Asset Management Report for the 34th Period(Semi-Annual Report for the 34th Period)
From January 1, 2023, to June 30, 2023

Asset Management Report for the 34th Period (Semi-Annual Report for the 34th Period)

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 34th period (from January 1, 2023, to June 30, 2023).
In terms of external growth, the transfer in phases of Shintomicho Building decided upon in the 32nd period was completed.
Also, an asset replacement involving acquiring Shin-Yokohama Arena-dori Building near Shin-Yokohama Station in
March 2023 and transferring Pacific Square Sengoku in July 2023 was conducted from the standpoint of seeking to improve
location conditions and building age.
In addition, JEI decided on transfer of Kowa Kawasaki Nishiguchi Building, which had a low occupancy rate and a large
amount of unrealized loss, and transfer in phases of JEI Kyobashi Building, which had an unrealized gain but a highbuilding age. As replacement properties for these two transfer properties, JEI acquired in July 2023 Bizcore Tsukiji, thefourth acquisition from the Bizcore series of medium-sized, high-grade office buildings developed by Nippon Steel Kowa
Real Estate Co., Ltd., a core sponsor, and decided on acquisition of the relatively new Osaki Bright Tower / Osaki Bright
Plaza in April 2024. This series of asset replacement was intended to resolve the Kowa Kawasaki Nishiguchi Building
issue that was at hand and thereby secure qualitative improvement of the portfolio, along with realizing stabilization of
distributions for the 34th period through utilization of the net gain on transfer of the two properties (approximately 0.9
billion yen).
On the leasing front, the period-end occupancy rate of the entire portfolio recovered from the 33rd period’s 93.0% to 96.5%
as a result of making steady progress in refilling vacancies, along with transferring Kowa Kawasaki Nishiguchi Building,which had a low occupancy rate. In addition, for rent revisions, JEI conducted flexible negotiation of terms and conditions
while placing top priority on prevention of tenant departures.
On the financial front, JEI sought to reduce financial costs by repaying some loans in appropriately adjusting the timing ofrefinancing in consideration of the cash flows from the series of asset replacements. In addition, JEI realized extension ofborrowing periods and diversification of maturity dates through timely issuance of investment corporation bonds to specificinvestors.
For ESG, JEI made progress in initiatives, including setting “net zero CO 2 emissions by fiscal 2050” as a new target for
reduction of CO2 emissions and implementing and disclosing quantitative financial analysis based on TCFD
recommendations. In fiscal 2022, CO2 emissions intensity was reduced by 74.2% (intensity basis) compared with fiscal
2013, achieving reduction already surpassing the target to reduce by 46% by fiscal 2030.
As a result, in the 34th period, JEI recorded operating revenue of 13,823 million yen, operating income of 4,477 million
yen, net income of 3,881 million yen, and distribution per unit of 2,800 yen as initially planned.

About Future Asset Management
In the real estate transaction market, transaction prices are expected to remain steady for the time being backed by factors
such as there continuing to be vigorous appetite for investment by market participants. JEI will continue to set the sponsor
pipeline as the main source of property acquisition and advance talks with the sponsors. At the same time, JEI intends toearnestly work on acquisition from third parties as well. In addition, in order to improve the portfolio over the medium tolong term, properties that are old or are likely to lose competitiveness in the future will continue to be considered for
replacement in a manner that would enhance quality.
In the office building leasing market, while trending toward inquiries and contracts gradually increasing for even large
floor space following the reclassification of COVID-19 to Class V Infectious Disease, there are concerns that theuncertainty over the office sector will not be dispelled immediately, given the factors such as the state of entrenchment of
remote work and the possibility of even further consolidation among mainly large companies. Full-fledged recovery in
office demand being expected to take a little more time and an increase in new supply in central Tokyo in 2023 lead to theoutlook continuing to be on the harsh side in that “the vacancy rate will be in the mid 6% range, or in some cases in the
7% range, and newly concluded rents will soften.”
Under such circumstances, JEI believes that, headed for increasingly further polarization by the superiority/inferiority interms of conditions, such as location, environmental performance and comfort, in response to the thinking on “new work
styles,” large buildings that are superior in terms of conditions fitting into the new office strategy will attract demand ascore offices.
As to the policy on leasing activities for the time being, JEI will continue to place top priority on “early refilling of vacatedfloors” and “prevention of departure” of existing tenants. Especially with the vacated floors, JEI will work to achieve earlyrefilling of vacated floors by cooperating with the sponsors, setting flexible terms and conditions taking into account thelevel of difficulty by property and other efforts.
As for rent renewal/revision, JEI will keep up initiatives for upward rent revisions, centering on regional properties, while
also responding flexibly to rent reduction requests with top priority placed on prevention of tenant departures.
In terms of finance, JEI will keep up stable and sound financial operations while seeking to reduce financial costs with theratio of fixed interest rates, remaining periods to maturity and diversification of maturity dates in mind. Furthermore, fromthe standpoint of maintaining and strengthening financing base through diversification of fund procurement means, JEI
will work on environmentally or socially conscious or new methods of funding, including sustainable finance.
With regard to ESG, continuing to be positioned as the most important issue in management, JEI will seek to further evolveand deepen its initiatives by keeping on taking on challenges with key themes being CO 2 emissions reduction, for which along-term target has been set, and TCFD, based on which disclosure of qualitative and quantitative analyses are made, in
addition to steadily carrying out previous efforts.
Finally, as always, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and otherlaws and regulations, and in addition to promoting compliance, also disclosing information on the status of operations tounitholders in an accurate and easy-to-understand manner.
We kindly ask for your continued understanding and support.
Asset Management Report for the 34th Period (Semi-Annual Report for the 34th Period)

1II. Asset Management Report
1. Outline of Asset Management Operation(1) Operating Results and Financial Position of the Investment Corporation
30th Period

Fiscal period
Operating revenue

31st Period

32nd Period

33rd Period

34th Period

January 1, 2021, to July 1, 2021, to January 1, 2022, to July 1, 2022, to January 1, 2023, toJune 30, 2021 December 31, 2021 June 30, 2022 December 31, 2022 June 30, 2023
(Millions of yen)

10,567

10,666

11,065

10,69913,823(Rental revenues)(Millions of yen)

(10,567)(10,666)(10,267)(10,141)(10,079)

Operating expenses(Millions of yen)

5,977

6,180

6,353

6,567

9,346

(Property operating expenses) (Millions of yen)

(5,355)(5,563)(5,699)(5,944)(5,972)

Operating income(Millions of yen)

4,590

4,485

4,711

4,132

4,477

Ordinary income(Millions of yen)

3,976

3,846

4,102

3,503

3,882

Net income(Millions of yen)

3,975

3,846

4,101

3,502

3,881

Total assets(Millions of yen)

293,970

293,960

291,430

294,540

287,045(-0.0)(-0.0)(-0.9)(1.1)(-2.5)

152,335

152,206

150,461

150,218

150,354(-0.1)(-0.1)(-1.1)(-0.2)(0.1)(Period-on-period change)
Net assets(Period-on-period change)(%)(Millions of yen)(%)

Unitholders’ capital, net (Note 1) (Millions of yen)

147,907

147,907

145,907

145,907

145,907

Total outstanding investment units(units)1,353,000

1,353,000

1,337,598

1,337,598

1,337,598

Net assets per unit

(yen)

112,590

112,495

112,486

112,304

112,406

Net income per unit (Note 2)

(yen)

2,938

2,842

3,052

2,618

2,901

(Millions of yen)

3,975

3,846

3,745

3,745

3,745

(yen)

2,938

2,843

2,800

2,800

2,800

(Profit distribution per unit)(yen)(2,938)(2,843)(2,800)(2,800)(2,800)(Distribution in excess ofearnings per unit)

(yen)

(－)

(－)

(－)

(－)

(－)

(%)

1.4

1.3

1.4

1.2

1.3

(%)

(2.7)

(2.6)

(2.8)

(2.4)

(2.7)

(%)

2.6

2.5

2.7

2.3

2.6

(Annualized rate)

(%)

(5.3)

(5.0)

(5.5)

(4.6)

(5.2)

Capital ratio (Note 5)

(%)

51.8

51.8

51.6

51.0

52.4

(%)

(-0.0)(-0.0)(-0.1)(-0.6)

(1.4)

(%)

100.0

100.0

91.3

107.0

96.5

Number of investment properties(properties)

35

36

35

36

35

Number of tenants (Note 7)(tenants)

187

587

585

617

611

Total leasable area (Note 8, 9)(m2)

336,375

341,070

335,534

337,389306,717

Occupancy rate

(%)

96.4

93.1

90.8

93.0

96.5

Depreciation(Millions of yen)

1,847

1,891

1,937

1,931

1,960

Capital expenditure(Millions of yen)

1,547

1,305

1,298

1,188

1,404

Net operating income (NOI)(Note 10)

(Millions of yen)

7,059

6,994

6,504

6,128

6,067

Funds from operation (FFO)
per unit (Note 11)

(yen)

4,303

4,240

3,918

3,665

3,634

FFO multiples (Note 12)(times)

18.3

15.8

15.5

18.0

17.1

Debt service coverage ratio(DSCR) (Note 13)(times)

13.2

13.2

14.4

12.8

14.1

Total distribution
Distribution per unit

Return on assets (Note 3)(Annualized rate)
Return on equity (Note 4)(Period-on-period change)
Payout ratio (Note 6)

Interest-bearing debt

125,600

125,600

125,600

128,600

120,600

Loan-to-value (Note 14)

(%)

42.7

42.7

43.1

43.7

42.0

Number of days in operation(days)

181

184

181

184

181

(Millions of yen)

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(Note 1) The amount of unitholders’ capital after subtracting any deduction from unitholders’ capital is shown. This does not accountfor any deduction from unitholders’ capital that is due to the implementation of distribution in excess of earnings related tothe allowance for temporary difference adjustments.
(Note 2) Net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding during thesix months period.
(Note 3) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 4) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 5) Capital ratio = Period end net assets / Period end total assets × 100(Note 6) 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.)
For the 32nd period, as buyback and cancellation of own investment units took place, the formula below was used to calculate
the payout ratio.
Payout ratio ＝ (Total distributions (not including distribution in excess of earnings / Net income) × 100(Note 7) Number of tenants indicates the number of end tenants in each property as of the end of each period in principle, starting fromthe 31st period. 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. However, for properties in which the residential portion or the percentage of theinterest owned by JEI is relatively low, the number of tenants indicates the number of master lease companies for the property,
considering a master lease company as a tenant. In addition, for land with leasehold interest, the number of tenants is counted
as one based on the lease agreement for the leased land.
(Note 8) For properties with joint ownership (including quasi co-ownership of trust beneficiary interest; the same applies hereinafter),the figure is obtained by taking the leasable area of the entire property and factoring in the percentage of the interest owned
by JEI, regarding the figure as JEI’s leasable area. The same applies hereinafter.
(Note 9) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 10) NOI = Rental revenues – Property operating expenses + Depreciation(Note 11) FFO per unit = (Net income + Depreciation – Gain on sale of real estate + Loss on sale of real estate + Impairment loss) /Total number of outstanding investment units (the figure is rounded down to the whole number).
(Note 12) FFO multiples = Period end investment unit price / Annualized FFO per unit
(Note 13) DSCR = (Net income before interest and taxes + Depreciation (*)) / (Interest expenses + Interest expense on investment
corporation bonds)* Includes depreciation except for property operating expenses.
(Note 14) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

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(2) Asset Management Development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006, under the Law Concerning Investment Trusts andInvestment Corporations of Japan (Law No. 198 of 1951, as amended; hereinafter referred to as the “Investment
Trust Law”). On March 15, 2006, it completed the corporate registration to the Kanto Local 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 long-term perspectives. On June 30, 2023, JEI
settled its 34th period.
1) Business conditions and results
In the period under review (34th period ended June 30, 2023), the world economy saw large and rapid rises inpolicy interest rates by European and U.S. financial authorities with the intention of curbing inflation, leading
to a stronger sense of uncertainty over the future.
In Japan, the economy remained pretty much firm with factors such as robust capital investment and increasing
number of foreign visitors, along with spending recovering gradually with the prospect of COVID-19 being
reclassified to Class V Infectious Disease after the consecutive holidays in May as the impact of COVID-19 wasstarting to show signs of subsiding. Amid such, although factors such as globally rising interest rates and surging
domestic prices led to moves to gradually raise long-term interest rates, the Bank of Japan continued to adopt
yield curve control (YCC) while maintaining the framework of monetary easing, leading to growing attention
on when the Bank of Japan would change such policy management stance.
In the real estate transaction market trends for office properties, although there was a point in which there was
not as much action taken by certain overseas investors, the acquisition appetite of investors within and outsideof Japan continued to be strong due to the favorable fund procurement environment on the back of the Bank ofJapan’s monetary easing stance, differences in interest rates in Japan and abroad and other factors, making theproperty acquisition environment still severe. Under such circumstances, JEI sold Kowa Kawasaki Nishiguchi
Building (disposition price: 16,050 million yen), which had a low occupancy rate due to the impact of thedeparture of a large tenant, to Nippon Steel Kowa Real Estate Co., Ltd., a sponsor, in June 2023, the loss on thesale of which was offset by the gain on the sale of 80% of JEI Kyobashi Building (disposition price: 5,040
million yen), and acquired a medium-sized, high-grade office building, Bizcore Tsukiji (acquisition price: 9,800
million yen), from Nippon Steel Kowa Real Estate Co., Ltd. in July as a replacement property.
In the office building leasing market, tenant moves became more active as the impact of COVID-19 waned,with particularly moves for the purpose of relocating to improve the office environment in terms of close
proximity to a train station, excellent environmental performance and comfort, etc. starting to be seen. The
vacancy rate in central Tokyo has been flat in the low to mid 6% range since around the fall of 2022 (publishedby Miki Shoji Co., Ltd.), but concerns over supply and demand from the entrenchment of remote work,
weakening relocation needs of foreign companies and increase in the volume of supply of new office properties
mainly in central Tokyo in 2023, among other factors, led to newly concluded rent levels continuing to be on a
downward trend.
The total number of properties owned and managed by JEI at the end of the period under review was 35 with a
total acquisition price of 265.4 billion yen and total leasable area of 306,716.67 m2 (92,781.79 tsubos).
The occupancy rate (Note 1) at the end of the period under review improved to 96.5% as a result of making
relatively steady progress in refilling vacancies, along with selling Kowa Kawasaki Nishiguchi Building, which
was laden with substantial vacancies.
2) Fund procurement highlights
JEI will work on stable and sound financial operations over the medium to long term with a basic policy of
procuring funds for the long term at fixed interest rates.
In the period under review, JEI issued investment corporation bonds in the amount of 2.0 billion yen in Marchwith the redemption of existing investment corporation bonds of the same amount. In addition, with the loans
due for repayment, JEI sought to reduce financial costs by repaying 8.0 billion yen in June in appropriately
adjusting the timing of refinancing in consideration of the cash flows from the property replacements.

4

As a result, as of the end of the period under review, the average remaining period of interest-bearing debt
(Note 2) was 3.8 years (shortened by 0.2 years from the end of the previous period) and the loan-to-value ratioof total assets (total assets-based LTV) (Note 3) was 42.0% (down 1.7 points from the end of the previous
period) due to repaying some loans due for repayment.
In addition, JEI continues to have commitment lines with a credit limit of 14.0 billion yen to reduce refinancing
risk and enhance stability for fund procurement, etc.
As of June 30, 2023, JEI has been granted the following rating.
Credit rating agency

Issuer rating (outlook)

Individual debt issue rating(Note 4)

Japan Credit Rating Agency, Ltd. (JCR)

Long-term issuer rating
AA- (Stable)

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.
With regard to CO2 emission intensity, in fiscal 2021, JEI set a medium-term target to reduce emission intensity
by 46% by fiscal 2030 compared with fiscal 2013. To meet the target, JEI has promoted a shift to LED lighting,air-conditioning equipment with excellent energy-saving performance, and carbon-free energy sources, such as“RE100” compatible electricity, at properties it owns. In addition, in January 2023, JEI set a long-term target ofnet zero CO2 emissions by fiscal 2050. In order to reduce our environmental impact, JEI has set targets to reduceenergy consumption and water consumption intensities by 1% per year compared with the previous period, andover the medium to long term, to reduce average consumption and emission intensities by 5% or more whencomparing the rates between fiscal 2015 and fiscal 2019 with the rates between fiscal 2020 and fiscal 2024.
Furthermore, JEI has continuously promoted the acquisition of Green Building Certification and the number ofcertified properties now stands at 26, accounting for 88.8% of leasable area (as of June 30, 2023; excluding landwith leasehold interest).
Such initiatives for sustainability by JEI earned high recognition, specifically an eighth year straight “GreenStar” rating (Note 6) in the Global Real Estate Sustainability Benchmark (GRESB) (Note 5) Real Estate
Assessment conducted in 2022, as well as a third year straight “5 Star,” the highest rating in “GRESB Rating”(Note 7), and JEI has been a constituent of the MSCI Japan ESG Select Leaders Index (Note 8) since May 2021.
In addition, JEI’s asset management company Japan Excellent Asset Management Co., Ltd. (hereinafter,“JEAM”) compiles the policy, initiatives and such of JEI and JEAM for each of the four items (“governance,”“strategy,” “risk management,” and “metrics and targets”) recommended by the Task Force on Climate-related
Financial Disclosures (TCFD) (Note 9), implements qualitative and quantitative analyses on the financial impact
of climate change and discloses them on JEI’s website based on the TCFD recommendations for which JEAM
expressed support in June 2021.
4) Financial results and distribution highlights
As a result of the management above, for the period under review, JEI posted 13,823 million yen in operating
revenue, 4,477 million yen in operating income, 3,882 million yen in ordinary income, and 3,881 million yen in
net income.
Concerning distributions in the period under review, JEI intended to have the amount of profit distribution
deducted from its taxable income by application of the special provisions of the tax system on investment
corporations (Section 67-15 of the Special Taxation Measures Law), and conducted a reserve for reduction entry
under the special provisions of the tax system in the case of the replacement of specified assets (Section 65-7 ofthe Special Taxation Measures Law).
As a result, distribution per unit was 2,800 yen as JEI decided to distribute the entire amount (except for the
portion of less than one yen per unit) of unappropriated retained earnings after subtracting 136 million yen forreserve for reduction entry from unappropriated retained earnings.

5

(Note 1) Occupancy rate is a percentage of total leased area to total leasable area of real estate or real estate in trust.
(Note 2) 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 3) Loan-to-value ratio of total assets ＝ (Period end interest-bearing debt / Period end total assets) ×100
(Note 4) 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, 13th series unsecured investment
corporation bonds, 14th series unsecured investment corporation bonds, 15th series unsecured investment
corporation bonds, 16th series unsecured investment corporation bonds and 17th series unsecured investment
corporation bonds.
(Note 5) A benchmark established by a European pension fund group that measures ESG considerations of real estatecompanies and management institutions which is used by major European, American, and Asian institutional
investors for decision-making on investments.
(Note 6) “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 7) “GRESB Rating” is a rating of the overall score according to the global ranking, and “5 Star” is a rating given
to the top 20% of participants, “4 Star” to the following 20% and so forth.
(Note 8) The MSCI Japan ESG Select Leaders Index is an index consisting of companies that have high Environmental,
Social and Governance performance selected from among the constituents of the MSCI Japan Investable
Market Index (IMI). The Index has been selected as one of the ESG indices for passive investment by theGovernment Pension Investment Fund (GPIF).
(Note 9) The TCFD (Task Force on Climate-related Financial Disclosures) is an international initiative established in2015 by the Financial Stability Board (FSB) at the request of the G20 to discuss climate-related issues to beaddressed by the financial sector.

6

(3) Capital Increase
The outline of the changes in the total number of outstanding investment units and unitholders’ capital, net, for themost recent five years up to the end of the period under review are as follows:
Unitholders’ capital, net
Capital transaction (units)
Remarks(Millions of yen) (Note 1)
Paid-up Date
Capital transaction
ChangeBalance
ChangeBalanceJanuary 21, 2020
February 13, 2020
April 28, 2022

Public offering
Third-party
allotment
Cancellation

43,0001,348,700

7,213

147,186(Note 2)4,300

1,353,000

721

147,907(Note 3)

-15,402

1,337,598-1,999145,907(Note 4)(Note 1) The amount of unitholders’ capital after subtracting any deduction from unitholders’ capital is shown. This does not accountfor any deduction from unitholders’ capital that is due to the implementation of distribution in excess of earnings related tothe allowance for temporary difference adjustments.
(Note 2) New investment units were issued at an issue price of 173,355 yen per unit (purchase price of 167,754 yen per unit) througha public offering in order to repay debts procured to acquire properties and partially fund property acquisitions.
(Note 3) New investment units were issued at a purchase price of 167,754 yen per unit through third-party allotment in order to partiallyfund future acquisitions of specified assets or partially fund repayment of loans.
(Note 4) Buyback of own investment units through market purchase on the Tokyo Stock Exchange based on a discretionary transaction
contract with a securities company took place from February 18, 2022, to April 13, 2022. All 15,402 own investment units
from the buyback were cancelled on April 28, 2022, based on the resolution passed at the board of directors’ meeting of JEI
held on April 18, 2022.
(Note 5) At JEI, there exist no investment units held by JEI (investment units without voting rights provided in Article 308-2 of the
Corporate Law which will be applied mutatis mutandis pursuant to Article 94 of the Investment Trust Law) or cross-heldinvestment units (investment units without voting rights provided in Article 160 of the Investment Trust Enforcement
Ordinance) as of the end of the period under review.

[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
30th period
31st period
32nd period
33rd period
34th period(June 2021) (December 2021) (June 2022) (December 2022) (June 2023)(closing date)
Investment
unit market Highest (yen)163,300
158,400
136,600
139,400
130,700
price
Lowest (yen)120,000
132,800
121,600
118,900
115,400(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.

7(4) Distributions Paid
Concerning distributions in the period under review, JEI decided to distribute the entire amount (except for the
portion of less than one yen per unit) of unappropriated retained earnings with provision of reserve for reduction
entry from unappropriated retained earnings along with the intention to have the amount of profit distribution
deducted from its taxable income by application of the special provisions of the tax system on investment
corporations (Section 67-15 of the Special Taxation Measures Law). As a result, distribution per unit was 2,800 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 per unit)(yen)
Of which, total profit
distributions(Thousands of yen)
(Profit distribution per unit)(yen)
Of which, total refund ofinvestment equity(Refund of investment
equity per unit)
Of total refund of investment
equity, total distribution
amount from reserve fortemporary difference
adjustments(Of refund of investment
equity per unit, distribution
amount per unit from reserve
for temporary difference
adjustments)
Of total refund of investment
equity, total distribution
amount from distribution
reducing unitholders’ capitalfor tax purpose(Of refund of investment
equity per unit, distribution
amount per unit from
distribution reducing
unitholders’ capital for tax
purpose)30th period

31st period

32nd period

33rd period

34th period

January 1, 2021, to July 1, 2021, to January 1, 2022, to July 1, 2022, to January 1, 2023, toJune 30, 2021 December 31, 2021 June 30, 2022 December 31, 2022 June 30, 2023
3,975,882

3,846,920

4,102,019

3,502,198

3,881,374

768

341

356,744－

136,100

3,975,114

3,846,579

3,745,274

3,745,274

3,745,274(2,938)(2,843)(2,800)(2,800)(2,800)3,975,114

3,846,579

3,745,274

3,745,274

3,745,274(2,938)(2,843)(2,800)(2,800)(2,800)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

8

(5) Policy and Issues on Future Investment Management
1) Outlook for business environment
In the real estate transaction market, transaction prices are expected to remain pretty much steady without any
significant tumbles with there continuing to be vigorous appetite for investment by market participants. However,the change in the Bank of Japan’s policy management stance at the end of July 2023 suggests that there will be acertain degree of tolerance for rises in long-term interest rates, leading to growing attention on where abouts longterm interest rates will settle in the future. JEI believes that there is a need to closely monitor the Bank of Japan’s
stance and the trends of long-term interest rates even further and, at the same time, keep an eye on also changes in
the political, economic and geopolitical situation ahead.
In the office building leasing market, while starting to gradually gain momentum for even large floor space with thereclassification of COVID-19 to Class V Infectious Disease, review of office functions by companies and such,recovery in office demand is expected to take a little more time given the factors such as the state of entrenchmentof remote work and the possibility of even further consolidation among mainly large companies. Under suchcircumstances, there are concerns that vacancy rates will remain unchanged or slightly rise and newly concluded
rents will soften in light of new supply increasing in 2023. On the other hand, office building conditions, such as
location, environmental performance and comfort, are expected to increase in weight based on new thinking on
offices with the work-style reform, leading to also increasingly further polarization by the superiority/inferiority interms of such conditions.
2) Policy and issues on future investment management
In the period under review, JEI announced property replacements with the transfer of Kowa Kawasaki Nishiguchi
Building, which had a low occupancy rate due to the impact of the departure of a large tenant. With the realizationof qualitative improvement of the portfolio and enhancement of occupancy rates through these replacements, JEI
will continue to promote the following initiatives to enhance core earning power.
A. External growth
JEI will work to acquire competitive properties by means of well-balanced investments based on size and area withthe aim of expanding asset size over the medium to long term. JEI will continue to have the asset managementcompany newly cultivate and refine property information sources in an effort to promptly gain access to market
information on disposition of properties and thereby keep seizing the right business opportunities while maintaining
a focus on cooperation with sponsor companies. At the same time, in order to improve the portfolio over the medium
to long term, properties that are old or are likely to lose competitiveness in the future will be considered for
replacement in a manner that would enhance portfolio quality.
B. Internal growth
JEI will work to prevent tenant departures by continuing to make efforts to capture needs in a timely manner throughfurther strengthening of finely-tuned relationships with existing tenants.
As to properties with vacancies at present or with expected vacancies, JEI will focus on filling those vacancies at an
early stage through measures such as setting flexible terms and conditions taking into account the property
characteristics, market environment, etc. based on collaboration with the sponsors, property management companies
and brokerage companies. As for rent renewal/revision, the policy is to promote flexible rent revision negotiations
while placing top priority on prevention of tenant departures.
C. Financial strategy
JEI will consistently work on stable and sound financial operations by continuing to procure funds based on a basic
policy of seeking to reduce financial costs with the ratio of fixed interest rates, remaining periods to maturity anddiversification of maturity dates in mind. In addition, JEI will work on new procurement methods such as green
finance and sustainability finance from the perspective of maintaining and strengthening its procurement basethrough diversification of fund procurement means.
JEI will set the upper limit of total assets-based LTV at 60% and manage it at around 35% to 50%.
D. Sustainability initiatives, BCP measures, etc.
JEI will continue to work to reduce the environmental burden and to cooperate/collaborate with stakeholders toachieve a sustainable society, deeming such as its corporate social responsibility. Over the medium to long term, JEI
aims to enhance the earning power of the entire portfolio and improve its ESG evaluation by making additional
strategic investments to maintain asset value and improve property competitiveness while conducting sustainability
initiatives, BCP measures and such.

9(6) Subsequent Events
Not applicable.
(Reference Material)
Acquisition of Asset (Osaki Bright Tower / Osaki Bright Plaza)
On August 17, 2023, JEI decided to conclude a transaction agreement for trust beneficiary interest in real estate
on August 18, 2023, as described below.
<Overview of the Asset to Be Acquired>
Asset to be acquired

Trust beneficiary interest in real estate (Note 1)

Name of property

Osaki Bright Tower / Osaki Bright Plaza

Location

Osaki Bright Tower
5-6-1 Kita-Shinagawa, Shinagawa-ku, Tokyo
Osaki Bright Plaza
5-4-1 Kita-Shinagawa, Shinagawa-ku, Tokyo

Planned acquisition price (Note 2)

13,100 million yen

Date of execution of agreement

August 18, 2023

Scheduled handover date

April 26, 2024

Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note 1) Trust beneficiary interest in real estate to exclusively-owned portions or co-ownership interest in exclusivelyowned portions of buildings under compartmentalized ownership and the corresponding rights of site (coownership interest in ownership).
(Note 2) Planned acquisition price does not include acquisition-related consumption tax and local consumption tax orfees required for the acquisition.

10

2. Outline of the Investment Corporation(1) Investment Units
Fiscal period
Total number of units
authorized
Total number of units
issued and outstanding

30th
As of June 30,
2021

31st
As of December 31,
2021

32nd
As of June 30,
2022

33rd
As of December 31,
2022

34th
As of June 30,
2023

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

1,353,000 units

1,353,000 units

1,337,598 units

1,337,598 units

1,337,598 units

Unitholders’ capital, net(Note)

147,907
147,907
145,907
145,907
145,907
million yen
million yen
million yen
million yen
million yen
6,797
6,978
7,556
7,193
7,710
Number of unitholders
individuals
individuals
individuals
individuals
individuals(Note) The amount of unitholders’ capital after subtracting any deduction from unitholders’ capital is shown. This does not accountfor any deduction from unitholders’ capital that is due to the implementation of distribution in excess of earnings related tothe allowance for temporary difference adjustments.

(2) Unitholders
Major unitholders as of June 30, 2023, are as follows:
Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%) (Note)

1-8-12 Harumi, Chuo-ku, Tokyo

386,731

28.91

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

209,166

15.64

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

134,427

10.05

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

60,936

4.56

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

20,660

1.54

STATE STREET BANK WEST
CLIENT - TREATY 505234

1776 HERITAGE DRIVE,NORTH QUINCY, MA 02171,U.S.A.

20,633

1.54

Mizuho Securities Co., Ltd.

1-5-1 Otemachi, Chiyoda-ku, Tokyo

15,889

1.19

The Shinkumi Federation Bank

1-9-5 Kyobashi, Chuo-ku, Tokyo

14,4091.08

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

14,014

1.05

STATE STREET BANK AND
TRUST COMPANY 505103

P.O. BOX 351 BOSTONMASSACHUSETTS 02101 U.S.A.

11,060

0.83

Total

887,925

66.38

Name

Custody Bank of Japan, Ltd.
(Trust Account)
The Master Trust Bank of Japan,
Ltd. (Trust Account)
Nippon Steel Kowa Real EstateCo., Ltd.
The Nomura Trust and Banking
Co., Ltd.
(Investment trust account)
The Dai-ichi Life Insurance
Company, Limited(Note)

Address

Ratio of number of units held to outstanding investment units is rounded to the second decimal place.

11

(3) Officers
1) Directors and accounting auditor
Compensation or fee forthe six months ended
June 30, 2023
(Thousands of yen)

Name

Major additional post

Executive
Director

Shuichiro Kayama

President, Japan Excellent Asset Management
Co., Ltd.

Supervisory
Director

Shunichi Maekawa(Note 2)

Professor Emeritus, Meikai University

1,500Supervisory
Director

Eiji Takagi

Eiji Takagi Certified Public Accounting Office

1,800Supervisory
Director

Osamu Hirakawa

Adviser, Foreign Law Joint Venture, Anderson
Mori & Tomotsune

1,800

Accounting
AuditorErnst & Young
ShinNihon LLC

–

Post

–

20,401(Note 3)(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 conflictsof interest between those companies, including those listed above, and JEI.
(Note 2) Shunichi Maekawa resigned as Supervisory Director on May 31, 2023.
(Note 3) The total amount of compensation or fee shown above is an estimated amount and includes the amount paid ascompensation for auditing during the period under review, the fee for the English financial statements audit, the fee
for the preparation of a comfort letter upon the issuance of the 17th series unsecured investment corporation bonds
in March 2023 and the fee for third-party assurance engagements.

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.
3) Matters concerning compensation agreement between directors, etc. and Investment Corporation
Not applicable.

(4) Matters Concerning Directors and Officers Liability Insurance Agreement
JEI has concluded the directors and officers liability insurance agreement as follows:
Scope of the insured

Executive Director andSupervisory Directors

Overview of the directors and officers liability insurance agreement(Overview of insured event covered by the insurance)
Compensation payment, dispute costs, etc. incurred by the insured as aresult of a damage compensation claim arising from an act performed by
the insured based on his or her position will be covered.
(Burden ratio of insurance premium)The entire amount is borne by JEI.
(Measures to ensure the appropriateness of the execution of duties of
directors and officers)
Damages and losses incurred by the insured for an act which was
performed acknowledging that such is a criminal act or violation of laws
and regulations will not be covered by the insurance.

(5) Asset Management Company, Asset Custodian, and Administrative Agents
JEI’s asset management company, asset custodian, and administrative agents as of June 30, 2023, 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 foraccounting and institution operation)

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Investment corporation bonds)

Mizuho Bank, Ltd.

12

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
33rd Period(As of December 31, 2022)

34th Period(As of June 30, 2023)

Total
acquisition
price(Millions of yen)
(Note 2)

Investment
ratio inportfolio
(%)

Total
acquisition
price(Millions of yen)
(Note 2)

Investment
ratio inportfolio(%)

Area I

10,9193.7

10,946

3.8

Area II

5,346

1.8

5,336

1.9

Area IV

1,608

0.5

1,662

0.6

Area I

131,05344.5

129,543

45.1

Area II

10,741

3.6

10,747

3.7

Area III

83,34028.3

66,463

23.2

Area IV

25,458

8.6

23,447

8.2

Total

268,467

91.1

248,146

86.4

Equity interest in anonymous association (Note 3)

5,241

1.8

5,177

1.8

Deposits in bank and other assets

20,831

7.1

33,721

11.7

Total assets

294,540100.0

287,045100.0Classification

Use

Real estate
property
Officebuilding
Trust beneficiaryinterest in realestateArea(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 of Osaka Station (JR), Osaka-Umeda Station(Hankyu Railway, Hanshin Electric Railway), Umeda Station (Osaka Metro), Yodoyabashi Station (Osaka
Metro), or Honmachi Station (Osaka Metro), respectively. Central Nagoya refers to the areas within about a 10minute walk of Nagoya Station (JR, Nagoya City Subway, and Nagoya Railroad), Fushimi Station (Nagoya City
Subway), or Sakae Station (Nagoya City Subway and Nagoya Railroad), respectively. Central Fukuoka refers to
the areas within about a 10- minute walk of Hakata Station (JR and Fukuoka City Subway), Tenjin Station(Fukuoka City Subway), and Nishitetsu Fukuoka Station (Nishi-Nippon Railroad), respectively. They are,however, not always in line with administrative districts.
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities.
The same applies hereinafter.
(Note 2) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date (amounts of realestate property and trust beneficiary interest in real estate are based on the book value after depreciations).
(Note 3) Equity interest in an anonymous association with Akasaka 2-chome Godo Kaisha as the business operator.

13

(2) Major Properties
The principal properties (top ten properties in net book value) owned by JEI as of June 30, 2023, are as follows.
Ratio of rental
Occupancy
Leasable area Leased area
revenue to total
Book
value
Name
rate
Major use
(Millions of yen) (m ) (Note 1)(m ) (Note 2)
rental revenues(%) (Note 3)(%)
OfficeAKASAKA INTERCITY
26,426
11,021.03
10,539.79
95.6
5.1
building
Nisseki Yokohama
Office21,72140,414.25
39,785.95
98.4
12.1
Buildingbuilding
OfficeOmori Bellport D
20,371
25,828.29
25,828.29
100.0
8.0
building
HAMARIKYU
Office16,49819,718.11
19,340.12
98.1
7.4
INTERCITY
building
Musashikosugi Tower
Office12,16024,986.15
23,069.14
92.3
6.9
Place
building
OfficeMansard Daikanyama
11,0675,420.80
5,278.27
97.4
2.3
building
Kowa Nishi-Shimbashi
Office10,946
8,949.04
8,949.04
100.0(Note 4)
Buildingbuilding
Kowa Kawasaki
Office10,667
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
OfficeBizcore Jimbocho
9,940
5,261.75
5,261.75
100.0(Note 4)
building
Daiba Garden City
Office9,087
12,122.85
11,036.97
91.0
3.3
Buildingbuilding
2

Total

148,888

172,334.99

2

167,702.04

97.3

－

－

(Note 1) Leasable area refers to area available for lease of which ownership is attributable to JEI as of June 30, 2023. For properties
with joint ownership (including quasi co-ownership of trust beneficiary interest), the figure is obtained by taking the leasablearea of the entire property and factoring in the percentage of the interest owned by JEI, regarding the figure as JEI’s leasablearea.
(Note 2) Leased area refers to area with lease contracts or master lease agreements that guarantee a certain amount of fixed rent payment
concluded with end tenants as of June 30, 2023. For properties with joint ownership, the figure is obtained by taking the leased
area of the entire property and factoring in the percentage of the interest owned by JEI, regarding the figure as JEI’s leased
area. For properties which are used for profit by the master lease company, leased area refers to the portion used, and thefigures indicate area which can be reasonably calculated based on the lease agreement on the master leasing. The leased areaof end tenants who terminated their lease arrangement but have not yet moved out as of the end of period is included in theleased area. This also applies to any figure which is calculated based on “leased area” in this document.
(Note 3) Occupancy rate is a percentage of total leased area to total leasable area of real estate or real estate in trust.
(Note 4) Not disclosed, as consent for disclosure has not been obtained.

14

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of June 30, 2023, 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-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-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

I-17

Bizcore Akasaka-mitsuke

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

I-18

Bizcore Jimbocho

3-9-2 Kanda-ogawamachi, Chiyoda-ku,
Tokyo

I-19

Bizcore Shibuya

1-3-15 Shibuya, Shibuya-ku, Tokyo

Ⅱ-1

NHK Nagoya Housou-Center
Building
Osaka Kogin Building(Land with Leasehold Interest)

Ⅱ-3

Form of ownershipAppraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)

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

25,60020,37113,800

9,017

9,450

7,934

30,70026,426

10,1009,087

28,60016,498

Real estate

12,60010,946

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

13,50011,067

8,250

6,429

6,360

6,124

9,870

9,940

6,950

6,643

175,780

140,489

Real estate

6,310

5,336

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

Trust beneficiaryinterest in real estate

2,840

1,865

Trust beneficiaryinterest in real estate

5,000

4,904

Trust beneficiaryinterest in real estate

3,770

3,977

17,92016,083

22,20012,16010,400

10,667

4,580

4,893

4,710

4,207

2,760

2,489

1,550

1,600

9,940

5,900

33,50021,721

734

732

2,170

2,089

92,544

66,463

785

531

4,210

2,852

10,400

5,025

4,530

2,261

5,340

4,228

2,050

1,644

3,550

2,772

1,670

1,662

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

Ⅱ-4

GRAND FRONT OSAKA(Umekita Plaza·South Building)

4-1 Ohbuka-cho, Kita-ku, Osaka City, Osaka(Umekita Plaza)
4-20 Ohbuka-cho, Kita-ku, Osaka City, Osaka(South Building)

Ⅱ-5

GRAND FRONT OSAKA(North Building)

3-1 Ohbuka-cho, Kita-ku, Osaka City, 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-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
3-7-7 Shin-Yokohama, Kohoku-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

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

Ⅲ-12

Nisseki Yokohama Building

Ⅲ-13

Yokohama Bentendori Dai-ichi
Seimei Building

Ⅲ-14

Shin-Yokohama Arena-dori 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

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

IV-9

Senshin Building

1-6-27 Chuo, Aoba-ku, Sendai-shi, Miyagi

Real estate

IV-10

Sapporo Otemachi Building

4-5-1 Minami Ichijo Nishi, Chuo-ku,
Sapporo-shi, Hokkaido
Area IV
Total

Trust beneficiaryinterest in real estate

4,564

4,130

37,099323,343

25,109248,146

15

(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., Daiwa Real
Estate Appraisal Co., Ltd. and The Tanizawa Sogo Appraisal Co., Ltd. as of June 30, 2023, pursuant to the articles ofincorporation of JEI and the regulations stipulated by the Investment Trusts Association, Japan. For properties with joint
ownership (including quasi co-ownership of trust beneficiary interest), the figure is obtained by taking the value of the entire
shared real estate and factoring in the percentage of the interest owned by JEI.

16

The leasing business at each office building invested by JEI is as follows:
33rd Period
34th Period
July 1, 2022, to December 31, 2022
January 1, 2023, to June 30, 2023
Ratio of rental
Ratio of rental
Property name
Property
Total number of Occupancy Rental revenue revenue to Total number of Occupancy Rental revenue revenue to
No.
rate
rate
tenants
tenants
total rental
total rental(Interim)(Interim)(At end of period) (At end of period) (Millions of yen)
(At end of period) (At end of period) (Millions of yen)revenues
revenues(Note 1)
(Note 1)
(%)
(%)
(%)
(%)
I-1
Omori Bellport D
24
93.8
809
8.0
25
100.0
810
8.0
2
2
Ⅰ-2
Shiba 2-Chome Building
100.0
378
3.7
100.0
377
3.7
(Note 1)
(Note 1)JEI Hamamatsucho
Ⅰ-3
4
100.0
244
2.4
5
61.2
123
1.2
Building
AKASAKA
Ⅰ-8
14
83.5
499
4.9
17
95.6
517
5.1
INTERCITY
Daiba Garden City
I-10
3
91.0
327
3.2
3
91.0
330
3.3
Building
HAMARIKYU
10
12
Ⅰ-12
97.5
731
7.2
98.1
747
7.4
INTERCITY(Note 1)
(Note 1)
Shintomicho Building
Ⅰ-13
10
93.9
49
0.5
6
0.1
－
－
(Note 3)
Kowa Nishi-Shimbashi
Ⅰ-14
5
100.0
(Note 2)
(Note 2)5100.0(Note 2)
(Note 2)
Building
Ⅰ-15
Mansard Daikanyama
10
97.4
237
2.3
10
97.4
229
2.3
AKASAKA
1
1
I-16
83.9
(Note 2)
(Note 2)81.5
(Note 2)
(Note 2)
INTERCITY AIR(Note 1)
(Note 1)
I-17
Bizcore Akasaka-mitsuke
7
88.9
129
1.3
7
88.9
130
1.3
I-18

Bizcore Jimbocho

7

89.4

(Note 2)

(Note 2)8100.0(Note 2)

(Note 2)

I-19

Bizcore Shibuya

6

87.5

157

1.6

7

100.0

146

1.5

Ⅱ-1
Ⅱ-3
Ⅱ-4
Ⅱ-5

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-7
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12
Ⅲ-13
Ⅲ-14
Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6
Ⅳ-7
IV-8
IV-9
IV-10

Area I
NHK Nagoya HousouCenter Building
Osaka Kogin Building(Land with Leasehold Interest)
GRAND FRONT OSAKA(Umekita Plaza·
South Building)
GRAND FRONT OSAKA(North Building)Area II
Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi Building
JEI Hongo Building
Kawasaki Nisshincho
Building
JEI Ryogoku Building
Kowa Kawasaki
Nishiguchi Building(Note 3)
Pacific Square Sengoku
Core City Tachikawa
Nisseki Yokohama
Building
Yokohama BentendoriDai-ichi Seimei Building
Shin-Yokohama
Arena-dori Building
Area III

103

94.1

－

－

102

95.3

－

－

41

100.0

363

3.6

41

96.5

373

3.7

1
(Note 1)

100.0

92

0.9

1
(Note 1)

100.0

98

1.0

2
(Note 1)

91.4

(Note 2)

(Note 2)2(Note 1)94.0

(Note 2)

(Note 2)

97.7

(Note 2)

(Note 2)

98.1

(Note 2)

(Note 2)

5(Note 1)
49

98.5

－

－

5
(Note 1)
49

97.0

－

－

47

88.1

645

6.4

49

92.3

698

6.9

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)5100.0(Note 2)

(Note 2)4100.0(Note 2)

(Note 2)

24

85.2

166

1.6

30

91.6

186

1.9

18

100.0

126

1.2

18

100.0

116

1.2

21

56.0

285

2.8

－

－

274

2.7

10

100.0

62

0.6

10

100.0

62

0.6

25

100.0

315

3.1

25

100.0

330

3.3

45

99.5

1,198

11.8

45

98.4

1,218

12.1

13

100.0

42

0.4

13

100.0

42

0.4

－

－

12

100.0

24

0.2

97.1

－

－

209

88.9

－

－

207

－

－

JEI Kyobashi Building
JEI Hiroshima
Hacchobori Building
SE Sapporo Building

22

100.0

189

1.9

22

100.0

187

1.9

44

96.0

138

1.4

43

93.4

146

1.5

43

100.0

441

4.4

43

100.0

438

4.4

Aoba-dori Plaza
Daiwa Minamimorimachi Building
JEI Naha Building
Hiroshima Dai-ichi
Seimei OS Building
Senshin Building
Sapporo Otemachi
Building
Area IV

47

94.4

184

1.8

47

96.3

188

1.9

10

100.0

192

1.9

10

100.0

192

1.9

18

100.0

87

0.9

18

100.0

86

0.9

29

100.0

147

1.5

29

100.0

147

1.5

16

96.2

53

0.5

15

76.8

48

0.5

27

98.5

134

1.3

26

97.4

135

1.3

256

98.7

－

－

253

97.5

－

－

Total

617

93.0

10,141

100.0

611

96.5

10,079100.0

17

(Note 1) Total number of tenants indicates the number of end tenants in principle. 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. However, for properties
in which the residential portion or the percentage of the interest owned by JEI is relatively low, the number of tenants indicatesthe number of master lease companies for the property, considering a master lease company as a tenant. In addition, for landwith leasehold interest, the number of tenants is counted as one based on the lease agreement for the leased land.
(Note 2) Not disclosed, as consent for disclosure has not been obtained.
(Note 3) JEI completed transfer of Shintomicho Building on January 26, 2023, and Kowa Kawasaki Nishiguchi Building on June 30,
2023.

(4) Securities Portfolio
The securities owned by JEI in its portfolio as of June 30, 2023, are as follows:Book value
Name

Asset type

Equity interest inanonymous association
with Akasaka 2-chome
Godo Kaisha as
business operator
Total

Equityinterest inanonymous
association

Quantity

Assessed value (Note 1)

Valuation
gains/losses
Amount(Thousands(Thousandsof yen)of yen)Unit priceAmount(Thousandsof yen)Unit priceRemarks－－

5,177,903－

5,177,903－(Note 2)－－

5,177,903－

5,177,903－－(Note 1) The assessed value states the book value.
(Note 2) The asset under management is trust beneficiary interest in ARK Hills Front Tower.

(5) Renewable Power Generation Facility
None(6) Right to Operate Public Facility
None

18

(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)
Classification
Type(Thousands of yen)
(Note 2)
Over one year
Interest rate swap
transactions
Over-the-counter
Floating interest rate－
34,640,000
29,370,000
transaction
receivable
Fixed interest rate
payable(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.

2) Shares
Name (Note 1)

KMO Corporation

Number ofsharesAcquisition price(Thousands of yen) (Note 4)

Assessed value(Thousands of yen) (Note 5)

Unit price

Unit price50

833 shares

Amount42,06950

Amount42,069Valuation
gains/losses－

Remarks－(Note 1) With the acquisition of GRAND FRONT OSAKA (North Building) (part of trust beneficiary interest in real estate), JEI
purchased 833 common shares of KMO Corporation, an entity that conducts facility management and business development
for Knowledge Capital (Note 2), and acquired the restitution rights of funds (Note 3) of Knowledge Capital’s funds. Moreover,said common shares may not be transferred separately from quasi co-ownership of the trust beneficiary interest in GRANDFRONT OSAKA (North Building).
(Note 2) Knowledge Capital, a center for industry-academia collaboration, is one of the main uses of GRAND FRONT OSAKA (North
Building).
(Note 3) The details of the restitution rights of Knowledge Capital’s funds are recorded below under “3) Securities other than shares”(Note 4) Acquisition price includes the costs of acquisition.
(Note 5) The assessed value of these unlisted shares is stated as the book value.

3) Securities other than shares
Asset type (Note 1)

QuantityBook value (Thousands of yen)
Unit priceAmountAssessed value(Thousands of yen) (Note 2)
Unit priceAmountValuation
gains/losses

Remarks

Restitution rights of
1
－
2,659
－
2,659
－
－
funds
(Note 1) With the acquisition of GRAND FRONT OSAKA (North Building) (part of trust beneficiary interest in real estate), JEI
acquired the restitution rights of funds of Knowledge Capital’s funds. Moreover, said restitution rights may not be transferred
separately from quasi co-ownership of the trust beneficiary interest in GRAND FRONT OSAKA (North Building).
(Note 2) The assessed value of the restitution rights of funds states the book value.

4) Other assets
Book value (Thousands of yen)
Asset type (Note 1)

Quantity
Unit priceAmountAssessed value(Thousands of yen) (Note 2)
Unit priceAmountValuation
gains/losses

Remarks

Restitution rights of
－
－
－
－
1
454
454
funds
(Note 1) With the acquisition of GRAND FRONT OSAKA (Umekita Plaza·South Building) and GRAND FRONT OSAKA (North
Building), JEI acquired restitution rights of funds concerning GRAND FRONT OSAKA TMO General Incorporated
Association, which runs businesses related to the revitalization of the area centering on GRAND FRONT OSAKA, theimprovement of the environment and the formation of communities.
(Note 2) The assessed value of the restitution rights of funds states the book value.

(8) Status of JEI’s Properties by Country and Region
None for JEI’s properties are in countries or regions other than Japan.

19

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 34th period (ended June 30, 2023). The values below include portions
to be expensed for accounting purposes.
Estimated construction costs(Millions of yen)
Payment for the Total of
Total six months ended advanceJune 30, 2023
payment

Property nameLocation

PurposeSchedule term

Kowa Kawasaki
Higashiguchi Building

Kawasaki-shi,
Kanagawa

Update of lower floor
and upper floor
elevators (Phase 1 andPhase 2)

From May 2023
To December 2023

282

－

－

Musashikosugi Tower
Place

Kawasaki-shi,
Kanagawa

Update of upper floor
elevators (Phase 1 andPhase 2)

From April 2023
To December 2023

155

－

－

NHK Nagoya HousouCenter Building

Nagoya-shi,
Aichi

Update of emergency
power generator (No.
1)

From April 2022
To December 2023

84

－

－

NHK Nagoya HousouCenter Building

Nagoya-shi,
Aichi

Update of elevators(Phase 2)

From September 2022
To August 2023

77

－

－

Omori Bellport D

Shinagawa-ku,
Tokyo

Update of cooling
tower

From July 2023
To December 2023

63

－

－

Nisseki Yokohama
Building

Yokohama-shi,
Kanagawa

Repair of exterior walls
and such (Phase 3)

From July 2023
To December 2023

45

－

－

Omori Bellport D

Shinagawa-ku,
Tokyo

Update of airconditioning automatic From September 2023
control equipment
To December 2023
(Phase 4 and Phase 5)

42

－

－

Musashikosugi Tower
Place

Kawasaki-shi,
Kanagawa

Conversion to
LED lighting in
exclusively-owned
sections (Phase 2)

From July 2023
To November 2023

32

－

－

JEI Naha Building

Naha-shi,
Okinawa

Conversion to
LED lighting in
exclusively-owned
sections (Phase 1)

From October 2023
To December 2023

22

－

－

20

(2) Capital Expenditures for the Six Months Ended June 30, 2023
The following table shows constructions conducted by JEI during the period ended June 30, 2023, and expensed ascapital expenditures. Capital expenditures for the period ended June 30, 2023, were 1,404 million yen and, whencombined with repairs and maintenance costs of 139 million yen classified as expenses in the period under review,
the amount of constructions completed totaled 1,543 million yen.
Property name
JEI Hiroshima
Hacchobori Building
Musashikosugi Tower
Place
Senshin Building
Daiwa Minamimorimachi Building
Nisseki Yokohama
Building
Shiba 2-Chome Building
Musashikosugi Tower
Place
JEI Naha Building
Kowa Kawasaki
Higashiguchi Building
NHK Nagoya HousouCenter Building
Nisseki Yokohama
Building
SE Sapporo Building
Yokohama BentendoriDai-ichi Seimei Building
Yokohama BentendoriDai-ichi Seimei Building
Yokohama BentendoriDai-ichi Seimei Building
JEI Kyobashi Building

Location

PurposeHiroshima-shi,
Hiroshima
Kawasaki-shi,
Kanagawa
Sendai-shi,
Miyagi
Osaka-shi,
Osaka
Yokohama-shi,
Kanagawa
Minato-ku,
TokyoKawasaki-shi,
Kanagawa
Naha-shi,
Okinawa
Kawasaki-shi,
Kanagawa
Nagoya-shi,
Aichi
Yokohama-shi,
Kanagawa
Sapporo-shi,
Hokkaido
Yokohama-shi,
Kanagawa
Yokohama-shi,
Kanagawa
Yokohama-shi,
Kanagawa
Osaka-shi,
Osaka

Amount Paid
(Millions of yen)Term

Renovation of air-conditioning systems(Phase 5)Update of waste disposal equipment
Maintenance of leasing units
Update of hot and cold water generator
Repair of exterior walls and such (Phase 2)
Maintenance of mechanical parking
equipment
Renovation of air-conditioning systems
Renovation of restrooms (Phase 2)
Update of lighting in exclusively-owned
sections (Phase 4)
Update of elevators (Phase 1)
Update of atrium blinds (Phase 1)
Update of central monitoring equipment
Update of elevators
Update of outdoor-air processing units
Conversion to LED lighting in common
spacesConversion to LED lighting in exclusivelyowned sections (Phase 3)

From April 2023
To June 2023
From December 2022
To March 2023
From June 2023
To June 2023
From June 2022
To March 2023
From February 2023
To June 2023
From June 2023
To June 2023
From February 2023
To March 2023
From September 2022
To March 2023
From April 2023
To June 2023
From March 2023
To March 2023
From February 2023
To June 2023
From April 2023
To June 2023
From June 2023
To June 2023
From May 2023
To May 2023
From January 2023
To February 2023
From February 2023
To March 2023

72
66
59
57
54
52
47
45
34
34
33
31
28
16
10
10
747

Other constructions

1,404

Total

(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)Item

30th Period
31st Period
32nd Period
33rd Period
34th Period
January 1, 2021, to July 1, 2021, to January 1, 2022, to July 1, 2022, to January 1, 2023, toJune 30, 2021 December 31, 2021 June 30, 2022 December 31, 2022 June 30, 2023

Reserved funds at
beginning of period

250

380

298

555

447

Increase

963

1,217

1,123

620

851

Decrease

834

1,299

866

729

884

Reserved funds at theend of period

380

298

555

447

414

21

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

33rd Period
July 1, 2022, to December 31, 2022

34th Period
January 1, 2023, to June 30, 2023

(a) Asset management fees

444,830

458,964(b) Custodian fees

21,70021,917(c) Administrative service fees

40,59440,530(d) Compensation for directors

5,400

5,100

(e) Accounting auditor fees

11,00011,000(f) Other

99,114

132,762622,639670,275

Total(2) Borrowings
Borrowings by each financing source as of the end of the 34th period (ended June 30, 2023) are as follows:
Classification
Averageinterest rate(%)
(Thousands of yen) (Thousands of yen)
(Note 1)
Balance at
beginning of
periodBalance at
end ofperiod3,000,000－

3,000,000－

2,000,000－

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

500,000

500,000

750,000

750,000

150,000

150,000

MUFG Bank, Ltd.

1,000,000

1,000,000

Sumitomo Mitsui Banking
Corporation

3,500,000

3,500,000

500,000

500,000

500,000

500,000－

3,500,000

15,770,000

14,270,000

LenderShort-term
Mizuho Bank, Ltd.
loans

Drawdown
dateAugust 1,
2022

Subtotal
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,
2015Long-termloans dueResona Bank, Ltd.
within one
year
Aozora Bank, Ltd.

The Bank of Fukuoka, Ltd.

Resona Bank, Ltd.
Aozora Bank, Ltd.
Development Bank of Japan Inc.
Subtotal

November 30,
2017

Maturitydate

0.25680

June 30,2023

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

Repayment
methodUse

Lump- Purchase ofsum
real estate

Remarks

Unsecuredand nonguaranteed

0.84375(Note 2)

November 30,
2023

Lumpsum

Repayment Unsecuredof existingand nonborrowing guaranteed

0.64801(Note 2)0.68431(Note 2)

May 31,2024

22

Classification
Averageinterest rate(%)
(Thousands of yen) (Thousands of yen)
(Note 1)Maturitydate

0.68431(Note 2)

May 31,
2024

Balance at
beginning of
periodBalance at
end ofperiod3,500,000－

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

The Bank of Fukuoka, Ltd.

150,000

150,000

1,000,000

1,000,000

0.42000(Note 2)2,000,000

2,000,000

0.26919

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

The Bank of Fukuoka, Ltd.

700,000

700,000

Resona Bank, Ltd.

200,000

200,000

Long-term
Mizuho Bank, Ltd.
loans

850,000

850,000

850,000

850,000

600,000

600,000

1,450,000

1,450,000

520,000

520,000

540,000

540,000

LenderDevelopment Bank of Japan Inc.

Drawdown
date

November 30,
2017

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

Nippon Life Insurance Company
Mizuho Bank, Ltd.

November 30,
2015

December 12,
2019
September 30,
2022

Sumitomo Mitsui Banking
Corporation
The Norinchukin Bank

June 29,2018

Shinkin Central BankMUFG Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.

November 1,
2018

The Norinchukin Bank
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust Bank,
LimitedNovember 29,
2021

1,080,000

1,080,000

1,620,000

1,620,000

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

850,000

850,000

850,000

600,000

600,000

1,450,000

1,450,000

1,300,000

1,300,000

Sumitomo Mitsui Banking
Corporation

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

September 29,
2017

March 8,2019

The Norinchukin Bank
Development Bank of Japan Inc.

September 29,
2017

Repayment
methodUse

Remarks

0.96275 November 30,(Note 2)2024

0.67400(Note 2)

December 12,
2024
March 31,2025

June 30,2025

Lumpsum
0.70600(Note 2)

November 1,
2025

0.39785

November 29,
2025

Repayment Unsecuredof existingand nonborrowing guaranteed

0.83441(Note 2)

March 31,2026

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

Asset Management Report for the 34th Period (Semi-Annual Report for the 34th Period)

23

Classification
Averageinterest rate(%)
(Thousands of yen) (Thousands of yen)
(Note 1)
Balance at
beginning of
periodBalance at
end ofperiod1,300,000

1,300,000

1,000,000

1,000,000

700,000

700,000

2,000,000

2,000,000

1,000,000

1,000,000

500,000

500,000

500,000

500,000

Development Bank of Japan Inc.

2,000,000

2,000,000

Mizuho Bank, Ltd.

1,175,000

1,175,000

1,175,000

1,175,000

1,000,000

1,000,000

1,087,500

1,087,500

1,162,500

1,162,500

1,000,000

1,000,000

2,000,000

2,000,000

1,950,000

1,950,000

2,000,000

2,000,000

1,200,000

1,200,000

Resona Bank, Ltd.

600,000

600,000

Mizuho Bank, Ltd.

1,950,000

1,950,000

2,000,000

2,000,000

1,200,000

1,200,000

600,000

600,000

2,000,000

2,000,000

2,000,000

2,000,000

Subtotal

71,830,000

68,330,000

Total

90,600,000

82,600,000

LenderDrawdown
date

Mizuho Bank, Ltd.
MUFG Bank, Ltd.

June 29,2018

Sumitomo Mitsui Banking
Corporation
Sompo Japan Insurance Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Sompo Japan Insurance Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.

January 31,
2022

November 30,
2022

MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation

January 31,
2020

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

June 30,
2021

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

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

December 30,
2021

December 30,
2022

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

June 30,2021
June 30,
2022

Maturity
date

0.79100(Note 2)

December 30,
2026

0.28000(Note 2)January 31,
2027

Repayment
methodUse

Remarks

0.34000 November 30,(Note 2)2027
0.68778(Note 2)0.71200(Note 2)

July 31,2028

January 31,
2029
Lumpsum

0.77000(Note 2)
0.55801(Note 2)0.49919

Repayment Unsecuredof existingand nonborrowing guaranteed

December 30,
2029

0.44349

January 31,2030

0.65000(Note 2)
1.08125(Note 2)June 28,2030
June 30,2031(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 the 34th Period (Semi-Annual Report for the 34th Period)

24

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of June 30, 2023, are as follows:
Classification
Issuancedate

Unsecured investment corporation bonds

Issue(Thousands of yen)

Balance at end ofInterest rate
period(%)

Maturity date(Thousands of yen)

Repayment
methodUse

7th series unsecured
investment corporation bonds

March 10,2014

8,000,000

8,000,000

1.13000

March 11,2024

(Note 1)

8th series unsecured
investment corporation bonds

September 9,2015

5,000,000

5,000,000

1.03000

September 9,2025(Note 2)

9th series unsecured
investment corporation bonds

October 27,
2016

2,000,000

2,000,000

0.45000

October 27,
2026(Note 3)10th series unsecured
investment corporation bonds

December 20,
2016

2,000,000

2,000,000

0.39000

December 20,
2023

11th series unsecured
investment corporation bonds

April 25,2017

7,000,000

7,000,000

0.65000

April 23,2027

2,000,000－

0.24000

April 20,2023

2,000,000

2,000,000

0.95000

April 20,2033

1,000,000

1,000,000

1.07000

September 9,2039(Note 2)－2,000,000

0.95000

March 30,2032

(Note 3)29,000,000

29,000,000

12th series unsecured
investment corporation bonds
13th series unsecured
investment corporation bonds

April 20,2018

15th series unsecured
investment corporation bonds

September 10,
201917th series unsecured
investment corporation bonds

March 30,
2023

Subtotal

Green bonds

Balance at
beginning of
period14th series unsecured
investment corporation bonds

August 10,
2018

4,000,000

4,000,000

0.63000

August 10,
2028

16th series unsecured
investment corporation bonds

October 29,
2020

5,000,000

5,000,000

0.75000

October 29,
2035

9,000,000

9,000,000

38,000,000

38,000,000

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

Remarks(Note 2)Lump-sum(Note 4)(Note 3)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 the 34th Period (Semi-Annual Report for the 34th Period)25

6. Condition of Investment Transactions(1) Transactions of Property, Asset-Backed Securities, Etc. and Infrastructure Assets, Etc.,
and Infrastructure-Related Assets(Millions of yen)
Name ofreal estate property
or asset-backed
securities, etc.

Type of asset

Acquisition
Acquisition
dateTransfer

Acquisition
price(Note 1)

Transferdate

Transfer
price

Net book
value

Gain (loss)
on transfer(Note 1)

(Note 2)

(Note 3)

Shintomicho
Trust beneficiary
Building
interest in real estate (60.0% quasi coownership interest)－－

January 26,
2023

1,860

1,031

797

Trust beneficiaryShin-Yokohamainterest in real estate Arena-dori Building

March 31,
2023

2,077

－

－

－

－

－

－

June 30,2023

16,05018,750(2,703)－－June 30,
2023

5,040

2,126

2,885

－

2,077

－

22,95021,908980

Kowa Kawasaki
Trust beneficiary
Nishiguchi Building
interest in real estate (65.0% quasi coownership interest)
JEI Kyobashi
Trust beneficiary
Building
interest in real estate (80.0% quasi coownership interest)
Total(Note 1) The acquisition/transfer price indicates the amount excluding related expenses (brokerage fee, taxes, etc.) required for theacquisition/transfer of the real estate property or asset-backed securities, etc., and is the purchase amount of the real estate
property or asset-backed securities, etc. stated in the purchase agreement.
(Note 2) Net book value at the time of transfer is indicated.
(Note 3) Gain (loss) on transfer indicates the amount obtained by deducting net book value and other transfer expenses from transfer
price.

(2) Transactions of Other Assets
None(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
Acquisition
Name of property
or transfer

Type ofasset

Acquisition/transfer date

Acquisition/transfer price(Millions of yen)
(Note 1)

Appraisal
value(Millions of yen)Appraiser

Appraisal
date

Shintomicho
Building(60.0% quasi coownership interest)

Trust
Chuo
beneficiary
January 26,
February 1,
1,254 Real EstateTransfer
1,860
interest in
2023
2022
(Note 2) Appraisal
real estateCo., Ltd.
Trust
Japan
Shin-Yokohama
beneficiary
March 31,January 1,
Acquisition
2,077
2,140 Real Estate
Arena-dori Building interest in
2023
2023
Institutereal estate
Kowa Kawasaki
Trust
Nishiguchi Building beneficiary
June 30,
Japan Valuers
June 1,
Transfer
16,05016,000(65.0% quasi cointerest in
2023
Co., Ltd.
2023
ownership interest)
real estate
JEI Kyobashi
Trust
Daiwa
Building
beneficiary
June 30,
June 1,
3,200 Real EstateTransfer
5,040(80.0% quasi cointerest in
2023
2023
(Note 3) Appraisal
ownership interest)
real estateCo., Ltd.
(Note 1) The acquisition/transfer price is the purchase price amount of the property stated in the purchase agreement (excluding
the amount equivalent to consumption taxes, etc.).
(Note 2) The appraisal value is the amount obtained by multiplying the appraisal value for the entire property by 60.0%, which is
the ratio of quasi co-ownership of the trust beneficiary interest subject to transfer.
(Note 3) The appraisal value is the amount obtained by multiplying the appraisal value for the entire property by 80.0%, which is
the ratio of quasi co-ownership of the trust beneficiary interest subject to transfer.

2) Others
None
Asset Management Report for the 34th Period (Semi-Annual Report for the 34th Period)

26

(4) Transactions with Interested Parties
1) Transactions
Acquisition price or disposal amountClassification
Total amount

Acquisition price

Disposal amount

2,077 million yen

22,950 million yen

Breakdown for transactions with interested parties－ million yen

Nippon Steel Kowa Real Estate Co., Ltd.
(Note)(－%)

16,050 million yen(69.9%)－ million yen
(－%)
Total
16,050 million yen(69.9%)
Interested parties refers to the interested parties of the asset management company, which has concluded an asset managementagreement with JEI as prescribed in Article 123 of the Investment Trust Enforcement Order and Section 26, Paragraph 1, Item
27 of the Regulations for Management Reports Concerning Investment Trusts and Investment Corporations of the Investment
Trusts Association, Japan.

2) 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

Property transaction
brokerage fees
Total

Amount paid (B)The Dai-ichi Building Co., Ltd.

510,820

33.5%

Nippon Steel Kowa Real EstateCo., Ltd.

453,676

29.7%

Sohgo Housing Co., Ltd.

109,425

7.2%

Akasaka Intercity Management
Co., Ltd.

22,265

1.5%

Nippon Steel Kowa Real Estate
53,100 Co., Ltd.

53,100100.0%

1,149,288

72.8%

1,525,027

1,578,127–(Note 1) Figures indicate fees paid to interested parties of the asset management company with whom JEI had direct transactions during
the six months ended June 30, 2023.
(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.
Kowa Real Estate Facilities Co., Ltd.
451,094 thousand yen
The Dai-ichi Building Co., Ltd.
21,807 thousand yen
Nippon Steel Kowa Real Estate Co., Ltd.
13,121 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 the 34th Period (Semi-Annual Report for the 34th Period)27

7. Accounting(1) Assets, Liabilities, Principal, and Profit and Loss
For assets, liabilities, principal, and profit and loss, please refer to the attached Balance Sheets, Statements ofIncome and Retained Earnings, Statements of Changes in Net Assets, Notes to Financial Statements andDistribution Information.
The data for the previous period in Balance Sheets, Statements of Income and Retained Earnings, Statements of
Changes in Net Assets, Notes to Financial Statements and Distribution Information are for reference, and not subject
to the audit by a financial auditor pursuant to the provisions of Article 130 of the Investment Trust Law in the period
under review.
In addition, Statements of Cash Flows is not subject to the audit by a financial auditor pursuant to the provisions ofArticle 130 of the Investment Trust Law and has thus not been audited by a financial auditor (accounting auditor).

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

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

8. Others(1) Notice1) General unitholders’ meeting
There were no applicable items during the period.
2) Board of directors’ meeting
Of the major contracts entered or amended, etc. by the board of directors’ meeting during the period, the following
table summarizes the major items.
Date of approval
by board

Matters approved

Summary
The board of directors made a comprehensive resolution on investment
corporation bonds to be issued in the period from February 17, 2023, toFebruary 16, 2023

Entrustment ofgeneral administrative

February 8, 2024. The board of directors approved the respective candidate
general administrator for “administrative duties concerning offering ofduties concerninginvestment

investment corporation bonds” and “administrative duties concerning
acceptance of claims for exercise of rights and other inquiries from holders

corporation bondsof investment corporation bonds, and other administrative duties concerninginvestment corporation bonds during the period,” and assigned decisions on
all other 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 the 34th Period (Semi-Annual Report for the 34th Period)28

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
June 30, 2023 and December 31, 2022with Independent Auditor’s Report29

Japan Excellent, Inc.
Balance Sheets
As of June 30, 2023 and December 31, 2022

As of
As of
June 30, 2023
December 31, 2022
(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust accounts(Note 4)
Rental receivables
Prepaid expenses and other current assets
Total current assets

30,744,687
336,670
457,513
31,538,871

17,839,723
423,472
398,862
18,662,058

8,194,210
6,253
62,263
10,609,617
7,891
107,815,908
1,361,005
245,933
148,137,279
65,561(37,543,965)
238,961,958

7,996,956
6,253
60,452
10,609,617
7,891
120,488,936
1,297,180
309,970
160,156,315
85,232(41,740,127)
259,278,678

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

1,721,607
7,382,016
1,833
80,5799,186,036

1,721,607
7,382,016
2,933
85,456
9,192,013

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

5,222,632
13
19,029738,188
1,260,880
7,240,744

5,286,294
15
19,029847,050
1,139,775
7,292,165

118,110
118,110
287,045,722

115,521
115,521294,540,438

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

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

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

As of
As ofJune 30, 2023
December 31, 2022
(Thousands of yen)
Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 5 and 8)
Investment corporation bonds due within one year
(Notes 5 and 9)
Long-term debt due within one year
(Notes 5 and 8)
Accounts payable – otherAccrued expenses
Accrued corporation taxes
Accrued consumption taxes
Advances received
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 5 and 9)
Long-term debt (Notes 5 and 8)
Security deposits from tenants
Security deposits from tenants for trust accounts
Total long-term liabilities
Total liabilities
Net assets (Note 10)
Unitholders’ equity:
Unitholders’ capital
Deduction from unitholders’ capital
Unitholders’ capital, net
Surplus
Voluntary reserve
Reserve for advanced depreciation of non-current
assetsRetained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

1,338,161－

1,356,841
3,000,000

10,000,000

4,000,000

14,270,000
486,371
160,313667
841,781
56,148
5,587
27,159,032

15,770,000
439,168
155,647679－
45,412－
24,767,749

28,000,000
68,330,000
1,208,748
11,993,418
109,532,167
136,691,199

34,000,000
71,830,000
1,239,716
12,484,549
119,554,265
144,322,015

147,907,649(1,999,960)
145,907,689

147,907,649(1,999,960)
145,907,689

565,459
3,881,374
4,446,834
150,354,523
150,354,523
287,045,722

808,535
3,502,198
4,310,733
150,218,422
150,218,422
294,540,438

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

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from January 1, 2023 to June 30, 2023
and from July 1, 2022 to December 31, 2022

For the period
For the period
from January 1, 2023 tofrom July 1, 2022 toJune 30, 2023
December 31, 2022
(Thousands of yen)
Revenues (Note 13) :Rental business revenues (Note 15)
Other (Note 15)
Gain on sales of real estate properties (Note 14 and 15)
Dividend income from investment in anonymous association
Total revenues
Operating expenses (Note 13) :Property operating expenses (Note 15)
Loss on sales of real estate properties (Note 14 and 15)
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 12) :Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

9,274,240
805,286
3,683,632
60,37013,823,530

9,271,175
869,919
530,613
28,214
10,699,922

5,972,173
2,703,576
458,964
21,91740,5305,100
143,762
9,346,024
4,477,505

5,944,541－
444,830
21,70040,594
5,400
110,114
6,567,180
4,132,741

87
505

89
229

291,393
133,371
153,249
12,995
4,826
3,882,261
3,882,261

309,718
155,105
151,969
12,856286
3,503,124
3,503,124884
2
3,881,374－
3,881,374

936(9)
3,502,198－
3,502,198

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

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from January 1, 2023 to June 30, 2023
and from July 1, 2022 to December 31, 2022
For the period from January 1, 2023 to June 30, 2023
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve for
Deduction
advancedfromdepreciation
Total
Number of Unitholders’ unitholders’ Unitholders’ of non-current
Retained
unitholders’units in issue
capitalcapitalcapital, net
assetsearnings
Total surplus
equity(Thousands of yen)
Balance as ofDecember 31, 2022
Changes during
the fiscal period:
Reversal of reserve
for reduction entry
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as of June30, 2023

1,337,598

147,907,649(1,999,960)

145,907,689

808,535

3,502,198

4,310,733

150,218,422

150,218,422

－

－

－

－

(243,076)

243,076

－

－

－

－

－

－

－

－

(3,745,274)(3,745,274)(3,745,274)(3,745,274)

－

－

－

－

－

3,881,374

3,881,374

3,881,374

3,881,374

－

－

－

－

(243,076)

379,176

136,100

136,100

136,100

1,337,598

147,907,649(1,999,960)

145,907,689

565,459

3,881,374

4,446,834

150,354,523

150,354,523

For the period from July 1, 2022 to December 31,2022
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve for
Deduction
advancedfromdepreciation
Total
Number of Unitholders’ unitholders’ Unitholders’ of non-current
Retained
unitholders’units in issue
capitalcapitalcapital, net
assetsearnings
Total surplus
equity(Thousands of yen)
Balance as of June30, 2022
Changes during
the fiscal period:
Provision ofreserve for
reduction entry
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as ofDecember 31, 2022

Total net
assetsTotal net
assets1,337,598

147,907,649(1,999,960)

145,907,689

451,790

4,102,019

4,553,810

150,461,499

150,461,499

－

－

－

－

356,744(356,744)

－

－

－

－

－

－

－

－

(3,745,274)(3,745,274)(3,745,274)(3,745,274)

－

－

－

－

－

3,502,198

3,502,198

3,502,198

3,502,198

－

－

－

－

356,744(599,821)(243,076)(243,076)(243,076)

1,337,598

147,907,649(1,999,960)

145,907,689

808,535

3,502,198

4,310,733

150,218,422

150,218,422

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

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from January 1, 2023 to June 30, 2023
and from July 1, 2022 to December 31, 2022
For the period
For the period
from January 1, 2023 tofrom July 1, 2022 toJune 30, 2023
December 31, 2022
(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
Decrease in property and equipment for trust accounts due to sale
Decrease in intangible assets for trust accounts due to sale
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Proceeds from redemption of investment securities
Purchases of investment securities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets for trust accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits in trust accounts from tenants
Payments for security deposits in trust accounts to tenants
Net cash 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 4)

3,882,261
1,961,548
12,995(87)444,642
86,801
94,779(135,539)(74,024)
47,602
841,781
10,736
108,861
21,837,292
1,889(134,366)
28,987,176
87(439,977)(679)
28,546,607

3,503,124
1,932,841
12,856(89)
461,688(112,685)(94,779)
31,364
194,190(30,920)(321,024)(14,479)(12,911)
689,433－(28,163)
6,210,445
89(458,178)(714)
5,751,642

63,661－(149,380)(3,246,198)(26,625)
6,213(37,181)774,466(1,265,597)(3,880,641)－(1,422)(74,957)(7,782,045)－
24,980(18,930)
1,434,979(953,623)(7,371,020)－(3,000,000)－(5,000,000)
1,984,414(2,000,000)(3,745,416)(11,761,001)
12,904,964
17,839,723
30,744,687

3,000,000－
8,750,000(8,750,000)－－(3,744,640)(744,640)(2,364,018)
20,203,741
17,839,723

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

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from January 1, 2023 to June 30, 2023
and from July 1, 2022 to December 31, 2022

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, 2023, JEI held 35 properties with 306,716.67 square meters of total leasable
space and had leases with 611 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.

35

3.

Summary of Significant Accounting Policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks and short-term
investments which are highly liquid, readily convertible into cash with an insignificant risk ofprice fluctuation and with an original maturity of three months or less.
Investment securities
Available-for-sale securities without market value are stated at cost determined by the moving
average method. For ownership interests in an anonymous association, JEI adopts the methodof factoring in the net amount of anonymous association income (loss) in proportion to its
ownership interests.
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 – 62 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:
Software5 years

Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
Revenue recognition
The content of main performance obligations related to revenue arising from contracts withcustomers of the Company and the normal timing for satisfying such performance obligations(the normal timing for recognizing revenue) are as follows:・Sale of real estate, etc.
Sale of real estate properties: The Company recognizes revenue from the sale of real estate
properties when the purchaser, as the customer, obtains control of the real estate property byfulfilling the delivery obligations stipulated in the contract for the sale of real estate property.

36

3.

Summary of Significant Accounting Policies (continued)

・Utilities income
Utilities income: The Company recognizes utilities income based on the supply of electricity,water, etc. to the lessee as the customer, in accordance with the terms of the real estate lease
contract and related agreements. Of utilities income, in the case that the Company determines
it is an agent for utilities income, the utilities income is recognized as income at the net amountreceived as charges for electricity, gas, etc. supplied by other parties, less the amount paid tosuch other parties.
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 13).
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 January 1, 2023 to June 30, 2023 was ¥6,050
thousand.
The capitalized amount for the period from July 1, 2022 to December 31, 2022 was ¥10,572
thousand.
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.

37

3.

Summary of Significant Accounting Policies (continued)

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, 2023 andDecember 31, 2022 consisted of the following:

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

5.

As of
As of
June 30, 2023
December 31, 2022
(Thousands of yen)
20,308,437
6,392,183
10,436,250
11,447,539
30,744,687
17,839,723

Financial Instruments

For the periods from January 1, 2023 to June 30, 2023 and from July 1, 2022 to
December 31, 2022
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.

38

5.

Financial Instruments (continued)(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 85.7% of existing borrowings being
covered by a fixed interest rate swap for the entire maturity as of June 30, 2023. 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 8, “Short-Term
Loans and Long-Term Debt,” and there is no balance outstanding under the facility
agreements as of June 30, 2023). Liquidity risk is also mitigated through theconstant management of liquidity on hand.
(c) Credit Risk
Investment securities represent ownership interests in an anonymous association andexposed to credit risk of the issuer. JEI regularly evaluates the financial condition of
the issuer, etc.
(3) Supplementary Explanation of the Fair Value of Financial Instruments
Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.
In addition, the contract value of derivative transactions, which is presented in Note17.
“Derivative Transactions” does not represent the market risk attributable to derivativetransactions.

39

5.

Financial Instruments (continued)

Fair value of financial instruments
The following are carrying values and fair values as of June 30, 2023 and December 31, 2022
of financial instruments and the differences between them. Please note that the following table
does not include ownership interests in an anonymous association (Note B).
In addition, since “Cash and cash deposits”, “Cash and deposits in trust”, and “Short-term loans”
are cash and due to be settled in a short period, and their fair values approximate their bookvalues, the notes are omitted.
As of June 30, 2023
As of December 31, 2022
Fair value
Fair value
Carrying value(Note A)
Difference Carrying value(Note A)
Difference(Thousands of yen)
Investment corporation
bonds(1) due within one year (Note C)
Long-term debt
(2) due within one year (Note C)
Investment corporationbonds(3) (Note C)(4) Long-term debt (Note C)
Total liabilities(5) Derivative transactions *10,000,000

10,045,242

45,2424,000,000

3,999,254(746)

14,270,000

14,313,142

43,142

15,770,000

15,821,551

51,551

28,000,000
68,330,000
120,600,000－

27,535,253
68,596,416
120,490,053－(464,747)
266,416(109,946)－

34,000,000
71,830,000
125,600,000－

33,288,272
71,464,009
124,573,086－(711,728)(365,990)(1,026,913)－*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(1) Investment corporation bonds due within one year and (3) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(2) Long-term debt due within one year and (4) 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.
(5) Derivative transactions
Please refer to Note 17, “Derivative Transactions.”

40

5.

Financial Instruments (continued)(Note B)Of investment securities, for ownership interests in an anonymous association, the fair value
is calculated by applying the treatment stipulated in Paragraph 24-16 of the Implementation
Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31
issued on June 17,2021). No notes are provided on matters prescribed in Paragraph 4 (1) of
the Implementation Guidance on Disclosures about Fair Value of Financial Instruments(ASBJ Guidance No. 19 issued on March 31, 2020).
The balance sheet amount for ownership interests in an anonymous association to which thistreatment is applied is ¥5,177,903 thousand as of June 30, 2023. Investment securities, otherthan ownership interests in an anonymous association are omitted because they lacksignificance.
(Note C)
Security deposits from tenants and Security deposits from tenants for trust accounts are omitted
because they lack significance.
(Note D)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date.

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

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, 2023
2 to 3 years
3 to 4 years(Thousands of yen)

1 year or less

1 to 2 years

4 to 5 years

Over 5 years

10,000,000

－

－

－

－

－

14,270,000－－
24,270,000－－
16,270,000
16,270,000－
5,000,000
17,660,000
22,660,000－
9,000,000
7,300,000
16,300,000－－
1,000,000
1,000,000－
14,000,000
26,100,000
40,100,000

1 year or less

1 to 2 years

As of December 31, 2022
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

4,000,000

－

－

－

－

－

15,770,000－－
19,770,000－
8,000,000
9,770,000
17,770,000－
5,000,000
17,510,000
22,510,000－
2,000,000
14,450,000
16,450,000－
7,000,000
4,000,000
11,000,000－
12,000,000
26,100,000
38,100,000

41

6.

Investment and Rental Property

For the periods from January 1, 2023 to June 30, 2023 and from July 1, 2022 to
December 31, 2022
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 30,2023 and December 31, 2022 for such real estate for lease.
As ofJanuary 1, 2023

Carrying value
Change during period
As of
(*2)
June 30, 2023
(Thousands of yen)

268,467,759

As ofJuly 1, 2022

(20,321,596)

248,146,162

Fair value
As ofJune 30, 2023
324,568,000

Carrying value
Fair value
Change during period
As of
As of
(*1)
December 31, 2022 December 31, 2022
(Thousands of yen)

263,194,237

5,273,521

268,467,759

345,443,000

A) Carrying value represents the acquisition cost less accumulated depreciation.
B) Details of change during period:(*1) The increase of ¥5,273,521 thousand during the period is mainly due to an increase of¥6,668,164 thousand related to the acquisition of BIZCORE Shibuya, and a decrease of¥689,433 thousand related to the part disposal of Shintomicho Building, and a decreaseof ¥1,931,741 thousand for depreciation costs.
(*2) The decrease of ¥20,321,596 thousand during the period is mainly due to an increase of¥2,093,066 thousand related to the acquisition of Shin-Yokohama Arena-dori Building,and a decrease of ¥1,031,803 thousand related to the disposal of Shintomicho Building,a decrease of ¥18,750,487 thousand related to the disposal of Kowa Kawasaki
Nishiguchi Building, a decrease of ¥2,126,568 thousand related to the part disposal of
JEI Kyobashi Building, and a decrease of ¥1,960,448 thousand for depreciation costs.
C) Fair value
Fair value as of June 30, 2023 is Pacific Square Sengoku’s transfer price, JEI Kyobashi
Building’s transfer price and for other properties, appraisal value provided by third-party
real estate appraisers.
Fair value as of December 31, 2022 is Shintomicho Building’s transfer price and for otherproperties, appraisal value provided by third-party real estate appraisers.

42

7.

Property and Equipment

Property and equipment at June 30, 2023 and December 31, 2022 consisted of the following:
As of June 30, 2023
Acquisition
cost

Accumulated
depreciation

As of December 31, 2022
Net
book value

Acquisition
cost

Accumulated
depreciation

Netbook value

5,514,725(Thousands of yen)
Buildings and building
improvements

8,194,210(2,605,261)

5,588,949

7,996,956(2,482,230)

Machinery and equipment

6,253(5,573)

679

6,253

(5,304)

949

Furniture and fixtures

62,263

16,98260,452

10,609,617
7,891

10,609,617
7,891(41,530)－－

18,921

10,609,617
7,891(45,281)－－

10,609,617
7,891

107,815,908(34,013,706)

73,802,202

120,488,936(38,308,003)

82,180,932

1,361,005(693,252)

667,752

1,297,180(684,400)

612,779

245,933(180,889)－

65,043309,970

148,137,279

160,156,315(218,658)－

160,156,315

LandConstruction 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

8.

148,137,279

91,31265,561－

65,561

85,232－

85,232

276,505,923(37,543,965)

238,961,958

301,018,806(41,740,127)

259,278,678

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of June 30, 2023 and December 31, 2022 consisted of
the following:
As of June 30, 2023
Weighted-averageinterest rate (*1)

Amount(Thousands of yen)

As of December 31, 2022
Weighted-averageinterest rate (*1)

Amount(Thousands of yen)

Short-term loans:
Unsecured loans from a bank due on June 30, 2023
Subtotal－

0.25680%－

3,000,000

0.26659%

3,000,000

Long-term debt due within one year:
Unsecured loans from a bank due on June 30, 2023－

1.20250% (*2)

2,000,000

1.20250% (*2)

Unsecured loans from an insurance company due on June30, 2023－

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)－

Subtotal

14,270,000

15,770,000

43

8.

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

Long-term debt:－

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 an insurance company due on
December 12, 2024

1,000,000

0.42000% (*2)

1,000,000

0.42000% (*2)

Unsecured loans from a bank due on March 31, 2025

2,000,000

0.26919%2,000,000

0.26364%

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 November 29, 2025

3,760,000

0.39785%

3,760,000

0.39310%

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)

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)

Unsecured loans from insurance companies due on
January 31, 2027

3,000,000

0.28000% (*2)

3,000,000

0.28000% (*2)

Unsecured loans from insurance companies due on
November 30, 2027

1,000,000

0.34000% (*2)

1,000,000

0.34000% (*2)

Unsecured loans from a bank due on July 31, 2028

2,000,000

0.68778% (*2)

2,000,000

0.68778% (*2)

Unsecured loans from banks due on January 31, 2029

5,600,000

0.71200% (*2)

5,600,000

0.71200% (*2)

Unsecured loans from an insurance company due on
January 31, 2029

1,000,000

0.77000% (*2)

1,000,000

0.77000% (*2)

Unsecured loans from a bank due on December 30, 2029

2,000,000

0.55801% (*2)

2,000,000

0.55801% (*2)

Unsecured loans from banks due on December 30, 2029

5,750,000

0.49919%5,750,000

0.49544%

Unsecured loans from banks due on January 31, 2030

5,750,000

0.44349%

5,750,000

0.43818%

Unsecured loans from an insurance company due on
June 28, 2030

2,000,000

0.65000% (*2)

2,000,000

0.65000% (*2)

Unsecured loans from a bank due on June 30, 2031

2,000,000

1.08125% (*2)

2,000,000

1.08125% (*2)

Unsecured loans from a bank due on May 31, 2024

Subtotal

68,330,000

71,830,000

Total

82,600,000

90,600,000(*1)The weighted-average interest rate is weighted-average figures during the period. As for the borrowings hedged by interestrate swaps for the purpose of mitigating interest rate fluctuation risk, the fixed interest rates after entering into the interest rate
swap transactions are used to calculate the weighted-average interest rate.
(*2)These are fixed-rate debt (incl. fixed-rate debt through each interest-rate swap agreement).

44

8.

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

The scheduled repayment amounts of long-term debt as of June 30, 2023 are as follows:
Long-term debt

1 year or less

1 to 2 years

14,270,000

16,270,000

2 to 3 years
3 to 4 years(Thousands of yen)
17,660,000
7,300,000

4 to 5 years

Over 5 years

1,000,000

26,100,000

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, 2023, these commitment lines
have never been utilized.
9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of June 30, 2023 and December
31, 2022 are summarized as follows:
As of June 30, 2023
Weighted-averageinterest rate

Amount(Thousands of yen)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
Unsecured bond #15
due on September 9, 2039
Unsecured bond #16
due on October 29, 2035
Unsecured bond #17
due on March 30, 2032
Total

As of December 31, 2022
Weighted-averageinterest rate

Amount(Thousands of yen)

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%－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%

1,000,000

1.07000%

1,000,000

1.07000%

5,000,000

0.75000%

5,000,000

0.75000%

2,000,000

0.95000%－

38,000,000

38,000,000

The scheduled redemption amounts of investment corporation bonds as of June 30, 2023 are as
follows:
Investment corporation bonds

1 year or less

1 to 2 years

10,000,000－

2 to 3 years
3 to 4 years(Thousands of yen)
5,000,000
9,000,000

4 to 5 years

Over 5 years－

14,000,000

45

10.

Net Assets

In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50,000 thousand.
Information on the cancellation of treasury investment units during the six-month period ended
June 30, 2023 and December 31, 2022 is as follows:
Six-month period
endedJune 30, 2023
Total number of treasury investment units
cancelled (units)
Total amount of cancellation (Thousands of yen)11.

Six-month period
ended
December 31, 2022

15,402

15,402

1,999,960

1,999,960

Per Unit Information

Net assets per unit as of June 30, 2023 and December 31, 2022 were calculated based on thenumber of units outstanding as of each date, (1,337,598 units) and (1,337,598 units),
respectively.
Net income per unit for the periods from January 1, 2023 to June 30, 2023 and from July 1,
2022 to December 31, 2022 was calculated based on the weighted-average number of units
outstanding during the corresponding periods, (1,337,598 units) and (1,337,598 units),
respectively.
Accordingly, net assets per unit were ¥112,406 as of June 30, 2023 and ¥112,304 as ofDecember 31, 2022. Net income per unit was ¥2,901 for the period from January 1, 2023 toJune 30, 2023 and ¥2,618 for the period from July 1, 2022 to December 31, 2022.
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, 2023 andDecember 31, 2022 are summarized as follows:
As of
As of
June 30, 2023
December 31, 2022
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

13
13
13

15
15
15

46

12.

Income Taxes(continued)

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from January 1, 2023 to June 30, 2023 and from July 1, 2022 to December 31, 2022
is as follows:

Statutory tax rate
Reconciliation:
Deductible distributions paid
Provision of reserve for reduction entry
Other
Effective tax rate

13.

For the period
from January 1,
2023 to June 30,2023
31.46%For the period
from July 1, 2022
to December 31,
2022
31.46%(30.35%)(1.10%)
0.01%
0.02%

(33.63%)
2.18%
0.02%
0.03%

Breakdown of Revenues and Expenses
For the period
For the period
from January 1, 2023
from July 1, 2022 toto June 30, 2023
December 31, 2022
(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
Profit

7,776,941
1,223,070
274,228
9,274,240

7,783,514
1,217,834
269,826
9,271,175

681,096
124,190805,286
10,079,527

693,763
176,155
869,919
10,141,094

1,525,027
1,149,170
1,036,895
21,609139,029
1,960,448
139,992
5,972,173
4,107,354

1,580,846
1,156,926
976,992
22,127137,117
1,931,741
138,789
5,944,541
4,196,553

47

14.

Breakdown of Gain or Loss on Sales of Real Estate Properties
For the period
For the period
from January 1, 2023
from July 1, 2022 toto June 30, 2023
December 31, 2022
(Thousands of yen)
Shintomicho Building
Proceeds from sale of real estate
Cost of sales of real estate
Other related sale expenses
Gain on sale of real estate

1,860,000
1,031,830
30,304
797,865

1,240,000
689,433
19,952
530,613

For the period
For the period
from January 1, 2023
from July 1, 2022 toto June 30, 2023
December 31, 2022
(Thousands of yen)
Kowa Kawasaki Nishiguchi Building
Proceeds from sale of real estate
Cost of sales of real estate
Other related sale expenses
Loss on sale of real estate

16,050,000
18,750,487
3,089
2,703,576－－－－

For the period
For the period
from January 1, 2023
from July 1, 2022 toto June 30, 2023
December 31, 2022
(Thousands of yen)JEI Kyobashi Building
Proceeds from sale of real estate
Cost of sales of real estate
Other related sale expenses
Gain on sale of real estate

5,040,000
2,126,568
27,6642,885,767－－－－

15．Transactions with Major Unitholders
Transactions with major unitholders are as follows:
For the period
For the period
from January 1, 2023 from July 1, 2022 toto June 30, 2023
December 31, 2022
(Thousands of yen)
Rental business revenues
Other
Gain on sales of real estate properties(Other related sale expenses)
Property operating expenses
Loss on sales of real estate properties

110,032480(53,100)－－－

466,798
2,703,576－－

48

16．Leases
JEI leases properties on which rental revenues are earned. At June 30, 2023 and December 31,
2022, future lease revenues under non-cancelable operating leases are summarized as follows:
As ofJune 30, 2023

(Thousands of yen)
2,663,020
4,873,661
7,536,681

Due within one year
Due after one year
Total

17.

As of
December 31, 2022
2,289,514
5,215,421
7,504,935

Derivative Transactions

Derivative Transactions as of June 30, 2023
(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, 2023 for each hedge accounting method applied.

Hedge
accounting
methodType of derivativetransaction

Hedgeditem

Contract amountMore than
one year
Fair value(Thousands of yen)

Method ofcalculating
the fair value

Specialtreatment ofInterest-rate swap
Longinterest-rate
Receive floating,
term
*
swaps
pay fixed
debt
34,640,000
29,370,000* 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 5, “Financial Instruments.”

49

17.

Derivative Transactions (continued)

Derivative Transactions as of December 31, 2022
(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, 2022 for each hedge accounting method applied.

Hedge
accounting
methodType of derivativetransaction

Contract amountMore than
one year
Fair value(Thousands of yen)

Hedgeditem

Method ofcalculating
the fair value

Specialtreatment ofInterest-rate swap
Longinterest-rate
Receive floating,
term
*
swaps
pay fixed
debt
34,640,000
29,370,000* 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 5, “Financial Instruments.”

18.

Related Party Transactions

For the period from January 1, 2023 to June 30, 2023
(1) Parent Company and Major Corporate Unitholders
Company
nameNipponSteel Kowa
Real EstateCo., Ltd.

Description of transaction

Amount(Thousands of yen)

Disposal of real estate
properties

16,050,000

Account－

Balance at the endof period(Thousands of yen)－

(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders

Name
Shuichiro
KayamaDescription of transaction
Payment of asset
management fees to JEAM

Amount(Thousands of yen)Account
Accounts
458,964 payable

Balance at the endof period(Thousands of yen)
387,09450

18.

Related Party Transactions (continued)

For the period from July 1, 2022 to December 31, 2022
(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
Shuichiro
Kayama19.

Description of transaction
Payment of asset
management fees to JEAM

Amount(Thousands of yen)Account
Accounts
444,830 payable

Balance at the end of
period(Thousands of yen)369,656

Segment Information

For the periods from January 1, 2023 to June 30, 2023 and from July 1, 2022 to
December 31, 2022
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.

51

20.

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.
JEI determined to distribute the whole amount obtained by deducting the provision of reserve
for reduction entry due to the transfer of real estate properties in accordance with Section 65.7of the Special Taxation Measures Law from unappropriated surplus.
Consequently, JEI set income available for distributions of dividends at ¥3,745,274,400, whichis the maximum integral multiple of the 1,337,598 units issued, but not exceeding¥3,881,374,641, which is the amount of retained earnings at June 30, 2023.
No cash distribution exceeding the income amount set forth in Section 33.1.4 of the bylaws of
JEI shall be made.
On August 17, 2023, the Board of Directors approved a resolution to make a cash distributionof ¥2,800 per unit aggregating to ¥ 3,745,274,400 to unitholders of record as of June 30, 2023.
21.

Revenue Recognition(1) Breakdown of revenue from contracts with customers
For the period from January 1, 2023 to June 30, 2023
Revenue from contracts withcustomers (*1)
Revenue from external customers(Thousands of yen)
Sales of real estate properties
22,950,000(*2)3,683,632
Utilities income
681,096
681,096
Other－
9,458,801
Total
23,631,096
13,823,530(*1)Rent revenues subject to Accounting Standard for Lease Transactions (ASBJ Statement No. 13) areexcluded from “Revenue from contracts with customers” as such revenues are not subject to AccountingStandard for Revenue Recognition. Revenue from contracts with customers mainly represents revenues
from the sale of real estate and utilities.
(*2)As sale of real estate is recorded as gain or loss on sales of real estate properties, etc. in the Statementof Income and Retained Earnings, the amount obtained by deducting cost of sale of real estate and otherexpenses related to sale from proceeds from sale of real estate is indicated for revenue from externalcustomers. Furthermore, as JEI records gain on sales of real estate properties for revenues while recording
loss on sales of real estate properties for operating expenses, the table above indicates the amount of gainon sales of real estate properties only.

For the period from July 1, 2022 to December 31, 2022
Revenue from contracts withcustomers *Revenue from external customers(Thousands of yen)
Sales of real estate properties
1,240,000
530,613
Utilities income
693,763
693,763
Other－
9,475,545
Total
1,933,763
10,699,922* Rent revenues subject to Accounting Standard for Lease Transactions (ASBJ Statement No. 13) areexcluded from “Revenue from contracts with customers” as such revenues are not subject to AccountingStandard for Revenue Recognition. Revenue from contracts with customers mainly represents revenues
from the sale of real estate and utilities.

52

21.

Revenue Recognition (continued)(2) Information that provides a basis for understanding revenue from contracts with customers
For the period from January 1, 2023 to June 30, 2023 and from July 1, 2022 to December
31, 2022
As described in the Summary of Significant Accounting Policies.
(3) Information about the relationship between the fulfillment of performance obligations undercontracts with customers and cash flows arising from those contracts, and the amount andtiming of revenue expected to be recognized in subsequent periods from contracts withcustomers that existed at the end of the current period
For the period from January 1, 2023 to June 30, 2023
(a) Balance of contract assets and contract liabilities

Claims arising from contracts with customers（At beginning of period）
Claims arising from contracts with customers（At end of period）
Contract assets（At beginning of period）
Contract assets（At end of period）
Contract liabilities（At beginning of period）
Contract liabilities（At end of period）

January 1, 2023 toJune 30, 2023
(Thousands of yen)
263,261
258,230－－－－(b) Transaction price allocated to remaining performance obligations
As of June 30, 2023, the transaction prices allocated to the remaining performanceobligations for the sale of real estate are ¥2,300,000 thousand and ¥1,260,000 thousand
for the real estate for which sale contracts were executed on February 10, 2023 andJune 30, 2023. JEI expects to recognize revenues for such remaining performanceobligations upon delivery of such real estate properties, which are expected to occur on
July 3, 2023 and January 22, 2024. In accordance with Paragraph 19 of the Guidance on
Accounting Standard for Revenue Recognition, JEI recognizes utility revenues at theamount it has the right to charge, because JEI has the right to receive from the customer
the amount of consideration that directly corresponds to the value to the customer, thelessee, of the portion of the performance completed by the end of the fiscal period.
Accordingly, JEI has applied the provisions of paragraph 80-22(2) of the AccountingStandard for Revenue Recognition and has not included in the notes the transaction
price allocated to the remaining performance obligations.
For the period from July 1, 2022 to December 31, 2022(a) Balance of contract assets and contract liabilities

Claims arising from contracts with customers（At beginning of period）
Claims arising from contracts with customers（At end of period）
Contract assets（At beginning of period）
Contract assets（At end of period）
Contract liabilities（At beginning of period）
Contract liabilities（At end of period）

July 1, 2022 to
December 31, 2022
(Thousands of yen)
224,317263,261
－
－
－
－

53

21.

Revenue Recognition (continued)(b) Transaction price allocated to remaining performance obligations
As of December 31, 2022, the total transaction price allocated to the remaining
performance obligations for the sale of real estate is ¥1,860,000 thousand for the realestate for which a sale contract was executed on February 17, 2022. JEI expects torecognize revenue for such remaining performance obligations upon delivery of such
real estate properties, which is expected to occur on January 26, 2023. In accordancewith Paragraph 19 of the Guidance on Accounting Standard for Revenue Recognition,
JEI recognizes utility revenues at the amount it has the right to charge, because JEI has
the right to receive from the customer the amount of consideration that directly
corresponds to the value to the customer, the lessee, of the portion of the performancecompleted by the end of the fiscal period. Accordingly, JEI has applied the provisionsof paragraph 80-22(2) of the Accounting Standard for Revenue Recognition and has notincluded in the notes the transaction price allocated to the remaining performanceobligations.

22.

Significant Subsequent Event

Not applicable.

54Independent Auditor’s Report

The Board of Directors
Japan Excellent, Inc.
OpinionWe have audited the accompanying financial statements of Japan Excellent, Inc. (the Company),
which comprise the balance sheet as at June 30, 2023, and the statements of income and retained
earnings, changes in net assets, and cash flows for the six-month period then ended, and notes tothe financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as at June 30, 2023, and its financial performance and its cash
flows for the six-month period then ended in accordance with accounting principles generally
accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance withthese requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Other Information
The other information comprises the information included in the Semi-Annual Report that
contains audited financial statements but does not include the financial statements and our
auditor’s report thereon. Management is responsible for preparation and disclosure of the otherinformation. The Supervisory Director is responsible for overseeing the Company’s reporting
process of the other information.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.

Ernst & Young ShinNihon LLC

55

Responsibilities of Management and Supervisory Director for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statementsin accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Supervisory Director is responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
・ Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the financial statements is not expressing an opinion on the effectiveness of the Company’s
internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation in accordance with accounting
principles generally accepted in Japan.

Ernst & Young ShinNihon LLC

56

We communicate with the Executive Director regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Executive Director with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
Fee-related information
The fees paid or payable to us and other EY Member Firms for the audits of the financial
statements of the Company and other non-audit fees charged in the audit period to the Company
are 13 million yen and 7 million yen, respectively.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

Ernst & Young ShinNihon LLC
Tokyo, Japan
September 13, 2023

佐 藤 賢 治Kenji Sato
Designated Engagement Partner
Certified Public Accountant

八 幡 正 博Masahiro Yawata
Designated Engagement Partner
Certified Public Accountant

Ernst & Young ShinNihon LLC

57