a) Asset management fees

443,596

418,129423,890414,743

416,479(b) Custodian fees

15,72515,015

14,96014,952

14,929(c) Administrative service
fees

27,37528,21928,29028,61829,597(d) Compensation for
directors

6,540

6,540

6,540

6,540

6,540

(e) Accounting auditor fees

11,50011,50011,50011,50011,500(f) Other
Total

85,221

66,201

83,13757,641

67,263589,958

545,605

568,317533,995

546,310

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
19

(2)Borrowings
Borrowings by each financing source as of the end of the 9 th period (ended December 31, 2010) are
as follows:
Classification

LenderMitsubishi UFJ Trust andShort-term Banking Corporation
loans
Mizuho Corporate Bank, Ltd.

Balance at the Balance at theend of theend of the
AverageBorrowing
previous period current period interest rate
date
(Thousands of (Thousands of (%) (Note 1)
yen)
yen)

December24, 2010–

1,900,000–

4,900,000

5,000,000

5,000,000

3,500,000

3,500,000

1,000,000

1,000,000

The Dai-ichi Life Insurance
Company, Limited

3,000,000

3,000,000

Mizuho Corporate Bank, Ltd.

6,000,000

6,000,000

4,000,000

4,000,000

3,000,000

3,000,000

Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Ltd.

June 29,
2006

Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Banking
Long-term Corporation
debt due
within one Mizuho Trust & Banking Co.,
Ltd.
year

October 24,
2008

2,000,000

Aozora Bank, Ltd.

–1,615,384

The Chuo Mitsui Trust andBanking Company, Limited–

1,615,384–

1,615,384

Sumitomo Mitsui Banking
Corporation

June 29,2009–

1,076,923

Mizuho Corporate Bank, Ltd.

–538,461

Mitsubishi UFJ Trust andBanking Corporation–

538,461

Subtotal

27,500,000

34,500,000

Aozora Bank, Ltd.

3,000,000–

The Chuo Mitsui Trust andBanking Company, Limited

3,000,000–

3,000,000–

2,000,000–

1,000,000–

1,000,000–

2,300,000

2,300,000

2,200,000

2,200,000

2,000,000

2,000,000

Mizuho Trust & Banking Co.,
Ltd.
Sumitomo Mitsui Banking
Corporation

June 29,2009

Long-term
Mizuho Corporate Bank, Ltd.
debt
(Note 4)
Mitsubishi UFJ Trust andBanking Corporation
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Banking
Corporation
The Norinchukin Bank

July 31,2007

0.78000

March 24,2011

Lumpsum

0.78000––

Use

Remarks

For
Unsecuredacquisitio
andn of real unguarantee
estated––Foracquisitio
n of realestate1.43470

1.96625(Note 2)June 29,2011

0.94000

2,000,000

Mizuho Trust & Banking Co.,Ltd.

Repayment method

3,000,000–

Subtotal

Maturity
date

Unsecured
andunguaranteedLumpsumFor
repayment of otherborrowing

1.34000

November29, 2011(Note 3)

1.24662

–

–

–

–

–

–
Unsecured
andunguaranteedLumpsum

0.69000

July 31,
2012

–

For
acquisitio
n of realestateAsset Management Report for 9th Period (Semi-Annual Report for 9th Period)
20

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.
October 24,
2008

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

June 29,2010

Mitsubishi UFJ Trust andBanking Corporation
Mizuho Trust & Banking Co.,Ltd.
The Dai-ichi Life Insurance
Company, Limited
Development Bank of JapanInc.
The Dai-ichi Life Insurance
Company, Limited
Development Bank of Japan
Inc.

500,000

500,000

2,500,000

2,500,000

1,500,000

1,500,000

2,000,000

2,000,000

1,000,000

1,000,000

6,000,000

6,000,000

1,000,000

1,000,000

3,100,000

3,100,000

1,800,000

1,800,000

1,800,000

1,800,000

1,300,000

1,300,000

2,000,000

2,000,000

1.96907(Note 2)

1.04000

July 31,2007
2,000,000

2,000,000

3,000,000

3,000,000

October 24,
2008

1.09000

2.25875(Note 2)2.28417(Note 2)June 28,
2013
For
repaymentof otherborrowing

December27, 2013

Foracquisitionof realestateJuly 31,2014

2.27344(Note 2)June 30,
2015

For
repaymentof otherborrowing

2,000,000

2,000,000–

6,000,000

1.73875(Note 2)

November30, 2017

Subtotal

51,000,000

44,000,000

1.48861

–

–

–

–

Total

78,500,000

83,400,000

1.34688

–

–

–

–

Development Bank of Japan
Inc.

November30, 2010(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 weighted-average rateadjusting the effect of the interest rate swaps.
(Note 2) The loans are fixed-rate loans.
(Note 3) On November 30, 2010, JEI prepaid 6 billion yen out of the initial principal amount of 13 billion yen.
(Note 4) The following table shows the total long-term debt maturing each year after the balance sheet date (excluding the
portion due within one year).
(Thousands of yen)Classification

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

Long-term debt

14,000,000

15,000,000

4,000,000

5,000,000

6,000,000

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
21

(3) Investment corporation bonds and short-term investment corporation bonds
Investment corporation bonds issued as of December 31, 2010 are as follows:
Issue

Issuance date

Balance at theend of theprevious period(Thousands ofyen)

1st series unsecured investment
corporation bonds

March 11,2010

12,000,000

2nd series unsecured investment
corporation bonds

June 28, 2010

Total

Balance at theend of thecurrent period(Thousands ofyen)Interest rate
(Note 1)(%)

Maturity date

Repayment
methodUse

Remarks

12,000,000

1.52000

March 11, 2014

Lump-sum(Note 2)

(Note 3)5,000,000

5,000,000

1.29000

June 26, 2015

Lump-sum(Note 2)

(Note 3)17,000,000

17,000,000

1.45235(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 appropriated to repayments of borrowings.
(Note 3) The bonds are with special pari passu conditions among specified investment corporation bonds.

6. Condition of Investment Transactions(1) Transactions of property and asset-backed securities, etc.
(Millions of yen)
Acquisition
Type of assets

Name of real property
Acquisition date

Transfer
Acquisition
priceTransfer date

TransferamountNet book
value

Gain (loss)
on transfer(Note 1)

(Note3)

No. 32 Kowa
Building

October 29, 2010

2,390

–

–

–

–

Trust beneficiaryinterest in real estate

Kowa Shirokanedai
Building

December 24, 2010

4,705

–

–

–

–

–

–

–

Real estate property

7,095(Note 1) The acquisition price indicates each contracted amount of the property in each purchase agreement or trust
beneficiary interest transfer agreement excluding related expenses (brokerage fee, taxes, etc.).
(Note 2) After acquiring co-ownership interest in No. 32 Kowa Building (acquisition of additional 30% interest), JEI
immediately established an additional trust for the acquired interest.

(2) Transactions of other assets
Other assets than property or asset-backed securities, etc. above are mainly bank deposits and bankdeposits in trust.

(3) Research for specified assets value, etc.
1) Real estate, etc.
(Millions of yen)
Acquisition

Acquisition

Acquisition price(Note 2)

Research value of
specified asset

Property name

Type of assets

Acquisition date

No. 32 Kowa Building

Real estate

October 29, 2010

2,390

2,544

Kowa Shirokanedai
Building

Trust beneficiary interest inreal estate

December 24, 2010

4,705

4,850

7,095

7,394

Total

(Note 1) The research for specified asset value, etc. shown above was conducted by Ernst & Young ShinNihon LLC at thetime of acquisition in accordance with the Japanese Institute of Certified Public Accountants (JICPA) Industry
Audit Committee Report No. 23, “Price Research of Specified Assets Held by Investment Trusts and Investment

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
22

Corporations.” In addition, JEI received a research report containing matters necessary for the identification of theproperty, such as the location and the lot number of the property.
(Note 2) The acquisition price indicates each contracted amount of the property in each purchase agreement or trust
beneficiary interest transfer agreement excluding related expenses (brokerage fee, taxes, etc.), rounding to themillion yen.

2) Other
Not applicable during the period.

(4) Transactions with interested parties and major shareholders
1) Transactions
Acquisition price or disposal amount
Acquisition price
Disposal amount
7,095 million yen– million yen
Acquisition price from interested parties
Disposal amount to interested parties
Total amountand major shareholders
and major shareholders
7,095 million yen– million yen
Breakdown for transactions with interested parties and major shareholders
Kowa Real Estate Co., Ltd.
2,390 million yen (100.0%)– million yen (–%)
KW Green First Y.K.
4,705 million yen (100.0%)
Total
7,095 million yen (100.0%)– million yen (–%)
Classification(Note)

Above transactions indicate transactions made with interested parties and major shareholders for the six months
ended December 31, 2010. “Interested parties” means the interested parties related to the asset managementcompany of JEI as prescribed in Section 26, Paragraph 1, Item 27 of the Regulations for Management Reports
Concerning Investment Trusts and Investment Corporations of the Investment Trusts Association, Japan. “Major
shareholders” means the major shareholders as defined in Section 29-4, Paragraph 2 of the Financial Instruments
and Exchange Act. “Interested parties” include “interested parties” as defined in Section 201 of the Investment
Trust Law as well as such juridical persons, etc. as in the case where the majority interest of them is owned by or
the majority of their officers come from said interested parties and major shareholders.

2) Amounts of fees paid and other expenses(Thousands of yen)Classification

Total amount paid(A)

Breakdown of transactions with interested parties
and major shareholders
Paid to

Property management costs andfees (Note 2)

Kowa Real Estate Co., Ltd.

353,666

34.9%

Sekisui House, Ltd.

45,236

4.5%

141,150 Kowa Real Estate Co., Ltd.

141,150100%

540,05246.8%

1,012,586

Property transaction brokerage
fees
Total

B/A

Amount paid (B)1,153,736(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 2010.
(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.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)
23

(5) Transactions with asset management companies concerning the additional
businesses of the asset management companies
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not run
any additional businesses classified in the type I financial instruments business, type II financial
instruments business, building lots and buildings transaction business, or real estate specified joint
enterprise and did not have applicable transactions.

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 of Income and Retained Earnings, Statements of Changes in Net Assets, Notes toFinancial Statements and Distribution 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 JEI
Not applicable during the period.

(2) Scheduled meetings
1) Unitholders’ meeting
Not applicable during the period.
2) Board of directors meeting
Outline of major contracts to be entered into or revised which were approved by the board of
directors of JEI during the six months ended December 31, 2010 is as follows:
Approval dateAugust 13, 2010

Approved agenda
Entrusting administrative duties concerninginvestment corporation bonds

Description
The board of directors appointed Mizuho Securities Co.,
Ltd. as a general administrator for subscription of
investment corporation bonds to be issued during theperiod from September 1, 2010 to December 31, 2010
and Mizuho Corporate Bank, Ltd. as a generaladministrator for acceptance of claims for exercising therights and other inquiries from creditors of the Investment
Corporation Bonds and other administrative duties
concerning investment corporation bonds during the
fiscal period.

(3) Other
Figures less than unit indicated in each statement have been rounded down for amounts androunded for ratio unless otherwise indicated in this Report.

Asset Management Report for 9th Period (Semi-Annual Report for 9th Period)24

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
December 31, 2010 and June 30, 2010
with Report of Independent Auditors

Japan Excellent, Inc.
Balance Sheets
As of December 31, 2010 and June 30, 2010
As of
As of
December 31,
June 30,
2010
2010(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust accounts (Notes 5 and 6) ¥ 13,151,936
Rental receivables
432,986
Other current assets
135,607
Total current assets
13,720,529
Property and equipment (Note 8):
Buildings and building improvements
3,364,688
Machinery and equipment
265
Furniture and fixtures
662
Construction in progress
13,404
Buildings and building improvements for trust accounts
66,005,514
Machinery and equipment for trust accounts
414,193
Furniture and fixtures for trust accounts
70,485Land for trust accounts
114,629,601
Less: accumulated depreciation(8,009,258)
Net property and equipment
176,489,554
Investments and other assets:
Leasehold rights
1,185,045
Leasehold rights for trust accounts
7,380,017
Security deposits
15,182Long-term prepaid expenses
262,394
Investment corporation bond issuance costs
70,862Other assets
63,066
Total investments and other assets
8,976,566
Total assets¥ 199,186,649
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
Derivative liabilities
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: 154,550 units as ofDecember 31, 2010 and June 30, 2010
Retained earnings
Total unitholders’ equity
Valuation and translation adjustments:
Unrealized loss on deferred hedge transactions (Note 6)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets¥

584,349
4,900,000
34,500,000
356,104
4,816
28,770252,234
40,626,273

As ofDecember 31,
2010(U.S. dollars)(Note 2)

¥ 15,149,859
464,133
103,828
15,717,820$ 161,492,336
5,316,633
1,665,111
168,474,080

3,325,628–
662
13,83964,567,292
413,595
60,948
108,503,144(7,016,054)
169,869,054

41,314,936
3,255
8,124
164,584
810,480,282
5,085,863
865,484
1,407,534,399(98,345,504)
2,167,111,423

1,185,045
7,380,017
15,181
404,493
80,70858,609
9,124,053¥ 194,710,927

14,551,140
90,619,066
186,415
3,221,938
870,108774,393
110,223,060$ 2,445,808,563¥$

467,463–
27,500,000
333,222
61,51660,222
243,823
28,666,246

7,175,205
60,166,994
423,624,754
4,372,590
59,139353,272
3,097,170
498,849,124

17,000,000
44,000,000
428,246
7,859,538
69,287,784
109,914,057

17,000,000
51,000,000
442,205
8,212,705
76,654,910
105,321,156

208,742,633
540,275,049
5,258,427
96,507,095
850,783,204
1,349,632,328

87,083,030
2,218,333
89,301,363

87,083,030
2,366,963
89,449,993

1,069,290,643
27,238,864
1,096,529,507(28,771)(28,771)
89,272,592¥ 199,186,649(60,222)(60,222)
89,389,771¥ 194,710,927(353,272)(353,272)
1,096,176,235$ 2,445,808,563

27

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from July 1, 2010 to December 31, 2010
and from January 1, 2010 to June 30, 2010

For the period
For the period
from July 1,
from January 1,
2010 to2010 toDecember 31,
June 30,
2010
2010(Thousands of yen)

For the period
from July 1,2010 toDecember 31,
2010(U.S. dollars)(Note 2)

Revenues:
Rental revenues (Note 14)
Other (Note 14)
Total revenues¥6,506,591
587,425
7,094,016¥6,746,130
556,0447,302,174$79,894,291
7,212,979
87,107,270

Operating expenses:
Property operating expenses (Note 14)
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income

3,494,167
416,479
14,93029,5986,540
78,763
4,040,477
3,053,539

3,516,170
414,743
14,953
28,6196,540
69,141
4,050,166
3,252,008

42,904,800
5,113,940
183,322
363,432
80,305967,132
49,612,931
37,494,339

2,907
–
1,019

3,490
19,141
2,333

35,699–12,517546,315
157,256
124,541

635,048
196,694
55,3706,708,191
1,930,948
1,529,236

9,846
128
2,219,379

5,192
16,8042,367,864

120,902
1,575
27,251,703

1,081
(5)
2,218,303
30¥2,218,333

969
2
2,366,893
70¥2,366,963

13,270(67)
27,238,500
363$27,238,863

Other income:Interest income
Penalty income
Other
Other expenses:
Interest expense
Loan arrangement fees
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Income before income taxes
Income taxes (Note 13):
Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

The accompanying notes are an integral part of these financial statements.
28

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from July 1, 2010 to December 31, 2010
and from January 1, 2010 to June 30, 2010

Number ofunits inissue
Balance as of December 31,
2009
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Changes in unrealized loss ondeferred hedge transactions
Total changes during the fiscal
periodBalance as of June 30, 2010

¥87,083,030¥ 2,486,006¥89,569,036¥(118,503)¥(118,503)¥89,450,533

–
–

–
–

(2,485,936)
2,366,893(2,485,936)
2,366,893

–
–

–
–

(2,485,936)
2,366,893

–

–

–

–

58,28158,28158,281–
154,550–¥87,083,030(119,043)¥ 2,366,963(119,043)¥89,449,993

58,281¥ (60,222)

58,281¥ (60,222)(60,762)¥89,389,771

For the period from July 1, 2010 to December 31, 2010
Net assets
Valuation and translation
Unitholders’ equity
adjustments
Unrealized
loss on
Total
Total
deferredvaluation andUnitholders’
Retained
unitholders’hedgetranslation
capitalearnings
equitytransactions
adjustments(Thousands of yen)Total
net assets

154,550¥87,083,030¥ 2,366,963¥89,449,993¥(60,222)¥(60,222)¥89,389,771

–
–

–
–

(2,366,933)
2,218,303(2,366,933)
2,218,303

–
–

–
–

(2,366,933)
2,218,303

–

–

–

–

31,451

31,451

31,451––(148,630)(148,630)

31,451

31,451(117,179)

154,550¥87,083,030¥ 2,218,333¥89,301,363¥(28,771)¥(28,771)¥89,272,592

Number ofunits inissue
Balance as of June 30, 2010
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Changes in unrealized loss ondeferred hedge transactions
Total changes during the fiscal
periodBalance as of December 31,
2010

Total
net assets

154,550

Number ofunits inissue
Balance as of June 30, 2010
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Changes in unrealized loss ondeferred hedge transactions
Total changes during the fiscal
periodBalance as of December 31,
2010

For the period from January 1, 2010 to June 30, 2010
Net assets
Valuation and translation
Unitholders’ equity
adjustments
Unrealized
loss on
Total
Total
deferredvaluation andUnitholders’
Retained
unitholders’hedgetranslation
capitalearnings
equitytransactions adjustments(Thousands of yen)

For the period from July 1, 2010 to December 31, 2010
Net assets
Valuation and translation
Unitholders’ equity
adjustments
Unrealized
loss on
Total
Total
deferredvaluation andUnitholders’
Retained
unitholders’hedgetranslation
capitalearnings
equitytransactions adjustments(U.S. dollars) (Note 2)

Total
net assets

154,550$1,069,290,643$ 29,063,885$1,098,354,528$(739,460)$(739,460)$1,097,615,068

–
–

–
–

(29,063,522)
27,238,501(29,063,522)
27,238,501

–
–

–
–

(29,063,522)
27,238,501

–

–

–

–

386,188386,188386,188––(1,825,021)(1,825,021)

386,188386,188(1,438,833)

154,550$1,069,290,643$ 27,238,864$1,096,529,507$(353,272)$(353,272)$1,096,176,235

The accompanying notes are an integral part of these financial statements.
29

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from July 1, 2010 to December 31, 2010
and from January 1, 2010 to June 30, 2010

For the period For the period For the period
from July 1, from January 1, from July 1,2010 to2010 to2010 toDecember 31,
June 30,
December 31,
2010
2010
2010
(Thousands of yen)
(U.S. dollars)(Note 2)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Interest income
Interest expense
Gain on liquidation of investment in securities
Decrease (increase) in rental receivables(Increase) decrease in prepaid expenses(Decrease) increase in accounts payable – trade
Decrease in accounts payable – other
Decrease in unpaid consumption taxes
Increase (decrease) in advances received
Decrease in long-term prepaid expenses
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 2,219,379
993,261
9,846(2,907)
670,856–
31,147(26,490)(36,115)(1,918)(56,700)
3,724
142,098
7,002
3,953,183
2,907(666,192)(1,111)
3,288,787¥ 2,367,864
992,611
5,192(3,490)690,418(123)(6,416)
79,3883,301(15,984)(32,762)(701)
64,364(38,564)
4,105,098
3,490(647,221)(2,814)
3,458,553$ 27,251,703
12,196,230
120,902(35,699)
8,237,427–
382,447(325,267)(443,459)(23,552)(696,219)
45,7301,744,821
85,981
48,541,045
35,699(8,180,154)(13,649)
40,382,941

Cash flows from investing activities
Proceeds from liquidation of investment in 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–(9,935)(7,443,973)
2,030(15,988)502,489(855,657)(7,821,034)

10,891(70,557)(199,441)
10,385(17,085)
190,590(351,395)(426,612)–(121,988)(91,404,385)
24,919(196,315)
6,170,057(10,506,595)(96,034,307)

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
Proceeds from issuance of investment corporation bonds
Payments for investment corporation bond issuance costs
Distributions to unitholders
Net cash provided by (used in) financing activities

4,900,000–
6,000,000(6,000,000)––(2,365,676)
2,534,324–(12,000,000)
8,000,000(13,000,000)
17,000,000(85,900)(2,487,342)(2,573,242)

60,166,994–
73,673,870(73,673,870)––(29,048,088)
31,118,906(1,997,923)
15,149,859¥ 13,151,936

458,699
14,691,160¥ 15,149,859(24,532,460)
186,024,796$ 161,492,336

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

The accompanying notes are an integral part of these financial statements.
30

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from July 1, 2010 to December 31, 2010
and from January 1, 2010 to June 30, 2010

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 Kowa Real Estate Co., Ltd., 20% by The
Dai-ichi Life Insurance Company, Limited, 15% by Sekisui House, Ltd. and 20% by othercorporations.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of December 31, 2010,
JEI held 19 properties with 228,177 square meters of total leasable space and had leases with108 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 ¥81.44 = U.S.$1.00, the foreign exchange rate prevailing on December 31, 2010,
has been 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.

31

3. Summary of Significant Accounting Policies
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks, a negotiablecertificate of deposit and short-term investments which are highly liquid, readily convertible
into cash with an insignificant risk of price fluctuation and with an original maturity of threemonths or less.
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 – 59 years
2 – 59 years
7 – 16 years
4 – 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 andliabilities 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.
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. The capitalized amount forthe period from July 1, 2010 to December 31, 2010 was ¥3,012 thousand ($36,981). No
property-related taxes were capitalized for the period from January 1, 2010 to June 30, 2010.

32

3. Summary of Significant Accounting Policies (continued)
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.
JEI deferred recognition of gains or losses resulting from changes in the fair value ofinterest-rate swap agreements because its interest-rate agreements met the criteria for deferredhedge accounting.
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.

Changes in Accounting Policies

New accounting standard for asset retirement obligations
Effective July 1, 2010, the Company adopted the Accounting Standard for Asset Retirement
Obligations (The Accounting Standards Board of Japan (hereinafter referred to as the ASBJ)
Statement No. 18, March 31, 2008) and the Guidance on Accounting Standard for Asset
Retirement Obligations (ASBJ Guidance No. 21, March 31, 2008). This change had
no effect on the Company’s revenues and expenses for the period ended December 31, 2010.

5. 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,
2010 and June 30, 2010 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,
2010
2010(Thousands of yen)

As ofDecember 31,
2010(U.S. dollars)¥ 2,290,294
10,861,642¥ 3,742,691
11,407,168$ 28,122,466
133,369,870¥13,151,936¥15,149,859$161,492,336

33

6.

Financial Instruments

For the periods from July 1, 2010 to December 31, 2010 and from January 1, 2010 toJune 30, 2010
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, matterssuch as seeking longer durations and maturities, securing fixed interest rates anddiversifying 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 in deposits. Derivative transactions are used solely for the purpose of hedging
against the risk 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 withcounterparties that are financial institutions having a high credit rating. For hedging
accounting methods, hedging instruments, hedged items, hedging policies andmethods for evaluation the effectiveness of hedging activities, see “Derivatives andhedge accounting” under Summary of Significant Accounting Policies.
(b) Liquidity Risk (the risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. Thisrisk is reduced by diversifying maturity dates and funding sources, and liquidity risk
is managed through the constant management 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.
Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.

34

6.

Financial Instruments (continued)

Fair Value of Financial Instruments
The following are carrying values and fair values as of December 31, 2010 and June 30, 2010of 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, 2010
Carrying value(1) Cash and cash
deposits(2) Cash in trust anddeposits in trust
Total assets(3) Short-term loans(4) Long-term debt due
within one year(5) Investment
corporation bonds(6) Long-term debt
Total liabilities(7) Derivativetransactions *Fair value

As of June 30, 2010

Difference
Carrying value(Thousands of yen)

As of December 31, 2010

Fair value

Difference

Carrying value

Fair value(U.S. dollars)

Difference¥–¥ 3,742,691¥ 3,742,691

¥

–

$

28,122,466$

28,122,466$–

10,861,642¥ 13,151,936

10,861,642¥ 13,151,936¥––

11,407,168¥ 15,149,859

11,407,168¥ 15,149,859

¥

–
–

$

133,369,870
161,492,336$

133,369,870
161,492,336

$

–
–

¥

¥

¥

–

¥

–

¥

–

$

60,166,994$

60,166,994$¥

2,290,294

4,900,000¥

2,290,294

4,900,000–¥–

34,500,000

34,513,981

13,981

27,500,000

27,525,604

25,604

423,624,754

423,796,422

171,668

17,000,000
44,000,000¥ 100,400,000

17,198,200
44,388,284¥ 101,000,465

198,200
388,284¥ 600,465

17,000,000
51,000,000¥ 95,500,000

17,096,300
51,417,729¥ 96,039,634

96,300417,729¥ 539,634

208,742,633
540,275,049$ 1,232,809,430

211,176,326
545,042,783$ 1,240,182,525

2,433,693
4,767,734$ 7,373,095

¥

¥

¥

¥

¥

¥

(28,771)(28,771)–(60,222)(60,222)–$(353,272) $(353,272)–$* The value of assets and liabilities arising from derivatives is shown at net value, with theamount in parentheses 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.
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.
The fair value of long-term fixed-rate debt is calculated by discounting the combined
value of principal and interest of the applicable long-term debt by a reasonable rate
assuming the same amount were to be borrowed 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 16, “Derivative Transactions”.
35

6.

Financial Instruments (continued)(Note 2)Financial instruments for which fair value is deemed extremely difficult to determine
As ofDecember 31,
As of
2010
June 30, 2010
(Thousands of yen)

As ofDecember 31,
2010(U.S. dollars)¥ 428,246¥ 442,205$ 5,258,427¥7,859,538¥8,212,705$96,507,095(1) Security deposits from tenants *(2) Security deposits from tenants fortrust accounts ** Security deposits from tenants and security deposits from tenants for trust accounts inleased properties are not subject to fair value disclosure because such deposits have nomarket price. Moreover, it is difficult to calculate the actual period of time on
deposit, namely, from the time the tenant moves in until the time the tenant vacates,
and it is extremely difficult to rationally estimate cash flow.
(Note 3)
Planned redemption amounts after settlement date of financial assets
1 year or less
Cash and cash
deposits
Cash in trust anddeposits in trust
Total

4 to 5 years

Over 5 years

¥

–

¥

–

¥

–

¥

–

¥

–

10,861,642¥13,151,936

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

1 to 2 years

As of December 31, 2010
2 to 3 years
3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$28,122,466

$

–

$

–

$

–

$

–

$

–

133,369,870$161,492,336

$

–
–

$

–
–

$

–
–

$

–
–

$

–
–

1 year or less
Cash and cash
deposits
Cash in trust anddeposits in trust
Total

As of December 31, 2010
2 to 3 years
3 to 4 years(Thousands of yen)

¥ 2,290,294

1 year or less
Cash and cash
deposits
Cash in trust anddeposits in trust
Total

1 to 2 years¥ 3,742,691
11,407,168¥15,149,859

1 to 2 years

¥

–

¥

–
–

As of June 30, 2010
2 to 3 years
3 to 4 years(Thousands of yen)
¥

–

¥

–
–

¥

–

¥

–
–

4 to 5 years

¥

–

¥

–
–

Over 5 years

¥

–

¥

–
–

36

6.

Financial Instruments (continued)(Note 4)
Planned redemption amounts after settlement date of borrowings, investment corporation
bonds and other interest-bearing debt

Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

7.

1 year or less

1 to 2 years¥ 4,900,000¥

As of December 31, 2010
2 to 3 years
3 to 4 years(Thousands of yen)

–

¥

–

¥

4 to 5 years–¥

Over 5 years

–

–

¥

34,500,000

–

–

–

–

–

–
–
¥ 39,400,000–
14,000,000¥ 14,000,000–
15,000,000¥ 15,000,000

12,000,000
4,000,000¥ 16,000,000

5,000,000
5,000,000¥ 10,000,000–
6,000,000¥ 6,000,000

1 year or less

1 to 2 years

As of December 31, 2010
2 to 3 years
3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$ 60,166,994

–

$

–

$

–

$

–

$

–

$

423,624,754

–

–

–

–

–

–
–
$ 483,791,748–
171,905,697$ 171,905,697–
184,184,676$ 184,184,676

147,347,741
49,115,914$ 196,463,655

61,394,892
61,394,892$ 122,789,784–
73,673,870$ 73,673,870

1 year or less

1 to 2 years

As of June 30, 2010
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

27,500,000

–

–

–

–

–

–
–
¥ 27,500,000–
13,000,000¥ 13,000,000–
21,000,000¥ 21,000,000

12,000,000
8,000,000¥ 20,000,000

5,000,000
9,000,000¥ 14,000,000

–
–
–

¥

Investment and Rental Property

For the periods from July 1, 2010 to December 31, 2010 and from January 1, 2010 toJune 30, 2010
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, 2010 and June 30, 2010, for such real estate for lease.
Carrying value
As ofJune 30,2010¥178,434,116

As of
ChangeDecember 31,
during period
2010(Thousands of yen)
¥6,620,500¥185,054,616

Fair value
As ofDecember 31,
2010¥173,780,000377.

Investment and Rental Property (continued)
Carrying value
As ofJune 30,
2010

Fair value
As ofDecember 31,
2010

As of
ChangeDecember 31,
during period
2010(U.S. dollars)$2,190,988,653$81,292,976$2,272,281,629$2,133,840,864

Carrying value
As ofDecember 31,
2009

Fair value
As ofJune 30,
2010

As of
ChangeJune 30,
during period
2010(Thousands of yen)

¥179,165,422¥(731,306)¥178,434,116¥173,858,000(Note 1)
Carrying value represents the acquisition cost less accumulated depreciation.
(Note 2)
Changes during period comprise an increase of ¥2,414,453 thousand ($29,647,015) related tothe acquisition of No. 32 Kowa Building and an increase of ¥4,864,128 thousand($59,726,518) related to the acquisition of Kowa Shirokanedai Building and a decrease of¥993,204 thousand ($12,195,530) for depreciation costs.
(Note 3)
Fair value as of December 31, 2010 and June 30, 2010 is appraisal value provided bythird-party real estate appraisers.

8. Property and Equipment
Property and equipment at December 31, 2010 and June 30, 2010 consisted of the following:
As of December 31, 2010
As of June 30, 2010
Acquisition
Accumulated
Net
Acquisition
AccumulatedNet
cost
depreciation
book value
cost
depreciation
book value(Thousands of yen)
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 fortrust accounts
Land for trust accounts
Construction in progress fortrust accounts
Total

¥

3,364,688
265
662
13,404¥ (342,259)
(12)
(199)
–

66,005,514(7,531,240)

414,193
70,485
114,629,601–¥184,498,812¥

3,022,429
253
463
13,404¥

3,325,628–
662
13,839¥ (302,949)
–
(155)
–

58,474,274

64,567,292(6,596,182)(118,031)

296,162

413,595(17,517)–52,968
114,629,601

60,948
108,503,144–¥(8,009,258)–¥176,489,554–¥176,885,108¥

3,022,679–
507
13,839As of December 31, 2010
Accumulated
Net
Acquisition costdepreciation
book value(U.S. dollars)$

41,314,936
3,255
8,124
164,584$ (4,202,591)(147)(2,441)–$

37,112,345
3,108
5,683
164,584

57,971,110

810,480,282(92,475,936)

718,004,346(104,028)

309,567

5,085,863(1,449,295)

3,636,568(12,740)–

48,208
108,503,144

865,484
1,407,534,399(215,094)–

650,390
1,407,534,399–¥(7,016,054)–¥169,869,054–$2,265,456,927–$(98,345,504)–$2,167,111,423

38

9. Short-Term Loans and Long-Term Debt
Short-term loans and long-term debt as of December 31, 2010 and June 30, 2010 consisted of
the following:

Short-term loans:
Unsecured loans from banks
due on March 24, 2011
SubtotalLong-term debt due within
one year:
Unsecured loans from banks
due on June 29, 2011
Unsecured loans from aninsurance company due on
June 29, 2011
Unsecured loans from banks
due on June 29, 2011
Unsecured loans from banks
due on November 29, 2011
SubtotalLong-term debt:
Unsecured loans from banks
due on November 29, 2011
Unsecured loans from banks
due on July 31, 2012
Unsecured loans from banks
and insurance companies
due on July 31, 2012
Unsecured loans from banks
due on June 28, 2013
Unsecured loans from banks
due on December 27, 2013
Unsecured loans from aninsurance company due on
July 31, 2014
Unsecured loans from abank due on July 31, 2014
Unsecured loans from aninsurance company and abank due on June 30, 2015
Unsecured loans from abank due on November 30,
2017
Subtotal
Total

As of
December 31,
2010

As of December 31, 2010
WeightedaverageAmountinterest rate
(Thousands of
yen)

As of June 30, 2010
WeightedaverageAmountinterest rate
(Thousands ofyen)¥ 4,900,000
4,900,000

0.780000%¥

9,500,000

1.43470%

9,500,000

1.45181%

116,650,294

3,000,000

1.96625%

3,000,000

1.96625%

36,836,935

15,000,000

0.94000%

15,000,000

1.00308%

184,184,676

7,000,000
34,500,000

1.34000%–
27,500,000

–

–

–
–

–

–

Amount(U.S. dollars)$

60,166,994
60,166,994

85,952,849
423,624,754

13,000,000

1.39000%–

7,000,000

0.69000%

7,000,000

0.75308%

85,952,849

7,000,000

1.96907%7,000,000

1.96907%85,952,849

7,000,000

1.04000%

7,000,000

1.10308%

85,952,849

8,000,000

1.09000%

8,000,000

1.14134%

98,231,826

2,000,000

2.25875%

2,000,000

2.25875%

24,557,957

2,000,000

2.28417%2,000,000

2.28417%

24,557,957

5,000,000

2.27344%5,000,000

2.27344%

61,394,892

6,000,000
44,000,000¥ 83,400,000

1.73875%–
51,000,000¥ 78,500,000–

73,673,870
540,275,049$ 1,024,066,797

39

10. Investment Corporation Bonds
Details of total investment corporation bonds outstanding as of December 31, 2010 and June30, 2010 are summarized as follows:

As of December 31, 2010
As of June 30, 2010
WeightedWeightedaverage
averageAmountinterest rate
Amountinterest rate
(Thousands of(Thousands of
yen)
yen)
Unsecured bond due on
March 11, 2014
Unsecured bond due on
June 26, 2015
Total

As of
December 31,
2010

Amount(U.S. dollars)¥12,000,000

1.52000%¥12,000,000

1.52000%$147,347,741

5,000,000¥17,000,000

1.29000%

5,000,000¥17,000,000

1.29000%

61,394,892$208,742,633

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 ¥577,629 ($7,093) as of December 31, 2010 and ¥578,387 as of June30, 2010. Net income per unit was ¥14,353 ($176) for the period from July 1, 2010 to
December 31, 2010 and ¥15,315 for the period from January 1, 2010 to June 30, 2010 and
was computed based on the weighted-average number of units outstanding during therespective periods.

40

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,
2010 and June 30, 2010 are summarized as follows:
As of
As of
December 31,
June 30,
2010
2010(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Unrealized loss on deferred hedgetransactions
Gross deferred tax assets
Valuation reserve
Total deferred tax assets
Net deferred tax assets¥

23

11,316
11,339(11,316)
23
¥
23

¥

18

23,68523,703(23,685)
18
¥
18

As of
December 31,
2010(U.S. dollars)$

285

138,942
139,227(138,942)
285
$
285

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from July 1, 2010 to December 31, 2010 and from January 1, 2010 to June 30,2010 is as follows:

Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

For the period from
July 1, 2010 to
December 31, 2010

For the period fromJanuary 1, 2010 toJune 30, 201039.33%

39.33%(39.31)0.03
0.05%(39.31)
0.02
0.04%

41

14. Breakdown of Property Rental Business Revenues and Expenses
For the period
For the period
from July 1,
from January 1,
2010 to2010 toDecember 31,
June 30,
2010
2010(Thousands of yen)
Rental business revenues:
Rental revenues
Other
Total rental businessrevenues
Property operating expenses:
Property management costs andfees
Utilities
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating
expensesProfit

For the period
from July 1,2010 toDecember 31,
2010(U.S. dollars)¥6,506,591
587,425¥6,746,130
556,044$79,894,291
7,212,979

7,094,016

7,302,174

87,107,270

1,005,851
649,690550,005
20,633
108,223
993,204
166,561

1,082,750
582,516
540,657
21,087130,898
992,554
165,708

12,350,826
7,977,525
6,753,497
253,353
1,328,866
12,195,530
2,045,203

3,494,167¥3,599,849

3,516,170¥3,786,004

42,904,800$44,202,470

15. Leases
JEI leases properties on which rental revenues are earned. At December 31, 2010 and June30, 2010, future lease revenues under non-cancelable operating leases are summarized asfollows:
As of
As of
As of
December 31,
June 30,
December 31,
2010
2010
2010
(Thousands of yen)
(U.S. dollars)
Due within one year
Due after one year
Total

¥652,359
8,226¥ 660,585¥1,032,650
202,840¥1,235,490$8,010,302
101,012$8,111,314

42

16. Derivative Transactions
Derivative Transactions as of December 31, 2010
(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 the settlement date for each hedge accounting method applied.
Contract amountHedge
accounting
methodType of derivativetransaction

Hedgeditem

More than
one year

Fair value

Method ofcalculating
the fairvalue

Contract amountMore than
one year(Thousands of yen)
Principal
methodInterest rate swap
Long-term
Receive floating, pay fixed debt–

¥6,250,000¥(28,771)

Fair value

Method ofcalculating
the fairvalue(U.S. dollars)*$76,743,615–$(353,272)** Calculated based on prices provided by counterparty financial institutions.
Derivative Transactions as of June 30, 2010
(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 the settlement date for each hedge accounting method applied.
Hedge accounting
methodType of derivativetransaction

Hedged item

Principal method

Interest rate swap
Receive floating, pay fixedLong-term debt

Contract amount
Fair value
More than
one year(Thousands of yen)
¥6,250,000–¥(60,222)

Method ofcalculating
the fair value** Calculated based on prices provided by counterparty financial institutions.

43

17. Related Party Transactions
For the period from July 1, 2010 to December 31, 2010
(1) Major unitholders
Not applicable.
(2) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

Amount(Thousands of(U.S. dollars)yen)¥416,479$5,113,940

Account
Accounts
payableBalance at the end of period(Thousands of(U.S. dollars)yen)¥253,078$3,107,545

For the period from January 1, 2010 to June 30, 2010
(1) Major unitholders
Not applicable.
(2) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

Amount(Thousands of(U.S. dollars)yen)¥414,743$4,685,833

Account
Accounts
payableBalance at the end of period(Thousands of(U.S. dollars)yen)¥254,787$2,878,624

18. Segment Information
For the period from July 1, 2010 to December 31, 2010
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.

4418. Segment Information (continued)
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.
(Additional information)
Effective July 1, 2010, JEI adopted the Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information (ASBJ Statement No. 17, March 27, 2009) and
Guidance on Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information (ASBJ Guidance No. 20, March 21, 2008).

19. 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
unappropriated retained 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 ¥2,218,256,150($27,237,919), the maximum integral multiple of the 154,550 units issued not exceeding
unappropriated retained earnings at December 31, 2010. No cash distribution exceeding theincome amount set forth in Section 33.1.4 of the bylaws of JEI shall be made.
On February 14, 2011, the Board of Directors approved a resolution to make a cash
distribution of ¥14,353 ($176) per unit aggregating to ¥2,218,256,150 ($27,237,919) tounitholders of record as of December 31, 2010.

45

20. Significant Subsequent Events(1) Issuance of new units
On January 13, 2011 and January 24, 2011, the Board of Directors approved a resolution
to complete a public offering of new uits as outlined below. JEI received payment on
January 31, 2011 and February 28, 2011 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 ¥102,052 million ($1,253,099 thousand) with 188,650
units in issue at February 28, 2011.
A. Issuance of new units through 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
31,000 units¥454,930 ($5,586) per unit
¥14,103 million ($173,168 thousand)¥438,984 ($5,390)¥13,609 million ($167,099 thousand)January 31, 2011

B. Issuance of new units through allocation to a third party
(i)
(ii)
(iii)
(iv)
(v)
(vi)

Method of issuance
Number of units issued
Proceeds per unit
Aggregate proceeds
Payment date
Allottee

Allocation to a third party
3,100 units¥438,984 ($5,390) per unit
¥1,361 million ($16,710 thousand)February 28, 2011
Mizuho Securities Co., Ltd.

(2) Acquisition of property
The following property was acquired.
1.
2.
3.
4.
5.
6.
7.

Type of asset acquired
Asset
Location
Acquisition priceContract date
Delivery dateSellerTrust Property
Daiba Garden City Building
2-3-5, Daiba, Minato-ku, Tokyo¥11,000 million ($135,069 thousand) (Note)
January 13, 2011
February 4, 2011
Sekisui House, Ltd.

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

46

20. Significant Subsequent Events (continued)(3) Disposition of property
The following property was transferred.
1.
2.
3.
4.
5.
6.
7.

Type of asset sold
Asset
Location
Disposal priceContract date
Delivery date
Purchaser

Trust Property
No. 36 Kowa Building
5-19, Sanbancho, Chiyoda -ku, Tokyo¥4,300 million ($52,800 thousand) (Note)
January 13, 2011
February 4, 2011
Kowa Real Estate Co., Ltd.

(Note) Transfer value does not include fees related to the transfer, adequate JEI share of
the applicable real estate tax and city planning tax, and consumption tax.
(4) Early repayment of loans
On February 16, 2011, the Executive Director resolved to repay the following outstanding
short-term loans on February 24, 2011 prior to their due date:1.
2.

Total amount of loans
Lender3.

Interest rate

4.
5.

Start of the loan period
Original due date

¥4,900 million ($60,167 thousand)
Mitsubishi UFJ Trust and Banking Corporation
Mizuho Corporate Bank, Ltd.
0.78%
(from January 24, 2011 through February 24, 2011)
December 24, 2010
March 24, 201147