Top REIT, Inc.

Business Report
The 18th Fiscal Period
From November 1, 2014 to April 30, 2015

1

Financial Highlights
18TH FISCALPERIODPERFORMANCE

19TH FISCALPERIODFORECAST

20TH FISCALPERIODFORECAST

181 days

184 days

182 days

OPERATING REVENUE¥5,612 million¥5,391 million¥5,407 million

OPERATING INCOME¥2,472 million¥2,178 million¥2,242 million

ORDINARY INCOME¥1,891 million¥1,626 million¥1,708 million

NET INCOME¥1,831 million¥1,625 million¥1,707 million¥9,700¥9,700PERIOD OF ASSET MANAGEMENTDIVIDEND PER UNIT

¥9,680NUMBER OF INVESTMENT UNITS

176,000 units

176,000 units

176,000 units

Until Nov. 12: 22 properties
Nov. 13 onward: 20properties

20 properties

20 properties

PORTFOLIO SIZE

The forward-looking statements above contain assumptions and actual results may differ due to change in
events, conditions or circumstances. These statements should not be considered to guarantee any dividend
amounts to be paid. Assumptions of forecasts for the 19th and 20th fiscal periods are as follows:(1) Portfolio Assets
The forward-looking statements are based on the assumption that portfolio assets will be the 20
properties Top REIT Inc. (“Top REIT”) owns as of the date of this document (June 15, 2015).
(2) Number of Investment Units Outstanding
The forward-looking statements are based on the assumption that the number of investment units
issued and outstanding will be 176,000 units, which is the number as of the date of this document, andthat no issuance of new investment units will be made through April 30, 2016.
(3) Interest-Bearing Liabilities
The forward-looking statements are based on the assumption that the balance of interest-bearing
liabilities is ¥90,598 million, which is the amount as of April 30, 2015.
During the 19th fiscal period, ¥8,500 million of investment corporation bonds due for redemption on
June 4, 2015 were financed in the entire amount using long-term loans. It is assumed that the ¥4,251
million in loans due for repayment on September 30, 2015 will be fully refinanced. It is also assumed
that, of long-term loans, ¥67 million will be repaid on June 30, 2015 as agreed upon.
For the 20th fiscal period, it is assumed that ¥19,527 million in loans due for repayment on February
29, 2016 will be fully refinanced. It is also assumed that, of long-term loans, ¥67 million will be
repaid on December 30, 2015 as agreed upon.
(4) Operating Revenue
For rental revenue from existing properties, Top REIT takes into account the execution of new leaseagreements and cancellation of lease agreements that have been finalized and scheduled as of the dateof this document, as well as such factors that may cause fluctuations as risks associated with rent
revision with tenants due for rent revision or contract renewal, in light of recent real estate leasing
market conditions.
For Kanda Nishiki-cho 3-chome Building, Top REIT expects revenue for the spaces to be leased forwhich lease agreements have been executed as of the date of this document. Furthermore, it isassumed that the occupancy rate of the property stands at 76.1% as of the last day of August 2015,
81.0% as of the last day of September 2015, and 94.3% as of the last day of October 2015 onward.

2

(5) Dividend per Unit
Dividends (dividend per unit) are calculated based on the dividend policy stipulated in Top REIT’s
Articles of Incorporation.
For the 19th and 20th fiscal periods, it is assumed that net income will be fully distributed as dividends(excluding fractions).
For the 19th fiscal period, it is assumed that part (approximately ¥82 million) of the internal reservesof reserve for reduction entry, etc. totaling approximately ¥266 million (balance at the end of April2015) will be reversed and applied to dividends.

3

GreetingThank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
The Japanese economy showed a sustained recovery trend during the fiscal period under review (18th fiscal
period), as illustrated by improved corporate performance and the corresponding improvements in wages and theemployment environment, along with lower crude oil prices and stock price increases. However, individual
consumers and corporations maintain a prudent stance with regard to purchasing and facility investments,
preventing the economy from entering a virtuous cycle. Additionally, looking at global economic conditions,factors including the U.S.’ exit strategy from quantitative easing and its impact on emerging countries, and theslowdown in Chinese economic growth are all situations that bear continued close attention.
In the domestic stock market, since last fall the domestic demand-related stocks have shown enhanced
performance, contributing to the Nikkei Stock Average surpassing the 20,000 yen mark for the first time in 15
years this April. The scale of the J-REIT market continues to expand with the listing of investment units focusedon investments in healthcare facilities such as fee-based nursing homes, reaching an all-time high total market
value of 10 trillion yen in November 2014. With the rise in long-term interest rates in February and March of lastyear, the Tokyo Stock Exchange REIT Index softened to an extent, but has since turned upward trend and calms
down recently.
With the interest rates hovering at a low level due to the Bank of Japan’s monetary easing policy as well as the
improvement of the real estate market, which has played an important role as the backdrop to the sound J-REIT
market, the relatively high yield offered by J-REITs has drawn attention. Looking at the real estate leasing market,
vacancy rates at office buildings in central Tokyo continue to decline, sparking expectations for improvement inrents and leasing terms. With regard to acquisitions of the property, investment-grade real estate prices remainhigh due to factors such as the inflow of capital from active investors abroad, and acquisition of new property
continues to be challenging. As such, investors are broadening their scope in terms of purpose, area and scale.
Given the prevailing conditions, while maintaining its selective investment approach, Top REIT seized theopportunity to dispose two properties last November. Additionally, as a result of the successful implementation ofa pivotal internal growth strategy focusing on properties under ownership announced at the time of the release of
our financial results for the previous fiscal period, efforts have continued since the end of the previous fiscal
period to attract new tenants to the Kanda Nishiki-cho 3-chome Building. However, its limited contribution to
profit during the fiscal period under review was the most significant factor in reduced revenue, and as such Top
REIT recorded period-on-period decrease in the financial results for the 18th fiscal period (fiscal period endedApril 30, 2015), with operating revenue of 5,612 million yen (down 3.1%), ordinary income of 1,891 million yen(down 3.3%), and net income of 1,831 million yen (down 6.3%). With special provisions for taxation applied tothe two disposed properties, we allocated approximately 187 million yen to internal reserve (reserve for reduction
entry of land, etc.), resulting in dividend per unit of 9,680 yen, surpassing the forecasted dividend by 4.1%.
Furthermore, with regard to internal reserve, Top REIT’s policy is to apply this reserve to improving the quality ofassets under management and to ensuring stable dividends, and we intend to continue our endeavors to maximize
the investment value of our unitholders. We appreciate your continued support and understanding.
June 15, 2015

Junichi Sahara

Tatsuya Chiba

Executive Officer
Top REIT, Inc.

President and Representative Director
Top REIT Asset Management Co., Ltd.

4

Change of Representative Director of Asset Management Company
As announced at the asset management company’s board of directors’ meeting heldon March 16, 2015, I, Tatsuya Chiba, was appointed to the post of Representative
Director of Top REIT Asset Management effective as of April 1, 2015. As the headof Top REIT’s asset management company, I intend to carry out my duties in such amanner as to satisfy the expectations of our investors and maintain the trust of themarket. I would like to express my gratitude to our investors for their continued
understanding and support.
Skilled Management of a Diversified Portfolio

Pursue both external growth and quality of portfolio assets
Pursue “stability” and “growth potential” of profitability by utilizing
characteristic of diversified assets
Maximum Use of Sponsor’s Strength

Tatsuya Chiba
President andRepresentative Director
Top REIT AssetManagement Co., Ltd.



Steady external growth through pipeline function
Achieving internal growth through “management-added benefits”

Top REIT’s investment policy is to invest “primarily in real estate related assets, andconduct management in pursuit of maximizing investment value for its unitholders bysecuring stable earnings and steady portfolio growth in the medium to long term,”
and in line with this policy Top REIT has adopted the two strategies above.
Fundamentally, “Implement Growth Strategy Focusing on Internal Growth” that was
indicated at the time of release of our financial results for the 17th fiscal period, hasborne fruit during the fiscal period under review. Despite continued challenging
conditions in real estate transactions, our stance with regard to the pursuit ofenhanced quality of our assets under management remains unchanged, and we intend
to continue to exercise prudence in investment and to improve profitability throughinternal growth.

Implement Growth Strategy Focusing on “Internal Growth”

Future Initiatives

Recognitionof Market
Environment

Current
Situationof TOP

SteadyProgress

Leasing activities for early leasing-up

Consider value enhancement
measures for existing portfolio
 Harumi Triton Y Kanda Nishiki-cho 3-chome
Building
 Shiba-Koen Building and Others

Begun conversion of cafeteria to office Additional acquisition of
Shiba-Koen Building(resulted in 100%-owned)

Conduct appropriate rent revision/
contract renewal

 Ito-Yokado Higashi-Narashino Store
Renewed contract
 Harumi Triton Y, Z and others
Settled rent revision with major tenants

Consolidate the foundation for stabilization of revenue as well as bottoming out of dividends

Decreased risk of tenant concentration due to diversification of tenants, lowering the concentration on major tenants

Pursued measures for value enhancement of properties owned, aiming improvement of profitability

 Real Estate Leasing Market
 Rent of the office building is in a recovery trend Real Estate Transaction Market
 Investors maintain positive investment stance while information on sale of excellent property is limited
Upward trend of prices and downward trend of investment returns will continue
 Financial/ Capital Market
 Short-term interest rate, while requires close monitoring, remains at a low level under ongoing “Quantitative andQualitative Financial Easing Measures”

Continue growth strategy focusing on “Internal Growth,” aiming to raise dividends level
 Steadily implement measures for value enhancement of existing portfolio
 Pursue leasing activities to achieve full occupancy of office building and conduct appropriate rent revision
 Firmly maintain policy of selective investment that contribute to the improvement of portfolio quality as well as investors’ value
 Manage ratio of fixed rate loans with careful monitoring of interest rate trend, spread maturities and equalize refinance amount5

Raising Dividends Level through Implementation of Growth Strategies
Given prevailing conditions and the move-out of major tenants, at the time of the release of our financial results
for the 17th fiscal period, we announced measures under the theme, “Implement Growth Strategy Focusing on
Internal Growth,” and through the implementation of those measures during the 18th fiscal period we focused on
the earliest possible improvement of dividends.
There is a more detailed explanation on the following pages with regard to the progress of the various measures
implemented, but as a result of these endeavors dividend per unit (“DPU”), which was forecast to be ¥9,300,
increased to 9,680 yen, and we have adjusted our forecast upward for the upcoming 19th fiscal period from
¥9,000 to ¥9,700. This figure also applies to the 20th fiscal period. Additionally, we will draw on internal reserves
and apply them to dividends for the 19th fiscal period in accordance with the existing plan.
In the 19th and 20th fiscal periods, increased profits will occur on a temporary basis through conversion of thecafeteria floor of Harumi Island Triton Square Office Tower Y into use for offices, and this is expected tocontribute to the increased dividend. Please refer to page 8 for further details.
At the time of release of our financial results for the 17th fiscal period, we indicated our intent not to allow
dividends per unit to drop below ¥9,000, and over the course of about six months, the various measures
implemented have progressed to the point where a significant increase in dividends can be achieved. In the 21stfiscal period, after the temporary effects of profit factors in the 19th and 20th fiscal periods have disappeared, we
believe we will approach the achievement of conditions conducive to maintaining dividends at above ¥9,600.
Going forward, we will continue to implement measures toward achieving stable dividends and to increasing
dividends.

Accumulation of internal reserve

Reversal of internal reserve

Harumi Triton Y: Receipt of temporary payment from cafeteria users(yen)
11,000Stabilized dividends
by reversal ofinternal reserve

10,000

9,700

9,700

9,680

Above ¥9,600

9,300
9,000
9,000

¥9,000

8,000

7,000
0
Forecast

Actual18th FP

Prev. forecast

New forecast

19th FPNew forecast

20th FP

21st FP onward

1 Raising stabilized dividends level toward 21st FP
Above ¥9,600(+) Leasing : Kanda Nishiki-cho bldg.
(+) Conversion of cafeteria: Harumi Triton Y(+) Leasing, add. Acquisition: Shiba-Koen bldg.

¥9,000(+) Rent revision: minimizing rent reduction

2 19th FP DPU forecast: Up ¥700
(prev. forecast: ¥9,000  new forecast: ¥9,700 )3 Realizing steady improvement of stabilized DPU
Aiming further improvement through acquisition of new assets and internal growth6

Implementation of Growth Strategy Focusing on “Internal Growth” (1)Leasing Activities - Kanda Nishiki-cho 3-chome Building

Based on start of contract

With regard to the Kanda Nishiki-cho 3-chome
Building, as a result of efforts to attract new tenants
through espousing the convenience of the location,
we have succeeded in increasing the occupancy rate
to 94.3%, as shown in the chart.

Based on signing of contract(%)

During tenant recruiting activities, our sponsor,
Sumitomo Mitsui Trust Bank has provided support as
more than half the leasable space has been occupied
by companies affiliated with or maintaining close
relationships with the sponsor. This, along withimproving market conditions, has made it possible
for us to fill the vacancies resulting from the exit ofprevious tenants.
Additionally, with the reduction in vacancy rates due to the improvement in the real estate leasing market, wehave shortened the rent-free periods (temporary rent-free periods awarded to new tenants).
We have secured an agreement with a convenience store to lease the first floor, further enhancing the convenienceof the property. As a result, remaining leasable space comprises about 45 tsubos on the first floor and about 88
tsubos on the first basement floor. We will continue our efforts to recruit additional tenants and achieve fulloccupancy.

Floor

Class

9F
8F
7F
6F
5F
4F
3F
2F
1F
B1F

OfficeFloor Space（㎡）
654.40663.79663.79648.98915.72951.07998.16
1,027.68
523.75671.70In service（Tsubo）
197.95200.79200.79Rental start: Oct. 1, 2015
196.29276.99287.67301.93310.86158.42 Rental start: Sep. 2015 (Plan) Vacancy (approx.45 tsubos)
Vacancy203.17 Rental start: Oct. 1, 2015
(approx.88 tsubos)

7

Implementation of Growth Strategy Focusing on “Internal Growth” (2)Enhancement of Asset Value - Conversion of Harumi Island Triton Y
With regard to the conversion of the cafeteria at Harumi Island Triton Square Office Tower Y to office space
under consideration as one of our internal growth measures put forth during the 17th fiscal period, following
discussions with tenants utilizing the cafeteria, we succeeded in reaching an agreement as anticipated, andconstruction is already underway. The construction period is expected to continue through the upcoming 19th and20th fiscal periods, and to be completed by the end of the 20th fiscal period.
Costs associated with the construction are capitalized as assets, and will be expensed as depreciation over theuseful lives. Additionally, with regard to cessation of operation of the cafeteria, under normal circumstances we
receive a partial payment from the tenants utilizing the cafeteria, and this is scheduled to be recorded as rental
revenue during the 19th and 20th fiscal periods.
Through the conversion of the cafeteria into office space, leasable area at the property will be increased by 8.1%,
increasing the property’s earning power. Furthermore, concerning the northern half of the area under construction,
which is set to be completed during the 19th fiscal period, we have already received an application from anexisting tenant to lease the space, and as such this area is expected to begin generating rental revenue in the 20th
fiscal period.
Concerning the southern half of the area, which will be available to rent at the beginning of the 21st fiscal period,
we will endeavor to secure a new tenant as early as possible to further increase rental revenue.
19th FP (May. 2015 - Oct. 2015)

20th FP (Nov. 2015 - Apr. 2016)

21th FP onward (May. 2016 -)Cafeteria closes
First phase construction(South : Conversion to office)(1) Record a loss on retirement of kitchen(2) Capitalize finalized construction costs of 1st phase(4) Capitalize finalized construction costs of 2nd phase(3) Recognize temporary payment for 1st phasefrom tenants as revenue(5) Recognize temporary payment for 2nd phasefrom tenants as revenue<Basic Floor Plan><1st phase><2nd phase>

North side

(North side)
Conversion to office

Lease to exisiting tenant

South side

Temporaryleasing(South)demolition

Lease half of south side space
to existing tenant temporarily

Rentable officespace

Up Approx.
8.1%

NOI yield(estimate)

Up Approx.
0.1% - 0.2%

<After completion of 2nd phase>(North side)(Core)

1,868.42m2（Approx. 565.19tsubo）

Effects of
conversion

Second phase construction(North: Conversion to office)(South: Removal of kitchen) lease inception(in early 20th FP)(North side)
Lease to exisiting tenant(Core)(Core)(South side)
Conversion to office(South side)
Lease to new tenant

Lease north side space
to existing tenant (planned)

Possible to solicit new tenant
to south side space

Construction costs, etc.
(estimate)
1st phase construction

Approx. ¥400m.

2nd phase construction

Approx. ¥150m.

Loss on retirement of assets (19th FP)

Approx. ¥60-70m.

 Plan to receive temporary payment for conversion from cafeteria users in 19th and 20th FP(Recognize payment as revenue on receipt)
Revenues/ Expenses during construction period
19th FP

20th FP(+) Temporary rent revenue (South)(+) Temporary payment from tenant(-) Loss on retirement of kitchen(-) Depreciation of completed construction(+) Office rental revenue (North)(+) Temporary payment from tenant(-) Depreciation of completed construction

8

Implementation of Growth Strategy Focusing on “Internal Growth” (3)Enhancement of Asset Value - Appropriate Rent RevisionDuring the fiscal period under review, we undertook rent revisions (including contract renewal) with 14 tenants
who accounted for approximately 21% of the total rental revenues of our portfolio. Among those revisions, there
was a reduction in the rent for the Ito-Yokado Higashi-Narashino Store which is the agreement we succeeded inrenewing for an additional six years. Concerning Harumi Island Triton Square Office Towers Y and Z, where weundertook rent revision for multiple tenants – including major tenants – in March of this year, we succeeded inrenewing agreements at almost the same rent levels. As a result, the average revision to the rent of these 14
tenants was a reduction of 6.1%. Excluding the reduction in rent of the Ito-Yokado Higashi-Narashino Store, theaverage revision was actually a slight increase of 0.3%.
Top REIT saw major tenants exit the Akasaka Oji Building, Harumi Island Triton Square Office Tower Y and theKanda Nishiki-cho 3-chome Building. In each case, we initiated concrete tenant recruiting activities. In the past,following the exits of major tenants, tenant recruiting activities required considerable time due to the extremely
challenging real estate leasing market environment caused by factors such as the global financial crisis and theGreat East Japan Earthquake. However, recent activities to attract tenants to the Kanda Nishiki-cho 3-chome
Building have been more successful, and we succeeded in restoring the occupancy rate to over 90% on a contract
basis about five months after the exit of a major tenant. We are gradually seeing full-fledged improvement in realestate leasing market conditions, including rents.
Going forward, rent revisions in the 19th fiscal period will be undertaken with eight tenants accounting for 4.0%
of total rental revenues from our portfolio, and in the 20th fiscal period, revisions will be undertaken with 12
tenants accounting for 7.1% of total rental revenues. During these periods, we are not scheduled to undertake rent
revision with any major tenants. We do not see a significant gap in the contracted rents of the tenants with whom
we will undertake rent revision and market rent, and we will negotiate appropriate rent revisions with thosetenants based on market standards.

Rent revision in 18th FP (excl. residential properties)

Rent revision in 19th and 20th FP (excl. residential properties)
（mn）

40

30
20

≪Down 6.1% on average, Up 0.3% excl. IY Higashi-Narashino ≫Monthly rent before
revision

Revised monthly
rent

Increase in monthly rent

Results of rent revision ＝

10(%)

Monthly rent before revision

-

（ｍｎ）

200

May Jun
2015

△6.1％
＋0.3％

150

19

0

14 tenants

19th FP
Oct.2015(Forecast)

20th FP
Apr.2016(Forecast)

21th FP
Oct.2016(Forecast)

Nov Dec

Akasaka Oji Building(some tenants)
Shiba-Koen Building(some tenants)
Shinjuku EAST
Building(some tenants)
Shinkawa Chuo
Building(some tenants)
Faret East Building(some tenants)
MEL Building(some tenants)

Jan Feb Mar Apr
2016
20th FP8
tenants
4.0％ oftotal rents(Note)

Akasaka Oji Building(some tenants)

20

Shiba-Koen Building(some tenants)
Shinjuku EAST
Building(some tenants)
Shinkawa Chuo
Building(some tenants)
Faret East Building(some tenants)

Rent Gap
Contracted rent(Months)

Market rent

Leasing of
Akasaka Oji building

6

Oct

Leasing ofHarumi Triton Y
Leasing of

4

2

12
tenants
7.1％ oftotal rents(Note)(Note) Ratio indicates the total monthly rent to be revised in 19th or 20th FP against the totalmonthly rent (including common service fees) of all properties owned in April 2015.

Average rent-free period
8

Sep

th FP

th FP

50
18th FP
Apr.2015
Excl.
IY Higashi-NarashinoAug

19th FP100

18th FP
Apr.2015

Jul

Kanda Nishiki-cho(*) Rent-free period corresponding to 2
year contract (at beginning of contract)0
11th FP 12th FP 13th FP 14th FP 15th FP 16th FP 17th FP 18th FP 19th FP
Oct,2011 Apr.2012 Oct.2012 Apr.2013 Oct.2013 Apr.2014 Oct.2014 Apr.2015 Oct.2015

19th FP

20th FP

Rent to be revised

Rent to be revised(Note) Market rent is the fair rent recognized by Top REIT.

9Acquisition and Sale of Properties
During the 18th fiscal period, Top REIT disposed two properties, Kanda Park Plaza and OAK PLAZA, on
November 13, 2014. At present, the real estate transaction market is highly competitive, and as such J-REITs are
struggling with their external growth activities. However, we identified this as an opportunity to sell, and as such
we sold the two properties, both of which were advanced in age. As a result, we recorded gain on sales of realestate properties for the 18th fiscal period of approximately ¥297 million. Special provision for taxation wasapplied to this amount, and we allocated approximately ¥187 million to internal reserve as reserve for reduction
entry of land, with the remaining sum (approximately ¥109 million) allocated to dividends for the 18th fiscal
period.

(In millions of yen)

Kanda ParkPlaza

OAK PLAZA

Acquisition Price¥5,156¥2,590Appraisal Value (Note1)¥5,080¥2,660

Sale Price (A)¥5,350¥2,900Book Value (B)¥5,050¥2,684¥7,746¥7,740¥8,250¥7,734¥215¥515

Kanda Park Plaza
Address

Kajicho, Chiyoda-ku, Tokyo

Difference between sale price andbook value (A)－(B)OAK PLAZA¥299

Cost of sale (C)¥218

Gains on sale (A)-(B)-(C)¥297

internal reserve (Note2)

Address

Kanda Awajicho, Chiyoda-ku, Tokyo

TOTAL

¥187

Dividends to unitholders¥109
Note: 1. Appraisal value as of Oct. 31, 2014 (end of 17th FP)
Note: 2. Internal reserve pursuant to special taxation measures recognized as reserve for reduction entry

In March, Top REIT acquired the eighth floor of the Shiba-Koen Building, of which we had already owned thefirst through seventh floors, and we now have exclusive ownership of the property. Through this exclusive
ownership, we will look to achieve enhanced efficiency in management and operation, increased asset value,higher investment yield, and enhanced liquidity.
Additionally, we succeeded in attracting a new tenant to lease the fourth floor of the building, which had beenvacant for some time, and as of March 1, 2015 achieved and is maintaining full occupancy.

Existing portion before additional acquisition(as of Oct. 31, 2014)

Additionally acquired portion (as of Feb. 28, 2015)
Whole property at end of 18th FP(as of Apr. 30, 2015)

Rentable Floor Space （㎡）Occupancy Rate（%）¥3,460 million¥400 million¥4,110 million

・ Mar. 1, 2015

4,000

100

3,000

80

2,000

60

1,000

40

Started contract with new tenant for one floor vacancy
Achieved full occupancy
・ Mar. 30, 2015
Acquired additional portion (8th floor), resulting in 100% owned

Continuing full occupancy

Additionally acquired portion

020
Oct.2014 Nov.2014 Dec.2014 Jan.2015 Feb.2015 Mar.2015 Apr.2015
End of
End of17th FP
18th FP

Increase in rentable office space463.74 ㎡

Acquisition Price (cash on hands)¥375 million

NOI yield (direct cap rate in appraisal as of Feb. 28, 2015 )

10

5.8%

Reinforcement of Financial Standing
The financial market in the 18th fiscal period saw both short-term and long-term interest rates remain at a low
level against the backdrop of ongoing monetary easing measures by the Bank of Japan. Recently, volatility oflong-term interest rates is increasing slightly, but the purchase of Japanese government bonds by the Bank ofJapan in an aim to achieve an inflation rate of 2% based on “quantitative and qualitative monetary easing” isexpected to continue. Therefore, the view is that interest rate levels will remain low in a stable manner for the time
being and a financing environment that is favorable for also J-REITs will continue.
During the fiscal period under review, utilizing the proceeds from the sale of the aforementioned two properties aswell as cash on hand, we were able to execute early repayment of borrowings totaling ¥9,697 million on
November 28, 2014. As a result, interest-bearing liabilities as of the end of the 18th fiscal period totaled ¥90,598
million, with LTV at 47.7%.
As we entered the 19th fiscal period, the redemption date for ¥8,500 million of investment corporation bonds wasapproaching. On June 3, 2015, we borrowed an additional ¥8,500 million from banks and applied it on the nextday (June 4) to reimbursement. Of the newly borrowed ¥8,500 million, ¥4,000 million has been borrowed for aperiod of five years, and the remaining ¥4,500 million for a period of seven years. Through the execution ofinterest-rate swaps on both borrowings, we have attempted to fix the interest rate.
Top REIT, while monitoring market interest rates – particularly while short-term interest rates are low – in orderto gain maximum benefit, has operated with a funding ratio of about 50% at fixed interest rates. Going forward,
while closely watching market interest rates, we will proceed with refinancing at fixed interest rates, and byincreasing the fixed interest rate on interest-bearing liabilities, we will prepare for potential future interest rate
hikes. Furthermore, we are also exploring the possibility of diversifying repayment dates for borrowings, leveling
repayment amounts and extending loan periods.
During the fiscal period under review, in addition to achieving a reduction in LTV through early repayment ofborrowings, we succeeded in bolstering internal reserves, thus fortifying our financial standing. The decrease in
LTV has enhanced our borrowing capacity, and given us increased flexibility in terms of the acquisition of new
properties. Concerning internal reserves, we believe this will contribute to the stabilization of dividends. In bothcases we have upgraded our financial strategy. Top REIT will continue to exercise sound financial management inline with market trends.

[ Ratio of Loans with Fixed Interest Rate ][ Change in status of interest-bearing liabilities ]Short-Term（Billion yen）

floating

Long-Term

150

fixed

100%

120

80%
6.7

90
10.3

30

94.1

96.9

96.0

100.4

90.5

49.1

52.7

52.6

51.0

50.9

55.9

56.0

53.5

53.5

48.6

48.6

44.1

44.0

46.5

46.5

51.4

51.4

40%

90.5

68.4

20%
33.4

49.0

13.2
87.5

72.7

47.4

60%

60
20.9

47.3

33.4

0
IPO
2nd FP
4th FP
6th FP
8th FP
10th FP 12th FP 14th FP 16th FP 18th FP
Mar.2006 Apr.2007 Apr.2008 Apr.2009 Apr.2010 Apr.2011 Apr.2012 Apr.2013 Apr.2014 Apr.2015

Repayment of borrowings
9,697million yen(on Nov. 28, 2014)（mn）

internal
reserves

ＬＴＶ
50.6

fixed

New borrowing for redemption of
investment corporation bonds(on Jun. 3, 2015)

20,00010th FP 11th FP 12th FP 13th FP 14th FP 15thFP 16thFP 17thFP 18thFP Jun.15
Apr.2011 Oct.2011 Apr.2012 Oct.2012 Apr.2013 Oct.2013 Apr.2014 Oct.2014 Apr.2015 2015

Repayment

25,0003,873

0%Jun, 152015

300

floating

47.4

50.5

51.5

51.4

(%)

50.0

47.3

47.7

50

2,827

200
15,000

40

37.1

5,824
9,000
19,04010,0008,500

Conduct operation with target ratio of loans to total
assets(LTV) of around 50% in contrast to the 60% celling30

8,500 4,670
4,251

0

27.8

4,000

16,700

5,000

100

1,230

3,000

1,822

2,355

4,500

4,000

4,500

0

20
IPO
2nd FP
4th FP
6th FP
8th FP
10th FP 12th FP 14th FP 16th FP 18th FP
Mar.2006 Apr.2007 Apr.2008 Apr.2009 Apr.2010 Apr.2011 Apr.2012 Apr.2013 Apr.2014 Apr.2015

18th FP 19th FP 20th FP 21th FP 22th FP 23th FP 24th FP 25th FP 26th FP 27th FP 28th FP 29th FP 30th FP 31th FP 32th FP 33th FP
Apr.2015 Oct.2015 Apr.2016 Oct.2016 Apr.2017 Oct.2017 Apr.2018 Oct.2018 Apr.2019 Oct.2019 Apr.2020 Oct.2020 Apr.2021 Oct.2021 Apr.2022 Oct.2022

Borrowed with fixed-interest currently , hedging risk of future interest rate hike

Prepare for investment opportunity by lowering LTV

Spread maturities and equalize refinance amount

Expand financial flexibility by accumulated internal reserve11

Property Tour - Visit to Sagamihara Shopping Center Sagamihara City, located in Kanagawa Prefecture, boasts a population of over 700,000. It serves as a commuter
town for Tokyo, and is the location of the Ito-Yokado Kobuchi Store (Sagamihara Shopping Center).
Facing Route 16, one of the capital’s inter-regional trunk roads, the store is also situated near Kobuchi Station on
the JR Yokohama Line. The shopping center affords superior transportation access via car and train.

A Renovated exterior
which gives customers
sense of pleasure for
shopping

In addition to renovation conducted on the exterior, it has newly contracted
21 specialty shops. It has upgraded its selection from fashion to generalmerchandise and food and beverage, and now offers a broad range of
products and services. A large-scale renovation has been conducted to
improve the shopping center’s close ties to the area.

Renovation of the design to provide customers with a more enjoyable shopping experience

Exterior
After

BeforePoint of Renewal
To further enhance convenience, an entrance
has been established on a direct line with thetrain station, and a park for children and an
online supermarket building have been
established.

Interior

Park for children serves as a greatplace for families to take a break.

Establishment of an online
supermarket building connects
the retail location with theInternet.

The branches of the MUJI daily goods store, the Akachan Honpo baby and maternity goods
store and the Loft daily goods store operated by Seven & I Holdings, have opened. Additionally,in the food court on the first floor, seating has been expanded more than fourfold, to 418 seats.

12【1】Overview of Asset Management Operation
1. Operating Results and Financial Position(In millions of yen, except per unit data or where otherwise indicated)
14th fiscal period 15th fiscal period 16th fiscal period 17th fiscal period 18th fiscal period
From
Nov. 1, 2012
toApr 30, 2013

From
May 1, 2013
toOct 31, 2013

From
Nov. 1, 2013
toApr 30, 2014

From
May 1,2014
toOct 31, 2014

From
Nov. 1, 2014
toApr 30, 2015

¥ 5,844¥ 5,154¥ 5,637¥ 5,792¥ 5,612(Revenue related to rental business)

5,844

5,154

5,637

5,792

5,315

Operating expenses

3,397

2,981

3,108

3,229

3,140

(Expenses related to rental business)

2,848

2,438

2,622

2,721

2,630

Operating income

2,447

2,172

2,528

2,563

2,472

Ordinary income

1,823

1,580

1,913

1,955

1,891

Net income

1,822

1,579

1,913

1,954

1,831

187,003(0.8)%

186,169(0.4)%

200,8027.9%

200,551(0.1)%

189,737(5.4)%

Interest-bearing liabilities

96,06595,997

100,430

100,362

90,598

Net assets(Period-on-period variation)

84,127(0.2) %

83,871(0.3) %

93,081
11.0%

93,1200.0%

92,998(0.1) %

Unitholders’ capital

82,26082,26091,143

91,143

91,143

Total cash distributions

1,822

1,579

1,912

1,954

1,703

Payout ratio (Note2)

100.0%

100.0%

99.9%

100.0%

93.0%(1) Operating results
Operating revenue(2) Assets, etc. (as of the end of the period)
Total assets(Period-on-period variation)(3) Cash distributions(4) Per unit information
Number of units outstanding

155,000

155,000

176,000

176,000

176,000

Net assets per unit (Note 3)

542,758

541,105

528,873

529,095

528,400

Dividend per unit

11,75910,191

10,864

11,107

9,680(Distribution of earnings per unit)

11,75910,191

10,864

11,107

9,680

－

－

－

－

－

ROA (Note 4)

1.0% <2.0%>

0.8% <1.7%>

1.0% <2.0%>

1.0% <1.9%>

1.0% <2.0%>

ROE (Note 4)(Distribution in excess of earnings perunit)(5) Financial indices2.2% <4.4>%

1.9% <3.7>%

2.2% <4.4>%

2.1% <4.2>%

2.0% <4.0>%

Ratio of unitholders’ equity to total assets(Period-on-period variation)

45.0%
0.3%

45.1%
0.1%

46.4%
1.3%

46.4%
0.0%

49.0%
2.6%

LTV (Note 4)

51.4%

51.6%

50.0%

50.0%

47.7%

Rental NOI (Note 5)

4,117

3,831

4,207

4,274

3,871

19

19

22

22

20

39

40

49

50

45

301,825.87 m2

301,825.87 m2

331,677.14 m2

331,709.64 m2

321,207.26 m2

Occupancy rate at the end of the period(Note 7)

94.5%

96.7%

98.1%

98.9%

98.9%

Depreciation and amortization

1,121

1,115

1,193

1,202

1,186

443

176

511

143

442

(6) Supplemental information
Number of properties at the end of theperiodNumber of tenants at the end of the period(Note 6)
Total rentable area at the end of the period

Capital expenditures

Notes:
1. Accounting data does not include consumption taxes.
2. Since fund procurement through public offering was conducted during the 16th fiscal period and the number of investment units had changed
accordingly, the payout ratio for the 16th fiscal period is calculated as follows:
Payout ratio= Total cash distribution (excluding distribution in excess of earnings) / Net income ×100

13

3. Net assets per unit for the 14th and 15th fiscal periods have been rounded to the nearest yen and net assets per unit for the 16th fiscal period
and onward have been rounded down to the nearest yen.
4. The indices above are calculated using the following formulas. Annualized figures indicated in angle brackets are based on the number ofdays in the relevant period.
ROA = Ordinary income / ((Total assets at beginning of period + Total assets at end of period)/2) × 100
ROE = Net income / ((Net assets at beginning of period + Net assets at end of period)/2) × 100
LTV= Interest bearing liabilities / Total assets
5. Rental NOI (Net operating income) = Rental revenue - Expenses related to rental business + Depreciation and amortization
6. Number of tenants at the end of the period indicates total number of tenants of each property as of the end of the period. In case a master leaseagreement is concluded, it is counted as one tenant. In case one tenant rents multiple units, it is counted as one tenant if the units are in thesame property and as multiple tenants if the units are in different properties.
7. Occupancy rate at the end of the period = Total leased areas at the end of the period / Total rentable areas at the end of the period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants is considered to be the leasedarea.
8. Unless otherwise mentioned, fractions are rounded off for monetary amounts and rounded for ratios throughout the report.

14

2. Overview of Asset Management Operation for the 18th Fiscal Period
A. Overview of Top REIT
Top REIT was founded on November 2, 2005 based on the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co., Ltd. (the “AssetManager”) as the incorporator. On March 1, 2006, Top REIT was listed on the Real Estate Investment
Trust Section of the Tokyo Stock Exchange (Securities Code: 8982) with the number of investment units
issued and outstanding totaling 145,500 units. As of the end of the 18th fiscal period (April 30, 2015), thetotal number of investment units issued and outstanding stood at 176,000 units as a result of the issuanceof additional investment units through the third-party allotment (9,500 units) on March 23, 2006, thepublic offering (20,000 units) on November 25, 2013, and the third-party allotment (1,000 units) on
December 13, 2013.
Top REIT manages its portfolio with the aim of maximizing the investment value for its unitholders bysecuring stable revenues over the medium to long term and achieving steady growth of its portfolio. To
do so, Top REIT focuses on two strategies, “skilled management of a diversified portfolio” and “optimal
application of the sponsors’ strengths.” As of the end of the 18th fiscal period, its portfolio consisted of
20 properties with a total acquisition value of ¥190,484 million.
B. Investment Environment and Management Performance<Investment Environment>(a)Economy in GeneralIn the 18th fiscal period, the Japanese economy showed some weakness in personal consumption due inpart to the prolonging of the repercussions from the rush demand prior to the consumption tax hike in
April 2014. However, ongoing economic policies by the Japanese government and monetary easing
measures by the Bank of Japan led to strong corporate performance and corresponding improvement in
the employment and income environment continuing. The Japanese economy thus maintained amoderate recovery trend. While U.S. interest rate trends, resurgence of the European debt problem,
China’s growth stagnation, resource-rich countries’ economic trends and other risk factors that may
impact the Japanese economy require close monitoring, such factors as anticipated improvement in
consumer sentiment associated with increase in companies’ capital investment and households’ income
against the backdrop of depreciation of the yen and high stock prices suggest that the moderate recovery
will continue.
(b)Real Estate Leasing Market[Office Buildings]
The office leasing market remained steady, as evident by such factors as the vacancy rate continuing totrend towards improvement in not only Tokyo but also Osaka, Fukuoka and other major office districts,
and the upward turn in rents and shortening rent-free periods, mainly for excellent office buildings incentral Tokyo. Based on continued assumption of robust office demand buoyed by such factors as
improvement in the employment environment and corporate performance, the market as a whole isexpected to continue to be on a moderate recovery trend.
[Retail Properties]
Despite a temporary decline due to decrease in demand on the rebound of the rush demand prior to theconsumption tax hike and other factors, personal consumption is showing signs of gradual recovery andis thought to remain steady going forward, backed by improvement in the employment and income
environment. On an analysis by business category, strong showings are expected to continue fordepartment stores in Tokyo, which are expected to benefit from growth in consumption driven by
inbound tourism, and for food supermarkets and other business categories that target a small trade area,
which are showing consecutive year-on-year increases in business performance. Among large-scale
general supermarkets, on the other hand, are stores struggling with continuing year-on-year decreases inbusiness performance. In this manner, the state of disparities arising in business performance dependingon the characteristics of individual retail properties is thought to continue.

15

[Residential Properties]
Rental residential property construction starts in the Tokyo metropolitan area is forecast to remain at alow level due in part to soaring land acquisition costs and construction costs. With improvement in theemployment and income environment and other factors, the trend of in-migration exceedingout-migration continues in the Tokyo metropolitan area and major urban areas of Japan. As such, thefavorable supply-demand environment is expected to continue for highly-competitive rental residential
properties that are excellent in terms of location and quality. The rental residential property market isthus thought to see strong showings in both occupancy rate and rent.
(c) Real Estate Transaction Market
In the current real estate transaction market, a positive investment stance is maintained overall,centering on not only J-REITs but also private placement funds, business corporations, overseas
investors who anticipate a full-fledged recovery of the Japanese economy and other investors. This has
led to ongoing capital inflow into the market continuing. On the other hand, with information on sale ofexcellent properties being limited, competition over property acquisition is increasingly intensifying andtransaction prices are on an upward trend. Investors’ expected cap rate is also on a downward trend.
Recent survey results show that the expected cap rate of excellent office buildings in the“Marunouchi/Otemachi District” is in the 3.5% to 4.0% range. With investors’ appetite for real estate
investment remaining strong against the backdrop of a favorable financing environment, the downward
trend of investment returns is seen to continue for the time being.
(d) Financial Market
The financial market in the 18th fiscal period saw both short-term and long-term interest rates remain at
a low level against the backdrop of ongoing monetary easing measures by the Bank of Japan. Recently,
volatility of long-term interest rates is increasing slightly, but the purchase of Japanese government
bonds by the Bank of Japan in an aim to achieve an inflation rate of 2% based on “quantitative andqualitative monetary easing” is expected to continue. Therefore, the view is that interest rate levels willremain low in a stable manner for the time being and a financing environment that is favorable for also
J-REITs will continue.
<Asset Management Performance >(a)Acquisition and Sale of Assets
Top REIT began the 18th fiscal period with 22 properties (total acquisition value: ¥197,855 million).
With an aim to acquire highly-competitive and highly-profitable properties, Top REIT considered
acquisition of properties through not only the “optimal application of the sponsors’ strengths” but also
by utilizing established information channels and its characteristics as a diversified REIT to collect andcarefully select from property sale information, with a focus on excellent office buildings located incentral Tokyo at the core, and also considered revision of the existing portfolio. During the 18th fiscal
period, Top REIT sold two properties, Kanda Park Plaza (sale price: ¥5,350 million) and OAK PLAZA(sale price: ¥2,900 million), each to third parties on November 13, 2014, and used part of the proceedsfrom the sale of these two properties to early repayment of existing loans on November 28, 2014. In
addition, on March 30, 2015, Top REIT made additional acquisition of compartmentalized ownership in
Shiba-Koen Building (acquisition price: ¥375 million), resulting in Top REIT owning the entire
property.
As a result, as of the end of the 18th fiscal period, Top REIT has a portfolio consisting of 20 properties(total acquisition value: ¥190,484 million).
(b)Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT is sustaining and increasing revenue over the medium
to long term by maintaining and improving tenant satisfaction (the “Tenants First” policy) and keeping
operational management costs at an appropriate level. Top REIT strived to improve tenant satisfaction
and maintain and improve high occupancy rates while sustaining trusted relationships with tenants anddiscerning tenant needs via property management companies. During the 18th fiscal period, Top REIT
continued to focus on tenant solicitation activities for successor tenants of Kanda Nishiki-cho 3-chome
Building, which has been a pending issue. As a result, the occupancy rate reached 76.1% at the end of
the 18th fiscal period (end of April 2015), and is expected to further improve to 94.3% at the end of
October 2015. Top REIT continues its effort to solicit successor tenants for lease-up.
Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of the16

operational management conditions and steady implementation of asset management plans for each
property. Based on asset management plans, Top REIT also carried out renovation and repairs that
contributed to enhancing the competitiveness of properties and maintaining and improving thefunctionality of properties, and construction that contributed to improving tenant satisfaction. Top REIT
also took steps to keep relevant costs at an appropriate level and conducted efficient management of
resources. Furthermore, as of the date of this document, with regard to one floor of Harumi Island
Triton Square Office Tower Y that had been used as a cafeteria for the employees of tenants, Top REIT
commenced construction to convert the floor into office leasing space and is also concurrently working
to solicit tenants to move into the concerned leasing space after the construction work is complete.
C. Funding
Top REIT procures funds under a financial policy based on stable financial management. During the18th fiscal period, with the sale of Kanda Park Plaza and OAK PLAZA on November 13, 2014, Top
REIT used the proceeds from the sale and cash on hand to make early repayment totaling ¥9,697 millionof certain existing loans on November 28, 2014. Using cash on hand, Top REIT also repaid ¥67.5
million in long-term loans on December 30, 2014 as agreed upon.
As a result, at the end of the 18th fiscal period, the balance of interest-bearing liabilities amounted to¥90,598 million (¥82,098 million in long-term loans (including the current portion) and ¥8,500 million
in investment corporation bonds (including the current portion)), and the ratio of interest-bearing
liabilities to total assets was 47.7%. Moreover, the ratio of long-term interest-bearing liabilities(including the current portion) was 100%, while the ratio of interest-bearing liabilities with fixedinterest rates accounted for 51.4%.
Furthermore, after the closing date of the 18th fiscal period, the investment corporation bonds due forredemption on June 4, 2015 were financed in the entire amount using long-term loans. As a result, as ofthe date of this document, the balance of interest-bearing liabilities amounts to ¥90,598 million (¥90,598
million in long-term loans (including the current portion)).
The credit rating of Top REIT as of April 30, 2015 is as follows:
Credit Rating Agency
Rating [Outlook]
Issuer rating: A+
Rating and Investment Information, Inc. Rating outlook:[Negative](R&I)
Unsecured investment corporation bond rating(No. 1 Unsecured Investment Corporation Bonds): A+
Note: No. 1 Unsecured Investment Corporation Bonds were fully redeemed on June 4, 2015.

Moreover, Top REIT conducted shelf registration for investment corporation bonds, as indicated below inorder to secure flexible procurement of long-term funds.
[Overview of Shelf Registration]
Object of Shelf Registration
Investment corporation bonds(excluding short-term corporation bonds)

Amount to be Issued

Scheduled Period of Issue¥ 100,000 million

From May 20, 2014 to May 19, 2016

D. Earnings Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded asset
management performance during the 18th fiscal period of ¥5,612 million in operating revenue, ¥2,472
million in operating income and ¥1,891 million in ordinary income after deducting expenses concerning
borrowings, etc., and net income was ¥1,831 million.
As for dividends, investment corporations may deduct the dividend distributions for the tax purpose
under the conditions set forth in Article 67-15 of the “Special Taxation Measures Act of Japan” (Act No.
26 of 1957, as amended). Based on this treatment, Top REIT declared a dividend per investment unit of¥9,680. This is the maximum value arrived at when the number of units issued and outstanding (176,000
units) is multiplied by an integer, which does not exceed the unappropriated retained earnings for the
18th fiscal period after deducting both (1) the amount of deferred tax liabilities adjusted to reflect thechange in tax rate, and (2) the portion of gain on sales of real estate properties set aside as reserve for
reduction entry by applying the “Special Provisions for Taxation in the Event of Advance Acquisition ofLand, etc. in 2009 and 2010” (Article 66-2 of the “Special Taxation Measures Act of Japan”).

17

3. Balance of Paid-in Capital
Change in paid-in capital of Top REIT during the past five years is as follows:
Issue date

Units issued andoutstanding (units)
Increase
Balance
20,000175,000
1,000
176,000

Remarks

Paid-in capital(In millions of yen)
Increase
Balance¥ 8,460¥ 90,720
423
91,143

Note

November 25, 2013
Public offering
Note 1
December 13, 2013
Third party allotment
Note 2
Notes:
1. New investment units were issued at a price of ¥ 438,750 per unit (issue value of ¥423,000 per unit)
through a public offering in order to raise funds for the acquisition of assets.
2. New investment units were issued at a value of ¥ 423,000 per unit through a third party allocation to raise
funds for the acquisition of assets, etc.

[Market Price of Investment Units]
The market price of the investment units on the Tokyo Stock Exchange REIT Section during respective
fiscal periods is as follows:
14th fiscal period

15th fiscal period

16th fiscal period

17th fiscal period

18th fiscal period

From Nov. 1, 2012
to Apr. 30, 2013

From May 1, 2013
to Oct. 31, 2013

From Nov. 1, 2013
to Apr. 30, 2014

From May 1, 2014
to Oct. 31, 2014

From Nov. 1, 2014
to Apr. 30, 2015

High¥576,000¥ 519,000¥ 494,000¥ 483,000¥ 539,000

Low

351,000

411,000

437,500

444,000

439,000

4. Cash Distribution
The dividend per unit for the 18th fiscal period is ¥ 9,680. Top REIT expects to distribute almost all thebalance of unappropriated retained earnings of the 18th fiscal period after deducting the amount ofdeferred tax liabilities adjusted to reflect the change in tax rate which would be transferred to the reserve
for reduction entry to be eligible for special tax treatments (Article 67-15 of the Act on Special Measures
Concerning Taxation) that allows Top REIT to deduct an amount equivalent to distributions of retained
earnings as expenses from taxable income.
(In thousands of yen except per unit data)
14th fiscal period

15th fiscal period

16th fiscal period

17th fiscal period

18th fiscal period

From Nov. 1, 2012
to Apr. 30, 2013

From May 1, 2013
to Oct. 31, 2013

From Nov. 1, 2013
to Apr. 30, 2014

From May 1, 2014
to Oct. 31, 2014

From Nov. 1, 2014
to Apr. 30, 2015

¥ 1,822,649¥ 1,579,617¥ 1,913,997¥ 1,954,943¥ 1,832,069

4

12

1,933

111

128,389

1,822,645

1,579,605

1,912,064

1,954,832

1,703,680<11,759><10,191><10,864><11,107><9,680>Distribution of earnings

1,822,645

1,579,605

1,912,064

1,954,832

1,703,680<Per unit> (yen)<11,759><10,191><10,864><11,107><9,680>

－

－

－

－

－

<－>

<－>

<－>

<－>

<－>

Unappropriated retained
earnings
Retained earnings brought
forward
Total cash distributions<Per unit> (yen)Repayment
capitalof<Per unit> (yen)paid-in18

5. Management Policy and Issues to be Addressed(a) Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction (the“Tenants First” policy) and keeping operational management costs at an appropriate level. Under thisstrategy, Top REIT will focus on sustaining relationships of trust with tenants, leasing vacant spaces andsuch, as well as striving to maintain stable occupancy rates over the medium to long term.
Furthermore, Top REIT will also work to ensure an appropriate perception of the operational
management conditions for each property while steadily implementing such measures as to sustain andimprove revenues and keep operational management costs at an appropriate level. In addition, Top REIT
will carry out systematic repair work and such to enhance the competitiveness of properties and tomaintain and improve the functionality of properties, in an aim to secure stable revenues over the
medium to long term.
(b) Investment Strategy for New Properties
Top REIT aims to maintain or increase its dividends over the medium to long term by realizing external
growth through acquisition of new properties. Top REIT will continue to not only further utilize
pipeline support functions from sponsor companies, but also utilize various established information
channels to collect information on new properties based on detailed analysis of market environment ofeach asset classes, while placing emphasis on primarily highly competitive office buildings. By doing so,
Top REIT aims to expand the portfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. Goingforward, Top REIT will work to reduce the risk of concentration on specific properties by steadily
advancing further external growth.
(c) Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation for acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk of fundprocurement by extending borrowing periods and dispersing the repayment dates. At the same time, Top
REIT will manage the risk of interest rate fluctuations by taking into account the balance of borrowings
at floating and fixed interest rates, as it discerns the interest rate trends. Moreover, financial soundness
will be maintained by keeping the leverage at an appropriate level.
(d) Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.

19

6. Significant Subsequent Events
There are none applicable.
[Reference Information]
Top REIT decided at its Board of Directors meeting held on May 21, 2015 to convene the 6th General
Meeting of Unitholders on July 24, 2015.
<New Borrowings>
Top REIT took out loans on June 3, 2015 as shown below. The proceeds from the borrowings wereapplied for the redemption of No. 1 Unsecured Investment Corporation Bonds on June 4, 2015.
Long-term loan (Term Loan No. 24-(1))(1) Lenders(2) Amount of borrowing(3) Interest rate(4) Execution date(5) Borrowing method(6) Principal repayment date
(7) Principal repayment method(8) Collateral and guarantee

Sumitomo Mitsui Trust Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
¥4,000 million
0.430% (fixed by the interest-rate swap agreement
until principal repayment date)June 3, 2015
Borrowing based on the loan agreement concluded onJune 1, 2015
May 29, 2020
Bullet repayment on the principal repayment dateUnsecured and unguaranteed

Long-term loan (Term Loan No. 24-(2))(1) Lenders(2) Amount of borrowing(3) Interest rate(4) Execution date(5) Borrowing method(6) Principal repayment date
(7) Principal repayment method(8) Collateral and guarantee

Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
¥4,500 million
0.825% (fixed by the interest-rate swap agreement
until principal repayment date)June 3, 2015
Borrowing based on the loan agreement concluded onJune 1, 2015
May 31, 2022
Bullet repayment on the principal repayment dateUnsecured and unguaranteed20

【2】Outline of Top REIT
1. Status of Unitholders Capital

Number of units authorized (units)
Number of units issued and outstanding(units)Unitholders’ capital (In millions of yen)
Number of unitholders

14th fiscal period

15th fiscal period

16th fiscal period

17th fiscal period

18th fiscal period

As of Apr. 30, 2013

As of Oct. 31, 2013

As of Apr. 30, 2014

As of Oct. 31, 2014

As of Apr. 30, 2015

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

155,000

155,000

176,000

176,000

176,000¥ 82,260
7,872¥ 82,260
7,590¥ 91,143
9,163¥ 91,143
9,846¥ 91,143
8,770

2. Major Unitholders
Major unitholders as of April 30, 2015 are as follows:
NameJapan Trustee Services Bank, Ltd. (trust account)
The Master Trust Bank of Japan, Ltd. (trust account)
Trust & Custody Services Bank, Ltd. (securities investment trust account)
The Nomura Trust and Banking Co., Ltd. (investment trust account)
Sumitomo Mitsui Trust Bank, Limited
NIPPON STEEL KOWA REAL ESTATE CO., LTD.
OJI REAL ESTATE CO., LTD.
STATE STREET BANK AND TRUST COMPANY 505223
The Asahi Fire & Marine Insurance Company, Limited
NOMURA BANK (LUXEMBOURG) S.A.
STATE STREET BANK-WEST PENSION FUND CLIENTS-EXEMPT 505233
STATE STREET BANK AND TRUST COMPANY 505001
CBNY DFA INTERNATIONAL REAL ESTATE SECURITIES PORTFORIOTHE GIBRALTAR LIFE INSURANCE CO., LTD. (J-REIT general account)
The Minami-Nippon Bank, Ltd.
Total

Number of units
held (units)
40,482
16,492
9,808
6,106
3,176
3,162
3,162
2,563
2,010
1,932
1,926
1,841
1,714
1,343
1,270
96,987

Share of units held(%) (Note)
23.00
9.37
5.57
3.47
1.80
1.80
1.80
1.46
1.14
1.10
1.09
1.05
0.97
0.76
0.72
55.11

Note: The share of units held is the ratio to the total number of units issued and outstanding. They are eachrounded to the second decimal place.

3. Information on Officers and Auditor
A: Names of officers and an auditor as of April 30, 2015 are as follows:
Post
Executive Officer
Supervisory Director

Name
Junichi Sahara(Note1)
Yasuyuki Kuribayashi(Note1)Supervisory Director

Kunio Tsuneyama(Note1)

Accounting Auditor

KPMG AZSA LLC

Major additional post

Total amount of fee paid
during the current period(In thousands of yen)

Adviser, Sumitomo Mitsui Trust
Guarantee Co., Ltd.
Partner Attorney,
City-Yuwa Partners (Note2)
Managing Partner, Tsuneyama
Certified Public Accountants Office
Managing Partner, Tsuneyama Sogo
Accountants OfficeDirector in Kuroda Electric Co., Ltd.
(Note2)－¥ 2,700
1,800

1,800

10,000Notes:
1. There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
2. Although Supervisory Directors may have additional posts in entities other than those listed above, there
is no interest between those companies including those listed above and Top REIT.
3. There was no resignation or dismissal of the Officer, Director or Auditor during the current period.

B: Policy on determination of dismissal and denial of reappointment of accounting auditor
The Board of Directors shall decide after taking various factors into consideration.

21

4. Information on Asset Manager, Asset Custodian and Administrative AgentsThe asset manager, asset custodian and administrative agents of Top REIT as of April 30, 2015 are as
follows:
Business

Company name

Asset manager

Top REIT Asset Management Co., Ltd.

Assets custodian

Sumitomo Mitsui Trust Bank, Limited

Administrative agent(running of the organization, accounting matters, etc.)
Administrative agent(unitholders’ register, special accounts)
Administrative agent(investment corporation bonds)

Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Trust Bank, Limited22

【3】 Portfolio Overview
1. Portfolio Summary

Type of asset

Asset class

Real estate

Office building

Office building

Retail property

Area

18th fiscal period
As of April 30, 2015
AmountPercentage of(In millions of
total assetsyen)(%)(Note 1)
(Note 2)Central Tokyo¥ 5,818

2.9¥ 6,186

3.3

Subtotal

5,818

2.9

6,186

3.3

Central Tokyo

132,74466.2

127,266

67.1

Tokyo
Metropolitan Area

1,618

0.8

1,596

0.8

Subtotal

134,362

67.0

128,863

67.9

27,275

13.6

27,167

14.3

1,211

0.6

1,203

0.6

Subtotal

28,48714.2

28,370

15.0

Central Tokyo

2,348

1.2

2,322

1.2

Tokyo
Metropolitan Area

17,2508.6

17,1159.0

Subtotal

19,5999.8

19,438

10.2

Central Tokyo

2,686

1.3

－

－

Subtotal

2,686

1.3

－

－

190,955

95.2

182,859

96.4

9,596

4.8

6,877

3.6

¥ 200,551

100.0¥ 189,737

100.0<190,955><95.2><182,859><96.4>

Tokyo
Metropolitan Area
Other
Major Cities

Real estatein trust
Residential
property

17th fiscal period
As of October 31, 2014
AmountPercentage of(In millions of
total assetsyen)(%)(Note 1)
(Note 2)

Other

Subtotal of real estate and real estate in trust
Cash, deposits and other assets

Total assets (Note 3)

Notes:
1. Amounts are the book value as of each period end. Real estate and real estate in trust represent the bookvalues after deducting accumulated depreciation. Amounts are rounded down to the nearest million yen.
2. Percentage of total assets shows the ratio of respective assets to total assets and is rounded to the firstdecimal place.
3. Figures in angle brackets represent the portions of actually owned properties in the object assets.

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

Chiyoda-ku, Chuo-ku, Minato-ku, Shibuya-ku,
Shinjuku-ku and Shinagawa-ku

―

Tokyo
Metropolitan Area

Tokyo (excluding Central Tokyo),
Kanagawa, Saitama and Chiba Prefectures―

KansaiRegional economic zone centering
on Osaka

Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama Prefectures

ChukyoRegional economic zone centeringon Nagoya

Aichi, Gifu and Mie Prefectures

Other Major cities

Cities designated by government ordinance andother major cities (excluding cities belonging to
the above classifications)23―

2. Major Properties Owned
The major properties (top ten properties by book value) that Top REIT owns as of April 30, 2015 are as
follows:
Book value
Property name
(In millions ofyen)

Rentable area
(Note 1)

Leased area
(Note 2)

Occupancy
rate(Note 3)

Share inrentalrevenue(Note 4)

(m2)

(m2)

(%)

(%)

Primary use

NEC Head Office
Building

Trust
beneficiaryinterest¥ 42,623

72,238.03

72,238.03

100.0

27.1

Officebuilding

Harumi Island
Triton Square
Office Tower Y

Trust
beneficiaryinterest

29,69623,170.40

23,125.00

99.8

15.6

Officebuilding

Harumi Island
Triton Square
Office Tower Z

Trust
beneficiaryinterest

19,114

10,914.20

10,914.20

100.0

Officebuilding

Kanda Nishiki-cho
3-chome Building

Trustbeneficiaryinterest

12,6107,719.04

5,874.61

76.1

Officebuilding

Sagamihara Shopping
CenterTrust
beneficiaryinterest

11,163

61,763.28

61,763.28

100.0

6.3

Retailproperty

Fukasawa House
Towers H&I

Trust
beneficiaryinterest

9,934

11,357.44

10,544.64

92.8

4.5

Residential
property

Akasaka Oji
Building

Trust
beneficiaryinterest

9,716

7,301.15

7,301.15

100.0

5.1

Officebuilding

Ito-Yokado
Higashi-Narashino Store

Trust
beneficiaryinterest

7,661

51,098.42

51,098.42

100.0

3.3

Retailproperty

Shiba-Koen Building

Real estate

6,186

3,524.17

3,524.17

100.0

1.7

Officebuilding

Trust
Shinjuku EAST Building beneficiaryinterest

5,721

7,523.04

7,479.09

99.4

4.5

Officebuilding¥ 154,429

256,609.17

253,862.59

98.9

78.5

Total
Notes:

1. Rentable area is total rentable area for each asset as of the end of the 18th fiscal period. Furthermore, in the case ofco-ownership (including quasi-co-ownership), the stated figure is given by multiplying the rentable area of the wholebuilding by the ratio of co-ownership, and rounded to the second decimal place.
2. Leased area is the area based on lease agreements effective as of the end of the 18th fiscal period. Furthermore, in thecase of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leased area of thewhole building by the ratio of co-ownership, and rounded to the second decimal place. In the case of pass-through typemaster-lease agreements, the area subleased to end-tenants is calculated as the leased area.
3. Occupancy rate is the figure given by dividing the leased area as of the end of the 18th fiscal period by rentable area, androunded to the first decimal place.
4. Share in rental revenue is rounded to first decimal place. Share in rental revenue for Harumi Island Triton Square
Office Tower Z and Kanda Nishiki-cho 3-chome Building is not disclosed as the consent of the tenants has not beenobtained.

24

3. Details of Assets(a) Details of Properties
A. The details of properties owned by Top REIT as of April 30, 2015 are as follows
Asset class(In millions of yen)

Area

Property name

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building

Office building

Shiba-Koen Building
Central Tokyo

Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo
Building
Shinjuku EAST Building

Retail property

Tokyo
Metropolitan
Area

Type of title

Appraisal value(Note)

Book value

5-7-1 Shiba, Minato-ku, Tokyo

Trust beneficiaryinterest¥ 54,500¥ 42,623

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

Trust beneficiaryinterest

27,20029,696

8-1-22 Akasaka,
Minato-ku, Tokyo
3-5-5 Shiba, Minato-ku,
Tokyo

Trust beneficiaryinterest

9,610

9,716

Real estate

4,110

6,186

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

Trust beneficiaryinterest

12,30019,114

3-11-1 Kanda Nishiki-cho,
Chiyoda-ku, Tokyo
1-17-24, Shinkawa,Chuo-ku, Tokyo
10-5, Tomihisa-cho,Shinjuku-ku, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

8,310

12,610

6,150

5,710

6,550

5,721

2,120

2,072

2,630

1,596

133,480

135,050

9,080

11,163

3,990

7,661

4,140

3,732

Trust beneficiaryInterest

4,930

4,609

Trust beneficiaryinterest

1,300

1,203

23,44028,370

2,860

2,322

7,810

9,934

5,460

4,809

1,370

1,202

1,300

1,169

18,80019,438¥ 175,720¥ 182,859

Ginza Oji Building

4-9-8, Ginza, Chuo-ku, Tokyo

Faret East Building

2-34-7 Akebonocho,
Tachikawa-shi, Tokyo

Trust beneficiaryinterest

3-13-33 Kobuchi, Minami-ku,
Sagamihara-shi, Kanagawa
7-3-1 Higashi Narashino,
Narashino-shi, Chiba
7-3-1 Bessho, Minami-ku,
Saitama-shi, Saitama
Building A:1-10, Oyamadai,
Kashiwa-shi, Chiba
Building B: 1-29, Oyamadai,
Kashiwa-shi, Chiba
2-7-28 Chuo, Aoba-ku,
Sendai-shi, Miyagi

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Subtotal (10 properties)
Sagamihara Shopping
Center
Ito-Yokado
Higashi-Narashino StoreTokyo
Musashiurawa Shopping
Metropolitan
SquareArea
Kojima × Bic Camera
Kashiwa Store
Other
Major Cities

Address

MEL Building

Subtotal (5 properties)

Residential property

Central Tokyo

Tokyo
Metropolitan
Area

Top Residence
Nihonbashi Kayabacho
Fukasawa House
Towers H&I
Ecology Toyosu
Procentury
Impress
Musashi-Koganei
Top Residence Yoga

3-4-1 Nihonbashi
Kayabacho, Chuo-ku,
Tokyo
2-1-2 Fukasawa,
Setagaya-ku, Tokyo
4-8-8 Toyosu, Koto-ku,
Tokyo
4-14-18 Nakamachi,
Koganei-shi, Tokyo
1-14-12 Tamagawadai,
Setagaya-ku, Tokyo

Subtotal (5 properties)
Total(20 properties)

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Note: Appraisal values are the assessed values based on appraisal reports by real estate appraisers in accordance with the asset
evaluation method and standards stipulated in Top REIT’s Articles of Incorporation and rules set forth by The Investment
Trusts Association, Japan (real estate appraisal reports were prepared by The Tanizawa Sogo Appraisal Co., Ltd.; Japan Real
Estate Institute and Daiwa Real Estate Appraisal Co., Ltd.) with April 30, 2015 as the points of evaluation.

25

B. Operating results by property are as follows:

Area

Property nameShare in total
Occupancy
Rentalrentalrate
revenuerevenues(at end of (In millions (%)(Note 3)
period)of yen)(%)(Note 2)

1

100.0

¥ 1,439

24.8

1

100.0

¥ 1,439

27.1

Harumi Island Triton
Square Office Tower Y

8

93.6

801

13.8

9

99.8

830

15.6

6

100.0

271

4.7

6

100.0

270

5.1

9
2

90.2
84.8

154
74

2.7
1.3

2

100.0

10
88

0.2
1.7

Harumi Island Triton
Square Office Tower Z

1

100.0

1

100.0

Kanda Nishiki-cho
3-chome Building

1

100.0

5

76.1

Shinkawa Chuo Building

1

97.6

213

3.7

1

100.0

204

3.8

Shinjuku EAST Building

4

99.4

242

4.2

4

99.4

240

4.5

Ginza Oji Building

2

100.0

89

1.5

2

100.0

92

1.7

Faret East
Building

1

96.2

152

2.6

1

96.2

147

2.8

36

98.1

4,203

72.6

32

98.5

3,880

73.0

2

100.0

332

5.7

2

100.0

332

6.3

1

100.0

236

4.1

1

100.0

177

3.3

3

100.0

126

2.2

3

100.0

126

2.4

1

100.0

1

100.0

1

100.0

58

1.0

1

90.9

56

1.1

8

100.0

912

15.8

8

99.9

851

16.0

Top Residence
Nihonbashi Kayabacho

1

99.4

92

1.6

1

97.2

89

1.7

Fukasawa House Towers
H&I

1

95.3

241

4.2

1

92.8

238

4.5

Ecology Toyosu
Procentury

1

96.6

166

2.9

1

96.0

166

3.1

Impress Musashi-Koganei

1

94.9

44

0.8

1

95.3

44

0.8

Top Residence Yoga

1

94.2

38

0.7

1

95.4

38

0.7

5

96.1

582

10.1

5

94.7

577

10.9

OAK PLAZA(Note 4)

1

100.0

94

1.6

-

-

6

0.1

Subtotal (1 property)
Total (22 properties)

1
50

100.0
98.9

94

1.6
100.0

45

98.9

6

¥ 5,792¥ 5,3150.1
100.0

Central Tokyo

Akasaka Oji Building

Subtotal (11 properties)
Sagamihara Shopping
Center
Ito-Yokado
Higashi-Narashino Store
Musashiurawa Shopping
SquareKojima × Bic Camera
Kashiwa StoreTokyo Metropolitan
Area

Retail property

Occupancy
RentalShare in
Number ofrate
revenue
total rental
tenants(at end of (In millions revenues
period)of yen)(%)(Note 3) (Note1)(%)(Note 2)

Kanda Park Plaza (Note 4)
Shiba-Koen Building

Other
Major
CitiesCentralTokyo
Tokyo Metropolitan
Area

Residential property

18th fiscal period
From November 1, 2014
to April 30, 2015

NEC Head Office Building

MEL
Building

Subtotal (5 properties)

CentralTokyo

Subtotal (5 properties)
Other

Number oftenants(Note1)

Tokyo
Metropolitan
Area

Office building

Asset class

17th fiscal period
From May 1, 2014
to October 31, 2014

Notes:
1. Number of tenants indicates total number of tenants of each property as of the end of the period. In the case a master
lease agreement is concluded, it is counted as one tenant. In the case one tenant rents multiple units, it is counted as one
tenant if the units are in the same property and as multiple tenants if the units are in different properties.
2. Rental revenue is rounded down to the nearest million yen. Rental revenue for Harumi Island Triton Square Office Tower

26

Z, Kanda Nishiki-cho 3-chome Building and Kojima × Bic Camera Kashiwa Store is not disclosed as the consent of
the tenants has not been obtained.
3. Share in total rental revenues is rounded to the first decimal place. Share in total rental revenues for Harumi Island Triton
Square Office Tower Z, Kanda Nishiki-cho 3-chome Building and Kojima × Bic Camera Kashiwa Store is not disclosed
as the consent of the tenants has not been obtained.
4. Kanda Park Plaza and OAK PLAZA were sold to third parties on November 13, 2014.

(b) Details of Investment Securities
There are none applicable.

4. Contracted Amount and Fair Value of Specified Transactions
The contracted amount and fair value of the specified transactions of Top REIT as of April 30, 2015 are
as follows:
Segment

Contract amount (Notes 1, 2)
Exceeding one year

Type of transaction

Transaction other than Interest-rate swap
market transaction(Fixed-rate payable and floating-ratereceivable)
Total(In millions of yen)
Fair value(Notes 1, 3)¥ 29,700¥13,000¥ (140)¥ 29,700¥13,000¥ (140)Notes:
1. The above figures are rounded down to the nearest million yen.
2. Contract amounts of interest-rate swap transactions represent figures based on the notional principal.
3. Fair value is evaluated at the price calculated by the counterparty of the concerned transaction, based on the prevailingmarket rate.

5. Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the“3-(a) Details
of Properties.”There were no significant specified assets that are main investment targets of Top REIT
other than those listed in the table mentioned above as of April 30, 2015.

6. Assets by Country and Region
There are none applicable.

27

【4】Capital Expenditures
1. Scheduled Capital Expenditures
The table below shows the estimated amounts of significant capital expenditures for repair andmaintenance of its properties, planned as of April 30, 2015. The estimated amounts shown in the tablebelow include costs that may be recognized as expenses.

Scheduled term forconstruction
or maintenance

Property nameLocation

PurposeHarumi Island Triton
Square Office Tower Y

Chuo-ku,Tokyo

14F restoration work
(1st construction period)

Kanda Nishiki-cho
3-chome Building

Chiyoda-ku,
Tokyo

Sagamihara
Shopping Center

Joinery work of entrance

Sagamihara-shi,
Kanagawa

Partition installation(B1F, 6F)
Exterior wall coating

From May 2015
to Oct. 2015
From Jun. 2015
to Jul. 2015
From Sep. 2015
to Oct. 2015
From Jan. 2015
to Jul. 2015

Estimated amounts(In millions of yen)
Payment
Total ofduring theTotaladvancecurrent
payment
period
¥ 408

¥－

¥－

13

－

－

18

－

－

133

－

－

2. Capital Expenditures Made During the 18th Fiscal Period
The following table is an overview of capital expenditures made during the 18th fiscal period. Capital
expenditures during the 18th fiscal period amounted to ¥ 442 million and combined with ¥ 84 million inrepairs and maintenance costs that are recognized as expenses for the 18th fiscal period, a total of ¥526
million of construction work was implemented.
Property name

NEC Head
Office Building

Sagamihara Shopping
CenterOthersPurposeScheduled term forconstruction or maintenanceCapital expenditures(In millions of yen)

Renewal of
air conditioning facility

From May 2014
to November 2014

¥ 26

Repair of waterproof
function of heat storagetank

From May 2014
to January 201514

Renewal of gondola

From May 2014
to January 2015

26

Renewal of parts forelectrical substationequipment

From May 2014
to January 201520

Renewal of emergency
broadcasting equipment

From May 2014
to March 201534

Renewal of monitoring
device and wiring

From May 2014
to March 201548

Renewal ofventilating duct

From May 2014
to March 201520

Renewal ofcooling machine

From May 2014
to March 201544

Renewal of drainpipe for
air conditioning facility

From May 2014
to March 201514

Renewal offire-prevention
monitoring equipment,
etc.

From October 2014
to April 201540

Renewal of function

From October 2014
to April 2015

152

Location

Minato-ku,
Tokyo

Sagamihara-shi,
Kanagawa

Total

¥ 442

28

3. Funds Reserved for Long-term Repair and Maintenance Plan
(In millions of yen)
14th fiscal period

15th fiscal period

16th fiscal period

17th fiscal period

18th fiscal period

From November 1, 2012
to April 30, 2013

From May 1, 2013
to October 31, 2013

From November 1, 2013
to April 30, 2014

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Balance of reserved funds at
beginning of the period

¥ 410

¥ 375

¥ 414

¥ 385

¥ 486

Amount reserved during theperiod

197

197

197

282

111

Amount withdrawn fromreserved funds during the period

232

158

225

181

202

Amount carried forward

¥ 375

¥ 414

¥ 385

¥ 486

¥ 395

【5】Expenses and Liabilities
1. Details of Expenses Related to Asset Management(In millions of yen)
18th fiscal period
From November 1, 2014
to April 30, 2015

17th fiscal period
From May 1, 2014
to October 31, 2014(a) Asset management fee (Note)

¥ 369

¥ 341

Asset custody fee andadministrative service fees

7876(c) Directors’ compensations

66(d) Audit fee1010(e) Other expenses

44

75

¥ 508

¥ 509

(b)

Total

Note: With regard to the asset management fee in the 18th fiscal period, there were ¥41 million of fees related to thesale of properties (included in the costs of sale) and ¥1 million of fees related to the acquisition of a newproperty (included in the book value) in addition to the amounts described above.

29

2. Borrowings
Borrowings from financial institutions as of April 30, 2015 are as follows:(In millions of yen, unless otherwise stated)Dateborrowed

Increase

Decrease

Balance at the endof the period

¥ 135

¥ 67

¥ 67

¥ 135

Sumitomo Mitsui Trust
Bank, Limited

-

6,012

-

6,012

Mizuho Bank, Ltd.

-

3,841

-

3,841

-

3,006

-

3,006

LenderTerm Loan Development Bank of
No. 11
Japan Inc.

Sumitomo Mitsui
Term Loan Banking Corporation
No. 14The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Current Portion of Long-term Loans

Balance at the
beginning of theperiodJanuary 13,
2010

March 3,
2011

3,006

-

3,006

Mitsubishi UFJ Trust andBanking Corporation

-

835

-

835

Sumitomo Mitsui Trust
Bank, Limited

-

717

-

717

-

1,266

-

1,266

-

422

-

422

The Yamaguchi Bank,
Ltd.

-

422

-

422

Sumitomo Mitsui Trust
Bank, Limited

3,000

-

1,734

1,266

1,500

-

867

633

Sumitomo Mitsui
Term Loan Banking Corporation
No.19-① The Bank of

Repayment
methodUse offunds

Remarks

2.42

November30, 2016(Note 2)

(Note 3)

Unsecured
andunguaranteed

1.39

February29, 2016

Bulletrepaymentonrepayment
date(Note 5)

Unsecured
andunguaranteed

February29, 2016

Bulletrepaymentonrepayment
date(Note 7)

Unsecured
andunguaranteed(Note 5)

Unsecured
andunguaranteed(Note 8)

Unsecured
andunguaranteed

0.69(Note 6)

November30, 2012

0.61

Tokyo-Mitsubishi UFJ,
Ltd.

1,500

-

867

633

Resona Bank, Ltd.

1,000

-

578

422

Mizuho Bank, Ltd.

1,800

-

1,041

759

Term Loan
Mitsubishi UFJ Trust andNo. 20Banking Corporation

Due on(Note 4)-The Bank of Fukuoka,
Term Loan Ltd.
March 31,
No. 152011
The Hiroshima Bank, Ltd.

Average interest
rate (%)(Note 1)March 27,2013

(Note 6)

0.61
1,275

-

737

538

10,21019,594

5,891

23,913

1,957

-

67

1,890

Sumitomo Mitsui Trust
Bank, Limited

6,012

-

6,012

-

Mizuho Bank, Ltd.

3,841

-

3,841

-

3,006

-

3,006

-

Bulletrepayment
Septemberon
30. 2015 repayment
date

Bulletrepayment
Septemberon30, 2015 repayment
date(Note 6)

SubtotalLong-term Loans

Term Loan Development Bank of
No.11
Japan Inc.

January 13,
2010

Sumitomo Mitsui
Term Loan Banking Corporation
March 3,
No. 142011
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited
The Bank of Fukuoka,
Term Loan Ltd.
March 31,
No. 152011
The Hiroshima Bank, Ltd.
The Yamaguchi Bank,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Sumitomo Mitsui
Term Loan Banking Corporation
November
No. 1630, 2011
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trust andBanking Corporation

2.42

November30, 2016(Note 2)

(Note 3)

Unsecured
andunguaranteed

1.39

February29, 2016

Bulletrepaymentonrepayment
date(Note 5)

Unsecured
andunguaranteed(Note 7)

Unsecured
andunguaranteed(Note 5)

Unsecured
andunguaranteed(Note 4)

3,006

-

3,006

-

835

-

835

-

1,700

-

1,700

-

3,000

-

3,000

0.69

1,000

-

1,000

-

1,000

-

1,000

-

6,687

-

-

6,687

4,440

-

-

4,440

3,474

-

-

3,474

(Note 6)

0.51
3,474

-

-

3,474

965

-

-

965

30

February29, 2016

Bulletrepaymentonrepayment
date

November30, 2016

Bulletrepaymentonrepayment
date

Date
borrowed

Long-term Loans (continued)

LenderSumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Sumitomo Mitsui
Term Loan Banking Corporation
No. 17The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Sumitomo Mitsui
Term Loan Banking Corporation
No. 18The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Sumitomo Mitsui
Term Loan Banking Corporation
No. 20
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Development Bank ofJapan Inc.
Sumitomo Mitsui Trust
Bank, Limited
Term Loan
No. 21
Resona Bank, Ltd.

March
30, 2012

June 29,2012

March 27,2013

April 30,
2013

Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
Term Loan
Mizuho Bank, Ltd.
No.23-①

March 31,
2014

Aozora Bank, Ltd.
The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
The Dai-ichi Life
Insurance Company,
Term Loan
LimitedNo.23-②
Sumitomo Mitsui
Banking Corporation
The Bank of Fukuoka,Ltd.
Mizuho Bank, Ltd.

June 30,
2014

Balance at the
beginning of theperiodIncrease

Decrease

Balance at the endof the period

1,008

-

-

1,008

644

-

-

644

504

-

-

504

504

-

-

504

340

-

-

340

5,660

-

-

5,660

4,255

-

-

4,255

3,330

-

-

3,330

Average interest
rate (%)(Note 1)

Due onRepayment
methodUse offunds

Remarks

0.61

October
31, 2016

Bulletrepaymentonrepayment
date(Note 3)

Unsecured
andunguaranteed

0.70

June 30,
2017

Bulletrepaymentonrepayment
date(Note 5)

Unsecured
andunguaranteed

March
27, 2018

Bulletrepaymentonrepayment
date(Note 8)

Unsecured
andunguaranteed

0.73

April
30, 2018

Bulletrepaymentonrepayment
date(Note 3)

Unsecured
andunguaranteed

0.82

March 29,2019

Bulletrepaymentonrepayment
date(Note 7)

Unsecured
andunguaranteed

March 29,2019

Bulletrepaymentonrepayment
date(Note 5)

Unsecured
andunguaranteed(Note 9)

3,330

-

-

3,330

925

-

-

925

1,428

-

-

1,428

1,264

-

-

1,264

989

-

-

989

989

-

-

989

2,355

-

-

2,355

730

-

-

730

500

-

-

500

1,400

-

-

1,400

1,400

-

-

1,400

1,000

-

-

1,000

500

-

-

500

200

-

-

200

1,000

-

-

1,000

1,000

-

-

1,000

1,000

-

-

1,000

0.73

1.08

(Note 4)

0.90
400

-

-

400

300

-

-

300

300

-

-

300

Subtotal

81,652-

23,46758,185

Total¥ 91,862¥ 19,594¥ 29,359¥ 82,098

Notes:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance during the period) and rounded
to the second decimal place.
Repayment of ¥67.5 million has been and will be made at the end of June and December each year starting on June 30, 2010, with the remaining
payment of ¥1,822.5 million to be made on November 30, 2016, the final repayment date.
The borrowings have been used for the acquisition of trust beneficiary interest in real estate.
To avoid interest rate volatility risk, the interest rates are hedged by interest rate swap transactions and the average interest rates show theweighted-average interest rates reflecting the effect of the relevant interest rate swap transactions.
The borrowings have been used for the repayment of long-term loans.
The partial early repayment of borrowings was made on November 28, 2014.
The borrowings have been used for the repayment of short-term loans.
The borrowings have been used for the repayment of short-term and long-term loans.
To avoid interest rate volatility risk, a portion of the borrowing amounting to ¥8,500 million is hedged by an interest rate swap transaction andthe average interest rate shows the weighted-average interest rate reflecting the effect of the relevant interest rate swap transaction.

31

3. Investment Corporation Bonds
Investment corporation bonds issued and outstanding as of April 30, 2015 are as follows:(In millions of yen, unless otherwise stated)

Name of Bonds

Issue
Date

Balance as of
the beginningof the period

Balance as ofthe end of theperiodNo.1 Unsecured
Investment Corporation
Bonds (Note)

June 4,2010¥ 8,500¥ 8,500¥ 8,500¥ 8,500

Total

Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

Remark

1.00

June 4,2015

Bulletpayment

Repaymentofborrowing

Unsecured
andunguaranteed

Note: No. 1 Unsecured Investment Corporation Bonds were issued with special pari passu conditions among the specified investment corporation
bonds, and were fully redeemed on June 4, 2015.

4. Short-Term Investment Corporation Bonds
There are none applicable.
5. Subscription Rights
There are none applicable.

32

【6】Transactions during the Period
1. Acquisitions and Sales of Real Estate Properties and Asset Backed Securities(In millions of yen)Type of
Asset
Trust
BeneficiaryInterest in
Real Estate
Trust
BeneficiaryInterest in
Real Estate

Property Name

Acquisition
Acquisition
Acquisition
Price
Date
(Note)

Sale
Sale Date

Sale Price(Note)

Book Value

Gain/Loss on
Sale

Kanda Park Plaza-¥-

November 13,
2014¥ 5,350¥ 5,050¥ 107

OAK PLAZA--

November 13,
2014

2,900

2,684

190

Shiba-Koen Building
March 30,
(Additional375
2015
acquisition)
Note: Acquisition/Sale price is the amount required for transaction of the relevant property indicated in the sales agreement, excluding expenses
such as brokerage fees, property and other taxes.
Real Estate

2. Transactions of Others Assets
Other major assets besides real estate properties and asset backed securities stated above consist mostlyof bank deposits or bank deposits in trust.
3. Research on Prices of Specified Assets(1) Real estate properties(In millions of yen)
Acquisition/
Sale

Property Name

Sale

Kanda Park PlazaSale

OAK PLAZA

Acquisition

Shiba-Koen
Building

Transaction Date
November 13,
2014
November 13,
2014
March 30, 2015

Acquisition/ Sale
Price
(Note 1)

Appraisal Value(Note 2)

¥ 5,350¥ 5,080

2,900

2,660

375

400

Appraiser
Japan Real Estate
InstituteJapan Real Estate
Institute
Daiwa Real EstateAppraisal Co., Ltd.

Date of Appraisal
October 31, 2014
October 31, 2014
February 28,
2015

Notes:
1. Acquisition/Sale price is the amount required for transaction of the relevant property indicated in the sales agreement,
excluding expenses such as brokerage fees, property and other taxes.
2. Appraisal value indicated in the above table is based on The Real Estate Appraisal Standards.

(2) Others
There are none applicable.

33

4. Transaction with Interested Parties(1) Transactions
There were no transactions of specified assets with interested parties during the 18th fiscal period.
(2) Amounts of Fees Paid, etc.
Fees paid to interested parties during the 18th fiscal period are as follows:(In thousands of yen unless otherwise stated)
Item

Transactions with interested parties, etc.
and major unitholders

Total amount offees paid (A)Paid to
OJI REAL ESTATE CO., LTD.
Property management fees

¥ 432,436(B) / (A)(%)

Amount(B)¥ 35,130

8.1

Sumitomo Mitsui Trust Bank, Limited

1,250

0.3

Sumitomo Mitsui Trust Realty Co., Ltd.

986

0.2

Brokerage fees

160,500

Sumitomo Mitsui Trust Bank, Limited

160,500

100.0

Trust compensation

17,490Sumitomo Mitsui Trust Bank, Limited

14,99085.7

Asset custody fees

8,622

Sumitomo Mitsui Trust Bank, Limited

8,622

100.0

Administrative service fees

67,447

Sumitomo Mitsui Trust Bank, Limited

67,447100.0

Sumitomo Mitsui Trust Bank, Limited

972

8.3

Other fees paid

11,703
6

0.1

OJI REAL ESTATE CO., LTD.
Borrowing related expenses
Investment unit issuance related
expenses
Investment corporation bondrelated expenses
Other non-operating expenses

170,089

Sumitomo Mitsui Trust Bank, Limited

75,112

44.2

6,678

Sumitomo Mitsui Trust Bank, Limited

100

1.5

5,574

Sumitomo Mitsui Trust Bank, Limited

623

11.2

2,377

Sumitomo Mitsui Trust Bank, Limited

342

14.4

Other expenses related to
5,712 OJI REAL ESTATE CO., LTD.
482
8.5
rental businessNotes:
1. Interested parties means interested parties of the Asset Manager which concluded asset management entrustment
contract with Top REIT as prescribed in Article 123 of the Enforcement Order of the Investment Trust and Investment
Corporations Law. However, the table above also includes transactions with interested parties as provided in theinternal rules of the Asset Manager (including special purpose companies, etc. to which interested parties, etc. havebeen entrusted with asset management). The parties to which payments were made during the current period were OJI
REAL ESTATE, Sumitomo Mitsui Trust Bank, and Sumitomo Mitsui Trust Realty.
2. In addition to the fees paid described above, the amount paid for repair and maintenance to interested parties during
the 18th fiscal period was ¥70,762 thousand for OJI REAL ESTATE. Furthermore, the concerned payments include
construction management fees.

5. Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd., the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments business, type 2 financial instruments business,building lots and buildings transaction business, or real estate specified joint enterprise business, and has
no such transactions with Top REIT.

【7】Overview of Accounting
1. Assets, Liabilities, Principal and Profit/Loss
Please refer to the accompanying “II. Balance Sheets,” “III. Statements of Income,” “IV. Statements of
Changes in Net assets,” “V. Notes to Financial Statements,” and “VI. Statements of CashDistributions.”34

2. Change in Depreciation Method
There are none applicable.
3. Change in Valuation Methods of Real Estate, etc.
There are none applicable.
4. Investment Trust Beneficiary Certificates of Top REIT
There are none applicable.
5. Overseas Investment Vehicles and Overseas Properties owned by Overseas Investment Vehicles
There are none applicable.

【8】Others
1. Notice(1) The 6th General Meeting of Unitholders
The 6th General Meeting of Unitholders of Top REIT is scheduled to be held on July 24, 2015.
(2) Board of Directors Meeting
Executions or modifications of significant agreements approved by the Board of Directors of Top
REIT during the fiscal period are as follows:
Approval date

AgendaJune 15, 2015

Determination of agendas andother matters to be submitted forapproval at the 6th General
Meeting of Unitholders

Details
The Board of Directors determined the agendas andother matters to be submitted for approval at the 6thGeneral Meeting of Unitholders to be held on July 24,
2015, as follows:First Item :Partial amendments to the Articles of Incorporation
Second Item :Appointment of one Executive Officer
Third Item :Appointment of two substitute Executive Officers
Fourth Item :Appointment of two Supervisory Directors

2. Others
Unless otherwise stated, fractions less than the specified unit are rounded down to the nearest
specified unit for monetary amounts and rounded to the nearest specified unit for ratios.

35

II. Balance Sheets
17th Fiscal Period(Reference)
As of October 31, 2014
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Other
Total current assets
Non-current assets
Property and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property and equipment
Intangible assets
Leasehold right in trust
Other intangible assets in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance expenses
Total deferred assets
Total assets¥(Note 1)

(Note 1)

(Note 1)¥36

4,427,277
3,926,308
219,407
360,75417
08,933,766(In thousands of yen)
18th Fiscal Period
As of April 30, 2015¥

2,046,803
3,796,885
218,025
298,13715
13
6,359,881

1,158,083(241,752)
916,330
5,559(3,469)2,089
20,309(12,582)
7,726
6,609
(2,562)
4,047
4,888,525
66,838,553(17,163,781)
49,674,771
802,038(335,874)
466,164
312,926(182,083)
130,843
279,398(172,805)
106,593
134,748,836
190,945,929

1,222,605(258,166)
964,439
5,559(3,550)2,009
20,309(13,177)
7,131
6,609
(3,050)3,559
5,209,643
66,198,127(17,863,648)
48,334,479
801,461(353,838)
447,622
310,592(204,492)
106,099
303,189(179,472)
123,717
127,651,793
182,850,494

7,348
1,924
42
9,315

7,348
1,650
21
9,019

10,000372,029
246,400
628,429
191,583,674

10,000244,946
241,210496,157
183,355,671

7,349
26,71434,063
200,551,504

1,837
20,03521,873
189,737,426¥

17th Fiscal Period(Reference)
As of October 31, 2014

(In thousands of yen)
18th Fiscal Period
As of April 30, 2015

Liabilities
Current liabilities¥

Operating accounts payable
Current portion of investment corporation bonds
Current portion of long-term loans
Accounts payable
Accrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Non-current liabilities
Long-term loans
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Deferred tax liabilities
Long-term advances received
Derivatives liabilities
Total non-current liabilities(Note 1)

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry

186,273
8,500,000
10,210,000
256,812110,509670
223,962
801,889
5,899
20,296,018¥

352,904
8,500,000
23,913,000
231,359
103,139764
85,700704,242
3,711
33,894,820

81,652,500
127,4295,298,658
11,76435
44,377
87,134,766

58,185,000
170,568
4,373,971
72,345－42,216
62,844,102

107,430,784

96,738,923

91,143,100

91,143,100

51,87351,880Total voluntary retained earnings
Unappropriated retained earnings

51,873
1,954,943

51,8801,832,069

Total surplus
Total unitholders’ equity

2,006,816
93,149,916

1,883,949
93,027,049(29,195)(28,546)(29,195)
93,120,720(28,546)
92,998,503

Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets(Note 2)¥

37

200,551,504¥¥ 189,737,426

III. Statements of Income
17th Fiscal Period(Reference)
From May 1, 2014
to October 31, 2014
Operating revenue
Rental revenue(Note 1)Other rental business revenue(Note 1)Gain on sales of real estate properties(Note 2)
Total operating revenue
Operating expenses
Expenses related to rental business(Note 1)
Asset management fee
Asset custody fee
Administrative service fees
Directors’ compensations
Audit fee
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Gains on forfeiture of unclaimed dividends
Insurance income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Borrowing related expenses
Amortization of investment unit issuance expenses
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings

¥

¥

38

5,762,641
29,981－
5,792,623(In thousands of yen)
18th Fiscal Period
From November 1, 2014
to April 30, 2015¥

5,283,814
31,369297,259
5,612,443

2,721,218
369,341
9,009
69,0856,300
10,00044,4603,229,416
2,563,206

2,630,481
341,711
8,622
67,4476,300
10,00075,8283,140,392
2,472,051

1,579
563
3,979
820
6,942

1,025
611
424
－
2,061

402,362
42,965
5,511
154,6146,678
2,137
614,271
1,955,878
1,955,878
963
(9)
954
1,954,924
19
1,954,943

355,378
42,034
5,511
170,0896,678
2,440
582,133
1,891,979
1,891,979
944
59,06860,013
1,831,965
103
1,832,069¥

IV. Statements of Changes in Net Assets
17th fiscal period from May 1, 2014 to October 31, 2014
(In thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges during
the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes
during the period
Balance at the endof the period¥ 91,143,100

Voluntary retained earnings
Total
Reserve forvoluntary
reduction entry
retainedearnings

Total surplus

Totalunitholders’equity¥ 49,958¥ 49,958¥ 1,913,997¥ 1,963,956¥ 93,107,056

1,914

1,914

(1,914)－－(1,912,064)(1,912,064)(1,912,064)

1,954,924

1,954,924

1,954,924

－

1,914

1,914

40,94542,86042,860¥ 91,143,100¥ 51,873¥ 51,873¥ 1,954,943¥ 2,006,816¥ 93,149,916

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges during
the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes
during the period
Balance at the endof the period

Unappropriatedretainedearnings

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets¥ (25,275)¥ (25,275)¥ 93,081,780－(1,912,064)
1,954,924(3,920)(3,920)(3,920)(3,920)(3,920)38,940¥ (29,195)¥ (29,195)¥ 93,120,720

39

18th fiscal period from November 1, 2014 to April 30, 2015
(In thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges during
the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes
during the period
Balance at the endof the period¥ 91,143,100

Voluntary retained earnings
Total
Reserve forvoluntary
reduction entry
retainedearnings

Total surplus

Totalunitholders’equity¥ 51,873¥ 51,873¥ 1,954,943¥ 2,006,816¥ 93,149,916

7

7

(7)

－

－

(1,954,832)(1,954,832)(1,954,832)

1,831,965

1,831,965

1,831,965－

7

7(122,874)(122,866)(122,866)¥ 91,143,100¥ 51,880¥ 51,880¥ 1,832,069¥ 1,883,949¥ 93,027,049

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges during
the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes
during the period
Balance at the endof the period

Unappropriatedretainedearnings

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets¥ (29,195)¥ (29,195)¥ 93,120,720－(1,954,832)
1,831,965
649

649

649

649

649

(122,216)¥ (28,546)¥ (28,546)¥ 92,998,503

40

V. Notes to Financial Statements
Note 1. Assumptions for Going Concern
17th fiscal period (Reference)
From May 1, 2014
to October 31, 2014

18th fiscal period
From November 1, 2014
to April 30, 2015

There are none applicable.

There are none applicable.

Note 2. Summary of Significant Accounting Policies

Classification

1.

Depreciation andAmortization of
Non-current
Assets17th fiscal period (Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

(1) Property and Equipment (including assets in (1) Property and Equipment (including assets intrust)
trust)
Depreciation of property and equipment is
Depreciation of property and equipment iscalculated on a straight-line basis over the
calculated on a straight-line basis over theestimated useful lives of the assets ranging as
estimated useful lives of the assets ranging asstated below:
stated below:
Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

2~59 years
2~54 years
2~15 years
2~12 years

Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

2~59 years
2~54 years
2~15 years
2~12 years(2) Intangible Assets(2) Intangible Assets
Intangible Assets are amortized using theIntangible Assets are amortizedstraight-line method.
straight-line method.

using the(3) Long-term Prepaid Expenses(3) Long-term Prepaid Expenses
Long-term Prepaid Expenses are amortized using
Long-term Prepaid Expenses are amortized using
the straight-line method.
the straight-line method.
2.

Amortization ofDeferred Assets(1) Investment Corporation Bond Issuance Costs(1) Investment Corporation Bond Issuance Costs
Investment Corporation Bond Issuance Costs are
Investment Corporation Bond Issuance Costs areamortized using the straight-line method over theamortized using the straight-line method over thematurity period of the bonds.
maturity period of the bonds.
(2) Investment Unit Issuance Expenses(2) Investment Unit Issuance Expenses
Investment Unit Issuance Expenses are amortized
Investment Unit Issuance Expenses are amortizedusing the straight-line method over three years.
using the straight-line method over three years.

3.

Taxes on Property
and Equipment

With respect to property taxes, city planning taxes
and depreciable asset taxes, of the taxation amountassessedanddetermined,theamountcorresponding to the relevant period is accounted
for as expenses related to rental business.
Of the amounts paid for the acquisitions of realestate or trust beneficiary interests in real estate,
the amounts equivalent to property taxes iscapitalized as part of the acquisition costs of therelevant property instead of being charged as
expenses.
There were no capitalized property taxes during
the 17th fiscal period.

41

With respect to property taxes, city planning taxes
and depreciable asset taxes, of the taxation amountassessedanddetermined,theamountcorresponding to the relevant period is accounted
for as expenses related to rental business.
Of the amounts paid for the acquisitions of realestate or trust beneficiary interests in real estate,
the amounts equivalent to property taxes iscapitalized as part of the acquisition costs of therelevant property instead of being charged as
expenses.
Capitalized property taxes amounted to ¥ 1,733
thousand during the 18th fiscal period.

4.

Hedge
Accounting(1) Hedge Accounting Approach
Deferred hedge accounting is applied for interest
rate swap transactions. However, special
treatment is applied for interest rate swaps when
the requirements for special treatment are
fulfilled.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Hedge Effectiveness Assessment
Hedge effectiveness is assessed by comparing the
cumulative change in hedged items and thecumulative change in hedging instruments andthen examining the ratio of the amount of change
in both.

(1) Hedge Accounting Approach
Deferred hedge accounting is applied for interest
rate swap transactions. However, special
treatment is applied for interest rate swaps when
the requirements for special treatment are
fulfilled.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Hedge Effectiveness Assessment
Hedge effectiveness is assessed by comparing the
cumulative change in hedged items and thecumulative change in hedging instruments andthen examining the ratio of the amount of change
in both.

5.

Other Significant
Items
Fundamental toPreparing the
Financial
Statements(1) Trust Beneficiary Interests in Real Estate(1) Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, all
For trust beneficiary interests in real estate, allaccounts of assets and liabilities held in trust as
accounts of assets and liabilities held in trust as
well as all income generated and expenses
well as all income generated and expenses
incurred from the trust are recorded in the
incurred from the trust are recorded in theconcerned items accounts on the balance sheet andconcerned items accounts on the balance sheet andstatement of income.
statement of income.
Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust.

1.Cash and Deposits in trust
2.Buildings in trust, structures in trust, machineryand equipment in trust, tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

1.Cash and Deposits in trust
2.Buildings in trust, structures in trust, machineryand equipment in trust, tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust(2) Consumption Taxes(2) Consumption Taxes
Consumption taxes are excluded from transaction
Consumption taxes are excluded from transaction
amounts.
Furthermore,
non-deductible
amounts.
Furthermore,
non-deductible
consumption taxes related to acquisition of
consumption taxes related to acquisition ofproperties are included in the acquisition costs ofproperties are included in the acquisition costs of
the respective properties.
the respective properties.

42

Note 3. Balance Sheets
17th fiscal period (Reference)

18th fiscal period

As of October 31, 2014

As of April 30, 2015

1. Asset Pledged as Collateral and Secured Liabilities

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows:

Assets pledged as collateral are as follows:(In thousands of yen)
¥ 2,215,760
70,431
8,892,092¥ 11,178,283

Buildings in trust
Structures in trust
Land in trust
Total( In thousands of yen)
¥ 2,203,777
67,771
8,892,092¥ 11,163,640

2,266,146
Buildings in trust
Structures
73,090 in trust
8,892,092
Land in trust
11,231,329
Total

Secured liabilities are as follows:

Secured liabilities are as follows:(In thousands of yen)

Tenant leasehold and security
deposits in trust
Total(In thousands of yen)
Tenant leasehold and security
326,648
deposits in trust
Total 326,648¥ 326,648¥ 326,648¥ 326,648¥ 326,648

2. Minimum total net assets as required by Article 67-4 in the 2. Minimum total net assets as required by Article 67-4 in theInvestment Trust and Investment Corporations Law:
Investment Trust and Investment Corporations Law:
¥ 50,000 thousand¥ 50,000 thousand

Note 4. Statements of Income
1. Breakdown of operating income from real estate rental business(In thousands of yen)

17th fiscal period(Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

A. Revenue related to rental business
Rental and parking lots revenue¥ 5,407,387¥ 4,975,223

Other rental revenue

355,253

308,591

Other rental business revenue

23,242

21,349Cancellation penalty received

6,739

10,0205,792,623

5,315,184

Property management fees

436,231432,436

Utilities expenses

297,115

247,539

Property and other taxes

638,223

630,540

Non-life insurance expenses

11,115

10,546

Repair and maintenance

94,08584,3001,202,801

1,186,513

41,64538,604

2,721,218

2,630,481¥ 3,071,404¥ 2,684,702

Total revenue related to rental business
B. Expenses related to rental business

Depreciation and amortization
Other
Total expenses related to rental business
C. Operating income from real estate rental business(A − B)43

2. Breakdown of gain on sales of real estate properties(In thousands of yen)

17th fiscal period (Reference)
From May 1, 2014
to October 31, 2014

18th fiscal period
From November 1, 2014
to April 30, 2015
Kanda Park Plaza

Breakdownof gain on
sales of realestateproperties

Proceeds from sales of real estate
properties
Cost of sale of real estate properties
Other sales related expenses
Gain on sale of real estate propertiesOAK PLAZA－

Proceeds from sales of real estate
properties
Cost of sale of real estate properties
Other sales related expenses
Gain on sale of real estate properties¥ 5,350,000
5,050,382
192,487¥ 107,129¥ 2,900,000
2,684,345
25,524¥ 190,129

Note 5. Statements of Changes in Net Assets

Number of investment units authorized
Number of investment units issued and outstanding

44

17th fiscal period(Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

2,000,000 units

2,000,000 units

176,000 units

176,000 units

Note 6. Income Taxes
1. Breakdown of deferred tax assets and deferred tax liabilities is as follows:(Deferred Tax Assets)(In thousands of yen)

17th fiscal period(Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Current assets
Enterprise tax payable

¥ 17

¥ 15

15,14013,627¥ 15,158¥ 13,642

Non-current assets
Deferred gains or losses on hedges
Total deferred tax assets(Deferred Tax Liabilities)(In thousands of yen)

17th fiscal period(Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Non-current liabilities
Reserve for reduction entry¥ 26,905¥ 85,972

Total deferred tax liabilities

26,90585,972¥ 11,747¥ 72,329(Net deferred tax liabilities)

2. The reconciliation of tax rate difference between the statutory tax rate and the effective tax rate

Effective statutory tax rate

17th fiscal period(Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 201534.16%

34.15%(34.14%)(30.75%)0.03%(0.23%)

0.05%

3.17%

(Adjustment)
Deductible cash distributions
Other
Effective tax rate after applying tax effect accounting

3. Adjustment to deferred tax assets and deferred tax liabilities due to the change in tax rate
The Act on Partial Amendment of the Income Tax Act, etc. (Act No. 9 of 2015) was promulgated on March 31,
2015, and the corporate tax rate was changed from fiscal periods starting on or after April 1, 2015. Accordingly, theeffective statutory tax rate used to calculate the deferred tax assets and liabilities for temporary differences expected
to be settled or realized during fiscal periods which start on or after May 1, 2015 has been changed to 32.31% from34.15%. This change had little impact on the deferred tax assets and the income taxes-deferred.

Note 7. Leases
There are none applicable.

45

Note 8. Financial Instruments
Information on financial instruments for the periods ended October 31, 2014 and April 30, 2015 required
pursuant to the revised accounting standards are as follows:
1. Status of Financial Instruments(1) Policies for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units with the aim of contributing to steady growth of assets and stable and efficientperformance in accordance with the financial policy stated by the Asset Manager.
For management of surplus funds through financial instruments, investment targets include securities andmonetary claims in accordance with the investment limitations stipulated in the Articles of Incorporation.
However, as a general rule, the surplus funds are held as bank deposits.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.
(2) Financial Instruments, their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (“TRAM”), the asset management company of Top
REIT, strive to improve risk management through regular monitoring of the adequacy and effectiveness ofrisk management systems. Top REIT and TRAM have a structure that monitors various risks regularly andreflects the results of monitoring on the risk management plan and the asset management plans. In addition,
Top REIT and TRAM monitor risks through various transactions and reflect the results of monitoring in thedecision-making in a timely manner.
For individual financial instruments, their risks and risk management system, Top REIT and TRAM strive forrisk management based on the Articles of Incorporation set by the Asset Manager.
①

Credit risk concerning deposits and derivative transactions
Deposits, especially time deposits of large amounts used for investment of Top REIT’s surplus funds are
exposed to credit risks such as bankruptcy of the depository financial institutions. Top REIT minimizes
the risk through such measures as limiting them to short term deposits, setting a standard of credit rating
for depository financial institutions to be used and establishing rules for the ceiling amounts of deposit.
For derivative transactions, Top REIT limits credit risks by setting a standard of credit rating for
financial institutions used in the transaction and putting in place a structure to monitor deals, the fairvalue of each transaction and credit status of counter parties.

②

Market risks concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and to refinance existing loans and bonds.
Floating-rate loans are exposed to market risks. Top REIT manages interest-raising risks by fixing
interest rates through interest swap transactions and setting a target for fixed-rate interest ratios. In
addition, when procuring new loans or refinancing existing loans, Top REIT considers interest-raisingrisks and the following ways such as diversifying the financial methods and lenders, and dispersing
repayment dates to minimize risks. For hedging instruments and hedged items, hedging policy, hedge
effectiveness assessment in hedge accounting, please refer to “4. Hedge Accounting” under “Note 2.
Summary of Significant Accounting Policies.”③

Liquidity risks concerning loans and tenant leasehold and security deposits
Loans, investment corporation bonds and tenant leasehold are exposed to liquidity risk at the time of
repayment of loans, redemption of investment corporation bonds and return of tenant leaseholds. Top
REIT manages these risks by preparing monthly fund management plans. In addition, Top REIT
monitors liquidity risks regularly and at the time of various transactions by preparing cash flowschedules which include projections of repayment of loans and tenant leaseholds, distribution ofdividends, taking into account a comparative monitoring with liquidity on hand that factors in theliquidity of portfolio properties.

(3) Supplemental Explanation regarding the Fair Value of Financial Instruments
The fair value of financial instruments is based on the observed market price, if available. When there is noobserved market price available, fair value is reasonably estimated. Certain assumptions are used for theestimation of fair value. Since various factors are reflected in estimating the fair value, different assumptions
and factors could result in a different value. Furthermore, the contractual amounts of derivative transactions
stated in “2. Fair Values of Financial Instruments” below do not represent the market risk involved in thesederivative transactions.

46

2. Fair Values of Financial Instruments
17th fiscal period from May 1, 2014 to October 31, 2014 (Reference)Book value, fair value and differences between the values as of October 31, 2014 are shown in the table below.
Financial instruments for which fair value is difficult to estimate are not included in the table (Please refer toNote 2).
(In thousands of yen)
As of October 31, 2014
Book value

Fair value

Difference¥ 4,427,277¥ 4,427,277¥ －Cash and deposits in trust

3,926,308

3,926,308－

Total assets
Current portion of investment
corporation bonds(4) Current portion of long-term loans¥ 8,353,586¥ 8,353,586¥－¥ 8,500,000¥ 8,531,025¥ 31,025

10,210,000

10,211,606

1,606

(5)
(6)

Long-term loans
Tenant leasehold and security
deposits in trust

81,652,500

81,874,568

222,068

1,198,333

1,198,333－

Total liabilities¥ 101,560,833¥ 101,815,533¥ 254,700¥ (44,377)¥ (44,377)¥ －¥ (44,377)¥ (44,377)

¥ －

(1)

Cash and deposits

(2)
(3)

Derivative transactions (*1)
Derivatives designatedas hedging instruments

Total derivative transactions(*1) The value of derivative transactions is the net of derivative assets and derivative liabilities, with amounts inparentheses representing the net liability position.

(Note1) Methods to estimate fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of
the fair value. Therefore, the book value is used as the fair value.
Liabilities(3) Current portion of investment corporation bonds
The fair value is a referential figure based on the values published by the financial data provider.
(4) Current portion of long-term loans, and(5) Long-term loans
Since floating rate long-term loans reflect market interest rates within a short period of time, thebook value is determined to be a reasonable estimate of the fair value. In the case of fixed interest
rate loans, the fair value is estimated by discounting the principal and the interest cash flows of thedebt at the current rate that is reasonably estimated to be applicable if Top REIT enters into new
similar loans.
Furthermore, the fair value of long-term loans that qualify for the special treatment of interest-rate
swaps is calculated by discounting the sum of the interest after reflecting the effect of the relevantinterest rate swap, and the principal, using reasonable estimates of the rate that would be applicableto similar fixed-rate long-term loans (Please refer to “Derivative Transactions” below).
(6) Tenant leasehold and security deposits in trust
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of
the fair value. Therefore, the book value is used as the fair value.

47

Derivative Transactions
Derivatives designated as hedging instruments
The contract amount or the equivalent principal amount set out in the contract as of the closing datefor each derivative designated as a hedging instrument is as follows:(In thousands of yen)Contract amount
Hedge
Type of
Method ofHedgedaccounting
derivative
Fair value calculating the fair
More
than
item
methodtransactions
value
one year
Based
on
value
Interest rate swap
providedbyFixed rate
Principal
Long-term
counterparty
treatment¥ 8,500,000 ¥ 8,500,000 ¥ (44,377)
payable andloans
financial institution
methodfloating ratereceivable
Interest
rate swap
SpecialFixed rate
treatment ofLong-term
21,200,000 21,200,000(*2)―
payable andinterest-rate
loans
floating rate
swaps
receivable(*2) Because the transactions based on the special treatment of interest-rate swaps and the hedged long-term loans are treatedas one item, the fair value is included under the fair value of long-term loans (refer to Note 1(5)).

(Note 2) Financial instruments of which the fair value is difficult to estimate are as follows:(In thousands of yen)
ItemBook value
Tenant leasehold and security deposits in trust (*3)
¥ 4,100,325
Total¥ 4,100,325(*3) Tenant leasehold and security deposits in trust (excluding (6) above) are not subject to fair value disclosure because
they are not marketable, and the actual deposit period is not estimable as leases may be cancelled, renewed or re-signed
even if a lease term is set in the lease contract, which makes a reasonable estimate of future cash flows difficult.

(Note 3) Redemption schedule for monetary claims after the end of the period(In thousands of yen)
Due within one year
¥ 4,427,277
3,926,308¥ 8,353,586

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment schedule for investment corporation bonds and long-term loans after the end of the period(In thousands of yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two to three
three to four
four to five
one yearfive years
years
years
years
years
Investment
corporationbonds¥ 8,500,000

¥ －

¥ －

¥ －

¥ －

¥ －

Long-term
loans

10,210,000

26,535,000

38,362,500

8,255,000

8,500,000

－

Total

¥ 18,710,000¥ 26,535,000¥ 38,362,500¥ 8,255,000¥ 8,500,000

¥ －

48

18th fiscal period from November 1, 2014 to April 30, 2015
Book value, fair value and differences between the values as of April 30, 2015 are shown in the table below.
Financial instruments for which fair value is difficult to estimate are not included in the table (Please refer toNote 2).
(In thousands of yen)
As of April 30, 2015
Book value

Fair value

Difference¥ 2,046,803¥ 2,046,803¥ －Cash and deposits in trust

3,796,885

3,796,885－

Total assets
Current portion of investment
corporation bonds(4) Current portion of long-term loans¥ 5,843,689¥ 5,843,689¥－¥ 8,500,000¥ 8,504,675¥ 4,675

23,913,000

23,991,626

78,626(5)(6)

Long-term loans
Tenant leasehold and security
deposits in trust

58,185,000

58,306,844

121,844

23,44323,443－

Total liabilities¥ 90,621,443¥ 90,826,589¥ 205,145¥ (42,216)¥ (42,216)¥－¥ (42,216)¥ (42,216)

¥ －

(1)

Cash and deposits

(2)
(3)

Derivative transactions (*1)
Derivatives designatedas hedging accounting

Total derivative transactions(*1) The value of derivative transactions is the net of derivative assets and derivative liabilities, with amounts inparentheses representing the net liability position.

(Note1) Methods to estimate the fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of
the fair value. Therefore, the book value is used as the fair value.
Liabilities(3) Current portion of investment corporation bonds
The fair value is a referential figure based on the values published by the financial data provider.
(4) Current portion of long-term loans, and(5) Long-term loans
Since floating rate long-term loans reflect market interest rates within a short period of time, thebook value is determined to be a reasonable estimate of the fair value. In the case of fixed interest
rate loans, the fair value is estimated by discounting the principal and the interest cash flows of thedebt at the current rate that is reasonably estimated to be applicable if Top REIT enters into new
similar loans.
Furthermore, the fair value of long-term loans that qualify for the special treatment of interest-rate
swaps is calculated by discounting the sum of the interest after reflecting the effect of the relevantinterest rate swap, and the principal, using reasonable estimates of the rate that would be applicableto similar fixed-rate long-term loans (Please refer to “Derivative Transactions” below).
(6) Tenant leasehold and security deposits in trust
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of
the fair value. Therefore, the book value is used as the fair value.

49

Derivative Transactions
Derivatives designated as hedging instruments
The contract amount or the equivalent principal amount set out in the contract as of the closing datefor each derivative designated as a hedging instrument is as follows:(In thousands of yen)Contract amount
Hedge
Type of
Method ofHedgedaccounting
derivative
Fair value calculating the fair
More
than
item
methodtransactions
value
one year
Based on value
Interest rate swap
provided by
Fixed rate
Principal
Long-term
counterparty
treatment¥ 8,500,000 ¥ 8,500,000 ¥ (42,216) financial institution
payable andloans
methodfloating ratereceivable
Interest
rate swap
SpecialFixed
ratetreatment ofLong-term¥ 21,200,000 ¥ 4,500,000(*2)―
payable andinterest-rate
loans
floating
rate
swaps
receivable(*2) Because the transactions based on the special treatment of interest-rate swaps and the hedged long-term loans are treatedas one item, the fair value is included under the fair value of long-term loans (refer to Note 1(4), (5)).

(Note 2) Financial instruments of which the fair value is difficult to estimate are as follows:(In thousands of yen)
ItemBook value
Tenant leasehold and security deposits in trust (*3)
¥ 4,350,528
Total¥ 4,350,528(*3) Tenant leasehold and security deposits in trust (excluding (6) above) are not subject to fair value disclosure because they
are not marketable, and the actual deposit period is not estimable as leases may be cancelled, renewed or re-signed even
if a lease term is set in the lease contract, which makes a reasonable estimate of future cash flows difficult.

(Note 3) Redemption schedule for monetary claims after the end of the period(In thousands of yen)
Due within one year
¥ 2,046,803
3,796,885¥ 5,843,689

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment schedule for investment corporation bonds and long-term loans after the end of the period(In thousands of yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two to three
three to four
four to five
one yearfive years
years
years
years
years
Investment
corporation bonds¥ 8,500,000

¥ －

¥ －

¥ －

¥ －

¥ －

Long-term loans

23,913,000

23,930,000

25,755,000

8,500,000

－

－

Total

¥ 32,413,000¥ 23,930,000¥ 25,755,000¥ 8,500,000

¥ －

¥ －

50

Note 9. Investment and Rental Properties
Top REIT owns office buildings and other properties for lease in Tokyo and other areas.
The following tables show book values, net change in book values during the period and fair values of theseinvestment and rental properties as of the balance sheet dates.
17th fiscal period from May 1, 2014 to October 31, 2014 (Reference)(In thousands of yen)Book value
Balance at the beginningof the period¥ 192,014,984
Notes:
1.
2.
3.
4.

Change during the period¥ (1,059,782)

Balance at the end of
the period¥ 190,955,201

Fair value at the end oftheperiod¥ 181,500,000

Summary of corresponding investment and rental properties are presented in “【3】Portfolio Overview.”
Book value represents the acquisition cost less accumulated depreciation and amortization.
The increase during the period is primarily attributable to capital expenditures, and the decrease during the period ismainly due to the depreciation and amortization.
Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser. Meanwhile,the fair values of Kanda Park Plaza and OAK PLAZA are calculated based on the sale prices dated November 13,
2014 (Kanda Park Plaza: ¥ 5,350,000 thousand and OAK PLAZA: ¥ 2,900,000 thousand).

Furthermore, profit and loss from investment and rental properties for the fiscal period ended October 31, 2014 ispresented in “Note 4. Statements of Income.”
18th fiscal period from November 1, 2014 to April 30, 2015
(In thousands of yen)Book value
Balance at the beginningof the period¥ 190,955,201
Notes:
1.
2.
3.

4.

Change during the period¥ (8,095,709)

Balance at the end of
the period¥ 182,859,492

Fair value at the end oftheperiod¥ 175,720,000

Summary of corresponding investment and rental properties are presented in “【3】Portfolio Overview.”
Book value represents the acquisition cost less accumulated depreciation and amortization.
The increase during the period is primarily attributable to the additional acquisition of Shiba-Koen building (8thfloor, ¥ 384,036 thousand) and capital expenditures, and the decrease during the period is mainly due to the sales of
Kanda Park Plaza (¥ 5,050,382 thousand) and OAK PLAZA (¥ 2,684,345 thousand), as well as the depreciation andamortization.
Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, profit and loss from investment and rental properties for the fiscal period ended April 30, 2015 ispresented in “Note 4. Statements of Income.”

Note 10. Restrictions of Asset Management Activities
There are none applicable.

51

Note 11. Transactions with Interested Parties
17th fiscal period from May 1, 2014 to October 31, 2014 (Reference)(In thousands of yen unless otherwise stated)

Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank, Ltd.

Interested
Party and
Assetscustodian

Sumitomo
Mitsui
Trust
Bank,
LimitedBusiness
description
oroccupation

Banking

Ratio ofinvestment
units held tototal number ofinvestment
units(Note 1)23.35%(Note 3)

Type oftransaction

Rental revenue,
etc.
(Note 4)
Administrative
service fees
Trust
compensation
Other fees paid
Property
management fees
Other
non-operating
expenses

Banking

1.80%

Borrowing
related expenses
Investment unit
issuance related
expenses
Investment
corporation bondrelated expenses

Notes:
1.
2.
3.
4.
5.

Amount oftransaction(Note 2)Item in balance
sheetsOperatingaccounts¥ 503,416 receivable
Advances
received
Accounts
69,085payableBalance atperiod end(Note 2)

¥ 6,454
70,20563,223

17,375962

Operatingaccounts payable

－

1,250
Long-term
342 prepaid expenses
Prepaid expenses
Long-term
65,180 prepaid expenses
Prepaid expenses
Investment unit
100 issuance
expenses
Accounts
payable625 Investment
corporation bondissuance costs

60
720
133,377
108,516

Ratio of investment units held to total number of investment units is rounded to the second decimal place.
Consumption taxes are excluded from the amounts of transactions. Consumption taxes are included in the balances
at period end, but excluded only for investment unit issuance expenses and investment corporation bond issuancecosts. Furthermore, transaction terms are determined based on prevailing market conditions.
The ratio described above was held to trust accounts.
The rental revenues, etc. described above include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking lots revenue.
Interested parties means interested parties of the asset manager which concluded asset management entrustment
contract with Top REIT as prescribed in Article 123 of the Enforcement Order of the Investment Trust andInvestment Corporations Law. However, the table above also includes transactions with interested parties asprovided in the internal rules of the Asset Manager (including special purpose companies, etc. to which interested
parties, etc. have been entrusted with asset management).

52

400
56
747

18th fiscal period from November 1, 2014 to April 30, 2015
(In thousands of yen unless otherwise stated)

Attribution

Interested
Party

Interested
Party and
AssetscustodianCompany
nameJapan
Trustee
Services
Bank, Ltd.

Business
description
oroccupation

Banking

Sumitomo
Mitsui
Trust
Real Estate
Realty Co.,
Ltd.

Sumitomo
Mitsui
Trust
Bank,
LimitedBanking

Ratio ofinvestment
units held tototal number ofinvestment
units(Note 1)23.00%(Note 3)－1.80%

Type oftransaction

Rental revenue,
etc.
(Note 4)

Property
management fees
Administrative
service fees
Brokerage fees
Trust
compensation
Other fees paid
Property
management fees
Other
non-operating
expenses
Borrowing
related expenses
Investment unit
issuance related
expenses
Investment
corporation bondrelated expenses

Notes:
1.
2.
3.
4.
5.

Amount oftransaction(Note 2)Item in balance
sheetsOperatingaccounts¥ 506,411 receivable
Advances
received

986

67,447

Balance atperiod end(Note 2)

¥ 6,449
70,205

Operatingaccounts payable
Accounts
payable－60,731

160,500
14,990Operating
972 accounts payable

－

1,250
342 Prepaid expenses
Long-term
75,112 prepaid expenses
Prepaid expenses
Investment unit
100 issuance
expenses
Accounts
payable623 Investment
corporation bondissuance costs

420
89,47387,695

Ratio of investment units held to total number of investment units is rounded to the second decimal place.
Consumption taxes are excluded from the amounts of transactions. Consumption taxes are included in the balances
at period end, but excluded only for investment unit issuance expenses and investment corporation bond issuancecosts. Furthermore, transaction terms are determined based on prevailing market conditions.
The ratio described above was held to trust accounts.
The rental revenues, etc. described above include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking lots revenue.
Interested parties means interested parties of the asset manager which concluded asset management entrustment
contract with Top REIT as prescribed in Article 123 of the Enforcement Order of the Investment Trust andInvestment Corporations Law. However, the table above also includes transactions with interested parties asprovided in the internal rules of the Asset Manager (including special purpose companies, etc. to which interested
parties, etc. have been entrusted with asset management).

53

300
55
186

Note 12. Per Unit Information
17th fiscal period (Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Net assets per unit

¥ 529,095

Net assets per unit

¥ 528,400

Net income per unit

¥ 11,107

Net income per unit

¥ 10,408

Diluted net income per unit has not been presented since there
are no outstanding warrants or convertible bonds.

Diluted net income per unit has not been presented since there
are no outstanding warrants or convertible bonds.

Notes:
1. The per unit amounts are rounded down to the nearest yen.
2. Net income per unit is calculated by dividing the net income by the weighted average number of investment units over thenumber of days in the period.
3. The basis for the calculation of net income per unit is as follows:(In thousands of yen unless otherwise stated)
17th fiscal period (Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Net Income¥ 1,954,924¥ 1,831,965－－

Net income attributable to ordinary investment units¥ 1,954,924¥ 1,831,965

Weighted-average number of units during the period

176,000 units

176,000 units

Amounts not attributable to ordinary unitholders

54

Note 13. Significant Subsequent Events
17th fiscal period (Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

<Sale of Properties>
Top REIT sold two properties subsequent to October 31,
2014 on November 13, 2014 as described below.

There are none applicable.

Kanda Park Plaza(1) Type of Asset: Trust beneficiary interest in real estate in Japan(2) Property Name: Kanda Park Plaza(3) Address (Residential building address):
2-2-2 Kajicho, Chiyoda-ku, Tokyo(4) Sale Price: ¥ 5,350 million(5) Book Value: ¥ 5,052 million (as of October 31, 2014)(6) Gain on sale: Approx. ¥ 109 million(7) Sales Agreement date: November 12, 2014
(8) Delivery Date: November 13, 2014(9) Purchaser: Undisclosed

OAK PLAZA(1) Type of Asset: Trust beneficiary interest in real estate in Japan(2) Property Name: OAK PLAZA(3) Address (Residential building address):
2-10-6 Kanda Awajicho, Chiyoda-ku, Tokyo(4) Sale Price: ¥ 2,900 million(5) Book Value: ¥ 2,686 million (as of October 31, 2014)(6) Gain on sale: Approx. ¥ 191 million(7) Sales Agreement date: November 12, 2014
(8) Delivery Date: November 13, 2014(9) Purchaser: NIPPON STEEL KOWA REAL ESTATE CO., LTD.

55

VI. Statements of Cash Distributions

Classification

I. Unappropriated retained earnings
II. Total Amount of Dividends(Dividend per unit)
III. Voluntary retained earnings

17th fiscal period (Reference)

18th fiscal period

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Amount(yen) (Note 1)

Amount(yen) (Note 2)¥ 1,954,943,312¥ 1,832,069,089

1,954,832,000[11,107]

1,703,680,000[9,680]7,879

128,233,041¥ 156,048

Reserve for reduction entry

IV. Retained earnings brought forward¥ 103,433

Notes:
1.
In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amountsof dividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distributean amount in excess of 90% of its distributable profits as stipulated in Article 67-15 of the Act on Special Measures
Concerning Taxation.” Based on these policies, Top REIT decided on a total distribution of ¥ 1,954,832,000 as
distribution of income for the period. This is the maximum value arrived at when the number of units issued andoutstanding (176,000 units) is multiplied by an integer, which does not exceed the unappropriated retained earnings ofthe 17th fiscal period after deducting the amount of deferred tax liabilities adjusted to reflect the change in tax rate
which would be transferred to the reserve for reduction entry.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the Articles
of Incorporation.
2.

In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the total
amount of dividends is limited to the amount of income. The article also stipulates the policy that “Top REIT shall
distribute an amount in excess of 90% of its distributable profits as stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation.” Based on these policies, Top REIT decided on a total distribution of ¥1,703,680,000
as distribution of income for the period. This is the maximum value arrived at when the number of units issued andoutstanding (176,000 units) is multiplied by an integer, which does not exceed the unappropriated retained earnings ofthe 18th fiscal period after deducting both (1) the amount of deferred tax liabilities adjusted to reflect the change in tax
rate, and (2) the amount of retained earnings brought forward pursuant to Article 66-2 of the “Special Taxation
Measures Act of Japan ” which would be transferred to the reserve for reduction entry.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.

56

VII. Statements of Cash Flows (Reference Information)(In thousands of yen)

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of trademark
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance expenses
Interest income and interest on securities
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) of consumption taxes refundable
Decrease (increase) in prepaid expenses
Decrease in property and equipment in trust due to sale
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net

17th fiscal period
From May 1, 2014
to October 31, 2014

18th fiscal period
From November 1, 2014
to April 30, 2015¥¥

1,955,878
1,202,801
21
5,511
6,678
(1,579)445,328(25,992)
137,402(7,615)－
15,974
4,086
223,962
6,218
120,345(29,376)

1,891,979
1,186,513
21
5,511
6,678
(1,025)
397,412
1,382－
62,617
7,734,728(5,696)(25,453)(138,262)(97,646)
127,083(16,236)

4,059,646
1,579(466,150)(1,145)
3,593,929

11,129,607
1,025(404,780)(851)
10,725,000(3,587)(255,766)
26,413－
160,435(511,732)(584,237)(388,632)(245,384)
43,239(100)
285,796(1,210,483)(1,515,565)

Cash flows from financing activities
Proceeds from long-term loans
Repayment of long-term loans
Payment of dividends
Net cash used in financing activities

4,000,000(4,067,500)(1,912,064)(1,979,564)－(9,764,500)(1,954,832)(11,719,332)

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

1,030,128
7,323,458(2,509,897)
8,353,586

SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Purchase of property and equipment in trust
Proceeds from tenant leasehold and security deposits
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash used in investing activities

Cash and cash equivalents at the end of the period (Note 1)
Note: The statements of cash flows are not audited by any independent auditor.

57¥

8,353,586¥

5,843,689

Note concerning Significant Accounting Policy [Reference Information]
17th fiscal period

18th fiscal period

Classification

From May 1, 2014
to October 31, 2014

From November 1, 2014
to April 30, 2015

Scope offunds instatementsof cash flows

Funds (cash and cash equivalents) in the statement ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are easily convertible to cash, have a
low risk of price fluctuation and mature within threemonths from the date of purchase.

Funds (cash and cash equivalents) in the statement ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are easily convertible to cash, have a
low risk of price fluctuation and mature within threemonths from the date of purchase.

Note concerning Statements of Cash Flows [Reference Information]
17th fiscal period
From May 1, 2014
to October 31, 2014
*1.

Reconciliation of cash and cash equivalents at theend of the period and amount of items presented in
the balance sheet is as follows:

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

18th fiscal period
From November 1, 2014
to April 30, 2015*1.

(As of October 31, 2014)(In thousands of yen)
¥ 4,427,277
3,926,308¥ 8,353,586

Reconciliation of cash and cash equivalents at theend of the period and amount of items presented in
the balance sheet is as follows:

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

58(As of April 30, 2015)(In thousands of yen)
¥ 2,046,803
3,796,885¥ 5,843,689

Unit and Unitholders Information

Number of Unitholders

Number of Units Held59