Asset Management Report for 26th Period(Semi-Annual Report for 26th Period)
From January 1, 2019 to June 30, 2019

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)1

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 26th period (from January 1, 2019 to June 01, 2019).
During the 26th period, we maintained extremely high occupancy rates in the range of 99% while working to increase
rental revenues through efforts to attract new tenants with an aim for an increase in the rent level and to conclude upward
rent revisions.
Furthermore, on the financial front, we extended the average remaining period of interest-bearing debt while at the sametime lowering the average interest rate.
As a result, JEI recorded operating revenue of 10,668 million yen, operating income of 4,318 million yen and net incomeof 3,690 million yen, and distribution per unit stood at 2,827 yen.
In the 27th period, we plan to acquire BIZCORE AKASAKA MITSUKE completed in March this year from the BIZCORE
series which features medium-sized, high-grade office buildings developed by Nippon Steel Kowa Real Estate Co., Ltd.,the sponsor.

About Future Asset Management
The real estate transaction market is expected to see real estate transaction prices remain high, backed by a strong appetite
for investment by market participants and other factors. In the office building leasing market, vacancy rates and rent levels
are expected to continue to improve for the time being, supported by ongoing strong needs from tenants for floor expansion
within the same buildings, establishment of new bases, expansionary relocation and such.
Under such an environment, JEI will continue with quality growth through investment in prime real estate as well as asset
replacement by utilizing the sponsor pipeline with an aim to expand its asset size and improve profitability over the medium
to long term while carefully watching financial trends and market trends going forward. Furthermore, JEI will endeavor toenhance profitability of the entire portfolio by maintaining the level of occupancy rate as well as by improving the rent
level based on market trends. In terms of finance, JEI will strive to conduct well-balanced financial management byworking to reduce financing costs while continuing to follow the basic policy of fixing interest rates of loans, extending
borrowing periods and diversifying maturity dates.
In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and other laws andregulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the status of our operations
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 26th period (Semi-Annual Report for 26th Period)

2II. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
22nd Period
23rd Period
24th Period
25th Period
26th Period
January 1, 2017
July 1, 2017 January 1, 2018 July 1, 2018 January 1, 2019
to June 30,
to December 31,
to June 30,
to December 31,
to June 30,
2017
2017
2018
2018
2019

Fiscal period
Operating revenue(Rental revenues)
Operating expenses(Property operating expenses)
Operating income
Ordinary income
Net income
Total assets(Period-on-period change)
Net assets(Period-on-period change)
Unitholders’ capital
Total outstanding investment
units
Net assets per unit
Net income per unit (Note 1)
Total distribution
Distribution per unit
(Profit distribution per unit)(Distribution in excess ofearnings per unit)
Return on assets (Note 2)(Annualized rate)
Return on equity (Note 3)(Annualized rate)
Capital ratio (Note 4)(Period-on-period change)
Payout ratio (Note 5)
Number of investment
properties
Number of tenants
Total leasable space (Note 6, 7)
Occupancy rate

(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(%)(Millions ofyen)(%)(Millions ofyen)

10,642

11,085

10,535

10,657

10,668(10,642)(10,806)(10,535)(10,657)(10,668)

6,488

6,565

6,509

6,373

6,349

(5,890)(5,931)(5,754)(5,780)(5,747)

4,154

4,519

4,025

4,284

4,318

3,460

3,701

3,340

3,597

3,691

3,459

3,700

3,339

3,596

3,690

297,177

282,197

285,008

285,400

286,172(0.4)(-5.0)

(1.0)

(0.1)

(0.3)

143,693

143,933

143,786

143,727

143,822

(0.0)

(0.2)

(-0.1)(-0.0)(0.1)

139,972

139,972

139,972

139,972

139,972(units)1,305,700

1,305,700

1,305,700

1,305,700

1,305,700(yen)

110,050

110,234

110,122

110,076

110,149(yen)(Millions of
yen)
(yen)

2,649

2,833

2,557

2,754

2,826

3,460

3,486

3,655

3,595

3,691

2,650

2,670

2,800

2,754

2,827

(yen)

(2,650)(2,670)(2,800)(2,754)(2,827)

(yen)

(－)

(－)

(－)

(－)

(－)

(%)

1.2

1.3

1.2

1.3

1.3

(%)

(2.4)

(2.5)

(2.4)

(2.5)

(2.6)

(%)

2.4

2.6

2.3

2.5

2.6

(%)

(4.9)

(5.1)

(4.7)

(5.0)

(5.2)

(%)

48.4

51.0

50.5

50.4

50.3

(%)

(-0.2)(2.7)(-0.6)(-0.1)(-0.1)

(%)

100.0

94.2

109.5

100.0

100.0

(properties)

31

29

30

31

31

(tenants)
(m2)

242

243

202

204

204

362,292

356,854341,247

343,830

343,830(%)(Millions ofyen)(Millions of
yen)

99.4

99.1

99.6

99.6

99.4

1,967

1,972

1,926

1,920

1,935

1,056

1,092

867

809

1,285

Net operating income (NOI)(Note 8)Funds from operation (FFO) per
unit (Note 9)
FFO multiples (Note 10)
Debt service coverage ratio(DSCR) (Note 11)(Millions of
yen)

6,719

6,847

6,707

6,797

6,856

(yen)

4,156

4,131

4,159

4,225

4,309

(times)

14.9

16.0

17.0

17.7

18.2

(times)

10.7

10.7

11.1

11.7

12.5

Interest-bearing debt

(Millions of
yen)
(%)

137,900

122,500

126,500

126,600

126,600

46.4

43.4

44.4

44.4

44.2

181

184

181

184

181

Depreciation
Capital expenditure

Loan-to-value (Note 12)
Number of days in operation(days)

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)3

(Note 1) Net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding during thesix months period.
(Note 2) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 3) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 4) Capital ratio = Period end net assets / Period end total assets × 100(Note 5) Payout ratio = (Distribution per unit (not including distribution in excess of earnings per unit) / Net income per unit) × 100(Figures are rounded to the first decimal place.)(Note 6) For properties with joint ownership (including quasi co-ownership of trust beneficiary interest), a figure obtained bymultiplying the leasable space of the entire property by the ownership ratio is indicated as JEI’s leasable space. The same shallapply hereinafter.
(Note 7) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 8) NOI = Rental revenues – Property operating expenses + Depreciation(Note 9) FFO per unit = (Net income + Depreciation – Gain on sale of real estate + Loss on sale of real estate) / Total number ofoutstanding investment units (the figure is rounded down to the whole number).
(Note 10) FFO multiples = Period end investment unit price / Annualized FFO per unit
(Note 11) DSCR = (Net income before interest and taxes + Depreciation) / (Interest expenses + Interest expense on investment
corporation bonds)(Note 12) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

Asset Management Report for 26th period (Semi-Annual Report for 26th 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, JEI has continued investment management primarily in
office buildings with the aim of maintaining sound corporate growth and stable revenues from the medium- to longterm perspectives. On June 30, 2019, JEI settled its twenty-sixth period.
1) Business conditions and results
The Japanese economy during the 26th period continued to remain stable backed by ongoing improvements in
employment and income despite some weakness in exports due to stronger pressure for adjustment in the global
manufacturing industry amid mounting concerns over the worldwide economic slowdown attributable to the
U.S.-China trade friction, etc. With regard to the financial environment in the U.S., the long-term interest rate
has turned to decline with expectations for further rate cuts in the monetary policy, while the pace of increasein employment is slowing down and inflationary pressure seems limited. In Japan as well, the long-term interest
rate for yen has declined since additional monetary easing by the Bank of Japan may be discussed with theplanned consumption tax hike in October, despite capital investment remaining solid.
In the real estate transaction market, amid the continuing favorable environment for fund procurement,
transaction yields are at low level and real estate transaction prices remain high as market participation by
overseas investors, private funds, private REITs and general companies, etc. also continues.
In the office building leasing market, tenant needs for floor area increased in the same building, relocation for
expansion and better location, etc. continue to be apparent, and vacancy rates and levels of asking rent are
improving. JEI has conducted negotiations with tenants emphasizing rent levels and has further strengthened
efforts for upward rent revisions to suit the value of properties for current contracts by ensuring to seize
opportunities for upward rent revision. As to new contracts, JEI has conducted leasing activities while setting
higher rent levels based on market trends. As a result, rent revenue for existing properties increased by 70
million yen and period-end occupancy rate (Note 1) stood at 99.4%.
The total number of properties owned and managed by JEI at the end of the current period was 31 with totalacquisition price of 273.5 billion yen and total leasable space of 343,830.44 m2 (104,008.71 tsubo).
2) Fund procurement highlights
JEI will work on stable and sound financial operations with a basic policy of procuring funds for the long term
at fixed interest rates.
In the 26th period, JEI refinanced 3.75 billion yen in loans that matured in March with loans with a lower
interest rate (0.78% lowered to 0.57% (Note 2)) while extending the borrowing period from 5.0 years to 7.1
years.
Moreover, JEI temporarily refinanced the investment corporation bonds redeemed in March with short-term
funds (5.0 billion yen, 1-year term) from a bank to allow for flexible responses upon comprehensively judging
the market environment for investment corporation bond issuance, trends in interest rates and financing, etc.
accompanying asset replacement, etc.
As a result of the above, as of the end of the 26th period, the average remaining period of interest-bearing debt
(Note 3) was 4.6 years (shortened by 0.3 years from the end of the previous period) and the period-end averageinterest-bearing debt interest rate (Note ４) was 0.77% (down 0.02% from the end of the previous period) andthe loan-to-value ratio of total assets (total assets-based LTV) was 44.2% (down 0.2% from the end of theprevious period).
In addition, JEI continues to have commitment lines of 14.0 billion yen with a credit limit to reduce refinancing
risk and enhance stability for fund procurement, etc.

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

5The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of June 30, 2019)
Credit rating agency

Issuer rating (outlook)

Japan Credit Rating Agency, Ltd.
(JCR)

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

Moody’s Japan

Individual debt issue rating(Note 5)AA−―3) Sustainability initiatives
JEI has worked to reduce the environmental burden and to cooperate/collaborate with stakeholders to achieve asustainable society through corporate social responsibility, while recognizing the importance of consideration
for the environment, society and governance (ESG) in the real estate investment management business.
For instance, setting a target to reduce energy consumption intensity by an average of 1% per year over the
medium to long term, JEI has worked to reduce environmental burden at properties it owns through efforts suchas adoption of LED lighting and upgrading of air-conditioning equipment for better energy-saving performance.
Furthermore, JEI has continuously promoted acquisition of DBJ Green Building certification and the number ofcertified properties stands at 11, or 61.0% of the entire portfolio (as of June 30, 2019; based on leasable space
excluding land with leasehold interest).
Such initiatives for sustainability by JEI earned high recognition including a fourth consecutive “Green Star”
rating (Note 7) in the Global Real Estate Sustainability Benchmark (GRESB) (Note 6) Real Estate Assessment
conducted in 2018, as well as the highest rating of “5 Star” in “GRESB Rating” (Note 8), a rating of overall
score according to global ranking, for the third consecutive year.
Furthermore, in light of the recent heightening of interest in ESG investment from investors, JEI improved its
website upon revamping on May 31, 2019, by adding new content concerning sustainability, etc. to showcase
its efforts on sustainability to investors.
4) Financial results and distribution highlights
As a result of the above management, JEI posted 10,668 million yen in operating revenue, 4,318 million yen in
operating income, 3,691 million yen in ordinary income and 3,690 million yen in net income for the period
under review.
Concerning distributions in the period under review, JEI determined to distribute the entirety of unappropriatedretained earnings (except for the portion of less than one yen per unit) to be eligible for special provisions of thetax 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 for theperiod was 2,827 yen.
(Note 1) Occupancy rate is a percentage of total leased space to total leasable space of each real estate or real estate intrust.
(Note 2) The interest rate fixed by the interest rate swap agreement is stated.
(Note 3) Average remaining period of interest-bearing debt is calculated by applying a weighted average of theremaining period until the repayment date or redemption date of borrowings and investment corporation bonds
at the end of the period to the balance of each interest-bearing debt, for all interest-bearing debt.
(Note 4) Period-end average interest-bearing debt interest rate is calculated by applying a weighted average of interestat the end of the current period to the balance of each interest-bearing debt, for all interest-bearing debt.
(Note 5) The rating is for 7th series unsecured investment corporation bonds, 8th series unsecured investment
corporation bonds, 9th series unsecured investment corporation bonds, 10th series unsecured investment
corporation bonds, 11th series unsecured investment corporation bonds, 12th series unsecured investment
corporation bonds, 13th series unsecured investment corporation bonds and 14th series unsecured investment
corporation bonds.
(Note 6) GRESB is a benchmark established by European pension fund groups to measure real estate companies andmanagement institutions’ consideration to sustainability and is used in cases such as when major European andAsian institutional investors select investment targets.
(Note 7) “Green Star” is given when a high evaluation with a score exceeding 50% is made in the two evaluation axes(“Management Policy” and “Implementation & Measurement).
(Note 8) “5 Star” is given to the top 20% of participants.

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

6

(3) Capital Increase
JEI had no changes in the total number of outstanding investment units for the period under review. The outline of
the changes in the total number of outstanding investment units and unitholders’ capital until the end of the period
under review are as follows:
Unitholders’ capital
Capital transaction (units)
Paid-up Date
Capital transaction
Remarks(Millions of yen)
ChangeFebruary 20, 2006
June 26, 2006
July 21, 2006
July 11, 2007
August 8, 2007
January 31, 2011
February 28, 2011
January 30, 2013
February 27, 2013
January 1, 2014
January 27, 2014
February 26, 2014
July 13, 2015
August 12, 2015
July 11, 2016
August 10, 2016

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

Balance

ChangeBalance

400

400

200

200

(Note 1)

128,000

128,400

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

134,800

3,211

67,641(Note 3)19,000

153,800

18,702

86,344(Note 4)

750

154,550738

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

13,608100,691(Note 6)

3,100

188,650

1,360

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

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

224,950

1,440

117,901(Note 9)899,800

1,124,750–

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

9,135

127,036(Note 11)8,000

1,212,750

913

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

5,894

133,845(Note 13)4,700

1,264,450

589

134,434(Note 14)37,5001,301,950

5,034

139,469(Note 15)3,750

1,305,700

503

139,972(Note 16)

(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 a third
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.
(Note 5) New investment units were issued at an issue price of 984,360 yen per unit through an allocation of investment units to a third
party in order to partially repay debts procured to acquire properties.
(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 and to fund acquisition of a new property.
which was acquired.
(Note 7) New investment units were issued at an issue price of 438,984 yen per unit through an allocation of investment units to a third
party in order to repay short-term loans procured to acquire new properties and to fund acquisition of a new property.
(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.
(Note 9) New investment units were issued at an issue price of 436,609 yen per unit through an allocation of investment units to a third
party in order to fund acquisition of properties.
(Note 10) With December 31, 2013 as the record date, JEI implemented a 5-for-1 split of its investment units held by Unitholders statedor 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.
(Note 12) New investment units were issued at an issue price of 114,196 yen per unit through an allocation of investment units to a third

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

7

party in order to partially fund future acquisitions of specified assets or repayment of loans and redemption of investment
corporation bonds.
(Note 13) New investment units were issued at an offer price of 129,675 yen per unit (issue price of 125,419 yen per unit) through apublic offering in order to partially repay debts procured to acquire properties.
(Note 14) New investment units were issued at an issue price of 125,419 yen per unit through an allocation of investment units to a third
party in order to partially fund future acquisitions of specified assets or partially fund repayment of loans.
(Note 15) New investment units were issued at an offer price of 138,742 yen per unit (issue price of 134,259 yen per unit) through apublic offering in order to partially repay debts procured to acquire properties.
(Note 16) New investment units were issued at an issue price of 134,259 yen per unit through an allocation of investment units to a third
party in order to partially fund future acquisitions of specified assets or partially fund repayment of loans.
(Note 17) At JEI, there exist no investment units held by JEI (investment units without voting rights provided in Article 308-2 of the
Corporate Law which will be applied mutatis mutandis pursuant to Article 94 of the Investment Trust Law) or cross-heldinvestment units (investment units without voting rights provided in Article 160 of the Investment Trust Enforcement
Ordinance) as of the end of 26th period.

[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listed on theReal Estate Investment Trust Section of the Tokyo Stock Exchange during each period is as follows:
Fiscal period
22nd period
23rd period
24th period
25th period
26th period
Investment(closing date) (June 2017) (December 2017) (June 2018) (December 2018) (June 2019)
unit market
Highest (yen)147,200
137,200
147,400
156,200
164,500
price
Lowest (yen)125,100
121,100
131,400
141,000
147,600(Note)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.

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)8

(4) Distributions Paid
Concerning distributions in the period under review, JEI determined to distribute the entirety of 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 for the period was 2,827
yen.
Fiscal period
Accounting period
Unappropriated retained
earnings at end of period(Thousands of yen)
Retained income(Thousands of yen)
Total cash distribution
amount (Thousands of yen)
(Cash distributions perunit) (yen)Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)
Of which, total refund ofinvestment equity(Refund of investment
equity per unit)
Of total refund ofinvestment equity, total
distribution amount fromreserve for temporary
difference adjustments(Of refund of investment
equity per unit, distribution
amount per unit fromreserve for temporary
difference adjustments)
Of total refund ofinvestment equity, total
distribution amount from
distribution reducing
unitholders’ capital for tax
purpose(Of refund of investment
equity per unit,
distribution amount perunit from distribution
reducing unitholders’capital for tax purpose)

22nd period

23rd period

24th period

25th period

26th period

January 1, 2017 to July 1, 2017 to January 1, 2018 to July 1, 2018 to January 1, 2019 toJune 30, 2017 December 31, 2017 June 30, 2018 December 31, 2018 June 30, 20193,460,111

3,700,279

3,339,461

3,596,244

3,691,3106

214,060－－－

3,460,105

3,486,219

3,655,960

3,595,897

3,691,213(2,650)(2,670)(2,800)(2,754)(2,827)3,460,105

3,486,219

3,655,960

3,595,897

3,691,213(2,650)(2,670)(2,800)(2,754)(2,827)

－

－

－

－

－

(－ )

(－ )

(－ )

(－ )

(－ )

－

－

－

－

－

(－ )

(－ )

(－ )

(－ )

(－ )

－

－

－

－

－

(－ )

(－ )

(－ )

(－ )

(－ )

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

9(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
In the real estate market, although transaction yields are believed to be drawing closer to the level where room forfurther lowering is scarce, real estate transaction prices are expected to remain high backed by factors such as thefavorable fund procurement environment and vigorous appetite for investment by market participants.
In the office building leasing market, the level of asking rent is forecasted to rise moderately, centering oncompetitive buildings for the time being, as office demand is strong. Going forward, focusing on market trends
seems necessary as increase in the amount of office floor supply is expected mainly in central Tokyo.
2) Policy and issues on future investment management
A. External growth
JEI will continue striving for acquisition of competitive properties, including through the replacement of assets, bymeans of well-balanced investments based on size and target area, to increase asset size and improve portfolio quality
over the medium to long term. JEI will continue enhancing further interaction and collaboration with sponsor
companies and have the asset management company newly cultivate and refine property information sources in aneffort to promptly gain access to market information on disposition of properties and thereby keep seizing the rightbusiness opportunities.
B. Internal growth
JEI will continue to make efforts to capture the needs of existing tenants in a timely manner by further strengthening
finely-tuned relationships. JEI will aim to enhance earnings of the entire portfolio and its ESG evaluation bycontinuously making additional strategic investments considering also energy saving and BCP measures in order tomaintain asset value and improve property competitiveness over the medium to long term while setting new rents
based on market trends as well as promoting upward rent revisions to realize rents that are more suitable for theproperty value, along with the aforementioned initiatives.
C. Financial strategy
JEI will consistently work on stable and sound financial operations with a basic policy of procuring funds for thelong term at fixed interest rates. In addition, JEI will consider issuance of green bonds from the perspective of
maintaining and strengthening its financial base through diversification of fund procurement means while carefully
monitoring the environment of the financial market.
JEI will set the upper limit of total assets-based LTV at 60% and manage it at around 35% to 50%. Furthermore, JEI
will conduct financial operations that emphasize stability by reducing refinancing risks through diversification of
maturity dates of interest-bearing debt.
D. Sustainability initiatives
JEI will work to reduce the environmental burden and to cooperate/collaborate with stakeholders to achieve asustainable society through corporate social responsibility.

(6) Subsequent Events
None

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

10

(Reference Material)
1) Conclusion of Transaction Agreement for Trust Beneficiary Interest in Real Estate
JEI concluded a transaction agreement for trust beneficiary interest in real estate on August 19, 2019, for theasset to be acquired described below.
<Overview of the Asset to Be Acquired>
Asset to be acquired

Trust beneficiary interest in real estate

Name of asset

BIZCORE AKASAKA MITSUKE

Location

3-1-2 Akasaka, Minato-ku, Tokyo

Acquisition price (Note)

6,200,000,000 yen

Date of conclusion of agreement

August 19, 2019

Scheduled acquisition date

October 1, 2019

Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note) Acquisition price is the acquisition value of trust beneficiary interest, excluding acquisition-related expenses,
JEI’s share of real estate tax and city planning tax or consumption tax.
2)

Borrowing of Funds
JEI concluded an individual commitment line agreement as of August 19, 2019, to allot funds to part of thefunds for the acquisition of the asset as indicated in 1) above and the related expenses, etc. described below.
<Overview of Borrowing>
LenderMizuho Bank, Ltd.

Loan amount

4,000,000,000 yen

Interest rate

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

Drawdown date

October 1, 2019

Principal repayment date

October 1, 2020

Principal repayment method

To be repaid in full on the principal repayment date(early repayment permitted)

Collateral

Unsecured / Non-guaranteed

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)11

2. Outline of the Investment Corporation(1) Investment units
22nd
As of June 30,
2017

Fiscal period
Total number of units
authorized
Total number of units
issued and outstanding
Unitholders’ capital

24th
As of June 30,
2018

25th
As of December
31, 2018

26th
As of June 30,
201910,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

1,305,700 units

1,305,700 units

1,305,700 units

1,305,700 units

1,305,700 units

139,972 million yen

Number of unitholders

23rd
As of December
31, 2017

139,972 million yen 139,972 million yen 139,972 million yen 139,972 million yen

8,086 individuals

7,680 individuals

7,189 individuals

6,741 individuals

6,393 individuals(2) Unitholders
Major unitholders as of June 30, 2019 are as follows:
Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%)

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

325,18124.90

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

197,132

15.10

1-8-1 Akasaka, Minato-ku, Tokyo

71,560

5.48

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

59,876

4.59

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

49,905

3.82

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

20,660

1.58

STATE STREET BANK WEST
CLIENT - TREATY 505234

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

19,442

1.49

DFA INTERNATIONAL REALESTATE SECURITIESPORTFOLIO

6300 BEE CAVE ROAD, BUILDING ONE
AUSTIN TX 78746 US

14,862

1.14

The Chukyo Bank, Ltd.

3-33-13 Sakae, Naka-ku, Nagoya-shi, Aichi

13,7991.06

JP MORGAN CHASE BANK
38577125 BANK STREET，CANARY WHARF，
LONDON，E14 5JP，UNITED KINGDOM

12,753

0.98

Total

789,170

60.13

Name

Japan Trustee Services Bank, Ltd.
(Trust Account)
The Master Trust Bank of Japan,
Ltd. (Trust Account)
Nippon Steel Kowa Real EstateCo., Ltd.
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

Address

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

12

(3) Officers
1) Directors and accounting auditor
Compensation or fee forthe six months ended
June 30, 2019
(Thousands of yen)

Post

Name

Executive
Director

Hidehiko Ogawa

President, Japan Excellent Asset Management
Co., Ltd.

Supervisory
Director

Tsuyoshi Nagahama

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Sugiyama Jogakuen University, Schoolof Modern Management

Eiji Takagi

Eiji Takagi Certified Public Accounting Office

Supervisory
Director
Supervisory
Director
Accounting
AuditorErnst & Young
ShinNihon LLC

Major additional post

–

6,540

16,301(Note 2)–

(Note 1) There are no investment units of JEI held by either the Executive Director or the Supervisory Directors. Although Supervisory
Directors may have additional posts in companies other than those listed above, there are no conflicts of interest between thosecompanies, including those listed above, and JEI.
(Note 2) The total amount of compensation or fee shown above is an estimate and includes the amount paid as compensation forauditing during the 26th period (11,000 thousand yen), fees for audit of English financial statements and fees for third-party
assurance engagement.

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 Investment Trust Law, and deliberate discontinuation of re-election based on circumstances in all respects.

(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
JEI’s asset management company, asset custodian and administrative agents as of June 30, 2019 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 26th period (Semi-Annual Report for 26th Period)13

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
25th Period(As of December 31, 2018)

26th Period(As of June 30, 2019)

Total
acquisition
price (Millionsof yen)(Note 2)

Investment
ratio inportfolio (%)

Total
acquisition
price (Millionsof yen)(Note 2)

Investment
ratio inportfolio (%)

Area I

11,045

3.9

11,016

3.8

Area II

5,555

1.9

5,683

2.0

Area I

99,44534.8

99,067

34.6

Area II

8,953

3.1

8,896

3.1

Area III

94,60033.1

94,55533.0

Area IV

21,3907.5

21,256

7.4

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

17,698

6.2

17,551

6.1

Total

258,68990.6

258,028

90.2

Deposits in bank and other assets

26,7109.4

28,144

9.8

Total assets

285,400

100.0

286,172100.0Classification

Use

Real estate
property

Trust beneficiaryinterest in realestateOfficebuilding

Area(Note 1)

(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 Metro), Yodoyabashi Station (Osaka Metro) or Honmachi Station(Osaka Metro), respectively. Central Nagoya refers to the areas within about a 10-minute 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 10minute walk from Hakata Station (JR and Fukuoka City Subway), Tenjin Station (Fukuoka City Subway) andNishitetsu Fukuoka Station (Nishi-Nippon Railroad), respectively. They are, however, not always in line withadministrative 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 26th period (Semi-Annual Report for 26th Period)

14

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of June 30, 2019 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
Office29,45238,375.65
38,375.65
100.0
8.9
Nishiguchi Buildingbuilding
OfficeAKASAKA INTERCITY
26,90811,021.03
11,021.03
100.0
5.6
building
Nisseki Yokohama
Office23,26840,440.72
40,127.05
99.2
11.0
Buildingbuilding
OfficeOmori Bellport D
20,84225,801.66
25,801.66
100.0
8.7
building
Other(commercial
HAMARIKYU
17,551
19,718.11
18,264.94
92.6
6.8 facilities,
INTERCITY
residence,etc.)
Musashikosugi Tower
Office12,59925,043.93
25,043.93
100.0
7.6
Place
building
OfficeMansard Daikanyama
11,3045,420.80
5,420.80
100.0
3.0
building
Kowa Nishi-Shimbashi
Office11,016
8,949.04
8,949.04
100.0(Note 4)
Buildingbuilding
Daiba Garden City
Office9,729
12,122.85
12,122.85
100.0
3.1
Buildingbuilding
Kowa Kawasaki
Office9,322
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
2

Total

171,995

205,506.51

2

203,739.67

99.1

－

－

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of June 30, 2019. For properties
with joint ownership, the value is obtained by multiplying the total leasable space of the shared property by the percentage ofthe interest owned by JEI, regarding the figure as JEI’s leasable space.
(Note 2) Leased space refers to space with lease contracts or master lease agreements that guarantee a certain amount of fixed rent
payment concluded with end tenants as of June 30, 2019. For properties with joint ownership, the value is obtained bymultiplying the total leased space of the property by the percentage of the co-ownership interest owned by JEI, regarding thefigure as JEI’s leased space. For properties which are used for profit by the master lease company, leased space refers to the
portion used and the figures indicate space which can be reasonably calculated based on the lease agreement on the 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 June 30, 2019.
(Note 4) The values of Kowa Nishi-Shinbashi Building and Kowa Kawasaki Higashiguchi Building are not disclosed as consent on
disclosure from the end tenants have not been obtained.

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

15

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of June 30, 2019 are as follows:
Property
No.

Property nameLocation (Residential address)

Ⅰ-1

Omori Bellport D

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

Ⅰ-2

Shiba 2-Chome Building

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

Ⅰ-3

JEI Hamamatsucho Building

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

Ⅰ-8

AKASAKA INTERCITY

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

Ⅰ-9

Kowa Shirokanedai Building

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

I-10

Daiba Garden City Building

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

Ⅰ-12

HAMARIKYU INTERCITY

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

Ⅰ-13

Shintomicho Building

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

Ⅰ-14

Kowa Nishi-Shimbashi Building

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

Ⅰ-15

Mansard Daikanyama

10-1 Sarugakucho, Shibuya-ku, Tokyo

I-16

AKASAKA INTERCITY AIR

1-8-1Akasaka, Minato-ku, Tokyo

Ⅱ-1

NHK Nagoya Housou-Center
Building

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

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

Ⅲ-1

Musashikosugi Tower Place

Ⅲ-2

Kowa Kawasaki Higashiguchi
Building

Area II
1-403 Kosugi-machi, Nakahara-ku,
Kawasaki-shi, Kanagawa
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-7

JEI RYOGOKU BUILDING

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

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

Ⅲ-11

Core City Tachikawa

2-37-7 Akebono-cho, Tachikawa-shi, Tokyo
1-1-8 Sakuragi-cho, Naka-ku, Yokohama-shi,
Kanagawa
4-59 Bentendori, Naka-ku, Yokohama-shi,
Kanagawa
Area III
2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,Osaka
14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Hiroshima
1-1-2 Kitananajonishi, Kita-ku, Sapporo-shi,
Hokkaido

Ⅲ-12

Nisseki Yokohama Building

Ⅲ-13

Yokohama Bentendori Dai-ichi
Seimei Building

Ⅳ-2

JEI Kyobashi Building

Ⅳ-3

JEI Hiroshima Hacchobori Building

Ⅳ-4

SE Sapporo Building

Ⅳ-5

Aoba-dori Plaza

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

Ⅳ-6

Daiwa Minami-morimachi Building

2-6, 2-chome Kita Tenjinbashi, Kita-ku,
Osaka-shi, Osaka

Ⅳ-7

JEI Naha Building

2-8-1 Kumoji, Naha-shi, Okinawa

IV-8

Hiroshima Dai-ichi Seimei OS
Building

1-2-21 Matoba-cho Minami-ku,
Hiroshima-shi, Hiroshima
Area IV

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

Total

Appraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)
26,70020,842

13,200

9,077

8,730

8,172

29,40026,908

5,290

4,705

10,5009,729

25,20017,551

2,140

1,749

13,20011,016

13,50011,304

7,680

6,577

155,540

127,635

6,090

5,683

5,850

7,031

2,400

1,865

14,34014,58021,30012,599

9,740

9,322

4,630

5,016

4,580

4,246

2,470

2,229

26,10029,452

1,380

1,620

9,040

6,148

29,20023,268668

650

109,108

94,555

4,380

2,879

3,720

2,566

8,680

5,104

4,430

2,199

5,190

4,206

1,860

1,500

3,240

2,799

31,50021,256

310,488

258,028(Note) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report prepared by real estateappraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd., Japan Valuers Co., Ltd. and Daiwa
Real Estate Appraisal Co., Ltd. as of June 30, 2019 pursuant to the articles of incorporation of JEI and the regulations stipulatedby the Investment Trusts Association, Japan. For properties with joint ownership in the current portfolio, the value is obtainedby 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 26th period (Semi-Annual Report for 26th Period)

16

25th Period
July 1, 2018 to December 31, 2018
Property
No.

Property name

Total numberoftenants(At endof period)

Occupancy Rental revenue
rate (At end(Interim)of period)(Millions of
(%)
yen)

(Note 1)

I-1
Ⅰ-2
Ⅰ-3
Ⅰ-8
Ⅰ-9
I-10
Ⅰ-12
Ⅰ-13
Ⅰ-14
Ⅰ-15
I-16

Ⅱ-1
Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-7
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12
Ⅲ-13
Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6
Ⅳ-7
IV-8

Omori Bellport D
Shiba 2-Chome Building
JEI Hamamatsucho
Building
AKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building
HAMARIKYUINTERCITY
Shintomicho Building
Kowa Nishi-Shimbashi
Building
Mansard Daikanyama
AKASAKA
INTERCITY AIR
Area I
NHK Nagoya HousouCenter Building
JEI Nishi-Honmachi
Building
Osaka Kogin Building(Land with Leasehold
Interest)
Area II
Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi Building
JEI Hongo Building
Kawasaki Nisshincho
Building
JEI Ryogoku Building
Kowa Kawasaki
Nishiguchi Building
Pacific Square Sengoku
Core City Tachikawa
Nisseki Yokohama
Building
Yokohama BentendoriDai-ichi Seimei Building
Area IIIJEI Kyobashi Building
JEI Hiroshima
Hacchobori Building
SE Sapporo Building
Aoba-dori Plaza
Daiwa Minamimorimachi Building
JEI Naha Building
Hiroshima Dai-ichi
Seimei OS Building
Area IV
Total

26th Period
January 1, 2019 to June 30, 2019
Ratio ofrentalrevenue tototal rental
revenues(%)

Total numberoftenants(At endof period)

Occupancy Rental revenue
rate (At end(Interim)of period)(Millions of
(%)
yen)

(Note 1)

Ratio ofrentalrevenue tototal rental
revenues
(%)

1
2

100.0
100.0

931
372

8.7
3.5

1
2

100.0
100.0

923
373

8.7
3.5

1

100.0

230

2.2

1

100.0

230

2.2

14

100.0

596

5.6

14

100.0

594

5.6

1

100.0

182

1.7

1

100.0

184

1.7

1

100.0

335

3.1

1

100.0

335

3.1

1

98.5

744

7.0

1

92.6

722

6.8

11

100.0

72

0.7

11

100.0

70

0.7

5

100.0

(Note 2)

(Note 2)5100.0(Note 2)

(Note 2)

10

100.0

316

3.0

10

100.0

315

3.0

1

98.5

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

48

99.7

-

-

48

98.7

-

-

39

100.0

386

3.6

38

99.9

385

3.6

1

93.9

187

1.8

1

98.4

217

2.0

1

100.0

88

0.8

1

100.0

89

0.8

41

97.5

-

-

40

99.3

-

-

40

100.0

819

7.7

40

100.0

810

7.6

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

1

100.0

216

2.0

1

100.0

217

2.0

1

100.0

112

1.1

1

100.0

112

1.1

1

99.7

953

8.9

1

100.0

949

8.9

1
1

100.0
100.0

55
316

0.5
3.0

1
1

100.0
100.0

53
322

0.5
3.0

1

100.0

1,162

10.9

1

99.2

1,173

11.0

1

100.0

41

0.4

1

100.0

42

0.4

49
1

99.9
95.6

181

1.7

49
1

99.8
100.0

177

1.7

1

100.0

154

1.5

1

98.6

153

1.4

1
51

100.0
98.6

396
189

3.7
1.8

1
52

100.0
99.4

403
196

3.8
1.8

10

100.0

199

1.9

10

100.0

198

1.9

1

100.0

81

0.8

1

100.0

82

0.8

1

100.0

142

1.3

1

100.0

142

1.3

66
204

99.2
99.6

10,657

100.0

67
204

99.7
99.4

10,668100.0(Note 1) Total number of tenants indicates the total number of tenants in each property as of the end of each period. For properties forwhich master lease agreements have been concluded, the number of tenants is counted as one per property. When a tenant has
multiple tenancies in the same property, it is counted as one tenant, and when in multiple properties, it is counted as multiple
tenants. As for Osaka Kogin Building (Land with Leasehold Interest), total number of tenants is counted as one based on thelease agreement for the leased land.
(Note 2) Rental revenue (interim) and ratio of rental revenue to total rental revenues for Kowa Nishi-Shimbashi Building, Kowa
Kawasaki Higashiguchi Building and JEI Hongo Building are not disclosed as consent on disclosure of rents from the end
tenants has not been obtained; and those for AKASAKA INTERCITY AIR are not disclosed as consent on disclosure of rents
from the co-owners has not been obtained.

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

17

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

Over-the-countertransaction

Interest rate swap
transactions
Floating interest ratereceivable
Fixed interest rate
payable46,140,000–

40,540,000(Note 1) Contract amount of swap transactions is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation as over-the-counter transactions meet requirements for special accounting under the
Accounting Standard for Financial Instruments.

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

Asset Management Report for 26th period (Semi-Annual Report for 26th 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 theproperties owned by JEI as of the end of the 26th period (ended June 30, 2019). The values below include portions
to be expensed for accounting purposes.

Property nameLocation

PurposeSchedule term

Estimated construction costs(Millions of yen)
Payment
for the six
Total ofTotal
monthsadvanceended
payment
June 30, 2019

Kowa Kawasaki
Higashiguchi Building

Kawasaki-shi,
Kanagawa

Renovation of airconditioning systems(Phase 2)

From January 2019
To December 2019

597

－

－

Kowa Kawasaki
Nishiguchi Building

Kawasaki-shi,
Kanagawa

Renovation of elevators(Phase 4)

From April 2019
To December 2019

126

－

－

Hiroshima Dai-ichi
Seimei OS Building

Hiroshima-shi,
Hiroshima

Renovation of common
use area

From June 2019
To December 2019

96

－

－

Omori Bellport D

Update of automatic
air conditioning
From September 2019
Shinagawa-ku, Tokyo control equipment (2nd To November 2019
term)

48

－

－

HAMARIKYUINTERCITY

Minato-ku, Tokyo

From October 2019
To December 2019

45

－

－

Renovation of multilevel parking lot
From November 2019
(Replacement of
To December 2019
circulation drive system
for No. 1 to No. 4)

33

－

－

Yokohama-shi,
Kanagawa

Change of vibration
control device system

From December 2019
To December 2019

30

－

－

Yokohama-shi,

Update of airconditioner heat source

From October 2019
To November 2019

15

－

－

SE Sapporo Building

Nisseki Yokohama
Building
Yokohama BentendoriDai-ichi Seimei
Building

Sapporo-shi,
Hokkaido

Kanagawa

Update of ITV
equipment(2) Capital Expenditures for the Six Months Ended June 30, 2019
The following table shows constructions conducted by JEI during the period ended June 30 and expensed as capital
expenditures. Capital expenditures for the period ended June 30 were 1,285 million yen and, when combined withrepairs and maintenance costs of 285 million yen classified as expenses in the period under review, the amount ofconstructions completed totaled 1,570 million yen.
Property nameLocation

PurposeScheduled term

Amounts
Paid (Millions of yen)

Kowa Kawasaki
Nishiguchi Building
NHK Nagoya
Housou-Center
Building

Kawasaki-shi,
Kanagawa

Renovation of air-conditioning
systems (Phase 2)

From July 2018
To June 2019

529

Nagoya-shi, Aichi

Renovation ofbathrooms/kitchens (Phase 2)

From March 2018
To March 2019204

Kowa Kawasaki
Nishiguchi Building

Kawasaki-shi,
Kanagawa

Renovation of elevators(Phase 3)

From September 2018
To June 2019163

JEI Hamamatsucho
Building

Minato-ku, TokyoJEI Kyobashi Building

Osaka-shi, Osaka

Renovation of restrooms on the From November 2018
3rd and 8th floors
To February 2019
Renovation of passenger
From May 2019
elevators
To June 2019

Other constructions
Total

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

–

44
40
302
1,285

19

(3) Reserved Funds for Long-term Repairs and Maintenance Plans
Based on the long-term repairs and maintenance plans developed for each property, JEI has set aside the following
cash reserves, derived from depreciation and other excess cash flows, in order to fund large-scale repairs, maintenanceand other construction.
(Unit: Millions of yen)Item22nd Period
23rd Period
24th Period
25th Period
26th Period
January 1, 2017
July 1, 2017 to January 1, 2018 to July 1, 2018 to January 1, 2019 toto June 30, 2017 December 31, 2017 June 30, 2018 December 31, 2018 June 30, 2019

Reserved funds at
beginning of period

450

546

289

258

290

Increase

468

484

636

469

411

Decrease

371

742

667

437

417

Reserved funds at theend of period

546

289

258

290

284

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

5. Expenses and Liabilities(1) Expenses Associated with Asset Management(Unit: Thousands of yen)
25th Period
July 1, 2018
to December 31, 2018

Account

26th Period
January 1, 2019
to June 30, 2019(a) Asset management fees

445,785

447,411(b) Custodian fees

21,25021,278(c) Administrative service fees

39,42839,215(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other

68,89076,096592,896

601,541

Total(2) Borrowings
Borrowings by each financing source as of the end of the 26th period (ended June 30, 2019) are as follows:
Classification
LenderShort-term
Mizuho Bank, Ltd.
loans
Sub Total
Mizuho Bank, Ltd.
The Norinchukin BankMUFG Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Nippon Life Insurance Company
Development Bank of Japan Inc.

Drawdown
date
November 2,
2018
March 8,2019

March 11,2014
December 12,
2016
January 31,
2012Long-term Mizuho Bank, Ltd.
loans due Sumitomo Mitsui Banking
within one
Corporationyear
June 28,
Mizuho Trust & Banking Co., Ltd.
2013
MUFG Bank, Ltd.
The Dai-ichi Life Insurance Company
LimitedMizuho Bank, Ltd.
The Norinchukin Bank
December 27,
2013
MUFG Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Sub Total

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
Use
Remarks(Thousands(%)(Thousands ofmethodof yen)(Note 1)yen)
October 8,
Redemption
2,000,000
2,000,000 0.26224
2019ofUnsecured
Lumpinvestment
andsum
March 8,
corporation unguaranteed
5,000,000 0.26123
－
2020
bonds
2,000,000
7,000,000
850,000－
1,450,000－ 0.77500
March 8,2019
850,000－ (Note 2)
600,000－

1,000,000

1,000,000－

2,000,000－

500,000－

1,000,000－－

600,000
500,000－

1,000,000－－－－
4,750,000

675,000
1,162,500
675,000
487,500
9,600,000

0.25000(Note 2)1.60000(Note 2)

December 12,
2019

Repayment Unsecured
Lumpof existingandsumborrowing unguaranteed

1.36400(Note 2)
1.31261(Note 2)January 31,
2020

1.00000(Note 2)

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

21

Classification

LenderDevelopment Bank of Japan Inc.

Drawdown
date

January 31,
2012

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

June 28,
2013

MUFG Bank, Ltd.
The Dai-ichi Life Insurance
Company Limited

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
(Thousands(%)(Thousands ofmethodof yen)(Note 1)yen)
2,000,000－

500,000－

1,000,000－

600,000－

500,000－

1,000,000－

675,000－

1,162,500－

675,000－

487,500－

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

Mizuho Bank, Ltd.

520,000

520,000

MUFG Bank, Ltd.

540,000

540,000

1,080,000

1,080,000

Sumitomo Mitsui Trust Bank Limited

1,620,000

1,620,000

Mizuho Bank, Ltd.

1,950,000

1,950,000

MUFG Bank, Ltd.

2,000,000

2,000,000

1,200,000

1,200,000

600,000

600,000

2,000,000

2,000,000

1,000,000

1,000,000

2,000,000

2,000,000

500,000

500,000

500,000

500,000

Mizuho Bank, Ltd.

1,950,000

1,950,000

MUFG Bank, Ltd.

2,000,000

2,000,000

1,200,000

1,200,000

600,000

600,000

2,000,000

2,000,000

3,000,000

3,000,000

Mizuho Bank, Ltd.

420,000

420,000

MUFG Bank, Ltd.

250,000

250,000

Sumitomo Mitsui Banking
Corporation

140,000

140,000

1,560,000

1,560,000

1,500,000

1,500,000

Resona Bank, Ltd.

500,000

500,000

Aozora Bank, Ltd.

750,000

750,000

The Bank of Fukuoka, Ltd.

150,000

150,000

Mizuho Bank, Ltd.
The Norinchukin BankMUFG Bank, Ltd.

December 27,
2013

Mizuho Trust & Banking Co., Ltd.
Mizuho Bank, Ltd.
Development Bank of Japan Inc.
The Dai-ichi Life Insurance
Company Limited

Sumitomo Mitsui Banking
Corporation

Mizuho Trust & Banking Co., Ltd.

Long-term
Resona Bank, Ltd.
loans
Sompo Japan Nipponkoa Insurance
Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Development Bank of Japan Inc.
Sompo Japan Nipponkoa Insurance
Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.

Mizuho Trust & Banking Co., Ltd.

September 28,
2018
June 28,
2013
July 31,2014

November 29,
2016

December 29,
2014

January 31,
2017
July 31,2014
November 30,
2017

December 29,
2014

Resona Bank, Ltd.
Development Bank of Japan Inc.
The Dai-ichi Life Insurance
Company Limited

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

June 30,
2015
June 29,2018

November 30,
2015

Use

Remarks

1.60000(Note 2)

1.36400(Note 2)January 31,
2020

1.31261(Note 2)1.00000(Note 2)0.26121

September 30,
2020

1.60750(Note 2)0.98834(Note 2)June 30,2021

0.41909

November 29,
2021

0.81875(Note 2)

December 30
2021
Lumpsum

0.35000(Note 2)January 31,
2022

1.15417(Note 2)June 30,
2022

Repayment Unsecuredof existingandborrowing unguaranteed

0.35000 November 30,(Note 2)2022

0.93625(Note 2)

December 30,
2022

1.20250(Note 2)0.46000(Note 2)June 30,2023

0.84375 November 30,(Note 2)2023

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

22Classification

Lender (Note 3)

Drawdown
date

MUFG Bank, Ltd.

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
(Thousands of(%)(Thousands ofmethodyen)(Note 1)yen)
1,000,000

1,000,000

3,500,000

3,500,000

500,000

500,000

500,000

500,000

3,500,000

3,500,000

Mizuho Bank, Ltd.

870,000

870,000

MUFG Bank, Ltd.

590,000

590,000

350,000

350,000

1,560,000

1,560,000

Resona Bank, Ltd.

1,000,000

1,000,000

Aozora Bank, Ltd.

750,000

750,000

Sumitomo Mitsui Banking
Corporation
Resona Bank, Ltd.

November 30,
2017

Aozora Bank, Ltd.
Development Bank of Japan Inc.

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

November 30,
2015

The Bank of Fukuoka, Ltd.

150,000

150,000

Mizuho Bank, Ltd.

3,700,000

3,700,000

MUFG Bank, Ltd.

1,000,000

1,000,000

400,000

400,000

1,000,000

1,000,000

1,000,000

1,000,000

700,000

700,000

200,000

200,000

Mizuho Bank, Ltd.

850,000

850,000

MUFG Bank, Ltd.

850,000

850,000

600,000

600,000

The Norinchukin Bank

1,450,000

1,450,000

Mizuho Bank, Ltd.

2,200,000

2,200,000

MUFG Bank, Ltd.

1,750,000

1,750,000

1,100,000

1,100,000

The Norinchukin Bank

850,000

850,000

Aozora Bank, Ltd.

500,000

500,000

Mizuho Bank, Ltd.

－

850,000

MUFG Bank, Ltd.

－

850,000－

600,000－

1,450,000

1,300,000

1,300,000

1,300,000

1,300,000

1,000,000

1,000,000

700,000

700,000

Sub Total

82,850,000

78,000,000

Total

89,600,000

94,600,000

Sumitomo Mitsui Banking
Corporation
The Norinchukin Bank

June 29,2018

Shinkin Central Bank
Long-term The Bank of Fukuoka, Ltd.
loans
Resona Bank, Ltd.

Mizuho Trust & Banking Co., Ltd.

Sumitomo Mitsui Banking
Corporation

Mizuho Bank, Ltd.

November 1,
2018

September 29,
2017

March 8,2019

The Norinchukin Bank
Development Bank of Japan Inc.

September 29,
2017

Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation

June 29,
2018

Use

Remarks

0.64801 November 30,(Note 2)2023

0.68431(Note 2)

May 31,2024

0.96275 November 30,(Note 2)2024

0.67400(Note 2)June 30,2025

Lumpsum

0.70600(Note 2)

Repayment Unsecuredof existingandborrowing unguaranteed

November 1,
2025

0.83441(Note 2)
March 31,2026

0.57100(Note 2)0.83071 September 30,(Note 2)2026
0.79100(Note 2)

December 30,
2026(Note 1) Average interest rate is calculated by applying a weighted average to the loan balance during the period. Borrowings hedged
by interest rate swaps to avoid interest rate fluctuation risk are calculated by applying a weighted average rate in considerationof the effect of the interest rate swaps.
(Note 2) Loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).

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

23

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of June 30, 2019 are as follows:
Classification
Issuance
date
Issue

Unsecured investment corporation bonds

6th series unsecured
investment corporation
bonds
March 10,2014
7th series unsecured
investment corporation
bonds
8th series unsecured
September 9,
investment corporation
2015
bonds
9th series unsecured
October 27,
investment corporation
2016
bonds
10th series unsecured
December 20,
investment corporation
2016
bonds
11th series unsecured
April 25,
investment corporation
2017
bonds
12th series unsecured
investment corporation
bonds
April 20,2018
13th series unsecured
investment corporation
bonds

Green
bonds

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

Maturity date

5,000,000－

0.46000

March 11,2019

8,000,000

8,000,000

1.13000

5,000,000

5,000,000

1.03000

September 9,2025(Note 2)2,000,000

2,000,000

0.45000

October 27,
2026(Note 3)2,000,000

December 20,
0.39000
2023

Remarks

Lump-sum
2,000,000(Note 4)(Note 2)7,000,000

7,000,000

0.65000

April 23,2027

2,000,000

2,000,000

0.24000

April 20,2023

0.95000

April 20,2033

0.63000

August 10,
2028(Note 3)33,000,000

28,000,000

4,000,000

4,000,000

Sub Total

4,000,000

4,000,000

Total

37,000,000

32,000,000

August 10,
2018

Use

(Note 1)2,000,000

14th series unsecured
investment corporation
bonds

Repayment
methodMarch 11,2024

2,000,000

Sub Total(Note 1)
(Note 2)
(Note 3)(Note 4)

Balance at
beginning of period(Thousands ofyen)

Lump-sum(Note 2)

(Note 4)

The funds were used for redeeming existing investment corporation bonds and repaying existing borrowings.
The funds were used for repaying existing borrowings.
The funds were used for redeeming existing investment corporation bonds.
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 26th period (Semi-Annual Report for 26th Period)24

6. Condition of Investment Transactions(1) Transactions of Property, Asset-Backed Securities, etc. and Infrastructure Assets, etc.
and Infrastructure Related Assets
None(2) Transactions of Other Assets
None(3) Appraisal and Research for Specified Asset Value, etc.
1) Real estate, etc.
None2) Others
Of the transactions of JEI that are subject to investigation for specified asset value and other particulars under
Article 201 of the Investment Trust Law are investigated and reported by Ernst & Young ShinNihon LLC.
One interest rate swap contract was subject to investigation during the period from January 1, 2019 to June 30,
2019 and we have received the consensus report on procedure operation results from Ernst & Young ShinNihon
LLC. Concerning the interest rate swap contract, Ernst & Young ShinNihon LLC was requested to report on thename of counterparty, quantity, contractual figures, transaction term and other matters pertaining to the over-thecounter derivative transaction.
This investigation is not part of the audit of financial statements and will not provide a guarantee of the adequacyof prices and the internal control system.

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

25

(4) Transactions with Interested Parties
1) Transactions
None2) Amounts of fees paid and other expenses(Unit: Thousands of yen)
Breakdown of transactions with interested parties
Classification

Total amount paid (A)B/APaid to

Property management
costs and fees

Total

Amount paid (B)Nippon Steel Kowa Real
Estate Co., Ltd.
Kowa Real Estate Facilities,
Co., Ltd.
1,399,365

1,399,365

201,43014.4%

293,946

21.0%

Akasaka Intercity
Management Co., Ltd.

8,537

0.6%

Nippon Steel Community
Service Co., Ltd.

2,131

0.2%

–

506,046

36.2%(Note 1) Figures indicate fees paid to interested parties of asset management companies with whom JEI had transactions during the six
months ended June 30, 2019.
(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 during the period.
Nippon Steel Kowa Real Estate Co., Ltd.
22,801 thousand yen
Kowa Real Estate Facilities Co., Ltd.
236,443 thousand yen
Nippon Steel Community Service Co., Ltd. 2,405 thousand yen(5) Transactions with Asset Management Company Concerning the Additional Businessesof 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 26th period (Semi-Annual Report for 26th Period)26

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

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

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

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)27

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 June 30, 2019, are summarized below.
Approval dateFebruary 15,
2019

Approved agenda

Entrustment of generaladministrative duties concerninginvestment corporation bonds

Description
The board of directors made a comprehensive
resolution on investment corporation bonds to beissued in the period from February 15, 2019 toFebruary 8, 2020. The board of directors approved
the respective candidate general administrator for“administrative duties concerning offering ofinvestment corporation bonds” and “administrative
duties concerning acceptance of claims for exerciseof rights and other inquiries from creditors of theinvestment corporation, and other administrative
duties concerning investment corporation bonds
during the period,” and assigned decisions on allother necessary matters to the Executive Director.

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

(3) Disclosure of 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 been rounded
off to the nearest indicated unit in this Report.

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)28

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
June 30, 2019 and December 31, 2018with Independent Auditor’s Report

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

29

30

Japan Excellent, Inc.
Balance Sheets
As of June 30, 2019 and December 31, 2018
As ofJune 30, 2019

As ofDecember 31, 2018

(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust accounts(Notes 5 and 6)
Rental receivables
Consumption taxes refundable
Prepaid expenses and other current assets
Total current assets

25,647,834
362,961－
219,297
26,230,092

24,239,320
391,990
28,951
197,80724,858,070

Property and equipment (Note 8) :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

7,312,013
6,253
49,835
9,292,709－
116,973,957
942,708
265,897
146,475,849
116,057(32,515,031)
248,920,250

7,087,968
6,253
49,835
9,292,709
14,169115,955,569
906,063
263,244
146,475,849
112,000(30,581,954)
249,581,709

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

1,721,607
12
7,382,016
10,633
4,297
9,118,567

1,721,607
37
7,382,016－
4,435
9,108,097

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

7
15,181
902,009836,314
1,753,513

27
15,181
845,703828,873
1,689,786

149,873
149,873
286,172,297

162,503
162,503
285,400,167

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

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)31

As of
As ofJune 30, 2019
December 31, 2018
(Thousands of yen)
Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 6 and 9)
Investment corporation bonds due within one year
(Notes 6 and 10)
Long-term debt due within one year
(Notes 6 and 9)
Accounts payable – otherAccrued expenses
Accrued corporation taxes
Accrued consumption taxes
Advances received
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 6 and 10)
Long-term debt (Notes 6 and 9)
Security deposits from tenants (Note 6)
Security deposits from tenants for trust accounts (Note 6)
Total long-term liabilities
Total liabilities
Net assets (Note 11)
Unitholders’ equity:
Unitholders’ capital
Surplus
Voluntary reserve
Reserve for advanced depreciation of non-current assets
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

1,657,518
7,000,000

1,385,707
2,000,000－

5,000,000

9,600,000
439,565
149,470742
221,152
85,6891,332
19,155,471

4,750,000
433,933
153,947
1,159－
82,728013,807,474

32,000,000
78,000,000
1,129,346

32,000,000
82,850,000
1,126,906

12,065,244
123,194,591
142,350,062

11,888,617
127,865,523
141,672,998

139,972,885

139,972,885

158,039
3,691,310
3,849,350
143,822,235
143,822,235
286,172,297

158,0393,596,244
3,754,283
143,727,168
143,727,168
285,400,167

Japan Excellent, Inc.
Asset Management Report for 26th period (Semi-Annual Report for 26th Period)

32

Statements of Income and Retained Earnings
For the periods from January 1, 2019 to June 30, 2019and from July 1, 2018 to December 31, 2018

For the period
from January 1, 2019
to June 30, 2019

For the period
from July 1, 2018
to December 31, 2018

(Thousands of yen)
Revenues (Note 14) :Rental business revenues
Other
Total revenues
Operating expenses (Note 14) :Property operating expenses
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income
Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Other
Ordinary income
Income before income taxes
Income taxes (Note 13) :Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

9,850,159
818,102
10,668,262

9,779,867
877,818
10,657,685

5,747,936
447,411
21,27839,215
6,540
87,096
6,349,477
4,318,784

5,780,672
445,785
21,25039,4286,540
79,8906,373,568
4,284,116

127
1,051

132
1,274

358,380
126,920
129,970
12,630315
3,691,747
3,691,747

363,145
148,049
153,761
16,9896,167
3,597,409
3,597,409

762
20
3,690,964
346
3,691,310

1,179
(13)
3,596,244－
3,596,244

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

33

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from January 1, 2019 to June 30, 2019and from July 1, 2018 to December 31, 2018
For the period from January 1, 2019 to June 30, 2019
Net assets
Unitholders’ equity
SurplusNumber ofunits in issue

Unitholders’capitalVoluntary
reserve
Reserve foradvanceddepreciation of
non-current
assetsRetainedearnings

Total surplus

Totalunitholders’equityTotal net
assets(Thousands of yen)
Balance as ofDecember 31, 2018
Changes during
the fiscal period:
Distributions fromretained earnings
Net income
Total changes
during the fiscal
periodBalance as ofJune 30, 20191,305,700

139,972,885

158,0393,596,244

3,754,283

143,727,168

143,727,168

－

－

－

(3,595,897)(3,595,897)(3,595,897)(3,595,897)

－

－

－

3,690,964

3,690,964

3,690,964

3,690,964－－－

95,066

95,066

95,066

95,0661,305,700

139,972,885

158,039

3,691,310

3,849,350

143,822,235

143,822,235

For the period from July 1, 2018 to December 31, 2018
Net assets
Unitholders’ equity
SurplusNumber ofunits in issue

Unitholders’capitalVoluntary
reserve
Reserve foradvanceddepreciation of
non-current
assetsRetainedearnings

Total surplus

Totalunitholders’equityTotal net
assets(Thousands of yen)
Balance as ofJune 30, 2018
Changes during
the fiscal period:
Provision ofreserve for
reduction entry
Distributions fromretained earnings
Net income
Total changes
during the fiscal
periodBalance as ofDecember 31, 2018

1,305,700

139,972,885

474,537

3,339,461

3,813,999

143,786,884

143,786,884－－(316,498)

316,498

－

－

－

－

－

－

(3,655,960)(3,655,960)(3,655,960)(3,655,960)

－

－

－

3,596,244

3,596,244

3,596,244

3,596,244－－(316,498)

256,782(59,715)(59,715)(59,715)1,305,700

139,972,885

158,0393,596,244

3,754,283

143,727,168

143,727,168

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

34

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from January 1, 2019 to June 30, 2019and from July 1, 2018 to December 31, 2018
For the period
For the period
from January 1, 2019from July 1, 2018
to June 30, 2019
to December 31, 2018
(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Interest income
Interest expense
Decrease (increase) in rental receivables
Decrease (increase) in consumption taxes refundable
Decrease (increase) in prepaid expense
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 (used in) operating activities
Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets
Proceeds from security deposits from tenants
Proceeds from security deposits in trust accounts from tenants
Payments for security deposits in trust accounts to tenants
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans
Repayment for short-term loans
Proceeds from long-term debt
Repayment for long-term debt
Proceeds from issuance of investment corporation bonds
Payments for redemption of investment corporation bonds
Distributions to unitholders
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 5)

3,691,747
1,936,097
12,630(127)
488,350
29,02928,951(17,900)(7,940)6,138
221,152
2,961(56,306)(8,828)6,325,955
127(492,827)(1,178)
5,832,077

3,597,409
1,920,714
16,989(132)
516,906
2,497
53,75952,025
170,364
11,329－(580)
31,361(33,176)
6,339,467
132(509,400)(901)
5,829,298(240,408)(755,652)(11,000)
2,440
368,962(192,334)(827,993)(5,704)(7,363,421)－
22,569231,706(151,371)(7,266,221)

5,000,000－
3,750,000(3,750,000)－(5,000,000)(3,595,570)(3,595,570)
1,408,513
24,239,320
25,647,834

8,000,000(6,900,000)
5,750,000(3,750,000)
3,973,700(7,000,000)(3,656,349)(3,582,649)(5,019,572)
29,258,892
24,239,320

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

35

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from January 1, 2019 to June 30, 2019and from July 1, 2018 to December 31, 2018

1.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM was originally owned 45% by NIPPON STEEL KOWA REALESTATE CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by Sekisui
House, Co., LTD., and 20% by other corporations. Due to the transfer of ownership by Sekisui
House, Co., LTD., 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 June 30, 2019, JEI held
31 properties with 343,830.44 square meters of total leasable space and had leases with 204
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 andExchange Law of Japan and related regulations, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards.
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 reportof JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying financial
statements, certain reclassifications and modifications have been made for the convenience ofreaders outside Japan. In addition, the notes to the financial statements include information thatmight not be required under Japanese GAAP but is presented here in as additional information.
The amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements in accordance with the financial statements originally prepared in Japaneseand filed with the regulatory authorities in Japan.

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

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
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Buildings and building improvements
Machinery and equipment
Furniture and fixtures

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

Intangible assets
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Brand and trademark
Software10 years
5 years

Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
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 andthe 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 14).

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

37

3.

Summary of Significant Accounting Policies (continued)

JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at the timeof acquisition of such properties including trust accounts. The capitalized amount for the period
from July 1, 2018 to December 31, 2018 was ¥14,068 thousand. The capitalized amount for theperiod from January 1, 2019 to June 30, 2019 was ¥687 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 the swap
agreements are recognized and included in interest expense of the hedged loans, and theinterest-rate swaps are not required to be measured at fair value separately. For interest-rate
swaps that meet the specific criteria for the special accounting treatment, assessments of hedge
effectiveness are not performed.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.

4.

Cash and Cash Equivalents

Cash and cash equivalents including trust accounts in the accompanying balance sheets andcash and cash equivalents in the accompanying statements of cash flows at June 30, 2019 andDecember 31, 2018 consisted of the following:

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

As of
As of
June 30, 2019
December 31, 2018
(Thousands of yen)
9,553,228
8,224,411
16,094,605
16,014,909
25,647,834
24,239,320

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

38

5.

Financial Instruments

For the periods from January 1, 2019 to June 30, 2019 and from July 1, 2018 to
December 31, 2018
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 JEI’s Annual Funding Procurement
Plan. When procuring funds by means of interest-bearing debt, matters such as seeking
longer durations and maturities, securing fixed interest rates over the entire term of the
instrument in order to benefit from the recent favorable financial environment with low
interest rates, and diversifying maturity dates are taken into consideration to achieve a morestable 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 forthe purpose of hedging against the risk of fluctuations in interest rates of borrowings andinvestment corporation bonds.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest rate fluctuation risk)
Borrowings and investment corporation bonds are primarily used to acquire properties
or to refinance existing borrowings or bonds. Some of such debt were floating rate
instruments and thus were exposed to the risk of interest rate fluctuations. Based oninterest rate forecasts developed through constant financial market monitoring
activities, JEI has concentrated on hedging against the risk of interest rate fluctuations
principally using interest-rate swaps, through which a floating interest rate is swapped
for a fixed interest rate, which finally led to 89.9% of existing borrowings being
covered by a fixed interest rate swap for the entire maturity as of June 30, 2019. To
reduce credit risk, derivative transactions (interest-rate swaps) are entered into
exclusively with counterparties that are financial institutions with high credit ratings.
For hedging accounting methods, hedging instruments, hedged items, hedging
policies and methods for evaluation of the effectiveness of hedging activities, see“Derivatives and hedge accounting” under Summary of Significant Accounting
Policies.
(b) Liquidity Risk (Risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced through diversification of maturity dates and funding sources, andarrangement of commitment line agreements (as described in Note 9, “Short-Term
Loans and Long-Term Debt,” there is no balance outstanding under the facility
agreements as of June 30, 2019). Liquidity risk is also mitigated through theconstant management of liquidity on hand.

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

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 June 30, 2019 and December 31, 2018of financial instruments and the differences between them. When fair value is extremely
difficult to ascertain, it is excluded from the following table (Note B).
As of June 30, 2019
As of December 31, 2018
Fair value
Carrying
Fair value
Difference
Difference(Note A)
value
(Note A)
(Thousands of yen)
9,553,228
9,553,228
8,224,411
8,224,411－－
16,094,605
16,094,605
16,014,909
16,014,909－－
25,647,834
25,647,834－
24,239,320
24,239,320－
7,000,000
7,000,000－
2,000,000
2,000,000－

Carryingvalue(1) Cash and cash deposits(2) Cash and deposits in trust
Total assets(3) Short-term loans (Note C)(4) Investment corporation bonds
due within one year (Note C)(5) Long-term debt
due within one year (Note C)(6) Investment corporation bonds(Note C)
(7) Long-term debt (Note C)
Total liabilities(8) Derivative transactions *

－

－

－

5,000,000

5,002,800

2,800

9,600,000

9,685,985

85,9854,750,000

4,754,243

4,243

32,000,000
78,000,000
126,600,000

32,733,763
79,777,491
129,197,240

733,763
1,777,491
2,597,240

32,000,000
82,850,000
126,600,000

32,484,079
84,648,708
128,889,831

484,079
1,798,708
2,289,831

－

－

－

－

－

－

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

(Note A)
Methods for calculating the fair value of financial instruments and matters related toderivatives transactions
Assets(1) Cash and cash deposits and(2) Cash and deposits in trust
Carrying value approximates fair value because of the short maturities of these instruments.

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

40

5.

Financial Instruments (continued)

Liabilities(3) Short-term loans
Carrying value approximates fair value because of the short maturities of these instruments.
(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 an interestrate swap, the fair value is calculated in a similar manner using the total principal andinterest amount, treated in combination with the interest-rate swap, given that the interestrate swap is subject to the special treatment of interest-rate swaps under Japanese GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by applying a reasonably assumed interest rate as a discount rate, which
was determined to be applicable for the borrowings under similar conditions.
(4) Investment corporation bonds due within one year and(6) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(8) Derivative transactions
Please refer to Note 16, “Derivative Transactions.”(Note B)・Financial instruments for which fair value is deemed extremely difficult to determine
The fair values of security deposits from tenants and security deposits from tenants for trust
accounts are as follows:① Security deposits from tenants*② Security deposits from tenants for trust accounts*

As of
As of
June 30, 2019
December 31, 2018
(Thousands of yen)
1,129,346
1,126,906
12,065,244
11,888,617* Security deposits from tenants and security deposits for trust accounts from tenants in leased properties are
not subject to fair value disclosure, since such deposits have no market price. Furthermore, due to theircharacteristics, it is extremely difficult to estimate the fair value of security deposits in advance because of
the uncertainty of the timing when the tenant vacates. As a result, it is therefore impossible to rationallyestimate the exact cash flow from such security deposits.

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

41

5.

Financial Instruments (continued)

・The scheduled redemption amounts of financial assets after the balance sheet dateCash and cash deposits
Cash and deposits in trust
Total

Cash and cash deposits
Cash and deposits in trust
Total

1 year or less

1 to 2 years

9,553,228
16,094,605
25,647,834－－－

1 year or less

1 to 2 years

8,224,411
16,014,909
24,239,320－－－

As of June 30, 2019
2 to 3 years
3 to 4 years(Thousands of yen)
－
－
－
－
－
－
As of December 31, 2018
2 to 3 years
3 to 4 years(Thousands of yen)
－
－
－
－
－
－

4 to 5 years

Over 5 years

－
－
－

－
－
－

4 to 5 years

Over 5 years

－
－
－

－
－
－

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

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

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

As of June 30, 2019
2 to 3 years
3 to 4 years(Thousands of yen)－－

1 year or less

1 to 2 years

7,000,000

－

－

－

－

9,600,000－－
16,600,000－－
6,000,000
6,000,000－－
14,510,000
14,510,000

1 year or less

1 to 2 years

2,000,000－

5,000,000－－

4,750,000－－
11,750,000－－
10,600,000
10,600,000－－
13,510,000
13,510,000

4 to 5 years

Over 5 years

－

－

－

－

－

－
2,000,000
11,750,000
13,750,000－
10,000,000
14,270,000
24,270,000－
20,000,000
31,470,000
51,470,000

4 to 5 years

Over 5 years

－

－

－

－

－

－
－
11,750,000
11,750,000－
4,000,000
15,770,000
19,770,000－
28,000,000
31,220,000
59,220,000

As of December 31, 2018
2 to 3 years
3 to 4 years(Thousands of yen)－－

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

42

6.

Investment and Rental Property

For the periods from January 1, 2019 to June 30, 2019 and from July 1, 2018 to
December 31, 2018
JEI owns rental office buildings and other properties in Tokyo and other regions for the purposeof generating rental income. The following is the carrying value and fair value as of June 30,
2019 and December 31, 2018 for such real estate for lease.
Carrying value
As of
Change during period
As ofDecember 31, 2018(*1)
June 30, 2019
(Thousands of yen)
258,689,768(661,596)
258,028,172
Carrying value
As of
Change during period
As ofJuly 1, 2018(*2)
December 31, 2018
(Thousands of yen)
253,180,617
5,509,151
258,689,768

Fair value
As ofJune 30, 2019
310,488,000

Fair value
As ofDecember 31, 2018
303,455,000

A) Carrying value represents the acquisition cost less accumulated depreciation.
B) Details of change during period:(*1) A decrease of ¥661,596 thousand during period is mainly due to depreciation costs of¥1,935,705 thousand.
(*2) The increase of ¥5,509,151 thousand during the period is mainly due to an increase of¥6,613,775 thousand related to the acquisition of AKASAKA INTERCITY AIR, and adecrease of ¥1,920,688 thousand for depreciation costs.

C) Fair value
Fair value as of June 30, 2019 and December 31, 2018 is appraisal value provided by thirdparty real estate appraisers.

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

43

7.

Property and Equipment

Property and equipment at June 30, 2019 and December 31, 2018 consisted of the following:
As of June 30, 2019

As of December 31, 2018

Acquisition
cost

Accumulated
depreciation

7,312,013
6,253
49,835
9,292,709－(1,663,787)(3,380)(14,862)－－5,648,225
2,872
34,973
9,292,709－

116,973,957(30,201,675)

942,708

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
Total

Net
Acquisition
book value
cost(Thousands of yen)

Accumulated
depreciation

Netbook value

7,087,968
6,253
49,835
9,292,709
14,169(1,556,856)(3,099)(11,440)－－

5,531,112
3,154
38,394
9,292,709
14,16986,772,281

115,955,569(28,423,768)

87,531,801(480,429)

462,278

906,063(448,093)

457,970

265,897
146,475,849(150,895)－

115,002
146,475,849

263,244
146,475,849(138,696)－

124,547
146,475,849

116,057
281,435,282－(32,515,031)

116,057
248,920,250

112,000
280,163,664－(30,581,954)

112,000
249,581,709

8. Short-Term Loans and Long-Term Debt
Short-term loans and long-term debt as of June 30, 2019 and December 31, 2018 consisted of
the following:
As of June 30, 2019
Weighted-averageAmountinterest rate (*1)
Short-term loans:(Thousands of yen)

As of December 31, 2018
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)Unsecured loans from a bank due on October 8, 2019

2,000,000

0.26224%2,000,000

0.26273%

Unsecured loans from a bank due on March 8, 2020

5,000,000

0.26123%－－

Subtotal

7,000,000

2,000,000

Long-term debt due within one year:

Unsecured loans from banks due on March 8, 2019
Unsecured loans from an insurance company due on
December 12, 2019－

0.77500% (*2)

3,750,000

0.77500% (*2)

1,000,000

0.25000% (*2)

1,000,000

0.25000% (*2)

Unsecured loans from a bank due on January 31, 2020

2,000,000

1.60000% (*2)－－

Unsecured loans from banks due on January 31, 2020
Unsecured loans from an insurance company due on
January 31, 2020

2,600,000

1.36400% (*2)－－

1,000,000

1.31261% (*2)－－

Unsecured loans from banks due on January 31, 2020

3,000,000

1.00000% (*2)－－

Subtotal

9,600,000

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

4,750,000

44

8.

Short-Term Loans and Long-Term Debt (continued)
Long-term debt:
Unsecured loans from a bank due on January 31, 2020
Unsecured loans from banks due on January 31, 2020
Unsecured loans from an insurance company due on
January 31, 2020
Unsecured loans from banks due on January 31, 2020－－

1.60000% (*2)
1.36400% (*2)

2,000,000
2,600,000

1.60000% (*2)
1.36400% (*2)－

1.31261% (*2)

1,000,000

1.31261% (*2)－

1.00000% (*2)

3,000,000

1.00000% (*2)

Unsecured loans from a bank due on September 30, 2020

2,000,000

0.26121%2,000,000

0.26367%

Unsecured loans from a bank due on June 30, 2021
Unsecured loans from an insurance company due on
June 30, 2021

2,000,000

1.60750% (*2)

2,000,000

1.60750% (*2)

2,000,000

0.98834% (*2)

2,000,000

0.98834% (*2)

Unsecured loans from banks due on November 29, 2021

3,760,000

0.41909%3,760,000

0.41909%

Unsecured loans from banks due on December 30, 2021
Unsecured loans from insurance companies due on
January 31, 2022

5,750,000

0.81875% (*2)

5,750,000

0.81875% (*2)

3,000,000

0.35000% (*2)

3,000,000

0.35000% (*2)

Unsecured loans from a bank due on June 30, 2022
Unsecured loans from insurance companies due on
November 30, 2022

2,000,000

1.15417% (*2)

2,000,000

1.15417% (*2)

1,000,000

0.35000% (*2)

1,000,000

0.35000% (*2)

Unsecured loans from banks due on December 30, 2022

5,750,000

0.93625% (*2)

5,750,000

0.93625% (*2)

Unsecured loans from a bank due on June 30, 2023
Unsecured loans from an insurance company due on
June 30, 2023

2,000,000

1.20250% (*2)

2,000,000

1.20250% (*2)

3,000,000

0.46000% (*2)

3,000,000

0.46000% (*2)

Unsecured loans from banks due on November 30, 2023

5,270,000

0.84375% (*2)

5,270,000

0.84375% (*2)

Unsecured loans from banks due on November 30, 2023

5,500,000

0.64801% (*2)

5,500,000

0.64801% (*2)

Unsecured loans from a bank due on May 31, 2024

3,500,000

0.68431% (*2)

3,500,000

0.68431% (*2)

Unsecured loans from banks due on November 30, 2024

5,270,000

0.96275% (*2)

5,270,000

0.96275% (*2)

Unsecured loans from banks due on June 30, 2025

8,000,000

0.67400% (*2)

8,000,000

0.67400% (*2)

Unsecured loans from banks due on November 1, 2025

3,750,000

0.70600% (*2)

3,750,000

0.70600% (*2)

Unsecured loans from banks due on March 31, 2026

6,400,000

0.83441% (*2)

6,400,000

0.83441% (*2)

Unsecured loans from banks due on March 31, 2026

3,750,000

0.57100% (*2)－

Unsecured loans from a bank due on September 30, 2026

1,300,000

0.83071% (*2)

1,300,000

0.83071% (*2)

Unsecured loans from banks due on December 30, 2026

3,000,000

0.79100% (*2)

3,000,000

0.79100% (*2)

Subtotal
Total

78,000,000

82,850,000

94,600,000

89,600,000－(*1) The weighted-average interest rate is weighted-average figures during the period. As for the borrowings hedged byinterest-rate swaps for the purpose of mitigating interest rate fluctuation risk, the fixed interest rates after entering into
the interest rate swap transactions are used to calculate the weighted-average interest rate.
(*2) These are fixed-rate debt (incl. fixed-rate debt through each interest-rate swap agreement).

The scheduled repayment amounts of long-term debt as of June 30, 2019 are as follows:

Long-term debt

1 year or less

1 to 2 years

9,600,000

6,000,000

2 to 3 years
3 to 4 years(Thousands of yen)
14,510,000
11,750,000

4 to 5 years

Over 5 years

14,270,000

31,470,000

JEI has commitment lines of ¥14,000,000 thousand with three financial institutions to mitigate
refinancing risk and enhance financial stability. As of June 30, 2019, these commitment lines
have never been utilized.

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

45

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of June 30, 2019 and December
31, 2018 are summarized as follows:
As of June 30, 2019
WeightedaverageAmountinterest rate
(Thousands of yen)Unsecured bond #6
due on March 11, 2019
Unsecured bond #7
due on March 11, 2024
Unsecured bond #8
due on September 9, 2025
Unsecured bond #9
due on October 27, 2026
Unsecured bond #10
due on December 20, 2023
Unsecured bond #11
due on April 23, 2027
Unsecured bond #12
due on April 20, 2023
Unsecured bond #13
due on April 20, 2033
Unsecured bond #14
due on August 10, 2028
Total

As of December 31, 2018
WeightedaverageAmountinterest rate
(Thousands of yen)－

0.46000%

5,000,000

0.46000%

8,000,000

1.13000%

8,000,000

1.13000%

5,000,000

1.03000%

5,000,000

1.03000%

2,000,000

0.45000%

2,000,000

0.45000%

2,000,000

0.39000%

2,000,000

0.39000%

7,000,000

0.65000%

7,000,000

0.65000%

2,000,000

0.24000%

2,000,000

0.24000%

2,000,000

0.95000%

2,000,000

0.95000%

4,000,000

0.63000%

4,000,000

0.63000%

32,000,000

37,000,000

The scheduled redemption amounts of investment corporation bonds as of June 30, 2019 are as
follows:

Investment corporation bonds

10.

1 year or less

1 to 2 years－－

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

4 to 5 years

Over 5 years

10,000,000

20,000,000

Net Assets

In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50,000 thousand.

11.

Per Unit Information

Net assets per unit as of June 30, 2019 and December 31, 2018 were calculated based on thenumber of units outstanding as of each date, (1,305,700 units) and (1,305,700 units),
respectively.
Net income per unit for the periods from January 1, 2019 to June 30, 2019 and July 1, 2018 to
December 31, 2018 was calculated based on the weighted-average number of units outstanding
during the corresponding periods, (1,305,700 units) and (1,305,700 units), respectively.
Accordingly, net assets per unit were ¥110,149 as of June 30, 2019 and ¥110,076 as ofDecember 31, 2018. Net income per unit was ¥2,826 for the period from January 1, 2019 toJune 30, 2019 and ¥2,754 for the period from July 1, 2018 to December 31, 2018.

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

46

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 for eachfiscal period in order to meet the condition set forth in the Special Taxation Measures Law ofJapan concerning the deductibility of cash dividends paid for income tax purposes.
Details of significant components of deferred tax assets and liabilities as of June 30, 2019 andDecember 31, 2018 are summarized as follows:
As of June 30,
As of December 31,
2019
2018
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

7
7
7

27
27
27

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from January 1, 2019 to June 30, 2019 and July 1, 2018 to December 31, 2018 is asfollows:

Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

For the period from
For the period
January 1, 2019from July 1, 2018
to June 30, 2019
to December 31, 201831.51%
31.51%(31.51%)
0.02%
0.02%

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)(31.50%)
0.02%
0.03%

47

13.

Breakdown of Revenues and Expenses
For the period
For the period
from January 1, 2019from July 1, 2018
to June 30, 2019
to December 31, 2018
(Thousands of yen)
Revenues:
Rental business revenues
Rental revenues
Common area revenues
Other rental revenues
Subtotal
Other
Utilities revenues
Other revenues
Subtotal
Total rental revenues
Property operating expenses:
Property management costs and fees
Utilities expenses
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating expenses
Profit8,302,097
1,272,591
275,471
9,850,159

8,224,089
1,283,197
272,580
9,779,867

713,089
105,013818,102
10,668,262

792,175
85,642877,818
10,657,685

1,399,365
959,157
917,694
22,333285,363
1,935,705
228,316
5,747,936
4,920,325

1,358,100
1,029,767
894,114
24,388314,615
1,920,688
238,996
5,780,672
4,877,012

14．Leases
JEI leases properties on which rental revenues are earned. At June 30, 2019 and December 31,
2018, future lease revenues under non-cancelable operating leases are summarized as follows:

Due within one year
Due after one year
Total

As of June 30,
As of December 31,
2019
2018
(Thousands of yen)
750,472
711,805
2,469,014
1,788,058
3,219,487
2,499,864

Asset Management Report for 26th period (Semi-Annual Report for 26th Period)48

15. Derivative Transactions
Derivative Transactions as of June 30, 2019(1) Transactions to which hedge accounting is not applied:
Not applicable.
(2) Transactions to which hedge accounting is applied:
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of June 30, 2019 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Interest-rate swap
Receive floating,pay fixed

Contract amount
Fair value
More than
one year(Thousands of yen)

Hedgeditem

Long-term
debt

46,140,000

40,540,000

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 disclosurein Note 6, “Financial Instruments.”

Derivative Transactions as of December 31, 2018
(1) Transactions to which hedge accounting is not applied:
Not applicable.
(2) Transactions to which hedge accounting is applied:
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of December 31, 2018 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Interest-rate swap
Receive floating,pay fixed

Hedgeditem

Long-term
debt

Contract amount
Fair value
More than
one year(Thousands of yen)

46,140,000

42,390,000

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 disclosurein Note 6, “Financial Instruments.”

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16.

Related Party Transactions

For the period from January 1, 2019 to June 30, 2019(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

Description of transaction

Hidehiko
Ogawa

Payment of asset management
fees to JEAM

Amount(Thousands of yen)
447,411

Account
Accounts
payableBalance at the end of period(Thousands of yen)
368,885

For the period from July 1, 2018 to December 31, 2018
(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

Description of transaction

Hidehiko
Ogawa

Payment of asset management
fees to JEAM

Amount(Thousands of yen)
445,785

Account
Accounts
payableAsset Management Report for 26th period (Semi-Annual Report for 26th Period)

Balance at the end of period(Thousands of yen)
365,33850

17.

Segment Information

For the periods from January 1, 2019 to June 30, 2019 and from July 1, 2018 to
December 31, 2018
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 ¥3,691,213,900, which is the maximum integral
multiple of the 1,305,700 units issued, but not exceeding ¥3,691,310,948, which is the amountof retained earnings at June 30, 2019. No cash distribution exceeding the income amount set
forth in Section 33.1.4 of the bylaws of JEI shall be made.
On Augest 19, 2019, the Board of Directors approved a resolution to make a cash distributionof ¥2,827 per unit aggregating to ¥3,691,213,900 to unitholders of record as of June 30, 2019.

19.

Significant Subsequent Event

Not applicable.

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51