Asset Management Report for 17th Period(Semi-Annual Report for 17th Period)
From July 1, 2014 to December 31, 2014

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 17th period (from July 1, 2014 to December 31,2014).
JEI recorded total revenues of 9,695 million yen, net income of 3,040 million yen and the
distribution per unit for the period was 2,507 yen. JEI realized increase in revenue, income anddistribution following the previous period.
As a result of focusing on leasing activities in close collaboration with the respective property
management companies, JEI achieved a further increase in the occupancy rate of its portfolio of
99.1% at the end of the period under review from 98.3% at the end of the previous period. The
occupancy rate steadily remains at a high level far exceeding the market level.
In terms of finance, JEI continuously conducts stable financial operations by achieving 100% fixedinterest rates as a measure against the risk of interest rate rises in the future.
About Future Asset Management
The Japanese economy continues to be on a mild recovery trend due to additional monetary easing
by the Bank of Japan, improvement in the corporate performance and employment income
environment and other factors.
In the office building leasing market, rising rents are observed centering on excellent buildings incentral Tokyo, and such movements are expected to gradually spread into other areas.
In the real estate investment market, real estate transaction prices are in a state where they may riseas the supply of excellent properties is limited, especially in central Tokyo and metropolitan areas,
while favorable fund procurement environment and expansion in market players are expected.
With this perspective, in addition to maintaining a high occupancy rate, JEI will endeavor to improve
profitability of the entire portfolio by keeping and raising the rent level based on market trends.
Furthermore, JEI will pursue opportunities to invest in excellent real estate properties, including
asset replacements, for increasing asset size over the medium- to long-term. Concurrently, JEI will
strictly adhere to appropriate portfolio management while cautiously assessing the sense ofoverheating in the real estate investment market.
In terms of financing, we will continue our efforts in conducting stable financial operations by
striving to diversify maturity dates and minimize financing costs.
In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange
Act and other laws and regulations to promote compliance, as well as to accurate and easy-tounderstand disclosure of the status of 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 17th period (Semi-Annual Report for 17th Period)

2II. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
13th Period
14th Period 15th Period 16th Period 17th Period
July 1, 2012 to January 1, July 1, 2013 to January 1, July 1, 2014 toDecember 31, 2013 to June December 31, 2014 to June December 31,
2012
30, 2013
2013
30, 2014
2014

Fiscal period(Millions of
yen)

7,599

8,418

8,850

9,558

9,695

(Rental revenues)(Millions ofyen)(7,597)(8,409)(8,848)(9,558)(9,695)

Operating expenses(Millions of
yen)

4,427

4,871

5,140

5,592

5,731

(Millions ofyen)(3,950)(4,350)(4,605)(5,022)(5,180)Operating income(Millions of
yen)

3,172

3,546

3,709

3,966

3,963

Ordinary income(Millions of
yen)

2,310

2,589

2,775

3,011

3,041

Net income(Millions of
yen)

2,309

2,598

2,774

3,010

3,040

Total assets(Millions ofyen)

228,020

257,613257,901

277,842

278,037(−0.3)(12.9)

(0.1)

(7.7)

(0.1)

104,545

120,683

120,713130,998

131,028

Revenues(Property operating expenses)(Period-on-period change)
Net assets(Period-on-period change)(%)(Millions of
yen)

(0.0)

(15.4)

(0.0)

(8.5)

(0.0)

(Millions ofyen)

102,052

117,901

117,901

127,950

127,950

Outstanding investment units(units)188,650

224,950

224,950

1,212,750

1,212,750

Net assets per unit (Note 1)(yen)554,175

107,297

107,324

108,017

108,042

Net income per unit (Note 2)(yen)

12,241

2,376

2,466

2,511

2,506

(Millions of
yen)

2,309

2,744

2,774

3,010

3,040

(yen)

12,242

12,200(2,440)12,334(2,466)

2,482

2,507

(yen)

12,242

12,200(2,440)12,334(2,466)

2,482

2,507

(yen)

(–)

(–)
(–)

(–)
(–)

(–)

(–)

(Of this, distribution in excess of earnings
per unit after split)(Note 5)Return on assets (Note 4)

(%)

1.0

1.1

1.1

1.1

1.1

(%)

(2.0)

(2.2)

(2.1)

(2.3)

(2.2)

(%)

2.2

2.3

2.3

2.4

2.3

(Annualized rate)

(%)

(4.4)

(4.7)

(4.6)

(4.8)

(4.6)

Capital ratio (Note 6)

(%)

45.8

46.8

46.8

47.1

47.1

(%)

(0.1)

(1.0)

(−0.0)(0.3)(−0.0)

(%)

100.0

105.6

99.9

99.9

100.0

Number of investment properties(properties)

24

28

28

30

30

Number of tenants(tenants)

134

152

157

206

214

266,915

302,505

302,505

330,285

330,179

Unitholders’ capital

Total distribution(%)

Distribution per unit
(Distribution per unit after split)(Note 3)

(Profit distribution per unit)(Of this, profit distribution per unit after
split)(Note 4)(Distribution in excess ofearnings per unit)(Annualized rate)
Return on equity (Note 5)(Period-on-period change)
Payout ratio (Note 7)

Total leasable space (Note 8)(㎡)

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)3

Occupancy rate

(%)

94.0

97.1

98.7

98.3

99.1

Depreciation(Millions of
yen)

1,284

1,433

1,504

1,624

1,657

Capital expenditure(Millions of
yen)

283

572

775

558

415

(Millions of
yen)

4,932

5,493

5,747

6,160

6,172

(yen)

19,050

3,584

3,804

3,822

3,873

(times)

12.7

15.4

16.3

17.4

20.8

(times)

4.0

4.4

4.4

4.8

5.0

113,300

125,400

125,400

133,900

133,900

Net operating income (NOI)(Note 9)Funds from operation (FFO) per
unit (Note 10)
FFO multiples (Note 11, 12)
Debt service coverage ratio(DSCR) (Note 13)
Interest-bearing debt

(Millions ofyen)

Loan-to-value (Note14)

(%)

49.7

48.7

48.6

48.2

48.2

Number of days in operation(days)

184

181

184

181

184

(Note 1) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. Net assets per unit iscalculated assuming the split of investment units was implemented at the beginning of the fourteenth period.
(Note 2) Net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding during
the six months period. Moreover, a five-for-one split of investment units was implemented with January 1, 2014 as theeffective date. Net income per unit is calculated assuming the split of investment units was implemented at the beginning of
the fourteenth period.
(Note 3) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. Distribution per unit
after spit, of this, profit distribution per unit after split and of this, distribution in excess of earnings per unit after split arecalculated assuming the split of investment units was implemented at the beginning of the fourteenth period (figures arerounded down to the nearest whole number).
(Note 4) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 5) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 6) Capital ratio = Period end net assets / Period end total assets × 100(Note 7) Payout ratio = Total distribution / Net income × 100(Note 8) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 9) NOI = Rental revenues – Property operating expenses + Depreciation(Note 10) FFO per unit = (Net income + Depreciation – Gain on sale real estate + Loss on sale of real estate) / Number of Outstanding
investment units (the figure is rounded down to the whole number). Moreover, a five-for-one split of investment units was
implemented with January 1, 2014 as the effective date. Outstanding investment units are calculated assuming the split ofinvestment units was implemented at the beginning of the fourteenth period.
(Note 11) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one decimal
place.)(Note 12) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. FFO multiples arecalculated based on the period end investment unit price calculated assuming the split of investment units was implemented
at the beginning of the fourteenth period.
(Note 13) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment corporation bonds)(Note 14) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

Asset Management Report for 17th period (Semi-Annual Report for 17th 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 December 31, 2014, we settled our seventeenth period.
1) Business conditions and results
The Japanese GDP posted negative growth for the two consecutive quarters of April – June 2014 and July –September 2014 from the reactionary decrease in demand following the rush demand ahead of theconsumption tax hike and impact of inventory adjustment. However, the Japanese economy continues to be
on a mild recovery trend due to additional monetary easing by the Bank of Japan, improvement in thecorporate performance and employment income environment and other factors.
In the office building leasing market, tenant needs for floor area increase in the same building and relocationfor expansion have become apparent backed by expectations for improvement in corporate performance, andthe vacancy rate continues to be on an improving trend. JEI succeeded in maintaining a higher occupancy
rate of the portfolio of 99.1% at the end of the period under review from 98.3% at the end of the previous
period. Although rent rises are being observed centering on excellent buildings in central Tokyo, the pace ofrent rise in the leasing market as a whole is expected to remain slow.
In the real estate investment 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 evensome sense of overheating. In addition to the new listings of J-REITs, even more overseas investors, private
funds, private REITs, etc. are beginning to participate in the market.
The entire real estate portfolio of JEI at the end of the period was 30 properties in terms of the number ofproperties held, 265.4 billion yen in investment amount (on an acquisition price basis) and 330,179.79m2 in
total leasable space at a period-end.
2) Fund raising highlights
During the period, JEI also aimed to reduce borrowing costs and convert floating-rate debts to fixed ratedebts by taking advantage of financing environment with low interest rate while continuing to make efforts
as during the previous period to extend borrowing period and diversify maturity dates.
As the refinancing of long-term fixed interest loans of 4.0 billion yen which matured on July 31, 2014, JEI
procured 2.0 billion yen of loans (period of 6.92 years) and 2.0 billion yen of loans (period of 7.92 years),
both long-term fixed interest loans, on the same date.
In addition, as the refinancing of long-term floating interest loans of 11.5 billion yen which matured on
December 29, 2014, JEI procured 5.75 billion yen of loans (period of 7 years) and 5.75 billion yen of loans(period of 8 years), both long-term floating interest loans, on the same date. Furthermore, the interest rates ofthe long-term floating interest loans were fixed through interest rate swap transactions.
As a result, as of the end of the period, JEI had the average remaining debt maturity of interest-bearing debts(Note 1) at 3.60 years, long-term borrowing ratio (Note 2) and fixed rate ratio (Note 3) are both at 100.0%,
and weighted average interest rate for loans purchased (Note 4) at 1.13%. Outstanding interest-bearing debts
totaled 133.9 billion yen, 103.9 billion yen in long-term loans (including 15.54 billion yen in long-term loans
due within one year) and 30. 0 billion yen in investment corporation bonds (including 5.0 billion yen ofinvestment corporation bonds scheduled to be redeemed within one year). (The loan to value ratio to thetotal assets was 48.2%.)
JEI has commitment lines of 14.0 billion to reduce refinancing risk, enhance stability for fund procurement,
etc.
Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

5The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of December 31, 2014)
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+―

(Note 1) Calculated using a weighted-average of the remaining maturity of all interest-bearing debts from the end of the period underreview by respective interest-bearing debt.
(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(Note 3) Fixed rate ratio = Total interest-bearing debts at fixed interest rate (including long-term loans which interest rates were fixed
through interest rate swap transactions) / total interest-bearing debts(Note 4) Calculated using a weighted-average of interest rates at the end of the period under review by outstanding amount of respective
interest-bearing debt for all interest-bearing debts.
(Note 5) The rating of JRC is for the 2nd series unsecured investment corporation bonds, 3rd series unsecured investment corporation
bonds, 4th series unsecured investment corporation bonds, 5th series unsecured investment corporation bonds, 6th series
unsecured investment corporation bonds and 7th series unsecured investment corporation bonds. The rating of R&I is for the 2ndseries unsecured investment corporation bonds, 3rd series unsecured investment corporation bonds and 4th series unsecured
investment corporation bonds.

3) Financial results and distribution highlights
As a result of the above management, JEI posted 9,695 million yen in total revenues, 3,963 million yen in
operating income, 3,041 million yen in ordinary income and 3,040 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 2,507 yen.

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)63) Capital Increase
JEI had no changes in the number of outstanding investment units for the period under review. The outline of thechanges in the number of outstanding investment units and unitholders’ capital until the end of the period underreview are as follows:
Unitholders’ capital
Capital transaction (units)(Millions of yen)
Paid-up Date
Capital transaction
Remarks
ChangeBalance
ChangeBalanceFebruary 20, 2006

Private placement
for incorporation

June 26, 2006

400

400

200

200

(Note 1)

Public offering

128,000

128,400

64,23064,430(Note 2)

July 21, 2006

Allocation of
investment units toa third party

6,400

134,800

3,211

67,641(Note 3)

July 11, 2007

Public offering

19,000

153,800

18,702

86,344(Note 4)

August 8, 2007

Allocation of
investment units toa third party

750

154,550738

87,083(Note 5)January 31, 2011

Public offering

31,000185,550

13,608100,691(Note 6)

February 28, 2011

Allocation of
investment units toa third party

3,100

188,650

1,360

102,052(Note 7)January 30, 2013

Public offering

33,000221,650

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

224,950

1,440

117,901(Note 9)January 1, 2014

Allocation of
investment units toa third party
Split of investment
unit

899,800

1,124,750–

117,901(Note 10)January 27, 2014

Public offering

80,0001,204,750

9,135

127,036(Note 11)February 26, 2014

Allocation of
investment units toa third party

8,000

1,212,750

913

127,950(Note 12)February 27, 2013

(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.

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

7

[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:
13th period
Fiscal period(December(closing date)2012)

Investment unit
market price15th period (December 2013)

14th period(June 2013)

Before exrights date

After exrights date

16th period(June 2014)

17th period(December
2014)

Highest (yen)511,000

739,000

639,000

123,300

141,600

164,700

Lowest (yen)371,000

463,000

515,000

117,600

114,200

133,400(Note 1) 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.
(Note 2) JEI implemented a 5-for-1 split of its investment units with January 1, 2014 as the effective date.

(4) Distributions Paid
The distribution per unit for the period (the seventeenth period) was 2,507 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

13th period

14th period

15th period

16th period

17th period

Accounting period

July 1, 2012 to
December 31,
2012

January 1, 2013
to June 30, 2013

July 1, 2013 to
December 31,
2013

January 1, 2014
to June 30, 2014

July 1, 2014 toDecember 31,
2014

2,309,504

2,598,369

2,774,683

3,010,447

3,040,640

51

–

149

402

275

2,309,453

2,744,390

2,774,533

3,010,045

3,040,364(12,242)(12,200)(12,334)(2,482)(2,507)(2,440)(2,466)2,309,453

2,744,390

2,774,533

3,010,045

3,040,364(12,242)(12,200)(12,334)(2,482)(2,507)(2,440)(2,466)

–

–

–

–

–

(–)

(–)

(–)

(–)

(–)

(–)

(–)

Retained earnings at end of
period (Thousands of yen)
Retained income (Thousandsof yen)Total cash distribution
amount (Thousands of yen)
(Cash distributions perunit) (yen)(Distribution per unit after
split) (yen) (Note)
Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)(Profit distribution per unit
after split) (yen) (Note)
Total refund of investment
equity(Refund of investment per
unit)(Refund of investment perunit after split) (yen) (Note)(Note) JEI implemented a five-for-one split of investment units with January 1, 2014 as the effective date. Distribution per unit after
split, profit distribution per unit after split and refund of investment per unit after split are calculated assuming the split ofinvestment units was implemented at the beginning of the fourteenth period.

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

8

(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
In the Japanese economy ahead, a mild recovery is expected along with factors such as the recovery inpersonal consumption due to improvements in the employment and income situations, improvements incorporate earnings and improvements in terms of trade stemming from the decline in crude oil prices.
However, future trends must be carefully watched since risks remain that the political issues and concerns
about continuous deflation in Europe, a slowdown in overseas economies mainly of emerging nations andheightening geopolitical tension could affect the Japanese economy.
In the office building leasing market, the vacancy rate is expected to continue to be on an ongoing trend of
improving since office demand is on the rise due to improvement in the employment situation, increased needs
for new store openings and relocations for expansion among companies. Furthermore, the trend of rising newrents are becoming apparent centering on excellent buildings in central Tokyo, and such movements are
expected to gradually spread into other areas. It is expected that the rent level will gradually make aturnaround if tenants’ ability to pay rent increase in line with improvements in corporate earnings.
In the real estate investment market, real estate transaction prices are in a state where they may rise as the
supply of excellent properties is limited, especially in central Tokyo and metropolitan areas, while favorable
fund procurement environment and expansion in market players are expected. Cautiously assessing whether
the sense of overheating isn’t nurtured in the real estate investment market is needed.
2) Policy and issues on future investment management
In addition to maintaining a high occupancy rate, JEI will strive to maintain and improve earnings of the entire
portfolio by promoting measures to increase rental revenue. Moreover, in order to maintain asset value andimprove property competitiveness over the medium to long term, JEI will consistently implement additional
strategic investment plans.
For external growth, JEI will continue striving to acquire competitive properties with well-balanced
investments based on size, concentration and target area in mind to increase asset size and realize stableprofitability in our portfolio over the medium- to long-term. Moreover, JEI will also work on strategic asset
replacements in an aim to improve growth and stability of the entire portfolio. To this end, we will continueenhancing further interaction and collaboration with sponsor companies and have our asset managementcompany cultivate and refine property information sources in an effort to proactively gain access to market
information and thereby keep seizing the right business opportunities.
Regarding financial operations, JEI achieved a fixed interest rate ratio of 100% by executing interest-rate swap
agreements to convert floating-rate debts to fixed-rate debts after refinancing floating interest loans of 11.5
billion yen which matured in December 2014 through procuring two loans of half the amount each (period of
7 years and 8 years) while realizing lengthening of the remaining period of debts to 3.60 years for the averageremaining period of interest-bearing debt as of the end of the 17th period.
Although the fund-raising environment is generally favorable for JEI, we will consistently work, with ancontinuous aim to reduce borrowing costs taking advantage of current low interest financing environment, on
stable and sound financial operations while carefully watching future changes in situations within and outside
Japan and endeavoring to lengthen the remaining period of debts, diversify maturity dates, ensure liquidity byrenewing commitment lines and maintain an appropriate ratio of interest-bearing debts.

(6) Subsequent Events
None

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)9

2. Outline of the Investment Corporation(1) Investment units
13th
As of December
31, 2012

14th
As of June 30,
2013

2,000,000 units

2,000,000 units

2,000,000 units

188,650 units

224,950 units

224,950 units

1,212,750 units

1,212,750 units

Unitholders’ capital

102,052 million
yen

117,901 million
yen

117,901 million
yen127,950 million
yen127,950 million
yen

Number of unitholders

6,760 individuals 7,361 individuals 6,846 individuals

Fiscal period
Number of units
authorized
Number of units
issued and outstanding

15th
16th
17th
As of December As of June 30, 2014 As of December
31, 2013(Note)
31, 2014
10,000,000 units 10,000,000 units

8,451 individuals 7,917 individuals(Note) JEI implemented a five-for-one split of its investment units with January 1, 2014 as the effective date.

(2) Unitholders
Major unitholders as of December 31, 2014 are as follows:

Name

Address

Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%)

Japan Trustee Services Bank, Ltd.
(Trust Account)

1-8-11 Harumi, Chuo-ku, Tokyo

349,255

28.80

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

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

74,784

6.17

NIPPON STEEL KOWA REALESTATE CO., LTD.

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

71,560

5.90

Harumi Island Triton Square Office Tower Z,
1-8-12 Harumi, Chuo-ku, Tokyo

68,745

5.67

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

46,885

3.87

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

20,6601.70

17,8251.47

13,006

1.07

12,4001.02

12,0000.99

687,120

56.66

Trust & Custody Services Bank,
Ltd. (Securities Investment Trust
Account)
The Nomura Trust and Banking
Co., Ltd. (Investment Trust
Account)
The Dai-ichi Life Insurance
Company, Limited
STATE STREET BANK AND
TRUST COMPANY 505223
Bank of Kyoto, Ltd.
The Fuji Fire and Marine
Insurance
RBC ISB A／C DUB NONRESIDENT - TREATY RATE

P.O. BOX 351 BOSTONMASSACHUSETTS 02101 U.S.A
700 Yakushimae-cho, Karasuma-dori,Matsubara-Agaru, Shimogyo-ku, Kyoto-shi,
Kyoto
1-18-11 Minami-Senba, Chuo-ku, Osakashi, Osaka
14 PORTE DE FRANCE, ESCH-SURALZETTE, LUXEMBOURG, L-4360
Total

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

10

(3) Officers
1) Directors and accounting auditor
Name

Post

Compensation or fee forthe six months ended
December 31, 2014
(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

13,000(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.

(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
Our asset management company, asset custodian and administrative agents as of December 31, 2014 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 17th period (Semi-Annual Report for 17th Period)11

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

Use

Area

16th Period(June 30, 2014)

17th Period(December 31, 2014)

Total
Total
Investment
Investment
acquisitionacquisition
ratio inratio inprice (Millions
price (Millions
portfolio (%)
portfolio (%)
of yen)of yen)Area I

3,844

1.4

3,847

1.4

Area II

5,826

2.1

5,786

2.1

Office Area I
building Area II

121,91043.9

121,502

43.7

9,229

3.3

9,203

3.3

Area III

79,475

28.6

78,92028.4

Area IV

17,960

6.5

17,922

6.4

OthersTrust beneficiary (commercial
interest in realfacilities, Area I
estateresidence,
etc.)

18,853

6.8

18,7106.7

Total

257,09992.5

255,892

92.0

Deposits in bank and other assets

20,742

7.5

22,1448.0

Total assets

277,842100.0

278,037

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 17th period (Semi-Annual Report for 17th Period)

12

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of December 31, 2014 are as
follows:
Ratio of rental
Book value
Leasable space Leased space Occupancy revenue to total
Name(Millions ofMajor use
rate (%)(m ) (Note 1)(m ) (Note 2)
rental revenues(Note 3)yen)(%)
Kowa Kawasaki
Office29,74238,375.66
38,288.61
99.8
9.8
Nishiguchi Buildingbuilding
OfficeAKASAKA INTERCITY
27,48911,021.03
10,727.29
97.3
6.0
building
OfficeAkasaka Garden City
22,544
8,769.53
8,769.53
100.0
3.9
building
OfficeOmori Bellport D
21,35925,801.66
25,801.66
100.0
9.8
building
Other(commercial
HAMARIKYU
18,71019,718.11
19,615.79
99.5
7.5 facilities,
INTERCITY
residence,etc.)
Musashikosugi Tower
Office12,58025,159.49
25,159.49
100.0
8.2
Place
building
Daiba Garden City
Office10,465
12,122.85
12,122.85
100.0
3.5
Buildingbuilding
Kowa Kawasaki
Office9,817
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
OfficeShiba 2-Chome Building
9,030
11,749.30
11,654.49
99.2
3.8
building
JEI Hamamatsucho
Office8,411
6,411.26
6,411.26
100.0
2.0
Buildingbuilding
2

Total

170,152

177,741.61

2

177,163.69

99.7

–

–

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of December 31, 2014. For
properties with joint ownership, the value is obtained by multiplying the total leasable space of the shared real estate by thepercentage of the interest owned by JEI.
(Note 2) Leased space refers to space with lease contracts concluded with end tenants as of December 31, 2014. For properties withjoint ownership, the value is obtained by multiplying the total leased space of the shared real estate by the percentage of theinterest owned by JEI. 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 masterleasing. 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 thisdocument.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of December 31, 2014.
(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 17th period (Semi-Annual Report for 17th Period)

13

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of December 31, 2014 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 Hamatsucho Building

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

Ⅰ-4

No. 32 Kowa Building

5-2-32 Minami-Azabu, 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-11

No. 35 Kowa Building

1-14-14 Akasaka, 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

1-13-3 Higashi-Sakura, Higashi-ku, Nagoya-shi,
Aichi

Form of ownership
Trust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateReal estate

Area I

Ⅱ-2

JEI Nishi-Honmachi Building

1-3-15 Awaza, Nishi-ku, Osaka-shi, Osaka

Ⅱ-3

Osaka Kogin Building (Land with
Leasehold Interest)

4-1-1 Koraibashi, Chuo-ku, Osaka-shi, Osaka

Real estate
Trust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateArea II
Ⅲ-1

Musashikosugi Tower Place

1-403 Kosugi-machi, Nakahara-ku, Kawasaki-shi,
Kanagawa

Ⅲ-2

Kowa Kawasaki Higashiguchi
Building

1-53 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Ⅲ-3

JEI Hongo Building

2-38-16 Hongo, Bunkyo-ku, Tokyo

Ⅲ-5

Kawasaki Nisshincho Building

7-1 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Ⅲ-6

No. 44 Kowa Building

1-2-7 Higashiyama, Meguro-ku, Tokyo

Ⅲ-7

JEI RYOGOKU BUILDING

3-25-5 Ryogoku, Sumida-ku, Tokyo

Ⅲ-8

Ebina Prime Tower

2-9-50 Chuo, Ebina-shi, Kanagawa

Ⅲ-9

Kowa Kawasaki Nishiguchi Building

66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Kanagawa

Ⅲ-10

Pacific Square Sengoku

2-29-24 Hon-Komagome, Bunkyo-ku, Tokyo

Trust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateAppraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)
23,80021,35911,800

9,030

6,360

8,411

6,690

7,367

16,80022,54425,20027,489

5,040

4,841

12,00010,465

9,320

8,212

21,40018,710

1,810

1,778

4,130

3,847

144,350

144,059

5,550

5,786

4,340

7,338

1,890

1,865

11,78014,98917,00012,580

8,460

9,817

4,580

5,135

3,870

4,486

1,480

979

2,160

2,311

3,740

5,870

24,90029,742

1,430

1,647

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

14

Ⅲ-11

Core City Tachikawa

2-37-7 Akebono-cho, Tachikawa-shi, Tokyo

Trust beneficiaryinterest in realestate

7,290

6,348

74,91078,920

4,010

3,160

2,700

2,705

6,120

5,431

2,890

2,208

4,800

4,416

Area IV

20,52017,922

Total

251,560

255,892

Area III
Ⅳ-2

JEI Kyobashi Building

2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,
Osaka

Ⅳ-3

JEI Hiroshima Hacchobori Building

14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Hiroshima

Ⅳ-4

SE Sapporo Building

1-1-2 Kitananajonishi Kita-ku, Sapporo-shi,
Hokkaido

Ⅳ-5

Aoba-dori Plaza

3-2-1 Chuo, Aoba-ku, Sendai-shi, Miyagi

Ⅳ-6

Daiwa Minami-morimachi Building

2-2-, 2-chome Kita Tenjinbashi, Kita-ku, Osakashi, Osaka

Trust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestate(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 December 31, 2014 pursuant to the articles of incorporation of JEI and theregulations stipulated by the Investment Trusts Association, Japan. For properties with joint ownership in the current portfolio,
the value is obtained 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 17th period (Semi-Annual Report for 17th Period)

15

Property
No.

Property name16th Period
January 1, 2014 to June 30, 2014
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)(%)

17th Period
July 1, 2014 to December 31, 2014
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)(%)

Ⅰ-1

Omori Bellport D

1

100.0

923

9.7

1

100.0

950

9.8

Ⅰ-2

Shiba 2-Chome Building

2

100.0

370

3.9

2

99.2

371

3.8

Ⅰ-3

JEI Hamamatsucho
Building

1

87.1

237

2.5

1

100.0

190

2.0

Ⅰ-4

No. 32 Kowa Building

1

100.0

249

2.6

1

100.0

252

2.6

Ⅰ-7

Akasaka Garden City

1

100.0

366

3.8

1

100.0

379

3.9

Ⅰ-8

AKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building

13

100.0

516

5.4

12

97.3

578

6.0

1

100.0

175

1.8

1

100.0

176

1.8

1

100.0

336

3.5

1

100.0

335

3.5

Ⅰ-9
Ｉ-10
Ⅰ-11

No. 35 Kowa Building

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

Ⅰ-12

HAMARIKYUINTERCITY

1

99.4

637

6.7

1

99.5

723

7.5

Ⅰ-13

Shintomicho Building

11

100.0

71

0.8

11

100.0

73

0.8

Ⅰ-14

Kowa Nishi-Shimbashi
Building

6100.0(Note 2)

(Note 2)6100.0(Note 2)

(Note 2)

40

99.2

-

-

39

99.6

-

-

Ⅱ-1

NHK Nagoya Housou
CenterJEI Nishi-Honmachi
Building
Osaka Kogin Building(Land with Leasehold
Interest)

29

97.0

349

3.7

30

98.9

395

4.1

1

100.0

208

2.2

1

100.0

211

2.2

1

100.0

83

0.9

1

100.0

83

0.9

31

98.6

-

-

32

99.5

-

-

36

100.0

787

8.2

37

100.0

796

8.2

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

Area I

Ⅱ-2
Ⅱ-3

Area II
Ⅲ-1
Ⅲ-2

Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi

Ⅲ-3

JEI Hongo Building

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

Ⅲ-5

Kawasaki Nisshincho
Building

1

100.0

193

2.0

1

100.0

194

2.0

Ⅲ-6

No. 44 Kowa Building

1

100.0

91

1.0

1

100.0

97

1.0

Ⅲ-7

JEI Ryogoku Building

1

98.0

102

1.1

1

93.9

101

1.0

Ⅲ-8

Ebina Prime Tower

33

97.2

477

5.0

33

97.2

406

4.2

Ⅲ-9

Kowa Kawasaki
Nishiguchi Building

1

99.6

945

9.9

1

99.8

950

9.8

Ⅲ-10

Pacific Square Sengoku

5

69.1

67

0.7

7

94.7

55

0.6

Ⅲ-11

Core City Tachikawa

1

87.7

363

3.8

1

97.9

285

2.9

81

97.9

-

-

84

99.0

-

-

Ⅳ-2

JEI Kyobashi Building

1

100.0

182

1.9

1

100.0

186

1.9

Ⅳ-3

JEI Hiroshima
Hacchobori Building

1

98.5

142

1.5

1

98.7

144

1.5

Ⅳ-4

SE Sapporo Building

1

99.2

363

3.8

1

100.0

369

3.8

Ⅳ-5

Aoba-dori Plaza

42

84.7

137

1.4

47

88.1

174

1.8

Ⅳ-6

Daiwa Minamimorimachi Building

9

97.7

162

1.7

9

95.7

194

2.0

Area IV

54

96.8

-

-

59

97.2

-

-

Total

206

98.3

9,558

100.0

214

99.1

9,695

100.0

Area III(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.

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

16

(4) Securities Portfolio
None

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

17

(5) Other Assets
1) Contract amount and fair value of specified transactions and foreign exchange forwards transactions

Contract amount (Thousands of yen) (Note 1)
Classification

Type

Fair value(Thousands of yen)
(Note 2)

Over one year

Over-the-countertransaction

Interest rate swap
transactions
Fixed interest rate
payableFloating interest ratereceivable

76,900,000

66,360,000–(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.

Asset Management Report for 17th period (Semi-Annual Report for 17th 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 December 31, 2014. The values below include portions to be expensed foraccounting purposes.
Estimated construction costs(Millions of yen)
Payment
for the six
Property nameLocation
PurposeSchedule term
Total ofmonths advanceTotal
ended payment
December31, 2014
Renewal of wallMusashikosugi
Kawasaki-shi,
From October 2014
through type air
191––
Tower Place
Kanagawa
To March 2015
conditioner (1/5thterm)
NHK Nagoya
From July 2014
Housou-Center
Nagoya-shi, Aichi
Renewal of heat source
90––
To March 2015
Building
Replacement of multiSE Sapporo
Sapporo-shi,
From June 2015
level parking lot no. 1
49––
Building
Hokkaido
To June 2015
pallet floorboard
Renewal of drainpipes
No. 44 Kowa
From February 2015
for restrooms andMeguro-ku, Tokyo30––
officekitchenettes
in
Building
To June 2015
respective floor(2) Capital Expenditures for the Six months Ended December 31, 2014
The following table shows constructions conducted by JEI during the period for properties it owned as ofDecember 31, 2014 and expensed as capital expenditures. Capital expenditures for the period ended December
31, 2014 were 415 million yen and, when combined with repairs and maintenance costs of 176 million yenclassified as expenses, the amount of constructions completed totaled 591 million yen.
Amounts
Paid
Property nameLocation
PurposeScheduled term(Millions ofyen)
Replacement of multi-level
From December 2014
SE Sapporo Building
Sapporo-shi, Hokkaido parking lot no. 2 pallet
51
To December 2014
floorboard
Daiwa Minami-morimachi
Osaka-shi, Osaka
Building

Renewal of air-conditioning
systems

Other constructions
Total

From March 2014
To July 2014

47

–

315
415

Asset Management Report for 17th period (Semi-Annual Report for 17th 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

13th Period
14th Period
July 1, 2012 toJanuary 1, 2013
December 31,
to June 30, 20132012

15th Period
July 1, 2013 to
December 31,
2013

17th Period
16th Period
July 1, 2014 toJanuary 1, 2014
December 31,
to June 30, 2014
2014

Reserved funds at beginning of
period

267

281

299

309

368

Increase

14

25

364

143

80

Decrease

–

7

354

83

132

281

299

309

368

316

Reserved funds at the end of
periodAsset Management Report for 17th period (Semi-Annual Report for 17th Period)20

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

16th Period
January 1, 2014
to June 30, 2014

17th Period
July 1, 2014
to December 31, 2014(a) Asset management fees

397,206

409,168(b) Custodian fees

19,353

20,748(c) Administrative service fees

37,29440,643(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other

98,15263,016

569,545

551,117

Total

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

21

(2) Borrowings
Borrowings by each financing source as of the end of the 17th period (ended December 31, 2014) are as follows:
Classification
Lender
The Dai-ichi Life Insurance Company
LimitedDrawdowndate

July
31,2007

Balance at
beginning of
period(Thousands ofyen)
2,000,000

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

2.25875(Note 2)2.28417(Note 2)Development Bank of Japan Inc.

2,000,000−

Mitsubishi UFJ Trust and Banking

4,000,000−

3,900,000−

2,400,000−

1,200,000−

3,000,000

3,000,000

2,000,000

2,000,000−

1,620,000−

1,620,000−

650,000

Mizuho Bank, Ltd.

−370,000

Sumitomo Mitsui Banking Corporation−

280,000

Mizuho Bank, Ltd.

−

500,000

Mitsubishi UFJ Trust and Banking−

500,000

Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Resona Bank, Ltd.
The Dai-ichi Life Insurance Company
LimitedDevelopment Bank of Japan Inc.
Long-term Mizuho Trust & Banking Co., Ltd.
loans due
Aozora Bank, Ltd.
within one
year
Aozora Bank, Ltd.

June 29,2011

October
24, 2008

November29, 2011

January 31,
2012−

500,000

Aozora Bank, Ltd.

−

200,000

The Bank of Fukuoka−

300,000

The Norinchukin Bank−

2,000,000−

1,500,000

Resona Bank, Ltd.

−

500,000

Sub Total

20,500,000

15,540,000

1,620,000−

1,620,000−

650,000−

Mizuho Bank, Ltd.

370,000−

Sumitomo Mitsui Banking Corporation

280,000−

Mizuho Bank, Ltd.

500,000−

Mitsubishi UFJ Trust and Banking

500,000−

500,000−

200,000−

300,000−

2,000,000−

1,500,000−

500,000−

4,600,000

4,600,000

4,400,000

4,400,000

Sumitomo Mitsui Banking Corporation

4,000,000

4,000,000

Sumitomo Mitsui Trust Bank, Limited

1,620,000

1,620,000

1,080,000

1,080,000

540,000

540,000

520,000

520,000

Resona Bank, Ltd.

Mizuho Trust & Banking Co., Ltd.

July 31,2012

Mizuho Trust & Banking Co., Ltd.
Aozora Bank, Ltd.
Aozora Bank, Ltd.

Resona Bank, Ltd.

November29, 2011

January 31,
2012

Aozora Bank, Ltd.
Long-term
The Bank of Fukuoka
loans
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

July 31,
2012

Resona Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Mizuho Bank, Ltd.

Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Mizuho Bank, Ltd.

June 29,2011

November29, 2011

0.859542.27344(Note 2)

Maturitydate

Use

Remarks

Acquisitionof real estate

July 31, 2014

December29, 2014
Repaymentof existing
borrowing

June 30,
2015

Unsecured
andunguaranteed

Lumpsum

1.13750(Note 2)

1.14125(Note 2)

Repayment
methodAcquisitionof real estate

November30, 2015
Repaymentof existing
borrowing

0.97125(Note 2)

Repaymentof existing
borrowing

1.13750(Note 2)Acquisitionof real estate
November30, 2015
1.14125(Note 2)
Unsecured
andunguaranteed

Lumpsum
0.97125(Note 2)

Repaymentof existing
borrowing

1.36375(Note 2)June 29,2016

1.24375(Note 2)

November29, 2016

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

22Classification
LenderMizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Sumitomo Mitsui Banking Corporation

Balance atBalance at end of
beginning of
Average
Repayperiod
Maturity
periodinterest rate
ment
(Thousands ofdate(Thousands of(%) (Note 1)
methodyen)
yen)
2,000,000
2,000,000
January 31,
1.24750 January 31,
1,500,000
1,500,000
2012(Note 2)2017
1,500,000
1,500,000
Drawdown
date

Mizuho Bank, Ltd.

1,500,000

1,500,000

Mitsubishi UFJ Trust and Banking

1,300,000

1,300,000

1,200,000

1,200,000

2,000,000

2,000,000

1,000,000

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

Aozora Bank, Ltd.

500,000

500,000

500,000

500,000

500,000

500,000

500,000

500,000

3,000,000

3,000,000

Mizuho Bank, Ltd.

5,000,000

5,000,000

Mitsubishi UFJ Trust and Banking

2,000,000

2,000,000

Sumitomo Mitsui Banking Corporation

1,100,000

1,100,000

1,000,000

1,000,000

Resona Bank, Ltd.

200,000

200,000

The Bank of Fukuoka

700,000

700,000

Shinkin Central Bank

1,000,000

1,000,000

The Norinchukin Bank

1,450,000

1,450,000

Mizuho Bank, Ltd.

850,000

850,000

Mitsubishi UFJ Trust and Banking

850,000

850,000

Sumitomo Mitsui Banking Corporation
Sompo Japan Nipponkoa Insurance Inc.
(Note 3)
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
Development Bank of Japan Inc.

July 31,2012

November30, 2010

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking

Resona Bank, Ltd.
Sompo Japan Nipponkoa Insurance Inc.
Long-term (Note 3)loans Tokio Marine & Nichido Fire InsuranceCo., Ltd.
The Dai-ichi Life Insurance Company
LimitedThe Norinchukin Bank

Mizuho Trust & Banking Co., Ltd.

July 31,2012

June 28,2013

June 29,2011

June 28,2013

600,000

600,000

1,450,000

1,450,000

Mizuho Bank, Ltd.

850,000

850,000

Mitsubishi UFJ Trust and Banking

850,000

850,000

Mizuho Trust & Banking Co., Ltd.

600,000

600,000

The Norinchukin Bank

March 11,2014

Remarks
Use

1.03000(Note 2)January 31,
20171.09734(Note 2)
1.73875(Note 2)
1.08375(Note 2)

1.04550(Note 2)

November30, 2017

1.19212(Note 2)

Lumpsum

1.65125(Note 2)June 29,2018

0.81225(Note 2)June 30,
2018

Repayment Unsecuredof existingandborrowing unguaranteed

0.74500 November 1,(Note 2)
2018

0.77500(Note 2)

March 8,2019

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

23

Drawdown
date

Balance at
beginning of
period(Thousands ofyen)

January 31,
2012

2,000,000

2,000,000

500,000

500,000

500,000

500,000

1,000,000

1,000,000

600,000

600,000

Classification
LenderDevelopment Bank of Japan Inc.
Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Sumitomo Mitsui Banking Corporation

June 28,
2013

Mizuho Trust & Banking Co., Ltd.

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

The Dai-ichi Life Insurance Company
Limited1,000,000

1,000,000

The Norinchukin Bank

1,162,500

1,162,500

675,000

675,000

675,000

675,000

487,500

487,500

2,000,000

2,000,000−

2,000,000−

2,000,000−

1,950,000−

1,200,000−

600,000−

2,000,000−

2,000,000−

1,950,000−

1,200,000−

600,000

Sub Total

83,400,000

88,360,000

Total

103,900,000

103,900,000

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking

December27, 2013

Mizuho Trust & Banking Co., Ltd.
Long-termloans Development Bank of Japan Inc.
The Dai-ichi Life Insurance Company
LimitedJune 28,
2013
July 31,2014

Mitsubishi UFJ Trust and Banking
Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.

December29, 2014

Resona Bank, Ltd.
Development Bank of Japan Inc.

July 31,2014

Mitsubishi UFJ Trust and Banking
Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Resona Bank, Ltd.

December29, 2014

Maturity
date

Repayment
methodUse

Remarks

1.60000(Note 2)

1.36400(Note 2)

1.31261(Note 2)January 31,
2020

1.00000(Note 2)

Lumpsum

1.60750(Note 2)
1.98834(Note 2)June 30,2020

0.81875(Note 2)

December30, 2020

1.15417(Note 2)June 30,2021

0.93625(Note 2)

December30, 2021

Repayment Unsecuredof existingandborrowing unguaranteed(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 effectof the interest rate swaps.
(Note 2) The loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).
(Note 3) Sompo Japan Insurance Inc. changed its trade name to Sompo Japan Nipponkoa Insurance Inc. on September 1, 2014.

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

24

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of December 31, 2014 are as follows:
Issue

2nd series unsecured
investment corporationbonds
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
Total

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

Balance at
beginning ofIssuance dateperiod(Thousands ofyen)June 28, 2010

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

Maturity date

5,000,000

5,000,000

1.29000 June 26, 2015

5,000,000

5,000,000

1.01000

November 4,
2011

Use

Remarks(Note 1)

November 4,
2016(Note 2)2,000,000

2,000,000

1.40000

November 2,
2018
November25, 2013

Repayment
methodLump-sum(Note 4)(Note 1)5,000,000

5,000,000

0.46000

5,000,000

5,000,000

0.46000

March 11,2019

1.13000

March 11,2024

March 10,2014

(Note 3)8,000,000

8,000,000

30,000,000

30,000,000

The funds were used for repaying existing borrowings.
The funds were used for acquiring new properties.
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 17th period (Semi-Annual Report for 17th Period)25

6. Condition of Investment Transactions(1) Transactions of Property and Asset-Backed Securities, Etc.
None(2) Transactions of Other Assets
None(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
None2) Others
Of the transactions of JEI that are subject to research for specified assets value and other particulars under
Section 201 of the Investment Trust Law are researched and reported by Ernst & Young ShinNihon LLC.
Two interest rate swap transactions were subject to the research during the period from July 1, 2014 toDecember 31, 2014 and we have received the related research report from Ernst & Young ShinNihon LLC. In
the research, Ernst & Young ShinNihon LLC is requested to report on the name of counterparty, currency,
contractual interest rate, transaction term and other matters pertaining to the subject interest rate swap
transactions.

(4) Transactions with Interested Parties
1) Transactions
None2) Amounts of fees paid and other expenses

Classification

Property management
costs and fees

Total

(Unit: Thousands of yen)
Breakdown of transactions with interested parties
and major shareholders
Total amount paid (A)B/APaid toAmount paid (B)
NIPPON STEEL KOWA
REAL ESTATE CO., LTD.
1,246,265
Kowa Real Estate Facilities,
Co., Ltd.
1,246,265–

136,26310.9%

285,27622.9%

421,540

33.8%(Note 1) Figures indicate fees paid to interested parties of asset management companies with whom JEI had transactions during thesix months ended December 31, 2014.
(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..

2,442 thousand yen

KOWA REAL ESTATE FACILITIES CO., LTD.

95,417 thousand yen

Asset Management Report for 17th period (Semi-Annual Report for 17th Period)

26

(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 17th period (Semi-Annual Report for 17th Period)27

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 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
directors of JEI during the six months ended December 31, 2014 is summarized below.
Approval date

Approved agenda

September 19,
2014

Conclusion of amendment
agreement to the asset
management agreement

Description
Provisions on compensations paid for
operations commissioned to the AssetManagement Company were partiallyrevised.

(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 17th period (Semi-Annual Report for 17th Period)28

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
December 31, 2014 and June 30, 2014
with Independent Auditor’s ReportJapan Excellent, Inc.
Balance Sheets
As of December 31, 2014 and June 30, 2014

AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 5)
Rental receivables
Consumption taxes refundable
Prepaid expenses and other current assets
Total current assets
Property and equipment (Note 7):
Buildings and building improvements
Machinery and equipment
Furniture and fixtures
Land
Construction in progress
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
Intangible assets:
Leasehold rights
Brand and trademark
Leasehold rights for trust accounts
Other intangible assets for trust accounts
Total intangible assets
Investments and other assets:
Security deposits
Long-term prepaid expenses
Other assets
Total investments and other assets
Deferred assets:
Investment corporation bond issuance costs
Total deferred assets
Total assets

As of
As of
December 31,
June 30,
2014
2014(Thousands of yen)

As ofDecember 31,
2014(U.S. dollars)(Note 2)

¥ 20,133,942
891,341–
187,374
21,212,657¥ 18,431,014
857,232
374,253
253,502
19,916,001$ 167,045,066
7,395,183–
1,554,587
175,994,836

5,681,734
6,253
10,716
3,032,789
3,690

5,637,229
6,253
10,716
3,022,966
11,266

47,139,579
51,882
88,90925,162,105
30,617103,706,287
646,734
159,601
152,291,495
6,177(18,759,432)
246,786,044

103,368,528
590,461
152,432
152,290,671
9,469(17,101,867)
247,998,124

860,418,875
5,365,752
1,324,159
1,263,515,262
51,249(155,641,181)
2,047,507,208

1,721,608
308
7,380,017
5,071
9,107,004

1,721,403
366
7,380,017–
9,101,786

14,283,644
2,560
61,229,708
42,07575,557,987

15,182483,751
321,631
820,564

15,182
370,695
315,397
701,274

125,958
4,013,533
2,668,476
6,807,967

110,838
110,838¥278,037,107

125,301
125,301¥277,842,486

919,585
919,585$ 2,306,787,583

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

Liabilities
Current liabilities:
Accounts payable – trade
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
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
Units authorized:
10,000,000 units as of December 31, 2014
Units issued and outstanding:
1,212,750 units as of December 31, 2014
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

As of
As of
December 31,
June 30,
2014
2014(Thousands of yen)

As ofDecember 31,
2014(U.S. dollars)(Note 2)¥$

791,737¥

900,124

6,568,794

5,000,000
15,540,000
344,430
205,401
542
432,931
86,882
22,401,923

5,000,000
20,500,000
332,909236,686
33–
98,801
27,068,553

41,483,448
128,930,557
2,857,628
1,704,150
4,496
3,591,896
720,830
185,861,799

25,000,000
88,360,000
764,785

25,000,000
83,400,000
775,322

207,417,240
733,095,495
6,345,182

10,481,873
124,606,658
147,008,581

10,600,277
119,775,599
146,844,152

86,964,852
1,033,822,769
1,219,684,568

127,950,539

127,950,539

1,061,565,910

37,3473,040,640
3,077,987
131,028,526
131,028,526

37,3473,010,448
3,047,795
130,998,334
130,998,334¥ 278,037,107¥ 277,842,486

309,857
25,227,248
25,537,105
1,087,103,015
1,087,103,015$
2,306,787,583

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

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from July 1, 2014 to December 31, 2014
and from January 1, 2014 to June 30, 2014

For the period from For the period
July 1,from January 1,
2014
2014
to December 31,
to June 30,
2014
2014
(Thousands of yen)

For the period
from July 1,
2014
to December 31,
2014(U.S. dollars)(Note 2)

Revenues:
Rental revenues (Note 13)
Other (Note 13)
Total revenues¥8,754,613
941,199
9,695,812¥8,599,070
959,325
9,558,395$72,634,312
7,808,833
80,443,145

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

5,180,793
409,168
20,74940,644
6,540
74,016
5,731,910
3,963,902

5,022,564
397,206
19,35337,294
6,540
109,152
5,592,109
3,966,286

42,983,432
3,394,746
172,148
337,20954,260614,089
47,555,884
32,887,261

1,799
2,419

1,760
1,849

14,926
20,076

627,936
143,137–
140,904

632,100
115,11735,702
151,857

5,209,793
1,187,566–
1,169,038

14,464526
3,041,153

16,304
7,416
3,011,399

119,998
4,362
25,231,506

3,041,153

3,011,399

25,231,506

907
8
3,040,238
402¥3,040,640

1,100
13,010,298
150¥3,010,448

7,528
65
25,223,913
3,335$25,227,248

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

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

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from July 1, 2014 to December 31, 2014
and from January 1, 2014 to June 30, 2014

Balance as of December 31,
2013
Changes during the fiscal period:
Split of units
Issuance of new units
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of June 30, 2014

Balance as of June 30, 2014
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31,
2014

Balance as of June 30, 2014
Changes during the fiscal period:
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31,
2014

For the period from January 1, 2014 to June 30, 2014
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Number ofunits inissue

Unitholders’capital224,950¥117,901,291¥37,347¥ 2,774,683¥ 2,812,030¥120,713,321¥120,713,321

899,800
88,000–10,049,248

–
–

–
–

–
–

–
10,049,248–
10,049,248

–
–

–
–

–
–

(2,774,533)
3,010,298(2,774,533)
3,010,298(2,774,533)
3,010,298(2,774,533)
3,010,298

987,800
1,212,750

10,049,248¥127,950,539–¥37,347

235,765¥ 3,010,448

235,765¥ 3,047,795

10,285,013¥130,998,334

10,285,013¥130,998,334

For the period from July 1, 2014 to December 31, 2014
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Total net assets

Number ofunits inissue

Unitholders’capital1,212,750¥127,950,539¥37,347¥ 3,010,448¥ 3,047,795¥130,998,334¥130,998,334

–
–

–
–

–
–

(3,010,046)
3,040,238(3,010,046)
3,040,238(3,010,046)
3,040,238(3,010,046)
3,040,238

Total net assets

–

–

–

30,19230,19230,19230,192

1,212,750¥127,950,539¥37,347¥ 3,040,640¥ 3,077,987¥131,028,526¥131,028,526

For the period from July 1, 2014 to December 31, 2014
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(U.S. dollars) (Note 2)

Number ofunits inissue

Unitholders’capital1,212,750$1,061,565,910$309,857$ 24,976,748$ 25,286,605$1,086,852,515$1,086,852,515

–
–

–
–

–
–

(24,973,413)
25,223,913(24,973,413)
25,223,913(24,973,413)
25,223,913(24,973,413)
25,223,913

Total net assets

–

–

–

250,500

250,500

250,500

250,500

1,212,750$1,061,565,910$309,857$ 25,227,248$ 25,537,105$1,087,103,015$1,087,103,015

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

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from July 1, 2014 to December 31, 2014
and from January 1, 2014 to June 30, 2014
For the period For the period
from
from
July 1,January 1,
2014 to2014 toDecember 31,
June 30,
2014
2014(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuancecosts
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
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

For the period
fromJuly 1,2014 toDecember 31,
2014(U.S. dollars)(Note 2)

¥ 3,041,153
1,657,642¥ 3,011,399
1,624,902$ 25,231,506
13,752,945

14,464–(1,799)768,840(34,109)374,253
64,350(28,379)
11,646432,931(11,919)(113,056)(5,141)
6,170,876
1,799(800,126)(1,029)5,371,520

16,30435,702(1,760)783,957(23,332)(374,253)(108,871)
136,074(4,094)(243,807)(38,000)
22,776
17,5404,854,537
1,760(802,252)(1,722)
4,052,323

119,998–(14,926)
6,378,831(282,996)
3,105,064
533,889(235,450)
96,6193,591,896(98,893)(937,989)(42,655)
51,197,839
14,926(6,638,393)(8,537)44,565,835–(51,915)(478,670)
(204)
6,536
(17,074)

97,285(866,748)(19,217,065)(536,359)
136,497––(430,723)(3,971,382)(1,692)54,227(141,654)

209,992(328,395)(659,730)

1,515,515(327,854)(19,198,729)

1,742,239(2,724,595)(5,473,580)

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 new units
Proceeds from issuance of investment corporation bonds
Payments for investment corporation bond redemption
Payments for investment corporation bond issuance costs
Payments for new unit issuance costs
Distributions to unitholders
Net cash provided by (used in) financing activities––
15,500,000(15,500,000)
–
–
–
–
–
(3,008,862)(3,008,862)

9,000,000(9,000,000)
7,500,000–
10,049,248
13,000,000(12,000,000)(76,000)(35,702)(2,774,560)
15,662,986––
128,598,689(128,598,689)
–
–
–
–
–
(24,963,594)(24,963,594)

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

1,702,928
18,431,014¥ 20,133,942

516,580
17,914,434¥ 18,431,014

14,128,661
152,916,405$ 167,045,066

Cash flows from investing activities
Purchases of investment securities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits in trust accounts fromtenants
Payments for security deposits in trust accounts to tenants
Net cash used in investing activities

The accompanying notes are an integral part of these financial statements.
35

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from July 1, 2014 to December 31, 2014
and from January 1, 2014 to June 30, 2014

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 54% by NIPPON STEEL KOWA
REAL ESTATE CO., LTD., 26% by The Dai-ichi Life Insurance Company, Limited, and
20% by other corporations. Due to the transfer of ownership by Sekisui House on May 12,
2014, ownership interests of 9% and 6% were each acquired 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 December 31, 2014, JEI
held 30 properties with 330,179.79 square meters of total leasable space and had leases with
214 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. Amounts have been rounded to the nearest thousand yen in theaccompanying financial statements and in the notes thereto, whereas amounts were truncatedin the Japanese financial statements prepared in accordance with Japanese GAAP.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The
rate of ¥120.53 = U.S. $1.00, the foreign exchange rate prevailing on December 31, 2014, hasbeen used for translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled into U.S. dollars atthat or any other rate.
36

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).

37

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. No property-related taxes were
capitalized for the period from July 1, 2014 to December 31, 2014, whereas the capitalized
amount for the period from January 1, 2014 to June 30, 2014 was ¥121,674 thousand.
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 treatments, 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 December 31,
2014 and June 30, 2014 consisted of the following:

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

As of
As of
December 31,
June 30,
2014
2014(Thousands of yen)

As ofDecember 31
2014(U.S. dollars)¥ 5,591,016
14,542,926¥ 3,967,721
14,463,293$ 46,386,926
120,658,140¥20,133,942¥18,431,014$167,045,066

38

5.

Financial Instruments

For the periods from July 1, 2014 to December 31, 2014 and from January 1, 2014 toJune 30, 2014
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 rate, 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 Risks)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, thorough which a floating interest
rate is swapped for a fixed interest rate, which finally led to all existing borrowings
being covered by a fixed interest rate swap for its entire maturity by the end of
December 31, 2014. To reduce credit risk, derivative transactions (interest-rate
swaps) are entered into exclusively with counterparties that are financial institutions
having a high credit rating. For hedging accounting methods, hedging instruments,
hedged items, hedging policies and methods for evaluation of the effectiveness ofhedging activities, see “Derivatives and hedge accounting” under Summary of
Significant Accounting Policies.
(b) Liquidity Risk (the 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 December 31, 2014). Liquidity risk is also mitigated through theconstant management of liquidity on hand.

39

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 December 31, 2014 and June 30, 2014of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note 2).
As of December 31, 2014
As of June 30, 2014
Carrying value
Fair value
Difference
Carrying value
Fair value
Difference(Thousands of yen)
(1) Cash and cash deposits(2) Cash in trust anddeposits in trust
Total assets¥(3) Short-term loans(4) Investment corporation
bonds due within one
year(5) Long-term debt due
within one year(6) Investment corporation
bonds(7) Long-term debt
Total liabilities¥(8) Derivative transactions *¥5,591,016

14,542,926¥ 20,133,942
–

¥

–

¥

14,542,926¥ 20,133,942¥––

14,463,293¥ 18,431,014

–

¥

–

¥

¥

¥

5,591,016

3,967,721–

As of December 31, 2014
Carrying value
Fair value
Difference(U.S. dollars)

¥

–

$

14,463,293¥ 18,431,014¥––

120,658,140$ 167,045,066

–

¥

–

$

¥

¥

3,967,721

46,386,926–

46,386,926$–

120,658,140$ 167,045,066

$

–
–

–

$

–

$

$

5,000,000

5,025,300

25,3005,000,000

5,049,400

49,40041,483,448

41,693,354

209,906

15,540,000

15,665,910

125,910

20,500,000

20,644,680

144,680

128,930,557

129,975,193

1,044,636

25,000,000
88,360,000¥ 133,900,000

25,443,840
89,716,287¥ 135,851,337

443,840
1,356,287¥ 1,951,337

25,000,000
83,400,000¥ 133,900,000

25,302,410
84,827,154¥ 135,823,644

302,410
1,427,154¥ 1,923,644

207,417,240
733,095,495$ 1,110,926,740

211,099,643
744,348,189$ 1,127,116,379

3,682,403
11,252,694$ 16,189,639

–

¥

–

¥

–

¥

–

¥

–

¥

–

$

–

$

–

$

–

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

(Note 1)
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 and(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.
40

5.

Financial Instruments (continued)
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 15, “Derivative Transactions.”(Note 2)Financial instruments for which fair value is deemed extremely difficult to determine
As of
As of
December 31,
June 30,
2014
2014(Thousands of yen)

As ofDecember 31,
2014(U.S. dollars)(1) Security deposits from tenants*¥$(2) Security deposits from tenants fortrust accounts*¥ 10,481,873

764,785¥

775,322¥ 10,600,277

6,345,182$ 86,964,852* 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 its
characteristics it is extremely difficult to estimate the security deposits in advance because of theuncertainty of the timing when the tenant vacates. Therefore, it is impossible to rationally estimate theexact cash flow from such security deposits.

(Note 3)The scheduled redemption amounts of financial assets after the balance sheet dateCash and cash deposits
Cash in trust anddeposits in trust
Total

Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of December 31, 2014
2 to 3 years 3 to 4 years(Thousands of yen)

1 year or less

1 to 2 years¥ 5,591,016

¥

–

¥

–

¥

–

¥

–

¥

–

14,542,926¥20,133,942

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

1 year or less

1 to 2 years$ 46,386,926

$

–

$

–

$

–

$

–

$

–

120,658,140$167,045,066

$

–
–

$

–
–

$

–
–

$

–
–

$

–
–

As of December 31, 2014
2 to 3 years 3 to 4 years(U.S. dollars)

4 to 5 years

4 to 5 years

Over 5 years

Over 5 years

41

5.

Financial Instruments (continued)

Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of June 30, 2014
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¥ 3,967,721

¥

–

¥

–

¥

–

¥

–

¥

–

14,463,293¥18,431,014

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

(Note 4)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date
1 year or less
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

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 December 31, 2014
2 to 3 years
3 to 4 years(Thousands of yen)

1 to 2 years
¥

–

¥

–

¥

–

4 to 5 years¥–

Over 5 years¥–

5,000,000

–

–

–

–

–

15,540,000

–

–

–

–

–

–
–
¥ 20,540,000

5,000,000
16,760,000¥ 21,760,000–
24,000,000¥ 24,000,000

7,000,000
17,750,000¥ 24,750,000

5,000,000
3,750,000¥ 8,750,000

8,000,000
26,100,000¥ 34,100,000

1 year or less

1 to 2 years

As of December 31, 2014
2 to 3 years
3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years

–

$

–

$

–

$

$

–

–

$

$

–

41,483,448

–

–

–

–

–

128,930,557

–

–

–

–

–

–
–
$ 170,414,005

41,483,448
139,052,518$ 180,535,966–
199,120,551$ 199,120,551

58,076,827
147,266,241$ 205,343,068

41,483,448
31,112,586$ 72,596,034

66,373,517
216,543,599$ 282,917,116

1 year or less

1 to 2 years

As of June 30, 2014
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

5,000,000

–

–

–

–

–

20,500,000

–

–

–

–

–

–
–
¥ 25,500,000–
23,540,000¥ 23,540,000

5,000,000
15,760,000¥ 20,760,000–
26,000,000¥ 26,000,000

12,000,000
7,500,000¥ 19,500,000

8,000,000
10,600,000¥ 18,600,000

42

6.

Investment and Rental Property

For the periods from July 1, 2014 to December 31, 2014 and from January 1, 2014 toJune 30, 2014
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 ofDecember 31, 2014 and June 30, 2014 for such real estate for lease.

As ofJune 30, 2014
¥257,099,544

As ofJune 30, 2014
$2,133,075,122

As of
December 31, 2013
¥238,103,099

Carrying value
ChangeAs ofduring period (*1)
December 31, 2014
(Thousands of yen)¥(1,206,805)¥255,892,739

Carrying value
ChangeAs of(*1)
during period
December 31, 2014
(U.S. dollars)$(10,012,487)

Fair value
As ofDecember 31, 2014
¥251,560,000
Fair value
As ofDecember 31, 2014

$2,123,062,635$2,087,115,241

Carrying value
ChangeAs ofduring period (*2)
June 30, 2014
(Thousands of yen)

Fair value
As ofJune 30, 2014

¥18,996,445¥257,099,544¥248,390,000(Note 1)
Carrying value represents the acquisition cost less accumulated depreciation.
(Note 2)(*1) A decrease of ¥1,206,805 thousand ($10,012,487) during period is mainly due todepreciation costs of ¥1,657,585 thousand ($13,752,472).
(*2) Changes during the period comprise increases of ¥12,099,982 thousand related to theacquisition of HAMARIKYU INTERCITY (Additional acquisition ofcompartmentalized ownership), ¥2,190,578 thousand related to the acquisition of
Aoba-dori Plaza, ¥4,435,960 thousand related to the acquisition of Daiwa
Minami-morimachi Building, ¥1,335,694 thousand related to the acquisition of NHK
Nagoya Housou-Center Building (Additional acquisition of co-ownership interest), anda decrease of ¥1,624,845 thousand for depreciation costs.
(Note 3)
Fair value as of December 31, 2014 as well as June 30, 2014 is appraisal value provided bythird-party real estate appraisers.

43

7.

Property and Equipment

Property and equipment at December 31, 2014 and June 30, 2014 consisted of the following:
As of December 31, 2014
As of June 30, 2014
Acquisition
Accumulated
Net
Acquisition
AccumulatedNet
cost
depreciation
book value
cost
depreciation
book value(Thousands of yen)
Buildings and building
improvements
Machinery andequipment
Furniture and fixtures
Land
Construction in progress
Buildings and building
improvements for trust
accounts
Machinery andequipment for trust
accounts
Furniture and fixtures
for trust accounts
Land for trust accounts
Construction in progress
for trust accounts
Total

¥

5,681,734¥(819,946)¥

4,861,788¥

5,637,229¥(737,078)¥

4,900,151

Acquisition
cost$

As of December 31, 2014
AccumulatedNet
depreciation
book value(U.S. dollars)

47,139,579$(6,802,836)$

40,336,743

6,253
10,716
3,032,789
3,690

(848)
(2,010)
–
–

5,405
8,706
3,032,789
3,690

6,253
10,716
3,022,966
11,266(566)(1,429)
–
–

5,687
9,287
3,022,966
11,26651,882
88,90925,162,105
30,617(7,036)(16,676)––

44,846
72,23325,162,105
30,617103,706,287(17,619,383)

86,086,904

103,368,528(16,075,495)

87,293,033

860,418,875(146,182,551)

714,236,324

646,734(244,505)

402,229

590,461(223,973)

366,488

5,365,752(2,028,583)

3,371,169

159,601
152,291,495(72,740)–

86,861
152,291,495

152,432
152,290,671(63,326)–

89,106
152,290,671

1,324,159
1,263,515,262(603,499)–

720,660
1,263,515,262

6,177¥ 265,545,476–¥ (18,759,432)

6,177¥ 246,786,044

9,469¥ 265,099,991–¥ (17,101,867)

9,469¥ 247,998,124

51,249$ 2,203,148,389–$ (155,641,181)

51,249$ 2,047,507,208

44

8.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of December 31, 2014 and June 30, 2014 consisted of
the following:
As of December 31, 2014
As of June 30, 2014
Weighted-average
Weighted-average(*1)
Amountinterest rate
Amountinterest rate (*1)
(Thousands of yen)(Thousands of yen)
Long-term debt due within one year:
Unsecured loans from an insurancecompany due on July 31, 2014
Unsecured loans from a bank due on
July 31, 2014
Unsecured loans from banks due on
December 29, 2014
Unsecured loans from a bank due on
June 30, 2015
Unsecured loans from an insurancecompany due on June 30, 2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
SubtotalLong-term debt:
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
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
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 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 a 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
Subtotal
Total

¥

–

–

–
–

As of
December, 2014
Amount(U.S. dollars)–

2,000,000

2.25875% (*2)–

2,000,000

2.28417% (*2)––

11,500,000

0.86000%–¥$

2,000,000

2.27344% (*2)

2,000,000

2.27344% (*2)

16,593,379

3,000,000

2.27344% (*2)

3,000,000

2.27344% (*2)

24,890,069

4,540,000

1.13750% (*2)––

37,666,971

2,000,000

1.14125% (*2)––

16,593,379

4,000,000
15,540,000

0.97125% (*2)–
20,500,000–

33,186,759
128,930,557

–

–

–

–

–

–

13,000,000
3,760,000
5,000,000
4,000,000
3,000,000
6,000,000
3,000,000
2,000,000
1,000,000
3,000,000
11,000,000
3,750,000
3,750,000
2,000,000
2,600,000
1,000,000
3,000,000
2,000,000
2,000,000
5,750,000
2,000,000
5,750,000
88,360,000¥ 103,900,000

4,540,000

1.13750% (*2)–

2,000,000

1.14125%(*2)–

0.97125%(*2)–

1.36375%(*2)

107,856,966

1.24375%(*2)

31,195,553

1.24750%(*2)

41,483,448

1.03000%(*2)

33,186,759

1.09734%(*2)

24,890,069

1.73875%(*2)

49,780,138

1.08375%(*2)

24,890,069

1.04550%(*2)

16,593,379

1.19212%(*2)

8,296,690

1.65125%(*2)

24,890,069

0.81225%(*2)

91,263,587

0.74500%(*2)

31,112,586

0.77500%(*2)

31,112,586

1.60000%(*2)

16,593,379

1.36400%(*2)

21,571,393

1.31261%(*2)

8,296,690

1.00000%(*2)

24,890,069(*2)

16,593,379

4,000,000

1.36375%(*2)

1.24375%(*2)

1.24750%(*2)

1.03000%(*2)

1.09734%(*2)

1.73875%(*2)

1.08375%(*2)

1.04550%(*2)

1.19212%(*2)

1.65125%(*2)

0.81225%(*2)

0.74500%(*2)

0.77500%(*2)

1.60000%(*2)

1.36400%(*2)

1.31261%(*2)

1.00000%(*2)

1.60750%(*2)

2,000,000

1.60750%

0.98834%

(*2)

–

–

16,593,378

0.81875%

(*2)

–

–

47,705,965

1.15417%

(*2)

–

–

16,593,378

0.93625%(*2)–
83,400,000¥ 103,900,000–

47,705,965
733,095,495$ 862,026,052

13,000,000
3,760,000
5,000,000
4,000,000
3,000,000
6,000,000
3,000,000
2,000,000
1,000,000
3,000,000
11,000,000
3,750,000
3,750,000
2,000,000
2,600,000
1,000,000
3,000,000(*1) The weighted-average interest rate is weighted-average figures during the period. As for the borrowings, which were
hedged by interest-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 debts (incl. Fixed-rate debts through each interest-rate swap agreement).

45

8.

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

The scheduled repayment amounts of long-term debt as of December 31, 2014 (excluding thelong-term debt due within one year) are as follows:

Long-term debt

Long-term debt

1 to 2 years

2 to 3 years

3 to 4 years
4 to 5 years(Thousands of yen)Over 5 years¥16,760,000¥24,000,000¥17,750,000¥3,750,000¥26,100,000

1 to 2 years

2 to 3 years

3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$139,052,518$199,120,551$147,266,241$31,112,586$216,543,599

JEI has commitment lines of ¥14,000 million ($116,154 thousand) with three financial
institutions to mitigate refinancing risk and enhance financial stability. As of December 31,
2014, these commitment lines have never been utilized.

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of December 31, 2014 and June30, 2014 are summarized as follows:

Unsecured bond #2 dueon June 26, 2015
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
Total

As of
December
31,2014

As of December 31, 2014
WeightedaverageAmountinterest rate
(Thousandsof yen)As of June 30, 2014
WeightedaverageAmountinterest rate
(Thousandsof yen)¥ 5,000,000

1.29000%¥ 5,000,000

5,000,000

1.01000%

5,000,000

1.01000%

41,483,448

2,000,000

1.40000%

2,000,000

1.40000%

16,593,379

5,000,000

0.46000%

5,000,000

0.46000%

41,483,448

5,000,000

0.46000%

5,000,000

0.46000%

41,483,448

8,000,000¥30,000,000

1.13000%

8,000,000¥30,000,000

1.13000%

66,373,517$248,900,688

Amount(U.S. dollars)

1.29000% $ 41,483,448

46

9.

Investment Corporation Bonds (continued)

The scheduled redemption amounts of investment corporation bonds as of December 31, 2014
are as follows:

Investment
corporation bonds

Investment
corporation bonds

1 year or less

1 to 2 years¥5,000,000¥5,000,000

1 year or less

1 to 2 years$41,483,448$41,483,448

2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years¥7,000,000¥5,000,000¥8,000,000

2 to 3 years
3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$41,483,448$66,373,517––$58,076,827

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.

11. Per Unit Information
JEI implemented a five-for-one split of its investment units with January 1, 2014 as theeffective date.
Net assets per unit as of December 31, 2014 and June 30, 2014 were calculated based on thenumber of units outstanding as of each date respectively, i.e. 1,212,750 units after completionof the abovementioned five-for-one split of its investment units.
Net income per unit for the period from July 1, 2014 to December 31, 2014 was calculated
based on the number of units outstanding during the respective period, i.e. 1,212,750 units.
Net income per unit for the period from January 1, 2014 to June 30, 2014 were calculated
based on the weighted-average number of units outstanding during the period, i.e. 1,198,783
units.
Accordingly, net assets per unit were ¥108,042 ($896) as of December 31, 2014 and ¥108,017
as of June 30, 2014. Net income per unit was ¥2,506 ($21) for the period from July 1, 2014 toDecember 31, 2014, and ¥2,511 for the period from January 1, 2014 to June 30, 2014.

47

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 December 31,
2014 and June 30, 2014 are summarized as follows:
As of
As of
December 31,
June 30,
2014
2014(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

¥14
14
¥14

¥23
23
¥23

As of
December 31,
2014(U.S. dollars)
$122
122
$122

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from July 1, 2014 to December 31, 2014 and from January 1, 2014 to June 30,
2014 is as follows:
For the period
For the period
from July 1, 2014 from January 1,
to December 31, 2014 to June 30,
2014
2014
Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

34.16%

36.59%(34.15)0.02
0.03%(36.57)0.02
0.04%

Adjustment in deferred tax assets and deferred tax liabilities due to tax rate change
The “Act for Partial Revision of Income Tax Act” (Act No.10 of 2014) promulgated on
March 31, 2014 partially revised the “Special Measures to Secure the Funds to Realize the
Restoration of the Damages following the Great East Japan Earthquake” (Act No.117 of
2011) to limit the taxation period of the special corporate tax for restoration to March 31,
2014, which resulted in a change of the statutory tax rate applicable to the deferred tax assets
and deferred tax liabilities arising from the temporary differences that are expected to beresolved in the fiscal period starting on April 1, 2014 and after to 34.16%. The impact of thischange is minimal.
The “Act for Local Corporation Tax Act” (Act No.11 of 2014) and The “Act for Partial
Revision of Local Tax Act” (Act No.4 of 2014) promulgated on March 31, 2014 had led tothe establishment of the “Local Corporation Tax Act”, as well as partial involvement of“Special Local Corporation Tax” in “Corporation Tax”, which resulted in a change of thestatutory tax rate applicable to the deferred tax assets and deferred tax liabilities arising fromthe temporary differences that are expected to be resolved in the fiscal period starting on
October 1, 2014 and after to 34.15%. The impact of this change is minimal.
48

13. Breakdown of Property Rental Business Revenues and Expenses
For the period
For the period
from July 1, 2014 from January 1,
to December 31, 2014 to June 30,
2014
2014
(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

For the period
from July 1, 2014
to December 31,
2014(U.S. dollars)¥8,754,613
941,199¥8,599,070
959,325$72,634,312
7,808,833

9,695,812

9,558,395

80,443,145

1,246,265
1,118,202
753,159
27,048
176,671
1,657,585
201,863

1,272,707
1,013,223
699,483
27,459189,1621,624,845
195,685

10,339,874
9,277,373
6,248,726
224,409
1,465,786
13,752,472
1,674,791

5,180,793¥4,515,019

5,022,564¥4,535,831

42,983,432$37,459,713

14. Leases
JEI leases properties on which rental revenues are earned. At December 31, 2014 and June 30,
2014, future lease revenues under non-cancelable operating leases are summarized as follows:
As of
December 31,
As of
2014
June 30, 2014
(Thousands of yen)
Due within one year
Due after one year
Total

¥

466,260
694,741¥1,161,001¥ 606,136
489,252¥1,095,388

As ofDecember 31,
2014(U.S. dollars)$3,868,415
5,764,052$9,632,467

49

15. Derivative Transactions
Derivative Transactions as of December 31, 2014
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of December 31, 2014 for each hedge accounting method
applied.
Hedge
accounting
methodType of derivativetransaction

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

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps¥76,900,000¥66,360,000

Method ofcalculating
the fair value*

Contract amount
Fair
More thanvalue
one year(U.S. dollars)$638,015,432$550,568,323

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 June 30, 2014
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of June 30, 2014 for each hedge accounting method applied.
Hedge
accounting
methodType of derivativetransaction

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
¥65,400,000¥65,400,000

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.”50

16. Related Party Transactions
For the period from July 1, 2014 to December 31, 2014
(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
Description oftransaction

Name
Hidehiko
Ogawa

Payment of asset
management fees to
JEAM

Amount(Thousands(U.S. dollars)of yen)¥409,169$3,394,746

Account
Accounts
payableBalance at the end of period(Thousands(U.S. dollars)of yen)¥272,759$2,262,998

For the period from January 1, 2014 to June 30, 2014
(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)
¥397,206

Account
Accounts
payableBalance at the end of period(Thousands of yen)
¥269,840

51

17. Segment Information
For the periods from July 1, 2014 to December 31, 2014 and from January 1, 2014 toJune 30, 2014
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.

18. 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 ¥3,040,364,250 ($25,224,959), which is
the maximum integral multiple of the 1,212,750 units issued, but not exceeding¥3,040,640,250, which is the amount of retained earnings at December 31, 2014. No cash
distribution exceeding the income amount set forth in Section 33.1.4 of the bylaws of JEI
shall be made.
On February 16, 2015, the Board of Directors approved a resolution to make a cash
distribution of ¥2,507 ($20.8) per unit aggregating to ¥3,040,364,250 ($25,224,959) tounitholders of record as of December 31, 2014.

19. Significant Subsequent Events
Not applicable.

52