11th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2010 ~ May 31, 2011

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation

Strengthen Financial Base and Steadily
Daiwa Office Investment Corporation (DOI) is a REIT (real estate investment trust) specializing in investment in officebuildings, focused on the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards). Through aportfolio comprised of A Class buildings (buildings with a total floor area of 30,000m2 or more) and B Class buildings(buildings with a total floor area of 2,000m2 or more, but less than 30,000m2), DOI strives to earn stable revenues bymeeting the diverse needs of a broad range of tenants and flexibly responding to market changes.

By continuously acquiring new properties based on our strong financial base, DOI will strive to achieve its mediumterm goal of an asset size of 350 billion yen. At the same time, DOI will conduct activities to un-collateralize properties
and other activities to enhance creditworthiness.

Contents
I.

Overview of Daiwa Office Investment Corporation
3 Characteristics of Daiwa Office Investment Corporation……… 3
To Our Investors……………………………………………… 4
Financial and Management Highlights………………………… 5
Internal Growth Measures… ………………………………… 6External Growth Measures…………………………………… 8
Overview of Portfolio (portfolio list)………………………… 11
Overview of Portfolio (portfolio distribution) ………………… 12
Financial Conditions… …………………………………… 14
Description of Asset Manager……………………………… 15

II. Asset Management Report………………………… 17
III. Balance Sheets… …………………………………… 22
IV. Statements of Income……………………………… 24
V.

Statements of Changes in Unitholders’ Equity …… 25

VI. Notes to Financial Statements…………………… 26
VII. Independent Auditors’ Report… ………………… 37
VIII. Statements of Cash Flows [Information Only] … … 38

Investment Unit and Investor Information…………………… 16

IX. Investor Information… ……………………………… 39

2

Expand Asset Size
Activities for solid growth・Continue acquiring properties

Achieve asset size of 350 billion yen
at an early stage

・Leverage borrowing capacity

Keep the medium-term, upper-limit
LTV target range within 40%~50%

Asset size

Asset size

350

billion yen

Further growth ofasset size

(medium-term target)

311.3
Asset size

287.3

billion yen(as of July 8, 2011)

billion yen

Establishment of stable revenue base(as of May 31, 2011)

・Establish marketing department

Further strengthen relations with tenants

・Maintain and improve property value

Capture tenant needs by reinforcing ties
with property managers
Keep renovating to improve habitability
and convenience

・Lower borrowing costs

Increase creditworthiness and promote
unsecured loans

3 Characteristics of Daiwa Office Investment Corporation
Office Specialized REIT
Applies advanced know-how on
operating office buildings

Office buildings
0%50%

Five Central Wards of Tokyo
0%

91.6%

50%

100%
Based on acquisition price0

Portfolio comprised of
A Class and B Class buildings
Operates Shinjuku Maynds Tower
at the core and blue-chip medium-sized
office buildings

100%

Regional Cities 1.7%
Greater Tokyo 6.7%

REIT focused on theFive Central Wards of Tokyo
Places priority on owning
office buildings in favorable locations
for which there is high demand

100%

A Class buildings(Shinjuku Maynds Tower)

20

46.6%

0%

40

60

B Class buildings

80

53.4%

50%

100%
Based on acquisition price(Note) All the percentages in the above graphs are figures as of the end of May 2011.
0

20

40

60

I. Overview of Daiwa Office Investment Corporation

80

3

To Our Investors
Activities for achieving future growth

We would like to express our deep gratitude to all our unitholders for their support of Daiwa Office Investment Corporation (DOI).
Furthermore, we would like to express our heartfelt condolences to all those affected by the Great East Japan Earthquake on
March 11, 2011. At the same time, we hope for the safety and early restoration of the disaster-stricken areas.
Now, the DOI was able to work on activities for achieving future growth in various areas, such as external growth, internal
growth and financial strategy, for the 11th Fiscal Period (fiscal period ended May 2011).
First of all, we are currently pouring efforts into achieving our medium-term target to achieve a total acquisition price of 350
billion yen. During the 11th Fiscal Period, we acquired a total of two properties, which are the Daiwa Kayabacho Building andJimbocho Place for a total of 9.15 billion yen. Of these, Daiwa Kayabacho Building became the first property we acquired fromthe sponsor group after the Daiwa Securities Group became our sponsor. Although not a property acquisition during the 11th
Fiscal Period, we also acquired E Space Tower at 24 billion yen in July 2011, making this our second largest asset next to
Shinjuku Maynds Tower. These examples show just how DOI is striving to steadily expand its asset portfolio.
With respect to internal growth, the occupancy rate of Shinjuku Maynds Tower almost reached 100% during the 10th Fiscal
Period (fiscal period ended November 2010). As a result, rent revenue increased. Simultaneously, other properties we alreadyown also maintained occupancy rate levels.
In terms of our financial strategy, we strove to enhance our financial base by reducing borrowing costs and procuring unsecuredloans at the time of procuring loans for acquiring new properties and refinancing existing borrowings.
As a result of all these activities, DOI recorded operating revenues of 6,759 million yen and operating income of 2,824 million
yen during the 11th Fiscal Period. This represents an increase in both sales and profit. Furthermore, as a result of the impact of
the earthquake, we posted temporary extraordinary losses. However, despite this fact, DOI’s distribution per unit for the 11th
Fiscal Period was 3,671 yen, a 431 yen distribution per unit increase from that of the 10th Fiscal Period.
For the 12th Fiscal Period (fiscal period ending November 2011), we are determined to strive towards thegoal of increasing distributions even further. This will be accomplished through the increased rent
revenue from the acquisition of E Space Tower and properties we already own, reducing borrowing costs
and other efforts.
We wish for the continued success of our unitholders and ask for your continued support of DOI.

Kazuo Otaka Executive Director of Daiwa Office Investment Corporation

11th Fiscal Period

Distribution per unit (actual)

3,671 yen

12th Fiscal Period

Distribution per unit (forecast)

4,100 yen(fiscal period ended May 2011)(fiscal period ending November 2011)(Note)

4

The forecast on distribution above is calculated based on certain assumptions and may vary due to changes in the status and other factors. Moreover, the forecasts set forth herein should not be construed asa guarantee of distribution amounts.

Financial and Management Highlights
Revenues recovered well due to increase in rental revenue from newly acquired and existing properties◦ External growth

Acquisition of Daiwa Kayabacho Building as of March 25, 2011 at 5.60 billion yen
Acquisition of Jimbocho Place as of March 29, 2011 at 3.55 billion yen◦ Internal growth

Portfolio’s occupancy rate was 95.4% and rental revenue from existing properties
increased◦ Financial management

Reduction of borrowing costs in fund procurement for acquiring properties andrefinancing existing borrowings
Procurement of unsecured loans

11th Period

10th Period

9th Period

8th Period

7th Period(May 2011)(November 2010)(May 2010)(November 2009)(May 2009)

6,759
2,824
1,588
1,453
395,798
505,900
3,671
298,626

6,424
2,482
1,274
1,282
395,798
505,4693,240
294,562

6,986
2,959
1,774
2,076
395,798
507,475
5,246
283,867

7,744
3,903
2,711
2,710
395,798
509,075
6,847
286,901

8,178
4,279
2,999
3,157
343,905
558,1139,179
275,769

28.9

28.1

25.5

25.3

25.4

35
191,346.43
95.4

33
182,548.82
95.9

31
174,928.31
85.7

30
171,951.76
92.8

30
172,135.20
97.7

Operating revenues (million yen)
Operating income (million yen)
Ordinary income (million yen)
Net income (million yen)
Total number of units issued (units)
Net assets per unit (yen)Distribution per unit (yen)Total assets (million yen)
Loan-to-value (LTV)(based on total asset value) (%)
Number of investment properties
Total rentable area (m2)Occupancy rate (%)

Operating Revenues

Total Assets(million yen)(million yen)

10,000300,000

7,500

298,626
8,178

294,562

290,000

7,744
6,986

6,424

286,901

6,759

5,000

280,000

2,500

270,000

283,867
275,769

0

7th Period

8th Period

9th Period

10th Period

11th Period

Net Income

7th Period

8th Period

9th Period

10th Period

11th Period

Distribution Per Unit

(million yen)

(yen)

3,500

3,000

260,000

10,000

9,179

3,157

7,500

2,710

2,500

6,847

2,000

2,076

5,000

1,500
1,282

1,000

5,246

1,453
3,240

2,500

3,671

500
0

7th Period

8th Period

9th Period

10th Period

11th Period0

7th Period

8th Period

9th Period

10th Period

11th Period

I. Overview of Daiwa Office Investment Corporation

5

Internal Growth Measures
Enhance property value with various measures

Office Market Trends◦ Office Rent and Vacancy Rate

Although the vacancy rate in the office market reached apeak and stayed there during the 11th Fiscal Period, officerent continues on a downward trend due to concerns
about the impact of the earthquake and large supplies in
the future office market. However, since the period of aturnaround in office rent usually lags behind a turnaroundin the vacancy rate, office rent is expected to bottom out
after quite some time.

(%)
10.0

(yen/tsubo)
24,0007.5

22,000

5.0

20,000

2.5
0.0
May
2001

18,000
Average vacancy rate (left axis)
Market rent (Advertised rent in the Five Central Wards of Tokyo; existing buildings) (right axis)
16,000
May
May
May
May
May
May
May
May
May
May
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
(Source) Prepared by Daiwa Real Estate Asset Management Co., Ltd. based on data of Miki Shoji Co., Ltd.

Leasing Strategy
The portfolio’s occupancy rate as of the end of the 11th Fiscal Period was maintained at the 95% level. As a result, rental revenue fromexisting properties increased. Following the 12th Fiscal Period, we estimate that the occupancy rate will temporarily drop in view of theeconomic impact of the earthquake and the impact of large supplies of large-scale offices. However, DOI will strive to achieve further
internal growth by enhancing property value with various measures.
(%) 100
95
90
85
80
75
70
(million yen) 9,000
8,000
7,000

99.0

97.4

97.0

98.3

98.2

97.7

95.9

92.8

95.4
90.7

90.4

85.7
Occupancy rate

Occupancy rate (DOI forecast)
NOI: Rental revenues + Other revenues related to property leasing− Expenses related to rent business + Depreciation
NOI yield: NOI ÷ Period average acquisition price

7.1

6,000

5.7

5.4

5.2

4.8

5,000

4.7

4.8

6,895

3,000
3,143

3,974

3,282

6,373

5,133

6,334

5,915

4,922

3.2
4,465

3.5

3.4

4,873

5,409

5,275

33

30

4
3
2

-20

Services 25.7%

-12

-14

Number of Move Outs

Downsizing
1
1Retail 4.1%
Construction

4.2%

Electronics 4.7%

9th Fiscal Period 10th Fiscal Period 11th Fiscal Period

CostSpace ConsoliReduction Expansion dation
Moving in
1
6
60 0
Moving out
1
0
50 6

◦List of Industries of Top 50 Tenants (Companies) (Note)

16
4

-24

-53
8th Fiscal Period

0

Other 17.4%

31
17

6

Number of Move Ins

671
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period 11th Period 12th Period 13th Period(forecast) (forecast)(Note) The forecast figures set forth above are the figures calculated based on certain terms using information available at the end of the 11th Fiscal Period. Accordingly, actual
results may vary from these figures.

◦ Changes and Reasons for Tenants Moving In/Out (Note)(No. of Cases)
40
30
24
20
5
10
0
-10
-20
-19
-30
-40
-50
-60
7th Fiscal Period

8

5
3.5

1,000
0

9 (%)

6
4.5
3.7

4,000
2,000

97.6

BetterLocation
40

Difference

Other

Total

4
4

16
12

40
(Note) Figures above exclude new moving in/out for residential and warehouse properties
30
20
10
0

Food Products

4.8%

Information andTelecommunication

16.7%

Precision
Equipment 5.9%
Banks 6.0%

Real Estate 10.4%(Note) The top 50 tenants comprise 58.1% of the leased floor area as of the end of the 11th Fiscal
Period. Furthermore, industry classifications have been prepared by DOI based on the 33
industries classified by the Tokyo Stock Exchange.

Impact of the Great East Japan Earthquake on Properties
After the occurrence of the Great East Japan Earthquake on March 11,
2011, on-site investigations were conducted by third-party investigationcompanies, etc. They confirmed that for all 35 properties owned by DOI,
there were no human casualties and no damage that would have amajor impact on operations. Moreover, some properties did incur minor
damage, particularly on the interior and exterior of buildings as well as
facilities. Repairs, renovation and reinforcement work was conducted.

◦ Restoration Costs Resulting fromthe Great East Japan Earthquake
Conducted prior to the end of May 2011

61 million yen

Other expenses incurred prior to the end of May 2011
(including investigation fees)
Estimated costs for restoration work from June 2011
onwards

8 million yen
63 million yen

Total

134 million yen

Strengthening Earthquake Resistance of Properties
Of the 35 properties owned by DOI, 18.3% were ◦Ratio of New/Old Earthquake
Resistance Standard Buildings
built based on old earthquake resistance(based on acquisition price)
standards. The following is a list of buildings built
Old Resistancebased on the old earthquake resistance standards,
Standards
but major construction to enhance earthquake
18.3%
resistance was performed. As a result, thesebuildings ha ve an earthquake resistance
New Resistance Standards
performance that is not inferior to that of new
81.7%
earthquake resistant standard buildings.
Conducted

Portfolio PML

5.62%(Prepared by NKSJ Risk Management, Inc.)

Construction to strengthen earthquake resistance ofDaiwa Kyobashi Building (conducted in 2005)

Daiwa Ginza
Daiwa Ginza Annex

Strengthening of walls, reinforcement of pillars and beams (carbon fiber+steel plate winding+reinforced steel), slit installment, etc.

Daiwa Shibuya SS

Strengthening of walls

Daiwa Onarimon

New reinforcing walls, strengthening of walls, strengthening of pillars, carbon fiber sheet winding of pillars, new steel plate brace, etc.

Conducted

Daiwa Ginza 1-Chome

Additional reinforcing walls, strengthening of walls, new steel plate brace, slit installment, carbon fiber sheet winding of beams, etc.

in 2005

Daiwa Kyobashi

Additional reinforcing walls, strengthening of walls, carbon fiber sheet winding of pillars and beams, etc.

Conducted

Daiwa Shimbashi 510

Strengthening of walls, steel plate winding of pillars, slit installment, etc.

in 2006

Daiwa Nihombashi Honcho

Additional reinforcing walls, new steel-framed brace, aramid fiber sheet winding of pillars, etc.

in 2003

Electricity Conservation Efforts
From July 1, 2011 to September 22, 2011 (9:00~20:00 on weekdays),electricity conservation is implemented, with the understanding andcooperation of tenants, by major consumers in the service area of theTokyo Electric Power Company (contracted 500kW or more) to reduce
the usage of power (15% reduction from maximum of same period
last summer).
Properties Housing Large Customers (contracted 500kW or more) (9 Properties)
Shinjuku Maynds Tower
Daiwa Ginza
Daiwa Shibaura
Daiwa Tsukishima
Daiwa Shinagawa North Daiwa Nihombashi Honcho
Daiwa Nishi Shimbashi
Benex S-3
Daiwa Higashi-Ikebukuro◦ Specific Efforts of Tenants in Electricity Conservation

・Held meetings with tenants concerning electricity conservation
・Distributed announcements to tenants concerning electricity conservation incommon-use areas
・Visited individual tenants (primarily major tenants) and requested cooperationfor electricity conservation, and also confirmed their respective electricity
conservation policies for the summer
・Drafted and implemented effective electricity conservation measures for eachbuilding by holding meetings with air conditioning and automatic control
equipment manufacturers
・Applied for shared use schemes (adjusting by integrating the conservation
amount at buildings that have difficulty in reducing electricity consumption
with those that can easily reduce consumption)◦Electricity Conservation Measures (Examples)
CommonUse Areas

Restrooms and Hot Water
Supply Rooms

Encourage turning off lights in restrooms when not in use
Turning off electric water heater water supply for restroom sinks and hot water supply rooms, as well as handdryers, toilet seat heaters and hot water washers

Lights at Entrances, Elevator Halls,
Turn off 80-90% (10-20% of usual)
Hallways, etc.
Air Conditioning of Common-Use Areas Completely turn off
At buildings with three or more regular elevators, complete stopping of one
Elevators
Tenant Areas Air Temperature Settings
Set air-conditioning temperatures higher than last year (targeting 28°C)(requests toTurning off unneeded lights
Lighting
tenants)
Use of blinds and fans
I. Overview of Daiwa Office Investment Corporation

7

External Growth Measures
Promote acquisition of selected properties by leveraging low LTV and expand acquisition channels

Real Estate Transaction Market Trends(transactions)

(DI)

800
300
700
600
500
400
300
200
100
0

During the 11th Fiscal Period, the real estatetransaction market was forced into a low note due totemporary stagnation of economic activities triggeredby the earthquake. On the other hand, the lending
stance of financial institutions continues to ease andthe need for funds to sell properties, etc. continues ona downward trend.

No. of transactions

Lending stance DI (real estate)

Lending stance DI (all industries)

Sharp decline in number of transactions
Stricter lending attitude

2007
2nd Half

2008
1st Half

2008
2nd Half

2009
1st Half

2009
2nd Half

2010
1st Half

2010
2nd Half

2011
1st Half

30
20
10
0
-10
-20
-30
-40
-50

(Source) Prepared by Daiwa Real Estate Asset Management Co., Ltd. based on data of Urban Research InstituteCorporation's “Real Estate Transaction Survey” and Bank of Japan's website

External Growth Target and Property Acquisition Policy
85.5×25
During the 11th Fiscal Period, DOI acquired two office buildings (Daiwa Kayabacho Building and Jimbocho
Place) for a total acquisition
price of 9.15 billion yen.
DOI will continue acquiring properties as it continues to strive to procure funds by taking advantage of its low LTV and by expanding its
acquisition channels. Furthermore, through the acquisition of relatively new properties which are highly profitable, DOI will continue to800
improve its portfolio.
700
600◦ Medium-Term External Growth Target
500
400
Achieve medium-term target of 350 billion yen in total acquisition price at an early stage
through proactive property
300
acquisitions by leveraging borrowing capacity.
200
100
0

◦ Distribution of Portfolio Properties and Acquisition Policy[Chart of Distribution of Portfolio Properties]

30
20
Present Portfolio100Investment is concentrated
in the Five Central Wards of Tokyo
Comprised of A Class-10building (Shinjuku Maynds Tower) and-20
B Class buildings (Note)-30
Some B Class buildings-40 are old buildings ( 2 )-50(as of July 8, 2011)
DOI portfolio properties(Total floor area: m2 )120,000

100,000

Shinjuku Maynds Tower

80,000A Class buildings

Presently targeted
investment zone
60,000Daiwa Kayabacho Building
E Space Tower(acquired in July 2011)

40,000Investment breakdown
Share
Five Central Wards 92.3%
6.2%
Greater Tokyo
1.5%
Regional Cities
Share
Classification
A Class buildings 43.0%
B Class buildings 57.0%
Area

Acquisition Policy
Focus investment on the Five Central Wards of Tokyo
Focus investment on A Class buildings and B Class buildings
within the targeted building age range of 20 years or younger
in Zone 1
Acquire properties that improve stability and profitability ofthe existing portfolio
Always consider sales and replacement of properties in Zone 2

1

B Class buildings

20,0002

Jimbocho Place
0.0

10.0

20.0

30.0

40.0

50.0

60.0
(Age: years)(Note) A Class buildings are buildings with a total floor area of 30,000m2 or more, and B Classbuildings are buildings with a total floor area of 2,000m2 or more, but less than 30,000m2.

Portfolio History and Market Conditions
350
300

Subprime
mortgagecrisisBullish period(billion yen)

Adjustment period

Expansion period

Total acquisition price
287.0

250

283.4

265.0

265.0

265.0

269.1

278.1

287.3

200
150
100
50

79.5

0
IPO
Oct. 2005

8

110.8

End of
1st Period
May 2006

130.4

138.4

End of
2nd Period
Nov. 2006

End of
3rd Period
May 2007

Investment based on
selected properties
End of
4th Period
Nov. 2007

End of
5th Period
May 2008

End of
6th Period
Nov. 2008

End of
7th Period
May 2009

End of
8th Period
Nov. 2009

End of
9th Period
May 2010

End of10th Period
Nov. 2010

End of11th Period
May 2011

End of12th Period
Nov. 2011

End of13th Period
May 2012

Properties Acquired During the 11th Fiscal Period
During the 11th Fiscal Period, DOI acquired two properties, including a property acquired for the first time from the Daiwa Securities
Group. The effect of support received from our sponsor, the Daiwa Securities Group, is starting to show in terms of external growth andinternal growth, centering on our financial base.

Daiwa Kayabacho Building [acquired on March 25, 2011]• First property acquired from the Daiwa
Securities Group after the change insponsors

Address• Excellent access to transit located a
3-minute walk from the Kayabacho Stationon the Tokyo Metro Hibiya Line and Tozai
Line• Most recently built property in portfolio• Extremely stylish design with mirrored
glass exterior and highly advanced officespecifications
Bank of Japan

Metro

kyo
1 To omon Line

Mitsukoshi-mae Sta.

Toky
Toza o Metro
i Lin
e
t

Eita

tree

i St

w
i As a Stre
e
aku
sa t
Lin
e
Toe

su

ree

t
Kayabacho Sta.

Sho

Yae

Stre

et

◦Revitalization of Surrounding Areas
This building is located in a financial business
district that is one of the best in Japan as it
encompasses the Tokyo Stock Exchange. It not
only boasts high concentration of offices, butthere are expectations of a new market due tothe opening of new retail facilities that willaccompany the redevelopment of theneighboring Nihombashi area.

6

Tok
y
Hib o Met
iyr
Shin a Lin o-Oh eaStre shi
et

Chu

t
tree
ri S

Tok
yo
Gin Metr
za
Lin o
e

obo
Sot

Daiwa
Tokyo
Kayabacho
Exchange Building
Nihonbashi Sta. StockC1

oS

Gran Tokyo
North Tower
Tokyo Sta.

Ningyocho
Sta.

Hanz

1-chome, NihombashiKayabacho, Chuo-ku, Tokyo
Site area
880.35m2
Structure and floors S·SRC B1/8F
Total floor area
5,843.65m2
Rentable floor area 5,899.11m2
Completion
April 30, 2010
Acquisition price5.60 billion yen
Occupancy
100.0% (as of May 31, 2011)

Jimbocho Place [acquired on March 29, 2011]• Stylish external appearance that is covered
with full-height glass sash
• Excellent access to transit a 2-minute walkfrom the Jimbocho Station on the Tokyo
Metro Hanzomon Line, the Toei Subway
Shinjuku Line and Toei Subway Mita Line• Relatively new and maintains highcompetitiveness even in building
specifications
usan
Hak etStre a Line
i Mit
Toe

dai

Sen
Stre

Daiwa Jimbochoet5Toei ku Line
Jimbocho Sta.
ni
Kudanshita Sta. Yasuku
ShinjuStreet Jimbocho Place
Jimbocho Sta.
Daiwa Kudan

ibo

ri S

tree

etro
yo M
Tok ai LineToztKitanomaru Park
Science Museum
The National
Museum ofModern Art

3-chome, Kanda-Jimbocho,
Chiyoda-ku, Tokyo
Site area
500.05m2
Structure and floors S 9F
Total floor area
3,496.44m2
Rentable floor area 2,889.34m2
Completion
February 9, 2010
Acquisition price3.55 billion yen
Occupancy
100.0% (as of May 31, 2011)◦Maintains Stable Revenue
Based on the fact that it is highly accessible tolarge terminal stations, such as Tokyo Stationand Shinjuku Station, the area’s office demand
has a track record of solid performance. As
such, stable operations after acquisition are
expected.

Tokyo Metro
HanzomonLine

Chiyoda Ward Office

UchNippon Budokan

Address

Takebashi Sta.
Hirakawabori Moat

I. Overview of Daiwa Office Investment Corporation

9External Growth Measures

Properties Acquired During the 12th Fiscal Period
During the 12th Fiscal Period, DOI acquired E Space Tower for 24 billion yen. Due to this, the average age of portfolio properties (based on
the weighted average of acquisition prices) has improved from 21.2 years to 20.3 years. Furthermore, the investment ratio of Shinjuku
Maynds Tower (based on acquisition price) has decreased from 46.6% to 43.0%. As a result, DOI is working to improve the portfolio
through the diversification of the investment ratio and other efforts.

E Space Tower [acquired on July 8, 2011]•Tremendous ofﬁce demand in the area here
due to large number of IT-relatedcompanies, etc. active in the Shibuya
Station vicinity

Address

Maruyamacho,
Shibuya-ku, Tokyo
Site area
2,998.38m2
Structure and floors S SRC B1/15F
Total floor area
18,145.04m2
Rentable floor area 13,960.74m2
Completion
October 31, 2002
Acquisition price24.0 billion yen
Occupancy
89.3% (as of July 8, 2011)• About a 7-minute walk from Shibuya
Station on the JR Line and Tokyo Metrolines, and a 3-minute walk from Shinsen
Station of the Keio Inokashira Line• Relatively new, large-scale building that israre even in the Shibuya area with highly
advanced building specifications
JR Yamanote LineroTokyo Met Line
Hanzomontro
Shibuya 109 Shibuya ExcelMo eToky a Line
Hotel Tokyu
en et
Ginz
Dog a Stre
ShibuyaSta.
kaZMark City
Tok
Me
Keio shira Line
yu
i
Inoka
Toy ji Str
oko eetCerulean Tower
3
Lin
Tokyu Hotele

BunkamuraTo
To kyush De
i L neine n

E Space Tower

Shinsen Sta.

Tokyu Hands
Seibu
r-Ga Department B
i Stre Store
A
et

Cente

Tokyo Metro
Fukutoshin Line

Shibuya Edge

◦Total AUM Exceeds 300 Billion Yen
After acquisition of this property, the total valueof our assets under management became
311.345 billion yen. This is the first time thetotal value of our AUM has exceeded 300
billion yen since DOI’s founding. Through theenhancement of profitability that accompanies
the ever increasing value of our portfolio, wewill strive to raise our presence in the J-REIT
market.

◦ Large-Scale Offices Scheduled for Completion (Note)◦Shibuya, a favorite area for IT-related companies

A few large-scale office buildings are being supplied near Shibuya
Station, but compared to other major office areas, the volume of
office supply is low.

While the image of Shibuya town is one that represents thelatest fashion and a creator of the “young culture,” it is also an
area which boasts a high concentration of cutting edge ITrelated companies compared to other areas.

Shinjuku-ku◦ Percentage of Information & Telecommunications
Industry and Service Industry (Note)

Shinjuku

Chiyoda-ku
TokyoShibuya-ku

Chuo-ku

Shibuya Ward

24%

Shimbashi
ShibuyaMinato-ku

Information &Telecommunications Industry
Service Industry

55%

Meguro Ward 1.0%

Other

Shinagawa Ward 9.0%
Shibuya Ward

4.6%

5 Major Wards of Tokyo

Shinjuku Ward

11.7%

Chiyoda Ward 37.2%

Minato Ward 24.9%

Chuo Ward 11.7%(Note) A diagram illustrating the distribution of large-scale office buildings that are scheduled for completion
after 2011 in the vicinity of the 5 major wards of Tokyo (larger than 10,000m2 in total floor area), anda pie-chart showing the percentage of total floor area by ward based on the aforementioned.
(Source) Prepared by DOI based on the “Nikkei Real Estate Market Report: June 2011 (“New Large-Scale
Office Buildings Map 2011”)”

10

21%

ShinagawaAll of Japan

16%

10%

80%

70%
14%

10%

(Note) Industrial distribution of areas where the head office of companies listed on the First Section,
Second Section, and Mothers Market of the Tokyo Stock Exchange, and JASDAC listedcompanies are located, against the total number of such companies by region(Source) Bloomberg

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 34 B Class buildings(as of May 31, 2011)
Property Name

Address

Rentable
Area (m2)(Note 2)

Structure andExecution
No. of Floors Completion of Major
Repairs(Note 3)Acquisition
Price

Appraisal
Value at End
of Period

Ownership TypePML (%)

mm
yen

Share

(mm yen)(Note 4)Land

Building(Note 5)

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza

Ginza, Chuo-ku, Tokyo

8,273.05 SRC B3/12F

July 1963

2003

14,1004.9

13,900Fee simple andleaseholdFee simple

9.17

2 Daiwa Ginza Annex

Ginza, Chuo-ku, Tokyo

2,032.52

SRC B3/8F

Aug. 1972

2003

3,050

1.1

2,900

Fee simple

Fee simple

7.46

3 Daiwa Shibaura

Shibaura, Minato-ku, Tokyo

9,626.35 SRC B1/12F

Oct. 1987

8,265

2.9

7,290

Fee simple

Fee simple

5.09

4 Daiwa Minami-Aoyama

Minami Aoyama, Minato-ku, Tokyo

2,715.54 S·SRC B2/5F Sept. 1990

4,550

1.6

3,980

Fee simple

Fee simple

12.79

5 Daiwa Sarugakucho

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

3,000

1.0

2,490

LeaseholdFee simple

9.79

Compartmentalized
ownership

6.03

SRC 8F

June 1985

6 Daiwa A Hamamatsucho

Hamamatsucho, Minato-ku, Tokyo

3,671.25 SRC B2/10F

July 1993

2,865

1.0

2,910

Fee simple

7 Daiwa Jingumae

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

1.0

2,020

Fee simple

Fee simple

12.01

8 Daiwa Shibadaimon

Shibadaimon, Minato-ku, Tokyo

2,384.70 SRC·RC B1/7F Nov. 1996

2,578

0.9

2,820

Fee simple

Fee simple

2.99

9 Daiwa Misakicho

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

July 1996

2,346

0.8

2,410

Fee simple

Fee simple

6.68

10 Daiwa Shimbashi 510

Shimbashi, Minato-ku, Tokyo

2,803.80

SRC B1/8F

Apr. 1974

2,080

0.7

2,540

Fee simple

Fee simple

8.13

11 BPS SQUARE

Tsukiji, Chuo-ku, Tokyo

2,852.97

SRC 10F

Jan. 1996

1,560

0.5

1,660

Fee simple

Fee simple

7.67

12 Daiwa Tsukiji

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,370

Fee simple

Fee simple

9.70

13 Daiwa Tsukiji 616

Tsukiji, Chuo-ku, Tokyo

2,932.65

SRC B1/9F

Mar. 1994

2,440

0.8

2,410

Fee simple

Fee simple

7.69

14 Daiwa Tsukishima

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.7

7,710

Fee simple

Fee simple

10.89

15 Nihombashi MS Bldg.

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,920.19

SRC B2/7F

Apr. 1993

2,520

0.9

2,420

Fee simple

Fee simple

7.84

16 Daiwa Azabudai

Azabudai, Minato-ku, Tokyo

1,705.44

SRC B2/9F

Apr. 1984

1,600

0.6

1,830

Fee simple

Fee simple

9.57

17 Daiwa Shibuya SS

Shibuya, Shibuya-ku, Tokyo

2,980.92 SRC·S B1/9F

July 1977

2003

3,930

1.4

3,940

Fee simple

Compartmentalized
ownership (100%)

8.67

18 Daiwa Nihombashi Honcho

Nihombashi-Honcho, Chuo-ku, Tokyo

7,419.75 SRC B1/10F

Jan. 1964

2006

7,420

2.6

6,980

Fee simple

Fee simple

8.49

19 Daiwa Ginza 1-chome

Ginza, Chuo-ku, Tokyo

3,757.77 SRC B2/11F

Jan. 1962

2005

4,620

1.6

4,190

Fee simple

Fee simple

10.16

20 Daiwa Kyobashi

Hachobori, Chuo-ku, Tokyo

3,220.47

SRC B1/8F

Oct. 1974

2005

3,460

1.2

3,130

10.04

21 Sunline Building No. 7

Kojimachi, Chiyoda-ku, Tokyo

2,405.15

SRC B2/9F

Oct. 1987

2,680

0.9

2,280

22 Daiwa Onarimon

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,8604.8

14,400Compartmentalized
ownership (100%)
Co-ownership Compartmentalized
ownershipCompartmentalized
Fee simple ownership (100%)

133,800 46.6

106,000

Co-ownership

Co-ownership

6.42

4,060

Fee simple

Fee simple

3.14

RC B1/4F

2006

2003

Fee simple

8.62
5.45

23 Shinjuku Maynds Tower (Note 7) Yoyogi, Shibuya-ku, Tokyo

45,544.04 S·SRC B3/34F Sept. 1995

24 SHIBUYA EDGE

Udagawacho, Shibuya-ku, Tokyo

2,480.65

RC B1/9F

Aug. 2006

25 Daiwa Kodenmacho

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

SRC 8F

Mar. 1985

2,460

0.9

1,920

Fee simple andleaseholdFee simple

7.71

26 Daiwa Jimbocho

Kanda Jimbocho, Chiyoda-ku, Tokyo

3,166.84

S B1/8F

Mar. 1997

4,150

1.4

3,820

Fee simple

Fee simple

5.58

27 Daiwa Nishi-Shimbashi

Nishi-Shimbashi, Minato-ku, Tokyo

4,815.84 SRC B1/10F

July 1993

5,000

1.7

5,680

Fee simple

Fee simple

6.76

28 Daiwa Kudan (Note 8)

Kudan Minami, Chiyoda-ku, Tokyo

3,104.23

Mar. 1987

4,000

1.4

3,990

Fee simple Compartmentalized
ownership (100%)

7.96

29 Daiwa Kayabacho Building

Nihonbashi-Kayabacho, Chuo-ku, Tokyo

5,899.11 S·SRC B1/8F

Apr. 2010

5,600

1.9

5,980

Ownership

Ownership

5.58

30 Jimbocho Place

Kanda-Jimbocho, Chiyoda-ku, Tokyo

2,889.34

Feb. 2010

3,550

1.2

3,660

Ownership

Ownership

6.13

263,264 91.6

230,690

Subtotal

SRC 9F
S 9F

161,505.49

Greater Tokyo Area (Note 1)

5,900

2.1

5,468.85

3,414

31 Daiwa Kinshicho

Kameido, Koto-ku, Tokyo

5,468.85

Jan. 1992

3,653

1.3

3,570

Fee simple

Fee simple

7.42

32 Daiwa Higashi-Ikebukuro

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,630.94 SRC·S B1/9F June 1993

2,958

1.0

3,570

Fee simple

Fee simple

5.56

33 Benex S-3

Shin-Yokohama, Kohoku-ku, Yokohama City, Kanagawa

7,470.28 S·SRC B1/12F Feb. 1994

4,950

1.7

3,410

Fee simple

Fee simple

5.66

34 Daiwa Shinagawa North

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,551.33 SRC B1/11F

7,710

2.7

5,770

Fee simple

Fee simple

5.56

19,271

6.7

16,320

4,810

1.7

2,920

Fee simple

Fee simple

11.56

4,810

1.7

2,920

287,345 100.0

249,930

Subtotal

S B1/5F

July 1991

24,121.40

Regional Cities (Note 1)

35 Daiwa Minami-Semba

Minami-Semba, Chuo-ku, Osaka City, Osaka

5,719.54

Subtotal

5,719.54

Total

191,346.43

SRC B1/8F

Sept. 1986

5.62 (Note 6)(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo Prefectures), Nagoya area (Aichi and Mie Prefectures), ordinance designated cities (Sapporo, Sendai, Niigata, Shizuoka, Hamamatsu, Okayama,
Hiroshima, Kita Kyushu and Fukuoka), and the cities of Hakodate, Asahikawa, Aomori, Morioka, Akita, Koriyama, Iwaki, Utsunomiya, Maebashi, Toyama, Kanazawa, Nagano, Gifu, Otsu, Nara, Wakayama,
Kurashiki, Fukuyama, Shimonoseki, Takamatsu, Matsuyama, Kochi, Kurume, Nagasaki, Kumamoto, Oita, Miyazaki and Kagoshima.
(Note 2) The Rentable Area are indicated as of May 31, 2011 (end of 11th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2011 (end of 11th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2011) prepared by NKSJ Risk Management, Inc.
(Note 6) The PML total shows the portfolio PML.
(Note 7) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total Rentable area of the entire building.
(Note 8) Starting from July 1, 2011, the name of the building has been changed to Daiwa Kudan (former Kyodo Building (Kudan Ichigo-kan)). Moreover, hereinafter the building will be called by its new name.

I. Overview of Daiwa Office Investment Corporation 11

Overview of Portfolio (portfolio distribution)
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku
and Shibuya Wards)

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo Area
Ikebukuro

32

Toshima-ku

2 Daiwa Ginza Annex

3 Daiwa Shibaura

Shinjuku-ku
Shinjuku

Shinjuku Maynds Tower 23

Shibuya-ku
1 Daiwa Ginza

5 Daiwa Sarugakucho

Daiwa Jingumae 7

6 Daiwa A Hamamatsucho

Daiwa Minami-Aoyama 4
Daiwa
Shibuya SS

SHIBUYA EDGE 24
Shibuya17Tokyo
7 Daiwa Jingumae

8 Daiwa Shibadaimon

9 Daiwa Misakicho

10 Daiwa Shimbashi 510

Shinagawa-ku

12

11 BPS SQUARE

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

16 Daiwa Azabudai

17 Daiwa Shibuya SS

19 Daiwa Ginza 1-chome

21 Sunline Building No. 7

25 Daiwa Kodenmacho

26 Daiwa Jimbocho

27 Daiwa Nishishimbashi

28 Daiwa Kudan

29 Daiwa Kayabacho Building

30 Jimbocho Place

31 Daiwa Kinshicho

32 Daiwa Higashi-Ikebukuro

33 Benex S-3

(as of May 31, 2011)

JR Yamanote Line
JR Saikyo Line
JR Chuo Line
JR Yokosuka Line andSobu Rapid Line

Daiwa Higashi-Ikebukuro

4 Daiwa Minami-Aoyama

15 Nihombashi MS Bldg

Daiwa Misakicho
5 Daiwa Sarugakucho
9
Jimbocho
30 26 Daiwa Jimbocho
Place
28
Daiwa Kudan

Chiyoda-ku

Daiwa
Nishishimbashi

25 Daiwa Kodenmacho

Kameido31

14 Daiwa Tsukishima

Daiwa Kinshicho

15 Nihombashi MS Bldg.

21 Sunline Building No. 7

BPS SQUARE
Daiwa Tsukiji
Daiwa Ginza Annex

Kinshicho

18 Daiwa Nihombashi HonchoTokyo

29 Daiwa Kayabacho Building

Chuo-ku

Koto-ku

19 20 Daiwa Kyobashi
2
1

11
12

18 Daiwa Nihombashi Honcho

Daiwa Ginza 1-chome

Daiwa Ginza
27
13 Daiwa Tsukiji 616
10
22
Shimbashi 14 Daiwa Tsukishima
Daiwa Onarimon
6
Daiwa Shimbashi 510
8
16
Daiwa A Hamamatsucho
Daiwa Azabudai
Daiwa Shibadaimon
3 Daiwa Shibaura
Minato-ku

20 Daiwa Kyobashi

22 Daiwa Onarimon

Shinagawa24 SHIBUYA EDGE

34 Daiwa Shinagawa North

33
35

Benex S-3
Daiwa Minami-Semba

34 Daiwa Shinagawa North

35 Daiwa Minami-Semba

23 Shinjuku Maynds Tower

I. Overview of Daiwa Office Investment Corporation 13

Financial Conditions
Strengthen financial standing by un-collateralizing borrowings and reducing debt costs

Financial Strategy
DOI has established a solid financial base by making the most of the creditworthiness and network of the Daiwa Securities Group. Goingforward, DOI will continue focusing on stable financial management to support further growth.

Activities for Achieving Unsecured Borrowing Status
During the 12th Fiscal Period, DOI continues negotiations with banks to attain unsecured status for all borrowings. For this reason,
temporary costs may be incurred, but it is projected that overall costs will be reduced based on the drop in interest rates for procuringborrowings and reducing expenses for management of collateral.
◦ Ratio of Unsecured Borrowings
100（%）◦ Benefits of Unsecured Borrowings Status
Ratio of unsecured borrowings (Note)・Increased ﬂexibility for procuring borrowings
・Reduced financial costs including expenses for
management of collateral・Positive ingredients for improved ratings・Facilitates expansion of lending financial institutions
・Facilitates issuing investment corporation bonds

75
Immediately following acquisition of
E Space Tower

50
25
0

3rd Fiscal 4th Fiscal 5th Fiscal 6th Fiscal 7th Fiscal 8th Fiscal 9th Fiscal 10th Fiscal 11th Fiscal 12th Fiscal
PeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriod(Note) Ratio of unsecured borrowings = Unsecured interest-bearing liabilities / Interest-bearing liabilities

Status of Interest-Bearing Liabilities◦ Interest-Bearing Liabilities (as of July 8, 2011)◦Ratio of Long- to Short-Term Liabilities
70.0 (%)

Interest-bearing liabilities
59.0

60.8

LTV (based on acquisition price)
54.0

54.4

Expected ratio of interest-bearing liabilities(based on acquisition price)

52.2

End of 11th
Fiscal Period

60.0

54.8
%

50.0
Medium-term, upper-limit LTV target range(billion yen)
160.0

154.9

147.8

120.0
22.6
80.0

77.0

40.0

35.9
26.4

27.4

70.0

72.5

84.1

60.3

59.7

26.9

72.4

30.0

29.8

30.0
111.7
86.2

82.7

20.0

◦ Diversification of Repayment Dates (as of July 8, 2011)
Borrowings announced
on June 30, 2011

25,00010,000Shinsei Bank

4,000

3,500

19,000

3,000
5,000

5,500
0

5,000

12,500
7,100

5,500
1,000

4.0

SMBC
Mizuho Trust & Banking
Aozora Bank
Shinsei Bank

85×56

2,000
5,000

4,000

12th Period 13th Period 14th Period 15th Period 16th Period 17th Period 18th Period

3,500
28th Period(Note) In the list of repayment dates, scheduled payments are not considered. Rather, lump-sum repayments amounts are indicated.

14(Capped)Floating interest
rates

5.0

Borrowings announced
on June 30, 2011

6,000

8.2%

(%)
6.0

Borrowings announced
on June 30, 2011

2,000

19,600

Fixed interest
rates◦ Debt Cost Rate (Note)

Orix Trust and Banking 1,000 Sumitomo Trust & Banking
Bank of Fukuoka
3,500

Aozora Bank

52.8
%

38.9
%

Floating
interest rates(million yen)
30,00015,000End of 11th
Fiscal Period

0.0

End of End of End of End of End of End of End of End of End of End of End of As of
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th 11th July 8,
Period Period Period Period Period Period Period Period Period Period Period 2011

(Note) LTV (based on acquisition price) =Total interest-bearing liabilities / Total acquisition price of properties

20,000◦ Ratio of Fixed- to Floating-Rate
Borrowings

3.0
2.0
1.0
0.0

2800
2400

Debt cost rate
Expected debt cost rate

1stPer
2nd iodPer
3rd iodPer
4th iodPer
5th iodPer
6th iodPer
7th iodPer
8th iodPer
9th iodPe
10t riodhPe
11t riodhPe
12t riodhPe
13t riodhPe
14t riod
hP
erio
d

0

Long-term
borrowings, etc.

10.0

40.0

45.2
%

Current portionof long-termborrowings

2000(Note) Debt cost rate (annualized):((Interest expense + Financial related expenses) /Interest-bearing liabilities)

1600
1200

800

Description of Asset Manager
Daiwa Real Estate Asset Management promotes steady asset management by executing a high degreeof professionalism, maximizing the branding power and credibility of the Daiwa Securities Group

Organization of Asset Manager (as of July 14, 2011)◦Description◦ Directors and Auditor

Name

Daiwa Real Estate Asset Management Co., Ltd.

President and Representative Director

Akira Yamanouchi

Address

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

Vice President and Representative Director

Yoshiki Nishigaki (Head of Advisory Dept.)

Established

October 21, 2004

Vice President and Representative Director

Paid-in Capital

200 million yen

Yuji Shinozuka(Head of Finance & Business Planning Dept.)

Director

Atsuko Takahashi(Head of Investment Management Dept.)

President and Representative Director Akira Yamanouchi
Directors

8 (5 executives, 2 non-executives, 1 auditor)

Employees

40

Director

Naoyuki Owa (Head of Administrative Dept.)

Registration of Financial Instruments
No. 355 (Kinsho), Director-General, Kanto Local Finance Bureau
Business Operator

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Hikaru Sakagami

Building Lots and Buildings
Transaction Business License

No. (2)-83920, Governor of Tokyo

Auditor (non-executive)

Toshihiko Onishi

Discretionary Agent for Real
Estate Transaction Approval

No. 34, Minister of Land, Infrastructure, Transport and Tourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Securities Investment Advisers Association◦Organizational Chart

Shareholders’ Meeting

Auditors

Board of Directors

Compliance Committee
Investment Committee

Compliance Officer

President and Representative Director

Internal Control Office

Investment Management Department

Marketing Department

Finance Department

Administrative Department

Business Planning Department

Advisory Department

Acquisitions Team

Marketing activities
concerning trust
beneficiary rights business
Relation with tenants of DOI
owned properties

Finance and IR Team

Operation of DOI’s General
Meeting of Unitholders andBoard of Directors
Operation of General
Meeting of Shareholders,
Board of Directors andCommittees
Submission of applications
for various permits,
licenses, approvals,
registrations, etc. stipulated
by laws and regulations
Storage and managementof documents andinformation
Labor and humanresources matters

Research and analysis of thereal estate market, retailindustry, and real estate
investment trust market
Analysis of businesschallenges of DOI
Matters relating to thedevelopment of medium-term
asset management plans andannual asset management
plans
Development and revision of
the Investment Guidelines
Matters relating to theprovision of new
businesses
Overseeing of DOI’s risk
management

Matters relating to advisoryconcerning formulation of
replacement plans orincome and expense plansfor customers’ assets
Matters relating to advisoryconcerning disposal ofcustomers’ assets
Matters relating to advisoryconcerning management,
operation, leasing andmaintenance andrenovation of customers’
assetsMatters relating toreporting and other duties
being conducted forinvestors of private funds

Formulation of investment
policies
Asset acquisition anddisposal

Matters relating to financing,asset liability management andmanagement of surplus funds
Matters relating to IR activities
and formulation of the IR strategy

Asset Management Team

Accounting Team

Formulation of asset
leasing and management
policies
Asset leasing andmanagement

Matters relating to financial
results and accounting,cash allotment, accounting
audits, and preparation offinancial documents
Management of budget andperformance
Matters concerning
accounting and finance of
the Asset Manager

Investment Planning Team
Budget and performance
management of portfolio

Support System Backed by Sponsor Cooperation
Sponsor Support

100% ownership
Sponsor support agreement

Asset Manager

Daiwa Real Estate
Asset Management
Instruction

Property Management
Companies

Optimal application of financial market
know-how possessedby Daiwa Securities Group

Daiwa Securities
Group Inc.
13.1% ownership

Assetmanagement
contract

Investment Corporation

Borrowings

General administrationaffairs contact

Daiwa Office
Investment Corporation

Interest

Management
contract

Listed on TSE REIT Market
Code: 8976

Manager of Unitholder Registry, etc.
Special account management institution

Chuo-Mitsui
Trust and Banking

Investment
Distributions

Financial institutions

Individual investors
Institutional investors

General Administrator
Asset Custodian

Sumitomo
Trust and Banking
I. Overview of Daiwa Office Investment Corporation 15

Investment Unit and Investor Information

History of Investment Unit Price(yen) 400,000

16,000 (units)
Investment unit price (left axis)

Trading volume (right axis)

350,000

14,000300,000

12,000250,000

10,000200,000

8,000

150,000

6,000

100,000

4,000

50,000

2,000

0
2009
June

0
July

Aug. Sept.

Oct.

Nov.

2010
Dec. Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept.

Oct.

Nov.

2011
Dec. Jan. Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2011)
146×57

Individuals/others 36,746 units (9.3%)
No. of investment
units by investor type
Total:

Financial institutions 134,610 units (34.0%)

395,798 units

Other domestic
132,640 units (33.5%)
corporations
Securities firms 53,962 units (13.6%)
Other domestic corporations 190 (1.6%)
Financial institutions 20 (0.2%)

No. of unitholders
by investor type
Total:

Foreigners 37,840 units (9.6%)

Individuals/others 11,801 (97.2%)

12,146

Foreigners 112 (0.9%)
Securities firms 23 (0.2%)

Top Ten Unitholders (as of May 31, 2011)
Name of Investor

Number of Units Owned

Percentage Share

1.

K.K. Columbus

68,905 units

17.4%

2.

Daiwa PI Partners Co. Ltd.

60,000 units

15.2%

3.

Japan Trustee Services Bank, Ltd. (trust account)

59,646 units

15.1%

4.

Daiwa Securities Group Inc.

16000

51,893 units

13.1%

5.

The Nomura Trust and Banking Co., Ltd. (investment trust account)

14000

30,579 units

7.7%

6.

Trust & Custody Services Bank, Ltd. (securities investment trust account)

0

20

7.

The Master Trust Bank of Japan, Ltd. (trust account)8.

Nomura Bank (Luxembourg) S.A.

9.

Goldman Sachs International

10. The Fuji Fire and Marine Insurance Co., Ltd.

40

12000

60

10,341 units
10000
8000
6000
4000

16

25,136 units

2000
0

6.4%

80

2.6%

9,893 units

2.5%

7,055 units

1.8%

5,369 units

1.4%

100

Note: The percentage share figures are rounded to the first decimal place.

II.

Asset Management Report

1. Management Status and Other Performance Highlights Data
Settlement Period(

11th Period
From Dec. 1, 2010
To May 31, 2011)(

10th Period
From June 1, 2010
To Nov. 30, 2010)(

9th Period
From Dec. 1, 2009
To May 31, 2010)(

8th Period
From June 1, 2009
To Nov. 30, 2009)(

(1) Operating Performance(Millions of yen , except per unit data or where otherwise indicated)
Operating revenues
6,759
6,424
6,986
7,744
Rental revenues
6,715
6,375
6,610
7,652
Operating expenses
3,935
3,942
4,027
3,841
Property-related expenses
3,166
3,195
3,249
3,010
Operating income
2,824
2,482
2,959
3,903
Ordinary income
1,588
1,274
1,774
2,711
Net income
1,453
1,282
2,076
2,710
(2) Properties, etc. (as of end of period)
Total assets
298,626
294,562
283,867
286,901[period-on-period percentage change][1.4%][3.8%][−1.1%][4.0%]
Interest-bearing liabilities
86,25082,776
72,40972,531
Net assets
200,234
200,063
200,857
201,491[period-on-period percentage change][0.1%][−0.4%][−0.3%][5.0%]
Unitholders’ capital
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
1,453
1,282
2,076
2,710
Dividend payout
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)395,798
395,798
395,798
395,798
Net assets per unit (yen)505,900
505,469
507,475
509,075
Distribution per unit (yen)
3,671
3,240
5,246
6,847
Distribution amount from earnings per unit (yen)
3,671
3,240
5,246
6,847
Distribution amount in excess of earnings per unit (yen)––––(5) Financial Indicators
ROA
0.5%
0.4%
0.6%
1.0%
Notes 2and 3[annual rate][1.1%][0.9%][1.2%][1.9%]
ROE[annual rate]
Capital ratio[period-on-period basis points change]
LTV (loan to value)
Property leasing cash flows (NOI)(6) Other Referential Information
Number of investment properties
Number of tenants
Total rentable area (m 2)
Occupancy rate
Depreciation
Capital expenditures(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)7th Period
From Dec. 1, 2008
To May 31, 2009

8,178
8,063
3,899
3,025
4,279
2,999
3,157
275,769[1.3%]
70,023
191,938[−3.1%]
188,7813,157
100.0%
343,905
558,113
9,179
9,179
–

0.7%
[1.5%]
67.1%[−0.9%]
28.9%
4,830

0.6%
[1.3%]
67.9%[−2.8%]
28.1%
4,416

1.0%
[2.1%]
70.8%[0.6%]
25.5%
4,546

1.4%
[2.7%]
70.2%[0.6%]
25.3%
5,822

1.1 %
[2.2%]
1.6%[3.2%]
69.6%[−3.2%]
25.4%
6,220

35
334
191,346.43
Note 7
95.4%
1,281
540

33
324
182,548.82
95.9%
1,236
364

31
298
174,928.31
85.7%
1,185
568

30
288
171,951.76
92.8%
1,180
302

30
294
172,135.20
97.7%
1,182
538

Notes 3and 4Note 5Note 6)

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 7th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 8th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 9th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 10th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 11th Fiscal Period are the annualized figures calculated based on 182 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report 17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (former DA Office Investment Corporation; hereinafter “Investment
Corporation”) 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. (hereinafter “Asset Manager”; former, K.K. daVinci Select) as the organizer. After its establishment, theInvestment Corporation 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 (securities code: 8976) the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition prices), subsequent
activities, such as the additional acquisition of properties and replacement of portfolio properties, resulted in theassets under management amounting to 287,345 million yen (sum total of acquisition prices) as of the last dayof May 2011.
The Investment Corporation strives to secure stable revenues and maximize returns for unitholders based ona clear portfolio development policy of specializing in investment in office buildings, with a particular focus on
investment in A Class buildings (refers to buildings with a total floor area of 30,000m2 or more) and B Classbuildings (refers to buildings with a total floor area of 2,000m2 or more, but less than 30,000m2) situated in
downtown Tokyo, as well as through dedicated efforts to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from December 1, 2010 to May 31, 2011)
With the recovery of the global economy, the Japanese business conditions showed signs of a recovery
during the fiscal period under review. However, the Great East Japan Earthquake that occurred on March
11, 2011 brought great damages to the economy such as decrease in production activities and slump in
consumption. Since then, along with the recovery of production facilities and the supply chain for partsand equipment, restrictions that were placed on production activities started to loosen and household
and business sentiment is gradually improving. Under these circumstances, production activities andconsumption are moving towards a recovery.
In terms of the office leasing market, vacancy rates are seesawing because of the consolidation or
expansion of the tenant. New advertised rents are on a downward trend but the scale of decline is
becoming smaller, and looks as though it is bottoming out.
In the office transaction market, easing of the lending attitude of financial institutions caused real estatecompanies and fund’s (including REITs) purchase motivation to increase. Postponements and such oftransactions, etc. were seen immediately following the Great East Japan Earthquake, but the market is
gradually returning to a calm state and transactions have resumed.
(B) Management Performance
To increase the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties) overthe medium and long term, the Investment Corporation worked on “external growth” which aims to boost
revenue through acquiring and selling properties, and “internal growth” which aims to maximize income
generating from existing properties.
Concerning external growth, the Investment Corporation proactively engaged in property acquisition
activities and purchased “Daiwa Kayabacho Building” (acquisition price: 5,600 million yen) on March 25,
2011 and “Jimbocho Place” (acquisition price: 3,550 million yen) on March 29, 2011. The acquisition
contributed to the long-term EPS.
As a result of the acquisition, the Investment Corporation’s assets under management at the end of the
11th Fiscal Period (May 31, 2011) totaled 35 properties, the sum total of acquisition prices amounted to287,345 million yen. Moreover, this results in investments in the five central wards of Tokyo, which theInvestment Corporation positions as a top priority investment area, accounting for 91.6% of the entire
portfolio (based on acquisition price).
Concerning internal growth, in spite of the severe office leasing market conditions, the occupancy rate
at the end of the 11th Fiscal Period was maintained at 95.4% through strengthening cooperation withleasing brokers and property managers. Moreover the Investment Corporation try to heighten tenantsatisfaction levels by strengthening relations with tenants.

18

(3) Overview of Capital Procurement
On March 18, 2011, the Investment Corporation borrowed 2,000 million yen from Resona Bank, Limited torefinance the borrowing of 2,000 million yen on March 21, 2008. Further, on March 25, 2011, the Investment
Corporation borrowed 4,000 million yen in total from Resona Bank, Limited and Sumitomo Mitsui Banking
Corporation to acquire a property, etc.
On May 25, 2011, the Investment Corporation repaid 1,400 million yen borrowed from Mizuho Bank, Ltd. on
September 18, 2009 ahead of schedule by utilizing a new loan of 1,000 million yen from Shinsei Bank, Limited
and cash reserves.
In addition, contractual repayments of 41.25 million yen in total were made to Development Bank of Japan
Inc. and The Kagawa Bank, Ltd. on February 28, 2011. Moreover, contractual repayments of 84.375 million
yen in total were made to Sumitomo Mitsui Banking Corporation, The Sumitomo Trust and Banking Co., Ltd.,
Development Bank of Japan Inc., The Chuo Mitsui Trust and Banking Company, Limited, Taiyo Life Insurance
Company and The Gunma Bank, Ltd. on May 31, 2011.
As a result, the balance of interest-bearing liabilities outstanding at the end of the 11th Fiscal Period stoodat 86,250 million yen (long-term loans payable: 77,750 million yen; investment corporation bonds: 8,500
million yen). Furthermore, of long-term loans payable, the balance of the current portion of interest-bearing
liabilities outstanding stood at 38,958.75 million yen (including 258.75 million yen in contractual repayments).
In addition, for the purpose of reducing risk of future interest rate fluctuations, the interest rate for the 7,100
million yen loan has been capped. The principal repayment for the loan is due on February 20, 2012.
(4) Capital Expenditures During the 11th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 11th
Fiscal Period. Capital expenditures amounted to 540 million yen and, combined with the 187 million yen in
repair expenses, totals 727 million yen in construction work implemented.
Name of Property(location)

Expenditure(millions of yen)

Purpose

PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for replacement ofcold-water coil in air-conditioning systemon each floor

From: Mar. 2011
To: May 2011

249

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Updating security equipment

From: Mar. 2011
To: May 2011

105

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for replacement ofgondola rope and communications
equipment

From: Apr. 2011
To: May 201114

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Enlargement construction work for aircondition equipment on 27F

From: Jan. 2011
To: Feb. 201110

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for replacement ofcommon area's floor and wall on 27, 30
and 33F

From: Jan. 2011
To: Apr. 201110

From: Dec. 2010
To: May 2011

152

Other
Total

540

II. Asset Management Report 19

(5) Overview of Financial Performance and Distributions
As a result of the management described above, the Investment Corporation posted financial performance forthe 11th Fiscal Period of 6,759 million yen in operating revenues, 2,824 million yen in operating income, 1,588
million yen in ordinary income, 134 million yen in extraordinary expenses (70 million yen in loss on disaster and64 million yen in provision for loss on disaster) for repair expenses to fix minor-damage, some owned buildings
were suffered due to the Great East Japan Earthquake and 1,453 million yen in net income.
Concerning distributions, to ensure that the cash dividend would be deducted from taxable income (Article
67-15 of the Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments, hereinafter“Special Taxation Measures Act”)), the Investment Corporation decided to distribute the entire retained earnings
at the current period end, excluding fractions of the distribution amount per unit that are less than 1 yen.
Accordingly, the Investment Corporation declared a distribution amount per unit of 3,671 yen.

3. Future Management Policy and Tasks(1) Investment Environment
Going forward, the Japanese economy is expected to expand due to an increase in demand that
accompanies earthquake reconstruction efforts as recovery of productive facilities and the supply chain ofparts and equipment that were damaged by the Great East Japan Earthquake progress and production andconsumption moves toward a recovery. On the other hand, due to the progress in both the recovery offacilities of power companies and the state of progress made by households and companies in saving
electricity, concerns over a shortage in electricity are starting to wane. However, caution is seen in thebusiness confidence of companies, particularly among non-manufacturers. In addition, there are concerns
about the impact on production activities by the power supply restrictions stemming from the cessation ofoperations of nuclear power plants. As a result, there is a possibility that the Japanese economy may
experience downward pressure.
Under these prospects, the slow downward trend of the vacancy rates of the office leasing market is
expected to continue. However, since the recent Great East Japan Earthquake a movement is seen among
tenants to prefer buildings that have advanced disaster prevention performance, such as seismic
performance and emergency power generating capabilities, when selecting buildings to move into. Due tothis, it seems that the market will divide into two extremes. Moreover, although newly advertised rents are
expected to gradually bottom out, it will take a while before they enter a recovery trend.
In the office transaction market, acquisition demand by real estate companies and funds (including REITs) is
expected to stay strong due to the easing of lending attitudes of financial institutions. However, as mentioned
before, the market is expected to divide into two extremes since office buildings as an investment target are
being selected from the perspective of disaster prevention performance.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under such office leasing market conditions, the tenant side is also expected to become more selectivewith properties. Consequently, the Investment Corporation will carry out operational management under
the following policy in an aim to enhance the competitiveness of existing properties and thereby increase
the long-term EPS over the medium and long term.
(a) Maintain and raise occupancy rates
Strive to maintain and raise occupancy rates through the provision of office environments of hightenant satisfaction levels by maintaining the quality of buildings and equipment and proactively
implementing renovations, etc. of common-use areas and thereby lowering vacancy risks.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium and long term through further strengthening of good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining the high level of tenantsatisfaction with office environments through implementing efficient operational management andreviewing systematic construction work leveraging the economies of scale achieved from proactively
realizing external growth.

20(B) Investment Strategy for New Properties
Based on various external growth strategies, the Investment Corporation will concentrate its investment
in A Class and B Class buildings by maintaining a balance with the financing and market situation. In
principal, the Investment Corporation will invest in properties around Tokyo, but also will look into
investment in competitive properties in the areas other than Tokyo from a viewpoint of territoriallydistributed investments.
As pipeline with expanding its own information-sourcing channels, the Investment Corporation will
search for properties that meet its investment criteria by proactively gathering real estate transaction
market information through growing partnership with the Asset Manager and Sponsor Group and utilizing
the Group’s extensive network of clients.
During the 11th Fiscal Period, the Investment Corporation acquired Daiwa Kayabacho Building andJimbocho Place, which are situated in the five central wards of Tokyo. Remarkably, Daiwa Kayabacho
Building was the first property which the Investment Corporation acquired from the current sponsor. The
Investment Corporation believes acquisition of these properties will contribute to further stabilization andenhancement of the portfolio. The Investment Corporation will continue to strive to acquire properties thatare in line with the investment strategy described above.
(C) Financial Strategy
The Investment Corporation will conduct disciplined financial management based on the following basic
content.
(a) Control leverage by keeping LTV ratio levels within the range of 40% to 50% at maximum.
(b) Diversify repayment deadlines, targeting 20.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period.
(c) Aim to have long-term loans account for at least 60% to 70% of total loans.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount of distributions paid, separately from working capital.
The Investment Corporation will also continue to diversify lenders, which shall mainly be Japanesefinancial institutions.
(D) Schedule of Capital Expenditures
The following table lists major capital expenditures in conjunction with the refurbishment or renewal work
planned for the future on the properties held as of May 31, 2011. Please note that the amounts below
include costs that will be recognized as expenses.
Estimated Cost
(millions of yen)
Name of Property(location)

Payment Cumulative
Total
for the amountamounts current
paid
periodPurposeEstimated Period

Daiwa Sarugakucho(Chiyoda-ku, Tokyo)

Renovation work for air
conditioning, power supply
enlargement and common area

From: Sep. 2011
To: Nov. 2011

350

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for
replacement of disasterprevention equipment

From: Oct. 2011
To: Nov. 2011

43

–

–

II. Asset Management Report 21

III. Balance Sheets
As of May 31, 2011 and November 30, 2010
(Thousands of yen)

As of
May 31, 2011

As ofNovember 30, 2010

AssetsCurrent Assets:
Cash and cash equivalents [Notes 5 and 11]

14,535,324

18,503,967

174,669

176,919–

119,735

Prepaid expenses

626,451

766,503

Deferred tax assets

21

19

230,462

224,879

15,566,927

19,792,022

Land

225,160,518

218,730,715

Buildings and structures

62,680,143

59,307,505

Machinery and equipment

755,291

743,396

Tools, furniture and fixtures

74,031

68,572

Construction in progress

27,73922,409

Other

9,759

9,759

(10,889,507)(9,608,134)

4,970,291

4,970,291

282,788,265

274,244,513

1,250

1,384

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

92,645

334,656

Deferred investment corporation bond issuance costs

42,502

51,038Other [Note 11]

21,07525,155

Total Other Assets

271,156

525,917

298,626,348

294,562,452

Tenant receivables
Consumption taxes refundable

Other
Total Current Assets
Investment Properties, at cost: [Notes 4 and 5]

Less: accumulated deprecation
Leasehold rights
Total Investment Properties, net
Other Assets:
Right of trademark

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

22

(Thousands of yen)

As of
May 31, 2011

As ofNovember 30, 2011

Liabilities
Current Liabilities:
Operating accounts payable

875,740

593,106

38,958,750

14,258,750

245,157

237,902

850

795

Accrued consumption taxes

43,82728,537

Rent received in advance

716,018

807,721

Provision for loss on disaster

63,721–

Other

236,082

176,938

41,140,145

16,103,749

Investment corporation bonds [Note 11]8,500,000

8,500,000

Long-term debt [Notes 5, 7 and 11]

38,791,250

60,016,875

Tenant security deposits [Note 11]9,956,757

9,871,834

4,075

6,528

Total Long-Term Liabilities

57,252,082

78,395,237

Total Liabilities

98,392,227

94,498,986

198,780,951

198,780,951

Retained earnings

1,453,170

1,282,515

Total Unitholders’ Equity

200,234,121

200,063,466

Total Net Assets

200,234,121

200,063,466

Total Liabilities and Net Assets

298,626,348

294,562,452

Long-term debt due within one year [Notes 5, 7 and 11]
Accounts payable – other
Income taxes payable

Total Current Liabilities
Long-Term Liabilities:

Other

Net Assets [Note 6]
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 395,798 units

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

III. Balance Sheets 23

IV. Statements of Income
For the six months ended May 31, 2011 and November 30, 2010
(Thousands of yen)

For the six months ended
May 31, 2011

For the six months ended
November 30, 2010

6,715,059
43,7286,374,685
49,804

6,758,787

6,424,489

3,165,924
542,152
14,8093,194,661
516,632
14,57582,61336,2235,400
87,886

83,79527,774
4,881
100,667

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

3,935,007
2,823,780

3,942,985
2,481,504

1,465
6,029
1,686

1,788
1,903
1,143

9,180

4,834

729,851

719,395

96,481

92,016

410,557
8,536

391,405
9,867

Total Non-Operating Expenses
Ordinary Income

1,245,425
1,587,535

1,212,683
1,273,655

610

9,714

610

9,714

70,34363,721––

134,064–

Income Before Income Taxes
Income taxes – current
Income taxes – deferred

1,454,081

1,283,369

1,043
(3)

987
4

Total Income Taxes [Note 10]
Net Income
Retained Earnings Brought Forward

1,040
1,453,041
129

991
1,282,378
137

Retained Earnings at End of Period

1,453,170

1,282,515

Operating Revenues and Expenses
Operating Revenues: [Note 8]
Rental revenues
Other revenues related to property leasing
Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 8]
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses

Extraordinary Income:Gain on donation of investment property
Total Extraordinary Income
Extraordinary Losses: [Note 9]
Loss on disaster
Provision for loss on disaster
Total Extraordinary Losses

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

24

IV. Statements of Income

V.

Statements of Changes inUnitholders' Equity

For the six months ended May 31, 2011 and November 30, 2010
(Thousands of yen)

Number of
Units
Balance as of November 30, 2010

Unitholders’CapitalRetained
Earnings

Total

395,798

198,780,951

1,282,515

200,063,466

Cash dividends declared––(1,282,386)(1,282,386)

Net income––

1,453,041

1,453,041

395,798

198,780,951

1,453,170

200,234,121

Balance as of May 31, 2011		

(Thousands of yen)

Number of
Units
Balance as of May 31, 2010

Unitholders’CapitalRetained
Earnings

Total

395,798

198,780,951

2,076,494

200,857,445

Cash dividends declared––(2,076,357)(2,076,357)

Net income––

1,282,378

1,282,378

395,798

198,780,951

1,282,515

200,063,466

Balance as of November 30, 2010

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

V. Statements of Changes in Unitholders’ Equity 25

VI. Notes to Financial Statements
For the six months ended May 31, 2011 and November 30, 2010

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (former DA Office Investment Corporation: hereinafter, “DOI”) wasestablished on July 11, 2005 as an investment corporation under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter, the “Investment Trust Law of Japan”) by the founder (the former
daVinci Select; presently, Daiwa Real Estate Asset Management (hereinafter, “DREAM”)).
DOI is an externally managed real estate fund, established as an investment corporation. DREAM, as DOI’s
asset management company, is engaged in acquiring, managing, leasing, and renovating office properties.
Daiwa Securities Group Inc. currently owns 100% of DREAM.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2011, DOI had ownership or beneficiary interests in 35 office properties with approximately
191,346 square meters of rentable office space and had leased office space to 334 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 95.4%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (hereinafter, “Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP. Some supplementary information included in
the statutory Japanese language financial statements, but not required for fair presentation, is not presented in
the accompanying financial statements. DOI does not prepare consolidated financial statements, as DOI has no
subsidiaries.

Note 2 – Summary of Significant Accounting Policies
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 beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The
estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

2-50 years
2-23 years
3-18 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures forrepairs and maintenance which do not add to the value of a property or prolong its useful life are expensed as
incurred.
Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Provision for Loss on Disaster
A Provision for loss on disaster is recognized at an estimated amount as of the fiscal period ended May 31, 2011
in order to provide for expected expenditure for recovery costs, etc. related to the Great East Japan Earthquake.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of
temporary differences between the amounts of assets and liabilities for financial statements and for income tax
purposes is recognized as deferred taxes.

26

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from thepurchase date of each property until the end of the calendar year as part of the acquisition cost of the relevant
property. Capitalized real estate taxes amounted to 19,131 thousand yen for the period ended November 30,
2010.
Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and otheroperating revenues such as utility charge reimbursements, parking space rental revenues and other income.
Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge
reimbursements are recognized when earned and their amounts are reasonably estimated.
Hedge Accounting
DOI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation basedon its risk management policy. DOI utilizes derivative financial instruments such as interest-rate cap agreements
only for the purpose of hedging its exposure to changes in interest rates. DOI applies special treatment to theinterest-rate cap contract that meets the criteria for such special treatment. Under the special treatment, interestrate cap is not remeasured at fair value: instead, the net amount paid or received under the interest-rate cap
contract is recognized and included in interest expense. In addition, assessment of the effectiveness of thehedge has been omitted because the interest-rate cap agreement meets the criteria for the special treatment.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as
all income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheet andincome statement accounts.
Consumption Taxes
Consumption taxes received and paid are not included in the accompanying statements of income.

Note 3 – Change in Accounting Policy
Adoption of Accounting Standard for Asset Retirement Obligations
From the fiscal period ended November 30, 2010, DOI adopted the “Accounting Standard for Asset Retirement
Obligations” (the Accounting Standards Board of Japan (hereinafter, “ASBJ”) Statement No. 18 issued on March
31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21
issued on March 31, 2008). There was no effect on DOI’s revenues and expenses.

VI. Notes to Financial Statements 27

Note 4 – Schedule of Tangible Assets of Investment Properties
Investment properties as of May 31, 2011 and November 30, 2010 consisted of the following:
As of May 31, 2011

(Thousands of yen)

As of November 30, 2010

Acquisition
costs

Accumulated
depreciation

Book value

Acquisition
costs

Accumulated
depreciation

Book value

Land

225,160,518–

225,160,518

218,730,715–

218,730,715

Buildings andstructures

62,680,143(10,598,765)

52,081,378

59,307,505(9,354,563)

49,952,942

Machinery andequipment

755,291(256,905)

498,386

743,396(225,280)

518,116

Tools, furnitureand fixtures

74,031(24,078)

49,953

68,572(18,532)

50,040Construction inprogress

27,739–27,73922,409–22,409

Other

9,759

(9,759)–9,759(9,759)–

Total

288,707,481(10,889,507)

277,817,974

278,882,356(9,608,134)

269,274,222

Note 5 – Schedule of Pledged Assets and Secured Liabilities
Pledged assets and secured liabilities as of May 31, 2011 and November 30, 2010 consisted of the following:
Pledged assets(Thousands of yen)
As of May 31, 2011
Cash and cash equivalents

As of November 30, 2010

3,787,370

4,693,237

Land

163,817,609

190,766,118

Buildings and structures

33,321,441

42,554,889

Machinery and equipment

367,028

459,649

Tools, furniture and fixtures

35,124

44,667

Construction in progress

17,044

22,3742,281,476

4,970,291

203,627,092

243,511,225

Leasehold rights
Total
Secured liabilities(Thousands of yen)
As of May 31, 2011

As of November 30, 2010

Long-term debt due within one year

38,951,250

14,258,750

Long-term debt

20,806,250

54,516,875

Total

59,757,500

68,775,625

Note 6 – Net Assets
DOI issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue
prices of new units are designated as stated capital. DOI maintains at least 50,000 thousand yen as the minimum
amount of net assets, as required by the Investment Trust Law of Japan.

28

Note 7 – Long-Term Debt
Long-term debt as of May 31, 2011 and November 30, 2010 consisted of the following:(Thousands of yen)

As of
May 31, 2011

As ofNovember 30,
2010

Secured loans due 2011 to 2013, principally from banks and insurancecompanies with interest rates mainly ranging from 1.3% to 2.5%

59,757,500

68,775,625

Unsecured loans due 2011 to 2014 from banks with interest rates mainly
ranging from 0.7% to 1.5%

17,992,500

5,500,000

3,500,000
5,000,000
86,250,000

3,500,000
5,000,000
82,775,625

2.9% unsecured bonds due 20191.9% unsecured bonds due 2013
Total
[Note] The interest rate presented is the spot rate as of May 31, 2011.
The annual maturities of long-term debt as of May 31, 2011 were as follows:
Due within one year
Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years(Thousands of yen)

38,958,750
21,291,250
22,500,000––
3,500,000

Note 8 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended May 31, 2011 and November 30, 2010
(Thousands of yen )were as follows:A.

For the six months ended
May 31, 2011

For the six months ended
November 30, 2010

6,715,059

6,374,685

43,72849,804

6,758,787

6,424,489

Consignment expenses

463,343534,440

Utilities expenses

565,646624,108

Taxes and dues

594,936

560,634

Non-life insurance expenses

12,091

13,107

Repair expenses

187,179

163,878

1,281,118

1,235,683

61,611

62,811

Total property-related expenses

3,165,924

3,194,661

Operating income from property leasing [A – B]

3,592,863

3,229,828

Operating revenues
Rental revenues
Other revenues related to property leasing
Total operating revenues

B.

Property-related expenses

Depreciation
Other property-related expenses
C.

Note 9 – Extraordinary Losses
The losses are the actual and expected expenditure for recovery costs, etc. related to the Great East Japan
Earthquake.
VI. Notes to Financial Statements 29

Note 10 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.07% for the period ended May 31, 2011 and 0.08 % for the period ended November
30, 2010. The following table summarizes the significant differences between the statutory tax rates and DOI’s
effective tax rates for financial statement purposes.

Statutory tax rate
Deductible dividends
Others
Effective tax rate

For the six months ended
May 31, 201139.33%(39.30)0.04
0.07%

For the six months ended
November 30, 201039.33%(39.30)0.05
0.08%

DOI was established as an investment corporation under the Investment Trust Law of Japan, and as long as
an investment corporation distributes to its unitholders at least 90% of earnings available for dividends for aperiod and other requirements prescribed in the Special Taxation Measures Law of Japan are met, theinvestment corporation is allowed to deduct the total amount of dividends in calculating its taxable income underJapanese tax regulations.

Note 11 – Financial Instruments(For the six months ended November 30, 2010 and May 31, 2010)(1) Status of Financial Instruments(A) Policy for financial instruments
DOI procures various financing methods (such as bank borrowings, issuance of investment corporation
bonds, equity finance) for acquisition and repair of investment properties, payments of dividends andreimbursement of bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, the Company secure long-term fixed-rate borrowings with well-diversified maturities.
DOI manages surplus funds through safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are only for the purpose of reducing risk of future interest rate fluctuations.
(B) Types and risks of financial instruments and related risk management system
Proceeds from the financing of debts and investment corporation bonds are used mainly to acquisition of
investment properties and reimbursement of current debts and bonds. While these debts and bonds are
exposed to liquidity risk, DOI manages the risk by 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 withparticular focus on domestic financial institutions. Bank borrowings with floating interest rates are
exposed to the risk of future interest rate fluctuations and DOI manages that using derivative transactions(IRS, etc.).
Security deposits represent funds deposited by tenants, and DOI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving
some parts of the funds.
Deposits are used for investment of DOI’s surplus funds. These deposits are exposed to credit risks
such as bankruptcy of the depository financial institutions. DOI manages credit risk by restricting thetenor of the deposit relatively short and setting a minimum credit rating requirement for the depository
financial institutions.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there isno quoted market price available, fair value is reasonably estimated. As certain assumptions are used forthe estimation of fair value, the result of such estimation may differ if different assumptions are used. Also,
the contractual amounts of derivative transactions do not represent the market risk involved in thesederivative.

30

(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of May 31, 2011 and November 30, 2010 are as
follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(As of May 31, 2011)
Cash and cash equivalents
Total assets
Long-term debt due within one year
Investment corporation bonds
Long-term debt
Total liabilities
Derivative transactions(Thousands of yen)Book Value
14,535,324
14,535,324
38,958,750
8,500,000
38,791,250
86,250,000
4,807

Fair Value
14,535,324
14,535,324
38,977,858
8,508,500
38,989,519
86,475,877
10(As of November 30, 2010)
Cash and cash equivalents
Total assets
Long-term debt due within one year
Investment corporation bonds
Long-term debt
Total liabilities
Derivative transactions

Difference––
19,1088,500
198,269
225,877(4,797)(Thousands of yen)Book Value
18,503,967
18,503,967
14,258,750
8,500,000
60,016,875
82,775,625
8,108

Fair Value
18,503,967
18,503,967
14,298,434
8,509,500
60,241,171
83,049,105
574

Difference––
39,6849,500
224,296
273,480(7,534)

Notes:
1. Method to estimate fair value of financial instruments
Assets(1) Cash and Cash Equivalents
As these instruments are settled within a short-term period, their fair value and book value are nearly
identical. Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Long-Term Debt
For long-term debt with floating interest rates, their fair value and book value are nearly identical. Therefore,
for these items, their book value is assumed as their fair value.
For long-term debt with fixed interest rates, their fair value is based on the present value of principle andinterest cash flows discounted at the current interest rate estimated to be applied if similar new debt isentered into.
(2) Investment Corporation Bonds
The fair value of investment corporation bonds is based on their observable market price, if available. For
floating-rate investment corporation bond, there is no observable market price and the book value areassumed as their fair value because such debt reflects the market interest rates in a short-term period.
Derivatives(1) Derivatives to which hedge accounting is not applied
Not applicable(2) Derivatives to which hedge accounting is applied

VI. Notes to Financial Statements 31

(As of May 31, 2011)(Thousands of yen)

Method of Hedge Accounting

Type of Derivative
Transaction

Hedged Item

Special treatment for interest rate
cap transaction

Interest rate cap
transaction

Long-term debt due
within one year

Contract Amount(over one year)

Fair Value(*)

7,100,000(–)

10(As of November 30, 2010)(Thousands of yen)

Method of Hedge Accounting

Type of Derivative
Transaction

Hedged Item

Contract Amount(over one year)

Fair Value(*)

Special treatment for interest rate
cap transaction

Interest rate cap
transaction

Long-term debt

7,100,000(7,100,000)

574*The fair value is provided by the financial institution.
2. Financial instruments for which it is very difficult to estimate the fair value
Tenant security deposits (with a book value of 9,956,757 thousand yen in May 31, 2011 and 9,871,834
thousand yen in November 30, 2010) that have been deposited from tenants are not marketable and theactual deposit period cannot be reliably determined, thus making it impossible to reasonably estimate their
future cash flows, and therefore, it is considered to be extremely difficult to estimate their fair value.
3. Redemption schedule for money claims(As of May 31, 2011)

Cash and cash equivalents
Total(Thousands of yen)

Due within
1 yearDue after
1 to 2 years

Due after
2 to 3 years

Due after
3 to 4 years

Due after
4 to 5 years

14,535,324
14,535,324

–
–

–
–

–
–

–
–

(As of November 30, 2010)

Cash and cash equivalents
Total(Thousands of yen)

Due within
1 yearDue after
1 to 2 years

Due after
2 to 3 years

Due after
3 to 4 years

Due after
4 to 5 years

18,503,967
18,503,967

–
–

–
–

–
–

–
–

4. Redemption schedule for investment corporation bonds and long-term debt
(As of May 31, 2011)(Thousands of yen)

Due within
1 yearDue after
Due after
Due after
Due after
1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years

Long-term debt due within one year 38,958,750––
Investment corporation bonds–– 5,000,000
Long-term debt
– 21,291,250 17,500,000
Total
38,958,750 21,291,250 22,500,000

–
–
–
–

(As of November 30, 2010)–
3,500,000–
3,500,000(Thousands of yen)

Due within
1 yearDue after
Due after
Due after
Due after
1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years

Long-term debt due within one year 14,258,750––
Investment corporation bonds–– 5,000,000
Long-term debt
– 44,035,625 15,981,250
Total
14,258,750 44,035,625 20,981,250

32

–
–
–
–

Due after
5 years––
5,000,000
5,000,000––––

Due after
5 years–
3,500,000–
3,500,000

Note 12 – Investment and Rental Properties(For the six months ended May 31, 2011)
DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as
follows.
(Thousands of yen)Book Value
As of
November 30, 2010

Changeduring the period(*1)

274,219,900

As of
May 31, 2011

8,538,676

282,758,576

Fair value as of
May 31, 2011
249,930,000(For the six months ended November 30, 2010)
DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as
follows.
(Thousands of yen)Book Value
As of
May 31, 2010

Changeduring the period(*2)

265,860,150

As ofNovember 30, 2010

8,359,750

274,219,900

Fair value as ofNovember 30, 2010
242,859,000(Note 1) The book value represents the acquisition cost less accumulated depreciation.
(Note 2) Significant changes(*1) For the six months ended May 31, 2011, the major reason of increase is acquisition of the Daiwa Kayabacho Building (5,600,000
thousand yen) and the Jimbocho Place (3,550,000 thousand yen). The major reason of decrease is depreciation (1,281,118
thousand yen).
(*2) For the six months ended November 30, 2010, the major reason of increase is acquisition of the Daiwa Nishi-Shimbashi (former
the Kyodo Building (Nishi-Shimbashi)) (5,000,000 thousand yen) and the Daiwa Kudan (former the Kyodo Building (Kudan Ichigokan)) (4,000,000 thousand yen). The major reason of decrease is depreciation (1,235,683 thousand yen).
(Note 3) The fair values as of May 31, 2011 and as of November 30, 2010 represent the sum of appraisal values estimated by external realestate appraisers.

Income and loss from investment and rental properties for the period ended May 31, 2011 and November 30,
2010 are disclosed in Note 8.

Note 13 – Transactions with Related Parties(For the six months ended May 31, 2011)(1) Parent Company, Major Corporate Unitholders and OtherClassification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting rights, etc. heldby related party (held in DOI)
Relationship with related party
Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at end of period (thousands of yen)

Other affiliated company
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company
13.11% directly held in DOI 15.16% indirectly held in DOI
Provision of capital
Payment of interest expense on investment corporation
bonds (Note 1)
49,987
Investment corporation
Other (current liabilities)bonds
3,500,000
20,497(Note 1) Issuance conditions of the investment corporation bonds were decided by analyzing the spread of similar bonds, the difference of
spread between senior bonds and subordinated bonds and the past track record of similar bonds.
VI. Notes to Financial Statements 33

(2) Subsidiaries, Affiliates and Other
Not applicable.
(3) Sister Companies, Subsidiaries of Other Affiliated Companies and OtherClassification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting rights, etc. heldby related party (held in DOI)
Relationship with related party
Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at end of period (thousands of yen)

Subsidiary of other affiliated company
Daiwa Property Co.,Ltd
Chuo-ku, Tokyo
100 million yen
Real estate rent business–
Purchase of trust beneficial interest in real estate
Purchase of trust beneficial interest in real estate (Note 1)
5,600,000 (Note 2)––(Note 1) Terms of transaction were determined based on the market. Terms and conditions with interested persons were determined based on
the assets manager’s office regulation which was established to prevent the conflict of interest.
(Note 2) Consumption tax is excluded from the transaction amount.

(4) Directors, Major Unitholders and Other
Not applicable.
(For the six months ended November 30, 2010)(1) Parent Company, Major Corporate Unitholders and OtherClassification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting rights, etc. heldby related party (held in DOI)

Other affiliated company
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company

Relationship with related party

Provision of capital
Payment of interest expense on investment corporation
bonds (Note 1)
51,286
Investment corporation
Other (current liabilities)bonds
3,500,000
18,649Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at end of period (thousands of yen)

13.11% directly held in DOI 15.16% indirectly held in DOI(Note 1) Issuance conditions of the investment corporation bonds were decided by analyzing the spread of similar bonds, the difference of
spread between senior bonds and subordinated bonds and the past track record of similar bonds.

(2) Subsidiaries, Affiliates and Other
Not applicable.
(3) Sister Companies, Subsidiaries of Other Affiliated Companies and Other
Not applicable.
(4) Directors, Major Unitholders and Other
Not applicable.

34

Note 14 – Per Unit Information
Information about net income per unit for the periods ended May 31, 2011 and November 30, 2010 and net
assets per unit as of May 31, 2011 and November 30, 2010 were as follows. The computation of net income perunit is based on the weighted average number of units outstanding during the period. The computation of net
assets per unit is based on the number of units outstanding at each period end.
As of
May 31, 2011

As ofNovember 30, 2010

Net assets per unit

505,900 yen

505,469 yen

Net income per unit

3,671.17 yen

3,239.98 yen

Net income per unit was calculated by dividing the net income by the daily weighted average number ofinvestment units issued and outstanding. The diluted net income per unit is not stated as there are no diluted
investment units.
(Note) The basis for calculating the net income per unit is as follows.

As ofNovember 30, 2010
Net income (thousands of yen)

As ofNovember 30, 2010

1,453,041

1,282,378

Amount not available to ordinary unitholders(thousands of yen)––

Net income available to ordinary unitholders(thousands of yen)

1,453,041

1,282,378

395,798

395,798

Average number of units during the period (units)

Note 15 – Significant Subsequent Events(1) Acquisition of the Asset
DOI purchased trust beneficial interest in real estate on July 8, 2011.
Overview of the Asset(A) Type of asset

Trust beneficial interest in real estate(B) Property name

E SPACE TOWER(C) Location

3-6 Maruyamacho Shibuya-ku, Tokyo(D) Acquisition price

24,000,000 thousand yen (excluding acquisition costs and consumption tax, etc.)(E) Date of agreement

June 30, 2011

(F) Date of delivery

July 8, 2011

(G) Seller

Endeavor Realty Fund Ltd.

VI. Notes to Financial Statements 35

(2) Borrowing of Funds
DOI borrowed loans on July 8, 2011.
These funds were allocated to acquisition of the property and its related costs.
The remaining will be allocated to cash reserves.

LenderDate of
Loan

Sumitomo Mitsui
Banking
Corporation

July 8,2011

Mizuho Trust& Banking Co.,
Ltd.

Aozora Bank,
Ltd.

Balance(thousandsof yen)13,500,000

Interest Rate

Date ofMaturity

3-month Japanese Yen
TIBOR+0.60%

July 8,
2014

Repayment
Method

Notes(Note 1, Note 2)

July 8,2011

3,000,000

3-month Japanese Yen
TIBOR+0.60%

July 8,2014(Note 1, Note 2)

July 8,2011

1,500,000

3-month Japanese Yen
TIBOR+0.60%

July 8,2014(Note 1, Note 2)

Shinsei Bank,
LimitedJuly 8,2011

1,000,000

3-month Japanese Yen
TIBOR+0.60%

July 8,2014

Bullet payment Unsecured(Note 1, Note 2)

The Sumitomo
Trust andBankingCo., Ltd.

July 8,2011

The Bank ofFukuoka, Ltd.

July 8,2011

5,000,000

3-month Japanese Yen
TIBOR+0.50%

July 8,2013(Note 1, Note 3)

1,000,000

3-month Japanese Yen
TIBOR+0.50%

July 8,2013(Note 1, Note 3)

Orix Trust andBanking
Corporation(Note 1)

(Note 2)
(Note 3)(Note 4)36

July 8,2011

1,000,000

3-month Japanese Yen
TIBOR+0.40%

January 10,2013(Note 1, Note 4)

Interest payment dates are the last business day of February, May, August and November. Interest rate is calculated based on 3-month Japanese Yen TIBOR
which Japanese Bankers Association (“JBA”) releases two business days prior to the interest payment date. (The basic interest rate from July 8, 2011 to August
31, 2011 is calculated based on the 2-month Japanese Yen TIBOR which JBA released on July 6, 2011.)
The basic interest rate from June 1, 2014 to July 8, 2014 will be calculated based on the 1-month Japanese Yen TIBOR which JBA will release on May 28, 2014.
The basic interest rate from June 1, 2013 to July 8, 2013 will be calculated based on the 1-month Japanese Yen TIBOR which JBA is going to release on May 29,
2013.
The basic interest rate from December 1, 2012 to January 10, 2013 will be calculated based on 1 month Japanese Yen TIBOR which JBA will release on
November 28, 2012.

VII. Independent Auditors’ ReportVII. Independent Auditors’ Report 37

VIII. Statements of Cash Flows[Information Only]
For the six months ended May 31, 2011 and November 30, 2010
(Thousands of yen)

For the six months
ended
May 31, 2011

For the six months
ended
November 30, 2010

Income before income taxes

1,454,081

1,283,369

Depreciation and amortization

1,282,286

1,237,420

8,536

7,867

Interest expense

826,331

811,411

Increase (Decrease) in provision for loss on disaster

63,721–(Increase) Decrease in tenant receivables

2,250(34,818)

Increase (Decrease) in accounts payable(62,477)(41,612)

Increase (Decrease) in rent received in advance(91,704)

155,002

Cash payments of interest expense(823,838)(770,028)(Increase) Decrease in consumption taxes refundable

119,735(87,205)

Other, net

449,866

290,971

3,228,787

2,852,377––(9,472,148)(9,506,408)–(7,374)

Proceeds from tenant security deposits

652,313

1,441,683

Payments for tenant security deposits(567,390)(537,329)

Net Cash Used in Investing Activities(9,387,225)(8,609,428)

Cash Flows from Financing Activities:––

Proceeds from long-term debt

7,000,000

5,500,000

Repayments of long-term debt

(3,525,625)(133,125)–

4,965,834(1,284,580)(2,075,330)

Net Cash Provided by Financing Activities

2,189,795

8,257,379

Net Change in Cash and Cash Equivalents:(3,968,643)

2,500,328

Cash and Cash Equivalents at Beginning of Period

18,503,967

16,003,639

Cash and Cash Equivalents at End of Period

14,535,324

18,503,967

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
Payments for purchases of intangible assets

Proceeds from investment corporation bonds
Payment of dividends

The statements of cash flows are not audited by any independent auditor.
Summary of Significant Accounting Policies [Information Only]
Cash and Cash Equivalents
DOI considers all highly liquid investments with original maturity of three months or less to be cash and cash
equivalents.

38

VIII. Statements of Cash Flows [Information Only]IX. Investor Information
Investor Memo
End of fiscal period
General Meeting of Investors
Date for finalizing Unitholders with voting rights for
the General Meeting of Unitholders
Reference date for finalizing payment of distributions
Listed financial instruments exchange
Newspaper in which notice is posted
Manager of Unitholder Registry, etc.
Office handling administrative affairs
Service counterMay 31 and November 30 of each year
Held at least once every two years
Date publicly announced beforehand
May 31 and November 30 of each year (distributions are paid within three months of this reference date)Tokyo Stock Exchange (securities code: 8976)
Nihon Keizai Shimbun
The Chuo Mitsui Trust and Banking Co., Ltd., 3-33-1 Shiba, Minato-ku, Tokyo 105-8574
Transfer Agency Department of The Chuo Mitsui Trust and Banking Co., Ltd., 2-8-4 Izumi,
Suginami-ku, Tokyo 168-0063 Phone 0120-78-2031 (toll-free in Japan)
All branches of The Chuo Mitsui Trust and Banking nationwide and the head office andbranches nationwide of Japan Securities Agents, Ltd.

IR Calendar
July 13, 2011

August 12, 2011

August 15, 2011

・Announcement of financial resultsfor period ended in May 2011
・Sending of Japanese version
Business Report for 11th Fiscal
Period (Statement of Financial
Performance)
・Start paying distributions for period
ended in May 2011May
End of fiscal period

July
AugustFebruary 2012 ・Sending of Japanese version Business
Report for 12th Fiscal Period(Statement of Financial Performance)
February
January

November
End of fiscal period

February 2012 ・Start paying distributions for period
ending in November 2011
January 2012 ・Announcement of financial resultsfor period ending in November 2011

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 the subscribers of updates in website content such as press releaseof financial results
13, 2011situation
・Announcement
announcements via e-mail free of charge. The website will be continually enhanced and enriched so thatJanuary
the current
and future
for period ended in November 2011
strategies of DOI are clearly communicated.

Daiwa Office Investment Corporation

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

February 10, 2011 ・Sending of Japanese version
Business Report for 10th Fiscal
Period (semi-annual report)
February 14, 2011 ・Start paying distributions for period
ended in November 2010

January

November
End of fiscal period

February

Important information is distributed via
e-mail. Please access and follow the simple
Auguststeps if you wish to receive our IR mail
July
Delivery Service.
May
End of fiscal period

July 2011

・Announcement of financial results forperiod ended in May 2011

The slideshow of the Earnings
Announcement for the 11th Fiscal Period in
August 2011 ・Sending of Japanese version BusinessHTML format. Please accessReport
to view.
for 11th Fiscal Period(semi-annual report)

August 2011

・Start paying distributions for period
ending in May 2011

IX. Investor Information

39

The Daiwa Office Investment Corporation logo has been created. The logo symbolizes hospitality with an open door and thedesire to be a bright and open investment corporation. We will continue to aim to be a highly-transparent investment
corporation that is further cherished and trusted by our investors and tenants.