Disclaimers
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative Investment
Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as
implemented in their respective jurisdictions. Accordingly, you should not use thisdocument for any other purpose.
Netherlands
The units of Daiwa Office Investment Corporation (“Daiwa Office” or the “AIF”) are being
marketed in the Netherlands in accordance with Section 1:13b of the Dutch Financial
Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordance with thisprovision, Daiwa Real Estate Asset Management Co. Ltd. (the “AIFM”) has notified theDutch Authority for the Financial Markets (Autoriteit Financiële Markten, the “AFM”) of
its intention to offer these units in the Netherlands. This document is not addressed to or
intended for and the units of Daiwa Office will not, directly or indirectly, be offered, sold,transferred or delivered in the Netherlands, except to or by individuals or entities that are
qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft.
As a consequence, neither the AIFM nor Daiwa Office is subject to the license requirement
for investment institutions (beleggingsinstellingen) or their managers pursuant to the Wft.
Consequently, the AIFM and Daiwa Office are only subject to the supervision of the Dutch
Central Bank (De Nederlandsche Bank) or the AFM for the compliance with the ongoingregulatory requirements as referred to in the Dutch law implementation of Article 42 of the
AIFMD. According to Article 23 of the AIFMD, the prospectus is not subject to approvalby the AFM. No approved prospectus is required to be published in the Netherlands pursuant
to Article 3 of the Regulation (EU) 2017/1129 (the “Prospectus Regulation”) as amended
and applicable in the Netherlands.
European Economic Area
In addition to the restrictions under the AIFMD, the units of Daiwa Office are not intended
to be offered, sold or otherwise made available to and should not be offered, sold orotherwise made available to any retail investor in the European Economic Area (“EEA”).
For these purposes, a retail investor means a person who is one (or more) of: (i) a retailclient as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended, (the“MiFID II”) including any client, beneficiary, principal, or similar of any person acting asa trustee, agent, nominee, or similar; or (ii) a customer within the meaning of Directive (EU)2016/97, where that customer would not qualify as a professional client as defined in point(10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus

Regulation, as amended. Consequently, no key information document has been prepared,
required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or sellingthe units of Daiwa Office or otherwise making them available to retail investors in the EEA.
Therefore offering or selling the units of Daiwa Office or otherwise making them available
to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
United Kingdom
The units of Daiwa Office are being marketed in the United Kingdom pursuant to Article
59 of the United Kingdom Alternative Investment Fund Managers Regulations 2013. In
accordance with this provision, the AIFM has notified the Financial Conduct Authority (the
“FCA”) of its intention to offer these units in the United Kingdom.
For the purposes of the United Kingdom Financial Services and Markets Act 2000, as
amended (“FSMA”), Daiwa Office is an unregulated collective investment scheme which
has not been authorized by the FCA.
Accordingly, any communication of an invitation or inducement to invest in Daiwa Office
may be made only to (i) investment professionals falling within Article 19(5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended(the “Order”); (ii) high net worth companies, unincorporated associations or other entities,
falling within Articles 49(2)(a) to (d) of the Order; or (iii) other persons to whom it may
lawfully be communicated (all such persons, together being referred to as “Relevant
Persons”).
In the United Kingdom, this document and its contents are directed only at Relevant Persons
and must not be acted on or relied on by persons who are not Relevant Persons. The
transmission of this document and its contents in the United Kingdom to any person otherthan a Relevant Person is unauthorized and may contravene the FSMA and other United
Kingdom securities laws and regulations.
Prohibition of Sales to UK Retail Investors
In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its
domestic laws, the units of Daiwa Office are not intended to be offered, sold or otherwise
made available to and should not be offered, sold or otherwise made available to any retailinvestor in the United Kingdom. For these purposes of this provision, a “retail investor”
means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article
2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European
Union (Withdrawal) Act 2018 (the “EUWA”); or (ii) a customer within the meaning of the2

provisions of the FSMA and any rules or regulations made under the FSMA to implement
Directive (EU) 2016/97, where that customer would not qualify as a professional client, as
defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part ofdomestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article
2 of Regulation (EU) 2017/1129, as it forms part of domestic law by virtue of the EUWA;
and the expression “offer” includes the communication in any form and by any means ofsufficient information on the terms of the offer and the units to be offered so as to enable an
investor to decide to purchase or subscribe the units.
Consequently no key information document required by Regulation (EU) No 1286/2014, as
it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”), foroffering or selling the units or otherwise making them available to retail investors in the
United Kingdom has been prepared and therefore offering or selling the units or otherwise
making them available to any retail investor in the United Kingdom may be unlawful under
the UK PRIIPs Regulation.

3

Article 23 (1)(a)Objectives of the AIF

Daiwa Office’s investment objective is to maximize unitholder value by continuing to
improve the quality of its portfolio through acquisitions of select office buildings. In
accordance with the guidelines set by the Asset Manager, Daiwa Office targets officebuildings that have a total floor space generally in excess of 2,000 m2 and are locatedmostly in the five central wards of Tokyo, but these target properties also can be locatedin the greater Tokyo area or major regional cities.

Investment strategy

Daiwa Office seeks to maximize unitholder value by improving the quality of its portfolio
through selective acquisitions of office buildings while utilizing its experienced asset
management team and its disciplined management structure to continue to enhance its
assets and provide stable income over the long term. Its principal growth strategies are as
follows:•

Grow its portfolio through selective acquisitions. In line with its investment
policies, Daiwa Office will continue to focus on acquiring select office buildingsthat will improve the stability and profitability of its portfolio. Daiwa Office willcontinue to principally focus on office buildings built within the last 25 years at thetime of acquisition, located mostly in the greater Tokyo area, particularly in thefive central wards of Tokyo, and located in areas with consistent demand for officebuildings at appealing locations.

•

Diversify risk by reducing dependence on its flagship property. Daiwa Office’s
portfolio is composed of medium to large-scale office buildings and is able to meetthe needs of a wide variety of tenants. However, historically, its portfolio haslargely been dominated, in terms of contribution to its portfolio size and rental
revenues, by Shinjuku Maynds Tower. Over time Daiwa Office has diversified its
portfolio by reducing the concentration risk arising from this property.

•

Improve portfolio quality through property replacement. Daiwa Office willcontinue to improve the overall quality of its portfolio by replacing certain
properties that are relatively less attractive from the perspective of long-term
operating revenues and expenses.

Types of assets the AIF

Real estate, trust beneficiary interests in real estate, real estate securities, specified assets

may invest in

and other assets.

Techniques it may

Daiwa Office intends to achieve its objective by leveraging its experienced asset

employ and all

management team and its disciplined management structure to continue to enhance its

associated risks

assets and provide stable income over the long term.
The principal risks with respect to investment in Daiwa Office are as follows:4•

any adverse conditions in the Japanese economy could adversely affect Daiwa
Office;•Daiwa Office may not be able to acquire properties to execute the growth andinvestment strategy in a manner that is accretive to earnings;•

Daiwa Office relies on certain properties for a significant portion of its rental
revenues;•

increases in prevailing market interest rates, including as a result of growing
inflationary pressures and tightening monetary policies in response by the UnitedStates, Japan and other major countries, may increase the interest expense andmay result in a decline in the market price of the units;•

Daiwa Office’s reliance on Daiwa Securities Group Inc. could have a material
adverse effect on its business;•there are potential conflicts of interest between Daiwa Office and Daiwa
Securities Group Inc., including the AIFM;•

Daiwa Office faces significant competition in seeking tenants and it may bedifficult to find replacement tenants;•

most of the properties in Daiwa Office’s portfolio are concentrated in the five
central wards of Tokyo; and•Daiwa Office’s policy of investing solely in office buildings could have a material
adverse effect on its business.

In addition, Daiwa Office is subject to the following risks:•

risks associated with global health events;•

risks associated with political developments and uncertainty, such as ongoingmilitary conflicts in the Middle East and Ukraine, developments relating to
Taiwan, and tension between South Korea and North Korea;•

risks related to impairment losses relating to its properties;•risks related to loss of rental revenues;•

risks related to unitholders’ limited control over changes in Daiwa Office’s
investment policies;•

risks related to dependence on the performance of service providers to which
Daiwa Office is required to assign various key functions;•

Daiwa Office’s ownership rights in some of its properties may be declared invalid
or limited;•risks related to loss of rights in a property due to the recharacterization ofpurchase of the property as a secured financing;•risks related to leasehold or subleasehold rights;•

risks related to dilution as a result of further issuances of units;5•risks related to inability to obtain financing for future acquisitions;•risks related to downgrading of credit rating;•risks related to illiquidity in the real estate market;•

risks related to lack of control over operating costs;•

risks related to decreases in tenant leasehold deposits and/or security deposits;•risks related to property defect;•risks related to the environmental assessments of Daiwa Office’s properties madeprior to its ownership;•

risks related to insolvency of master lessees;•

risks related to damage from a natural or man-made disaster;•

regulatory and financial risks related to climate change;•risks related to a high loan-to-value, or LTV, ratio;•risks related to the restrictive covenants under debt financing arrangement;•risks related to entering into forward commitment contracts and contracts topurchase properties under development;•risks related to the insider trading regulations;•risks related to tight supervision by the regulatory authorities;•risks related to relying on expert appraisals and engineering, environmental andseismic reports;•

risks related to relying on industry and market data;•risks related to cost of complying with regulations applicable to the properties;•risks related to violation of earthquake resistance standards;•

risks related to Daiwa Office’s dependence on the efforts of the AIFM’s key
personnel;•risks related to holding the property in the form of stratified ownership (kubunshoyū) interests or co-ownership interests (kyōyū-mochibun);•risks related to relying on expert appraisals and engineering, environmental andseismic reports as well as industry and market data;•risks related to holding Japanese anonymous association (tokumei kumiai)interests;•

risks related to investment in Japanese special purpose companies or real estate
investment funds;•

risks related to investments in trust beneficiary interest;•

risks related to the tax authority disagreement with the AIFM’s interpretations of
the Japanese tax laws and regulations;•risks related to being unable to benefit from reductions in certain real estatetaxes enjoyed by qualified J-REITs;

6

•

risks related to failure to satisfy a complex series of requirements pursuant toJapanese tax regulations;•risks related to changes in Japanese tax laws;•

risks related to instability in the global financial system; and•risks related to uncertainty in the Bank of Japan’s policy including its policy on
prevailing market interest rates.

Any applicable

Daiwa Office is subject to investment restrictions under Japanese laws and regulations

investment restrictions(e.g., the Act on Investment Trusts and Investment Corporations (the “ITA”), the Financial
Instruments and Exchange Act (the “FIEA”)) as well as its articles of incorporation.
Daiwa Office must invest primarily in specified assets as defined in the ITA. Specified
assets include, but are not limited to, securities, real estate, leaseholds of real estate,surface rights (chijō-ken) (i.e., right to use land for the purpose of having a structure on it)
or trust beneficiary interests for securities or real estate, leaseholds of real estate or
surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets in real estate, realestate-related assets and liquid assets as provided by the listing requirements. Real estatein this context includes, but is not limited to, real estate, leaseholds of real estate, surface
rights, and trust beneficiary interests for these assets, and real estate-related assets in thiscontext include, but are not limited to, anonymous association (tokumei kumiai) interests
for investment in real estate.
Pursuant to the ITA, investment corporations may not independently develop land for
housing or to construct buildings, but may outsource such activities in certain
circumstances.
Investment restrictions Daiwa Office places in its articles of incorporation are as follows:(1) Daiwa Office may invest in securities other than real estate-backed securities and inmonetary claims, for the purpose of ensuring stability of investment in real estate andreal estate-backed securities.
(2) Daiwa Office may enter into derivative transactions for the purpose of hedging interest
volatility risk stemming from its debt.

Circumstances in which Daiwa Office may take out loans or issue long-term or short-term investment corporation
the AIF may use

bonds for the purpose of investing in properties, conducting repairs, paying cash

leverage

distributions, repaying obligations (including repayment of tenant leasehold or security
deposits, and obligations related to loans or long-term or short-term investment
corporation bonds) and other activities.

7

The types and sources

Loans or investment corporation bonds. Daiwa Office currently does not have anyof leverage permitted

outstanding guarantees, but may be subject to restrictive covenants in connection withand associated risks

any future indebtedness that may restrict the operations and limit the ability to make cash
distributions to unitholders, to dispose of the properties or to acquire additional
properties. Furthermore, Daiwa Office may violate restrictive covenants contained in theloan agreements Daiwa Office executes, such as the maintenance of debt service coverageor loan-to-value ratios, which may entitle the lenders to require Daiwa Office tocollateralize the properties or demand that the entire outstanding balance be paid.
Further, in the event of an increase in interest rates, to the extent that Daiwa Office has
any debt with unhedged floating rates of interest or Daiwa Office incurs new debt, interest
payments may increase, which in turn could reduce the amount of cash available for
distributions to unitholders. Higher interest rates may also limit the capacity for short- andlong-term borrowings, which would in turn limit the ability to acquire properties, andcould cause the market price of the units to decline.

Any restrictions on

The maximum amount of each loan and investment corporation bond issuance will be one

leveragetrillion yen, and the aggregate amount of all such debt will not exceed one trillion yen.

Any restrictions on

No applicable arrangements.

collateral and asset
reuse arrangements
Maximum level of

Daiwa Office has set an upper limit of 60% as a general rule for its loan-to-value, or LTV,

leverage which theratio in order to operate with a stable financial condition. Additionally, Daiwa Office

AIFM is entitled to

strives to maintain its LTV within a conservative range of 40 – 50%. Daiwa Office may,

employ on behalf of

however, temporarily exceed any such levels as a result of property acquisitions or other

the AIF

events.

8Article 23(1) (b)Procedure by which

Amendment of the articles of incorporation. Amendment requires a quorum of a majority of

the AIF may change

the total issued units and at least a two-thirds vote of the voting rights represented at theits investment

meeting. Unitholders should note, however, that under the ITA and Daiwa Office’s articles

strategy / investment

of incorporation, unitholders who do not attend and exercise their voting rights at a generalpolicymeeting of unitholders are deemed to be in agreement with proposals submitted at themeeting, except in cases where contrary proposals are also being submitted.
Additionally, the guidelines of the AIFM, which provide more detailed policies within Daiwa
Office’s overall investment strategy and policy, can be modified without such formal
amendment of the articles of incorporation.

Article 23(1) (c)Description of the

Daiwa Office is a corporate-type investment trust in the form of investment corporation

main legal(toshi hojin) provided for under the ITA. Therefore, the relationship between Daiwa Office

implications of theand its unitholders is governed by Daiwa Office’s articles of incorporation (as opposed tocontractual

individual agreements), which can be amended from time to time upon resolution of a

relationship enteredgeneral unitholders’ meeting. Daiwa Office’s articles of incorporation stipulate rules relating

into for the purposeto general unitholders meetings, including the convocation, setting of record date, exercise

of investment,of voting rights, resolutions and election of Daiwa Office’s directors.

including jurisdiction,
applicable law, andthe existence or notof any legal
instruments
providing for therecognition andenforcement of
judgments in the
territory where the
AIF is establishedThe relationship between Daiwa Office and its unitholders is also governed by, and issubject to the provisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid judgment any final and conclusive civil
judgment for monetary claims (which, for this purpose, are limited to those of a purely civil
nature and do not include monetary claims of the nature of criminal or administrative
sanction, such as punitive damages, even though they take the form of civil claims) against
Daiwa Office obtained in a foreign court provided that (i) the jurisdiction of such foreign
court is admitted under the laws of Japan, (ii) Daiwa Office has received service of process
for the commencement of the relevant proceedings, otherwise than by a public notice or
any method comparable thereto, or has appeared without any reservation before suchforeign court, (iii) neither such judgment nor the relevant proceeding is repugnant to public
policy as applied in Japan, (iv) there exists reciprocity as to the recognition by such foreign
court of a final judgment obtained in a Japanese court and (v) there is no conflicting
judgement on the subject matter by any Japanese court.
Daiwa Securities Group Inc., the sponsor of Daiwa Office, has entered into a sponsor
support agreement with the AIFM dated as of June 17, 2009, which is governed by Japaneselaw. Pursuant to the sponsor support agreement, Daiwa Securities Group Inc. has agreed toprovide support to the AIFM in the following areas:•

Information provision9

Daiwa Securities Group Inc. has agreed to provide information to the AIFM at any
time regarding real estate, real estate trust beneficiary interests and other relevant
assets or matters related to the management of the AIFM that, in the discretion of
Daiwa Securities Group Inc., is helpful to Daiwa Office or the AIFM. Daiwa
Securities Group Inc. shall provide such information in a manner that Daiwa
Securities Group Inc. considers appropriate, unless prohibited by law, internal
regulation or contracts to which Daiwa Securities Group Inc. is a party.
•

Support in securing personnel
Daiwa Securities Group Inc. has agreed to support the AIFM in a commerciallyreasonable manner in its efforts to secure personnel as directors and employees. In
the event that the personnel of Daiwa Securities Group Inc. are seconded ortransferred to the AIFM, the AIFM shall bear the wages and any other expenses
associated with such personnel.

•

Sponsor Support Agreement
In addition, Daiwa Securities Group Inc. has agreed to support, at its discretion, theAIFM in other areas such as establishment of bridge funds. In addition, as part ofsponsor support under the sponsor support agreement, a wholly owned subsidiaryof Daiwa Securities Group Inc., Daiwa Securities Realty Co. Ltd. (“DRT”), and the
AIFM entered into a basic warehousing agreement as of July 1, 2021, which wasamended and restated as a basic agreement on pipeline support, etc. dated as ofApril 1, 2022. Under the terms of this agreement, if DRT independently obtains
information on a certain property which DRT determines that the property meetsthe investment criteria of the investment corporations managed by the AIFM
(including Daiwa Office), DRT shall notify the AIFM of the information on suchproperty without delay, except in cases where providing the information on suchproperty would result in DRT being in breach of its contractual obligations to a third
party or in certain other circumstances. In addition, this agreement allows the AIFM
to propose DRT to provide warehousing (i.e., investing in and temporary holding ofa property with a goal of selling the property to Daiwa Office after a certain amountof time) in accordance with the terms of this agreement, and DRT shall, uponreceipt of such proposal, hold discussions with the AIFM in good faith regarding
such proposal for warehousing.

Daiwa Office is not involved in or threatened by any legal arbitration, administrative orother proceedings, the results of which might, individually or in the aggregate, be material.
Article 23(1) (d)The identity of the
AIFM, AIF's
depository, auditor• AIFM (Asset Manager): Daiwa Real Estate Asset Management Co. Ltd.
The AIFM manages and operates portfolio assets.
• Auditor: KPMG AZSA LLC

10and any other service
providers and a

The auditor audits financial statements and prepare audit reports.
• Custodian and Transfer Agent: Sumitomo Mitsui Trust Bank, Limited

description of their

The custodian provides administrative services related to custody of assets. The transfer

duties and theagent provides administrative services related to unitholders’ register, issuance ofinvestors' rights

investment securities, cash payment to unitholders, and addressing unitholders’ claims,

theretooffers and notices.
• General Administrators: Sumitomo Mitsui Trust Bank, Limited
The general administrator provides administrative services including the services related
to accounting and tax payment and preparation of accounting books.
Service providers owe contractual obligations under their respective agreements with the
AIF or AIFM, as the case may be. In addition, the FIEA provides that the Asset Manager owes
the AIF a fiduciary duty and must conduct its activities as the asset manager in good faith.
The FIEA also prohibits the Asset Manager from engaging in certain specified conduct,
including entering into transactions outside the ordinary course of business or with relatedparties of the Asset Manager that are contrary to or violate the AIF’s interests.
Pursuant to the ITA, the unitholders have the right to approve the execution or terminationof the asset management agreement at a general meeting of unitholders.

Article 23(1) (e)Description of how

Not applicable.

the AIFM complies
with therequirements tocover professional
liability risks (ownfunds / professional
indemnity insurance)
Article 23(1) (f)Description of any
delegatedmanagement
function such as

Not applicable.
There is no delegation of such functions beyond the AIFM, which is responsible for portfolio
and risk management, and the Custodian, which is responsible for safekeeping activities.

portfolio
management or risk
management and of
any safekeeping
function delegatedby the depositary,

11the identification of
the delegate and any
conflicts of interest
that may arise fromsuch delegations
Article 23(1) (g)Description of the

Daiwa Office makes investment decisions based on the valuation of properties, upon

AIF’s valuationconsideration of the property appraisal value.

procedure andpricing methodology,
including themethods used in
valuing hard-to-value
assetsDaiwa Office shall evaluate assets in accordance with its Article of Incorporation. The
methods and standards that Daiwa Office uses for the evaluation of assets shall be based on
the Regulations Concerning the Calculations of Investment Corporations, as well as theRegulations Concerning Real Estate Investment Trusts and Real Estate Investment
Corporations and other regulations stipulated by ITA, in addition to Japanese GAAP.
J-REITs may only use the valuation methods prescribed in the rules of the Investment Trusts
Association, Japan, which emphasize market price valuation.

Article 23(1) (h)Description of the
AIF’s liquidity risk
management,
including redemption
rights in normal andexceptional
circumstances andexisting redemption
arrangements withinvestors

The AIFM stipulates basic provisions of risk management in its risk management rules.
Additionally, the AIF uses various financing methods, including investment corporation
bonds and long-term loans, to finance acquisitions and repayment obligations. Daiwa Officecontrols related risk by maintaining the ratio of interest-bearing debt to total assets under acertain percentage, diversifying repayment deadlines, and retaining a certain amount ofhighly liquid cash and deposits.
For floating rate borrowings exposed to the risk of interest rate fluctuations, Daiwa Officeclosely monitors the movement of interest rates, and intends to increase the proportion of
its obligations subject to fixed rate loans and similar instruments.
Risks related to deposits are managed through the use of liquid deposits.
As Daiwa Office is a closed-end investment corporation, unitholders are not entitled torequest the redemption of their investment.

Article 23(1) (i)Description of allCompensation: The articles of incorporation provide that Daiwa Office may pay its executive

fees, charges andofficer up to 800 thousand yen per month and each of its supervisory officers up to 500

expenses and athousand yen per month. The board of officers is responsible for determining a reasonablemaximum amountcompensation amount for the executive officer and each of the supervisory officers.

which is directly /indirectly borne by
the investors

Asset Manager:

12• Asset Management Fee: Daiwa Office will pay the Asset Manager an asset management
fee as follows:oType 1 management fee: Asset-based fee. Daiwa Office pays to the Asset Managera type 1 management fee for each month. The amount of the type 1 management
fee is calculated by multiplying the total evaluated value of the operated assets asof the end of each month (excluding national and local consumption taxes andexpenses) by 0.05%, and then dividing by 12. The fee is paid by the end of thefollowing month.

oType 2 management fee: Leasing profit-based fee. Daiwa Office pays to the AssetManager a type 2 management fee for each month. This type 2 management fee
is payable within each month for 80% of the fee calculated based on the total
property leasing profit prescribed in the annual asset management plan provided
by the Asset Manager at the beginning of each fiscal period, and any amountremaining or overpaid is payable or receivable, respectively, after the settlement
date for each fiscal period without delay. The amount of the fee is equal to 5.5% ofleasing profit.

oType 3 management fee: Distributable amount-based fee. The Asset Manager
receives a type 3 management fee, which is equal to 3.5% of the distributableamount payable within one month after the approval of the financial statements
for each fiscal period.

oType 4 management fee: Acquisition fee. For each new property Daiwa Officeacquires, the Asset Manager receives an acquisition fee, which is equal to up to
0.75%, or 0.5% in a case where the property is acquired from a related party in its
rules regarding related-party transactions, of the purchase price (excluding
national and local consumption taxes and expenses), payable by the end of themonth immediately following the month of such acquisition.

oType 5 management fee: Disposition fee. For each property Daiwa Office disposesof, the Asset Manager receives a disposition fee, which is equal to 0.5% of thedisposition price (excluding national and local consumption taxes and expenses)
payable by the end of the month immediately following the month of suchdisposition.

Custodian:• Custodian Fee: Daiwa Office will pay the Custodian a fee per operational period
calculated as follows:
The amount of total assets for the prior period x 0.03% p.a.

13

General Administrators:• General Administrators Fee: Daiwa Office will pay the General Administrators a fee per
operational period calculated as follows:
The amount of total assets for the prior period x 0.09% p.a.
Transfer Agent:• Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as preparation, maintenance andstorage of Daiwa Office’s unitholder register; preparation and reporting of the end-ofperiod unitholders register and unitholder statistical data.
The monthly standard fees will be the total of the amount calculated using thefollowing table divided by 6, with a minimum monthly fee of 200,000 yen.
Number of Unitholders

Fees per Unitholder

first 5,000 unitholders

480 yenover 5,000 to 10,000

420 yenover 10,000 to 30,000

360 yenover 30,000 to 50,000

300 yenover 50,000 to 100,000

260 yenover 100,000

225 yen• Other fees:
Daiwa Office pays the transfer agent other fees for various other services, including inconnection with the issuance of dividends.
Auditor:• Auditor Fee:
Daiwa Office may pay the independent auditor up to 20 million yen per fiscal period.
The board of officers is responsible for determining the actual compensation amount.
The AIF may also incur other miscellaneous fees in connection with the issuance of units,
investment corporation bonds and the operation, acquisition or disposition of properties.
Article 23(1) (j)14

Description of theUnder Article 77 paragraph 4 of the Act on the ITA, which applies the requirements of

AIFM's procedure to

Article 109 paragraph 1 of the Companies Act to investment corporations, investment

ensure fair treatment

corporations are required to treat unitholders equally depending on the number andof investors andcontent of units held. In addition, upon liquidation, the allotment of residual assets todetails of any

unitholders is required to be made equally depending on the number of units held under

preferential

Article 77 paragraph 2 item 2 and Article 158 of the ITA.

treatment received
by investors,
including detailingthe type of investors
and their legal or
economic links with
the AIF or AIFM
Article 23(1) (k)The latest annual

Not applicable. (The semiannual reports of Daiwa Office are, however, available atreport referred to in

https://www.daiwa-office.co.jp/en/ir/disclosure.html.)

Article 22(1)Article 23(1) (l)The procedure andDaiwa Office is authorized under the articles of incorporation to issue up to 2,000,000 units.

conditions for theIts units have been listed on the Tokyo Stock Exchange since October 19, 2005.

issue and sale of theSecondary market sales and transfers of units will be conducted in accordance with theunitsrules of the Tokyo Stock Exchange. Unit prices on the Tokyo Stock Exchange are determinedon a real-time basis by the equilibrium between bids and offers. The Tokyo Stock Exchange
sets daily price limits, which limit the maximum range of fluctuation within a single tradingday. Daily price limits are set according to the previous day’s closing price or special quote.

Article 23(1) (m)Latest net asset valueof the AIF or latest
market price of theunit or share of the

Daiwa Office’s unit’s latest market price is publicly available at the Tokyo Stock Exchange orfrom financial information venders (including Reuters, which can be viewed athttps://www.reuters.com/companies/8976.T.)

AIF
Article 23(1) (n)15

Details of the

The units of Daiwa Office were listed on the Tokyo Stock Exchange on October 19, 2005.

historicalperformance of the

Fiscal period

AIF, where available

Total Assets

Total Net Assets(JPY million)(JPY million)

Total unitholders’equity per unit
(base value) (JPY)

33rd Fiscal Period(December 1, 2021 to483,461

250,538

519,220

481,049

247,491

517,484

482,471

247,849

518,232

482,200

247,523

517,551

482,526

247,342

258,587

May 31, 2022)
34th Fiscal Period(June 1, 2022 toNovember 30, 2022)
35th Fiscal Period(December 1, 2022 to
May 31, 2023)
36th Fiscal Period(June 1, 2023 toNovember 30, 2023)
37th Fiscal Period(December 1, 2023 to
May 31, 2024)
The most recent five fiscal periods’ performance of the units is as described above.
(Note) Daiwa office conducted a 2-for-1 investment unit split with May 31, 2024 as therecord date and June 1, 2024 as the effective date.
Article 23(1) (o)Identity of the prime

No applicable prime broker.

broker, any material
arrangements of the
AIF with its prime
brokers, howconflicts of interest
are managed withthe prime broker andthe provision in thecontract with thedepositary on thepossibility of transfer
and reuse of AIF
assets, andinformation about

16

any transfer of
liability to the prime
broker that may exist
Article 23(1) (p)Description of how

The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodically throughand when periodic

the AIF Internet website and fiscal report.

disclosures will bemade in relation toleverage, liquidity
and risk profile of theassets, pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shallNot applicable.

inform the investors
before they invest in
the AIF of any
arrangement madeby the depository tocontractuallydischarge itself ofliability in accordancewith Article 21(13)The AIFM shall also

Not applicable.

inform investors of
any changes withrespect to depositary
liability without delay
Article 23(4)(a)Percentage of the AIF's assets which

There are no assets that are subject to special arrangements arising fromare subject to special arrangements

their illiquid nature.

arising from their illiquid nature. The
percentage shall be calculated as the
net value of those assets subject tospecial arrangements divided by the
net asset value of the AIF concerned

17Overview of any special

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements
Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements
How management and performance

There are no such special arrangements.

fees apply to such assets
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF

disclosed at an appropriate time.

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed-end

disclosed at an appropriate time.

AIF, notify to investors whenever they
make changes to its liquidity
management systems (which enable
an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (i.e.
there is a substantial likelihood that areasonable investor, becoming awareof such information, would reconsider
its investment in the AIF, including
because such information could
impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).

18

Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements
Terms of redemption andDaiwa Office is a closed-end investment corporation, and unitholders are

circumstances where management

not entitled to request the redemption of their investment.

discretion applies, where relevant
Also any voting or other restrictions

There are no voting or other restrictions on the rights attaching to units.

exercisable, the length of any lock-up
or any provision concerning ‘first inline’ or ‘pro-rating’ on gates andsuspensions shall be included
Article 23(4)(c)
The current risk profile of the AIF and

The AIFM stipulates basic provisions of risk management in their risk

the risk management systems

management rules.

employed by the AIFM to manage
those risks

Investment corporation bonds and long-term loans are used to financerehabilitation obligations, acquisition of real estate and repayment of loans.
These financial instruments are exposed to liquidity risk. Daiwa Officecontrols such risk by maintaining the ratio of interest-bearing debt to total
assets under a certain percentage, diversifying repayment deadlines, andretaining a certain amount of highly liquid cash and deposits.
For floating rate borrowings exposed to the risk of interest rate
fluctuations, Daiwa Office, in order to reduce the impact caused by risinginterest rates, closely monitors the movement of interest rates, and intends
to increase the ratio of fixed rate loans compared to floating rate loans.
Deposits are exposed to credit risks, including collapse of the financial
institutions where deposits are made, and, thus, are managed through theuse of liquid deposits.

19

Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded andwhere these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken
Article 23(5)(a)Any changes to the maximum amountAny new arrangements or change in applicable arrangements will beof leverage which the AIFM may

disclosed at an appropriate time.

employ on behalf of the AIF,
calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofRegulation (EU) No 231/2013,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of debt with interest is JPY 214,400 million as of May

leverage employed by the AIF

31, 2024.

calculated in accordance with thegross and commitment methods

20Pre-contractual disclosure for the financial products referred to in Article 8,paragraphs 1, 2 and 2a, of Regulation (EU) 2019/2088 and Article 6, first paragraph, ofRegulation (EU) 2020/852
Product Name: Daiwa Office Investment Corporation
Daiwa Office Investment Corporation (“DOI”) promotes environmental or social characteristics, but does
not have as its objective a sustainable investment within the meaning of Article 9(1) of Regulation (EU)2019/2088 (“SFDR”). DOI and Daiwa Real Estate Asset Management Co. Ltd. (the “Asset Manager”) are
hereinafter referred to collectively as “we,” “us” or “our” unless noted otherwise. References to “fiscalyear” or “FY” are to the 12 months began or beginning April 1 of the year specified in line with the fiscal
year of the Asset Manager, unless noted otherwise.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
investments with an environmental
characteristics and while it does not have as its
objective: __%objective a sustainable investment, it will have aminimum proportion of __% of sustainable investments☐ in economic activities that qualify☐ with an environmental objective in economic
as environmentally sustainable
under the EU Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do not☐ with an environmental objective inqualifyasenvironmentally
sustainable under the EU
economic activities that do not qualify as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective: __%☒ It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social characteristics are promoted by this financial product?
DOI and the Asset Manager focus on promoting environmental, social and governance, or ESG
characteristics in the belief that emphasis on ESG contributes to the enhancement of DOI’s medium- to longterm corporate value. From the environmental perspective, we implement environmental protection
measures, including those for resource conservation and energy-saving, in order to reduce the environmental
impact of DOI’s properties. From the social perspective, we conduct our business based on a social missionof providing high-quality and comfortable spaces, in partnership with stakeholders, while disclosing
appropriate information to such stakeholders to fulfil our accountability. From the governance perspective,
we make highly transparent and reasonable business decisions that are not only lawful and in compliancewith regulatory requirements, but also meet our high ethical standards. Details are provided below.
DOI does not have a specific index designated as a reference benchmark to determine whether DOI
is aligned with the environmental and/or social characteristics that it promotes.

● What sustainability indicators are used to measure the attainment of each of theenvironmental or social characteristics promoted by this financial product?

DOI and the Asset Manager use the following indicators to measure progress made on theenvironmental or social characteristics promoted by DOI:•

Global Real Estate Sustainability Benchmark (“GRESB”) Real Estate Assessment. DOI
and the Asset Manager have participated in the GRESB Real Estate Assessment every year
since the fiscal period ended November 30, 2011. GRESB is an industry-led internationalorganization that evaluates sustainability performance of real estate portfolios (including
listed funds, private funds and direct investments). For the year 2023, DOI was awarded a“Green Star” rating for the twelfth consecutive year by achieving high performance both in“Management Component” that evaluates policies and organizational structure forpromoting ESG and “Performance Component” that assesses environmental performanceand initiatives, and a four-star GRESB rating out of its five-star ranking system.

•

Green-Qualified Assets. We use various environmental certifications issued by third party
organizations to monitor and keep track of the ESG performance at the building level. We
use the Building-Housing Energy-Efficiency Labeling System (“BELS”), Comprehensive
Assessment System for Built Environment Efficiency (“CASBEE”), the Development
Bank of Japan (“DBJ”) Green Building Certification, and the Leadership in Energy &Environmental Design (“LEED”) rating system for environmental certification of thebuildings in DOI’s portfolio. We deem each of DOI’s office buildings to be energy efficientand sufficiently environmentally friendly if it received a certification of B+ Rank or higher
in the CASBEE ranking system, which consists of Rank S (excellent), Rank A (very good),
Rank B+ (good), Rank B– (slightly inferior) and Rank C (inferior), a certification of threestars or higher in the five-star ranking system of BELS, three stars or higher in the five-starranking system of the DBJ Green Building Certification, and/or silver rank or higher in the
LEED rating system, and classify such office building as “Green-Qualified Asset(s).” Asof June 30, 2024, the proportion of Green-Qualified Assets in DOI’s portfolio based ongross floor area was 64.5%. We aim to increase the proportion of Green-Qualified Assets
in DOI’s portfolio based on gross floor area to 70% by the end of FY2030.

•

Energy Saving Initiatives. The Asset Manager tracks and monitors consumption of energy,
including electricity, urban and propane gas, and steam energy in common areas of DOI’s
properties that the Asset Manager manages, and measures progress against annual andmedium- to long-term targets. These targets are shared with property managers and tenants
so that the Asset Manager can collaborate with such parties to continuously reduce DOI’s
properties’ energy consumption. Energy consumption intensity of DOI’s properties
increased from 0.173 MWh/m² in FY2022 to 0.180 MWh/m² in FY2023. We aim to reduceenergy consumption intensity by 1% per year (5% over five years) for the properties in
DOI’s portfolio by FY2024 with FY2019 as the base year (0.207 MWh/m²). In addition,
we have implemented eco-friendly equipment, such as LED lighting, high-efficiency
heating equipment and energy-saving air conditioning systems at DOI’s properties. As of
May 31, 2024, we have installed LED lighting for approximately 97.5% of common areas
and areas exclusively owned by DOI in its properties based on gross floor area. We intend
to install LED lighting for 100% of common areas and areas exclusively owned by DOI in
its properties based on gross floor area by the end of the fiscal period ending May 31, 2026.

•

Reduction of Greenhouse Gas (“GHG”) Emissions Initiatives. The Asset Manager tracks
and monitors GHG emissions, including direct emissions from burning fuels (i.e., Scope 1)
and indirect emissions from power purchases and procurement over the entire supply chainat DOI’s properties (i.e., Scope 2) and measures progress against the established targets.
The Asset Manager continuously strives to reduce environmental impact of DOI’s
properties that emit high levels of GHG. DOI’s properties’ CO2 emissions intensity(including both Scope 1 and Scope 2) has decreased from 0.071 t-CO2/m² in FY2022 to
0.060 t-CO2/m² in FY2023. DOI aims to reduce GHG emissions intensity (including both
Scope 1 and Scope 2) for the properties in DOI’s portfolio by 1% per year and 5% over
five years by FY2024 with FY2019 as the base year (0.089 t-CO2/m²), and by 46% by
FY2030 with FY2013 as the base year, and to become carbon neutral by FY2050. We haveinstalled equipment that contributes to reduction of GHG emissions, such as LED lighting,high-efficiency heating equipment and energy-saving air conditioning systems in DOI’s
properties.

•

Water-saving Initiatives. The Asset Manager tracks and monitors water consumption incommon areas of DOI’s properties that the Asset Manager manages. The Asset Manager
receives an overview of consumption volume of each property and cumulative consumption
volume of DOI’s entire portfolio and measures progress against annual and medium- tolong-term targets. These targets are shared with property managers and tenants so that theAsset Manager can collaborate with such parties to continuously reduce water
consumption. Water consumption intensity of DOI’s properties was 0.610 m³/m² in
FY2022 and 0.658m³/m² in FY2023. DOI aims to maintain the same level of water
consumption intensity for the properties in DOI’s portfolio with the level in FY2019 (0.787
m³/m²) until FY2024. We have installed water-saving equipment, such as water-saving
toilets, in DOI’s properties and promote water-saving to tenants by posting anannouncement.

•

Third-Party Evaluation of Environmental Performance Data. A third-party organization
conducted evaluation (verification) of DOI’s entire portfolio’s environmental performancedata (energy consumption, GHG emissions (including Scope 1 and 2), water consumption,
and waste output) for FY2023.

•

Mitsubishi UFJ Financial Group (“MUFG”) ESG Rating Certificate for J-REIT supported
by Japan Credit Rating Agency (“JCR”). DOI received the MUFG ESG Rating Certificate“S-Rank”, in consideration of the certain ESG factors selected by MUFG Research andConsulting Co., Ltd. in collaboration with JCR.

•JCR Green Finance Framework Evaluation. The JCR Green Finance Framework
Evaluation evaluates DOI’s green bond issuances and green loan guidelines, based on
JCR’s green bond principles. JCR evaluates whether each of the projects conducted is inaccordance with DOI’s green finance policy may be deemed a “green project” as well as
DOI’s management/operations and their level of transparency. In June 2023, DOI received
the highest grade from the JCR Green Finance Framework Evaluation, which indicates that
DOI has only included in its green finance framework the buildings that passed JCR’s
selective criteria, and DOI’s management and operations have been well established topromote green projects as planned.

•

The Task Force on Climate-related Financial Disclosures (TCFD). The Asset Manager
established the “Climate Change and Resilience Policy” to lay out our objectives and our
corporate functions for addressing climate-change related issues and to widen the scope of
disclosures of our climate-change related initiatives. We announced our support for the
TCFD recommendations in December 2021. In January 2022, the Asset Manager joined
the TCFD consortium, a group of domestic companies that support TCFD
recommendations. As we recognize that climate change is an important issue, we will
gradually strengthen our efforts to disclose information related to climate change, while
identifying and analyzing risks and opportunities related to climate change andcontinuously working to reduce the environmental impact of our business based on the
TCFD recommendations.

•Sustainable Procurement Initiatives. The Asset Manager takes into account the following
criteria in addition to quality and economic efficiency when choosing products and services
we use: (i) low-consumption of fossil fuels and energy, (ii) low usage and emission ofsubstances with adverse effects on environment and human health, (iii) designed toconserve biodiversity and ecology, (iv) designed for long-term usage, (v) designed to bereusable and recyclable, (vi) uses reclaimed material and has environmental certification,(vii) easily disposable, and (viii) reduces procurement amount to reduce waste.
Furthermore, the Asset Manager takes into consideration property managers and suppliers’
sustainability frameworks and ability to cooperate with the Asset Manager’s ESG practices
in making hiring decisions, in addition to their creditworthiness, product or service quality
and price.
o

Sustainability Framework. The Asset Manager considers whether the property
manager or supplier, as the case may be, (i) has adopted an environmental

management system, such as ISO14001, and obtains third-party certification, orotherwise fulfills the ESG requirements established by the Asset Manager, (ii)selects any subcontractor by taking into account its sustainability policy and makes
it comply with the Asset Manager’s ESG requirements, (iii) creates and maintains
appropriate and employee-friendly work environment, (iv) promotes diversity ofhuman resources and work-life balance, and prohibits unfair labor, (v) has
corporate ethics guidelines including anti-corruption policy, (vi) engages in andcontributes to the neighborhoods and communities surrounding DOI’s properties,and (vii) has a disaster risk management system.
o●Cooperation with the Asset Manager’s ESG practices. The Asset Manager requires
the property manager or supplier, as the case may be, to engage in (i) energysaving, water-saving and reduction of GHG emission, (ii) appropriate waste
management and recycling promotion, (iii) control and reduction of hazardous
chemical substances and maintenance of health and safety including water quality,and (iv) maintenance of favorable relationships with tenants.

What are the objectives of the sustainable investments that the financial product partiallyintends to make and how does the sustainable investment contribute to such objectives?
Not applicable.

●

How do the sustainable investments that the financial product partially intends to make, notcause significant harm to any environmental or social sustainable investment objective?
Not applicable.

Principal Adverse Impact
Does this product consider principal adverse impacts on sustainability factors?
Yes, we consider principal adverse impacts on sustainability factors. We collect on an ongoing basis
information on the principal adverse impact indicators of DOI’s existing portfolio, including exposure tofossil fuels through real estate assets, exposure to energy-inefficient real estate assets, GHG emissions andenergy consumption intensity. We aim to manage the risk connected to principal adverse impacts throughour investment decisions in several ways, including use of general screening criteria and due diligence.
•

Exposure to fossil fuels through real estate assets. DOI does not invest in real estate assets involved in
the extraction, storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient real estate assets. We consider DOI’s properties that do not qualify asGreen-Qualified Assets to be energy-inefficient real estate assets. As of June 30, 2024, 35.5% of DOI’s
properties did not qualify as Green-Qualified Assets based on gross floor area.

•

GHG emissions. Total amount of GHG emissions (including both Scope 1 and Scope 2) generated by
DOI’s properties was 44,771 t-CO2 in FY2019, 37,063 t-CO2 in FY2021, 34,589 t-CO2 in FY2022 and29,281 t-CO2 in FY2023. Scope 3 GHG emission is not applicable to DOI’s properties.

•

Energy consumption intensity. The amount of the energy consumption of DOI’s properties per square
meter was 0.181 MWh/m2 in FY 2020, 0.178 MWh/m2 in FY2021, 0.173 MWh/m2 in FY2022 and 0.180
MWh/m2 in FY2023.

We believe that investment decisions that would negatively affect climate or other environmentrelated resources, or have negative implications for society, can create various risks and hindrance to value
creation for DOI’s unitholders. To this end, we consider the principal adverse impacts of our investment
decisions on the above sustainability factors throughout all major steps of the investment decision andmanagement process throughout the lifecycles of the properties in DOI’s portfolio.

We consider, both at the entity-level (i.e., the Asset Manager) and at the fund-level (i.e., DOI),
principal adverse impacts of our investment decisions on sustainability factors. Under the Investment Trust
Act of Japan, we are prohibited from having any employees at the fund-level and are required to outsource
asset management to a third party. Accordingly, as discussed in detail elsewhere, any consideration at thefund-level of principal adverse impacts of our investment decisions on sustainability is principally conductedby the Asset Manager, subject to approval of DOI’s Board of Directors. In addition to the Asset Manager’s
contractual obligations to DOI under the asset management agreement, the Financial Instruments andExchange Act (Act No. 25 of 1948) of Japan (the “FIEA”) provides that the Asset Manager owes us (at thefund-level) a fiduciary duty in conducting its activities, including making investment decisions informed bysustainability considerations.
More information related to principal impacts on sustainability factors can be found on the following
website: https://www.daiwa-office.co.jp/assets/pdf/sfdr_statement-en.pdf
Investment Strategy
What investment strategy does this product follow?
We take into account sustainability in our investment process as follows.
•

Investment Policy. The Asset Manager ensures that the office buildings that DOI invests in areenvironmentally-sound in various manners. Throughout lifecycles of properties in DOI’s portfolio, DOI
addresses ESG-related issues surrounding properties by implementing environmental protection
measures and providing sustainable services such as bicycle sharing to improve the environment aroundthe properties for neighborhood residents and makes continuous efforts to enhance DOI’s unitholder
value.

•

Due Diligence. The Asset Manager investigates the environmental and geological conditions of each
property to determine the possibility of presence of environmental hazardous substances and land
pollution. The Asset Manager conducts, with assistance from outside experts, financial, property andlegal due diligence review to evaluate investments. DOI only invests in properties that have noenvironmental hazardous substances. DOI generally does not invest in properties that exceed the land
pollution threshold specified in the Ordinance for Enforcement of the Soil Contamination
Countermeasures Act (Act No. 53 of 2002) of Japan (the “Soil Contamination Act”), and when DOI
does, the Asset Manager consults professionals to weigh their impact on the surrounding environment
and people against the economic benefits they would bring before making investment decisions.

•Green Finance Framework. DOI has established the Green Finance Framework to provide investors
with investment opportunities with positive environmental impacts.

o Use of funds. Funds raised through green bonds or green loans must be used to acquire
and/or to refinance funds used to acquire Green-Qualified Assets.

o

Selection process of projects. The Asset Manager’s Finance Department will evaluate
and select projects based on sustainability considerations. The project is then examinedby the Asset Manager’s Sustainability Promotion Committee, which provides its
opinion on it from a sustainability perspective, considered by the Asset Manager’s
Investment Committee and the Board of Directors, and approved by DOI’s Board of
Directors.

●oManagement of procured funds. Any unallocated funds will be managed in cash or
cash equivalent. If any asset purchased with green bonds is subsequently sold, theproceeds from the sale will be managed so that total balance of outstanding green bonds
will not exceed the green bonds-eligible debt limit, which is set at the total acquisition
price of assets that meet the green bonds eligible criteria, multiplied by DOI’s portfolio
LTV.

oReporting. The following matters will be disclosed annually on DOI’s website: (i) the
status of allocation of funds from green bonds proceeds and (ii) the number of GreenQualified Assets and other buildings which have acquired certifications such as DBI
Green Building Certification, CASBEE for Real Estate Certification and LEED
Certification, and (iii) quantitative indicators such as amounts of energy consumption,
CO2 emissions and water consumption.

What are the binding elements of the investment strategy used to select the investments toattain each of the environmental or social characteristics promoted by this financial
product?
A binding element of the investment strategy is DOI’s green finance framework, which
involves determination of whether a target property has satisfied the eligible criteria (describedin detail above) as an eligible asset to receive the funding procured under the green financeframework. With respect to any property acquired or refinanced through the green financeframework, the Asset Manager’s Sustainability Promotion Committee is required to provide its
opinion on the property from a sustainability perspective, which is considered by the AssetManager’s Investment Committee and the Board of Directors and approved by DOI’s Board of
Director.
The other binding elements of the investment strategy are the exclusion of properties notmeeting the thresholds for environmental hazardous substances, soil contamination and otherenvironmental contamination in accordance with the Soil Contamination Act and otherenvironmental laws and ordinances.

●

What is the committed minimum rate to reduce the scope of the investments considered
prior to the application of that investment strategy?

As discussed above, DOI invests only in properties that have been subjected to ESG due
diligence review. When investing in or refinancing properties using proceeds procured under
the Green Finance Framework, DOI never invests in properties that do not meet the eligible
criteria under the framework.
●

What is the policy to assess good governance practices of the investee companies?
DOI invests directly or indirectly through trust beneficiary interests in real estate and realestate-related assets. Therefore, due diligence review (including the assessment of good
governance practices) in relation to investee companies is not applicable.
While there is no third-party rating used for assessment of DOI’s governance practices,
DOI and the Asset Manager have implemented the following measures to assess and enhance
DOI’s governance systems:•

Adoption of performance-linked asset management fees. DOI pays performance-linked fees
based on the total asset valuation to the Asset Manager to align the interest of DOI’s
unitholders and the interest of the Asset Manager.

•

Related-party transactions. DOI is not allowed to carry out related-party transactions whichamount exceed certain threshold without the approval of DOI’s board of directors.

•

Transparent and appropriate information disclosure. DOI holds management calls for its
overseas unitholders and engages with a wide range of unitholders at its earnings meetings,
which are held via teleconference. DOI makes ongoing disclosures in Japanese pursuant to
the FIEA and other applicable laws and regulations in Japan and provides English language
disclosures or translations where practicable.

Asset Allocation
What is the asset allocation planned for this financial product?
As of June 30, 2024, 64.5% of DOI’s properties based on gross floor area of the buildings qualified
as Green-Qualified Assets, and 35.5% did not. As described in more detail above, all of DOI’s properties
are evaluated against the environmental characteristics promoted by DOI. We aim to increase the proportionof Green-Qualified Assets in DOI’s portfolio based on gross floor area to 70% by the end of FY2030.

64.5% is #1 Aligned with E/Scharacteristics#1B Other E/S characteristics

Investments of DOI
35.5% qualifies as #2 Other#1 Aligned with E/S characteristics includes the investments of the financial product used to attain theenvironmental or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental orsocial characteristics that do not qualify as sustainable investments.
#2 Other includes the remaining investments of the financial product which are neither aligned with theenvironmental or social characteristics, nor are qualified as sustainable investments.
●

How does the use of derivatives attain the environmental or social characteristics promotedby this financial product?

Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with
the EU Taxonomy?
Not applicable.
●

Does this financial product invest in fossil gas and/or nuclear energy related activities thatcomply with the EU Taxonomy?
No. DOI does not invest in real estate assets involved in fossil gas and/or nuclear energyrelated activities.

●

What is the minimum share of investments in transitional and enabling activities?
Not applicable.

What is the minimum share of sustainable investments with an environmental objective that are notaligned with the EU Taxonomy?
Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable.
What investments are included under “#2 Other,” what is their purpose and are there any minimum
environmental or social safeguards?
“#2 Other” includes the properties in DOI’s portfolio that have not received the sufficientenvironmental certification to qualify as Green-Qualified Assets. As of June 30, 2024, 35.5% of theproperties in DOI’s portfolio based on gross floor area did not qualify as Green-Qualified Assets. Findings
from due diligence review conducted prior to an acquisition of a property, including the environmental andgeological conditions of each property to determine the possibility of environmental hazardous substancesand land pollution, are binding on our investment strategy, and DOI will not acquire a property that does notmeet certain criteria based on such findings.
Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether this financial productis aligned with the environmental or social characteristics that it promotes?
Not applicable. DOI does not have a specific index designated as a reference benchmark to
determine whether DOI is aligned with the environmental and/or social characteristics that it promotes.
●

How is the reference benchmark continuously aligned with each of the environmental orsocial characteristics promoted by the investment units of DOI?
Not applicable.

●

How is the alignment of the investment strategy with the methodology of the index ensured
on a continuous basis?
Not applicable.

●How does the designed index differ from a relevant broad market index?
Not applicable.

●

Where can the methodology used for the calculation of the designated index be found?
Not applicable.

More Product-specific Information
Where can I find more product-specific information online?
More product-specific information can be found on the website: https://www.daiwaoffice.co.jp/en/index.html
Note Regarding the EU Taxonomy Regulation
As set out above, we promote certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”),
to disclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy
regulation. The EU Taxonomy Regulation is complemented by technical standards and screening criteria.
The technical screening criteria for the first two environmental objectives (climate change mitigation andclimate change adaptation) were adopted in December 2021 and amended in June 2023. The amended criteria
apply as of January 1, 2024. The technical screening criteria for the other four environmental objectives(sustainable use and protection of water and marine resources, transition to a circular economy, pollution
prevention and control, and protection and restoration of biodiversity and ecosystems) were adopted in June
2023. They apply as of January 1, 2024.
DOI invests in economic activities that are eligible under the EU Taxonomy Regulation in respectof climate change mitigation and/or climate change adaptation. This means that screening criteria for theseinvestments have been or will be developed. The Asset Manager expressly states that in view of the fact thatthe regulations are still under development or have only recently been adopted and/or amended and the fact
that, as a result thereof, data on alignment of DOI’s investments with these environmental objectives andclimate related goals in line with EU Taxonomy Regulation are not sufficiently available, the Asset Manager
is not currently in a position to disclose on an accurate and reliable basis to what extent DOI’s investments
technically qualify as Taxonomy-aligned or “environmentally sustainable” within the specific meaning of
the EU Taxonomy Regulation. DOI’s investments may have a positive contribution to these environmental
objectives and may therefore eventually be considered Taxonomy-aligned, but at this stage, the AssetManager is required to state that there is no minimum proportion of DOI’s investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to thoseinvestments underlying the financial product that takes into account the EU criteria for environmentally
sustainable economic activities. The investments underlying the other portion of this financial product do
not take into account the EU criteria for environmentally sustainable economic activities.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF DOI (SFDR ARTICLE 6 DISCLOSURE)※ Scenario analysis is based on currently available information and objective forecast data from third-party
organizations and does not necessarily guarantee the accuracy of the information due to the inherent
uncertainty of known and unknown risks.
DOI and the Asset Manager address sustainability risks by taking into account environmental, socialand governance factors in our investment decision process and on a continuous basis.
From the environmental perspective, DOI and the Asset Manager implement environmental
protection measures, including those for resource conservation and energy-saving. For example, we willcontinue to implement new facilities and equipment that help us reduce the environmental impact of DOI’s
properties. From the social perspective, we conduct our business based on a social mission of providing
high-quality and comfortable spaces in partnership with stakeholders, while disclosing appropriate
information to such stakeholders to improve our accountability. From the governance perspective, we
continually aim to make transparent and reasonable business decisions not only to meet the applicable legal
and regulatory requirements, but also to meet the ethical standards we have set for our business.
The Asset Manager’s investment decision-making process involves assessment of material ESGrelated risks and opportunities to ensure that DOI’s sustainable investment strategy is implemented on acontinuous basis. With each acquisition opportunity, DOI and the Asset Manager review ESG-related due
diligence findings. These findings are required to be considered by the Asset Manager’s Investment
Committee before a final decision is made on the investment.
As part of due diligence review prior to investment, the Asset Manager investigates theenvironmental and geological conditions of each property to determine the possibility of environmental
hazardous substances and land pollution. The Asset Manager conducts, with assistance from outside experts,
financial, property and legal due diligence review to evaluate potential investments. DOI invests only inproperties that have no environmental hazardous substances. DOI generally does not invest in properties thatexceed a certain land pollution threshold specified in the Ordinance of Enforcement of the Soil
Contamination Act. If a property exceeds the land pollution threshold, the Asset Manager consultsprofessionals to weigh its impact on the surrounding environment and people against the economic benefits
it would bring before making an investment decision.
In addition, the Asset Manager has established a sustainability promotion system and designated its
President & CEO as the Chief Executive for Promoting Sustainability, in addition to establishing a Chief
Sustainability Officer who is responsible for executing sustainability measures and managing progress, andthe Sustainability Promotion Committee. Meetings of the Sustainability Promotion Committee are held
regularly (once a month in principle) to discuss sustainability related matters, including policies, goals andmeasures, and social finance framework.
Furthermore, the Asset Manager tracks the sustainability measures including energy-saving
initiatives, reduction of GHG emissions initiatives and water-saving initiatives.
As a result of the growing interest in ESG factors among DOI’s investors and other stakeholders,
we believe that insufficient engagement in ESG-related issues could materially adversely impact our
reputation, business activities and DOI’s unit price. Having established the Sustainability Policy, we willtake ESG factors into serious consideration when investing in new properties and managing DOI’s portfolioin accordance with such policy. We believe that our ongoing ESG initiatives will contribute to DOI’s
sustainable growth and improve unitholders’ value while mitigating such ESG-related risks. In addition, we
believe that such initiatives also contribute to reduction of the environmental impact on the Japanese
economy while contributing to local communities and regional economies and at the same time, generating
sustainable growth in unitholder returns.
While sustainability issues will severely impact our business activities, we believe that such issues
may also become potential business opportunities to create new value for sustainable growth. Accordingly,
we position our commitment to sustainability as part of the agenda that DOI needs to address in ourmanagement strategies. We also believe that integrating sustainability factors alongside traditional financial
and operational metrics in our investment decision process helps us make a more holistic assessment of aproperty’s risks and opportunities and is commensurate with the pursuit of superior risk-adjusted returns.