Asset Management Report for 20th Period(Semi-Annual Report for 20th Period)
From January 1, 2016 to June 30, 2016

I. Greetings
To Our Unitholders
We would like to express our sincere gratitude for your continued support of Japan Excellent, Inc. (JEI) and Japan
Excellent Asset Management Co., Ltd.
We hereby report the financial results of JEI for the 20th period (from January 1, 2016 to June 30, 2016).
JEI accelerated efforts to increase rents by ensuring to take opportunities of upward rent revision for current
contracts. Also, JEI promoted filling of vacancies while setting higher rent levels. As a result, the portfolio
occupancy rate improved to 99.1% at the end of the 20th period from 98.5% at the end of the 19th period.
In terms of finance, JEI successfully reduced financial costs through refinancing while adhering to the basic policyof fixing interest rates of loans, extending borrowing periods and diversifying maturity dates. JEI continues toretain rating of AA- from the rating agency as JEI’s ongoing stable finance management was recognized.
JEI recorded total revenues of 10,223 million yen, operating income of 3,982 million yen and net income of 3,122
million yen, and the distribution per unit of 2,462 yen for 20th period.
Also in the 21st period (ending December 2016), JEI has continued with quality growth through acquisition of
Mansard Daikanyama, a property close to central Tokyo located near a station that is relatively new and has highcompetitiveness, from the core sponsor, while procuring a total of around 5.5 billion yen through issuance of new
investment units in July 2016.

About Future Asset Management
In the real estate market, while a favorable fund procurement environment is expected to continue, real estatetransaction prices are expected to remain in the high price range as supply of prime properties is still limited. In theoffice building leasing market, the rent level is forecast to continue to increase gradually for the time being, in linewith the improving trend of the vacancy rate.
With this perspective, JEI will endeavor to enhance profitability of the entire portfolio by not only maintaining thehigh occupancy rate but also by improving the rent level based on market trends. Furthermore, JEI will continue
with growth through pursuit of opportunities to invest in prime real estate, including replacement of assets, with an
aim to expand its asset size over the medium to long-term. In terms of finance, JEI will strive to conduct stablefinancial management by working to reduce financing costs, while continuing to follow the basic policy of fixing
interest rates of loans, extending borrowing periods and diversifying maturity dates.
In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and otherlaws and regulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the statusof our operations and asset management to our unitholders.
We kindly ask for your continued understanding and support.
Hidehiko Ogawa
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

2II. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
16th Period 17th Period 18th Period 19th Period 20th Period,
January 1, July 1, 2014 to January 1, July 1, 2015 to January 1,
2014 to June December 31, 2015 to June December 31, 2016 to June
201430, 2015
2015
30, 2016
30, 2014

Fiscal period(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)

Revenues(Rental revenues)
Operating expenses(Property operating expenses)
Operating income
Ordinary income
Net income
Total assets(Period-on-period change)(%)(Millions ofyen)

Net assets(Period-on-period change)(%)

Unitholders’ capital
Total outstanding investment
units
Net assets per unit
Net income per unit (Note 1)
Total distribution
Distribution per unit
(Distribution per unit after split)

9,558

9,695

10,121

10,83910,223(9,558)(9,695)(10,121)(10,669)(10,223)

5,592

5,731

6,102

6,537

6,240

(5,022)(5,180)(5,533)(5,916)(5,655)

3,966

3,963

4,018

4,301

3,982

3,011

3,041

3,098

3,385

3,113

3,010

3,040

3,097

3,384

3,112

277,842

278,037

300,976

284,443

283,653

(7.7)

(0.1)

(8.3)

(−5.5)(-0.3)

130,998

131,028

131,085

137,857

137,808

(8.5)

(0.0)

(0.0)

(5.2)

(△0.0)(Millions ofyen)

127,950

127,950

127,950

134,434

134,434(units)

1,212,750

1,212,750

1,212,750

1,264,450

1,264,450(yen)

108,017

108,042

108,089

109,025

108,987

(yen)

2,511

2,506

2,554

2,685

2,461

(Millions of
yen)

3,010

3,040

3,097

3,161

3,113

(yen)

2,482

2,507

2,554

2,500

2,462

(yen)

2,482

2,507

2,554

2,500

2,462

(–)

(–)

(－)

(－)

(－)

(Profit distribution per unit)(Of this, profit distribution per unit after
split)(Distribution in excess ofearnings per unit)(yen)(Of this, distribution in excess of earnings
per unit after split)

Return on assets (Note 2)(Annualized rate)

(%)

1.1

1.1

1.1

1.2

1.1

(%)

(2.3)

(2.2)

(2.2)

(2.3)

(2.2)

Return on equity (Note 3)(Annualized rate)

(%)

2.4

2.3

2.4

2.5

2.3

(%)

(4.8)

(4.6)

(4.8)

(5.0)

(4.5)

Capital ratio (Note 4)(Period-on-period change)

(%)

47.1

47.1

43.6

48.5

48.6

(%)

(0.3)

(−0.0)(−3.6)

(4.9)

(0.1)

Payout ratio (Note 5)

(%)

99.9

100.0

99.9

93.4

100.0

Number of investment properties(properties)

30

30

31

30

30

Number of tenants(tenants)

206

214

219

224

228

Total leasable space (Note 6, 7)(㎡)

330,285

330,180

370,671356,918

356,884

Occupancy rate

(%)

98.3

99.1

97.9

98.5

99.1

1,624

1,657

1,786

1,908

1,899

558

415

790

635

729

(Millions of
yen)

6,160

6,172

6,374

6,662

6,467

(yen)

3,822

3,873

4,027

4,051

3,964

(Millions ofyen)(Millions ofyen)

Depreciation
Capital expenditure
Net operating income (NOI)(Note 8)Funds from operation (FFO) perthth

Asset Management Report for 20 period (Semi-Annual Report for 20 Period)

3

unit (Note 9)
FFO multiples (Note 10)
Debt service coverage ratio(DSCR) (Note 11)
Interest-bearing debt

(times)

17.4

20.8

17.4

16.5

17.6

(times)

4.8

5.0

5.0

5.6

5.5

133,900

133,900

155,400

131,900

131,900(Millions ofyen)

Loan-to-value (Note 12)

(%)

48.2

48.2

51.6

46.4

46.5

Number of days in operation(days)

181

184

181

184

182

(Note 1) Net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding during
the six months period.
(Note 2) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 3) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 4) Capital ratio = Period end net assets / Period end total assets × 100(Note 5) Payout ratio = Total distribution / Net income × 100 (figures for the 18th period and before are rounded down to one
decimal place while figures for the 19th period is rounded to one decimal place.)(Note 6) For properties with joint ownership, a figure obtained by multiplying the leasable space of the entire property by theownership ratio is indicated as JEI’s leasable space. The same shall apply hereinafter.
(Note 7) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 8) NOI = Rental revenues – Property operating expenses + Depreciation(Note 9) FFO per unit = (Net income + Depreciation – Gain on sale real estate + Loss on sale of real estate) / Total Number of
Outstanding investment units (the figure is rounded down to the whole number).
(Note 10) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one decimal
place before 18th fiscal period.)(Note 11) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment corporation bonds)(Note 12) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

4

(2) Asset Management Development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006 under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter referred to the “Investment Trust Law”). On March 15, 2006, it
completed the corporate registration to the Kanto Finance Bureau (registration number 52, issued by the Head of
the Kanto Local Finance Bureau) and listed on the Real Estate Investment Trust Section of the Tokyo Stock
Exchange (Securities Code: 8987) on June 27, 2006. Since the listing, we have continued investment management
primarily in office buildings with the aim of maintaining sound corporate growth and stable revenues from themedium- to long-term perspectives. On June 30, 2016, we settled our twentieth period.
1) Business conditions and results
The Japanese economy during the 20th period (ended June 2016) continues to be on a moderate recovery
trend against the backdrop of continuation of strong corporate earnings and pickup in capital investment aswell as the improvement in employment situation although some weakness is also seen.
In the real estate transaction market, a rise in real estate transaction prices due mainly to a decrease in
expected yields is observed amid the continuing favorable fund procurement environment, and there is senseof overheating. In addition to the new listings of J-REITs, market participation of not only overseas investors,
private funds and private REITs but also of general companies, etc. has become more noticeable.
In the office building leasing market, tenant needs for floor area increase in the same building, relocation for
expansion and for better location, etc. continue to be apparent backed by the continuation of strong corporate
earnings and the improvement in employment situation, and the vacancy rate continues to be on an improving
trend. As a result, new asking rent has been on a rising trend in major regional cities as well as in central
Tokyo. JEI has conducted leasing activities emphasizing rent levels and has promoted upward rent revisions
to suit the value of properties for current contracts by ensuring to seize opportunities of upward rent revision.
As to new contracts, JEI promoted filling of vacancies while setting higher rent levels based on market trends
and insisting on the rent level. As a result of these efforts, the portfolio occupancy rate improved 0.6% to99.1% at the end of the current period from 98.5% at the end of the previous period.
The total number of properties owned and managed by JEI at the end of the current period was 30 with totalacquisition price of 275.5 billion yen and total leasable space of 356,883.84 m2(107,957.36 tsubo).
2) Fund raising highlights
JEI has conducted financial operations under the basic policies of extending borrowing periods, diversifying
maturity dates and converting to fixed-rate loans. However, with the current low interest rates and theunderstanding that the risk of interest rate hike is small for the time being, JEI has also started to take out
medium-term borrowings with floating rates to focus on reducing financing costs.
With regard to the total of 13 billion yen of long-term borrowings with fixed interest rates which were due atthe end of June in the current period, JEI successfully reduced financing costs further by refinancing themwith borrowings for 3 and a half years with floating rates.
As a result, the loan to value ratio to the total assets (total assets-based LTV) was 46.5%, the averageremaining period of interest-bearing debts (Note 1) was 3.69 years and both long-term borrowing ratio (Note2) and fixed rate ratio (Note 3) were 89.4%, reducing the period end average interest-bearing debt interest
rate (Note 4) to 0.96%.
The total outstanding investment corporation bonds stood at 30.0 billion yen and the total outstanding
interest-bearing debts at 131.9 billion yen, unchanged from the previous period.
JEI has commitment lines of 14.0 billion to reduce refinancing risk, enhance stability for fund procurement,
etc.
The ratings granted to JEI by the following rating agencies are shown below:

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)5

(Ratings as of June 30, 2016)
Credit rating agency

Issuer rating (outlook)

Japan Credit Rating Agency, Ltd.
(JCR)
Rating and Investment Information,
Inc. (R&I)

Long-term issuer rating
AA- (Stable)
Issuer rating
A+ (Stable)
Issuer rating
A3 (Stable)

Moody’s Japan

Individual debt issue rating(Note 5)AA−A+―3) Financial results and distribution highlights
As a result of the above management, JEI posted 10,223 million yen in total revenues, 3,982 million yen in
operating income, 3,113 million yen in ordinary income and 3,112 million yen in net income for the period
under review.
Considering distributions in the period under review, JEI determined to distribute the whole unappropriatedretained earnings (except for the portion of less than one yen per unit) to be eligible for special provisions of
the tax system on investment corporations (Section 67-15 of the Special Taxation Measures Law), that allows
JEI to deduct the amount of profit distribution from its taxable income. Accordingly, distribution per unit forthe period was 2,462 yen.
(Note 1) Average remaining period of interest-bearing debts = Remaining period of borrowings and investment
corporation bonds before repayment dates and maturity dates as the end of the period ÷ Balance of relevantborrowings and investment corporation bonds as of the end of the period (weighted average)(Note 2) Long-term borrowing ratio = (long-term loans (including long-term loans due within one year) + investment
corporation bonds (including investment corporation bonds due within one year) / total interest-bearing debts
at the end of the period x 100(Note 3) Fixed rate ratio = Total interest-bearing debts at fixed interest rate at the end of the period (including longterm loans whose interest rates were fixed through interest rate swap transactions) / total interest-bearing
debts x 100(Note 4) The period end average interest-bearing debt interest rate is calculated by using a weighted–average of theinterest at the end of the current period, by balance of respective interest-bearing debt with all the interestbearing debts.
(Note 5) The rating of JCR is for the 3rd series unsecured investment corporation bonds, 4th series unsecured
investment corporation bonds, 5th series unsecured investment corporation bonds, 6th series unsecured
investment corporation bonds, 7th series unsecured investment corporation bonds and 8th series unsecured
investment corporation bonds. The rating of R&I is for the 3rd series unsecured investment corporation bonds
and 4th series unsecured investment corporation bonds.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)63) Capital Increase
JEI had no changes in the total number of outstanding investment units for the period under review. The outline of
the changes in the total number of outstanding investment units and unitholders’ capital until the end of the period
under review are as follows:
Unitholders’ capital
Capital transaction (units)
Capital transaction
Remarks
Paid-up Date
(Millions of yen)
ChangeFebruary 20, 2006
June 26, 2006
July 21, 2006
July 11, 2007
August 8, 2007
January 31, 2011
February 28, 2011
January 30, 2013
February 27, 2013
January 1, 2014
January 27, 2014
February 26, 2014
July 13, 2015
August 12, 2015

Private placement
for incorporation
Public offering
Allocation of
investment units toa third party
Public offering
Allocation of
investment units toa third party
Public offering
Allocation of
investment units toa third party
Public offering
Allocation of
investment units toa third party
Split of investment
unit
Public offering
Allocation of
investment units toa third party
Public offering
Allocation of
investment units toa third party

Balance

ChangeBalance

400

400

200

200

(Note 1)

128,000

128,400

64,23064,430(Note 2)6,400

134,800

3,211

67,641(Note 3)19,000

153,800

18,702

86,344(Note 4)

750

154,550738

87,083(Note 5)31,000185,550

13,608100,691(Note 6)

3,100

188,650

1,360

102,052(Note 7)33,000221,650

14,408116,460(Note 8)3,300

224,950

1,440

117,901(Note 9)899,800

1,124,750–

117,901(Note 10)80,0001,204,750

9,135

127,036(Note 11)8,000

1,212,750

913

127,950(Note 12)47,0001,259,750

5,894

133,845(Note 13)4,700

1,264,450

589

134,434(Note 14)

(Note 1) JEI was incorporated through private placement at a price of 500,000 yen per unit.
(Note 2) New investment units were issued at an offer price of 520,000 yen per unit (issue price of 501,800 yen per unit) through apublic offering in order to fund acquisition of new properties which were acquired at the time of the listing.
(Note 3) New investment units were issued at an issue price of 501,800 yen per unit through an allocation of investment units to athird party in order to partially fund new property acquisitions.
(Note 4) New investment units were issued at an offer price of 1,019,200 yen per unit (issue price of 984,360 yen per unit) through apublic offering in order to partially repay debts procured to acquire properties in the second period.
(Note 5) New investment units were issued at an issue price of 984,360 yen per unit through an allocation of investment units to athird party in order to partially repay debts procured to acquire properties in the second period.
(Note 6) New investment units were issued at an offer price of 454,930 yen per unit (issue price of 438,984 yen per unit) through apublic offering in order to repay short-term loans procured to acquire properties in the ninth period and to fund acquisitionof a new property which was acquired in the tenth period.
(Note 7) New investment units were issued at an issue price of 438,984 yen per unit through an allocation of investment units to athird party in order to repay short-term loans procured to acquire new properties in the ninth period and to fund acquisitionof a new property which was acquired in the tenth period.
(Note 8) New investment units were issued at an offer price of 451,425 yen per unit (issue price of 436,609 yen per unit) through apublic offering in order to fund acquisition of new properties which were acquired at the fourteenth period.
(Note 9) New investment units were issued at an issue price of 436,609 yen per unit through an allocation of investment units to athird party in order to fund acquisition of properties acquired in the fourteenth period.
(Note 10) With December 31, 2013 as the record date, JEI implemented a 5-for-1 split of its investment units held by Unitholders
stated or recorded on that date’s final unitholder registry with January 1, 2014 as the effective date.
(Note 11) New investment units were issued at an offer price of 118,072 yen per unit (issue price of 114,196 yen per unit) through apublic offering in order to fund acquisition of new properties which were acquired at the sixteenth period.
(Note 12) New investment units were issued at an issue price of 114,196 yen per unit through an allocation of investment units to athird party in order to partially fund future acquisitions of specified assets, repayment of loans and redemption of investment
corporation bonds.
(Note 13) New investment units were issued at an offer price of 129,675 yen per unit (issue price of 125,419 yen per unit) through a

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

7

public offering in order to partially repay debts procured to acquire properties in the eighteenth period.
(Note 14) New investment units were issued at an issue price of 125,419 yen per unit through an allocation of investment units to athird party in order to partially fund future acquisitions of specified assets and repayment of loans.
(Note 15) At JEI, there exist no investment units held by JEI (investment units without voting rights provided in Article 308-2 of the
Corporate Law which will be applied mutatis mutandis pursuant to Article 94 of the Investment Trust Law) or cross-heldinvestment units (investment units without voting rights provided in Article 160 of the Investment Trust Enforcement
Ordinance) as of the end of the nineteenth period.

[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listed on theReal Estate Investment Trust Section of the Tokyo Stock Exchange during each period is as follows:
17th period
19th period
Fiscal period
18th period
20th period
16th period(December(December
(June
2015)
(June
2016)
(June 2014)(closing
date)
2014)
2015)
Investment unit
market priceHighest (yen)141,600
164,700
168,400
141,900
161,000
Lowest (yen)(Note)

114,200

133,400

141,400

122,400

123,200

The highest and lowest prices of investment units refer to the closing prices on the Real Estate Investment Trust Section of
the Tokyo Stock Exchange.

(4) Distributions Paid
The distribution per unit for the period (the 20th period) was 2,462 yen per unit, based on JEI’s decision to
distribute the whole unappropriated retained earnings (except for the portion of less than one yen per unit) to beeligible for the special tax treatment on investment corporations (Article 67-15 of the Special Taxation Measures
Law) that allows JEI to deduct the amount of profit distribution from its taxable income.
Fiscal period
Accounting period
Retained earnings at end of
period (Thousands of yen)
Retained income (Thousands ofyen)
Total cash distribution amount(Thousands of yen)
(Cash distributions perunit) (yen)Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)
Total refund of investment
equity(Refund of investment per unit)
Of total refund of investment
equity, total distribution amountfrom reserve for temporary
difference adjustments(Of refund of investment equity
per unit, distribution amount perunit from reserve for temporary
difference adjustments)
Of total refund of investment
equity, total distribution amountfrom distribution reducing
unitholders’ capital for tax
purpose(Of refund of investment
equity per unit, distribution
amount from distribution
reducing unitholders’ capitalfor tax purpose)

16th period

17th period

18th period

19th period

20th period

January 1, 2014 to July 1, 2014 to January 1, 2015 to July 1, 2015 to January 1, 2016 toJune 30, 2014 December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2016
3,010,447

3,040,640

3,098,080

3,385,019

3,113,717

402

275

717

261,241641

3,010,045

3,040,364

3,097,363

3,161,125

3,113,075(2,482)(2,507)(2,554)(2,500)(2,462)3,010,045

3,040,364

3,097,363

3,161,125

3,113,075(2,482)(2,507)(2,554)(2,500)(2,462)

–

–

－

－

－

(–)

(–)

(－)

(－)

(－)

–

–

－

－

－

(–)

(–)

(－)

(－)

(－)

–

–

－

－

－

(–)

(–)

(－)

(－)

(－)

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

8

(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
Although global economic growth rate has been over 3% for the past 2 years, anxiety factors for the world
economy are mounting in 2016 as combination of slowdown of Chinese economy, political instability in EU
and downward pressure on resource-rich nations’ growth due to the fall in crude oil prices are seen. In
particular, U.K.’s decision in a referendum to leave EU and lingering financial deficit and debt crisis inSouthern European countries are likely to prolong the political confusion in EU and U.K. going forward.
The Japanese economy also shows low business confidence, and while strong yen and fall in stock prices are
expected to slow down to a certain degree due to (the anticipation for) additional monetary-easing measuresby the B.O.J. following the outcome of the Upper House election in July, it is necessary to pay attention to
the possibility that the deep-rooted pressure for strong yen to avoid risks attributable to anxiety factors
overseas could worsen the Japanese economy and lead to falling stock prices.
Although domestic long-term interest rates are likely to continue to be pressed downward going forward, therisk of domestic interest rates taking a turn should be closely watched as volatile movements in the financial
market due to overseas factors have been observed.
In the real estate transaction market, real estate transaction prices are continued to remain at a high range as
the supply of prime properties is still limited, especially in central Tokyo and metropolitan areas, while afavorable fund procurement environment and expansion in market players are expected.
In the office building leasing market, the vacancy rate is expected to continue to be on a moderate improving
trend since office demand is anticipated to remain strong, and rent levels of both new rents and ongoing rents
are expected to continue to be on an increasing trend though moderate for the time being centering oncompetitive buildings.
2) Policy and issues on future investment management
For external growth, JEI will continue striving to acquire, including replacing assets, competitive properties
with well-balanced investments based on size, concentration and target area to increase asset size and realize
stable profitability in our portfolio over the medium to long term. To this end, we will continue enhancing
further interaction and collaboration with sponsor companies and have the asset management company
cultivate and refine property information sources in an effort to proactively gain access to market
information and thereby keep seizing the right business opportunities.
For internal growth, JEI will continue to make efforts to capture the needs of existing tenants in a timely
manner by further strengthening finely-tuned relationships. JEI will aim to enhance earnings of the entire
portfolio by continuously making additional strategic investments in order to maintain asset value andimprove property competitiveness over the medium to long term while setting new rents based on market
trends as well as promoting upward rent revisions to realize rents that are more suitable for the property
value, along with the aforementioned initiatives.
Regarding financial operations, while fund procurement for long-term and with fixed interest rates willremain as our basic policies so long as the low interest rate environment continues, JEI will make flexible
case-by-case judgments taking into account the trend of financial environment, interest rate levels forrelevant terms and the balance of maturing debts in each fiscal period.
Since the risk of interest rate hike is limited for the time being, we are considering the possibility of flexibly
procuring funds through short-term borrowings with floating interest rates as well while carefully monitoringchange in long-term borrowing ratio and fixed rate ratio.
(6) Subsequent Events
1) Issuance of new investment units through public offering (primary offering)
The board of directors of JEI resolved the following issuance of new investment units through public
offering at its meetings held on June 22, 2016 and July 4, 2016. The payment for the offering was completed
on July 11, 2016.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)9<Issuance of new units through a public offering>Number of units issued

37,500 units

Issue price (offer price)¥138,742 per unit

Total offer price¥5,202,825,000

Proceeds per unit

¥134,259 per unit

Aggregate proceeds¥5,034,712,500

Payment dateJuly 11, 2016

2) Issuance of new investment units through third-party allotment (greenshoe option)
The board of directors of JEI resolved the following issuance of new investment units through third-party
allotment at its meetings held on June 22, 2016 and July 4, 2016. The payment for the offering wascompleted on August 10, 2016.
As a result, unitholders’ capital is 139,972,885,150 yen, including the amount increased through the above
primary offering, and the number of investment units issued and outstanding is 1,305,700 as of August 10,
2016.
<Issuance of new units through allocation to a third party>
Number of units issued

3,750 units

Issue price (offer price)¥134,259 per unit

Proceeds per unit

¥503,471,250

AllotteeMizuho Securities Co., Ltd.

Payment dateAugust 10, 2016

(Reference information)
1. Asset Acquisition
On June 22, 2016, JEI concluded the following purchase agreement for trust beneficiary interest in realestate. The property was handed over to JEI on July 1, 2016.
< Overview of acquisition asset>
Acquisition asset

Trust beneficiary interest in real estate

Property nameMansard Daikanyama

Location

10-1 Sarugakucho, Shibuya-ku, Tokyo

Acquisition price (Note)¥11,420,000,000

Date of execution of purchase agreement

June 22, 2016

Handover dateJuly 1, 2016

SellerYK Daikanyama Challengers(Note) The acquisition price represents the sale price of the trust beneficiary interest excluding costs related to theacquisition, JEI’s share of the real estate tax and city planning tax, and consumption taxes.
2. Debt Financing.
JEI concluded the following individual commitment line agreement on July 1, 2016 to partially fund theacquisition of assets described in above 1. and acquisition-related expenses.
Asset Management Report for 20th period (Semi-Annual Report for 20th Period)10

< Overview of debt financing>
LenderMizuho Bank, Ltd.

Loan amount¥11,500,000,000

Interest rate

Base interest rate (Japanese Bankers Association(JBA) one-week or one-month Yen-TIBOR) +0.20%

Drawdown dateJuly 1, 2016

Principal repayment dateNovember 29, 2016

Principal repayment method

Repayment on the principal repayment date(early repayment permitted)

Collateral

Unsecured/Non-guaranteed

3. Partial early repayment of borrowing
JEI conducted partial early repayment, on July 15, 2016, of 5,000 million yen for the borrowing described inabove 2. using proceeds from the issuance of new investment units through public offering described inabove (6) 1), etc.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)11

2. Outline of the Investment Corporation(1) Investment units
16th
As of June 30,
2014 (Note)Fiscal period
Total number of units
authorized
Total number of units
issued and outstanding

17th
As of December
31, 2014

18th
As of June 30,
2015

19th
As of December
31, 2015

20th
As of June 30,
2016

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

1,212,750 units

1,212,750 units

1,212,750 units

1,264,450 units

1,264,450 units

Unitholders’ capital

127,950 million yen 127,950 million yen 127,950 million yen 134,434 million yen 134,434 million yen

Number of unitholders

8,451 individuals

7,917 individuals

7,848 individuals

8,465 individuals

7,686 individuals(2) Unitholders
Major unitholders as of June 30, 2016 are as follows:
Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%)

Japan Trustee Services Bank, Ltd.
1-8-11 Harumi, Chuo-ku, Tokyo(Trust Account)

358,453

28.35

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

2-11-3 Hamamatsu-cho, Minato-ku, Tokyo

112,203

8.87

Trust & Custody Services Bank,
Harumi Island Triton Square Office Tower Z,
Ltd. (Securities Investment Trust
1-8-12 Harumi, Chuo-ku, Tokyo
Account)

100,601

7.96

NIPPON STEEL KOWA REALESTATE CO., LTD.

1-15-5 Minami Aoyama, Minato-ku, Tokyo

71,5605.66

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

2-2-2 Otemachi, Chiyoda-ku, Tokyo

53,809

4.26

The Dai-ichi Life Insurance
Company, Limited

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

20,6601.63

P.O. BOX 351 BOSTON,MASSACHUSETTS 02101, U.S.A.

20,082

1.59

1776 HERITAGE DRIVE， NORTHQUINCY， MA 02171, U.S.A.

13,836

1.09

1-18-11 Minami-Senba, Chuo-ku, Osakashi, Osaka

13,065

1.03

14 PORTE DE FRANCE, ESCH-SURALZETTE, LUXEMBOURG, L-4360

13,0001.03

777,269

61.47

Name

STATE STREET BANK AND
TRUST COMPANY 505223
STATE STREET BANK －WEST PENSION FUND
CLIENTS － EXEMPT 505233
The Fuji Fire and Marine
Insurance
RBC ISB A／C DUB NONRESIDENT／DOMESTIC
RATE－UCITS CLIENTSACCOUNT

Address

Total

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

12

(3) Officers
1) Directors and accounting auditor
Post

Name

Compensation or fee forthe six months ended
June 30, 2016
(Thousands of yen)

Major additional post

Executive
Director

Hidehiko Ogawa

President, Japan Excellent Asset Management
Co., Ltd.

Supervisory
Director

Tsuyoshi Nagahama

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai
University

Eiji Takagi

Eiji Takagi Certified Public Accounting Office

Supervisory
Director
Supervisory
Director
Accounting
AuditorErnst & Young ShinNihon
LLC

–

6,540

12,500(Note 2)–

(Note 1) There are no investment units of JEI held by neither the Executive Director nor the Supervisory Directors. Although
Supervisory Directors may have additional posts in companies other than those listed above, there is no conflict of interests
between those companies, including those listed above, and JEI.
(Note 2) The total amount of compensation or fee shown above is an estimated amount and includes the fee for the English financial
statements audit.

2) Policy on dismissal and discontinuation of re-election of accounting auditor
The board of directors of JEI shall deliberate dismissal of accounting auditor in accordance with the provisions
set out in the Law Concerning Investment Trusts and Investment Corporations, and deliberate discontinuation ofreelection based on circumstances in all respects.
3) Matters concerning an entity which received a business suspension order in the past two years

The accounting auditor of JEI received an order to suspend accepting new engagements for 3 months (fromJanuary 1, 2016, to March 31, 2016) from the Financial Agency on December 22, 2015.
(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
Our asset management company, asset custodian and administrative agents as of June 30, 2016 are as follows:
Classification

Name

Asset management company

Japan Excellent Asset Management Co., Ltd.

Asset custodian

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Transfer agent and other administrative work for accounting Mizuho Trust & Banking Co., Ltd.
and institution operation)
Administrative agent(Investment corporation bonds)

Mizuho Bank, Ltd.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)13

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
Area
(Note 1)
Classification

19th Period(December 31, 2015)

20th Period(June 30, 2016)

Total
Total
Total
acquisitionacquisition
Investment
acquisition
price (Millions
price (Millions
ratio inprice (Millionsof yen)of yen)portfolio (%)
of yen)(Note 2)
(Note 2)

Use

Area I

3,814

1.3

3,800

1.3

Area II

5,774

2.0

5,708

2.0

Office Area I
building Area II

105,29037.0

104,962

37.0

9,154

3.2

9,132

3.2

Area III

102,63536.1

102,342

36.1

Area IV

19,146

6.7

18,995

6.7

OthersTrust beneficiary (commercial
facilities, Area I
interest in realresidence,
estateetc.)

18,436

6.5

18,308

6.5

Total

264,25292.9

263,249

92.8

Deposits in bank and other assets

20,191

7.1

20,404

7.2

Total assets

284,443100.0

283,653

100.0

Real estate property

Trust beneficiaryinterest in realestate(Note 1) Areas are classified as follows:
Area I: Six central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya)
Area II: Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.), Central Nagoya (Meieki, Fushimi,
Sakae, etc.) and Central Fukuoka (Tenjin, Hakata-ekimae, etc.).
*Central Osaka refers to the areas within about a 10-minute walk from JR Osaka Station, Umeda Station (Hankyu
Railway, Hanshin Electric Railway, and Osaka City Subway), Yodoyabashi Station (Osaka City Subway) or
Hommachi Station (Osaka City Subway), respectively. Central Nagoya refers to the areas within about a 10minute walk from Nagoya Station (JR, Nagoya City Subway, and Nagoya Railroad), Fushimi Station (Nagoya
City Subway), or Sakae Station (Nagoya City Subway and Nagoya Railroad), respectively. Central Fukuoka
refers to the areas within about a 10-minute walk from Hakata Station (JR and Fukuoka City Subway), Tenjin
Station (Fukuoka City Subway) and Nishitetsu Fukuoka Station (Nishi-Nippon Railroad), respectively. They are,however, not always in line with administrative districts.
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities.
The same applies hereinafter.
(Note 2) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date (amounts of realestate property and trust beneficiary interest in real estate are based on the book value after depreciations).

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

14

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of June 30, 2016 are as
follows:
Ratio of rental
Book value
Leasable space Leased space Occupancy revenue to total
Name
Major use
(Millions ofrate (%)(m2) (Note 1)(m2) (Note 2)
rental revenues(Note 3)yen)(%)
Kowa Kawasaki
Office29,18338,375.66
37,863.42
98.7
9.0
Nishiguchi Buildingbuilding
OfficeAKASAKA INTERCITY
27,31811,021.03
11,021.03
100.0
5.4
building
Nisseki Yokohama
Office24,25740,440.73
40,314.38
99.7
11.0
Buildingbuilding
OfficeAkasaka Garden City
22,376
8,769.53
8,769.53
100.0
3.7
building
OfficeOmori Bellport D
21,21025,801.66
25,709.23
99.6
9.1
building
Other(commercial
HAMARIKYU
18,30819,718.11
19,429.98
98.5
7.0 facilities,
INTERCITY
residence,etc.)
Musashikosugi Tower
Office12,72925,159.49
25,159.49
100.0
7.7
Place
building
Daiba Garden City
Office10,222
12,122.85
12,122.85
100.0
3.3
Buildingbuilding
Kowa Kawasaki
Office9,624
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
OfficeShiba 2-Chome Building
8,918
11,749.30
11,654.49
99.2
3.6
building
Total

184,152

211,771.08

210,657.12

99.5

－

–

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of June 30, 2016. For
properties with joint ownership, the value is obtained by multiplying the total leasable space of the shared property by thepercentage of the interest owned by JEI, regarding the figure as JEI’s leasable space.
(Note 2) Leased space refers to space with lease contracts or master lease agreements that guarantee a certain amount of fixed rent
payment concluded with end tenants as of June 30, 2016. For properties with joint ownership, the value is obtained bymultiplying the total leased space of the property by the percentage of the interest owned by JEI, regarding the figure as
JEI’s leased space. For properties which are used for profit by the master lease company, leased space refers to the portion
used and the figures indicate space which can be reasonably calculated based on the lease agreement on the master leasing.
The leased space of end tenants who terminated their lease arrangement but have not yet moved out as of the end of period
is included in the leased space. This also applies to any figure which is calculated based on “leased space” in this document.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of June 30, 2016.
(Note 4) The values of Kowa Kawasaki Higashiguchi Building are not disclosed as consent on disclosure from the end tenants havenot been obtained.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

15

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of June 30, 2016 are as follows:
Property
No.

Property nameLocation (Residential address)

Ⅰ-1

Omori Bellport D

6-26-3 Minami-Oi, Shinagawa-ku, Tokyo

Ⅰ-2

Shiba 2-Chome Building

2-6-1 Shiba, Minato-ku, Tokyo

Ⅰ-3

JEI Hamamatsucho Building

2-2-12 Hamamatsu-cho, Minato-ku, Tokyo

Ⅰ-7

Akasaka Garden City

4-15-1 Akasaka, Minato-ku, Tokyo

Ⅰ-8

AKASAKA INTERCITY

1-11-44 Akasaka, Minato-ku, Tokyo

Ⅰ-9

Kowa Shirokanedai Building

3-19-1 Shirokanedai, Minato-ku, Tokyo

Ｉ-10

Daiba Garden City Building

2-3-5 Daiba, Minato-ku, Tokyo

Ⅰ-12

HAMARIKYU INTERCITY

1-9-1 and 15 Kaigan, Minato-ku, Tokyo

Ⅰ-13

Shintomicho Building

3-10-9 Irifune, Chuo-ku, Tokyo

Ⅰ-14

Kowa Nishi-Shimbashi Building

2-1-1 Nishi-Shimbashi, Minato-ku, Tokyo

Ⅱ-1

NHK Nagoya Housou-Center
Building

Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-6
Ⅲ-7
Ⅲ-8
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12

Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6
Ⅳ-7

Form of ownership
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Real estate

Area I
1-13-3 Higashi-Sakura, Higashi-ku, Nagoya-shi,
Real estate
Aichi
Trust beneficiary
JEI Nishi-Honmachi Building
1-3-15 Awaza, Nishi-ku, Osaka-shi, Osakainterest in real estate
Osaka Kogin Building (Land with
Trust beneficiary
4-1-1 Koraibashi, Chuo-ku, Osaka-shi, Osaka
Leasehold Interest)
interest in real estate
Area II
1-403 Kosugi-machi, Nakahara-ku, KawasakiTrust beneficiary
Musashikosugi Tower Placeshi, Kanagawa
interest in real estate
Kowa Kawasaki Higashiguchi
1-53 Nisshin-cho, Kawasaki-ku, Kawasaki-shi, Trust beneficiary
Building
Kanagawa
interest in real estate
Trust beneficiary
JEI Hongo Building
2-38-16 Hongo, Bunkyo-ku, Tokyo
interest in real estate
7-1 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Trust beneficiary
Kawasaki Nisshincho Building
Kanagawa
interest in real estate
Trust beneficiaryNo. 44 Kowa Building
1-2-7 Higashiyama, Meguro-ku, Tokyo
interest in real estate
Trust beneficiary
JEI RYOGOKU BUILDING
3-25-5 Ryogoku, Sumida-ku, Tokyo
interest in real estate
Trust beneficiary
Ebina Prime Tower
2-9-50 Chuo, Ebina-shi, Kanagawa
interest in real estate66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Trust beneficiary
Kowa Kawasaki Nishiguchi Building
Kanagawa
interest in real estate
Trust beneficiary
Pacific Square Sengoku
2-29-24 Hon-Komagome, Bunkyo-ku, Tokyo
interest in real estate
Trust beneficiaryCore City Tachikawa
2-37-7 Akebono-cho, Tachikawa-shi, Tokyo
interest in real estate
Trust beneficiary
1-1-8 Sakuragi-cho, Yokohama-shi, Kanagawa
Nisseki Yokohama Building
interest in real estate
Area III
2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,
Trust beneficiary
JEI Kyobashi Building
Osakainterest in real estate14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Trust beneficiary
JEI Hiroshima Hacchobori Building
Hiroshimainterest in real estate
1-1-2 Kitananajonishi Kita-ku, Sapporo-shi,
Trust beneficiary
SE Sapporo Building
Hokkaido
interest in real estate
Trust beneficiary
3-2-1 Chuo, Aoba-ku, Sendai-shi, Miyagi
Aoba-dori Plaza
interest in real estate
2-6, 2-chome Kita Tenjinbashi, Kita-ku,
Trust beneficiary
Daiwa Minami-morimachi Building
Osaka-shi, Osakainterest in real estate
Trust beneficiary
2-8-1 Kumoji, Naha-shi, Okinawa
JEI Naha Building
interest in real estate
Area IV
Total

Appraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)
25,00021,21011,900

8,918

7,120

8,320

17,20022,37625,10027,318

5,010

4,819

12,200

10,22222,00018,308

1,940

1,774

4,200

3,800

131,670

127,070

5,710

5,708

4,520

7,267

2,030

1,865

12,26014,84019,40012,729

9,160

9,624

4,580

5,151

4,080

4,448

1,740

994

2,150

2,279

3,890

5,745

25,00029,183

1,340

1,657

7,910

6,269

25,70024,257104,950

102,342

4,130

3,072

2,980

2,648

6,530

5,334

3,220

2,200

5,010

4,324

1,420

1,414

23,29018,995272,170

263,249(Note) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report prepared by realestate appraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd., Japan Valuers Co., Ltd. andDaiwa Real Estate Appraisal Co., Ltd. as of June 30, 2016 pursuant to the articles of incorporation of JEI and the regulations
stipulated by the Investment Trusts Association, Japan. For properties with joint ownership in the current portfolio, the value isobtained by multiplying the total value of the shared real estate by the percentage of the interest owned by JEI or the trustee.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

16

Property
No.

Ⅰ-1
Ⅰ-2
Ⅰ-3
Ⅰ-4
Ⅰ-7
Ⅰ-8
Ⅰ-9
Ｉ-10
Ⅰ-11
Ⅰ-12
Ⅰ-13
Ⅰ-14

Ⅱ-1
Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-6
Ⅲ-7
Ⅲ-8
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12
Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6
Ⅳ-7

Property name

Omori Bellport D
Shiba 2-Chome Building
JEI Hamamatsucho
Building
No. 32 Kowa Building(Note 3)
Akasaka Garden CityAKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building
No. 35 Kowa Building(Note 3)
HAMARIKYUINTERCITY
Shintomicho Building
Kowa Nishi-Shimbashi
Building
Area I
NHK Nagoya Housou
CenterJEI Nishi-Honmachi
Building
Osaka Kogin Building(Land with Leasehold
Interest)
Area II
Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi
JEI Hongo Building
Kawasaki Nisshincho
Building
No. 44 Kowa Building
JEI Ryogoku Building
Ebina Prime Tower
Kowa Kawasaki
Nishiguchi Building
Pacific Square Sengoku
Core City Tachikawa
Nisseki Yokohama
Building
Area IIIJEI Kyobashi Building
JEI Hiroshima
Hacchobori Building
SE Sapporo Building
Aoba-dori Plaza
Daiwa Minamimorimachi Building
JEI Naha Building
Area IV
Total

19th Period
July 1, 2015 to December 31, 2015
Ratio of
Total number
Occupancy Rental revenue
rentalofrate (At end(Interim)
revenue totenantsof period)(Millions of
total rental(At end(%))yen)
revenuesof period)(Note 1)
(%)
1
100.0
939
8.8
2
99.2
373
3.5
1

100.0

210

20th Period
January 1, 2016 to June 30, 2016
Ratio of
Total number
Occupancy Rental revenue
rentalofrate (At end(Interim)
revenue totenantsof period)(Millions of
total rental(At end(%))yen)
revenuesof period)(Note 1)
(%)
1
99.6
929
9.1
2
99.2
372
3.6

2.0

1

100.0

208

2.0

-

-

242

2.3

-

-

-

-

1

100.0

385

3.6

1

100.0

379

3.7

14

100.0

557

5.2

14

100.0

549

5.4

1

89.3

162

1.5

1

100.0

161

1.6

1

100.0

335

3.1

1

100.0

334

3.3

-

-

(Note 2)

(Note 2)

-

-

-

-

1

99.2

724

6.8

1

98.5

720

7.0

10

95.4

72

0.7

10

95.4

68

0.7

6

100.0

(Note 2)

(Note 2)6100.0(Note 2)

(Note 2)

38

99.1

-

-

38

99.5

-

-

30

94.2

362

3.4

31

95.1

370

3.6

1

100.0

196

1.8

1

100.0

193

1.9

1

100.0

83

0.8

1

100.0

83

0.8

32

97.3

-

-

33

97.8

-

-

37

100.0

795

7.5

37

100.0

789

7.7

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

1

100.0

191

1.8

1

100.0

190

1.9

1
1
36

100.0
100.0
98.8

88
102
419

0.8
1.0
3.9

1
1
36

100.0
97.8
98.6

85
103
421

0.8
1.0
4.1

1

98.7

901

8.4

1

98.7

924

9.0

9
1

100.0
100.0

47
306

0.4
2.9

9
1

95.5
98.5

49
324

0.5
3.2

1

98.3

1,109

10.4

1

99.7

1,129

11.0

90
1

99.2
84.9

181

1.7

90
1

99.3
94.3

159

1.6

1

100.0

145

1.4

1

98.9

144

1.4

1
50

97.0
93.8

362
178

3.4
1.7

1
53

100.0
99.4

354
183

3.5
1.8

10

100.0

197

1.9

10

100.0

196

1.9

1
64
224

95.6
95.2
98.5

10
10,669

0.1
100.0

1
67
228

100.0
98.8
99.1

73
10,2230.7
100.0(Note 1) Total number of tenants indicates the total number of tenants in each property as of the end of each period. For properties forwhich master lease agreements have been concluded, the number of tenants is counted as one per property. When a tenant
has multiple tenancies in the same property, it is counted as one tenant, and when in multiple properties, it is counted as
multiple tenants. As for Osaka Kogin Building (Land with Leasehold Interest), total number of tenants is counted as one
based on the lease agreement for the leased land.
(Note 2) No. 35 Kowa Building, Kowa Nishi-Shimbashi Building, Kowa Kawasaki Higashiguchi and JEI Hongo Building are notdisclosed as consents on disclosure from the end tenants have not been obtained.
(Note 3) JEI completed sales of No. 32 Kowa Building and No. 35 Kowa Building on December 24, 2015.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

17

(4) Securities Portfolio
None(5) Renewable power generation facility
None(6) Right to operate public facilityNone(7) Other Assets
1) Contract amount and fair value of specified transactions and foreign exchange forwards transactions
Fair value
Contract amount (Thousands of yen) (Note 1)(Thousands of yen)Classification
Type(Note 2)
Over one year

Over-the-countertransaction

Interest rate swap
transactions
Floating interest ratereceivable
Fixed interest rate
payable63,900,000

51,140,000–(Note 1) Contract amount of swap transactions is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation as over-the-counter transactions meet requirements for special accounting under the
Accounting Standard for Financial Instruments.

(8) Status of JEI’s properties by country and region
None for JEI’s properties in countries or regions other than Japan.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)18

4. Capital Expenditures for Owned Properties(1) Scheduled Capital Expenditures
The following table shows major items of scheduled capital expenditures for repairs and maintenance planned
for the properties owned by JEI as of the end of the 20th period (ended June 30, 2016). The values below
include portions to be expensed for accounting purposes.
Estimated construction costs(Millions of yen)
Payment
for the six
Property nameLocation
PurposeSchedule term
Total ofmonths advanceTotal
ended payment
June 30,
2016
NissekiYokohama-shi,
From April 2015
Renewal of air－Yokohama
480
150
To October 2016
Kanagawa
conditioning systems
Building
Renewal of wallMusashikosugi
Kawasaki-shi,
From July 2016
through type air－－
117
Tower PlaceTo December 2016
Kanagawa
conditioner (4/5th
term)
Renewal of central
Ebina Prime
From March 2016－－
Ebina-shi, Kanagawa monitoring98
Tower
To December 2016
equipment
Kowa Kawasaki
Kawasaki-shi,
Renewal of common From September 2016－－
Nishiguchi
86
To December 2016
Kanagawa
space (1/3th term)
Building
JEI Naha
Building

Naha-shi, Okinawa

Renewal of common
space

From July 2016
To December 2016

48

－

－

(2) Capital Expenditures for the Six months Ended June 30, 2016
The following table shows constructions conducted by JEI during the period ended June 2016 and expensed ascapital expenditures. Capital expenditures for the period ended June 2016 were 729 million yen and, whencombined with repairs and maintenance costs of 195 million yen classified as expenses, the amount ofconstructions completed totaled 925 million yen.

Property nameLocation

PurposeScheduled term

Amounts
Paid(Millions ofyen)Musashikosugi Tower
Place

Kawasaki-shi,
Kanagawa

Renewal of wall-throughtype air conditioner (3/5th
term)

From January 2016
To March 2016

117

JEI Hongo Building

Bunkyo-ku, Tokyo

Renovation of exterior
walls

From June 2015
To June 201687

Kowa Kawasaki
Nishiguchi Building

Kawasaki-shi,
Kanagawa

Renewal of central
monitoring equipment

From September 2015
To February 201670

Kawasaki Nisshincho
Building

Kawasaki-shi,
Kanagawa

Renovation of exterior wallsealing

From January 2016
To June 2016

39

Osaka-shi, Osaka

Renewal of air conditioning
systems on standard floor(9/10th term)

From April 2016
To June 2016

32

–

382

JEI Nishi-Honmachi
Building

Other constructions
Total
th

729
th

Asset Management Report for 20 period (Semi-Annual Report for 20 Period)

19

(3) Reserved Funds for Long-term Repairs and Maintenance Plans
Based on our long-term repairs and maintenance plans developed for each property, JEI has set aside thefollowing cash reserves, derived from depreciation and other excess cash flows, in order to fund large-scale
repairs and maintenance and other construction.
(Unit: Millions of yen)Item

17th Period
19th Period
16th Period
18th Period
20th Period
July 1, 2014 to
July 1, 2015 toJanuary 1, 2014
January 1, 2015
January 1, 2016
December 31,
December 31,
to June 30, 2014
to June 30, 2015
to June 30, 2016
2014
2015

Reserved funds at beginning of
period

309

368

316

317

310

Increase

143

80

119

65

619

Decrease

83

132

118

72

492

Reserved funds at the end of
period

368

316

317

310

436

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)20

5. Expenses and Liabilities(1) Expenses Associated with Asset Management(Unit: Thousands of yen)Account

19th Period
July 1, 2015
to December 31, 2015

20th Period
January 1, 2016
to June 30, 2016(a) Asset management fees

442,299424,387(b) Custodian fees

22,36821,211(c) Administrative service fees

41,825

41,178(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other

97,565

81,125621,598

585,442

Total

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

21

(2) Borrowings
Borrowings by each financing source as of the end of the 20th period (ended June 30, 2016) are as follows:
Classification
Drawdown
LenderShort-term
loans

date

Balance at
beginning of
period(Thousands ofyen)

Balance at end of
Averageperiodinterest rate
(Thousands of(%) (Note 1)
yen)

December
Nippon Life Insurance Company

1,000,000

1,000,000

Mitsubishi UFJ Trust and Banking

1,000,000

1,000,000

4,600,000－

4,400,000－

June 29,
Mizuho Bank, Ltd.
2011
4,000,000－

1,620,000

1,620,000

1,080,000

1,080,000

Mitsubishi UFJ Trust and Banking

540,000

540,000

Long-term Mizuho Bank, Ltd.
Loans due
within one Mizuho Bank, Ltd.
year
Mitsubishi UFJ Trust and Banking

520,000

520,000－

2,000,000－

1,500,000

Sumitomo Mitsui Banking Corporation

Repayment
methodDecemberLump- Acquisition

10, 2016

sum

0.26455

10, 2015
Sub Total

Maturitydate

1.36375

June 29,(Note2)

2016

Use

Remarks

Unsecuredandof real estate unguaranteed

Mitsui Sumitomo Trust & Banking Co.,
Ltd.
Sumitomo Mitsui Banking Corporation

NovemberJanuary 31,
2012

1.24375 November(Note2)29, 2011

29, 2016

Lumpsum

1.24750

Repayment Unsecured
andof existing
borrowing unguaranteed(Note2)

Sumitomo Mitsui Banking Corporation－

1,500,000

Mizuho Bank, Ltd.

－1,500,000

Mitsubishi UFJ Trust and Banking－

1,300,000

1.03000 January 31,(Note2)

Sumitomo Mitsui Banking Corporation

July 31,－1,200,000

Sompo Japan Nipponkoa Insurance Inc.

2012

－

2,000,000

2017

1.09734
Tokio Marine & Nichido Fire Insurance－

1,000,000

16,760,000

15,760,000(Note2)

Co., Ltd.
Sub Total

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

22Classification
Drawdown
Lenderdate

Balance at
beginning of
period(Thousands ofyen)

Balance at end of
Averageperiodinterest rate
(Thousands of(%) (Note 1)
yen)

2,000,000－

1,500,000－

Sumitomo Mitsui Banking Corporation

1,500,000－

Mizuho Bank, Ltd.

1,500,000－

Mitsubishi UFJ Trust and Banking

1,300,000－

Mizuho Bank, Ltd.
January 31,
Mitsubishi UFJ Trust and Banking
2012

Sumitomo Mitsui Banking Corporation

July 31,1,200,000－

Sompo Japan Nipponkoa Insurance Inc.

2012

2,000,000－

1,000,000－

6,000,000

6,000,000

1,000,000

1,000,000

1,000,000

1,000,000

Sumitomo Mitsui Banking Corporation

1,000,000

1,000,000

Mizuho Bank, Ltd.

1,000,000

1,000,000

Maturity
date

Repayment
methodUse

Remarks

1.24750(Note2)1.03000 January 31,(Note2)2017

1.09734
Tokio Marine & Nichido Fire Insurance(Note2)

Co., Ltd.
NovemberDevelopment Bank of Japan Inc.

1.73875

30, 2010
Mizuho Bank, Ltd.

(Note2)

July 31,
Mitsubishi UFJ Trust and Banking

1.08375

2012(Note2)
November
1.04550

Aozora Bank, Ltd.

500,000

500,000

30, 2017(Note2)
Resona Bank, Ltd.

June 28,500,000

500,000

Sompo Japan Nipponkoa Insurance Inc.

2013

500,000

500,000
1.19212Tokio Marine & Nichido Fire InsuranceLong-term Co., Ltd.
loans
The Dai-ichi Life Insurance Company
Limited

500,000

500,000

3,000,000

3,000,000

June 29,2011

Mizuho Bank, Ltd.

5,000,000

5,000,000

Mitsubishi UFJ Trust and Banking

2,000,000

2,000,000

1,100,000

1,100,000

1,000,000

1,000,000

Sumitomo Mitsui Banking Corporation
June 28,
The Norinchukin Bank
2013
Resona Bank, Ltd.

200,000(Note2)1.65125

June 29,(Note2)

2018

0.81225

June 30,(Note2)

2018

700,000

700,000

Shinkin Central Bank

1,000,000

1,000,000

The Norinchukin Bank

1,450,000

1,450,000

850,000

850,000

0.74500 November 1,(Note2)

2018

Mitsubishi UFJ Trust and Banking

850,000

850,000

March 11,600,000

600,0002014

1,450,000

1,450,000

Mizuho Bank, Ltd.

850,000

850,000

0.77500

March 8,Mitsubishi UFJ Trust and Banking

850,000

850,000(Note2)2019

Mizuho Trust & Banking Co., Ltd.

600,000

600,000

Mitsubishi UFJ Trust and Banking－

4,600,000－

4,400,000－

4,000,000

Mizuho Trust & Banking Co., Ltd.
The Norinchukin Bank

June 29,
Mizuho Trust & Banking Co., Ltd.
2016
Sumitomo Mitsui Banking Corporation

Repayment Unsecured
andof existing
borrowing unguaranteed

200,000

The Bank of Fukuoka

Mizuho Bank, Ltd.

Lumpsum

December
0.2836430, 2019

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

23

Classification
Drawdown
LenderDevelopment Bank of Japan Inc.

date
January 31,
2012

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking

Balance at
beginning of
period(Thousands ofyen)

Balance at end of
Averageperiodinterest rate
(Thousands of(%) (Note 1)
yen)

2,000,000

2,000,000

500,000

500,000

500,000

500,000

1.36400

June 28,

1,000,000

1,000,000(Note2)

Mizuho Trust & Banking Co., Ltd.

2013

600,000

600,000

1,000,000

Use

Remarks

January 31,
1.31261

1,000,000

LimitedRepayment
method1.60000(Note2)

Sumitomo Mitsui Banking Corporation

The Dai-ichi Life Insurance Company

Maturity
date

2020

(Note2)The Norinchukin Bank

1,162,500

1,162,500

Mizuho Bank, Ltd.

December

675,000

675,000

1.00000

Mitsubishi UFJ Trust and Banking

27, 2013

675,000

675,000(Note2)

Mizuho Trust & Banking Co., Ltd.

487,500

487,500

June 28,2013

2,000,000

2,000,000

1.60750(Note2)

July 31,2014

2,000,000

2,000,000

0.98834(Note2)

Mitsubishi UFJ Trust and Banking

2,000,000

2,000,000

Mizuho Bank, Ltd.

December

1,950,000

1,950,000

0.81875 December

Mizuho Trust & Banking Co., Ltd.

29, 2014

1,200,000

1,200,000(Note2)30, 2021

600,000

600,000

2,000,000

2,000,000

1.15417(Note2)June 30,2022

Development Bank of Japan Inc.
The Dai-ichi Life Insurance Company
LimitedResona Bank, Ltd.
Development Bank of Japan Inc.
Long-termloans
Mitsubishi UFJ Trust and Banking

July 31,2014

June 30,2021

2,000,000

2,000,000

Mizuho Bank, Ltd.

December

1,950,000

1,950,000

0.93625 December

Mizuho Trust & Banking Co., Ltd.

29, 2014

1,200,000

1,200,000(Note2)30, 2022

600,000

600,000

2,000,000

2,000,000

1.20250(Note2)June 30,
2023

Mizuho Trust & Banking Co., Ltd.

1,560,000

1,560,000

The Norinchukin Bank

1,500,000

1,500,000

750,000

750,000

Resona Bank, Ltd.
Development Bank of Japan Inc.

June 30,
2015

Aozora Bank, Ltd.
Resona Bank, Ltd.

November

500,000

500,000

0.84375 November

Mizuho Bank, Ltd.

30, 2015

420,000

420,000(Note2)

Mitsubishi UFJ Trust and Banking

250,000

250,000

The Bank of Fukuoka

150,000

150,000

Sumitomo Mitsui Banking Corporation

140,000

140,000

Mizuho Trust & Banking Co., Ltd.

1,560,000

1,560,000

Resona Bank, Ltd.

1,000,000

1,000,000

870,000

870,000

750,000

750,000

Mitsubishi UFJ Trust and Banking

590,000

590,000

Sumitomo Mitsui Banking Corporation

350,000

350,000

The Bank of Fukuoka

150,000

150,000

Mizuho Bank, Ltd.
NovemberAozora Bank, Ltd.

Lumpsum

Repayment Unsecuredof existingandborrowing unguaranteed

30, 2023

0.96275 November(Note2)30, 2015

Sub Total

84,140,000

85,140,000

Total

101,900,000

101,900,000

30, 2024(Note 1) The average interest rates are calculated using a weighted-average of the loan balance during the period. Borrowings
hedged by interest rate swaps to avoid interest rate fluctuation risk are calculated using a weighted average rate adjusting
the effect of the interest rate swaps.
(Note 2) Loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)

24

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of June 30, 2016 are as follows:
Issue

3rd series unsecured
investment corporationbonds
4th series unsecured
investment corporation
bonds
5th series unsecured
investment corporationbonds
6th series unsecured
investment corporation
bonds
7th series unsecured
investment corporation
bonds
8th series unsecured
investment corporation
bonds
Total

(Note 1)
(Note 2)
(Note 3)(Note 4)

Balance at
beginning ofIssuance dateperiod(Thousands ofyen)

Balance at endof period(Thousands ofyen)Interest rate(%)

Maturity date

5,000,000

5,000,000

1.01000

November 4,
2016

November 4,
2011

Repayment
methodUse

Remarks(Note 1)2,000,000

2,000,000

1.40000

November 2,
2018
November25, 2013

5,000,000

5,000,000(Note 2)0.46000
Lump-sum

5,000,000

5,000,000

0.46000

March 11,2019

March 10,2014

September 9,
2015(Note 4)(Note 3)8,000,000

8,000,000

1.13000

March 11,2024

5,000,000

5,000,000

1.03000

September 9,2025

30,000,000

30,000,000(Note 2)

The funds were used for acquiring new properties.
The funds were used for repaying existing borrowings.
The funds are used for redeeming existing investment corporation bonds and repaying existing borrowings.
The bonds are with special pari passu conditions among specified investment corporation bonds.

(4) Short-Term Investment Corporation Bonds
None(5) Subscription rights for New Investment Units
None

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)25

6. Condition of Investment Transactions(1) Transactions of Property, Asset-Backed Securities, Etc. and Infrastructure Assets, etc.
and Infrastructure Related Assets
None(2) Transactions of Other Assets
None(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
None2) OthersNone(4) Transactions with Interested Parties
1) Transactions
None2) Amounts of fees paid and other expenses(Unit: Thousands of yen)
Breakdown of transactions with interested parties
Classification

Total amount paid (A)B/APaid to

Property management
costs and fees
Total

NIPPON STEEL KOWA
REAL ESTATE CO., LTD.
1,423,291 Kowa Real Estate Facilities,
Co., Ltd.
1,423,291–

Amount paid (B)189,453

13.3%

256,557

18.0%

446,011

31.3%(Note 1) Figures indicate fees paid to interested parties of asset management companies with whom JEI had transactions during thesix months ended June 30, 2016.
(Note 2) Other than the Total amount paid indicated above, the following payments were made for maintenance and repair work, etc.
which were ordered to interested parties and major shareholders during the period.
NIPPON STEEL KOWA REAL ESTATE CO., LTD.
10,897 thousand yen
KOWA REAL ESTATE FACILITIES CO., LTD.
286,090 thousand yen(5)Transactions with Asset Management Company Concerning the Additional Businesses of
the Asset Management Company
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not conduct any
additional business falling under the categories of the type I financial instruments business, type II financial
instruments business, building lots and buildings transaction business, or real estate specified joint enterprise,and had no applicable transactions.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)26

7. Accounting(1) Assets, Liabilities, Principal, and Profit and Loss
For assets, liabilities, principal, and profit and loss, please refer to the attached Balance Sheets, Statements ofIncome and Retained Earnings, Statements of Changes in Net Assets, Notes to Financial Statements andDistribution Information.

(2) Change in Depreciation Calculation Method
No changes were made during the period.

(3) Change in Asset and Infrastructure Assets, etc. Valuation Method
No changes were made during the period

8. Others(1) Notice1) General unitholders’ meeting
There were no applicable items during the period.
2) Board of directors meeting
Major issues related to the execution and modification of major contracts approved by the board of directorsof JEI during the six months ended June 30, 2016 is summarized below.
Approval dateFebruary 18, 2016

Approved agenda

Description

Entrustment of generaladministrative duties
concerning investment
corporation bonds

The board of directors made acomprehensive resolution on investment
corporation bonds to be issued in the period
from February 19, 2016 to February 27,
2017. The board of directors approved therespective candidate general administrator
for “administrative duties concerning
offering of investment corporation bonds”
and “administrative duties concerning
acceptance of claims for exercise of rights
and other inquiries from creditors of theinvestment corporation, and otheradministrative duties concerning investment
corporation bonds during the period,” andassigned decisions on all other necessary
matters to the Executive Director.

(2) Investment Trust Beneficiary Certificates Incorporated by JEIThere were no applicable items during the period.

(3) Juridical Persons Owning Overseas Real Estate and Status of the Owned Real Estate
There were no applicable items during the period.

(4) Other
Unless otherwise stated, monetary amounts have been rounded down and percentage figures have beenrounded off to the nearest indicated unit in this Report.

Asset Management Report for 20th period (Semi-Annual Report for 20th Period)27

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
June 30, 2016 and December 31, 2015
with Independent Auditor’s ReportJapan Excellent, Inc.
Balance Sheets
As of June 30, 2016 and December 31, 2015

As of
As of
June 30,
December 31,
2016
2015
(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 5)
Rental receivables
Prepaid expenses and other current assets
Total current assets

18,373,960
653,046
149,155
19,176,162

17,970,143
795,482
164,01218,929,637

5,820,683
6,253
11,294
3,032,788

5,814,316
6,253
10,716
3,032,788

116,350,394
737,708
179,032
151,752,645
203,425(23,952,945)
254,141,281

115,641,899
730,465
172,325
151,752,645
37,375(22,053,080)
255,145,705

Intangible assets:
Leasehold rights
Brand and trademark
Leasehold rights for trust accounts
Other intangible assets for trust accounts
Total intangible assets

1,721,607
164
7,382,016
4,689
9,108,477

1,721,607
194
7,380,016
4,816
9,106,635

Investments and other assets:
Security deposits
Long-term prepaid expenses
Other assets
Total investments and other assets

15,181
739,930
367,226
1,122,338

15,181775,886
351,768
1,142,836

105,433
105,433
283,653,693

118,909
118,909284,443,725

Property and equipment (Note 7):
Buildings and building improvements
Machinery and equipment
Furniture and fixtures
Land
Buildings and building improvements for trust
accounts
Machinery and equipment for trust accounts
Furniture and fixtures for trust accounts
Land for trust accounts
Construction in progress for trust accounts
Less: accumulated depreciation
Net property and equipment

Deferred assets:
Investment corporation bond issuance costs
Total deferred assets
Total assets

The accompanying notes are an integral part of these financial statements.
30

As of
As ofJune 30,
December 31,
2016
2015
(Thousands of yen)
Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 5 and 8)
Investment corporation bonds due within one year
(Notes 5 and 9)
Long-term debt due within one year
(Notes 5 and 8)
Accounts payable – otherAccrued expenses
Accrued corporation taxes
Accrued consumption taxes
Advances received
Other current liabilities
Total current liabilities

Long-term liabilities:
Investment corporation bonds(Notes 5 and 9)
Long-term debt
(Notes 5 and 8)
Security deposits from tenants(Note 5)
Security deposits from tenants for trust accounts(Note 5)
Total long-term liabilities
Total liabilities

Net assets (Note 10)
Unitholders’ equity:
Unitholders’ capital
Surplus
Voluntary reserve
Reserve for advanced depreciation of
non-current assets
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

986,466
1,000,000

1,363,057
1,000,000

5,000,000

5,000,000

15,760,000
439,906
187,327522
98,31882,536490
23,555,567

16,760,000
435,955
190,650542
530,377
77,102
12,66925,370,355

25,000,000

25,000,000

85,140,000

84,140,000

740,329734,945

11,408,901
122,289,230
145,844,798

11,341,356
121,216,301
146,586,656

134,434,701

134,434,701

260,476
3,113,717
3,374,193
137,808,895
137,808,895
283,653,693

37,347
3,385,019
3,422,366
137,857,068
137,857,068
284,443,725

The accompanying notes are an integral part of these financial statements.
31

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from January 1, 2016 to June 30, 2016
and from July 1, 2015 to December 31, 2015

For the period
For the period
from January 1, from July 1, 20152016 to June 30, to December 31,
2016
2015
(Thousands of yen)
Revenues (Notes 13 and 14):
Rental revenues
Other
Gain on sales of real estate properties
Total revenues

10,223,234

9,697,871
971,892
170,002
10,839,766

Operating expenses (Note 13):
Property operating expenses
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income

5,655,480
424,387
21,211
41,1786,540
92,1256,240,922
3,982,311

5,916,331
442,299
22,36841,825
6,540
108,565
6,537,930
4,301,836

1,985
737

2,181
2,659

565,152
142,464
17,451
132,477

616,982
145,627
15,817
123,986

13,475225
3,113,786

12,8906,077
3,385,295

3,113,786

3,385,295

826
7
3,112,951
765
3,113,717

986
7
3,384,302
717
3,385,019

Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
New investment unit issuance costs
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Ordinary income
Income before income taxes
Income taxes (Note 12):Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

9,351,939
871,294–

The accompanying notes are an integral part of these financial statements.
32

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from January 1, 2016 to June 30, 2016
and from July 1, 2015 to December 31, 2015

For the period from July 1, 2015 to December 31, 2015
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserveforadvanceddepreciati
on of
Numberof units Unitholders’ non-curre
nt assetsin issuecapitalRetainedearnings

Total
surplusTotal
unitholders’equityTotal net
assets(Thousands of yen)
Balance as of June 30,
2015
Changes during the
fiscal period:
Issuance of new units
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as ofDecember 31, 2015

1,212,750

127,950,539

37,347

3,098,080

3,135,427

131,085,966

131,085,966

51,7006,484,162–––

6,484,162

6,484,162–––(3,097,363)(3,097,363)(3,097,363)(3,097,363)

–

–

–

3,384,302

3,384,302

3,384,302

3,384,302

51,7006,484,162–

286,939

286,939

6,771,101

6,771,101

1,264,450

134,434,701

37,347

3,385,019

3,422,366

137,857,068

137,857,068

For the period from January 1, 2016 to June 30, 2016
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserveforadvanceddepreciati
on of
Numberof units Unitholders’ non-curre
in issuecapitalnt assets

Balance as ofDecember 31, 2015
Reversal of reserve
for reduction entry
Provision of reserve
for reduction entry
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as of June 30,
2016

Retained
Total
earnings
surplus(Thousands of yen)Totalunitholders’equityTotal net
assets

1,264,450

134,434,701

37,347

3,385,019

3,422,366

137,857,068

137,857,068––(37,347)

37,347

–

–

–

–

–

260,476(260,476)

–

–

–

–

–

–

(3,161,125)(3,161,125)(3,161,125)(3,161,125)

–

–

–

3,112,951

3,112,951

3,112,951

3,112,951––

223,129(271,302)(48,173)(48,173)(48,173)

1,264,450

134,434,701

260,476

3,113,717

3,374,193

137,808,895

137,808,895

The accompanying notes are an integral part of these financial statements.
33

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from January 1, 2016 to June 30, 2016
and from July 1, 2015 to December 31, 2015
For the period
For the period
from
from
January 1,
July 1,2016 to2015 toJune 30,
December 31,
2016
2015
(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
New unit issuance costs
Interest income
Interest expense
Decrease (increase) in rental receivables
Decrease (increase) in consumption taxes refundable
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable – trade
Increase (decrease) in accounts payable – other
Increase (decrease) in unpaid consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Decrease in property and equipment for trust accounts due to sale
Decrease in intangible assets for trust accounts due to sale
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

3,113,786
1,900,022
13,475
17,451(1,985)
697,629
142,435–
31,235(122,061)(14,170)(432,059)
5,434
35,956––(39,142)
5,348,009
1,985(700,952)(846)
4,648,194

3,385,295
1,908,887
12,89015,817(2,181)
740,968
71,772
801,341
34,949208,798
20,510530,377(14,614)(163,461)
15,537,679
148(4,954)23,084,225
2,181(732,153)(1,209)22,353,044

Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets for trust accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits in trust accounts from tenants
Payments for security deposits in trust accounts to tenants
Net cash used in investing activities(10,356)(1,144,736)(2,150)6,133(749)
180,575(113,030)(1,084,314)(3,234)(2,150,745)–
21,980(10,500)
402,231(901,100)(2,641,368)

Cash flows from financing activities
Proceeds from short-term loans
Repayment for short-term loans
Proceeds from long-term debt
Repayment for long-term debt
Proceeds from issuance of investment corporation bonds
Proceeds from issuance of investment units
Payments for new unit issuance costs
Distributions to unitholders
Net cash used in financing activities––
13,000,000(13,000,000)–––(3,160,062)(3,160,062)

1,000,000(29,500,000)
10,540,000(10,540,000)
4,964,574
6,484,162(40,127)(3,097,281)(20,188,671)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

403,817
17,970,143
18,373,960(476,996)
18,447,139
17,970,143

The accompanying notes are an integral part of these financial statements.
34

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from January 1, 2016 to June 30, 2016
and from July 1, 2015 to December 31, 2015

1.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM was originally owned 45% by NIPPON STEEL KOWA
REAL ESTATE CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by
Sekisui House, Co., LTD., and 20% by other corporations. Due to the transfer of ownershipby Sekisui House, Co., LTD., on May 12, 2014, ownership interests of 9% and 6% were eachacquired by NIPPON STEEL KOWA REAL ESTATE CO., LTD., and The Dai-ichi Life
Insurance Company, Limited, respectively.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of June 30, 2016, JEI held
30 properties with 356,883.84 square meters of total leasable space and had leases with 228
tenants excluding residential tenants.

2.

Basis of Presentation

JEI maintains its accounting records and prepares its financial statements in accordance withaccounting principles generally accepted in Japan (“Japanese GAAP”), including provisions
set forth in the Investment Trust Law, the Corporation Law of Japan, the Financial
Instruments and Exchange Law of Japan and related regulations, which are different in certain
respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are a translation of the financial statements of JEI,
which were prepared in accordance with Japanese GAAP and presented in the securities
report of JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying
financial statements, certain reclassifications and modifications have been made for theconvenience of readers outside Japan. In addition, the notes to the financial statements include
information that might not be required under Japanese GAAP but is presented herein as
additional information.
The amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements in accordance with the financial statements originally prepared inJapanese and filed with the regulatory authorities in Japan.

35

3.

Summary of Significant Accounting Policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks and short-term
investments which are highly liquid, readily convertible into cash with an insignificant risk ofprice fluctuation and with an original maturity of three months or less.
Property and equipment including trust accounts and trademark rights
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Buildings
Building improvements
Machinery and equipment
Furniture and fixtures

2 – 60 years
2 – 59 years
6 – 16 years
3 – 15 years

Amortization of trademark rights is computed using the straight-line method over a period of
10 years.
Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
New investment unit issuance costs are charged to income as incurred.
Income taxes
Income taxes are accounted for on the basis of taxable income for financial statement
purposes. The asset and liability method is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
Consumption taxes
Consumption taxes received and paid are not included in the accompanying statements ofincome and retained earnings. Consumption tax related to properties, which has not been
deducted, is included in the cost of the properties.
Property-related taxes
Principally, property-related taxes including property taxes, urban planning taxes anddepreciable property taxes are imposed on a calendar-year basis and are expensed as property
and other taxes (refer to Note 13).

36

3.

Summary of Significant Accounting Policies (continued)

JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at thetime of acquisition of such properties including trust accounts. The capitalized amount for theperiod from July 1, 2015 to December 31, 2015 was ¥639 thousand. No property-related taxes
were capitalized for the period from January 1, 2016 to June 30, 2016.
Revenue recognition
Rental revenues are generally recognized on an accrual basis over the life of each lease.
Derivatives and hedge accounting
JEI utilizes interest-rate swap agreements as derivative financial instruments solely for the
purpose of hedging its exposure against fluctuation risk in interest rates. JEI has therefore
entered into certain interest-rate swap contracts in order to hedge the risk of variable rates for
its long-term debt obligations.
Each corresponding interest-rate swap is not required to be re-measured to fair value, because
it meets the criteria for the special hedge accounting treatment under Japanese GAAP, which
JEI applies to each interest-rate swap agreement.
Under this special hedge accounting treatment, the differentials paid or received under theswap agreements are recognized and included in interest expense of the hedged loans, and theinterest-rate swaps are not required to be measured at fair value separately. For interest-rate
swaps that meet the specific criteria for the special accounting treatment, assessments ofhedge effectiveness are not performed.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.

4.

Cash and Cash Equivalents

Cash and cash equivalents including trust accounts in the accompanying balance sheets andcash and cash equivalents in the accompanying statements of cash flows at June 30, 2016 andDecember 31, 2015 consisted of the following:
As of,
As ofJune 30,
December 31,
2016
2015
(Thousands of yen)
Cash and cash deposits
Cash and deposits in trust
Cash and cash equivalents including
trust accounts

2,962,118
15,411,841

2,207,430
15,762,712

18,373,960

17,970,143

37

5.

Financial Instruments

For the periods from January 1, 2016 to June 30, 2016 and from July 1, 2015 to
December 31, 2015
Overview(1) Policy for Financial Instruments
JEI borrows from banks, issues investment corporation bonds and issues investment units
to procure funds required to grow its assets under management and to repay liabilities,
based on the financial policy set forth by JEAM and the Company’s Annual Funds
Procurement Plan. When procuring funds by means of interest-bearing debt, matters suchas seeking longer durations and maturities, securing fixed interest rates over the entire
term of the instrument in order to benefit from the recent favorable financial environment
with low interest rates, and diversifying maturity dates are taken into consideration toachieve a more stable financial situation and avoid the risk of future interest rate hikes.
Surplus funds may be invested in deposits and safe, liquid financial assets and investment
securities, but are, in principle, placed in fixed-rate term deposits. Derivative transactions
are used solely for the purpose of hedging against the risk of fluctuations in interest rates
of borrowings and investment corporation bonds.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest rate fluctuation risk)
Borrowings and investment corporation bonds are primarily used to acquire
properties or to refinance existing borrowings or bonds. Some of such debt were
floating rate instruments and thus were exposed to the risk of interest rate
fluctuations. Based on interest rate forecasts developed through constant financial
market monitoring activities, JEI has concentrated on hedging against the risk ofinterest rate fluctuations using interest-rate swaps, through which a floating interest
rate is swapped for a fixed interest rate, which finally led to 89.4% of existing
borrowings being covered by a fixed interest rate swap for the entire maturity as ofJune 30, 2016. To reduce credit risk, derivative transactions (interest-rate swaps) areentered into exclusively with counterparties that are financial institutions with highcredit ratings. For hedging accounting methods, hedging instruments, hedged items,
hedging policies and methods for evaluation of the effectiveness of hedging
activities, see “Derivatives and hedge accounting” under Summary of Significant
Accounting Policies.
(b) Liquidity Risk (Risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced through diversification of maturity dates and funding sources, andarrangement of commitment line agreements (as described in Note 8, “Short-Term
Loans and Long-Term Debt,” there is no balance outstanding under the facility
agreements as of June 30, 2016). Liquidity risk is also mitigated through theconstant management of liquidity on hand.

38

5.

Financial Instruments (continued)(3) Supplementary Explanation of the Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.
Fair value of financial instruments
The following are carrying values and fair values as of June 30, 2016 and December 31, 2015
of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note B).
Carryingvalue

As of June 30, 2016
As of December 31, 2015
Fair value
Carrying
Fair value(Note A)
Difference
value(Note A)
Difference(Thousands of yen)

(1) Cash and cash
deposits(2) Cash in trust anddeposits in trust

2,962,118

2,962,118–

2,207,430

2,207,430–

15,411,841

15,411,841–

15,762,712

15,762,712–

Total assets

18,373,960

18,373,960–

17,970,143

17,970,143–

1,000,000

1,000,000–

1,000,000

1,000,000–

5,000,000

5,015,900

15,9005,000,000

5,033,200

33,200(3) Short-term loans(Note C)(4) Investment
corporation bonds
due within one year
(Note C)
(5) Long-term debt
due within one
year (Note C)

15,760,000

15,904,700

144,700

16,760,000

16,861,324

101,324(6) Investment
corporation bonds(Note C)

25,000,000

25,962,830

962,830

25,000,000

25,427,600

427,600(7) Long-term debt
(Note C)85,140,000

87,359,510

2,219,510

84,140,000

85,557,635

1,417,635

Total liabilities

131,900,000

135,242,941

3,342,941

131,900,000

133,879,759

1,979,759(8) Derivativetransactions *

–

–

–

–

–

–

* The value of assets and liabilities arising from derivative transactions is shown at net value.

(Note A)
Methods for calculating the fair value of financial instruments and matters related toderivatives transactions
Assets(1) Cash and cash deposits and(2) Cash in trust and deposits in trust
Carrying value approximates fair value because of the short maturities of these
instruments.
Liabilities(3) Short-term loans,(5) Long-term debt due within one year and39

5.

Financial Instruments (continued)(7) Long-term debt
Where floating rates apply, book value is generally considered appropriate as fair value.
The fair value of such liabilities is considered to approximate book value, since floating
rates reflect market interest rates within a short period of time.
If the loan is part of long-term debt, in the case of floating-rate debt hedged by aninterest-rate swap, the fair value is calculated in a similar manner using the total principal
and interest amount, treated in combination with the interest-rate swap, given that theinterest-rate swap is subject to the special treatment of interest-rate swaps under Japanese
GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by applying a reasonably assumed interest rate as a discount rate,
which was determined to be applicable for the borrowings under similar conditions.
(4) Investment corporation bonds due within one year and(6) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(8) Derivative transactions
Please refer to Note 16, “Derivative Transactions.”(Note B)・Financial instruments for which fair value is deemed extremely difficult to determine
The fair values of security deposits from tenants and security deposits from tenants for trust
accounts are as follows:
As of
As of
June 30,
December 31,
2016
2015
(Thousands of yen)
① Security deposits from tenants*

740,329734,945② Security deposits from tenants fortrust accounts*

11,408,901

11,341,356* Security deposits from tenants and security deposits in trust accounts from tenants in leased properties are
not subject to fair value disclosure, since such deposits have no market price. Furthermore, due to theircharacteristics, it is extremely difficult to estimate the fair value of security deposits in advance because of
the uncertainty of the timing when the tenant vacates. As a result, it is therefore impossible to rationallyestimate the exact cash flow from such security deposits.

40

5.

Financial Instruments (continued)

・The scheduled redemption amounts of financial assets after the balance sheet date
1 year or less
Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of June 30, 2016
2 to 3 years 3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

2,962,118

–

–

–

–

–

15,411,841
18,373,960

–
–

–
–

–
–

–
–

–
–

1 year or less
Cash and cash deposits
Cash in trust anddeposits in trust
Total

1 to 2 years

1 to 2 years

As of December 31, 2015
2 to 3 years 3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

2,207,430

–

–

–

–

–

15,762,712
17,970,143

–

–

–

–

–

–

–

–

–

–

(Note C)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date

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

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

As of June 30, 2016
2 to 3 years
3 to 4 years(Thousands of yen)

1 year or less

1 to 2 years

4 to 5 years

Over 5 years

1,000,000

–

–

–

–

–

5,000,000

–

–

–

–

–

15,760,000

–

–

–

–

–

–
–
21,760,000–
26,000,000
26,000,000

12,000,000
7,500,000
19,500,000–
21,600,000
21,600,000–
4,000,000
4,000,000

13,000,000
26,040,000
39,040,000

1 year or less

1 to 2 years

As of December 31, 2015
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

1,000,000

–

–

–

–

–

5,000,000

–

–

–

–

–

16,760,000

–

–

–

–

–

–
–
22,760,000–
24,000,000
24,000,000

7,000,000
17,750,000
24,750,000

5,000,000
3,750,000
8,750,000–
8,600,000
8,600,000

13,000,000
30,040,000
43,040,000

41

6.

Investment and Rental Property

For the periods from January 1, 2016 to June 30, 2016 and from July 1, 2015 to
December 31, 2015
JEI owns rental office buildings and other properties in Tokyo and other regions for the
purpose of generating rental income. The following is the carrying value and fair value as ofJune 30, 2016 and December 31, 2015 for such real estate for lease.
Carrying value
ChangeAs ofduring period(*1)
June 30, 2016
(Thousands of yen)

Fair value
As ofJune 30, 2016

264,252,146（1,002,551）

272,170,000

As ofJuly 1, 2015

Carrying value
ChangeAs of(*2)
during period
December 31, 2015
(Thousands of yen)

As ofJanuary 1, 2016

279,602,013(15,349,866)

263,249,595

264,252,146

Fair value
As ofDecember 31, 2015
268,610,000

A) Carrying value represents the acquisition cost less accumulated depreciation.
B) Details of change during period(*1) The decrease of ¥1,002,551 thousand during the period is mainly due to a decrease of¥1,899,992 thousand for depreciation costs.
(*2) The decrease of ¥15,349,866 thousand during the period is mainly due to an increase of¥1,432,381 thousand related to the acquisition of Okinawa No.27 Daikyo Building on
one hand, and a decreases of ¥15,537,828 thousand on account of the transfer of No.32
Kowa Building and No.35 Kowa Building on the other hand, and ¥1,908,830 thousandfor depreciation costs as well.
C) Fair value
Fair value as of June 30, 2016 and December 31, 2015 is appraisal value provided bythird-party real estate appraisers.

42

7.

Property and Equipment

Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following:
As of June 30, 2016
Acquisition
cost

Accumulated
depreciation

As of December 31, 2015
Netbook value

Acquisition
cost

Accumulated
depreciation

Netbook value(Thousands of yen)
Buildings and building
improvements
Machinery andequipment
Furniture and fixtures
Land
Buildings and building
improvements for trust
accounts

5,820,683（1,078,656）

4,742,027

6,253（1,692）

11,294（3,761）

3,032,788–

5,814,316(992,003)

4,822,312

4,561

6,253

(1,410)

4,842

7,533

10,716(3,170)7,546

3,032,788

3,032,788–

3,032,788

116,350,394（22,451,366）

93,899,028

115,641,899(20,673,882)

94,968,017

Machinery andequipment for trust
accounts

737,708（319,724）

417,983

730,465(293,250)

437,214

Furniture and fixtures
for trust accounts

179,032（97,744）

81,288172,325(89,363)

82,962Land for trust accounts

151,752,645

151,752,645

151,752,645–

151,752,645

Construction in progress
for trust accounts
Total

203,425
278,094,226––（23,952,945）

203,425

37,375–37,375

254,141,281

277,198,786(22,053,080)

255,145,705

43

8.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of June 30, 2016 and December 31, 2015 consisted of
the following:

Short-term loans:
Unsecured loans from an insurancecompany due on December 10, 2016
SubtotalLong-term debt due within one year:
Unsecured loans from banks due on
June 29, 2016
Unsecured loans from banks due on
November 29, 2016
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from insurancecompanies due on January 31, 2017
SubtotalLong-term debt:
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from insurancecompanies due on January 31, 2017
Unsecured loans from a bank due on
November 30, 2017
Unsecured loans from banks due on
November 30, 2017
Unsecured loans from banks due on
November 30, 2017
Unsecured loans from insurancecompanies due on November 30, 2017
Unsecured loans from an insurancecompany due on June 29, 2018
Unsecured loans from banks due on
June 30, 2018
Unsecured loans from banks due on
November 1, 2018
Unsecured loans from banks due on
March 8, 2019
Unsecured loans from banks due on
December 30, 2019
Unsecured loans from a bank due on
January 31, 2020
Unsecured loans from banks due on
January 31, 2020
Unsecured loans from an insurancecompany due on January 31, 2020
Unsecured loans from banks due on
January 31, 2020
Unsecured loans from a bank due on
June 30, 2021
Unsecured loans from an insurancecompany due on June 30, 2021
Unsecured loans from banks due on
December 30, 2021
Unsecured loans from a bank due on
June 30, 2022
Unsecured loans from banks due on
December 30, 2022
Unsecured loans from a bank due on
June 30, 2023
Unsecured loans from banks due on
November 30, 2023
Unsecured loans from banks due on
November 30, 2024
Subtotal
Total

As of June 30, 2016
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)

As of December 31, 2015
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)

1,000,000
1,000,000

0.26455%

1,000,000
1,000,000

0.36000%――

13,000,000

1.36375% (*2)
1.24375% (*2)

3,760,000

1.24375% (*2)

3,760,000

5,000,000

1.24750% (*2)――

4,000,000

1.03000% (*2)――

3,000,000
15,760,000

1.09734% (*2)―
16,760,000

―

―

―

5,000,000

1.24750% (*2)――

4,000,000

1.03000% (*2)――

3,000,000

1.09734% (*2)

6,000,000

1.73875% (*2)

6,000,000

1.73875% (*2)

3,000,000

1.08375% (*2)

3,000,000

1.08375% (*2)

2,000,000

1.04550% (*2)

2,000,000

1.04550% (*2)

1,000,000

1.19212% (*2)

1,000,000

1.19212% (*2)

3,000,000

1.65125% (*2)

3,000,000

1.65125% (*2)

11,000,000

0.81225% (*2)

11,000,000

0.81225% (*2)

3,750,000

0.74500% (*2)

3,750,000

0.74500% (*2)

3,750,000

0.77500% (*2)

3,750,000

0.77500% (*2)

13,000,000

0.28364%2,000,000

1.60000% (*2)

2,000,000

1.60000% (*2)

2,600,000

1.36400% (*2)

2,600,000

1.36400% (*2)

1,000,000

1.31261% (*2)

1,000,000

1.31261% (*2)

3,000,000

1.00000% (*2)

3,000,000

1.00000% (*2)

2,000,000

1.60750% (*2)

2,000,000

1.60750% (*2)

2,000,000

0.98834% (*2)

2,000,000

0.98834% (*2)

5,750,000

0.81875% (*2)

5,750,000

0.81875% (*2)

2,000,000

1.15417% (*2)

2,000,000

1.15417% (*2)

5,750,000

0.93625% (*2)

5,750,000

0.93625% (*2)

2,000,000

1.20250% (*2)

2,000,000

1.20250% (*2)

5,270,000

0.84375% (*2)

5,270,000

0.84375% (*2)

5,270,000
85,140,000
101,900,000

0.96275% (*2)

5,270,000
84,140,000
101,900,000

0.96275% (*2)――(*1) The weighted-average interest rate is weighted-average figures during the period. As for the borrowings hedged byinterest-rate swaps for the purpose of mitigating interest rate fluctuation risk, the fixed interest rates after entering into
the interest rate swap transactions are used to calculate the weighted-average interest rate.
(*2) These are fixed-rate debt (incl. Fixed-rate debt through each interest-rate swap agreement).

44

8.

Short-Term Loans and Long-Term Debt (continued)

The scheduled repayment amounts of long-term debt as of June 30, 2016 are as follows:

Long-term debt

1 year or less

1 to 2 years

15,760,000

26,000,000

2 to 3 years
3 to 4 years(Thousands of yen)
7,500,000
21,600,000

4 to 5 years

Over 5 years

4,000,000

26,040,000

JEI has commitment lines of ¥14,000 million with three financial institutions to mitigate
refinancing risk and enhance financial stability. As of June 30, 2016, these commitment lines
have never been utilized.

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of June 30, 2016 and December
31, 2015 are summarized as follows:
As of June 30, 2016
As of December 31, 2015

Amount(Thousands ofyen)
Unsecured bond #3 dueon November 4, 2016
Unsecured bond #4 dueon November 2, 2018
Unsecured bond #5 dueon November 2, 2018
Unsecured bond #6 dueon March 11, 2019
Unsecured bond #7 dueon March 11, 2024
Unsecured bond #8 dueon September 9, 2025
Total

Weightedaverage interest
rate

Weightedaverage interest
rate

Amount(Thousands ofyen)

5,000,000

1.01000%

5,000,000

1.01000%

2,000,000

1.40000%

2,000,000

1.40000%

5,000,000

0.46000%

5,000,000

0.46000%

5,000,000

0.46000%

5,000,000

0.46000%

8,000,000

1.13000%

8,000,000

1.13000%

5,000,000
30,000,000

1.03000%

5,000,000
30,000,000

1.03000%

The scheduled redemption amounts of investment corporation bonds as of June 30, 2016 are
as follows:

Investment
corporation bonds

1 year or less

1 to 2 years

5,000,000－

2 to 3 years
3 to 4 years(Thousands of yen)
12,000,000－

4 to 5 years

Over 5 years－

13,000,000

10. Net Assets
In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50 million.

45

11. Per Unit Information
Net assets per unit as of June 30, 2016 and December 31, 2015 were calculated based on thenumber of units outstanding as of each date (1,264,450 units).
Net income per unit for the periods from January 1, 2016 to June 30, 2016 and July 1, 2015 to
December 31, 2015 was calculated based on the weighted-average number of units
outstanding during the corresponding periods, that is, 1,264,450 units and 1,260,312 units,
respectively.
Accordingly, net assets per unit were ¥108,987 as of June 30, 2016 and ¥109,025 as ofDecember 31, 2015. Net income per unit was ¥2,461 for the period from January 1, 2016 toJune 30, 2016, and ¥2,685 for the period from July 1, 2015 to December 31, 2015.

12. Income Taxes
JEI is subject to income taxes in Japan.
JEI’s policy is to make dividend distributions in excess of 90% of distributable income foreach fiscal period in order to meet the condition set forth in the Special Taxation Measures
Law of Japan concerning the deductibility of cash dividends paid for income tax purposes.
Details of significant components of deferred tax assets and liabilities as of June 30, 2016 andDecember 31, 2015 are summarized as follows:
As of
As of
June 30,
December 31,
2016
2015
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

10
10
10

18
18
18

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from January 1, 2016 to June 30, 2016 and from July 1, 2015 to December 31,
2015 is as follows:
For the period from For the period fromJanuary 1, 2016 toJuly 1, 2015 toJune 30, 2016
December 31, 2015
Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

32.31%

32.31%(32.30)0.02
0.03%（30.17）（2.11）
0.03%

46

13.

Breakdown of Property Rental Business Revenues and Expenses
For the period from
For the period fromJanuary 1, 2016 toJuly 1, 2015 toJune 30, 2016
December 31, 2015
(Thousands of yen)

Rental business revenues:
Rental revenues
Other
Total rental businessrevenues
Property operating expenses:
Property management costs
and fees
Utilities
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating
expensesProfit

9,351,939
871,294

9,697,871
971,892

10,223,234

10,669,763

1,423,291
1,044,708
835,657
24,644
195,748
1,899,992
231,438

1,440,425
1,192,804
838,200
27,515
269,088
1,908,830
239,466

5,655,480
4,567,754

5,916,331
4,753,431

14. Breakdown of Gain on Sales of Real Estate Properties
Gain on sales of real estate properties for the periods from January 1, 2016 to June 30, 2016
and from July 1, 2015 to December 31, 2015 is as follows:
For the period from
For the period fromJanuary 1, 2016 toJuly 1, 2015 toJune 30, 2016
December 31, 2015
(Thousands of yen)
No. 32 Kowa Building
Proceeds from sale of realestateCost of sales of real estate
Other related sale expenses
Loss on sale of real estate

－
－
－
－

6,390,000
7,359,878
1,032
970,910For the period from
For the period fromJanuary 1, 2016 toJuly 1, 2015 toJune 30, 2016
December 31, 2015
(Thousands of yen)
No. 35 Kowa Building
Proceeds from sale of realestateCost of sales of real estate
Other related sale expenses
Gain on sale of real estate

－
－
－
－

9,320,000
8,177,950
1,136
1,140,913
47

15．Leases
JEI leases properties on which rental revenues are earned. At June 30, 2016 and December 31,
2015, future lease revenues under non-cancelable operating leases are summarized as follows:
As of
As of
June 30,
December 31,
2016
2015
(Thousands of yen)
Due within one year
Due after one year
Total

150,182
628,373778,555

150,967
663,468
814,435

16. Derivative Transactions
Derivative Transactions as of June 30, 2016
(1) Transactions to which hedge accounting is not applied:
Not applicable.
(2) Transactions to which hedge accounting is applied:
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of June 30, 2016 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Hedged item

Interest-rate swap
Long-term
Receive floating, pay
debt
fixed

Contract amount
Fair
More thanvalue
one year(Thousands of yen)

63,900,000

51,140,000

Method ofcalculating
the fair value** Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 5, “Financial Instruments.”

Derivative Transactions as of December 31, 2015
(1) Transactions to which hedge accounting is not applied
Not applicable.
(2) Transactions to which hedge accounting is applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of December 31, 2015 for each hedge accounting method
applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Hedged item

Interest-rate swap
Long-term
Receive floating, pay
debt
fixed

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
76,900,000

60,140,000

Method ofcalculating
the fair value*

48

16. Derivative Transactions (continued)* Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 5, “Financial Instruments.”

17. Related Party Transactions
For the period from January 1, 2016 to June 30, 2016
(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders
Name
HidehikoOgawa

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)
424,387

Account
Accounts
payableBalance at the end of period(Thousands of yen)341,988

For the period from July 1, 2015 to December 31, 2015
(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders
Name
HidehikoOgawa

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)442,299

Account
Accounts
payableBalance at the end of period(Thousands of yen)
357,96149

18. Segment Information
For the periods from January 1, 2016 to June 30, 2016 and from July 1, 2015 to
December 31, 2015
Since JEI has been engaged in the real-estate leasing business as a single segment, segment
information has been omitted.
Information about products and services
Since revenues from external customers for a single segment of similar products and services
accounted for more than 90% of total operating revenues, information about products andservices has been omitted.
Information about geographic area
(1) Revenues
Since 100% of the total operating revenues were generated from external customers
within Japan, geographical breakdown of revenues has been omitted.
(2) Property and equipment
Since 100% of total property and equipment on the balance sheet are located within
Japan, geographical breakdown of such property and equipment has been omitted.

Information about major clients
Since no single external client represents 10% or more of JEI’s total operating revenues,
information about major clients has been omitted.

19. Distribution Information
In accordance with Section 33.1.2 of the bylaws set forth by JEI for distributions of cash
dividends, the amount of dividends payable, which is limited by the amount of retained
earnings at end of period, shall be in excess of 90% of its distributable income for the fiscal
period as set forth in Section 67.15 of the Special Taxation Measures Law. Consequently, JEI
set income available for distributions of dividends at ¥3,113,075,900, which is the maximum
integral multiple of the 1,264,450 units issued, but not exceeding ¥3,113,717,142 which is theamount of retained earnings at June 30, 2016. No cash distribution exceeding the income
amount set forth in Section 33.1.4 of the bylaws of JEI shall be made.
On August 18, 2016, the Board of Directors approved a resolution to make a cash distributionof ¥2,462 per unit aggregating to ¥3,113,075,900 to unitholders of record as of June 30, 2016.

50

20. Significant Subsequent Event
Issuance of new units
On June 22, 2016 and July 4, 2016, the Board of Directors approved resolutions tocomplete a public offering and third-party allocation, respectively, of new units asoutlined below. JEI received payments on July 11, 2016 and August 10, 2016 for thesaid units, which were issued in accordance with the conditions outlined below. As aresult of the issuance of new units, JEI had unitholders’ capital of ¥139,972 million with
1,305,700 units in issue at August 10, 2016.
A. Issuance of new units through a public offering(i) Method of issuance(ii) Number of units issued(iii) Issue price (offer price)(iv) Total offer price(v) Proceeds per unit(vi) Aggregate proceeds(vii) Payment datePublic offering
37,500 units¥138,742 per unit
¥5,202 million¥134,259 per unit
¥5,034 million
July 11, 2016

B. Issuance of new units through allocation to a third party(i) Method of issuance(ii) Number of units issued(iii) Proceeds per unit(iv) Aggregate proceeds(v) Payment date(vi) Allottee

Allocation to a third party
3,750 units¥134,259 per unit
¥503 million
August 10, 2016
Mizuho Securities Co., Ltd.

51