Statement of Financial Performancefor the 30th Fiscal Period
From: June 1, 2020
To: November 30, 2020

6-2-1 Ginza, Chuo Ward, Tokyo

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

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

Fiscal Period

30th Period 29th Period 28th Period 27th Period 26th Period

June 1, 2020 From Dec. 1, 2019 From June 1, 2019 From Dec. 1, 2018 From June 1, 2018
( From
To Nov. 30,2020 )( To May 31,2020 )( To Nov. 30, 2019 )( To May 31, 2019 )( To Nov. 30, 2018 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
14,84914,272
14,094
13,833
13,193
Rental revenues
14,482
14,23813,916
13,628
13,164
Operating expenses
7,133
6,959
6,980
6,853
6,658
Property-related expenses
5,696
5,540
5,584
5,479
5,344
Operating income
7,715
7,312
7,114
6,979
6,535
Ordinary income
7,125
6,688
6,463
6,320
5,902
Net income
7,124
6,687
6,462
6,320
5,901
(2) Properties, etc. (as of end of period)
Total assets
488,570
487,212
486,030
485,636479,212[period-on-period percentage changes][+0.3%][+0.2%][+0.1%][+1.3%][+2.6%]
Interest-bearing liabilities
204,450
204,450
204,450
204,450
198,950
Net assets
255,511
255,127
254,892
254,460
254,124[period-on-period percentage changes][+0.2%][+0.1%][+0.2%][+0.1%][+0.2%]
Note 2
247,876
247,876
247,876
247,876
247,876
Unitholders’ capital, net(3) Distributions
Total distribution amount
6,796
6,687
6,462
6,177
5,901
Dividend payout
95.4%
100.0%
100.0%
97.8%
100.0%(4) Per Unit Information
Total number of units issued (units)491,877
491,877
491,877
491,877
491,877
Net assets per unit (yen)519,462
518,681518,203517,324
516,641
Distribution per unit (yen)13,817
13,595
13,13912,55911,997
Distribution amount from earnings per unit (yen)13,817
13,595
13,13912,55911,997
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
1.5%
1.4%
1.3%
1.3%
1.2%
ROA
Notes 3and 4[annual rate][2.9%][2.7%][2.7%][2.6%][2.5%]
2.8%
2.6%
2.5%
2.5%
2.3%
ROE
Notes 4and 5[annual rate][5.6%][5.2%][5.1%][5.0%][4.6%]
Capital ratio
52.3%
52.4%
52.4%
52.4%
53.0%
[period-on-period percentage changes][−0.1%][−0.1%][+0.0%][−0.6%][−1.3%]LTV (loan to value)
41.8%
42.0%
42.1%
42.1%
41.5%
Note 6
Property leasing cash flows (NOI)
10,612
10,536
10,157
9,962
9,553(6) Other Referential Information
Number of investment properties
60
60
59
59
58
Note 7
629
645
637
639
624
Number of tenants
363,740.62 366,336.34 364,787.57 364,375.19 360,958.95
Total rentable area (m2)Note 8
98.9%
99.5%
99.1%
97.1%
98.9%
Occupancy rate
Depreciation
1,827
1,838
1,826
1,813
1,734
Capital expenditures
802
489
1,351
471
1,738
(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 26th Fiscal Period are the annualized figures calculated based on 183 days of management.
		 Figures for the 27th Fiscal Period are the annualized figures calculated based on 182 days of management.
		 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.
(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 is counted
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 and Investment
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 theassets under management amounting to 464,878 million yen as of the last day of November 2020.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear portfolio
development policy of specializing in investment in office buildings, with a particular focus on investment in a
total floor area of more than about 2,000m2 situated in downtown Tokyo, as well as through dedicated efforts toheighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment
The Japanese economy during the fiscal period under review saw real GDP growth rate (Second
Preliminary Estimates) for July to September 2020 at an annual rate of +22.9%, a substantial rate of
growth on the rebound of the previous period when it had declined due to the impact of COVID-19, under
the ongoing quantitative/qualitative monetary easing policy of the Bank of Japan.
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 to future
economic uncertainties stemming from the spread of COVID-19 and other reasons have led to contract
cancellations and such, resulting in the vacancy rate rising to 4.33% at the end of November 2020. Officerent had continued to rise, albeit slightly, with the trend of improvement in the vacancy rate, but showed adownward 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 “Nihonbashi-Bakurocho 1-Chome Development Site (land)”(acquisition price: 3,775 million yen) in November 2020 as the development site of DOI’s first development
project. In addition, DOI divested “Daiwa Shimbashi 510” (sale price: 2,530 million yen) in November
2020. As a result, DOI’s assets under management as of the end of the 30th Fiscal Period (November 30,2020) totaled 60 properties, the sum total of acquisition prices of which amounted to 464,878 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 and

I. Asset Management Report3

reinforcing collaboration with leasing brokers and property managers. Consequently, the occupancy rate
as of the end of the 30th Fiscal Period (November 30, 2020) was 98.9%.
(3) Overview of Capital Procurement(A) Procurement of Capital for Repayment of Borrowings
In the 30th Fiscal Period, DOI made the following borrowings and issuance of investment corporation
bonds to fund the repayment of borrowings.
(i)	DOI took out loans of 7,600 million yen in total from Sumitomo Mitsui Banking Corporation, MUFG
Bank, Ltd., Kansai Mirai Bank, Ltd. and The Musashino Bank, Ltd. on August 31, 2020, to fund therepayment of the same amount borrowed from the same banks that was due for repayment on thesame day.
(ii)	DOI issued the seventh series of unsecured investment corporation bonds of 1,500 million yen andeighth series of unsecured investment corporation bonds of 2,400 million yen on September 11,
2020, as green bonds to be issued in accordance with a green finance framework to fund part of therepayment of short-term loans of 5,000 million yen in total due for repayment on January 29, 2021.
(iii)	DOI took out loans of 9,000 million yen in total from Sumitomo Mitsui Banking Corporation,
Development Bank of Japan Inc., Shinsei Bank, Ltd., Mizuho Trust and Banking Co., Ltd. and The
Higashi-Nippon Bank, Ltd. on November 30, 2020, to fund the repayment of the same amountborrowed from the same banks that was due for repayment on the same day.
On September 30, 2020, DOI conducted early repayment of short-term loans for 3,900 million yen out of 5,000
million yen in total borrowed from Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd.
and Sumitomo Mitsui Trust Bank, Ltd.
DOI concluded interest-rate swap agreements in the 30th Fiscal Period for 22,100 million yen of loans withfloating 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 30th
Fiscal Period (November 30, 2020) stood at 204,450 million yen in total (short-term loans payable: 3,600
million yen; long-term loans payable: 191,850 million yen; investment corporation bonds: 9,000 millionyen). The balance of the current portion of long-term loans payable stood at 24,200 million yen.
The average remaining period of interest-bearing liabilities as of the end of the 30th Fiscal Period stands
at 4.0 years.
(4) Capital Expenditures during the 30th Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures implemented
during the 30th Fiscal Period for existing portfolio properties. Capital expenditures for the 30th Fiscal Periodamounted to 802 million yen and, when combined with the 670 million yen in repair expenses charged to the30th Fiscal Period expenses, totals 1,473 million yen in construction work implemented.
Name of real estate
properties(Location)
Daiwa Shibaura(Minato-ku, Tokyo)
E SPACE TOWER(Shibuya-ku, Tokyo)
Daiwa Aoyama(Shibuya-ku, Tokyo)

PurposeUpgrading of air-conditioning facilities
Upgrading of air-conditioning facilities
Upgrading of air-conditioning facilities

Other

From: June 2 0 2 0
To: Nov. 2 0 2 0
From: June 2 0 2 0
To: Nov. 2 0 2 0
From: Feb. 2 0 2 0
To: Nov. 2 0 2 0Construction
amount paid
(Millions of yen)
147
108
60
486

Total

4

Period802

(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 30th Fiscal Periodof 14,849 million yen in operating revenue, 7,715 million yen in operating income, 7,125 million yen in ordinary
income and 7,124 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 taxation of
corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)). Accordingly, retaining 328,482,467 yenfrom application of “Special Provisions for Taxation in Cases of Repurchase of Specified Assets” (Article 65-7 ofthe Special Taxation Measures Act) as reserve for reduction entry, DOI decided to distribute the entire amountremaining after deducting provision of reserve for reduction entry from unappropriated retained earnings(excluding fractions of the distribution amount per unit that are less than 1 yen), and declared a distribution
amount per unit of 13,817 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment
It was expected that the Japanese economy going forward would continue to expand backed by solid trends
in personal spending against the backdrop of a favorable employment environment and improved income
environment while the monetary easing policy implemented by the Bank of Japan continued. However, it ismore likely that the economy will remain sluggish, falling below the potential growth rate. In addition, since theJapanese economy may slow down due to prolongation of the COVID-19 pandemic, careful attention isrequired.
In the Tokyo office building leasing market, with office consolidations and relocations to smaller offices
triggered by COVID-19 leading to the vacancy rate rising and rent dropping moderately mainly in central Tokyo,
future developments warrant close monitoring.
In the office building transaction market, backed by the favorable financing environment, among other factors,
the property acquisition appetite among overseas investors, real estate companies and funds (including J-REITs)
is thought to remain strong. However, changes in economic developments with the spread of COVID-19 andother 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 office market is expected to weaken temporarily over the
short term, mainly in Tokyo, since the vacancy rate is rising partly due to the impact of prolongation of
COVID-19. However, given that there is strong demand from head office functions being inclined to belocated in central Tokyo and such, the market for prime locations in central Tokyo is believed to remain
stable over the medium to long term. Going forward, needs for offices are likely to vary for companies inline with the diversification of work styles and places. 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 of buildings,
equipment and management system. In addition, concerning new tenants, strive to maintain andraise occupancy rates through the provision of highly satisfactory services from gaining 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 with hightenant satisfaction levels by implementing efficient operational management and reviewing
I. Asset Management Report5systematic construction work through optimal leveraging of economies of scale achieved fromproactively realizing external growth.
(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on
various external growth strategies, while maintaining a balance with the asset acquisition environment
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.
Furthermore, in the 30th Fiscal Period, DOI acquired “Nihonbashi-Bakurocho 1-Chome Development
Site (land)” located in Tokyo. The acquisition is DOI’s first development project, and is positioned as aproject that can be expected to achieve rejuvenation of the portfolio and also improvement in mediumto long-term profitability. DOI will continue to strive to acquire properties in line with the investment
strategy described above, while carefully discerning potential opportunities to consider suchdevelopment projects.
(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.
(D) Schedule of Capital Expenditures for the 30th 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 amount includes portions
that are expensed as a separate account item of accounting costs.

Name of real estate
properties(Location)
Daiwa Sasazuka Tower(Shibuya-ku, Tokyo)
Daiwa Tsukishima(Chuo-ku, Tokyo)
Daiwa River Gate
(Chuo-ku, Tokyo)
Daiwa Ebisu 4-chome(Shibuya-ku, Tokyo)
Daiwa Shibadaimon(Minato-ku, Tokyo)

6

PurposeRenovation ofcommon-use areas
Upgrading of airconditioning drain
Renovation of powerreceiving andtransforming facility
Renovation of exterior
walls
Renovation of airconditioning facilities

Scheduled
implementation
periodExpected construction amount(Millions of yen)TotalamountAmount paid
duringcurrent
periodTotalamountalreadypaid

From: Dec. 2 0 2 0
To: May 2 0 2 1
From: Dec. 2 0 2 0
To: May 2 0 2 1

89

–

–

62

–

–

From: Dec. 2 0 2 0
To: May 2 0 2 1

38

–

–

From: Dec. 2 0 2 0
To: May 2 0 2 1
From: Dec. 2 0 2 0
To: May 2 0 2 1

35

–

–

18

–

–

I. Asset Management Report7II. Balance Sheets
As of November 30, 2020 and May 31, 2020

(Thousands of yen)

As ofNovember 30, 2020

As of
May 31, 2020

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

31,850,409

31,349,701

Tenant receivables

367,681

265,445

Prepaid expenses

334,706

351,399

Other current assets

70,12066,852

Total Current Assets

32,622,918

32,033,400

Land

12,302,226

12,302,226

Buildings and structures

3,302,055

3,291,666

Tools, furniture and fixtures

20,207

20,207

Construction in progress

4,555

3,829

Land in trust accounts

356,251,046

354,391,051

Buildings and structures in trust accounts

109,697,467

109,281,898

Machinery and equipment in trust accounts

893,239

884,623

Tools, furniture and fixtures in trust accounts

315,131

297,798

Construction in progress in trust accounts

33,44629,061(30,924,452)(29,297,679)

2,398,275

2,398,275

306,884

306,884

454,600,083

453,909,843

107

161

113,684

113,684

Long-term prepaid expenses

1,051,039

1,046,864

Deferred tax assets (Note 14)

16,150–

Deferred investment corporation bond issuance costs

59,39531,997

Others107,144

76,917

1,347,522

1,269,624

488,570,524

487,212,868

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

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, 2020

As of
May 31, 2020

Liabilities
Current Liabilities:
Accounts payable

1,673,045

929,601

Short-term debt (Notes 4 and 9)3,600,000

5,000,000

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

24,200,000

33,300,000

672,515646,330

723

996

Accrued consumption taxes

312,827

393,369

Rent received in advance

2,453,412

2,341,174

Other current liabilities

608,779

576,816

Total Current Liabilities

33,521,303

43,188,288

9,000,000

5,100,000

Long-term debt (Notes 4 and 9)

167,650,000

161,050,000

Tenant security deposits including trust accounts (Note 4)

22,450,275

22,391,925

–

8,220

Derivative liabilities (Note 4)257,802

162,509

Other long-term liabilities

179,599

184,620

Total Long-Term Liabilities

199,537,677

188,897,276

233,058,980

232,085,565

251,551,759

251,551,759(3,675,523)(3,675,523)

247,876,236

247,876,236

710,209710,209

7,124,746

6,687,380

255,711,192

255,273,826

Deferred gains or losses on hedges(199,648)(146,523)

Total valuation and translation adjustments(199,648)(146,523)

Total Net Assets

255,511,543

255,127,303

Total Liabilities and Net Assets

488,570,524

487,212,868

Accounts payable – other
Income taxes payable

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

Deferred tax liabilities (Note 14)

Total Liabilities
Net Assets (Notes 8 and 15)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 491,877 units as ofNovember 30, 2020 and May 31, 2020
Deduction from unitholders’ capital
Unitholders’ capital, net
Reserve for reduction entry
Retained earnings
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, 2020 and May 31, 2020
(Thousands of yen)

Operating Revenues:
Rental revenues (Note 7)

For the fiscal period
endedNovember 30, 2020

For the fiscal period
ended
May 31, 2020

14,482,210

14,238,965

Other revenues related to property leasing (Note 7)
Gain on sale of investment properties (Note 11)
Total Operating Revenues

31,325336,387

18,247
15,435

14,849,922

14,272,648

Operating Expenses:
Property-related expenses (Note 7)

5,696,598

5,540,802

Asset management fees
Asset custody fees
Administrative service fees
Trust fees

1,199,825
24,32479,286
19,536

1,168,091
24,29473,442
19,439Directors’ compensation
Other operating expenses
Total Operating Expenses

7,200
107,151

7,200
126,692

7,133,923

6,959,962

Operating Income
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Insurance income
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
Other non-operating expenses
Total Non-Operating Expenses

7,715,998

7,312,685

17
623
14,706
220

15
630
5,267
5,471

15,567

11,385450,182
20,796130,0965,319

480,295
16,751
134,367
4,354

606,394

635,767

Ordinary Income

7,125,172

6,688,302

Income Before Income Taxes
Income taxes – current
Income taxes – deferred
Total Income Taxes (Note 14)

7,125,172

6,688,302

725
13

998
(5)

738

993

Net Income
Retained Earnings Brought Forward
Retained Earnings at End of Period

7,124,433
313
7,124,746

6,687,309
71
6,687,380

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, 2020 and May 31, 2020

(Thousands of yen)

Unitholders’ Equity
Number of
Deduction
Reserve for
Units
Unitholders’fromUnitholders’
Retained(Units)Capital Unitholders’ Capital, Net Reduction Earnings
Entry
CapitalBalance as ofNovember 30, 2019
Cash distributions
declared
Net income
Net changes of
items other thanunitholders’ equity
Balance as of
May 31, 2020
Cash distributions
declared
Net income
Net changes of
items other thanunitholders’ equity
Balance as ofNovember 30, 2020

491,877 251,551,759(3,675,523) 247,876,236

710,2096,462,843

Deferred
Gains or
Losses on
HedgesTotal Net
Assets(156,854) 254,892,434

－

－

－

－

－

(6,462,771)－(6,462,771)

－

－

－

－

－

6,687,309－

6,687,309

－

－

－

－

－

－

10,33010,330(3,675,523) 247,876,236

710,2096,687,380

491,877 251,551,759(146,523) 255,127,303

－

－

－

－

－

(6,687,067)－(6,687,067)

－

－

－

－

－

7,124,433－

7,124,433

－

－

－

－

－

－

(53,125)(53,125)(3,675,523) 247,876,236

710,209

7,124,746

491,877 251,551,759(199,648) 255,511,543

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, 2020 and May 31, 2020
(Thousands of yen)

For the fiscal period
endedNovember 30, 2020

For the fiscal period
ended
May 31, 2020

Income before income taxes

7,125,172

6,688,302

Depreciation and amortization

1,830,601

1,842,226

3,818

2,855

Interest expense

470,979

497,046

Increase in tenant receivables(102,235)(77,667)

Increase in accounts payable

413,565

145,649

Increase (decrease) in rent received in advance

112,238(13,972)

Interest payments(471,840)(494,658)(Decrease) increase in accrued consumption taxes
Decrease due to sale of investment properties in trust
accounts
Other, net(80,541)

71,4052,103,922

3,922,534

91,707

235,402

11,497,387

12,819,125(4,337,926)(6,919,517)

Proceeds from tenant security deposits including trust
accounts

780,704

1,042,727

Refunds of tenant security deposits including trust
accounts(722,354)(512,038)

Net Cash (Used in) Provided by Investing Activities(4,279,576)(6,388,828)

Proceeds from short-term debt

2,500,000

5,000,000

Repayments of short-term debt

(3,900,000)(5,000,000)

Proceeds from long-term debt

14,100,000

11,500,000

Repayments of long-term debt

(16,600,000)(11,500,000)

Proceeds from issuance of investment corporation bonds

3,868,783–

Distributions paid

(6,685,886)(6,461,313)(6,717,103)(6,461,313)

500,707(31,016)

Cash and Cash Equivalents at Beginning of Period

31,349,701

31,380,717

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

31,850,409

31,349,701

Cash Flows from Operating Activities:

Amortization of bond issuance costs

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

Cash Flows from Financing Activities:

Net Cash Used in Financing Activities
Net Change in Cash and Cash Equivalents

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, 2020 and May 31, 2020

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as“DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the“Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management(hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager,
as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating officeproperties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of November 30, 2020, DOI had ownership or trust beneficiary interests in 60 office properties withapproximately 363,740m2 of rentable office space and had leased office space to 629 tenants engaged in avariety of businesses. The occupancy rate for the office properties was approximately 98.9 %.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements. 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 been rounded
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.

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, 2020
As of May 31, 2020
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
5-15 years
Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs
and maintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.
VI. Notes to Financial Statements

13(c) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective
terms of the bonds.
(d) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements andincome tax bases of assets and liabilities using the statutory rate.
(e) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of
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 of theproperty, rather than expensing them. In subsequent calendar years, such taxes on investment properties arecharged as operating expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.
(Thousands of yen)

Capitalized real estate taxes

For the fiscal period ended For the fiscal period ended
November 30, 2020
May 31, 2020
1,113
7,661

(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 the current liabilities. Nondeductible consumption taxes relating to investment properties are amortized equally over five years.
(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 inorder 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 assessment of 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 other operating
revenues such as utility charge reimbursements, parking space rental revenues and other income. Rental revenues
are generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognizedwhen earned and their amounts can be reasonably estimated.
(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 relevant balance sheet
and income statement accounts of the accompanying financial statements.
(j) New Accounting Standards Issued But Not Yet Effective

14

“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, revised on March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, revised on
March 31, 2020)“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
revised on March 31, 2020)(a) Overview
The International Accounting Standard Board (“IASB”) and the Financial Accounting Standards Board(“FASB”) jointly developed a comprehensive accounting standard for revenue recognition, and issued“Revenue from Contracts with Customers” (IFRS 15, issued by IASB and Topic 606, issued by FASB) in May
2014.
Considering the situation that IFRS 15 is effective for the fiscal periods beginning on or after January 1,
2018 and Topic 606 is effective for the fiscal periods beginning after December 15, 2017, ASBJ developed acomprehensive accounting standard for revenue recognition and issued it together with the implementation
guidance. ASBJ’s basic policy developing the accounting standard for revenue recognition was to establish
accounting standards as a starting point by incorporating the basic principles of IFRS 15 from the viewpointof comparability of financial statements which is one of the benefits of maintaining consistency with IFRS 15,
and to add alternative treatments to the extent that they do not impair comparability in cases where previous
practices and others in Japan should be considered.
(b) Date of adoption
DOI will adopt the accounting standard and the implementation guidance from the beginning of the sixmonth period ending November 30, 2021.
(c) Impact of the adoption of the respective accounting standard
DOI is currently evaluating the impact of the adoption of the standard and guidance on financial statements.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, issued on July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, revised on July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, issued
on July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
revised on March 31, 2020)(a) Overview
Given the fact that the IASB and the FASB have issued detailed guidance providing substantially similar
requirements (IFRS 13 Fair Value Measurement and US Accounting Standards Codification Topic 820 Fair
Value Measurement) for the measurement of fair value, the ASBJ has made efforts to achieve the consistencyof Japanese accounting standards related to the measurement of fair value of financial instruments andrelated disclosures with such global accounting standards, which resulted in the issuance of ASBJ Statement
No. 30 Accounting Standards for Fair Value Measurement, etc. The ASBJ has decided to incorporate all of
the requirements provided by IFRS 13 in order to improve the comparability of financial statements of entities
in and out of Japan by adopting consistent methods as part of its basic policy in developing accounting
standards for the measurement of fair value. Also, the standards are designed to provide interpretations forcertain individual issues and topics in light of the practices implemented in Japan to date, provided that thecomparability of financial statements is not significantly reduced.
(b) Date of adoption
DOI will adopt the accounting standards and the implementation guidance from the beginning of the sixmonth period ending November 30, 2021.
(c) Impact of the adoption of the respective accounting standard
DOI is currently evaluating the impact of the adoption of the standards and guidance on financial
statements.

VI. Notes to Financial Statements

15

“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, issued on March 31,
2020)(a) Overview
The ASBJ developed and issued “Accounting Standard for Disclosure of Accounting Estimates” based on
the circumstances where the ASBJ received comments requesting that disclosure requirements beconsidered regarding the sources of estimation uncertainty in the Japanese accounting standards, since thedisclosure of such information is required by Paragraph 125 of IAS 1 “Presentation of Financial Statements”
and is highly useful for users of financial statements. The ASBJ’s fundamental policies in developing ASBJ
Statement No. 31 are, in principle, to present principles (disclosure objectives), rather than enhancing thedisclosure of existing notes, and to require each entity to determine specific contents of disclosures in light ofthe disclosure objectives by reference to the requirements of Paragraph 125 of IAS 1.
(b) Date of adoption
DOI will adopt the accounting standard from the end of the six-month period ending May 31, 2021.
“Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ
Statement No. 24, revised on March 31, 2020)(a) Overview
The ASBJ made necessary revisions and issued the revised “Accounting Standard for Accounting Policy
Disclosures, Accounting Changes and Error Corrections” based on the circumstances where the ASBJ
received proposals that the enhancement of note disclosures be considered regarding the accounting
policies and procedures adopted when the requirements in related accounting standards are not clearly
defined. When enhancing note disclosures on the accounting policies and procedures adopted when therequirements in related accounting standards are not clearly defined, note 1-2 of the Business Accounting
Principles is carried over to avoid an impact on the accounting practices used when the requirements in therelated accounting standards are clearly defined.
(b) Date of adoption
DOI will adopt the accounting standard from the end of the six-month period ending May 31, 2021.

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, 2020 and May 31, 2020 consisted of the following:(Thousands of yen)

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

As of November 30, 2020
28,137,822
3,712,586
31,850,409

As of May 31, 2020
27,688,243
3,661,457
31,349,701

Note 4 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units
for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bankborrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and welldiversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets andsecurities (in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties
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 derivative transactions (interest-rate swap) as
hedging instruments, in order to avoid interest rate fluctuations and to fix the amount of interest payments forfloating-rate borrowings.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash
flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The
assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the
special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in therisk management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits inthe 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 suchas bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term
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
The fair value of financial instruments is based on their quoted market price. When there is no quoted market
price available, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating
the fair value, different assumptions and factors could result in a different value. Also, the contractual amounts ofderivative 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, 2020 and May 31, 2020 were as
follows:(Thousands of yen)

As of November 30, 2020

As of May 31, 2020

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents
Total

31,850,409

31,850,409–

31,349,701

31,349,701–

31,850,409

31,850,409–

31,349,701

31,349,701–

3,600,000

3,600,060

60

5,000,000

5,000,000–

24,200,000

24,203,301

3,301

33,300,000

33,303,783

3,783

9,000,000

8,974,990(25,010)

5,100,000

5,057,090(42,910)Long-term debt

167,650,000

167,717,967

67,967161,050,000

161,206,148

156,148

Total

204,450,000

204,496,319

46,319204,450,000

204,567,021

117,021(291,287)(291,287)–(213,777)(213,777)–

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

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

The financial instruments whose fair value is deemed extremely difficult to determine are excluded from the abovetable (See Note 2 below).
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, theirbook value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, their fairvalue is calculated based on the present value of principle and interest cash flows discounted at the current interest
rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain floatingrate 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

Hedged item

As of November 30, 2020
Contracted amount
Fair value (*1)
Due after one year
Total

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

Long-term debt

116,500,000

93,300,000(291,287)

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

Long-term debt

11,100,000

11,100,000– (*2)

127,600,000

104,400,000(291,287)(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

Hedged item

As of May 31, 2020
Contracted amount
Fair value (*1)
Due after one year
Total

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

Long-term debt

118,100,000

87,800,000(213,777)

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

Long-term debt

3,000,000

1,000,000– (*2)

121,100,000

88,800,000(213,777)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps areprocessed as 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 22,450,275 thousand yen and22,391,925 thousand yen as of November 30, 2020 and May 31, 2020, respectively) that have been deposited bytenants were excluded from the scope of fair value disclosure because they are not marketable, and the actual
deposit period is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.
3. Redemption schedule for monetary claims(Thousands of yen)

As of November 30, 2020

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
31,850,409––––
31,850,409––––
Due within
one year

Due after
five years––(Thousands of yen)

As of May 31, 2020

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
31,349,701––––
31,349,701––––
Due within
one year

Due after
five years

VI. Notes to Financial Statements

–
–

19

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

As of November 30, 2020

Short-term debt
Investment corporation bonds
Long-term debt
Total

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

Due within
one year

Due after
five years

3,600,000
–
–
–
–
–
–
–
– 3,800,000 1,500,000 3,700,000
24,200,000 31,600,000 26,200,000 24,300,000 20,550,000 65,000,000
27,800,000 31,600,000 26,200,000 28,100,000 22,050,000 68,700,000(Thousands of yen)

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

Due within
one year

As of May 31, 2020

Short-term debt
Investment corporation bonds
Long-term debt
Total

Due after
five years

5,000,000
–
–
–
–
–
–
–
–
– 3,800,000 1,300,000
33,300,000 21,500,000 30,600,000 23,700,000 27,350,000 57,900,000
38,300,000 21,500,000 30,600,000 23,700,000 31,150,000 59,200,000

Note 5 – Tangible Fixed Assets of Investment Properties
Investment properties as of November 30, 2020 and May 31, 2020 consisted of the following:(Thousands of yen)

As of November 30, 2020
Acquisition
cost

Accumulated
depreciation

Book value

Acquisition
cost

Accumulated
depreciation

Book valueLand

12,302,226–

12,302,226

12,302,226–

12,302,226

Buildings andstructures

3,302,055(2,543,896)

758,158

3,291,666(2,471,226)

820,439

Tools, furnitureand fixtures

20,207(14,149)

6,057

20,207(13,159)

7,047

Construction inprogress

4,555

–

4,555

3,829

–

3,829

Land in trust
accounts

356,251,046–

356,251,046

354,391,051–

354,391,051

Buildings andstructuresin trust accounts

109,697,467(27,665,151)

82,032,316

109,281,898(26,145,879)

83,136,018

Machinery andequipmentin trust accounts

893,239(509,450)

383,788884,623(490,777)

393,845

Tools, furnitureand fixturesin trust accounts

315,131(191,804)

123,326

297,798(176,636)

121,161

Construction inprogressin trust accounts

33,446–33,44629,061–

29,061

482,819,375(30,924,452)

451,894,923

480,502,363(29,297,679)

451,204,683

Total

20

As of May 31, 2020

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, 2020
May 31, 2020
Book value: (Note 1)
Balance at beginning of period

453,876,951

452,653,020

685,129

1,223,931

Balance at end of period

454,562,081

453,876,951

Fair value (Note 3)

573,850,000

572,090,000

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, 2020, the major reason for the increase is acquisition of “Nihonbashi-Bakurocho 1-Chome
Development Site (land)” (3,775,000 thousand yen). The major reason for the decrease is disposition of “Daiwa Shimbashi 510 Building”(2,103,922 thousand yen) and depreciation (1,827,171 thousand yen). For the fiscal period ended May 31, 2020, the major reason for theincrease is acquisition of “Daiwa Nakano-Sakaue Building” (2,750,000 thousand yen) and “Nihonbashi Central Square” (3,521,531 thousandyen). The major reason for the decrease is disposition of “Daiwa Jimbocho Building” (3,922,534 thousand yen) and depreciation (1,838,770
thousand yen).
(Note 3)	The fair values as of November 30, 2020 and May 31, 2020 were determined by the sum of appraisal values provided by external real estateappraisers.

VI. Notes to Financial Statements

21

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended November 30, 2020 and May 31, 2020 were as
follows:(Thousands of yen)

For the fiscal period ended For the fiscal period ended
November 30, 2020
May 31, 2020
Revenues from property leasing:
Rental revenues

14,482,210

14,238,965

31,325

18,247

14,513,535

14,257,212

1,019,499

998,730

Utilities expenses

915,742935,302

Taxes and dues

1,169,520

1,134,736

Insurance expenses

19,99019,923

Repair expenses

670,253

538,920

1,827,171

1,838,770

74,421

74,419Total rental expenses

5,696,598

5,540,802

Income from property leasing

8,816,936

8,716,410

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

Depreciation
Other

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

22

Note 9 – 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 as ofNovember 30, 2020 and May 31, 2020 consisted of the following:(Thousands of yen)

As of November 30, 2020

As of May 31, 2020

0.3% unsecured short-term loans due 2021,
principally from banks

3,600,000

5,000,000

Total

3,600,000

5,000,000

191,850,000

194,350,000

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–

0.6% unsecured bond due 2030

2,400,000–

0.7% unsecured bond due 2031

1,300,000

1,300,000

200,850,000

199,450,000

Unsecured loans due 2020 to 2030, principallyfrom banks and insurance companies with interest
rates mainly ranging from 0.2% 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,
2020 were as follows:(Thousands of yen)

Due within
one year

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

Due after
five
years

Short-term debt, long-term debt
27,800,000 31,600,000 26,200,000 28,100,000 22,050,000 68,700,000
and investment corporation bonds

Note 10 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of November 30, 2020
and May 31, 2020 were as follows:(Thousands of yen)

November 30, 2020

As of May 31, 2020

Due within one year

9,404,348

10,656,341

Due after one year

15,085,262

16,770,630

Total

24,489,611

27,426,971

VI. Notes to Financial Statements

23

Note 11 – Gain on Sale of Investment Properties
Gain on sale of investment properties for the fiscal period ended November 30, 2020 was as follows:(Thousands of yen)

For the fiscal period
ended November 30, 2020
Daiwa Shimbashi 510 Building:
Proceeds from sale of investment property

2,530,000

Cost of selling investment property(2,103,922)

Other expenses related to sale(89,690)

Gain on sale of investment property

336,387

Gain on sale of investment properties for the fiscal period ended May 31, 2020 was as follows:(Thousands of yen)

For the fiscal period
ended May 31, 2020
Daiwa Jimbocho Building:
Proceeds from sale of investment property

4,000,000

Cost of selling investment property(3,922,534)

Other expenses related to sale

(62,030)

Gain on sale of investment property

15,435Note 12 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings in trust
as of November 30, 2020 and May 31, 2020.

Note 13 – 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, 2020 and May 31, 2020.
(Thousands of yen)

As of November 30, 2020
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

24

As of May 31, 2020

Note 14 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement to
distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation Measure
Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable income of DOI
will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able todeduct 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, 2020
May 31, 2020
Statutory tax rate

31.46

31.46

Deductible cash distributions(30.01)(31.45)

Provision of reserve for reduction entry(1.45)–

Others0.01(0.00)

Effective tax rate

0.01

0.01

The significant components of deferred tax assets and liabilities as of November 30, 2020 and May 31, 2020 wereas follows:(Thousands of yen)

As of November 30, 2020

As of May 31, 2020

Deferred tax assets:
Accrued enterprise tax

5

18

91,63970,59591,64470,613

Reserve for reduction entry

75,49475,494

Deferred gains on hedges

–

3,340

Total deferred tax liabilities

75,49478,834

Net deferred tax liabilities

16,150(8,220)

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

VI. Notes to Financial Statements

25

Note 15 – Per Unit Information
Information about earnings per unit for the fiscal periods ended November 30, 2020 and May 31, 2020, net assets
per unit as of November 30, 2020 and May 31, 2020 were as follows:(Yen)

For the fiscal period ended For the fiscal period ended
November 30, 2020
May 31, 2020
Earnings per Unit:
Net income per unit

14,484

13,595Weighted average number of units outstanding (units)491,877

491,877(Yen)

As of November 30, 2020
Net Assets per Unit

519,462

As of May 31, 2020
518,681

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

Note 16 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, thetotal amount of dividends that DOI has determined to pay out is 6,796,264,509 yen for the fiscal period ended
November 30, 2020 and 6,687,067,815 yen for the fiscal period ended May 31, 2020 that are the largest integral
multiple of 491,877, the number of units outstanding as of November 30, 2020 and May 31, 2020, after deducting
provision of reserve for reduction entry as stipulated in Article 65-7 of the Special Taxation Measure Act of Japan
from unappropriated 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, 2020
May 31, 2020
I Unappropriated retained earnings

7,124,746,976

6,687,380,982

II Cash distributions declared

6,796,264,509

6,687,067,815

328,482,467––

313,167

III

Voluntary reserves
Provision of reserve for reduction entry

IV Retained earnings brought forward

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 the boardof 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, 2020
May 31, 2020
Cash distributions per unit
Board of directors meeting dates

26

13,817

13,595January 20, 2021

July 17, 2020

Note 17 – Related-Party Transactions
No related-party transaction was entered into for the fiscal periods ended November 30, 2020 and May 31, 2020.

Note 18 – Segment Information
For the fiscal periods ended November 30, 2020 and May 31, 2020
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 19 – Significant Subsequent Events
Sales of Assets
DOI sold a trust beneficial interest in real estate on December 23, 2020 as described below.
Overview of the asset
Property nameDaiwa Kyobashi Building

Asset type

Trust beneficial interest in domestic real estate

Sale price4,200,000 thousand yen (excluding settlement amounts of property taxes and city
planning taxes and consumption taxes, etc.)

Agreement date

December 23, 2020

Delivery date

December 23, 2020

Purchaser

Non-disclosed (Note)(Note)	The purchaser is a domestic company. Its information is not disclosed since consent for disclosure has not been obtained from thepurchaser.

VI. Notes to Financial Statements27

VII. Independent Auditor’s Report28VII. Independent Auditor’s Report

29

30

VII. Independent Auditor’s Report

31

VIII. Investor Information
History of Investment Unit Price
10,000 (Units)(Yen) 1,000,000
Investment unit price (left axis)

Trading volume (right axis)

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

2018 2019
Dec. Jan. Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sept. Oct.

Nov.

Dec.

2020
Jan. Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sept. Oct.

Nov.

Overview of Investment Units and Unitholders (As of November 30, 2020)■ No. of Investment Units by Investor Type
30th
Fiscal Period

Individuals/others
13,756 units (2.8%)

Financial institutions
149,436 units (30.4%)■ No. of Unitholders
by Investor Type
Foreigners 112,223 units (22.8%)

Total: 491,877 units
Other domestic corporations 200,338 units (40.7%)

29th
Fiscal Period

Individuals/others
13,544 units (2.8%)

Financial institutions
164,656 units (33.5%)

Securities firms 16,124 units (3.3%)

Foreigners 97,416 units (19.8%)

Total: 491,877 units
Other domestic corporations 199,978 units (40.7%)

Number ofPercentage
Units Owned
Share(Units)

128,905

26.2

2. Daiwa Securities Group Inc.

67,321

13.7

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

55,770

11.3

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

40,521

8.2

STICHTING PGGM DEPOSITARY PGGM
LISTED REAL ESTATE PF FUND

26,376

5.4

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

14,398

2.9

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

10,941

2.2

8. BNYM AS AGT/CLTS 10 PERCENT

8,227

1.7

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

6,260

1.3

10. Mizuho Securities Co., Ltd.

5,252

1.1

7.

86
(1.5%)

Other domestic
corporations

106(1.9%)

Foreigners

251(4.4%)

Securities firms

20(0.4%)

Total

5,702

January 20, 2021: Announcement of financial results for
30th Fiscal Period
February 12, 2021: Sending of Japanese version of Business
Report for 30th Fiscal Period(Statement of Financial Performance)
February 15, 2021: Start paying distributions for
30th Fiscal PeriodNov.
End offiscal period

Aug.
July

Feb.
End offiscal period

Jan.

May

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

32

Financial institutions

IR Calendar

1. Daiwa Investment Management Inc.

5.

5,239
(91.9%)

Securities firms 16,283 units (3.3%)

Top Ten Unitholders (As of November 30, 2020)
Name of Investor

Individuals/others

July 2021: Announcement of financial results for
31st Fiscal Period
August 2021: Sending of Japanese version of Business
Report for 31st Fiscal Period(Statement of Financial Performance)
August 2021: Start paying distributions for
31st 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

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

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

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

VIII. Investor Information

33