Keep Growing

JAPAN REAL ESTATE INVESTMENT CORPORATIONMARCH 2003 SEMIANNUAL REPORTFor the period from October 1, 2002 to March 31, 2003

Profile

Japan Real Estate Investment Corporation (the “Company”) was incorporated on May 11, 2001 as one of the first real estate investment corporations in Japan. The Company invests primarily in office buildings, seeking stable growth and dividends in the medium to long term through highquality, competitive properties with geographical diversity. We endeavor to take full advantage of the potential inherent in Japanese real estate
investment trusts and corporations, or J-REITs, dedicating our resources toward enhancing profitability and ensuring stability. The Company was listed on the Tokyo Stock Exchange (“TSE”) on September 10, 2001. (Securities Code: 8952)

Note: Investment corporations, including Japan Real Estate Investment Corporation, are special legal entities incorporated and operated under the Investment Trust Law. Accordingly,
the “shares” of such investment corporations, including the shares of the Company, are governed by the Investment Trust Law and represent the equity interests in such investment corporations, which may differ in certain material respects from the “shares” governed by the Commercial Code of Japan and representing the equity interests in Japaneseordinary corporations incorporated and operated under the Commercial Code of Japan. Investors and readers are specifically reminded to pay attention to such differences whenreviewing this semiannual report and making any investment decision on or in respect of the “shares” of the Company. “Shareholders” of the Company may be construed
accordingly. See “About J-REIT System” (pages 40-42) for more details. Each of the investors and readers should consult their own legal, tax and other advisors regarding all
Japanese legal, tax and other consequences of an investment in the shares of the Company, with specific reference to their own legal, tax and other situation and any recentchanges in applicable laws, guidelines or their interpretation.

The Strengths of Japan Real Estate Investment Corporation• Portfolio of 30 high quality office buildings as of March 31, 2003 (including three properties acquired since September 30, 2002)• Steady growth — Total asset value doubled in one and a half years, from 20 buildings valued at ¥92.8 billion to 30 buildings valued at¥183.5 billion (as of March 31, 2003)• Superior geographic and tenant diversity, with a 94.4% occupancy rate (as of March 31, 2003)• Solid backing from Mitsubishi Estate Co., Ltd.; The Tokio Marine and Fire Insurance Co., Ltd.; The Dai-ichi Mutual Life Insurance Company;
and Mitsui & Co., Ltd.
• Highest issuer credit ratings of any office REIT in the world: A+ from Standard & Poor's and A2 from Moody’s Investors Service• Praise from investors — Awarded “Deal of the Year” 4th prize in Equity Finance by the “Nikkei Bonds and Financial Weekly” during 2002,
following 3rd place in 2001.
• Healthy financial strategy that supports strong growth through additional issues of shares and bonds

Contents
FINANCIAL HIGHLIGHTSSTOCK PRICE PERFORMANCEPORTFOLIO HIGHLIGHTSTO OUR SHAREHOLDERS
THE PORTFOLIO OF JAPAN REAL ESTATE INVESTMENT CORPORATIONOVERVIEW OF PORTFOLIO PROPERTIES

p.01
p.01
p.02
p.03

THE COMPANY'S INVESTMENT POLICIESPROFILE OF J-REA

p.16
p.24
p.40
p.43

p.08
p.11

CORPORATE DATA

p.44

FINANCIAL SECTIONABOUT J-REIT SYSTEM

Finacial Highlights
For the period from October 1, 2002 to March 31, 2003 and the period from April 1, 2002 to September 30, 2002 and the period from May 11, 2001 to March 31, 2002

Millions of yen

For the period from
October 1, 2002 to
March 31, 2003

Thousands of U.S. dollars (Note 1)

For the period from
April 1, 2002 to
September 30, 2002

For the period fromMay 11, 2001 to
March 31, 2002

For the period from
October 1, 2002 to
March 31, 2003

Operating Revenues

8,500

7,910

6,492

70,722

Operating Profits

3,687

3,386

2,961

30,682

Income before Income taxes

3,259

2,898

2,405

27,114Net Income

3,258

2,897

2,403

27,106Net Operating Income (NOI) (Note 2)

5,702

5,211

4,732

47,438Funds from operations (FFO) (Note 3)

4,568

4,091

3,505

38,003

FFO Multiple (note4)

14.6 times

14.1 times

13.5 times

Cash Distribution

3,258

2,897

2,403

27,106

14.6 times

Number of shares

225,400

225,400

160,400

225,400

Dividend per share (Yen/U.S.dollars)

14,455

12,853

14,983120

Notes:1. Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥120.20 = US$1.00, the foreign exchange rate on March 31, 2003, has been used fortranslation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S. dollars at that rate or any other rate.
2. NOI = (Property-Related Revenues – Property-Related Expenses) + Depreciation
3. FFO = Net Income – gains (losses) from sales of specified assets + Depreciation
4. FFO Multiple = Share Price at end of the respective term ÷ FFO per share (annualized)(Annualized portion of the calculation given in note 4 assumes a fiscal period of 203 days for the period ended March 31, 2002, 183 days for the period ended September 30, 2002 and 182
days for the period ended March 31, 2003.)

Stock price performance
2001

2002

2003

120.0%
115.0%
110.0%
105.0%
100.0%
95.0%
90.0%
85.0%
80.0%
75.0%
70.0%
65.0%
Sept

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Jan

Feb

Mar

The Company's stock price on TSETOPIXThe Company's PO priceNote: Based on the weekly closing price01

Portfolio Highlights

TRENDS IN THE STATE OF PORTFOLIO MANAGEMENT
Number of
Buildings

Total numberof tenants(Note 1)

Total leasable
floor space

Occupancy
rate

20

198

133,927m2

94.6%

2

93.9%

September 2001
October 2001

20

197

136,381m

November 2001

21

248

164,883m2

94.7%

2

93.8%

December 2001

22

266

171,734m

January 2002

23

269

178,698m2

94.1%

325

201,934m

2

94.0%

2

94.0%

February 2002

24

March 2002

24

328

201,884m

April 2002

24

326

201,580m2

93.3%

329

207,914m

2

93.6%

2

94.4%

25

May 2002
June 2002

25

334

207,914m

July 2002

26

333

212,194m2

94.3%

2

95.2%
95.3%

August 2002

27

340

215,928m

September 2002

27

339

215,928m2

340

220,720m

2

2

95.5%

28

October 2002

120,000•

140,000•

160,000•

180,000•

200,000•

220,000 Total leasable•
floor space(m 2 )Total leasable floor space
Occupancy rate

94.8%
(Note 2)

November 2002

29

347

223,771m

December 2002

29

345

223,771m2

95.3%

348

223,771m

2

95.2%

2

95.6%
94.4%

29

January 2003
February 2003

29

351

223,771m

March 2003

30

359

236,693m2

•
60.0

•
65.0

•
70.0

•
75.0

•
80.0

•
85.0

•
90.0

•
95.0

Occupacyrate(%)

Notes:1. In the event that the same tenant occupies several buildings, the tenant is calculated as one tenant in the total number of tenants.
2. Occupancy rate of “Genki Medical Plaza” is not considered in the calculation of October 2002, because the property was acquired at the end of that month, and its rent contracts started
at the begining of November 2002.

PORTFOLIO BREAKDOWN
Properties by geographic region

Tenants by industry type

(Percentage based on acquisition price)(All 359 tenants, based on leased floor space)

Other major cities(27.4%)
Tokyo 23 wards(67.7%)

Temporary staff agency(1.9%)
Machinery(2.3%)
Nonferrous metals and metal products(2.3%)
Ceramics
Others
(2.5%)(8.9%)
Transport services/ Travel(3.0%)
Construction(3.0%)
Communications(3.7%)

Real estate(4.6%)
Pharmaceuticals(5.0%)

02

Serviceindustries(14.4%)

Information
services
Electric (13.7%)
devices(9.0%)

Retail and restaurants(3.8%)

Tokyo metropolitan area,
excluding 23 wards(4.9%)

Finance,insurance(16.1%)

Textiles(5.8%)To Our Shareholders
The third period, from October 1, 2002 to March 31, 2003, was a challenging time for Japan
Real Estate Investment Corporation. Prospects for recovery in the Japanese economy remain
weak, and the real estate market is confronted with an excess of office space in Tokyo’s central
business district as well as a trend of mergers and corporate consolidation across the country.
However, the Company is pleased to report that it has maintained steady growth as befits thepioneer real estate investment trust in Japan.
Our listing on the Tokyo Stock Exchange in September 2001 broke new ground for the realestate investment trust market in Japan, and the Company has continued to lead the industry by
expanding its portfolio and pursuing high-quality investments.
The Company had acquired 24 buildings by the end of the first period (March 31, 2002) andanother three by the end of the second period (September 30, 2002). In the third period, theCompany increased its assets by acquiring another three buildings, as well as by expanding our
stake in one building. During this period the total tenant management program and proactive
marketing have accounted for high occupancy rates for the Company’s 30 buildings. The
Company has not only grown its assets, but also profits have mounted for two consecutive
periods.

Executive Director of Japan Real Estate Investment Corporation

Yoneichiro Baba (Left)
CEO & President of Japan Real Estate Asset Management Co., .Ltd

Ryoichi Kakehashi (Right)

03Management Challenges During the Period

The challenge facing the Company as it entered its third period was to sustain our growth by enhancing theoperating performance of our existing portfolio, and by making exceptional acquisitions under prevailing
economic conditions.

Boosting the performance of our current portfolio
In general, companies are reacting to the sluggish economy by closing regional branches and moving
offices to urban areas. Compounded with an oversupply of large office buildings in Tokyo’s central
business district this year (the so-called Year 2003 Problem), this trend of consolidation has further
depressed the market for leased office space.
Tenants are now more than ever in a position to be able to pick and choose among a number ofbuildings to find the one which best meets their heightened expectations in areas such as information
technology and rent. The market is therefore becoming polarized between buildings that continuallylose tenants and those that succeed at maintaining their occupancy rates.
Our dedication to tenant management and strategic marketing has been able to forestall major
contract cancellations and office vacancies. At the end of the period, the Company’s occupancy rate
stood at 94.4%.
To augment profitability when rental rates cannot be easily raised, the Company is also working to cut
the administrative costs (property management fees and utility expenses). For the 24 buildings
acquired in the first period, we set a target of a 7.3% reduction in annual administrative costs within
three years of acquisition. In fact, we are ahead of schedule by expecting a 5.7% cost reduction by
September 30, 2003.

Continued growth through advantageous acquisitions
Restructuring and downsizing among companies eligible for asset impairment accounting are bringing
numerous sale offers to the market. This puts us in a good position for acquiring superior properties.
The Company scrutinizes these properties with respect to their location, facility level, and local
competition as well as rights and other legal aspects. Based on such reviews, the Company has
acquired properties at prices determined to maximize stable revenue and return on investment for our
property portfolio.
In this period, the Company acquired the Kokusai Iidabashi Building on October 31, 2002 (renamed
the Genki Medical Plaza on April 1, 2003), the da Vinci Harajuku on November 22, 2002, and the
Aoyama Crystal Building on March 14, 2003. In addition, on March 3, 2003 we acquired a further
33.9% stake in the Kanazawa Park Building, to bring our total holdings in that building to 89.0%. The
total acquisition cost was ¥19.3 billion ($160.3 million).
Due to these investments, the Company’s portfolio as of March 31, 2003 consisted of 30 officebuildings worth a total of ¥183.5 billion ($1.5 billion), with total leasable floor space of 236,693 m 2(2,547,739 ft 2) accommodating 359 tenants. Our asset value has roughly doubled in the year and ahalf following our listing in September 2001.
04

Capital Procurement
Since quick financing is necessary when acquiring properties, the Company will focus on short-termborrowings in the initial stage. The Company will later achieve the optimum mix of financing methods
and resources based on our analyses of trends in the capital markets.
As of March 31, 2003, the Company’s total borrowings were ¥41.8 billion ($347.8 million), of which¥24.0 billion ($199.7 million) was in long-term loans, with outstanding issues of corporate bonds
totaling ¥25.0 billion ($208.0 million).
The Company secured the following issuer credit ratings from Standard & Poor’s and Moody’s
Investors Service as of the end of the period under review.

Rating agency

Issuer credit ratingStandard & Poor’s

Long-term: A+, Short-term: A1, Outlook: Stable

Moody’s Investors Service

Rating: A2, Outlook: Stable

On April 30, 2003, we issued our second and third series of corporate bonds (five-year and sevenyear bonds respectively) as part of our capital procurement. Each issue generated ¥10.0 billion($83.2 million), which was used to repay short-term loans and convert them to long term, fixedinterest bonds as long-term rates remain at a low level. These corporate bonds have received credit
ratings of A+ from Standard & Poor’s and A2 from Moody’s Investors Service.

Performance Review
The Company had operating revenues of ¥8.5 billion ($70.7 million), up 7.5% from thepreceding period, and operating profits of ¥3.7 billion ($30.7 million), up 8.9%, in the fiscal
period ended March 31, 2003. Income before income taxes was ¥3.3 billion ($27.1 million),up 12.5%, and net income was ¥3.3 billion ($27.1 million), up 12.5%.
The Company plans to allot dividends of approximately 100 percent of income before income
taxes at the end of each fiscal period in order to enjoy the tax benefits under the Special
Taxation Measures Law, which produced a dividend of ¥14,455 ($120.26) per share for thethird period.

05Outlook for the Next Period

Property acquisition policies
During the coming period in the real estate market, we expect to see disposal of real estate accelerate,
prompted by write-offs of bad debt and impairment accounting. We believe that the coming period will
present an opportunity to further increase our assets, and we plan to select superior properties for effective
investments to maximize returns for our shareholders. Our basic policies for property acquisition are asstated below.
1) Development of information channels
The Company will broaden its information channels pertaining to potential property acquisition anddevelop new channels to obtain the latest information on the liquidation of properties.
2) Due diligence of properties for acquisition
The Company will continue to make property acquisition selections on the basis of its due diligence,
including complete examination of all economic and physical factors as well as rights and legal matters,
and with due concern for building operating conditions. Property selections will concentrate on thoseable to yield stable profits over the medium to long term.
3) Consideration of geographic distribution
Our guidelines with respect to the geographic diversity of properties follow our principles on acquisition,and dictate that 60 to 70 percent of properties should be in the metropolitan area (Tokyo, Kanagawa
Prefecture, Chiba Prefecture, and Saitama Prefecture), with 30 to 40 percent in major regional cities. In
the near term the metropolitan area may figure more prominently, following our decision to prioritize
metropolitan properties based on our overall assessment of office demand trends and other factors.

Property management policies
While the coming period will offer opportunities for acquiring properties, we anticipate that market conditions will notsupport increasing rental revenue from our existing office buildings. The market is soft and some properties may suffer
reduced occupancy rates. We are responding to this situation by consistently following the management principles set forth
below, which will ensure stable profitability.
1) Ensure tenant satisfaction
The Company has property management contracts with seven management companies. Most of these firms werealready involved in administration of their respective buildings before acquisition by the Company, and have establisheda relationship with the tenants. We believe that further strengthening these relationships will increase tenantsatisfaction and help us continue to attract favorable tenants.
2) Fill vacancies promptly
To fill any vacancies in properties, the Company will work closely with the property management companies for its officebuildings to select candidates appropriate to the location and characteristics of the buildings, and actively pursue
tenancy contracts with these candidates. The Company also will make efforts to spur demand among existing tenants
for increases in office space.

063) Secure stable revenue
The Company will gradually shift a certain portion of its leasing contracts to fixed and/or long-term leases to secure stablerevenue in the future.
4) Reduce expenses through competition
The Company will promote vigorous competition among its seven property management companies to revamp their costs,
maintenance and administrative structures, thereby reducing property management fees and utility expenses by 5 percent
within three years from acquisition of the property.

Performance Forecasts
For the fourth period (from April 1, 2003 to September 30, 2003), the Company anticipates operating revenue of ¥8.8 billion($73.2 million), income before income taxes of ¥3.3 billion ($27.5 million), net income of ¥3.3 billion ($27.5 million), anddividends of ¥14,500 ($120.63) per share.
For the fifth period (from October 1, 2003 to March 31, 2004), the Company anticipates operating revenue of ¥8.4 billion($69.9 million), income before income taxes of ¥3.1 billion ($25.8 million), net income of ¥3.1 billion ($25.8 million), anddividends of ¥14,000 ($116.47) per share.
The above conservative forecast does not include consideration of revenues from expected acquisitions in the future. In
addition, the occupancy rate at the end of the fourth period is estimated at 93.5%, and planned cancellations and subsequentvacancies after the end of the fourth period are taken into account.

For Sustained Growth
There is scant prospect of a substantial improvement in economic conditions in the
coming period, and it is expected that revitalization in the market for leased office space
will lag behind any upswing in economic indicators. However, the Company has the strong
portfolio, capable management, and trustworthy professionals to overcome the adverse
economic climate.
Furthermore, the Company declared its core philosophy of what we call the 4 S’s:
Sincerity, Stability, Soundness, and Strength of Will at the time of foundation. We believethese core values are readily reflected in our business results, as the Company has
already performed substantially on the expectations of the previous period. By adhering tothis proven philosophy and steadily implementing our property acquisition andmanagement policies, we are confident that the Company will continue to grow andpresent stable dividends. We would like to sincerely thank you, our shareholders, for yourcontinued support.

Yoneichiro Baba

Ryoichi Kakehashi

Executive Director of Japan Real Estate Investment Corporation

CEO & President of Japan Real Estate Asset Management Co., .Ltd

07

The Portfolio of Japan Real Estate Investment Corporation
As of March 31, 2003

PROPERTIES ROSTER
NumberBuilding nameLocation

Type ofspecified asset

AcquisitionPrice(¥ millions)

Acquisition
dateTokyo 23 Wards

I-1
I-2
I-3
I-4
I-5
I-6
I-7
I-8
I-9
I-10
I-11
I-12
I-13
I-14
I-15
I-16

Mitsubishi Soken Building

Otemachi, Chiyoda-ku

Trust

9/25/2001

27,267 (14.9%)

Kodenmacho Shin-Nihonbashi Building

Nihonbashi, Chuo-ku

Trust

9/25/2001

3,173 ( 1.7%)

Shiba 2chome Daimon Building

Shiba, Minato-ku

Trust

9/10/2001

4,859 ( 2.6%)

Cosmo Kanasugibashi Building

Shiba, Minato-ku

Trust

9/25/2001

2,808 ( 1.5%)

Takanawadai Building

Higashi Gotanda, Shinagawa-ku

Trust

9/25/2001

2,738 ( 1.5%)

JAL Travel Building (Note 1)

Shimo Meguro, Meguro-ku

Trust

9/10/2001

1,362 ( 0.7%)

Omori-Eki Higashiguchi Building

Omori Kita, Ota-ku

Trust

9/10/2001

5,123 ( 2.8%)

Otsuka Higashi-Ikebukuro Building

Higashi-Ikebukuro, Toshima-ku

Trust

9/25/2001

3,541 ( 1.9%)

Ikebukuro 2chome Building

Ikebukuro, Toshima-ku

Trust

9/25/2001

1,728 ( 0.9%)

Shibuya Cross Tower

Shibuya, Shibuya-ku

Ownership

11/30/2001

34,600 (18.9%)

MD Kanda Building

Kanda, Chiyoda-ku

Ownership

5/31/2002

9,520 ( 5.2%)

Burex Kyobashi Building

Kyobashi, Chuo-ku

Ownership

7/22/2002

5,250 ( 2.9%)

Kandabashi Park Building

Kandanishiki-cho, Chiyoda-ku

Ownership

8/15/2002

4,810 ( 2.6%)

Genki Medical Plaza (Note 2)

Iidabashi, Chiyoda-ku

Ownership

10/31/2002

5,000 ( 2.7%)

da Vinci Harajuku

Jingumae, Shibuya-ku

Ownership

11/22/2002

4,885 ( 2.7%)

Aoyama Crystal Buliding

Kitaaoyama, Minato-ku

Ownership

3/14/2003

7,680 ( 4.2%)

Saitama, Saitama Prefecture

Ownership

Tokyo Metropolitan Area Excluding 23 Wards

II-1

II-2
II-3

Saitama Urawa Building (Note 3)

9/25/2001

1,232

10/11/2001

1,342

total

2,574 ( 1.4%)

Kawasaki Isago Building

Kawasaki, Kanagawa Prefecture

Trust

9/25/2001

3,375 ( 1.8%)

Ericsson Shin-Yokohama Building

Yokohama, Kanagawa Prefecture

Ownership

1/28/2002

3,000 ( 1.6%)

Other major cities

III-1
III-2
III-3
III-4
III-5

Sendai Honcho Honma Building

Sendai, Miyagi Prefecture

Trust

9/25/2001

2,924 ( 1.6%)

Niigata Ishizuecho Nishi-Bandaibashi Building

Niigata, Niigata Prefecture

Trust

9/25/2001

1,010 ( 0.6%)

Kanazawa Minamicho Building

Kanazawa, Ishikawa Prefecture

Trust

9/25/2001

1,331 ( 0.7%)

Nagoya Hirokoji Building

Nagoya, Aichi Prefecture

Ownership

9/10/2001

14,533 ( 7.9%)

Midosuji Daiwa Building

Osaka, Osaka Prefecture

Trust

9/25/2001

6,934

2/28/2002

7,380

total

III-6
III-7
III-8
III-9
III-10
III-11

14,314 ( 7.8%)

Fukusuke Sakaisujihonmachi Building

Osaka, Osaka Prefecture

Trust

9/25/2001

2,264 ( 1.2%)

Kobe Itomachi Building

Kobe, Hyogo Prefecture

Trust

9/25/2001

1,436 ( 0.8%)
3,657 ( 2.0%)

Hinode Tenjin Building

Fukuoka, Fukuoka Prefecture

Trust

9/10/2001

Tosei Tenjin Building

Fukuoka, Fukuoka Prefecture

Ownership

9/25/2001

1,550 ( 0.8%)

Kyoto Shijo Kawaramachi Building

Kyoto, Kyoto Prefecture

Ownership

12/20/2001

2,650 ( 1.4%)

Kanazawa Park Building

Kanazawa, Ishikawa Prefecture

Ownership

2/28/2002

2,880

3/3/2003

1,700

total

4,580 ( 2.5%)

TOTAL

183,542 ( 100%)

MAJOR TENANTS ROSTER
Rank

0

8

Name of tenant

Name of Building

Percent of total
rentable area

Leased area

1

Mitsubishi Reserch Institute, Inc. (Note 1)

Mitsubishi Soken Building

14,529m2 (156,389ft2 )

6.5%

2

The Dai-ichi Mutual Life Insurance Company

Midosuji Daiwa Building (also includes another 8 buildings)

13,292m2 (143,074ft2 )

6.0%

2

2

3

Nippon Ericsson K.K.

Ericsson Shin-Yokohama Building

5,794m ( 62,366ft )

2.6%

4

TOTO Ltd.

Nagoya Hirokoji Building, Midosuji Daiwa Building

4,840m2 ( 52,097ft2 )

2.2%

5

Center for Health Care & Public Concern (Note 2) Genki Medical Plaza

4,791m2 ( 51,570ft2 )2.1%

Notes:1. Lease with this tenant is a fixed-term lease for the period from February 1, 2001 to March 31, 2011. This tenant has agreed not to terminate the contract during the lease period.
2. Lease with this tenant is a fixed-term lease for the period from November 1, 2002 to October 31, 2017.This tenant has agreed not to terminate the contract during the lease period.

Percentage ofownership of thebuilding (%)

Completion

Appraisal value
at the end of period(¥ millions)

Total leasable
floor space

Leased area

Total number oftenants

Revenue fromleasing operations(¥millions)

100

1970

28,00018,006m2 (193,815ft2 )17,347m2 (186,721ft2 )

3972 (11.4%)

100

1991

3,140

3,897m2 ( 41,947ft2 )3,897m2 ( 41,947ft2 )

5161 ( 1.9%)

100

1984

4,890

9,622m2 (103,570ft2 )8,289m2 ( 89,222ft2 )

26

314 ( 3.7%)

100

1992

2,760

4,062m2 ( 43,723ft2 )4,062m2 ( 43,723ft2 )

7

111 ( 1.3%)

100

1991

2,810

4,091m2 ( 44,035ft2 )4,091m2 ( 44,035ft2 )

1

141 ( 1.7%)

100

1991

1,500

3,383m2 ( 36,414ft2 )3,383m2 ( 36,414ft2 )

1103 ( 1.2%)

100

1989

5,220

7,708m2 ( 82,968ft2 )7,598m2 ( 81,784ft2 )

19292 ( 3.4%)

100

1987

3,530

7,114m2 ( 76,574ft2 )

6,732m2 ( 72,463ft2 )

8190 ( 2.2%)

100

1990

1,520

2,186m2 ( 23,530ft2 )

1,941m2 ( 20,893ft2 )

476 ( 0.9%)

100

1976

34,40028,547m2 (307,277ft2 )28,547m2 (307,277ft2 )54

1,619 (19.0%)

100

1998

9,620

6,334m2 ( 68,179ft2 )6,334m2 ( 68,179ft2 )

2

3375 ( 4.4%)

100

2002

5,040

4,279m ( 46,059ft )4,279m2 ( 46,059ft2 )

1150 ( 1.8%)

56.76

1993

4,900

3,687m2 ( 39,686ft2 )3,687m2 ( 39,686ft2 )

7

198 ( 2.3%)

100

1985

5,450

4,791m2 ( 51,570ft2 )

4,791m2 ( 51,570ft2 )

170 ( 0.8%)

100

1987

4,960

3,051m2 ( 32,841ft2 )3,051m2 ( 32,841ft2 )

6132 ( 1.6%)

100

1982

7,430

4,916m2 ( 52,915ft2 )

4,916m2 ( 52,915ft2 )

923 ( 0.3%)

100

1990

2,570

4,510m2 ( 48,545ft2 )4,111m2 ( 44,250ft2 )

12147 ( 1.7%)

100

1990

3,190

6,831m2 ( 73,528ft2 )

6,831m2 ( 73,528ft2 )

10

195 ( 2.3%)

100

1992

3,180

6,964m2 ( 74,960ft2 )6,964m2 ( 74,960ft2 )

2

186 ( 2.2%)

93.39

1991

2,940

5,829m2 ( 62,743ft2 )25,829m2 ( 62,743ft2 )

2

13

164 ( 1.9%)

100

1984

854

4,383m ( 47,178ft )3,634m2 ( 39,116ft2 )

7

82 ( 1.0%)

100

1987

1,200

3,773m2 ( 40,612ft2 )3,337m2 ( 35,919ft2 )

1294 ( 1.1%)

100

1987

15,00021,590m2 (232,393ft2 )20,101m2 (216,365ft2 )

27

811 ( 9.5%)

2

100

1991

14,40020,449m2 (220,111ft2 )

18,685m2 (201,123ft2 )

18830 ( 9.8%)

46.17

1992

2,300

5,337m2 ( 57,447ft2 )

4,886m2 ( 52,592ft2 )

7161 ( 1.9%)

100

1989

1,180

3,478m2 ( 37,437ft2 )2,961m2 ( 31,872ft2 )

2

1070 ( 0.8%)

76.18

1987

3,750

5,944m ( 63,981ft )5,866m2 ( 63,141ft2 )

10215 ( 2.5%)

100

1992

1,420

4,080m2 ( 43,917ft2 )3,128m2 ( 33,669ft2 )

16

98 ( 1.2%)

100

1982

2,380

6,800m2 ( 73,195ft2 )

4,934m2 ( 53,109ft2 )

20

127 ( 1.5%)

89.0

1991

5,170

21,036m2 (226.492ft2 )19.185m2 (206.505ft2 )

64

378 ( 4.4%)––

184,704

236,693m2 (2,547,740ft2 )

223,410m2 (2,404,623ft2 )359

8,500 (100%)2

Notes: 1. On July 28, 2003 "JTS Building" was renamed to "JAL Travel Building".
2. On April 1, 2003 "Kokusai Iidabashi Building" was renamed to "Genki Medical Plaza".
3. On April 1, 2003 "Urawa Dai-ichi-Seimei Dowa Kasai Building" was renamed to "Saitama Urawa Building".

09LOCATIONS OF PORTFOLIO PROPERTIES

III-1– III-11: Other major cities

III-1
III-2

III-3
III-11
III-7 III-10
III-5 III-6

III-8

III-4

III-9

I-9

I-8

I-14

Saitama

I-13
I-1

II-1

I-15
I-10

I-16 I-4
I-3

I-6

I-5

II-2
Kanagawa

II-3
I-7...Tokyo Station

II-1– II-3 : Tokyo Metropolitan Area Excluding 23 Wards

1

0

I-2
I-12

Chiba

Tokyo

I-11

I-1– I-16 : Tokyo 23 Wards

Overview of Portfolio Properties
PROPERTY ACQUISITION
As of March 31, 2003

Mitsubishi Soken Building

Kodenmacho
Shin-Nihonbashi Building

I-1

I-2

Location:

3-6, Otemachi 2-chome, Chiyoda-ku, Tokyo

Location:

4-9, Kodenmacho, Nihonbashi, Chuo-ku, Tokyo

Site area:

3,441.35m2 (37,042.35ft2)

Site area:

773.28m2 (8,323.51ft2)

Floor area of building:

26,372.92m2 (283,875.47ft2)

Floor area of building:

5,822.88m2 (62,676.90ft2)

Structure:

Above ground: 15 floors

Structure:

Above ground: 9 floors

Below ground: 2 floors
Completion:

July 1970

Below ground: 1 floor
Completion:

November 1991

Shiba 2chome Daimon Building

Cosmo Kanasugibashi Building

I-3

I-4

Location:

3-3, Shiba 2-chome, Minato-ku, Tokyo

Location:

10-11, Shiba 1-chome, Minato-ku, Tokyo

Site area:

2,820.90m2 (30,363.89ft2)

Site area:

758.54m2 (8,164.85ft2)

Floor area of building:

16,235.10m2 (174,752.99ft2)

Floor area of building:

5,420.93m2 (58,350.35ft2)

Structure:

Above ground: 8 floors

Structure:

Above ground: 9 floors

Below ground: 2 floors
Completion:

March 1984

Below ground: 1 floor
Completion:

Takanawadai Building

March 1992

JAL Travel Building

I-5

I-6

Location:

1-5, Higashi Gotanda 3-chome, Shinagawa-ku, Tokyo

Location:

7-10, Shimo Meguro 3-chome, Meguro-ku, Tokyo

Site area:

1,416.17m2 (15,243.51ft2)

Site area:

1,401.52m2 (15,085.82ft2)

Floor area of building:

5,762.70m2 (62,029.13ft2)

Floor area of building:

5,269.58m2 (56,721.23ft2)

Structure:

Above ground: 13 floors

Structure:

Above ground: 6 floors

Completion:

January 1991

Below ground: 1 floor
Completion:

September 1991

1

1

Omori-Eki Higashiguchi Building

Otsuka Higashi-Ikebukuro Building

I-7

I-8

Location:

5-1, Omori Kita 1-chome, Ota-ku, Tokyo

Location:

32-22, Higashi-Ikebukuro 2-chome, Toshima-ku, Tokyo

Site area:

2,199.30m2 (23,673.05ft2)

Site area:

2,121.39m2 (22,834.43ft2)

Floor area of building:

14,095.34m2 (151,720.83ft2)

Floor area of building:

9,531.28m2 (102,593.74ft2)

Structure:

Above ground: 11 floors

Structure:

Above ground: 8 floors

Below ground: 2 floors
Completion:

July 1989

Below ground: 1 floor
Completion:

November 1987

Ikebukuro 2chome Building

Shibuya Cross Tower

I-9

I-10

Location:

14-2, Ikebukuro 2-chome, Toshima-ku, Tokyo

Location:

15-1, Shibuya 2-chome, Shibuya-ku, Tokyo

Site area:

397.26m2 (4,276.07ft2)

Site area:

5,153.45m2 (55,471.22ft2)

Floor area of building:

3,157.51m2 (33,987.12ft2)

Floor area of building:

61,862.33m2 (665,879.93ft2)

Structure:

Above ground: 9 floors

Structure:

Above ground: 32 floors

Below ground: 1 floor
Completion:

May 1990

Below ground: 3 floors
Completion:

MD Kanda Building

April 1976

Burex Kyobashi Building

I-11

I-12

Location:

9-1, Mitoshiro-cho, Kanda, Chiyoda-ku, Tokyo

Location:

7-14, Kyobashi 2-chome, Chuo-ku, Tokyo

Site area:

1,085.83m2 (11,687.77ft2)

Site area:

756.03m2 (8,137.83ft2)

Floor area of building:

8185.11m2 (88,103.71ft2)

Floor area of building:

5,470.54m2 (58,884.35ft2)

Structure:

Above ground: 10 floors

Structure:

Above ground: 8 floors

Completion:

February 1998

Below ground: 1 floor
Completion:

1

2

February 2002

Kandabashi Park Building

Genki Medical Plaza

I-13

I-14

Location:

19-1, Kandanishiki-cho 1-chome, Chiyoda-ku, Tokyo

Location:

6-5, Iidabashi 3chome, Chiyoda-ku, Tokyo

Site area:

1,218.56m2 (13,116.46ft2)

Site area:

1,052.80m2 (11,332.23ft2)

Floor area of building:

9,370.25m2 (100,860.43ft2)

Floor area of building:

6,722.02m2 (72,355.15ft2)

Structure:

Above ground: 10 floors

Structure:

Above ground: 8 floors

Below ground: 1 floor
Completion:

July 1993

Below ground: 1 floor
Completion:da Vinci Harajuku

September 1985

Aoyama Crystal Building

I-15

I-16

Location:25-15, Jingumae 3chome, Shibuya-ku, Tokyo

Location:

5-12, Kita-Aoyama 3chome, Minato-ku, Tokyo

Site area:

839.66m2 (9,038.02ft2)

Site area:

989.30m2 (10,648.73ft2)

Floor area of building:

4,359.20m2 (46,921.99ft2)

Floor area of building:

8,094.36m2 (87,126.88ft2)

Structure:

Above ground: 7 floors

Structure:

Above ground: 10 floors

Below ground: 2 floors
Completion:

December 1987

Below ground: 4 floors
Completion:

Saitama Urawa Building

December 1982

Kawasaki Isago Building

II-1
Location:

2-3, Takasago 2-chome, Urawa-ku, Saitama,

II-2
Location:

Saitama Prefecture

2-4, Isago 1-chome, Kawasaki-ku, Kawasaki,
Kanagawa Prefecture

Site area:

1,533.06m2 (16,501.70ft2)

Site area:

Floor area of building:

6,258.59m2 (67,366.84ft2)

Floor area of building:

1,594.50m2 (17,163.04ft2)
9,623.83m2 (103,589.94ft2)

Structure:

Above ground: 8 floors

Structure:

Above ground: 12 floors

Completion:

March 1990

Below ground: 1 floor
Completion:

December 1990

1

3

Ericsson Shin-Yokohama Building

Sendai Honcho Honma Building

II-3
Location:

2-1, Shin-Yokohama 1-chome, Kohoku-ku,

III-1
Location:

Yokohama, Kanagawa Prefecture

1-29, Honcho 2-chome, Aoba-ku, Sendai,
Miyagi Prefecture

Site area:

1,528.00m2 (16,447.24ft2)

Site area:

Floor area of building:

10,403.41m2 (111,981.26ft2)

Floor area of building:

8,247.50m2 (88,775.27ft2)

Structure:

Above ground: 10 floors

Structure:

Above ground: 11 floors

Below ground: 2 floors

Completion:

November 1991

Completion:

1,437.47m2 (15,472.78ft2)

April 1992

Niigata Ishizuecho
Nishi-Bandaibashi Building

Kanazawa Minamicho Building

III-2
Location:

III-3

1945-1, Ishizuecho Dori-ichinocho, Niigata,

Location:

3-10, Oyamamachi, Kanazawa, Ishikawa Prefecture

Niigata Prefecture

Site area:

887.17m2 (9,549.41ft2)

Site area:

957.90m2 (10,310.74ft2)

Floor area of building:

5,163.19m2 (55,576.06ft2)

Floor area of building:

6,410.33m2 (69,000.15ft2)

Structure:

Above ground: 9 floors

Above ground: 8 floors

Completion:

March 1987

Structure:

Below ground: 1 floor
Completion:

November 1984

Nagoya Hirokoji Building

Midosuji Daiwa Building

III-4
Location:

3-1, Sakae 2-chome, Naka-ku, Nagoya,

III-5
Location:

Aichi Prefecture
Site area:

4,095.81m2 (44,086.89ft2)

Site area:

Floor area of building:

33,377.73m2 (359,274.55ft2)

Floor area of building:

31,213.27m2 (335,976.52ft2)

Structure:

Above ground: 18 floors

Structure:

Above ground: 15 floors

Below ground: 2 floors
Completion:

1

4

6-8, Kyutaromachi 3-chome, Chuo-ku, Osaka,
Osaka Prefecture

May 1987

3,044.65m2 (32,772.31ft2)

Below ground: 2 floors
Completion:

September 1991

Fukusuke Sakaisujihonmachi
Building

Kobe Itomachi Building

III-6
Location:

III-7

8-14, Minamihonmachi 1-chome, Chuo-ku,

Location:

121, Itomachi, Chuo-ku, Kobe, Hyogo Prefecture

Osaka, Osaka Prefecture

Site area:

808.55m2 (8,703.15ft2)

Site area:

2,036.22m2 (21,917.67ft2)

Floor area of building:

4,894.09m2 (52,679.50ft2)

Floor area of building:

17,145.59m2 (184,553.42ft2)

Structure:

Above ground: 10 floors

Above ground: 13 floors

Completion:

September 1989

Structure:

Below ground: 2 floors
Completion:

October 1992

Hinode Tenjin Building

Tosei Tenjin Building

III-8
Location:

12-20, Tenjin 1-chome, Chuo-ku, Fukuoka,

III-9
Location:

Fukuoka Prefecture

9-25, Tenjin 3-chome, Chuo-ku, Fukuoka,
Fukuoka Prefecture

Site area:

1,452.15m2 (15,630.80ft2)

Site area:

Floor area of building:

12,527.07m2 (134,840.13ft2)

Floor area of building:

5,588.57m2 (60,154.81ft2)

Structure:

Above ground: 10 floors

Structure:

Above ground: 8 floors

Below ground: 2 floors

Completion:

March 1992

Completion:

1,221.31m2 (13,146.06ft2)

August 1987

Kanazawa Park Building

Kyoto Shijo Kawaramachi Building

III-11

III-10Location:

338, Tominaga-cho, Kawaramachidori Matsubara-agaru

Location:

1-1, Hirooka 3-chome, Kanazawa, Ishikawa Prefecture

2-chome, Shimogyo-ku, Kyoto, Kyoto Prefecture

Site area:

6,642.71m2 (71,501.47ft2)

Site area:

1,471.57m2 (15,839.83ft2)

Floor area of building:

43,481.20m2 (468,027.29ft2)

Floor area of building:

9,701.04m2 (104,421.02ft2)

Structure:

Above ground: 12 floors

Structure:
Completion:

Below ground: 2 floors

Above ground: 9 floors
Below ground: 1 floor

Completion:

October 1991

November 1982

Note: Details on area, structure etc. listed above as recorded in the registry.

1

5

The Company's Investment Policies(1) INVESTMENT POLICIES(i) Basic investment policies
The basic investment policies of the Company shall be as follows:
1 Basic Policies (Article 23 of the Articles of Incorporation)

The Company shall invest primarily in specified assets (the "portfolio real estate assets"), consisting of certain real estate assets and realestate related securities (as defined below) with the goals of achieving stable growth in value over a medium- to long-term period. The terms"real estate assets" and "real estate related securities" shall mean the items listed below.
I. Real estate assets:
1. Real estate
2. Leaseholds of real estate
3. Surface rights
4. Trust beneficiary rights in trust of real estate, leaseholds of land, and surface rights. These assets referred to herein include beneficiary
certificates of comprehensive trusts over real estate and moneys incidental thereto, but do not include marketable securities as defined in
Article 3, Item 1 of the Cabinet Order of Law on Investment Trusts and Investment Corporations (Cabinet Order No. 480 of 2000, as amended,the "Cabinet Order")5. Trust beneficiary rights in monetary trusts that are invested in real estate, leaseholds of real estate, and surface rights (except formarketable securities)
6. Equity interests in anonymous partnership relating to a contract that (i) either party makes a contribution to the other party for purposes ofmanagement of the assets described in any of the items listed in 1 through 5 above, (ii) the other party manages the contribution as
investments principally in any of such assets, and (iii) its profits are distributed (hereinafter referred to as "anonymous partnership equity
interest")
II. Marketable securities, value of which derives principally from real estate assets (the "real estate related securities") are as follows:
1. Preferred Securities (as defined in Article 2, Paragraph 8 of Asset Liquidation Law, Law No. 105 of 1998, as amended, the "Asset Liquidation
Law") issued by a special purpose company under such Law whose objective is to invest more than half of its assets in real estate assets
2. Beneficiary certificates (as defined in Article 2, Paragraph 12 of the Investment Trust Law) issued by an investment trust whose objective is
to invest more than half of its assets in real estate assets
3. Certificates for shares (as defined in Article 2, Paragraph 22 of the Investment Trust Law) issued by an investment corporation under such
Law whose objective is to invest more than half of its assets in real estate assets
4. Beneficiary certificates of a special purpose trust (as defined in Article 2, Paragraph 12 under the Asset Liquidation Law) , whose objective
is to invest more than half of its assets in real estate assets (except for the trust beneficiary rights referred to in 4. and 5. of I. above)
2 Investment attitude (Article 24 of the Articles of Incorporation)

The following is the basic policy of investment attitude of the Company, especially its policy concerning the acquisition and holding of thePortfolio Real Estate as set forth in the Articles of Incorporation.
A. In accordance with the Ministerial Ordinance of Ministry of Finance, the Company shall make an investment so that at least 75% of its total
assets is invested in real estate, leaseholds of real estate, surface rights, trust beneficiary rights (that entrust solely in real estate,leaseholds of land and surface rights), and anonymous partnership equity interests (that invest solely in real estate, leaseholds of realestate and surface rights). Anonymous partnership equity interests are equity invested under a contract such that one of the parties makes
an deposit for the purpose of management of assets by the second party, and the second party invests and manages the deposited funds inthe said assets, distributing the profits generated by that management.
B. It is the Company's asset investment policy to make an investment, so that the ratio (the "specified real estate ratio") of the aggregate
1

6value of the specified real estate to the aggregate value of the specified assets is at least 75%. The specified real estate shall mean,among the specified assets, the real estate, leaseholds of real estate, surface rights or the trust beneficiary rights of real estate, leaseholdsof land and surface rights.
C. It is the Company's asset investment policy that the ratio of the aggregate value of the real estate to that of the specified assets acquired
during any fiscal period (commencing on April 1, 2002) must be at least one half of the specified real estate ratio. The policy set under thispoint shall be applied as long as the said requirements related to exceptions to standard taxation under the real estate acquisition tax
exist.
D. The Company shall principally invest in office buildings which are located in Tokyo and other major metropolitan areas of Japan, including
those as such designated by the relevant Cabinet Order.
E. The Company shall make investment decisions only after it conducts thorough and sufficient due diligence investigations of the relevant realestate assets and becomes fully aware of the investment value in light of the investment climate.
F. The Company shall invest principally in real estate and trust beneficiary rights in trust of real estate, but may invest in other real estate
assets (meaning any asset listed in "I. Real estate assets" above, but excluding the real estate and the trust beneficiary rights in trust of
the real estate) and real estate related securities in addition to those described above in light of investment climate at that time and/or thesize of the assets.
3 Leasing of corporate assets (Article 27 of the Articles of Incorporation)

The Company may enter into leasing contracts with third parties with regard to real estate assets being specified assets, for the purpose ofgenerating earnings, and may cause the trustees to enter into leasing contracts with third parties with regard to the underlying real estate of
the trust beneficiary rights.
4 Loans and corporate bonds (Article 30 of the Articles of Incorporation)

A. In order to manage the portfolio of the Company in an efficient and stable manner, the Company may make borrowings or issue corporate
bonds with a view to utilizing the proceeds thereof toward acquisitions of specified assets, capital improvements of the real estate for leaseand the underlying real estate of the trust beneficiary rights and working capital.
B. The Company shall not make total borrowings, including loans and issuance of corporate bonds, in excess of an aggregate of ¥1 trillion.
C. The Company may borrow only from qualified institutional investors (the "qualified institutional investors") referred to in Article 2,
Paragraph 3, Item 1 of the Securities and Exchange Law of Japan (Law No. 25 of 1948, as amended).
(ii) Guidelines for investment and management of portfolio real estate assets based on basic investment policies
The asset management company, J-Rea, has internally established the asset management guidelines (the "Asset Management Guidelines"),as the internal guidelines with regard to investment and management by the Company of its portfolio real estate assets, based on the basic
investment policies outlined in section (i), 1 though 4 above and in accordance with the asset management agreement (the “AssetManagement Agreement”) concluded between the Company and the asset management company dated May 18, 2001, as amended on August
3, 2001 and April 1, 2003. Accordingly, the asset management company manages the portfolio real estate assets in compliance with such
Asset Management Guidelines, with the aim of managing the assets of the Company in an appropriate manner.
The Asset Management Guidelines have been formed, based on the current Japanese economic environment, real estate market conditions,financial environment, statistics of economy, property conditions and performance of the Company, all at the time of listing on the Tokyo
Stock Exchange, or TSE, the medium- and long-term outlook for the real estate market, and experience and know-how accumulated by theasset management company and other various complex factors then available to the investment management company. As such, the asset
management company intends to review the Asset Management Guidelines periodically to determine whether or not they appropriately fit withthe external and internal environmental factors. If the asset management company determines that it is in the best interests of the Company
and its investors to revise the Asset Management Guidelines to manage the portfolio, the Asset Management Guidelines may be revised
periodically in line with the Articles of Incorporation and the asset management agreement.
The asset management company will pursue the achievement of internal growth as well as external growth in order to enhance its earnings
and stability. Internal growth means that the Company will maximize the profitability of its own existing real estate and other assets. External

17

growth means that the Company will acquire new portfolio real estate assets within such an appropriate price range as may be considered thebest interests of the Company. The asset management company shall conduct the management by taking into account the stability of the cash
flow and the expected return from a comprehensive perspective. The asset management company will, in managing the assets, consider
various factors, including portfolio composition in terms of geographical diversification, use, size and age as well as the capitalization rate(meaning the return obtained by dividing the cash flow, excluding capital expenditures but after deduction of cost of repairs, by the property
acquisition costs). The Company is continuously engaged in market research activities, for the purpose of the external growth, to seek anopportunity to acquire new portfolio real estate assets. Once the Company makes an acquisition decision, the Company shall promptly make apublic announcement thereof.
1 Guidelines for acquisition of portfolio real estate assets

To achieve the external growth, the guidelines concerning the acquisition of portfolio real estate assets are as follows:
A. Geographic portfolio composition
1. The basic geographical diversification is to make investment of approximately 60-70% of the funds in real estate located in the greater
Tokyo metropolitan area and the approximately remaining 30-40% of the funds in cities in other parts of Japan.
2. It is, however, possible that the funds are invested in different investment allocation percentages as outlined above, if a relatively high rateof return is expected from such investment even though supply and demand are balanced and steady.
3. During the course of expansion of the asset base of the Company, the portfolio composition may tentatively deviate from the investment
allocation percentages as outlined above.
B. Property type portfolio composition
In principle, the asset management company will recommend the Company to invest in portfolio real estate assets used for office buildings.
While these assets may mainly be used for office buildings, they may also partially be used for commercial use or, depending on therelevant local municipal regulations, may be used for residential use. Accordingly, the Company may acquire the office buildings withcertain portion thereof used for commercial facilities or residential areas.
C. Building size and age in portfolio composition
1. In principle, the asset management company will recommend the Company to invest in land and buildings thereon that have total floor
space or size of 3,000 square meters or more per building.
2. In principle, the asset management company will recommend the Company to invest in buildings with the latest earthquake resistancecapabilities in compliance with the earthquake resistance standards or buildings with the equivalent capabilities as stated above.
3. In addition to the criteria referred to in 1. and 2. above, the asset management company will recommend the Company to make an investment
decision by taking into account such factors as location, building structures (including earthquake resistance standards), facilities (including
ceiling height, floor wiring, space per floor, electrical supply, and so forth), and the complexity of ownership and other rights.
D. Due diligence conducted at the time of acquisition
1. Acquisition of the real property
To thoroughly and accurately assess the quality of properties, the asset management company will conduct a comprehensive due diligenceof the property from an economic, physical, and legal standpoint.
The asset management company will make use of analytical assessment based on real estate appraisal reports, engineering reports, andseismic reports and real estate market reports issued by independent third party professionals who possess analytical capability andrelevant experience.
The asset management company will also make an on-site inspection of the property and hold interviews with persons in charge of property
management of the building.
182. The following table shows the due diligence items based on the above.

Type of Research
Economic Analysis

Details of Research

Source Materials-- Supply and demand conditions for office buildings in the location

real estate appraisal reports,

under consideration including a future outlook; analysis of market rental

market reports,

rates

on-site inspection-- Frontage condition, access to major roads and public transportation-- Level of discount rate and capitalization rate-- Analysis of the current operating costs of the building and room forreduction-- Reflection of inspection of the physical conditions of building, legal
due diligence, economic analysis of the current building operation-- Evaluation of dispositions
Physical Inspection-- Searching the boundary with neighboring properties and status of the

documents from the seller,

over boundary

engineering reports,-- The level of maintenance for the building and facilities and its state

seismic report,of deterioration

on-site inspection-- Medium- and long-term estimated repairs and capital expenditure-- Building and facility specifications (room layout, ceiling height, heat,ventilation and air-conditioning (HVAC) systems, electrical supply, etc.)-- Earthquake resistance capability of the building-- Investigation for existence of toxic substances within the building orwithin the property site-- Whether or not there has been any actual damage to the building asa result of natural disasters, such as typhoons, earthquakes, etc.
Legal Research-- Research into ownership and other rights and mortgages

documents from the seller,-- Research into lease contracts

engineering reports,-- Certification of the property boundary line, agreement regarding theon-site inspection

boundary-- Research into the level of compliance with legal requirements forconstruction and management of the building-- Research into management rules, agreements among the owners,
and leasehold agreements in cases where the building and land are notowned by a single owner-- Research into existence and substance of any agreements with theowners in the neighborhood regarding the countermeasures against
defective television radiation acceptance, etc.

19Research on the State of-- Investigation into the operations of the property management

documents from the seller,

Property Managementcompany and compliance with building management manual

on-site inspection-- Research into whether or not there have been any suggestions and/or
complaints made by tenants against the building management-- Tenant composition-- Research into the existence of any rules or stipulations governingbuilding management in cases where the property is not owned by asingle owner

E. Targeted Capitalization Rate
1. The asset management company will set a certain target for its capitalization rate and make acquisition of portfolio real estate assets by
taking into account the capitalization rate set for the total portfolio.
2. The capitalization rate referred to above may be adjusted from time to time in accordance with changes in the Company's financing policy
and/or changes in interest rates.
*The capitalization rate addressed in this section is based on the return calculated by dividing the cash flow (excluding capital expenditure
and after deduction of the cost of repairs) by the property acquisition costs.
2 Guidelines for management of portfolio real estate assets

To achieve internal growth, the policy for maintenance and management of portfolio real estate assets is as follows:
A. Policy for maintenance and management
For purposes of internal growth, the asset management company will ensure to make ongoing and scheduled capital expenditures andmanagement for the existing facilities and equipment of real estate owned by the Company with proper repairs and maintenance to enhancetenant satisfaction, the competitiveness of the property, and revenues (by increasing rental rates over time and the occupancy rate), and at
the same time minimize the relevant expenses (by reducing outsourced maintenance costs and reduction of water, gas and electricity costs,
and so forth). The asset management company will make effective use of the multiple property management companies in order to achievethese goals.
B. Insurance policy
In principle, the Company will carry comprehensive casualty and liability insurance covering all of the properties owned by the Company toprotect either from damages to or reduction in revenue from the properties arising from natural causes or accidents or any possible
financial losses arising from liability claims of third parties. In connection with procuring earthquake insurance, the Company will make adetermination based on the amount of the probable maximum loss, or PML, on its properties.
*1. The Company will carry comprehensive casualty insurance to compensate for financial losses due to damages and accidents except forearthquakes, floods, tidal waves and wars. This type of insurance can also include a special provision that compensates for corporate profits.
*2. Liability insurance covers the Company from possible financial losses arising from legal claims with regard to physical harm or financial
damage to third parties that results from possession, use, occupancy or management of the building.
3 Guidelines for disposal of portfolio real estate assets

In principle, the Company seeks to hold investment over a reasonably long-time and has no particular intention to engage in short-term buying
and selling of the properties. In determining the sale of a property, the Company makes a comprehensive analysis and determination by taking
into consideration such factors as the outlook for future profitability of that property, the amount that the property has changed in value andthe outlook for future additional change in value, the economic outlook and stability for the region in which the portfolio real estate assets arelocated, the deterioration of the real estate and other assets and the estimate of future expenses associated with its maintenance, and how
20well the particular property fits with the Company's total portfolio of properties.

(iii) Financing guidelines
The Company has stipulated the following financial guidelines in its Asset Management Guidelines.
1 In order to manage the assets of the Company in an efficient and stable manner, the Company may make borrowings or issue corporate

bonds for purposes of making acquisitions of specified assets, capital improvements for the existing portfolio real estate assets andworking capital.
2 The Company shall not make total borrowings, including loans and issuance of corporate bonds, in excess of an aggregate of ¥1 trillion.
3 The Company shall borrow only from qualified institutional investors.
4 In principle, the Company shall not borrow funds (including corporate bonds) in excess of 65% of the total value of its total assets (the"debt ratio"), and will seek to maintain an even lower debt ratio.
5 The Company shall seek to borrow funds at the most favorable possible terms in consideration of the economic climate at the time ofborrowing, with a view to reducing the future effects of refinancing and achieving the lowest possible financing costs . The Company willcompare terms presented from several qualified institutional investors, such as ratio of fixed interest loan, borrowing periods, requirementof collateral for borrowing and so forth, to achieve the best possible terms. However, the financing costs may fluctuate due to changes in
unforeseeable economic conditions in instances where penalties, which may arise from prepayment of borrowings, will be determined by
the interest rate environment at that time.
6 The Company may establish lines of credit facility in advance, including a maximum line of credit facilities and a commitment line or

future loan agreements to finance timely in need of capital whenever it becomes necessary to acquire additional specified assets.
7 The Company may use its properties as collateral for borrowing funds.

Borrowing and repayment of funds in the near term will be based on the following points.
1 As a flexible response is required when borrowing funds for the additional acquisition of specific assets, short-term borrowing will be

the main means for procuring the necessary funds.
2 Short-term borrowing procured for the additional acquisition of specified assets shall be converted to long-term fixed-interest borrowing

or corporate bonds as appropriate, with reference to the finance environment, to achieve low and stable fund procurement costs.

(2) INVESTMENT ASSETS(i) Assets in which the Company may invest are as follows:
1 Real estate assets and real estate related securities

2 Other specified assets

1. The Company may invest in the following marketable securities:
a. Government bonds
b. Municipal government bondsc. Bonds issued by special legal entities under special law
d. Corporate bonds (except for convertible bonds, bonds with warrants and bonds with stock acquisition rights)
e. Specified corporate bonds issued by special purpose companies, as set forth in Article 2, Paragraph 1, Item 3-2 of the Securities andExchange Law
f. Commercial paper, as set forth in Article 2, Paragraph 1, Item 8 of the Securities and Exchange Law
g. Securities or certificates which fall within any of the types described in a. through f. above and which are issued by foreign
governments or foreign legal entities
h. Beneficiary certificates except for those described in section (i), 1 , II., 2. of (1) of the investment policy above

2

1

i. Certificates for shares of investment corporations except for those described in section (i), 1 , II., 3. of (1) of the investment policy above
j. Corporate bonds issued by investment corporations, as set forth in Article 2, Paragraph 25 of the Investment Trust Law
k. Shares issued by foreign investment corporations, as set forth in Article 220, Paragraph 1 of the Investment Trust Law
l. Trust beneficiary certificates of foreign loan receivables, as set forth in Article 2, Paragraph 1, Item 10 of the Securities and Exchange Law
m. Securities or certificates representing options, as set forth in Article 2, Paragraph 1, Item 10-2 of the Securities and Exchange Law
n. Depositary receipts denominated in Japanese yen of the same nature as for those in a. through d. above, as described in Article 2,
Paragraph 1, Item 10-3 of the Securities and Exchange Law
o. Negotiable certificates of deposit issued by foreign entities denominated in Japanese yen
p. Trust beneficiary certificates of loan receivables, as set forth in Article 2, Paragraph 2, Item 1 of the Securities and Exchange Law
q. Rights against a foreign entity which are of the same nature as the rights in item p. above
2. The Company may invest in monetary claims, with the exception of those described in Article 3, Items 1, 12 and 14 of the Cabinet Order.
3. The Company may invest in financial derivatives, as described in Article 3, Item 14 of the Cabinet Order.
(ii) Investment criteria and future investment plan in terms of property type, geographical location, and business sector and so forth
Please refer to (i) Basic Investment Policies and (ii) Guidelines for investment and management of portfolio real estate assets based on basic
investment policies under (1) Investment Policies above.

(3) DISTRIBUTION POLICYThe Company will make cash distributions subsequent to each fiscal period in accordance with the following guidelines.
(i)

In connection with the total cash amount to be distributed to shareholders, accounting profits will be calculated in accordance withthe generally accepted accounting principles in Japan (Japanese GAAP).

(ii)

In making cash distributions to the extent of accounting profits, the Company will distribute profits as cash distributions in excess of
90% of the taxable income as defined in Article 67- 15 of the Special Taxation Measures Law of Japan.

(iii)

At the appropriate discretion of the board of directors, the Company may, in accordance with Article 136, Paragraph 1 of theInvestment Trust Law, make distributions in excess of accounting profits based on the Cash Distribution Statement approved
pursuant to Article 131, Paragraph 1 of the Investment Trust Law.

(iv)

The Company is allowed to make distributions in excess of accounting profits to the extent of the amount equivalent to the aggregateof the amount of depreciation for the current period and the amount of accounting profits. However, in cases where cash
distributions for the relevant period do not exceed 90% of the "distributable amount" stipulated by Article 39-32-3 of the Cabinet
Order of Enforcement of the Special Taxation Measures Law of Japan, the Company may make distributions in excess of accounting
profits to the extent of 91% of such distributable amount.

(v)

Distributions need to be made in cash in proportion to the number of shares registered on the final records of shareholders(including the records of beneficial shareholders) as of the close of each fiscal period.

(vi)
2

2

In the event that the Company issues additional shares during a business period, the value of the dividends in connection withthose shares may be calculated on a daily pro-rated basis, as determined by the board of directors.

(vii) Besides the above provisions, the Company shall comply with the rules on investment trusts and investment corporations(established on March 16, 2001, as amended) stipulated by the Investment Trusts Association of Japan.
(viii) If investors need to calculate a gain or loss upon distribution in excess of accounting profits, the Company will not make
distributions in excess of accounting profits to the shareholders. However, the Company will be able to make distributions inexcess of accounting profits in the following three cases pursuant to clauses (i) through (vii) above.
1. Due to changes of the tax codes or other reasons, it becomes no longer necessary for an individual investor to calculate a gain or loss
upon distribution in excess of accounting profits for the period.
2. Due to changes of the tax codes or other reasons, the board of directors determines that it is appropriate to make distributions inexcess of accounting profits since it would become a common practice for an investor to file an individual tax return to report a gainor loss upon payouts.
3. The board of directors determines that it is necessary to make distributions in excess of accounting profits to meet the distribution
requirements.

(4) INVESTMENT RESTRICTIONSIn accordance with the Articles of Incorporation, the investment restrictions of the Company are as follows:
1 The Company shall not seek to invest aggressively in the marketable securities and monetary claims described in (2) Investment Assets

above, but rather make investment to secure stability and liquidity (Article 26 of the Articles of Incorporation).
2 The Company shall limit its trading activity in financial derivatives to the extent of hedging the interest rate volatility risks, with regard toits debts and other risks (Article 26 of the Articles of Incorporation).
3 In order to manage the portfolio of the Company in an efficient and stable manner, the Company may make borrowings or issue corporate

bonds (not in excess of ¥1 trillion) with a view to utilizing the proceeds thereof toward acquisitions of specified assets, capital
improvements of the real estate for lease and the underlying real estate of trust beneficiary rights and working capital (Article 30 of the
Articles of Incorporation).
4 The Company shall borrow only from qualified institutional investors (Article 30 of the Articles of Incorporation).

2

3

Financial Section
FINANCIAL OVERVIEW OF JAPAN REAL ESTATE INVESTMENT CORPORATION p.24
BALANCE SHEETSSTATEMENTS OF INCOME AND RETAINED EARNINGSSTATEMENTS OF CASH FLOWSSTATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

p.28
p.30
p.31

NOTES TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT

p.32
p.32
p.39

FINANCIAL OVERVIEW OF JAPAN REAL ESTATE INVESTMENT CORPORATION

1. Selected Financial Data
Millions of yen

For the period from
October 1, 2002 to
March 31, 2003

Thousands of U.S. dollars (Note 1)

For the period from
April 1, 2002 to
September 30, 2002

For the period fromMay 11, 2001 to
March 31, 2002

For the period from
October 1, 2002 to
March 31, 2003

Operating Revenues

8,500

7,910

6,492

70,722

Operating Expenses

4,812

4,523

3,530

40,040Operating Profits

3,687

3,386

2,961

30,682

Income before Income taxes

3,259

2,898

2,405

27,114Net Income

3,258

2,897

2,403

27,106

Total Assets

200,022

185,397

161,809

1,664,079

Interest-Bearing Liabilities

66,80054,00064,000555,740

Total Shareholders' Equity

115,410

115,049

83,663960,155

Shareholders' Capital

112,152

112,152

81,260933,048

Number of Shares

225,400

225,400

160,400

225,400

Total Shareholders' Equity per Share (Yen/U.S.dollars)

512,026

510,424

521,591

4,260

Cash Distribution

3,258

2,897

2,403

27,106

Dividend Payout Ratio

99.9%

99.9%

99.9%

99.9%

Dividend Per Share (YenU.S.dollars)

14,455

12,853

14,983120

Net Operating Income (NOI)

5,702

5,211

4,732

47,438

4,568

4,091

3,505

38,003Funds From Operations (FFO)
Return on Assets (ROA) (Note 2)

1.7% (3.4% annualized) 1.6% (3.2% annualized) 2.0% (3.6% annualized) 1.7% (3.4% annualized)

Return on Equity (ROE) (Note 3)

2.8% (5.7% annualized) 2.7% (5.4% annualized) 2.9% (5.2% annualized) 2.8% (5.7% annualized)

EOP Equity Ratio (Note 4)
EOP Interest-Bearing Debt Ratio on Total Assets (Note 5)

57.7%

62.1%

51.7%

57.7%

33.4%

29.1%

39.6%

33.4%

FFO Multiple

14.6 times

14.1 times

13.5 times

14.6 times

Debt Service Coverage Ratio (Note 6)

14.5 times

13.9 times

15.5 times

14.5 times

Note 1: Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥120.20=US$1.00, the foreign exchange rate on March 31, 2003, has beenused for translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S. dollars at that rateor any other rate.
Note 2: ROA = Income before Income Taxes ÷ Average of Total Assets during the period
Note 3: ROE = Net Income ÷ Average of Net Worth during the period(Annualized portions of the calculations given in notes 2 and 3 above assume a fiscal period of 203 days for the period ended March 31, 2002, 183 days for the period ended
September 30, 2002 and 182 days for the period ended March 31, 2003.)
Note 4: EOP Equity Ratio = (Net Worth at end of period ÷ Total Assets at end of period) x 100
Note 5: EOP Interest-Bearing Debt Ratio on Total Assets = (Interest-Bearing Debt at end of period ÷ Total Assets at end of period) x 100
Note 6: Debt Service Coverage Ratio = Net Income before Interest, Taxes, Depreciation and Amortization ÷ Interest Expenses

24

2. Cash Distribution
The cash distribution for the period from October 1, 2002 to March 31, 2003 consisted of almost all taxable income for the period, qualifying the Company forspecial tax treatment as stipulated in Article 67-15 of the Special Taxation Measures Law of Japan. The dividend per share was ¥14,455 ($120.26). With
225,400 shares outstanding, the cash distribution totaled ¥3,258,157 thousand ($27,106,131). Retained earnings carried forward totaled ¥98,645 ($821).
(From October 1, 2002 to March 31, 2003)

Net Income(¥ thousands)(U.S. dollars)

3,258,255

27,106,947

Retained earnings of beginning of period
Distribution

105

879

3,258,157

27,106,131

98

820

(Dividend per share : ¥14,455)
Retained earnings carried forward

3. Paid-In Capital
The Company was established with funding from Mitsubishi Estate Co., Ltd. (160 shares), The Tokio Marine and Fire Insurance Co., Ltd. (120shares) and The Dai-Ichi Mutual Life Insurance Company (120 shares), each share representing ¥500,000 ($4,160). Additional shares were
issued in an initial public offering at ¥525,000 ($4,368) each (acceptance price of ¥506,625 ($4,215)). An additional 65,000 shares were
issued on May 8, 2002, at ¥490,980 ($4,085) per share (acceptance price of ¥475,268 ($3,954)).
The company issued no shares in the period, and the total paid-in capital was unchanged.
Common shares outstanding

Increase
Payment date

Remarks

May 11, 2001

Private placement

400

Balance400

Paid-in capital

Increase

Balance(¥ millions)(U.S. $ thousands)(¥ millions)

200

1,663

200

(U.S. $ thousands)

1,663

September 10, 2001 Additional share issue (Initial Public Offering)

160,000

160,400

81,060674,376

81,260676,039

May 8, 2002

65,000225,400

30,892257,004

112,152

933,044

Additional share issue

The Company was listed on the Tokyo Stock Exchange on September 10, 2001. Market quotations from that time are as follows:
Month

High

Low

September 2001 (September 10, 2001 to September 28, 2001)¥550,000¥491,000

October 2001

¥551,000¥534,000

November 2001

¥549,000¥536,000

December 2001

¥542,000¥485,000

January 2002

¥510,000¥480,000February 2002

¥531,000¥499,000March 2002

¥560,000¥527,000

April 2002

¥524,000¥495,000

May 2002¥527,000¥497,000

June 2002¥525,000¥512,000

July 2002¥528,000¥518,000

August 2002

¥534,000¥520,000

September 2002

¥540,000¥505,000

October 2002

¥543,000¥508,000

November 2002

¥563,000¥531,000

December 2002

¥609,000¥552,000

January 2003

¥609,000¥560,000February 2003

¥595,000¥569,000March 2003

¥603,000¥573,000

April 2003

¥618,000¥591,000254. Overview of Borrowings
The following is a list of the Company’s borrowings showing amounts and lending institutions as of March 31, 2003.
Balance
Category(¥ millions)(U.S. $ thousands)

Average interest rate

Short-term debt The Bank of Tokyo-Mitsubishi, Ltd.
Mizuho Corporate Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
The Mitsubishi Trust & Banking Corporation
The Bank of Tokyo-Mitsubishi, Ltd.
Mizuho Corporate Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
The Mitsubishi Trust & Banking Corporation
The Chugoku Bank, Ltd.

1,250
1,250
1,250
1,250
1,200
1,200
1,200
1,200
2,000

10,39910,39910,39910,399
9,983
9,983
9,983
9,983
16,6380.897%

June 23, 2003 Purchase ofreal estate

Secured/
Unguaranteed/
Senior/Floating rate

0.888%

June 23, 2003 Purchase ofreal estate

Secured/
Unguaranteed/
Senior/Floating rate

0.543%

October 31, 2003 Purchase ofreal estate

The Bank of Tokyo-Mitsubishi, Ltd.
Mizuho Corporate Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
The Mitsubishi Trust & Banking Corporation
Subtotal
The Bank of Tokyo-Mitsubishi, Ltd.
Mizuho Corporate Bank, Ltd.

1,500
1,500
1,500
1,500
17,8006,000
6,000

12,47912,47912,47912,479148,087
49,91649,9160.889%

June 23, 2003 Purchase ofreal estate

Unsecured/
Unguaranteed/
Senior/Floating rate
Secured/
Unguaranteed/
Senior/Floating rate

1.120%The Sumitomo Trust & Banking Co., Ltd.
The Mitsubishi Trust & Banking Corporation
Sompo Japan Insurance Inc.

5,200
5,200
1,600

43,261
43,261
13,311

Anticipateddate forprincipal
repayment:
June 23, 2006
Final date forprincipal
repayment:
June 23, 2008

Subtotal

24,00041,800199,665
347,753

Long-term debt

LenderTotal

Due

Use of funds

Purchase ofreal estate
trust
beneficiaryrightsRemarks

Secured/
Unguaranteed/
Senior/Fixed rate

5. Bonds Issued by the Company
Our past corporate bond issues are as follows, as of March 31, 2003.
Total principal amounts of bonds
Issue priceInterest Rate
Closing Date
Guaranty
Redemption method/date¥25 billion (U.S. $ 207 million)¥100 (U.S.$ 0.83) (par value)
1.32% annually
June 21, 2002
Unsecured/unguaranteed
Principal redeemed in full on June 21, 2007
Cancellation upon repurchase may be made at any time

The following list shows details of the issue of corporate bonds that was approved at the Board of Directors’ meeting held on April 16, 2003. These
were fully paid up by April 30, 2003.
Second issue of corporate bonds
Total principal amounts of bonds
Issue priceInterest Rate
Closing Date
Guaranty
Redemption method/date¥10 billion (U.S. $ 83 million)¥100 (U.S.$ 0.83) (par value)
0.69% annually
April 30, 2003
Unsecured/unguaranteed
Principal redeemed in full on April 30, 2008
Cancellation upon repurchase may be made at any timeThird issue of corporate bonds
Total principal amounts of bonds
Issue priceInterest Rate
Closing Date
Guaranty
Redemption method/date2

6¥10 billion (U.S. $ 83 million)¥100 (U.S.$ 0.83) (par value)
0.98% annually
April 30, 2003
Unsecured/unguaranteed
Principal redeemed in full on April 30, 2010
Cancellation upon repurchase may be made at any time

Note: The Company repaid short-term borrowings of ¥15.8 billion yen (U.S. $131million) on June 23, 2003 with the net proceeds from the bond issue and its own capital.

6. Capital Expenditures for Existing Properties
a. PLANNED CAPITAL EXPENDITURES
The following table represents the main capital expenditures planned for renovations of existing properties, as of March 31, 2003. The total expected
construction amount includes portions that will be accounted for as ordinary expenses.

Expected construction amounts (Millions of yen)

Objective

Estimated duration(Millions of yen)(Thousands of U.S. dollars)

Planned payment forthe period underreview

Previously paid total

Functional maintenance(drainage-related equipment
works for toilets on standard
floors, and in common
corridors)

From April 2003 to
March 2004

392

3,261

–

–

Shiba 2-chome
Daimon Building(Minato-ku, Tokyo)

Upgrading (works to replace
the heating equipment forbuilding air conditioning)

From April 2003 to
May 2003

98

815

–

–

Niigata Ishizuecho NishiBandaibashi Building(Niigata-shi, Niigata)

Upgrading (refurbishment of
toilets on all floors)

From October 2003
to February 2004

46

382

–

–

Upgrading (renewal ofcommon areas)

From July 2003 to
December 2003

90

748

Upgrading (work on air
conditioning equipment inindividual rooms)

From April 2003 to
May 2003

30

249

–

–

Functional maintenance(replacement of water supply From July 2003 toand drainage pipes to theDecember 2003
toilets and oil supply room)

30

249

Total
Property(Location)

Shibuya Cross Tower(Shibuya-ku, Tokyo)

Kyoto Shijo
Kawaramachi Building(Kyoto-shi, Kyoto)b. CAPITAL EXPENDITURES DURING THE PERIOD ENDED MARCH 31, 2003
The following table represents the main capital expenditures for acquired properties during the period under review. Capital expenditures amounted to ¥609
million (U.S.$5,066 thousand), with repair and maintenance adding ¥323 million (U.S.$2,687 thousand) throughout the term for a total of ¥933 million(U.S.$7,762 thousand).
The main capital expenditures in the period under review were for "Lending-related works" on Genki Medical Plaza and other works, as listed below. Other works
on properties include regular replacement works and upgrading of toilets and other common facilities.

Construction amounts
Property(Location)

Objective(Millions of yen)(Thousands of U.S. dollars)

Genki Medical Plaza(Chiyoda-ku, Tokyo)

Lending-related works

77

640

Niigata Ishizuecho
Nishi-Bandaibashi Building(Niigata-shi, Niigata)

Upgrading (various works involved in groupcontrol).

26

216

506
609

4,209
5,066

Other properties
Total

c. CASH RESERVES AT END OF PERIOD (RESERVES FOR CAPITAL IMPROVEMENTS)
In order to prepare for renovation of facilities useful for maintaining the value of properties for the future, the Company accumulates cash reserves each period
for capital improvements that will be conducted based on the medium- to long-term renovation strategy formulated for each of the properties. Cash reserves overthe period under review were as follows:(Millions of yen)

For the period from
October 1, 2002 to
March 31, 2003

Reserve balance at the beginning of the period
Amount accumulated
Withdrawal from reserves
Amount carried forward

1,104
145
933
316

(Thousands of U.S. dollars)

For the period from
April 1, 2002 to
September 30, 2002

719
838
453
1,104

For the period from
October 1, 2002 to
March 31, 2003

9,185
1,206
7,762
2,629
2

7

JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETSAs of March 31, 2003 and September 30, 2002

Thousands of yen

U.S. dollars

As of March
31, 2003

As of September
30, 2002

As of March
31, 2003

15,459,422

19,990,003

128,614,160

Rental receivables

88,501

83,741

736,281Consumption tax refundable

59,32869,322

493,576

ASSETS
Current Assets:
Cash and bank deposits

Other current assets

48,82522,272406,200

15,656,076

20,165,338

130,250,217

Land

128,013,200

113,727,332

1,065,001,660

Buildings and structures

58,008,534

52,171,555

482,600,120

Machinery and equipment

1,153,238

1,036,947

9,594,326

Tools, furniture and fixtures

8,042

2,942

66,910187,183,014

166,938,776

1,557,263,016(3,604,570)(2,294,189)(29,988,104)

183,578,444

164,644,587

1,527,274,912

14,10014,100117,304

Total current assets

Property and Equipment, at Cost :Less accumulated depreciation
Net property and equipment

Investments and Other Assets:
Deposits
Long-term prepaid expenses

47,63957,656396,332

Leasehold rights

725,600

444,160

6,036,608

Deferred corporate bond issuance costs
Other
Total Assets
The accompanying notes form an integral part of these financial statements

2

8

–

70,786

–

454

454

3,774

200,022,313

185,397,081

1,664,079,147

Thousands of yen

As of March
31, 2003

U.S. dollars

As of September
30, 2002

As of March
31, 2003

LIABILITIESCurrent Liabilities:
Trade accounts payable

482,612

128,327

4,015,076

Other payables

646,408551,315

5,377,773

Short-term loans

17,800,000

5,000,000

148,086,523

Accrued expenses

188,747

169,243

1,570,105

975

914

8,107

Rent received in advance

1,335,442

1,219,158

11,110,167

Other current liabilities

22,141

23,443

184,368

20,476,325

7,092,400

170,352,119

Corporate bond

25,000,000

25,000,000

207,986,689

Long-term loans

24,000,000

24,000,000

199,667,221

Deposits from tenants

15,135,313

14,255,089

125,917,747

Total long-term liabilities

64,135,313

63,255,089

533,571,657

Total Liabilities

84,611,638

70,347,489

703,923,776

112,152,420

112,152,420

933,048,419

Accrued income taxes

Total current liabilities

Long-Term Liabilities:

SHAREHOLDERS’ EQUITY
Shareholders’ capital

3,258,255

2,897,172

27,106,952

Total shareholders’ equity

Retained earnings

115,410,675

115,049,592

960,155,371

Total Liabilities and Shareholders’ Equity

200,022,313

185,397,081

1,664,079,147

The accompanying notes form an integral part of these financial statements

2

9

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF INCOME AND RETAINED EARNINGSFor the six months ended March 31, 2003 and September 30, 2002
Thousands of yen

For the Period from
October 1, 2002 to
March 31, 2003

U.S. dollars

For the Period from
April 1, 2002 to
September 30, 2002

For the Period from
October 1, 2002 to
March 31, 2003

7,889,166

70,293,501

Operating Revenues and Expenses
Operating Revenues:
Rental revenues
Non-rental revenues

8,449,279
51,473

21,117428,232

8,500,752

7,910,283

70,721,733

Property-related expenses

4,109,157

3,893,229

34,185,995

Asset management fees

432,809382,270

3,600,744

Operating Expenses:

Administrative service fees

158,097

133,920

1,315,287

Other operating expenses

112,702113,996

937,618

4,812,765

4,523,415

40,039,644

Operating profits

3,687,987

3,386,868

30,682,089

Interest received

85

510

707

Other non-operating revenues

478

2,315

3,976

Non-Operating Revenues and Expenses
Non-Operating Revenues:

Non-Operating Expenses:
Interest expense

175,038

224,827

1,456,227

Interest expense on corporate bonds

164,096

91,315

1,365,190

Amortization of corporate bond issuance costs

70,78670,786

588,899–

70,760–New share issuance costs
Other non-operating expenses

19,48833,861

162,127

Income before Income Taxes

3,259,142

2,898,144

27,114,329

Current

991

1,017

8,248

Deferred

1

16

11

3,258,150

2,897,111

27,106,070

105

61

882

3,258,255

2,897,172

27,106,952

Income Taxes :Net Income
Retained Earnings at beginning of period
Retained Earnings at end of period
The accompanying notes form an integral part of these financial statements

30

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended March 31, 2003 and September 30, 2002
Thousands of yen

For the Period from
October 1, 2002 to
March 31, 2003

U.S. dollars

For the Period from
April 1, 2002 to
September 30, 2002

For the Period from
October 1, 2002 to
March 31, 2003

Cash Flows from Operating Activities
Income before income taxes

3,259,142

2,898,144

27,114,329

Depreciation and amortization

1,310,644

1,194,194

10,903,860

Loss on retirement of property and equipment

388

155

3,232

Amortization of corporate bond issuance costs

70,78670,786588,900

New share issuance costs–

70,760–Non-cash portion of interest income

(85)

(510)

(707)

Non-cash portion of interest expense

339,134

316,143

2,821,418

Rental receivables and other receivables(4,760)(24,462)(39,600)

9,995

645,171

83,153(26,995)

24,522(224,585)

Consumption tax refundable
Prepaid expenses
Other current assets
Trade accounts payable441

17,546

3,665

354,285(131,290)

2,947,462

Other payables

95,093260,090

791,127

Rent received in advance

116,284

220,910

967,419

Other current liabilities(1,302)

17(10,833)

Long-term prepaid expenses

10,017(3,972)

83,336

5,533,067

5,558,204

46,032,176

85

510

707

(319,651)(301,456)(2,659,325)

SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities(931)(1,434)(7,749)5,212,570

5,255,824

43,365,809(20,244,890)(20,703,536)(168,426,703)

Cash Flows from Investing Activities
Purchases of property and equipment
Purchases of intangible assets(281,439)–(2,341,428)

Proceeds from lease deposits received

1,569,063

2,354,100

13,053,772

Repayment of lease deposits
Net cash used in investing activities(688,839)(517,111)(5,730,777)(19,646,105)(18,866,547)(163,445,136)

Cash Flows from Financing Activities
Proceeds from short-term borrowings

12,800,000

5,000,000

106,489,185

Repayment of short-term borrowings–(40,000,000)–

Proceeds from corporate bond–

25,000,000–

Payments of corporate bond issuance costs–(141,572)–

Proceeds from issuance of shares–

30,892,420–

Payments of share issuance costs–(70,760)–(24,101,877)

Dividends to shareholders(2,897,046)(2,403,273)

Net cash provided by financing activities

9,902,954

18,276,815

82,387,308

Net Increase in Cash and Cash Equivalents(4,530,581)

4,666,092(37,692,019)

Cash and Cash Equivalents at beginning of Period

19,990,003

15,323,911

166,306,179

15,459,422

19,990,003

128,614,160

Cash and Cash Equivalents at end of Period
The accompanying notes form an integral part of these financial statements

3

1

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the six months ended March 31, 2003 and September 30, 2002

Shareholders’ equity
SharesThousands of yen

Balance as of March 31, 2002

160,400

83,663,334

5/8/02 Second public offering

65,00030,892,420–(2,403,273)

Cash dividends paid
Net income

U.S. dollars–

2,897,111

225,400

115,049,592

957,151,349

Cash dividends paid–

(2,897,067)(24,102,048)

Net income–

3,258,150

27,106,070

225,400

115,410,675

960,155,371

Balance as of September 30, 2002

Balance as of March 31, 2003
The accompanying notes form an integral part of these financial statements

JAPAN REAL ESTATE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
March 31, 2003 and September 30, 2002

1. Organization and Basis of Presentation
Organization
Japan Real Estate Investment Corporation (the “Company”) is a real estate investment corporation formed to own and invest primarily in a portfolio of
office properties. The Company is externally managed by a licensed asset management company, Japan Real Estate Asset Management Co., Ltd.
(“J-Rea”). J-Rea is currently owned 36% by Mitsubishi Estate Co., Ltd., 27% by The Tokio Marine and Fire Insurance Co., Ltd., 27% by The Dai-ichi
Mutual Life Insurance Company and 10% by Mitsui & Co., Ltd.
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by Mitsubishi Estate Co., Ltd., The Tokio Marine
and Fire Insurance Co., Ltd. and The Dai-ichi Mutual Life Insurance Company under the Law Concerning Investment Trusts and Investment Corporationsof Japan, or the Investment Trust Law.
On September 10, 2001, the Company commenced operations when the Company was listed on the Tokyo Stock Exchange as one of the first realestate investment corporations in Japan (so-called “J-REITs”). The Company issued 160,000 shares at a price of ¥525,000, generating gross proceeds of¥84,000 million. The proceeds from the offering of the shares, net of underwriters’ discount, were ¥81,060 million.
During the six-month period ended September 30, 2002, the Company issued additional shares and corporate bond. On May 8, 2002, the Company
completed a second offering of 65,000 shares at a price of ¥490,980, generating gross proceeds of ¥31,914 million. The proceeds from the offering of
the shares, net of underwriters’ discount, were ¥30,892 million. On June 21, 2002, the Company issued ¥25,000 million of unsecured corporate bonddue June 2007 with an interest rate of 1.32% to the qualified investors.
At March 31, 2003, the Company owned a portfolio of 30 office properties (27 office properties at September 30, 2002) containing an aggregate of
approximately 237,000 square meters of net rentable area.

Basis of presenting financial statements
The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles and practices generally
accepted and applied in Japan (“Japanese GAAP”), including provisions set forth in the Investment Trust Law, the Japanese Commercial Code, theSecurities and Exchange Law of Japan and the related regulations, which may differ in some material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.

32The accompanying financial statements are a translation of the audited financial statements of the Company, which were prepared in accordancewith Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically inorder to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include information thatmight not be required under Japanese GAAP but is presented herein as additional information.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥120.20=US$1.00, the foreign exchange rateon March 31, 2003, has been used for translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could bereadily converted, realized or settled into U.S. dollars at that rate or any other rate.
2. Summary of Significant Accounting Policies
Property and equipment
Property and equipment is stated at cost, less accumulated depreciation. The costs of land, buildings and building improvements include the purchaseprice of property, legal fees and acquisition costs. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets
ranging as stated below:
Buildings

2-61 years

Structures

10-42 years

Machinery and equipment

3-10 years

Tools, furniture and fixtures

3-6 years

Expenditures for repairs and maintenance are charged to operations as incurred. Significant renewals and betterments are capitalized.
Deferred charges
Deferred charges include bond issuance costs and share issuance costs. Bond issuance costs are amortized using the straight-line method over one
year. Share issuance costs were charged to operations when incurred. The underwriters’ commissions of the public offering were not reflected to thefinancial statements since such costs are not payable by the Company under the so-called “spread method”. Under the spread method, the difference
between the offer price (the price paid by the shareholder) and the purchase price (the price received by the Company) was directly distributed to theunderwriters. The amounts of the difference incurred at the second offering on May 8, 2002 was ¥1,021 million.
Revenue recognition
Revenues from leasing of office space are recognized as rent accrued over the lease period.
Taxes on property and equipment
Property and equipment is subject to property taxes and city planning taxes on a calendar year basis. These taxes are generally charged to expense
during the period. The sellers of the properties were liable for property taxes for the calendar year including the period from the date of purchase by theCompany through the end of the year since the taxes are imposed on the owner registered in the record as of January 1 based on the assessment madeby the local government. The Company paid the amount equivalent to the property taxes to the sellers applicable to the period since acquisition andincluded the amount equivalent to the taxes in the purchase price of each property and capitalized as cost of the property.
Consumption taxes
Consumption taxes withheld and consumption taxes paid are not included in the statements of income. The consumption taxes paid are generally offset
against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld are included in the current assets and theexcess of amounts withheld over payments are included in the current liabilities.

33

Cash and cash equivalents
The statements of cash flows is provided for information purposes only since it is not required to be prepared by the Investment Trust Law, the JapaneseCommercial Code, the Securities and Exchange Law of Japan and the related regulations. Cash and cash equivalents consists of cash on hand, deposits
placed with bank and short-term investments which are highly liquid, readily convertible to cash and with insignificant risk of price fluctuation, withoriginal maturity of three months or less.
3. Property and Equipment
Property and equipment at March 31, 2003 and September 30, 2002 consisted of the following:Thousands of yen

As of March 31, 2003

U.S. dollars

As of September 30, 2002

As of March 31, 2003

Acquisition Costs

Book Value

Acquisition Costs

Book Value

Acquisition Costs

Book ValueLand

70,119,385

70,119,385

55,833,517

55,833,517

583,355,945

583,355,945

Buildings and structures

33,239,959

Accumulated depreciation

1,750,083

Machinery and equipment

481,635

Accumulated depreciation

79,670Tools, furniture and fixtures

2,942

Accumulated depreciation

393

2,549
57,893,815

Land in trust

57,893,815

Buildings and structures in trust

24,768,575

Accumulated depreciation

1,656,072

Machinery and equipment in trust

671,603

Accumulated depreciation

118,241

Tools, furniture and fixtures in trust
Accumulated depreciation
Total

27,584,214
31,489,876

276,538,765

1,062,197

26,522,017

365,344
401,965

14,559,755
4,006,949

35,231

330,113662,811

2,942

24,474
2,813

3,268

21,20657,893,815

57,893,815

481,645,715

481,645,715

206,061,355

1,116,412

23,470,929

671,603553,362

13,777,637

591,383

983,705–
4,989

192,283,718

5,587,377

80,2205,100
111

3,344,138

129

24,587,341
23,112,503

261,979,010

4,603,672

42,436––

183,578,444

928

164,644,587

41,508
1,527,274,912

4. Short-Term Loans
Short-term loans at March 31, 2003 and September 30, 2002 consisted of the following:Thousands of yen

U.S. dollars

As of March
31, 2003

As of September
30, 2002

As of March
31, 2003

15,800,000

5,000,000

131,447,588

Secured loans from banks, trust banks with variable interest,
due on June 23, 2003.
0.5425% unsecured loan from a bank,due on October 31, 2003

2,000,000–

16,638,935

17,800,000

5,000,000

148,086,523

The weighted average interest rates applicable to the bank loans at March 31, 2003 and September 30, 2002 were 0.85210% and 0.89417%,
respectively per annum.

34

5. Long-Term Loans
Long-term loans at March 31, 2003 and September 30, 2002 consisted of the following:Thousands of yen

U.S. dollars

As of March
31, 2003

As of September
30, 2002

As of March
31, 2003

24,000,000

24,000,000

199,667,221

24,000,000

24,000,000

199,667,221

Secured loans from banks, trust banks and an insurance company
with variable interest, due on June 23, 2006.

The weighted average interest rate applicable to the loans at March 31, 2003 and September 30, 2002 was 1.120% per annum.
6. Secured Assets
At March 31, 2003 and September 30, 2002, the following assets were pledged as collateral for the following loans:Thousands of yen

U.S. dollars

Pledged assets:

As of March
31, 2003

As of September
30, 2002

As of March
31, 2003

Bank deposits

8,947,979

8,690,039

74,442,417

Land and leasehold rights

61,333,079

51,111,173

510,258,559

Buildings and structures

21,991,643

19,674,960

182,958,763

Machinery and equipment

477,295

498,550

3,970,844

Tools, furniture and fixtures

4,989

–

41,507

Total

92,754,985

79,974,722

771,672,090

Loans secured by the pledged assets:

As of March
31, 2003

Short-term loans
Long-term loans
Total

Thousands of yen

U.S. dollars

As of September
30, 2002

As of March
31, 2003

15,800,000

5,000,000

131,447,587

24,000,000

24,000,000

199,667,221

39,800,000

29,000,000

331,114,808

7. Shareholders’ Equity
The Company is required to maintain net assets of at least ¥50 million ($ 416 thousand), as required pursuant to the Investment Trust Law.

8. Income Taxes
At March 31, 2003, the Company’s deferred tax assets consist mainly of the enterprise tax, which is not deductible for tax purposes. The reconciliationof tax rate difference between the adjusted statutory tax rate and the effective tax rate for the six months ended March 31, 2003 and September 30,
2002 were as follows:
For the period from October 1, 2002
to March 31, 2003

For the period from April 1, 2002
to September 30, 2002

Statutory tax rate

39.39%

39.39%

Deductible dividend distribution(39.38%)(39.37%)

Others

0.02%

0.02%

Effective tax rate

0.03%

0.04%

3

5

The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation Measures Law ofJapan, or the STML, an investment corporation is allowed to deduct dividends of accounting profits, or dividend distributions, paid to investors from its
taxable income if certain tax requirements are satisfied. Such tax requirements include dividend distributions in excess of 90% of its taxable income forthe fiscal period as stipulated by Article 67-15 of the STML. Based on the distribution policy provided by Article 33-2 of the Articles of Incorporation, theCompany made a dividend distribution of approximately 100% of retained earnings in the amount of ¥3,258 million ($27,106 thousand) and treated it as
tax deductible dividend. The Company will not distribute the dividends in excess of accounting profit under Article 33-3 of the Articles of Incorporation.
9. Per Share Information
The following table summarizes information about net assets per share and net income per share at March 31, 2003 and September 30, 2002, and forthe periods then ended:Yen

For the Period
from October 1, 2002
to March 31, 2003

U.S. dollars

For the Period
from April 1, 2002
to September 30, 2002

For the Period
from October 1, 2002
to March 31, 2003

Net assets at period end per share

512,026

510,424

4,260

Net income per share

14,455

12,853120

In calculating the net assets per share, the amount of the net assets included the cash distribution declared in the subsequent period.
Net income per share is computed by dividing net income by the weighted average number of shares outstanding during each period. The weighted
average number of shares used in the calculation was 225,400 shares for the six months ended March 31, 2003 and September 30, 2002. 225,400
shares for the six months ended September 30, 2002 were calculated as if 65,000 additional shares issued on May 8th, 2002 had been issued on
April 1, 2002. Diluted net income per share has not been presented since no warrants and convertible bonds were outstanding during the period.
10. Related Party Transactions
The Company entered into the following related party transactions with Mitsubishi Estate Co. Ltd. and certain affiliates of Mitsubishi Estate Co. Ltd.,the Tokio Marine and Fire Insurance Co., Ltd., and Mitsui & Co., Ltd.
Thousands of yen

For the Period
from October 1, 2002
to March 31, 2003

Purchase of the properties

4,810,000

Property management fees

591,053

596,476

4,917,249

Commissions for property acquisition

150,000–

1,247,920–

Utilities

66,20974,367550,823

Insurance

41,071

4,010

341,686

Other operating expenses

8,562

1,640

71,229–500–

113,490

125,201

944,174

Repair and maintenance6

For the Period
from October 1, 2002
to March 31, 2003–

Due diligence costs

3

U.S. dollars

For the Period
from April 1, 2002
to September 30, 2002

11. Breakdown of Property-Related Revenues and Expenses
For the six months ended March 31, 2003 and September 30, 2002
Thousands of yen

Property-Related Revenues
Rental Revenues

U.S. dollars

For the Period
from April 1, 2002
to September 30, 2002

For the Period
from October 1, 2002
to March 31, 2003

8,500,752

7,910,283

70,721,733

8,449,279

7,889,166

70,293,501

For the Period
from October 1, 2002
to March 31, 2003

Rental revenues

6,047,782

5,520,576

50,314,327

Common area charges

1,480,427

1,442,741

12,316,361

Parking revenues

321,562

306,922

2,675,225

Other rental revenues

599,508

618,927

4,987,588

Non-Rental Revenues

51,473

21,117428,232

Cancellation charges

18,112

11,030150,687

Other miscellaneous revenues

33,361

10,087

277,545

4,109,157

3,893,229

34,185,995

1,076,170

1,121,506

8,953,163

Property-Related Expenses
Property management fees
Utilities expenses

711,475

769,500

5,919,096

Property and other taxes

626,500

628,567

5,212,145

Casualty insurance

21,65920,205

180,190

Repairs and maintenance323,293

152,2072,689,621

1,310,644

1,194,194

10,903,860

39,416

7,050

327,920

4,391,595

4,017,054

36,535,738

Depreciation
Other rental expenses
Profits
12. Leases

The Company leases office buildings and earns rent income. As of March 31, 2003 and September 30, 2002, the future lease revenue under the
non-cancelable operating leases are as follows:
Thousands of yen

As of March
31, 2003

U.S. dollars

As of September
30, 2002

As of March
31, 2003

Due within one year

3,567,829

2,856,633

29,682,440

Due after one year

22,733,111

17,557,395

189,127,379

Total

26,300,940

20,414,028

218,809,819

3

7

13. Subsequent Events
Issuance of Corporate Bonds
On April 30, 2003, the Company issued a ¥10,000 million ($ 83,195 thousand) 0.69% unsecured corporate bond which is due in 2008 and a ¥10,000
million ($ 83,195 thousand) 0.98% unsecured corporate bond which is due in 2010.
The Company intends to use the proceeds from the issuance of these corporate bonds for the repayment of short-term loans, etc.

Appropriation of retained earnings
On May 7, 2003, the Board of Directors resolved to effect the payment of a cash distribution of ¥14,455 per share aggregating ¥3,258 million($27,106 thousand) to shareholders at the record date of March 31, 2003.

3

8

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors and Shareholders ofJapan Real Estate Investment Corporation

We have audited the accompanying balance sheets of Japan Real Estate Investment Corporation as of March 31, 2003 and September 30, 2002, therelated statements of income and retained earnings, and changes in shareholders’ equity for the six months ended March 31, 2003 and September 30,
2002, all expressed in yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to independently
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied in Japan. Those standards,
procedures and practices require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements, expressed in yen, referred to above present fairly, in all material respects, the financial position of Japan Real
Estate Investment Corporation at March 31, 2003 and September 30, 2002, and the results of its operations for the six months ended March 31,
2003 and September 30, 2002 in conformity with accounting principles and practices generally accepted in Japan.
The U.S. dollar amounts in the accompanying financial statements with respect to the six-month period ended March 31, 2003 are presented solely forconvenience. We have also reviewed the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the financial statements.

Shin Nihon & Co.
Tokyo, JapanMay 19, 2003

See Note 1 to the financial statements, which explains the basis of presenting the financial statements of Japan Real Estate Investment Corporation underJapanese accounting principles and practices.

3

9About J-REIT System
J-REIT STRUCTURE AND RELATED ORGANIZATIONS
The organizational structure of the Company is shown in the diagram on the next page, but we feel it would be helpful to add a further explanation of therole played by each of the related organizations. Understanding this relationship is the key to understanding the overall J-REIT system. (Numbers in the
diagram correspond to the numbers below.)1) Investment Corporation: A special type of entity for the specific purpose of owning and operating real estate properties.
The investment corporation is a special type of entity, incorporated and operated under the Investment Trust Law, for the purpose of owning andoperating real estate properties using capital raised from investors. It has a board of directors and shareholders' meeting just like an ordinary
corporation under the Commercial Code of Japan, but since this structure of the investment corporation is simply a vehicle for owning and operating
real estate properties, it is not permitted under its articles of incorporation to engage in any other business activities.
The principal responsibility of the investment corporation is custody and management of its assets, as well as issuance of equity securities. The
corporation does not, however, control its assets directly, as all management functions must be outsourced to a licensed asset management company.
2) Tokyo Stock Exchange & 3) Investors: Buy and sell the Company's shares, and receive dividends.
Investors provide capital for the investment corporation and receive equity securities, just as they would receive shares of stock issued by an ordinary
corporation. Dividends are also paid to shareholders of record at the end of the fiscal period. Investors may also buy and sell the equity securities on theTokyo Stock Exchange just like shares of an ordinary corporation, and the same trading regulations apply.
4) Asset Management Company: Real estate trust fund manager.
The investment corporation may not manage its assets by itself, but must outsource the investment decision and administration work to an asset
management company. The asset management company, therefore, performs a vital role for the real estate investment corporation.
The asset management company is normally involved with the investment corporation from the time of its incorporation, and afterwards performs therole of fund manager for the real estate properties on consignment from the investment corporation. The asset management company must have a good
grasp of the properties held by the investment corporation, and manage the assets to achieve higher earnings. As necessary, it will sell off some of theassets or acquire new ones.
In this way, the asset management company performs a series of duties in accordance with the Investment Trust Law.
5) Asset Holding Company/Administration Outsourcer
The investment corporation consigns the property holding function (physical possession of the property deeds) or trust beneficiary certificates to trustbanks or similar organizations. Administrative functions such as the transfer of share certificates are also outsourced to trust banks or securities
companies, just like for shares of ordinary corporations.
6) Property Management Companies
The primary responsibility of the property management companies is to manage the maintenance and leasing of buildings. Building maintenanceinvolves proper upkeep of the property to ensure long-term profitability for the investment corporation, and leasing services include monthly invoicing
for rents and negotiating contract renewals.

40

ORGANIZATIONAL STRUCTURE OF JAPAN REAL ESTATE INVESTMENT CORPORATION

2) Tokyo Stock Exchange
4) Asset Management
Company
3) Investors

Shareholders’ Meeting
Japan Real Estate AssetManagement Co., Ltd.

Trade

Investors

Asset Management
Agreement
Cashdistribution

Trade

Stock
1) Investment Corporation
Investment

Investors

Instruction
Loans
Japan Real Estate Investment
Corporation

Interest
payments

Board

Property management
outsourcing

Rental Revenue

Investment

Financial Institutions(Qualified institutional
investors)

Asset custodyoutsourcing
Administration
outsourcing
5) Asset Holding Company

6) Property Management
Companies

Real estate
management

Office Buildings

Administration
Outsourcer
The Sumitomo Trust &Banking Co., Ltd.

4

1

ROLE OF SHAREHOLDERS IN J-REIT SYSTEM
Set out below, in further detail, is the role shareholders of the investment corporation play in the J-REIT system. In particular, we would like to present a
description of certain principal rights of the shareholders of an investment corporation under the Investment Trust Law, which is in effect as of March 31,
2003. This summary does not purport to be a comprehensive description of all of the rights of the shareholders under Japanese law that may be relevant
to an investment decision on the shares of the Company.
Voting Rights A shareholder with one or more shares is entitled to one vote for each share. Except as otherwise provided by law or by the Articles ofIncorporation, a resolution can be adopted at a general meeting of shareholders by a majority vote cast in writing or through proxies who are also
shareholders. Shareholders who do not attend and/or do not exercise their voting rights at the general meeting of shareholders will be deemed to be inagreement with proposals submitted at the meeting.
Except in certain minor circumstances, the voting rights of shareholders apply to the following resolutions:Appointment and dismissal of executive director, supervisory directors and independent auditors; approval of the execution or termination of theasset management agreement with an asset management company; consolidation of shares; mergers; dissolution; amendment to the Articles ofIncorporation; and any other matters so required by the Investment Trust Law, any other law or the Articles of Incorporation.
Other Rights of Shareholders
In addition to the rights set out above, shareholders have the following rights:
Dividends upon resolution of the board of directors;
Derivative action;
Right to sue for annulment of resolutions;
Right to request bar on the executive director to prevent misconduct;
Right to void newly issued shares;
Right to sue for the nullification of merger;
Right to make submissions to shareholders' meetings;
Right to convene a general meeting of shareholders;
Right to request the appointment of an inspector;
Right to request the removal of directors;
Right to request for the dissolution of an investment corporation; andRight to inspect books.
Consolidation or Split of Shares An investment corporation may (i) consolidate shares upon resolution of the general meeting of shareholders, or (ii)split shares into a greater number of shares upon resolution of the board of directors.
No Redemption/Repurchase of Shares As an investment corporation is a closed-end J-REIT, shareholders are not entitled to request forredemption/repurchase of their shares from an investment corporation.
Issue of Additional Shares and Subscription Rights Shareholders have no pre-emptive rights with respect to issuance of additional shares. Shares
may be issued at the times and upon the terms approved by resolution of the board of directors.
Liquidation In the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among theshareholders in proportion to the numbers of shares held.

42

Profile of J-Rea (Asset Management Company)

Organization
Shareholders’ Meeting
Auditors
Board of Directors

CEO & President

Planning Department

Finance and Accounting Department

Real Estate Investment Department

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Investor relations and disclosure
DUTIES PERFORMED FOR J-Rea* Planning and drafting ofmanagement strategies* General, labor and accounting
administration* In-house legal affairs* Negotiation with government
agencies and related groups* Research and analysis of realestate market

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Formulation of financing strategy* Equity financing* Debt financing* Cash management* Accounting and taxation

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Acquisition and disposal of realestate assets* Leasing and management of realestate assets

Compliance Department

Risk Management Department

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Duties related to compliance
DUTIES PERFORMED FOR J-Rea* Duties related to compliance

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Duties related to risk management
DUTIES PERFORMED FOR J-Rea* Duties related to risk management

Principal Shareholders
Shareholder

Address

Numbers of Shares

Percentage

Mitsubishi Estate Co., Ltd.

6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo

102,855

36%

The Tokio Marine and Fire Insurance Co., Ltd.

2-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo

77,142

27%

The Dai-ichi Mutual Life Insurance Company

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

77,14227%

Mitsui & Co., Ltd.

2-1, Otemachi, 1-chome, Chiyoda-ku, Tokyo

28,571

10%

Total

285,710

100%

4

3

Corporate Data
As of March 31, 2003

Executives

Transfer Agent

Executive Director : Yoneichiro Baba

The Sumitomo Trust & Banking Co., Ltd.

Supervisory Directors : Tsunaya Kawamura

5-33, Kitahama 4-chome, Chuo-ku, Osaka 540-8639, Japan

Kenji Kusakabe
Certified Public Accountants
Paid-in Capital¥112,152,420,000

Shin Nihon & Co.
Hibiya Kokusai Bldg.
2-3, Uchisaiwai-cho 2-chome, Chiyoda-ku, Tokyo 100-0011, Japan

Number of Shares Issued
225,400

Incorporation
May 11, 2001

Number of Shareholders
15,520Executive Office
Japan Real Estate Investment Corporation

Stock Listing

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo 100-0005, JapanTokyo Stock Exchange
For further information, please contact :Securities CodeJapan Real Estate Asset Management Co., Ltd.

8952

Planning Department, Manager
Toshiya Kobayashi
Tel: 81-3-3211-7921
Fax: 81-3-3212-8886
E-mail: toshiya-kobayashi@j-rea.co.jp

44This semiannual report includes translations of documents originally filed under the Securities and Exchange Law of Japan. This report was prepared in English solely for theconvenience of readers outside Japan and should not be considered as a disclosure statement. The original Japanese documents shall take precedence in the event of any discrepancies
arising from the translations or interpretations contained in this report.
Estimates for Japan Real Estate Investment Corporation's future operating results contained in this semiannual report are forward-looking statements and are based on information currently available to the Company and its asset management company and are subject to risks and uncertainties. Consequently, these projections should not be relied upon as the solebasis for evaluating Japan Real Estate Investment Corporation. Actual results may differ substantially from the projections depending on a number of factors.

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