Statement of Financial Performancefor the 32nd Fiscal Period
From: June 1, 2021
To: November 30, 2021

Stock
Code

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

https://www.daiwa-office.co.jp/en/

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

32nd Period 31st Period 30th Period 29th Period 28th Period

June 1, 2021 From Dec. 1, 2020 From June 1, 2020 From Dec. 1, 2019 From June 1, 2019
( From
To Nov. 30,2021 )( To May 31,2021 )( To Nov. 30,2020 )( To May 31,2020 )( To Nov. 30, 2019 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
13,882
15,054
14,84914,272
14,094
Rental revenues
13,846
13,887
14,482
14,23813,916
Operating expenses
6,531
6,917
7,133
6,959
6,980
Property-related expenses
5,146
5,454
5,696
5,540
5,584
Operating income
7,351
8,137
7,715
7,312
7,114
Ordinary income
6,784
7,550
7,125
6,688
6,463
Net income
6,799
7,549
7,124
6,687
6,462
(2) Properties, etc. (as of end of period)
Total assets
483,279
484,310488,570
487,212
486,030[period-on-period percentage changes][−0.2%][−0.9%][+0.3%][+0.2%][+0.1%]
Interest-bearing liabilities
202,350
203,350
204,450
204,450
204,450
Net assets
253,637
253,522
255,511
255,127
254,892[period-on-period percentage changes][+0.0%][−0.8%][+0.2%][+0.1%][+0.2%]
Note 2245,093
245,093
247,876
247,876
247,876
Unitholders’ capital, net(3) Distributions
Total distribution amount
6,833
6,833
6,796
6,687
6,462
Dividend payout
100.5%
90.5%
95.4%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)
488,088
488,088491,877
491,877
491,877
Net assets per unit (yen)519,655
519,419
519,462
518,681518,203
Distribution per unit (yen)14,00014,00013,817
13,595
13,139Distribution amount from earnings per unit (yen)14,00014,00013,817
13,595
13,139Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
1.4%
1.6%
1.5%
1.4%
1.3%
ROA
Notes 3and 4[annual rate][2.8%][3.1%][2.9%][2.7%][2.7%]
2.7%
3.0%
2.8%
2.6%
2.5%
ROE
Notes 4and 5[annual rate][5.3%][5.9%][5.6%][5.2%][5.1%]
Capital ratio
52.5%
52.3%
52.3%
52.4%
52.4%
[period-on-period percentage changes][+0.1%][+0.0%][−0.1%][−0.1%][+0.0%]LTV (loan to value)
41.9%
42.0%
41.8%
42.0%
42.1%
Note 6
Property leasing cash flows (NOI)
10,508
10,248
10,612
10,536
10,157(6) Other Referential Information
Number of investment properties
60
59
60
60
59
Note
7
641
625
629
645
637
Number of tenants
361,534.74 360,471.93 363,740.62 366,336.34 364,787.57
Total rentable area (m2)Note 8
97.8%
97.5%
98.9%
99.5%
99.1%
Occupancy rate
Depreciation
1,808
1,816
1,827
1,838
1,826
Capital expenditures
498
436
802
489
1,351
(Note 1) Operating revenues, etc. do not include consumption taxes, etc.
(Note 2) Unitholders’ capital, net: Unitholders’ capital − Deduction from Unitholders' Capital(Note 3) ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100(Note 4) Figures for the 28th Fiscal Period are the annualized figures calculated based on 183 days of management.
		 Figures for the 29th Fiscal Period are the annualized figures calculated based on 183 days of management.
		 Figures for the 30th Fiscal Period are the annualized figures calculated based on 183 days of management.
		 Figures for the 31st Fiscal Period are the annualized figures calculated based on 182 days of management.
		 Figures for the 32nd Fiscal Period are the annualized figures calculated based on 183 days of management.
(Note 5) ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100(Note 6) Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation(Note 7)	Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
(Note 8) Occupancy rate: Total leased area ÷ Total rentable area2

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred
to as “DOI”) was established on July 11, 2005, in accordance with the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951; including amendments thereto) with Daiwa Real Estate
Asset Management Co., Ltd. (former name K.K. daVinci Select) (the “Asset Manager”) as the organizer.
After its establishment, DOI implemented an additional issuance of investment units through a public
offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (TSE) Real
Estate Investment Trust Section (stock code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition price),
subsequent activities, such as additional acquisition of properties and replacement of portfolio properties,
resulted in the assets under management amounting to 463,388 million yen as of the last day of November
2021.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on
investment in a total floor area of more than about 2,000 m2 situated in downtown Tokyo, as well as
through dedicated efforts to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment
The Japanese economy during the fiscal period under review saw deterioration due to a significant
decrease in automobile production alongside a shortage of semi-conductors, etc. as well as a drop in
individual consumption due to the impact of the declarations of a state of emergency concerning
COVID-19 up until September 30, 2021. As a result, the real GDP growth rate (Second Preliminary
Estimates) for July to September 2021 sat at an annual rate of -3.6%, registering negative growth.
In the office building leasing market in central Tokyo, the vacancy rate had continued to be on an
improving trend since June 2013, but office consolidations and relocations to smaller offices due tofuture economic uncertainties and deterioration in business performance stemming from the spread of
COVID-19 and other reasons have led to contract cancellations and such, resulting in the vacancy rate
(Miki Shoji’s average vacancy rate for the five central wards of Tokyo) rising to 6.35% as of the end of
November 2021. Office rent had continued to rise, albeit slightly, but turned to a downward trend after
peaking in July 2020.
For the office building transaction market, a strong appetite for property acquisitions continued
among real estate companies, funds (including J-REITs) and overseas investors with the continuing
proactive lending attitude by financial institutions, and there has been no material impact of COVID-19.
Nevertheless, future developments warrant close monitoring.
(B) Management Performance
In view of increasing the ordinary EPS (EPS (net income per unit) after deducting gain on sale fromproperties) over the medium to long term, DOI continued to work on “external growth,” which aims toboost revenue through acquisition of properties, and “internal growth,” which aims to maximize income
generating from owned properties.
Concerning external growth, DOI acquired “Kandabashi PR-EX” (acquisition price: ¥1,970 million) in
September 2021. As a result, DOI’s assets under management as of the end of the 32nd Fiscal Period(November 30, 2021) totaled 60 properties, the sum total of acquisition prices of which amounted to463,388 million yen.
Concerning internal growth, DOI conducted proactive leasing, such as capturing needs for floor
expansion within the same property through strengthening relationships with existing tenants andreinforcing collaboration with leasing brokers and property managers. Consequently, the occupancy
rate as of the end of the 32nd Fiscal Period (November 30, 2021) was 97.8%.

I. Asset Management Report3(3) Overview of Capital Procurement(A) Procurement of Capital for Repayment of Borrowings
In the 32nd Fiscal Period, DOI made the following borrowings to fund the repayment of borrowings.
(i)	DOI took out loans of 1,000 million yen from Shinsei Bank, Limited on August 31, 2021, to fundthe repayment of the same amount borrowed from the same bank due for repayment on the sameday.
(ii)	DOI took out loans totaling 5,500 million yen from Sumitomo Mitsui Banking Corporation, theDevelopment Bank of Japan Inc. and MUFG Bank, Ltd. to fund the repayment of loans totaling
6,500 million yen. The remaining 1,000 million yen was repaid with cash on hand.
DOI concluded interest-rate swap agreements in the 32nd Fiscal Period for 15,400 million yen ofloans with floating interest rates. Converting the interest payable to fixed rates, these are for the
purpose of hedging against future interest rate fluctuation risks.
(B) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the
32nd Fiscal Period (November 30, 2021) stood at 202,350 million yen in total (short-term loans payable:
2,400 million yen; long-term loans payable: 190,950 million yen; investment corporation bonds: 9,000
million yen). The balance of the current portion of long-term loans payable stood at 31,600 million yen.
The average remaining period of interest-bearing liabilities as of the end of the 32nd Fiscal Period
stands at 3.9 years.
(4) Capital Expenditures during the 32nd Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures
implemented during the 32nd Fiscal Period for existing portfolio properties. Capital expenditures for the
32nd Fiscal Period amounted to 498 million yen and, when combined with the 166 million yen in repair
expenses charged to the 32nd Fiscal Period expenses, totals 664 million yen in construction work
implemented.
Name of real estate
properties(Location)

Purpose

PeriodConstruction
amount paid
(Millions of yen)

Daiwa Kayabacho(Chuo-ku, Tokyo)

Addition of humidifiers

From: June 2021
To: Sept. 2021

45

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation of air-conditioning facilities

From: Aug. 2021
To: Nov. 2021

32

Daiwa Ginza(Chuo-ku, Tokyo)

Upgrading of private power generation
facilities

From: Oct. 2021
To: Oct. 2021

22

Other

398
Total

498

(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 32nd Fiscal
Period of 13,882 million yen in operating revenue, 7,351 million yen in operating income, 6,784 million yen
in ordinary income and 6,799 million yen in net income.
Concerning distributions, it is planned that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxationof corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)). Accordingly, DOI decided to
distribute the entire amount in which 33,973,619 yen of reversal of internally reserved reserve for reduction
entry is added to unappropriated retained earnings, and as a result declared a distribution amount per unitof 14,000 yen.

4

3. Outlook for the Next Fiscal Period(1) Investment Environment
Although it continues to hover at low levels due to the impact of COVID-19 for the time being, theJapanese economy going forward is expected to head toward recovery with vaccinations, development oforal medications and other advancements in measures to contain the spread of COVID-19, as well as thelifting of the declarations of a state of emergency, leading to normalization of economic activities.
Nevertheless, the Japanese economy may slow down due to prolongation of the COVID-19 pandemic(spread of highly contagious variants, etc.), interest rate trends and other factors. Accordingly, carefulattention is required.
In the Tokyo office building leasing market, although recovery is expected with normalization of economic
activities going forward, developments in office consolidations and relocations to smaller offices triggeredby COVID-19 leading to the vacancy rate rising and rent dropping moderately mainly in central Tokyo
continue to warrant close monitoring.
In the office building transaction market, backed by the favorable financing environment, among otherfactors, the property acquisition appetite among overseas investors, real estate companies and funds(including J-REITs) is thought to remain strong. However, the prolongation of the COVID-19 pandemic,interest rate trends and other factors may impact future developments in the transaction market.
(2) Future Management Policy and Tasks(A) Strategy for Managing Existing Properties
As to macro trends for the office market, the trend of contraction of office space is ongoing given theimpact of partial cancellations due to review of excess space, etc. as well as consolidation of offices
and such as the pandemic drags on. On the other hand, new resilient demand mainly from small- to
medium-sized companies is being steadily obtained for class B buildings which is DOI’s main focus. In
addition, rents are being secured at slightly higher levels by advancing tenant replacement throughleasing activities offering flexible terms. Therefore, DOI considers that maintaining/improving
competitiveness of buildings to qualify as prime offices that can increase the productivity of employees
and accommodate needs of the times and environment will be the future issue, and is determined tocontinue carrying out operational management under the following policy.
(i) Maintain and raise occupancy rates
	Concerning existing tenants, strive to reduce cancellation risks by improving the quality ofbuildings, equipment and management system. In addition, concerning new tenants, strive tomaintain and raise occupancy rates through the provision of highly satisfactory services fromgaining deeper understanding of tenant needs through proactive involvement in the market.
(ii) Maintain and raise profitability
	Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(iii) Control operational management costs
	Strive to control operational management costs based on maintaining office environments withhigh tenant satisfaction levels by implementing efficient operational management and reviewing
systematic construction work through optimal leveraging of economies of scale achieved fromproactively realizing external growth.

I. Asset Management Report5(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000 m2 or more based on
various external growth strategies, while maintaining a balance with the asset acquisition environment
and financing situation. In principle, considerations will focus on Tokyo as the investment target area,
but DOI will also consider investing in competitive properties in cities other than Tokyo from a viewpointof territorially-distributed investments.
As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue
to search for properties that meet its investment criteria by proactively gathering real estate transaction
market information through greater collaboration with the Asset Manager and Sponsor Group andutilizing the Group’s extensive network of clients, partners, etc.
Moreover, during the 32nd Fiscal Period DOI acquired Kandabashi PR-EX located in Tokyo. The
acquisition is thought to further the stabilization and enhancement of the portfolio. DOI will continue toseek out property acquisitions in accordance with the above investment strategy.
Also, in order to acquire relatively new properties in prime locations and realize an increase inprofitability in the medium to long term in a competitive real estate transaction market environment,
DOI has launched efforts for acquiring land close to train stations in central Tokyo and developing new
office buildings.
(C) Financial Strategy
DOI will conduct disciplined financial management of the following basic content.
(i)	Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within therange of 40% to 50% at maximum, taking into consideration also the LTV, etc. based on appraisal
value, as a principle.
(ii)	Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interestbearing liabilities that shall become due during any single fiscal period as a principle.
(iii) Aim to have long-term loans account for at least 70% of balance of loans as a principle.
(iv) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(v)	Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount equivalent to distributions paid, separately from working
capital.

6

(D) Schedule of Capital Expenditures for the 32nd Fiscal Period
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the expected construction amountincludes portions that are expensed as a separate account item of accounting costs.

Name of real estate
properties(Location)

Expected construction amount(Millions of yen)
PurposeScheduled
implementation
periodDaiwa Ginza(Chuo-ku, Tokyo)

Upgrading of airconditioning facilities

From: Dec. 2021
To: May 2022

245

–

–

Daiwa Nakano-Sakaue(Nakano-ku, Tokyo)

Upgrading of airconditioning facilities

From: Dec. 2021
To: May 2022

100

–

–

Daiwa River Gate
(Chuo-ku, Tokyo)

Renovation of powerreceiving andtransforming facility

From: Dec. 2021
To: May 2022

64

–

–

Daiwa River Gate
(Chuo-ku, Tokyo)

Conversion to LED
lighting in exclusive
areas

From: Dec. 2021
To: May 2022

37

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation of airconditioning facilities

From: Dec. 2021
To: May 2022

36

–

–

Total
amountAmountpaid
duringcurrent
periodTotalamountalreadypaid

I. Asset Management Report7II. Balance Sheets
As of November 30, 2021 and May 31, 2021

(Thousands of yen)

As ofNovember 30, 2021

As of
May 31, 2021

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

30,291,436

32,211,634

Tenant receivables

189,915

195,627

Prepaid expenses

340,300

357,076

Other current assets

94,13883,509Total Current Assets

30,915,790

32,847,848

Land

12,302,226

12,302,226

Buildings and structures

3,336,791

3,312,516

Tools, furniture and fixtures

20,976

20,847

Construction in progress

4,703

3,786

Land in trust accounts (Note 15)355,212,305

353,434,357

Buildings and structures in trust accounts (Notes 14 and 15)

109,953,740

109,268,116

Machinery and equipment in trust accounts

924,505

884,250

Tools, furniture and fixtures in trust accounts

354,822333,390

Construction in progress in trust accounts

230,034

50,081(34,027,726)(32,219,362)

2,398,275

2,398,275

306,884

306,884

451,017,540

450,095,371

7

52

113,684

113,684

1,066,645

1,098,268

Derivative assets (Note 4)

19,157

3,956

Deferred investment corporation bond issuance costs

49,36054,391Others97,64696,758

1,346,501

1,367,112

483,279,832

484,310,332

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

Less: accumulated depreciation
Leasehold rights
Leasehold rights in trust accounts
Total Investment Properties, net
Investments and Other Assets:
TrademarkLease and guarantee deposits in trust accounts
Long-term prepaid expenses

Total Investments and Other Assets
Total Assets

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

8

(Thousands of yen)

As ofNovember 30, 2021

As of
May 31, 2021

Liabilities
Current Liabilities:
Accounts payable

813,836924,290

Short-term debt (Notes 4 and 11)

2,400,000

2,400,000

Long-term debt due within one year (Notes 4 and 11)

31,600,000

21,500,000

619,303

634,448880

888

Accrued consumption taxes

286,169

335,635

Rent received in advance

2,351,548

2,366,227

Other current liabilities

642,362

573,944

Total Current Liabilities

38,714,100

28,735,434

9,000,000

9,000,000

Long-term debt (Notes 4 and 11)

159,350,000

170,450,000

Tenant security deposits including trust accounts (Note 4)

22,318,907

22,215,041

Deferred tax liabilities (Note 16)

55,1502,240

Derivative liabilities (Note 4)

29,436

210,647

Other long-term liabilities

174,578

174,578

Total Long-Term Liabilities

190,928,072

202,052,507

229,642,173

230,787,942

251,551,759

251,551,759(6,458,395)(6,458,395)

245,093,364

245,093,364

Reserve for reduction entry

1,755,357

1,038,691

Retained earnings

6,799,258

7,549,897

253,647,979

253,681,953

Deferred gains or losses on hedges(10,319)(159,563)

Total valuation and translation adjustments(10,319)(159,563)

Total Net Assets

253,637,659

253,522,389

Total Liabilities and Net Assets

483,279,832

484,310,332

Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bonds (Notes 4 and 11)

Total Liabilities
Net Assets (Notes 9 and 17)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 488,088 units as ofNovember 30, 2021 and May 31, 2021
Deduction from unitholders’ capital
Unitholders’ capital, net

Total Unitholders’ Equity
Valuation and translation adjustments

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

9III. Statements of Income and Retained Earnings
For the fiscal periods ended November 30, 2021 and May 31, 2021

(Thousands of yen)

For the fiscal period
endedNovember 30, 2021

For the fiscal period
ended
May 31, 2021

13,846,420

13,887,151

35,944

140,695–

1,026,965

13,882,364

15,054,812

Property-related expenses (Note 8)

5,146,252

5,454,733

Asset management fees

1,153,133

1,188,807

Asset custody fees

24,171

24,303Administrative service fees

72,902

73,343

Trust fees

18,21918,786

Directors’ compensation

7,200

7,200

Other operating expenses

109,453

150,049

Total Operating Expenses

6,531,333

6,917,224

Operating Income

7,351,030

8,137,588

Interest income

15

15

Reversal of distribution payable

515

624

Insurance income

555

2,622

Other non-operating revenues

46

2,042

1,133

5,304

Interest expense

406,711419,271

Interest expense on investment corporation bonds

26,041

26,276

Borrowing expenses

128,321135,066

6,542

11,499567,617592,113

Ordinary Income

6,784,546

7,550,779

Income Before Income Taxes

6,784,546

7,550,779

Income taxes – current

881

889

Income taxes – deferred(15,593)(7)

Total Income Taxes (Note 16)(14,712)882

6,799,258

7,549,897

Retained Earnings Brought Forward––

Retained Earnings at End of Period

6,799,258

7,549,897

Operating Revenues (Note 7):
Rental revenues (Note 8)
Other revenues related to property leasing (Note 8)
Gain on sale of investment properties (Note 13)
Total Operating Revenues
Operating Expenses:

Non-Operating Revenues:

Total Non-Operating Revenues
Non-Operating Expenses:

Other non-operating expenses
Total Non-Operating Expenses

Net Income

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

10

III. Statements of Income and Retained Earnings

IV. Statements of Changes in Net Assets
For the fiscal periods ended November 30, 2021 and May 31, 2021

(Thousands of yen)

Unitholders’ Equity
Number of
Units(Units)Balance as ofNovember 30,
2020

Deduction
Reserve forUnitholders’fromUnitholders’
Reduction
Unitholders’ Capital, net
Capital
Entry
Capital491,877 251,551,759(3,675,523) 247,876,236

Retained
Earnings

Treasury
Investment
Units

710,209

7,124,746–

Deferred
Gains or
Losses on
HedgesTotal Net
Assets(199,648) 255,511,543

Cashdistributions
declared

–

–

–

–

–

(6,796,264)––(6,796,264)

Net income

–

–

–

–

–

7,549,897––

7,549,897

Provision ofreserve for
reduction
entry

–

–

–

–

328,482(328,482)–––

Acquisition oftreasury
investment
units

–

–

–

–

–

–

(2,782,872)–(2,782,872)

Cancellationof treasury
investment
units(Note 10)

(3,789)-(2,782,872)(2,782,872)––

2,782,872––

Net changesof items otherthanunitholders’equity

–

–

–

–

–

–

–

40,08540,085(6,458,395) 245,093,364

1,038,691

7,549,897–(159,563) 253,522,389

Balance as of
May 31, 2021

488,088 251,551,759

Cashdistributions
declared

–

–

–

–

–

(6,833,232)––(6,833,232)

Net income

–

–

–

–

–

6,799,258––

6,799,258

Provision ofreserve for
reduction
entry

–

–

–

–

716,665(716,665)–––

Net changesof items otherthanunitholders’equity

–

–

–

–

–

–

–

149,243

149,243(6,458,395) 245,093,364

1,755,357

6,799,258–(10,319) 253,637,659

Balance as ofNovember 30,
2021

488,088 251,551,759

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

IV. Statements of Changes in Net Assets

11

V. Statements of Cash Flows
For the fiscal periods ended November 30, 2021 and May 31, 2021

(Thousands of yen)

For the fiscal period
endedNovember 30, 2021

For the fiscal period
ended
May 31, 2021

Income before income taxes

6,784,546

7,550,779

Depreciation and amortization

1,811,785

1,819,933

5,030

5,003

432,753445,547

Decrease in tenant receivables

5,712

172,053

Decrease in accounts payable(109,090)(274,083)

Decrease in rent received in advance(14,678)(87,185)

Interest payments(432,867)(445,419)(Decrease) increase in accrued consumption taxes(49,466)

22,808–3,130,260

125,5631,154

8,559,288

12,340,850

Payments for purchases of investment properties
including trust accounts(2,750,110)(1,066,094)

Proceeds from tenant security deposits including trust
accounts

1,100,840

932,619

Refunds of tenant security deposits including trust
accounts(996,973)(1,167,853)(2,646,243)(1,301,328)

Proceeds from short-term debt–

2,400,000

Repayments of short-term debt–

(3,600,000)

Proceeds from long-term debt

6,500,000

16,800,000

Repayments of long-term debt

(7,500,000)(16,700,000)–(2,782,872)(6,833,242)(6,795,425)

Net Cash Used in Financing Activities(7,833,242)(10,678,297)

Net Change in Cash and Cash Equivalents(1,920,198)

361,225

Cash and Cash Equivalents at Beginning of Period

32,211,634

31,850,409

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

30,291,436

32,211,634

Cash Flows from Operating Activities:

Amortization of bond issuance costs
Interest expense

Decrease due to sale of investment properties in trust
accounts
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:

Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

Payments for acquisition of treasury investment units
Distributions paid

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

12

V. Statements of Cash FlowsVI. Notes to Financial Statements
For the fiscal periods ended November 30, 2021 and May 31, 2021

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred toas “DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts
and Investment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as
the “Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate AssetManagement (hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The AssetManager, as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating
office properties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public
offering of units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of November 30, 2021, DOI had ownership or trust beneficiary interests in 60 office properties withapproximately 361,534 m2 of rentable office space and had leased office space to 641 tenants engaged in avariety of businesses. The occupancy rate for the office properties was approximately 97.8 %.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in
the Investment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations,and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are
different in certain respects as to application and disclosure requirements of International Financial ReportingStandards or accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications havebeen made from the Japanese GAAP financial statements. Certain supplementary information included in thestatutory Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements. Certain reclassifications have been made to the prior period’s financial
statements to conform to the presentation for the current period.
DOI maintains its accounting records in Japanese yen. Amounts less than 1 thousand yen have beenrounded down. As a result, the total shown in the financial statements and notes does not necessarily agree
to sum of individual account balances.
DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

VI. Notes to Financial Statements

13

Note 2 – Summary of Significant Accounting Policies(a) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
(b) Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the trust beneficiary interests in trust. Investment property
balances are depreciated using the straight-line method over the estimated useful lives as follows:
As of November 30, 2021

As of May 31, 2021

Buildings and structures

2-64 years

2-64 years

Machinery and equipment

10-23 years

10-23 years

Tools, furniture and fixtures

4-15 years

4-15 years

Cost related to the renovation, construction improvement of properties is capitalized. Expenditures forrepairs and maintenance which do not add to the value or prolong the useful life of property, are expensed as
incurred.
(c) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over therespective terms of the bonds.
(d) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements
and income tax bases of assets and liabilities using the statutory rate.
(e) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Ownersof the properties are registered by records maintained in each jurisdiction by the local government. The taxes
are imposed on the registered record owner as of January 1 of each year, based on an assessment made by
the local government.
When a property is purchased within the calendar year, the taxes for the corresponding calendar year are
imposed on the seller. DOI pays the seller the corresponding amount of the taxes for the period from property
acquisition date to December 31 of the calendar year and capitalizes these amounts as acquisition costs ofthe property, rather than expensing them. In subsequent calendar years, such taxes on investment propertiesare charged as operating expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.
(Thousands of yen)

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Capitalized real estate taxes

1,602

–

(f) Consumption Taxes
Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset
against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld
is included in the current assets while the excess of amounts withheld over payments is included in thecurrent liabilities. Non-deductible consumption taxes relating to investment properties are amortized equally
over five years.

14(g) Hedge Accounting
DOI enters into derivative transactions for the purpose of hedging risks in the Articles of Incorporation of DOI
in accordance with its general risk management policy. DOI uses interest-rate swaps as hedging instruments
in order to hedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DOI
applies the special accounting treatment to interest-rate swaps which qualify for hedge accounting and meet
specific criteria. Under the special accounting treatment, the related differentials paid or received under suchswap contracts can be recognized and included in interest expense or income of the hedged assets or
liabilities, and the interest-rate swaps are not required to be measured at fair value separately. The assessmentof hedge effectiveness has been made each fiscal period except for interest-rate swaps which meet the
special criteria.
(h) Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and otheroperating revenues such as utility charge reimbursements, parking space rental revenues and other income.
Major contents of performance obligations relating to revenue arising from contracts with DOI’s customers
and general timing of satisfying such performance obligations (general timing of revenue recognition) are as
follows:(1) Sales of Investment Properties
Revenue is recognized at the time when a purchaser of the investment property as a customer obtains
control over the investment property by satisfying delivery obligation as described in a contract regarding
the sale of the investment property.
(2) Utility Charge Revenue
Utility charge revenue is recognized depending on the volume of supply of electricity, water and others
to a tenant as a customer based on the lease agreement of the related property and contents of ancillaryagreements. For utility charge revenue for which DOI is determined to be an agent, the net amount isrecognized as revenue, which is calculated by deducting the amount payable to other parties from utility
charges received by DOI for electricity, water and others supplied by those parties.
(i) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, all assets and liabilities with respect to assets in trust, as well as
all income generated and expenses incurred with respect to assets in trust, are recorded in the relevantbalance sheet and income statement accounts of the accompanying financial statements.
(j) Changes in Accounting Policy
Adoption of Accounting Standard for Revenue Recognition
From the beginning of the fiscal period ended November 30, 2021, DOI adopted “Accounting Standard for
Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, revised on March 31,2020) and other related guidance. DOI recognizes revenue at the time of the transfer of promised goods orservices to customers in an amount that reflects the consideration to which DOI expects to be entitled in
exchange for those goods or services.
In accordance with the transitional treatment as stipulated in paragraph 89-3 of the Accounting Standard for
Revenue Recognition, DOI is not providing notes to “Revenue Recognition” concerning the fiscal period
ended May 31, 2021.
The effect of adopting these standard and guidance on financial statements was immaterial.
Adoption of Accounting Standard for Fair Value Measurement
From the beginning of the fiscal period ended November 30, 2021, DOI adopted “Accounting Standard for
Fair Value Measurement” (ASBJ Statement No. 30, issued on July 4, 2019) and other related standards andguidance. The new accounting policies as stipulated in these standards and guidance are applied
prospectively in accordance with the transitional treatment as stipulated in Paragraph 19 of the AccountingStandard for Fair Value Measurement and Paragraph 44-2 of the Accounting Standard for Financial
Instruments (ASBJ Statement No. 10, issued on July 4, 2019). The effect of adopting these standards andguidance on financial statements was immaterial.

VI. Notes to Financial Statements15

In accordance with the provision of Article 2, paragraph (5) of the Supplementary Provisions of the “Cabinet
Office Order Partially Amending the Regulation on Terminology, Forms, and Preparation Methods of Financial
Statements” (Cabinet Office Order No. 61 of September 24, 2021), the matters specified in the provision of
Article 8-6-2, paragraph (1), item (iii) of the Regulation on Terminology, Forms, and Preparation Methods ofFinancial Statements following the amendment are omitted.
The effect of adopting these standard and guidance on financial statements was immaterial.
(k) Accounting Estimates
Impairment of long-lived assets
Amount of investment properties recorded on the financial statements as of November 30, 2021 and May
31, 2021 were as follows:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Tangible fixed assets

448,312,380

447,390,211

Intangible fixed assets

2,708,043

2,711,464

DOI reviews investment properties for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset or asset group may not be recoverable in conformity with the accounting
standard for impairment of long-lived assets. The book value of investment properties has been reduced to its
recoverable amount when the invested amount may not be recoverable due to decrease in profitability.
DOI’s investment properties are grouped on an individual asset basis. DOI reviews the investment properties
for impairment when factors such as consecutive operating losses, significant decline in the market price,
deteriorated business environment and others related to investment properties indicate the carrying amount ofan asset may not be recoverable.
An impairment loss is recognized if the carrying amount of an asset exceeds the sum of the undiscounted
future cash flows expected from the asset. In such a case, the book value of the asset is reduced to therespective recoverable amount and the difference between the book value and recoverable amount isrecorded as an impairment loss.
Future cash flows used in determining recoverable amounts are measured by comprehensive judgement on
estimates based on market trends on rental revenues, occupancy rates, rental expenses and other factors aswell as transaction information of similar properties.
Operating results and market prices of each investment property may be affected by trends in the property
leasing market and property trading market. It is possible to have an impact on DOI’s financial position andresults of operations in the next fiscal period if assumptions used in estimates change.

16Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as ofNovember 30, 2021 and May 31, 2021 consisted of the following:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Cash and deposits

26,650,594

28,515,172

Cash and deposits in trust accounts

3,640,841

3,696,461

Cash and cash equivalents

30,291,436

32,211,634

Note 4 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment
units for acquisition and renovation of investment properties, cash distributions of dividends and repayment ofbank borrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate andwell-diversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets andsecurities (in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising fromliabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment
properties and repay or redeem outstanding borrowings and bonds. These borrowings and bonds are
exposed to liquidity risk. Such risk is managed in ways such as maintaining the LTV ratio at low levels,
diversifying maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders.
For the floating-rate borrowings exposed to the risk of future interest rate fluctuations, DOI uses derivativetransactions (interest-rate swap) as hedging instruments, in order to avoid interest rate fluctuations and to fix
the amount of interest payments for floating-rate borrowings.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount ofcash flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items.
The assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria
under the special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in
the risk management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits
in the event of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds.
Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks
such as bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in shortterm deposit and setting a minimum credit rating requirement for the depository financial institutions(excluding deposits for settlement purposes).
Supplemental Explanation regarding Fair Value of Financial Instruments
Since certain assumptions and factors are reflected in estimating the fair value, different assumptions andfactors could result in a different value. Also, the contractual amounts of derivative transactions do not
represent the market risk involved in these derivative transactions.

VI. Notes to Financial Statements

17

(b) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of November 30, 2021 and May 31, 2021 wereas follows:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents

30,291,436

30,291,436–

32,211,634

32,211,634

–

Total

30,291,436

30,291,436–

32,211,634

32,211,634–

Short-term debt

2,400,000

2,400,000–

2,400,000

2,400,000–

Long-term debt
due within one year

31,600,000

31,600,412

412

21,500,000

21,523,879

23,879Investment
corporation bonds

9,000,000

9,024,050

24,0509,000,000

8,979,070(20,930)

Long-term debt

159,350,000

158,874,541(475,458)

170,450,000

170,268,022(181,977)

Total

202,350,000

201,899,003(450,996)

203,350,000

203,170,972(179,027)(15,056)(15,056)–(232,803)(232,803)–

Liabilities

Derivativetransactions (*)(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parenthesis indicating the net
liability position.

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

18

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

As of November 30, 2021
Hedged item

Contracted amount

Fair value (*1)

Total

Due after one year

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

Long-term debt

100,300,000

76,500,000(15,056)

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

Long-term debt

28,900,000

28,900,000– (*2)

129,200,000

105,400,000(15,056)(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

As of May 31, 2021
Hedged item

Contracted amount

Fair value (*1)

Total

Due after one year

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

Long-term debt

99,800,000

82,800,000(232,803)

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

Long-term debt

20,500,000

20,500,000– (*2)

120,300,000

103,300,000(232,803)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate
swaps are processed as a single unit with the hedged long-term debt.

2. Financial instruments whose fair value is deemed extremely difficult to determine
Tenant security deposits including trust accounts (whose book values were 22,318,907 thousand yen and22,215,041 thousand yen as of November 30, 2021 and May 31, 2021, respectively) that have been depositedby tenants were excluded from the scope of fair value disclosure because they are immaterial.
3. Redemption schedule for monetary claims(Thousands of yen)

As of November 30, 2021

Due within
one year

Due after Due after Due after
two tothree toone totwo years three years four years

Due after
four tofive years

Due after
five years

Cash and cash equivalents

30,291,436

–

–

–

–

–

Total

30,291,436

–

–

–

–

–

(Thousands of yen)

As of May 31, 2021

Due within
one year

Due after Due after Due after
two tothree toone totwo years three years four years

Due after
four tofive years

Due after
five years

Cash and cash equivalents

32,211,634

–

–

–

–

–

Total

32,211,634

–

–

–

–

–

VI. Notes to Financial Statements

19

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

Due within
one year

As of November 30, 2021
Short-term debt
Investment corporation bonds

Due after Due after Due after
two tothree toone totwo years three years four years

Due after
four tofive years

Due after
five years

2,400,000

–

–

–

–

–

–

–

3,800,000

1,500,000–

3,700,000

Long-term debt

31,600,000 26,200,000 26,200,000 20,550,000 22,400,000 64,000,000

Total

34,000,000 26,200,000 30,000,000 22,050,000 22,400,000 67,700,000(Thousands of yen)

Due within
one year

As of May 31, 2021
Short-term debt
Investment corporation bonds

Due after Due after Due after
two tothree toone totwo years three years four years

Due after
four tofive years

Due after
five years

2,400,000

–

–

–

–

–

–

–

–

3,800,000

1,500,000

3,700,000

Long-term debt

21,500,000 30,600,000 25,600,000 27,350,000 20,700,000 66,200,000

Total

23,900,000 30,600,000 25,600,000 31,150,000 22,200,000 69,900,000

Note 5 – Tangible Fixed Assets of Investment Properties
Investment properties as of November 30, 2021 and May 31, 2021 consisted of the following:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Acquisition AccumulatedBook value
cost
depreciation

Acquisition AccumulatedBook value
cost
depreciationLand

12,302,226–

12,302,226

12,302,226–

12,302,226

Buildings andstructures

3,336,791(2,690,509)

646,2813,312,516(2,617,068)

695,448

Tools, furniture andfixtures20,976(16,039)

4,936

20,847(15,075)

5,771

Construction inprogress

4,703

–

4,703

3,786

–

3,786

Land in trust
accounts

355,212,305–

355,212,305

353,434,357–

353,434,357

Buildings andstructuresin trust accounts

109,953,740(30,559,769)

79,393,971

109,268,116(28,874,659)

80,393,456

Machinery andequipmentin trust accounts

924,505(544,085)

380,419884,250(512,570)

371,680

Tools, furnitureand fixturesin trust accounts

354,822(217,321)

137,500

333,390(199,989)

133,400

Construction inprogressin trust accounts

230,034–

230,034

50,081–50,081(34,027,726) 448,312,380

479,609,573

Total

20

482,340,106(32,219,362) 447,390,211

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

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Book value: (Note 1)
Balance at beginning of period

450,041,503

454,562,081

741,299(4,520,578)

Balance at end of period

450,782,802

450,041,503

Fair value (Note 3)

577,590,000

572,160,000

Change during the period (Note 2)(Note 1) The book value represents the acquisition cost less accumulated depreciation.
(Note 2)	Significant changes
		For the fiscal period ended November 30, 2021, the major reason for the increase is acquisition of “Kandabashi PR-EX” (1,970,000
thousand yen). The major reason for the decrease is depreciation (1,808,363 thousand yen). For the fiscal period ended May 31,
2021, the major reason for the decrease is disposition of “Daiwa Kyobashi Building” (3,130,260 thousand yen) and depreciation(1,816,503 thousand yen).
(Note 3)	The fair values as of November 30, 2021 and May 31, 2021 were determined by the sum of appraisal values provided by external
real estate appraisers.

Note 7 – Revenue Recognition
Information on breakdown of revenues arising from contracts with customers for the fiscal period ended
November 30, 2021 was as follows:(Thousands of yen)

For the fiscal period ended November 30, 2021
Revenues arising fromcontracts with customers(Note)
Sales of investment properties

Sales to externalcustomers––

975,711975,711Other–

12,906,653

Total

975,711

13,882,364

Utility charge revenues(Note)	Rental revenues and other revenues relating to property leasing for which “Accounting Standards for Lease Transactions” (ASBJ
Statement No. 13) is applied are not included in revenues arising from contracts with customers because the Accounting Standard
for Revenue Recognition is not applied to such revenues. Major revenues arising from contracts with customers are sales ofinvestment properties and utility charge revenues.

VI. Notes to Financial Statements

21

Note 8 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended November 30, 2021 and May 31, 2021 were as
follows:(Thousands of yen)

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Revenues from property leasing:
Rental revenues

13,846,420

13,887,151

35,944

140,695

13,882,364

14,027,847

1,049,643

1,036,453

Utilities expenses

870,406

774,452

Taxes and dues

1,147,461

1,145,554

Insurance expenses

20,33819,940

Repair expenses

166,756

583,977

1,808,363

1,816,503

83,281

77,850Total rental expenses

5,146,252

5,454,733

Income from property leasing

8,736,111

8,573,113

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

Depreciation
Other

Note 9 – Net Assets
DOI issues non-par value units in accordance with the Investment Trust Act and all of the amounts issued
are designated as stated capital. DOI maintains a minimum of 50 million yen of net assets as required by theInvestment Trust Act.

Note 10 – Treasury Investment Units
Cancellation of treasury investment units as of November 30, 2021 and May 31, 2021 were as follows.
(Thousands of yen)

As of November 30, 2021
Total number of own investments units
cancelled (units)
Total amount of cancellation

As of May 31, 2021

9,781

9,781

6,458,395

6,458,395

Total number of treasury investment units cancelled and total amount of cancellation during the fiscal period
ended May 31, 2021 were 3,789 units and 2,782,872 thousand yen, respectively.

22

Note 11 – Short-Term Debt, Long-Term Debt Due Within One Year,
Long-Term Debt and Investment Corporation Bonds
Short-term debt, long-term debt due within one year, long-term debt and investment corporation bonds asof November 30, 2021 and May 31, 2021 consisted of the following:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

0.3% unsecured short-term loans due 2022,
principally from banks

2,400,000

2,400,000

Total

2,400,000

2,400,000

190,950,000

191,950,000

1.0% unsecured bond due 2024

2,100,000

2,100,000

0.2% unsecured bond due 2024

1,700,000

1,700,000

0.3% unsecured bond due 2025

1,500,000

1,500,000

0.6% unsecured bond due 2030

2,400,000

2,400,000

0.7% unsecured bond due 2031

1,300,000

1,300,000

199,950,000

200,950,000

Unsecured loans due 2021 to 2031, principallyfrom banks and insurance companies withinterest rates mainly ranging from 0.1% to
0.8%

Total

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

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of November
30, 2021 were as follows:(Thousands of yen)

Due within
one year
Short-term debt, long-term
debt and investment
corporation bonds

Due after Due after Due after
two tothree toone totwo years three years four years

Due after
four tofive years

Due after
five years

34,000,000 26,200,000 30,000,000 22,050,000 22,400,000 67,700,000

Note 12 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of November 30,
2021 and May 31, 2021 were as follows:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Due within one year

9,185,785

9,486,733

Due after one year

18,786,130

17,694,040

Total

27,971,915

27,180,774

VI. Notes to Financial Statements

23

Note 13 – Gain on Sale of Investment Properties
No investment properties were sold during the fiscal period ended November 30, 2021.
Gain on sale of investment properties for the fiscal period ended May 31, 2021 was as follows:(Thousands of yen)

For the fiscal period ended
May 31, 2021
Daiwa Kyobashi Building:
Proceeds from sale of investment property

4,200,000

Cost of selling investment property(3,130,260)

Other expenses related to sale(42,774)

Gain on sale of investment property

1,026,965

Note 14 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings intrust as of November 30, 2021 and May 31, 2021.

Note 15 – Reduction of Investment Properties Acquired through Exchange
The following amounts were deducted from the acquisition cost of the investment property in trust acquired
through exchange as of November 30, 2021 and May 31, 2021.
(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Buildings and structures in trust accounts

182,846

182,846

Land in trust accounts

887,074

887,074

1,069,921

1,069,921

Total

Note 16 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct
the amount distributed to its unitholders from its taxable income when certain requirements, including arequirement to distribute in excess of 90% of distributable profit for the fiscal period, are met under theSpecial Taxation Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act,the entire taxable income of DOI will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to beable to deduct such amount from taxable income.
The following table summarizes the significant difference between the statutory tax rate and DOI’s effective
tax rate for financial statement purposes.
(%)

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Statutory tax rate

31.46

31.46

Deductible cash distributions(31.69)(28.47)–(2.99)

Others0.01

0.01

Effective tax rate

(0.22)

0.01

Provision of reserve for reduction entry

24

The significant components of deferred tax assets and liabilities as of November 30, 2021 and May 31, 2021
were as follows:(Thousands of yen)

As of November 30, 2021

As of May 31, 2021

Deferred tax assets:
Accrued enterprise tax

13

13

11,81774,484

11,83074,498Reserve for reduction entry

59,90075,494

Deferred gains on hedges

7,080

1,244

Total deferred tax liabilities

66,98076,738Net deferred tax liabilities(55,150)(2,240)

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

Note 17 – Per Unit Information
Information about earnings per unit for the fiscal periods ended November 30, 2021 and May 31, 2021, net
assets per unit as of November 30, 2021 and May 31, 2021 were as follows:(Yen)

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Earnings per Unit:
Net income per unit

13,93015,412

Weighted average number of units
outstanding (units)

488,088489,860(Yen)

As of November 30, 2021
Net Assets per Unit

As of May 31, 2021

519,655

519,419

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

VI. Notes to Financial Statements

25

Note 18 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. DOI has
determined to pay out as earnings distributions a total amount of dividends for the fiscal period ended
November 30, 2021 of 6,833,232,000 yen after adding the amount of reversal of reserve for reduction entry tounappropriated retained earnings and a total amount of dividends for the fiscal period ended May 31, 2021 of
6,833,232,000 yen which is the largest integral multiple of the total number of investment units issued andoutstanding (488,088 units), not in excess of unappropriated retained earnings after deducting provision ofreserve for reduction entry as stipulated in Article 65-7 of the Special Taxation Measure Act of Japan fromunappropriated retained earnings. Furthermore, DOI does not pay out dividends that exceed accounting
profits as outlined in Article 32-2 of DOI’s Articles of Incorporation.
(Yen)

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
I

Unappropriated retained earnings

II

Reversal of voluntary reserves
Reversal of reserve for reduction entry

III Cash distributions declared
IV

Voluntary reserves
Provision of reserve for reduction entry

V Retained earnings brought forward

6,799,258,381

7,549,897,400

33,973,619–

6,833,232,000

6,833,232,000–

716,665,400––

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

For the fiscal period ended For the fiscal period ended
November 30, 2021
May 31, 2021
Cash distributions per unit
Board of directors meeting dates

14,00014,000January 20, 2022

July 19, 2021

Note 19 – Related-Party Transactions
No related-party transaction was entered into for the fiscal periods ended November 30, 2021 and May 31,
2021.
DOI became a consolidated subsidiary of Daiwa Securities Group Inc., which is listed in Tokyo Stock
Exchange, Inc. and Nagoya Stock Exchange, Inc. during the fiscal period ended May 31, 2021.

26

Note 20 – Segment Information
For the fiscal periods ended November 30, 2021 and May 31, 2021
Segment Information
Segment information has been omitted as DOI has only one segment, which is property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements of income
and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for more than 90%
of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for more than
90% of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of theoperating revenues recorded in the statements of income and retained earnings.

Note 21 – Significant Subsequent Events(a) Acquisition and Divestment of Assets Through Replacement
DOI acquired and divested the trust beneficial interests in real estate through replacement on December 16,
2021 as described below.
Overview of the replacement
Agreement date

October 20, 2021

Replacement date

December 16, 2021

Counterparty of thereplacement

World Residential Co., Ltd.
Nichimo Real Estate Co., Ltd.

Overview of the acquired assets
Property nameKandasudacho 2-Chome Development Site (Land)

Asset type

Trust beneficial interest in domestic real estate

Location (lot number)

19-19 and 17 other parcels of land, Kanda Suda-cho 2-chome, Chiyoda-ku, Tokyo

Acquisition price

10,600,000 thousand yen (excluding acquisition costs, consumption tax, etc.)

SellerWorld Residential Co., Ltd. and Nichimo Real Estate Co., Ltd.

Overview of the divested assets
Property nameDaiwa Minami-Aoyama

Asset type

Trust beneficial interest in domestic real estate

Sale price (Note)

4,990,000 thousand yen

Purchaser

World Residential Co., Ltd.

(Note)

Daiwa Kojimachi 4-chome
3,200,000 thousand yen

The sale price excludes settlement amounts of property taxes, city planning taxes, consumption taxes, etc.

VI. Notes to Financial Statements

27

(b) Borrowing of Funds
DOI borrowed funds on January 31, 2022. These funds were allocated for acquisition of the properties
described in “(a) Acquisition and Divestment of Assets Through Replacement.”
Details of borrowings
Balance(Thousandsof yen)Interest rate

1,000,000

3 monthJapanese yen
TIBOR+0.250%(Note)

Sumitomo Mitsui
Trust Bank, Limited

1,000,000

3 monthJapanese yen
TIBOR+0.200%(Note)MUFG Bank, Ltd.

950,000

Shinsei Bank, Ltd.

500,000

LenderSumitomo Mitsui
Banking Corporation

3 monthJapanese yen
TIBOR+0.250%(Note)

Borrowingdate

Repayment
methodNote

Maturity

January 31,
2025

January 31,
2022

Bulletpayment

Unsecured

September 30,
2024

January 31,
2025(Note)	Interest payments shall be paid at the end of February, May, August and November (if any such date is not a business day, it will be
the following business day; if such date falls within the next month, the preceding business day of the month will be the paymentday). Interest rate is calculated based on the 3 month Japanese Yen TIBOR which Japanese Bankers Association announces twobusiness days prior to the first day of the applicable period.

28

VII. Independent Auditor’s ReportVII. Independent Auditor’s Report

29

30

VII. Independent Auditor’s Report

31

VIII. Investor Information
History of Investment Unit Price
Investment unit price (left axis)(Yen) 1,000,000

Trading volume (right axis)

10,000 (Units)

900,000

9,000

800,000

8,000

700,000

7,000

600,000

6,000

500,000

5,000

400,000

4,000

300,000

3,000

200,000

2,000

100,000

1,000

0

0

2019 2020
Dec. Jan. Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug. Sept.

Oct.

Nov.

Dec.

2021
Jan. Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug. Sept.

Oct.

Nov.

Overview of Investment Units and Unitholders (As of November 30, 2021)■ No. of Investment Units by Investor Type
32nd
Fiscal Period

Individuals/others
12,994 units (2.7%)

Financial institutions
151,031 units (30.9%)■ No. of Unitholders
by Investor Type
Foreigners 104,466 units (21.4%)

Total: 488,088 units
Other domestic corporations 200,285 units (41.0%)

31st
Fiscal Period

Individuals/others
13,618 units (2.8%)

Financial institutions
148,266 units (30.4%)

Securities firms 19,312 units (4.0%)

Foreigners 110,543 units (22.6%)

Total: 488,088 units
Other domestic corporations 200,346 units (41.0%)

Financial institutions

100(1.8%)

Other domestic
corporations

98(1.8%)

Foreigners

270(5.0%)

Securities firms

20(0.4%)

Total

5,423

IR Calendar
Number ofPercentage
Units Owned
Share(Units)January 20, 2022: Announcement of financial results for
32nd Fiscal Period

1. Daiwa Investment Management Inc.

128,905

26.4

February 14, 2022: Sending of Japanese version of Business
Report for 32nd Fiscal Period(Statement of Financial Performance)

2. Daiwa Securities Group Inc.

67,321

13.8

February 15, 2022: Start paying distributions for
32nd Fiscal Period

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

52,61010.8

4. Custody Bank of Japan, Ltd. (Trust Account)

39,9058.2

5. STICHTING PENSIOEN FONDS ZORG EN WELZIJN

17,8593.7

Nov.
End offiscal period

Aug.
July

Jan.

6.

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

14,279

2.9

7.

Custody Bank of Japan, Ltd.
(Securities Investment Trust Account)

10,735

2.2

8. SMBC Nikko Securities Inc.

7,373

1.5

July 2022: Announcement of financial resultsfor 33rd Fiscal Period

9. BNYM AS AGT/CLTS 10 PERCENT

6,496

1.3

4,705

1.0

August 2022: Sending of Japanese version of Business
Report for 33rd Fiscal Period(Statement of Financial Performance)

10. STATE STREET BANK WEST CLIENT - TREATY 505234(Note) The percentage share figures are rounded to the second decimal place.

32

4,935
(91.0%)

Securities firms 15,315 units (3.1%)

Top Ten Unitholders (As of November 30, 2021)
Name of Investor

Individuals/others

End offiscal period

Feb.

May

August 2022: Start paying distributions for33rd Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

Held at least once every two years

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

Date prescribed in Article 15 of the Articles of Incorporation

Reference date for finalizing payment of
distributions

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

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

Newspaper in which notice is posted

Nikkei Inc.

Manager of Unitholder Registry, etc.

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

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-8233 Phone 0120-782-031 (toll-free in Japan)

Service counter

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

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

Daiwa Office Investment Corporation

https://www.daiwa-office.co.jp/en/

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

VIII. Investor Information

33