JPR C1-4-4/30 03.5.9 5:50 PM ページ 1

JPR
Japan Prime Realty Investment Corporation
Business Report
July 1, 2002–December 31, 2002

Printed in Japan

JPR C1-4-4/30 03.5.9 5:51 PM ページ 49

PROFILECORPORATE DATA

Established on September 14, 2001, Japan Prime Realty Investment Corporation
is a closed-end, corporate type fund that invests primarily in

Head Office
9-9 Yaesu 1-Chome, Chuo-ku, Tokyo 103-8285, Japan
Tel: 81-3-3231-1051
Fax: 81-3-3274-7775

Mailing Address

high-quality office buildings and retail properties

Date of Establishment
September 14, 2001

located in Tokyo and other major cities in Japan.

Listing
Tokyo Stock Exchange (Securities Code: 8955)

With its geographically diverse portfolio, JPR’s primary objective is to achievesustainable growth and stable cash distribution to its investors.

Location of Records
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo
Main Branch, Stock Transfer Agency Division
Mizuho Trust & Banking Co., Ltd.
1-17-7 Saga, Koto-ku, Tokyo 135-8722
Stock Transfer Agency Division
0570-000324 (Direct)+81-3-3642-4004 (Representative)
Mizuho Trust & Banking Co., Ltd.
(All branches nationwide)
Mizuho Investors Securities Co., Ltd.
(Head Office and all branches nationwide)

Telephone
AgentsFiscal Period Ends
June 30 and December 31 of each year
General Meeting of Unitholders
More than once every two years
Cash Distribution Payment Eligibility
Unitholders of record as of June 30 and December 31 of each year

Note: On March 12, 2003, Mizuho Trust & Banking Co., Ltd. merged with Mizuho
Asset Trust & Banking Co., Ltd., to establish a new trust and banking entity under
the name of Mizuho Trust & Banking Co., Ltd. As a result, Mizuho Trust & Banking's
main branch changed its address on the same date.

Web Site
http://www.jpr -reit .co. jp/jpr_e/index.html

Transfer Agent
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo

English page
This Web site has been created specificallyfor our English-speaking readers.

Performance
Trends in occupancy rate by areaand purpose; trends in investment
conditions. Updated monthly.

FAQ
Answers to commonly asked
questions by our unitholders andinvestors are found here.

Investor Relations

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Note: Performance Information Report is prepared pursuant to the Investment Trust Law of Japan.

CONTENTS To Our Investors 1 Financial Highlights 3 Portfolio Breakdown 5 Activity Highlights 7 Property Portfolio of JPR 10
REIT Structure and External Service Providers 21 Management’s Discussion and Analysis 24 Financial Statements 28 JPR Investment Policies 38
Unitholder Information 47 Members of the Board 48 Corporate Data 49

News releases are posted here as appropriate, as well as information
useful to unitholders and investors in evaluating the status of JPR,
including financial statements and other legally mandated reports.

This document contains a translation of selected information described in the Financial Report (Kessan Tanshin) dated February 28, 2003 prepared under the timely disclosure
requirements of the Tokyo Stock Exchange, as well as the Financial Statements and Performance Information Report prepared pursuant to the Investment Trust Law of Japan, for theperiod from July 1, 2002 to December 31, 2002 of Japan Prime Realty Investment Corporation (“JPR”).
This English language document was prepared solely for the convenience of and reference by non-Japanese investors and is not intended to constitute a disclosure document. The
Japanese language Financial Report, Financial Statements and Performance Information Report for the aforementioned period should be referred to as the originals of this document.
English translations for legal, accounting, tax and business concepts used herein may not convey precisely identical concepts of the equivalent Japanese terms. With respect to any
and all terms herein, including without limitation, financial statements, if there exist any discrepancies in the meaning or interpretation thereof between the original Japanese documents
and English documents contained herein, the original Japanese documents will govern the meaning and interpretation. Neither JPR, Tokyo Realty Investment Management, Inc. nor anyof their respective directors, officers, employees, partners, unitholders, agents or affiliates will be responsible or liable for the completeness, appropriateness or accuracy of English
translations or the selection of the portion(s) of any document(s) translated into English. No person has been authorized to give any information or make any representations other thanas contained in this document in relation to the matters set out in this document, and if given or made, such information or representation must not be relied upon as having beenauthorized by JPR, Tokyo Realty Investment Management, Inc. or any of their respective directors, officers, employees, partners, unitholders, agents or affiliates.
The financial statements of JPR have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP), which may materially differ in certain
respects from generally accepted accounting principles in other jurisdictions.
Many provisions of this document contain information that constitutes forward-looking statements. These forward-looking statements are not a guarantee of future performance andinvolve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors.

JAPAN PRIME REALTY INVESTMENT CORPORATION

49

JPR P1-23 -5/2 03.5.9 5:45 PM ページ 1

TO OUR INVESTORSJapan Prime Realty Investment Corporation (“JPR” or “the Company”) faced a challenging
market environment during the six months ended December 31, 2002 (the second fiscal period).
Overall demand in Japan’s market forleased office space weakened owing toaccelerated corporate restructuring andglobal economic uncertainty. The vacancy
rate for December 2002, for all of Japan’s

Listed in June 2002, Japan Prime Realty
Investment Corporation is proud to be aleader in creating greater liquidity in Japan’s
real estate markets.

major cities deteriorated. Further falls in
occupancy and lease rates are expected, with growing concern over the so-called “Year 2003
Problem,” which refers to an expected increase in supply of new large-scale buildings, particularly
in Tokyo’s central business districts (CBDs).

Operating in a Challenging Market

Against this backdrop, we are pleased to be able to report that the Company recorded a soundperformance for the second fiscal period and is in strong financial and operational condition.
Operating revenues were ¥4,973 million, operating profits were ¥2,288
million with net income of ¥2,002 million. Net income exceeded
original forecasts due to the efforts of our asset managementcompany Tokyo Realty Investment Management, Inc.
(“TRIM”), which included initiatives to reduce administrative expenses, improved occupancy and additionalpurchases of prime real estate. As a result, the cash
distribution per unit was ¥6,912.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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The chart shows the investment performance of JPR since its IPO on June 14, 2002.
Performance (%)

Unit Price (yen)JPR Unit Price Performance130

240,000

TOPIX Performance120

230,000

JPR Unit Price110

220,000

100

210,000

90

200,00080

190,000

70
2002/6/14

180,000
7/5

8/2

9/6

10/4

11/1

12/6

JPR has achieved a 19% return on investment
since its IPO, and has dramatically outpaced
the TOPIX index.

Proactive Asset Management

Reducing Costs
JPR was successful in surpassing its original cost-cutting reduction target for outsourcing
expenses as a percentage of its entire portfolio. For the second fiscal period, JPR achieved a
reduction of approximately 4.7% against an original target of 3% (contract base for 25 properties,
excluding acquisitions for the period under review for comparative purposes).

Attracting Tenants
JPR will look to increase its occupancy rate by bolstering its leasing activities and to secure stableleasing earnings. To this end, the Company will pursue the following:●Prioritize building space that becomes vacant and accelerate activities to attract tenants tovacated space●Focus activities on existing tenants and companies with which JPR has a close relationship

2 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:45 PM ページ 3

FINANCIAL HIGHLIGHTS

All amounts in millions of yen
unless otherwise stated

All amounts in millions of yen
unless otherwise stated

All amounts in millions of
U.S. dollars unless otherwise stated (*)

Second period ended
December 31, 2002

First period ended
June 30, 2002

Second period ended
December 31, 2002

Operating revenues
Operating expenses
Operating profits
Income before income taxes
Net income

4,973
2,685
2,288
2,003
2,002

4,469
2,521
1,949
739
737

41.5
22.4
19.1
16.7
16.7

Total assets
Interest-bearing liabilities
Total unitholders’ equity
Unitholders’ capital

106,578
38,93058,98456,982103,956
37,00057,71956,982

888.9
324.7
491.9
475.2

Cash distribution
Dividend payout ratio
Number of units (units)
Unitholders’ equity per unit (yen/U.S. dollars)
Cash distribution per unit (yen/U.S. dollars)
Funds from operations (FFO) per unit (yen/U.S. dollars)

2,002
99.9%
289,600
203,673
6,912
9,775

737
99.9%
289,600
199,306
2,545
5,310

16.7

3.8%
6.8%
55.3%
36.5%
11.3
3,488
7.3%
3,337
7.0%

1.4%
2.7%
55.5%
35.6%
5.2
3,150
5.5%
2,944
5.1%

27
311
168,987.78
93.4%

25
281
162,739.50
94.1%

Return on total assets (annualized)
Return on total unitholders’ equity (annualized)
Equity ratio
Interest-bearing liabilities on total assets
Debt service coverage ratio (times)
Property net operating income (NOI)NOI yield (annualized)
Property net cash flows (NCF)
NCF yield (annualized)
Number of properties
Number of tenants
Total leasable floor space (square meters)
Occupancy ratio

1,698.7
57.6
81.5

29.1
27.8

(*) The rate of ¥119.90=US$1.00, the foreign exchange rate on December 31, 2002, has been used for translation.

JAPAN PRIME REALTY INVESTMENT CORPORATION

3

JPR P1-23 -5/2 03.5.9 5:45 PM ページ 4●Make regular evaluation of property management companies to improve tenant services andenhance cost performance. Consolidate property managers to reduce costs across theCompany’s portfolio from the third fiscal period based on results of property management
evaluations●Incorporate tenant inquiries and requirements in property manager evaluations to encourage
a better response and improve tenant services
Despite harsh operating conditions the Company maintained its portfolio occupancy rate at
93.4% as of December 31, 2002, 0.7 percentage points lower than the previous period.

Refining Property Management (PM) Evaluation
The Company continues to evaluate the capabilities of property management companies with aview to enhancing tenant services and raising cost performance. To this end, JPR conducted anevaluation survey which addressed prop-

TRIM enthusiastically displays a professional,
highly disciplined, investor-oriented approachto real estate asset management in Japan.

erty management capabilities of 23 of theCompany’s portfolio properties (excluding
two recent acquisitions and two retailfacilities). The survey was outsourced to a third-party institution and covered 83 categories (36relating to the property management company for each building, and 47 for each PM’s activities).
Survey results for each building are fed back to property managers to further enhance management systems and to improve overall service.

Growing the Portfolio

The acquisition market is impacted by two distinct trends. On the supply side, efforts to resolve
the non-performing debt problem, and the adoption of impairment accounting rules, have led to
an increased interest in the sale of properties, albeit often not at prices that fully reflect market
conditions. On the demand side, the market has become increasingly selective in Tokyo’s CBDs,

4 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:45 PM ページ 5

P O RT F O L I O B R E A K D O W N

Other cities 42.0%(¥39,770 million)

Retail properties 14.0%(¥13,240 million)

Tokyo CBDs 29.0%(¥27,470 million)

VALUE BREAKDOWNVALUE BREAKDOWNBY REGIONBY TYPE

Offices 86.0%(¥81,357 million)

Greater Tokyo 29.0%(¥27,357 million)

Tokyo CBDs 21.1%(¥735 million)

Other cities 46.3%(¥1,614 million)

Retail properties 20.4%(¥711 million)

NOI BREAKDOWNNOI BREAKDOWNBY REGIONBY TYPE
Greater Tokyo 32.6%(¥1,138 million)
Tokyo CBDs 11.8%(18,580.50m2)

Offices 79.6%(¥2,777 million)

Retail properties 25.8%(40,700.31m2)

TOTAL LEASEDFLOOR SPACETOTAL LEASEDFLOOR SPACEBY REGIONBY TYPE
Offices 74.2%(117,069.98m2)

Greater Tokyo 39.3%(62,014.12m2)

Other cities 48.9%(77,175.67m2)

8
9

7

Other 7.4%

6
5

1 Chemical
2 Electronics andRetail 29.3%

4electric appliances

3

TENANCY INDUSTRY SPREAD

3 Communications
4 Public services
5 Construction and21civil engineering

Wholesale 7.5%

6 Medical
7 Textile
8 Real estate
9 Banking

Other services 24.2%

Insurance 10.7%

TOTAL LEASABLE FLOOR SPACE AND OCCUPANCY RATE
Occupancy rate

180,000

100

160,000

95

140,000

90

120,000

85

100,000

80

75

80,000

Jan.
2002

Feb.

Mar.

Apr.

May

June

July

Aug.

2.6%
1.9%
1.8%
1.0%
1.2%

Accumulated
Investment¥94.60 billion¥92.18 billion

25

Sept.

Oct.

Nov.

Dec.

¥40.73 billion

Purchase
Period27

18¥72.66 billion

Dec.

3.4%
3.1%
2.5%

PORTFOLIO GROWTH

Total leasable floor space

Nov.
2001

3.6%

13

Nov.
2001

Dec.
2001

June
2002

Sept. 2002 to
Dec. 2002

Note: Accumulated investment does not include miscellaneous acquisition
expenses, fixed assets tax, city-planning tax, and consumption tax.

JAPAN PRIME REALTY INVESTMENT CORPORATION

5JPR P1-23 -5/2 03.5.9 5:45 PM ページ 6

while at the same time becoming less competitive for regional properties.
Given this, the Company strove to improve the balance of its portfolio and to diversify its asset
holdings by geographical location. In the second fiscal period, the Company acquired or increased
its ownership in three properties. In the adjoining areas of Tokyo, the Company acquired 50% of
the Shinyokohama 2nd Center Building for an investment of ¥920 million; it acquired 100% of the
SK Hiroshima Building in Hiroshima for

The three acquisitions indicate the solid
growth potential of JPR’s geographicallydiversified portfolio.

¥947 million; and it increased its ownership to 70% in the Shin-Kojimachi
Building located in a Tokyo CBD for ¥550

million. As of December 31, 2002, the Company had an asset portfolio of 27 buildings with total
leasable floor space of 168,987.78 square meters and 311 tenants.

Solid Capital Management

The Company’s fundamental policy for funds procurement is to establish the optimum mix
between stable medium- and long-term funds and highly liquid short-term financing. Currently,
JPR focuses mainly on bank borrowings responding to financial risks through the management ofdebt maturities. The Company maintains an eye on the securities and bonds markets as an additional source of funds procurement. The balance of total outstanding borrowings as of June 30,
2002 was ¥37.0 billion with an interest-bearing liabilities to total assets ratio of 35.6%, and a
medium- to long-term interest-bearing liabilities ratio of 94.6%. For the second fiscal period,
ended December 31, 2002, the Company held bank borrowings of ¥1.93 billion primarily in shortterm debt due to concerns over the financing costs of additional property acquisitions. As a result,the balance of total outstanding borrowings as of December 31, 2002 was ¥38.93 billion with aninterest-bearing liabilities to total assets ratio of 36.5% and a medium- to long-term interestbearing liabilities ratio of 89.9%.

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ACTIVITY HIGHLIGHTS

Shinyokohama 2nd Center Building
Acquired in a private transaction at a favorable price, this property has an estimated
NOI yield of 7.7%. The Shinyokohama 2nd Center Building was built to high specifications and is within the immediate proximity of the Shinkansen (Bullet Train) via
Shin-Yokohama Station. The Company received preferential negotiating rights andshares ownership of the property with an affiliate of The Yasuda Mutual Life
Insurance Company, with strong potential to increase its stake. With an occupancy
rate of 100% at the time of acquisition, the Shinyokohama 2nd Center Building is
expected to make a significant contribution to portfolio earnings.
Site Area (m2):
Total Floor Area (m2):Structure/Floors:
Completed:

841.71
7,781.93
S/SRC B2/12F
August 1991

SK Hiroshima Building
The SK Hiroshima Building was acquired in a private transaction at a favorable price.
The property is a multi-tenant, medium-scale building built to good specifications. As
the Company’s first purchase in the target region of Hiroshima, the property has
helped the Company achieve greater portfolio diversification. Unlike the office building market in other regional cities, the Hiroshima market is characterized by its stability. As each property acquisition is limited to approximately 1% of the Company’s
total investment amount, risk is minimized. The SK Hiroshima Building had an occupancy rate of 78% at the time of acquisition and an estimated NOI yield of about 7%(calculated on an average annual fixed property tax basis). The property is expected
to make a significant contribution to overall portfolio earnings, and the Company istargeting to raise the occupancy rate to 90% and the NOI yield to over 8% throughconcentrated leasing activities.
Site Area (m2):
Total Floor Area (m2):Structure/Floors:
Completed:502.41
4,268.70
SRC B1/9F
December 1989

Shin-Kojimachi Building (Additional Acquisition)
The Company made a significant increase in ownership of this property, from 49% to70%, through a private transaction at a favorable price, with the possibility to acquirea larger stake in the future. The estimated NOI yield for the newly acquired portion
is approximately 7.6%, while the estimated aggregate NOI yield for the property isapproximately 6.7%. The Shin-Kojimachi Building is in good condition, and it has been
managed by the Tokyo Tatemono Group since completion in 1985. The property hasa prime location, in the Chiyoda ward of central Tokyo. The property provides consistent cash flow and is expected to make a strong contribution to future portfolio
earnings and stability.
Site Area (m2):
Total Floor Area (m2):Structure/Floors:
Completed:

657.805,152.98
SRC B1/9F
October 1984

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P1-23 -5/2 03.5.9 5:45 PM ページ 8

A Winning Investment Strategy

The underlying theme of the Company’s investment activities is to enhance investor value
through stable cash distribution. To this end, JPR’s asset management company TRIM is engaged
in sound investment practices, focusing on risk diversification, information gathering and analysis, and low-cost operations.
In the context of property selection, the Company is guided by a single concern, minimizing
risk. Properties are selected in diverse areas and with a view toward diversified tenant composition. JPR’s property portfolio is targeting a breakdown of 80% office buildings and 20% retailfacilities, located 60% in Tokyo (Tokyo CBDs and the Greater Tokyo area) and 40% in other cities.
The Company plans to maintain this composition while increasing its asset holdings to ¥200
billion by the end of 2004 and ¥300

A well-balanced mix of office and retailproperties establishes a clear advantage for
JPR over REITs that invest in a single property
type.

billion by the end of 2006. The ability topurchase prime real estate at favorable
terms and conditions is based on thedepth and quality of the Company’s

information base backed by originators. In an effort to reduce operating costs, currently, theCompany is targeting a reduction in outsourcing expenses as a ratio of the total portfolio during
the third and fourth fiscal periods of 3%, and 10% by the end of December 2004. JPR will advance
an asset management commission system linked to the Company’s asset balance and based on
diminishing returns. In reducing the rate of commissions paid relative to the scale of assets
managed, JPR will enhance low-cost operations.

Looking Ahead

JPR is not anticipating a large direct impact on its business operations due to the broad profile ofits tenants and the geographic spread of its property portfolio despite concerns over the so-called
8 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:45 PM ページ 9“Year 2003 Problem.” Indirectly, however, the Company is expecting demands for rent reduction
and a lag between leasing contract renewals and new contract executions. To respond to these
difficult conditions, JPR will work closely with its property management companies to improve its
products and services. Enhancements include refurbishments, 24-hour building maintenance andmanagement services, and individual tenant air-conditioning. In addition, the Company will
strive to link rent reviews and adjustments to market movements on a real-time basis in an effort
to provide maximum service.
For the third fiscal period, the six months ending June 30, 2003, JPR is expecting challenging
conditions with pressures on attracting new tenants, vacancies, and lease rental income. On theearnings front, the Company will also book property tax and city planning tax applicable to thenine properties purchased between January 1, 2002 and December 31, 2002. To offset these negative features, investors will benefit from full-period revenues from properties purchased during
the second fiscal period and contributions from new acquisitions during the current term.

JPR will continue to reduce expenses, improve occupancy rates and acquire prime investment
properties in an effort to enhance investor value. The Company looks forward to your continued
kind support and understanding.

Hirohito Kaneko, Executive Officer,
Japan Prime Realty Investment Corporation

Toshihiro Hagiwara, President and CEO,Tokyo Realty Investment Management, Inc.

Note:
Property tax and city planning tax are charged to the owner on January 1, and it is general practice to prorate these taxes with the previous owner for
properties acquired between January 1 and December 31.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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P R O P E RT Y P O RT F O L I O O F J P R

A Tokyo CBDs
■

● A-1
● A-2
● A-3
● A-4
● A-5

Locations of Portfolio Properties

KanematKanematYasuda-L
Shin-Koji
Crest Yas

B Greater Tokyo■C – 10, 11

● B-1
● B-2
● B-3
● B-1
● B-2
● B-4
● B-5

Hokkaido

A Tokyo CBDs
Shinjuku-ku

Office A-5

Office A-3

Office A-4
Chiyoda-ku
Shibuya-ku

Office A-1
Office A-2

Arca East
JPR Chib
Asahi-Life
Tanashi A
TsurumiYasuda-L
Shinyoko

C Other Cities—Hokkaido■

Chuo-ku● C-10 North 33● C-11 Park East
● C-12 Sompo Ja● C-1 Niigata E

Minato-ku

C – 12

Hokuriku

TohokuShinagawa-ku

C Other Cities—Osaka, Ki■● C-2 Yasuda-L● C-3 Yasuda-L● C-4 Tokyo Ta● C-13 Sompo Ja● C-15 SK Hiros● C-5 Asahi-Life● C-6 JPR Takam

C –1

Osaka

B

Chugoku
KyushuC – 7, 8, 14

A

B Greater TokyoC – 5, 6

C – 13C Other Cities—Kyushu an■

SaitamaC – 2, 3, 4

C – 15Retail B-1

Kinki

Tokyo

Office B-1

Office B-4

Kanagawa Retail B-2

Office B-5
Office B-3

Shikoku

Office B-2
Chiba

C –9

Okinawa

10 JAPAN PRIME REALTY INVESTMENT CORPORATIONTokyo CBDs

Chiyoda, Chuo, Minato, Shinjuku,
Shinagawa, Shibuya

B

Greater Tokyo

All other areas of Tokyo and Chiba
Prefecture, Kanagawa Prefecture,
Saitama Prefecture

C

Other Cities

All other areas in JapanA● C-7 Yasuda-L● C-8 Asahi-Life● C-14 Tenjin 12● C-9 Yasuda-L

JPR P1-23 -5/2 03.5.9 5:45 PM ページ 11

A Tokyo CBDs
■

● A-1
● A-2
● A-3
● A-4
● A-5

Kanematsu Bldg.
Kanematsu Bldg. Annex
Yasuda-Life Ningyo-cho Bldg.
Shin-Kojimachi Bldg.
Crest Yasuda Bldg.

B Greater Tokyo
■

● B-1
● B-2
● B-3
● B-1
● B-2
● B-4
● B-5

Arca East
JPR Chiba Bldg.
Asahi-Life Yokohama Nihon Odori Bldg.
Tanashi ASTA (Retail)Tsurumi fuga 1 (Retail)Yasuda-Life Ikebukuro Bldg.
Shinyokohama 2nd Center Bldg.

C Other Cities—Hokkaido, Tohoku and Hokuriku■● C-10 North 33 Bldg.
● C-11 Park East Sapporo● C-12 Sompo Japan Sendai Bldg.
● C-1 Niigata Ekinan Center Bldg.
C Other Cities—Osaka, Kinki, Chugoku and Shikoku■● C-2 Yasuda-Life Osaka Bldg.
● C-3 Yasuda-Life Tenroku Bldg.
● C-4 Tokyo Tatemono Honmachi Bldg.
● C-13 Sompo Japan Wakayama Bldg.
● C-15 SK Hiroshima Bldg.
● C-5 Asahi-Life Takamatsu 2nd Bldg.
● C-6 JPR Takamatsu Bldg.
C Other Cities—Kyushu and Okinawa■● C-7 Yasuda-Life Hakata Bldg.
● C-8 Asahi-Life Fukuoka 3rd and 4th Bldg.
● C-14 Tenjin 121 Bldg.
● C-9 Yasuda-Life Naha Bldg.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P1-23 -5/2 03.5.9 5:45 PM ページ 12

Tokyo CBDs

RegionCompleted

Acquired

AcquisitionPrice

Chuo-ku, Tokyo

1993. 2

2001.12.27

16,27617.2%

15,60079.

Kanematsu Bldg. Annex

Chuo-ku, Tokyo

1993. 2

2001.12.27

2,874

3.0%

2,680

79.

A-3

Yasuda-Life Ningyo-cho Bldg.

Chuo-ku, Tokyo

1989.122001.11.16

2,100

2.2%

1,990

100.

A-4

Shin-Kojimachi Bldg.

Chiyoda-ku, Tokyo

1984.10

2001.11.16
2002.11.21(Total)

1,670
550

1.8%
0.6%

1,583
677

49.

2002. 6.21

4,000

4.2%

3,770

100.

27,47029.0%26,300TypeNo.

OfficeA-1

Kanematsu Bldg.

Office

A-2

OfficeOfficeOfficeA-5

Name

Crest Yasuda Bldg.

Location

Chiyoda-ku, Tokyo

1999. 9Greater Tokyo

Total

Appraisal
Value

Owners(%)

21.

OfficeB-1

Arca East

Sumida-ku, Tokyo

1997. 3

2001.11.16

5,880

6.2%

6,050

41.

OfficeB-2

JPR Chiba Bldg.

Chiba, Chiba

1991. 1

2001.12.13

2,350

2.5%

2,370

100.

OfficeB-3

Asahi-Life Yokohama Nihon Odori Bldg.

Yokohama, Kanagawa

1989.10

2001.11.16

2,927

3.1%

2,805

100.

RetailB-1

Tanashi ASTA

Nishitokyo, Tokyo

1995. 2

2001.11.16

10,20010.8%

10,85042.1%/52.

RetailB-2

Tsurumi fuga 1

Yokohama, Kanagawa

1985. 92001.11.16

3,040

3.2%

3,120

64.

OfficeB-4

Yasuda-Life Ikebukuro Bldg.

Toshima-ku, Tokyo

1980.10

2002. 6.21

2,040

2.2%

2,040

100.

OfficeB-5

Shinyokohama 2nd Center Bldg.

Yokohama, Kanagawa

1991. 8

2002. 9.25

920

1.0%

1,080

50.

27,35729.0%

28,315

Total

Other Cities%
of total

OfficeC-1

Niigata Ekinan Center Bldg.

Niigata, Niigata

1996. 3

2001.11.16

2,140

2.3%

2,190

52.

OfficeC-2

Yasuda-Life Osaka Bldg.

Osaka, Osaka

2000. 6

2001.12.25

8,300

8.8%

8,330

33.

OfficeC-3

Yasuda-Life Tenroku Bldg.

Osaka, Osaka

1991. 6

2001.11.16

418

0.4%

514

100.

OfficeC-4

Tokyo Tatemono Honmachi Bldg.

Osaka, Osaka

1970. 2

2001.11.16

4,150

4.4%

4,160

64.

OfficeC-5

Asahi-Life Takamatsu 2nd Bldg.

Takamatsu, Kagawa

1981. 8

2001.11.16

872

0.9%

831

100.

OfficeC-6

JPR Takamatsu Bldg.

Takamatsu, Kagawa

1982. 92001.12.18

2,130

2.3%

1,740

100.

OfficeC-7

Yasuda-Life Hakata Bldg.

Fukuoka, Fukuoka

2001.11.16

2,900

3.1%

2,738

100.

OfficeC-8

Asahi-Life Fukuoka 3rd and 4th Bldg.

Fukuoka, Fukuoka

1985. 6
1984. 2 (3rd)1986.10 (4th)2001.11.16

2,873

3.0%

2,854

100.

OfficeC-9

Yasuda-Life Naha Bldg.

Naha, Okinawa

1991.10

2001.11.16

1,560

1.6%

1,600

100.

Office

C-10

North 33 Bldg.

Sapporo, Hokkaido

1992. 2

2002. 6.18

3,700

3.9%

3,690

100.

Office

C-11

Park East Sapporo

Sapporo, Hokkaido

1985.11

2002. 6.18

2,150

2.3%

2,360

100.

OfficeC-12

Sompo Japan Sendai Bldg.

Sendai, Miyagi

1997.12

2002. 6.26

3,150

3.3%

3,270

100.

OfficeC-13

Sompo Japan Wakayama Bldg.

Wakayama, Wakayama

1996. 7

2002. 6.26

1,670

1.8%

1,690

100.

OfficeC-14

Tenjin 121 Bldg.

Fukuoka, Fukuoka

2000. 7

2002. 6.21

2,810

3.0%

2,820

52.

Office

C-15

SK Hiroshima Bldg.

Hiroshima, Hiroshima

1989.12

2002.10. 4

947

1.0%

1,011

100.

Total

39,77042.0%39,798

Total

94,597100.0%

94,413Note 1: Acquisition price does not include miscellaneous expenses of acquisition (real estate agent’s fee and consumption tax)
Note 2: Percentages and ratios are rounded to the first decimal point

12 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:45 PM ページ 13

Acquisition
Price

Appraisal
Value(millions of yen)%of total(millions of yen)27

16,276

17.2%

27

2,874

16

Total Leasable
Total Leased
RentalOccupancy # of%
Floor Space (m2) Floor Space (m2)
Revenue
Rate
Tenants (thousands of yen) of total(JPR’s portion)(JPR’s portion)

Ownership(%)

Site Area(m2)

15,60079.4%

1,751.13

7,958.59

7,757.74

97.5%

11

535,861

10.8%

3.0%

2,680

79.4%

679.06

2,291.13

2,291.13

100.0%

1

112,248

2.3%

2,100

2.2%

1,990

100.0%

550.062,777.68

2,777.68

100.0%

4

109,873

2.2%

16
21

1,670
550
(2,220)1.8%
0.6%(2.4%)

1,583
677(2,260)49.0%657.802,105.44

2,105.44

100.0%

901.36901.36100.0%

8
3(11)

77,917
6,937(84,854)1.6%
0.1%(1.7%)

21

4,000

4.2%

3,770

100.0%

636.903,265.34

2,747.15

84.1%

5

144,060

2.9%

27,47029.0%26,3004,274.95

19,299.54

18,580.50

96.3%

32

986,896

19.9%

16

5,880

6.2%

6,050

41.1%

3,755.01

7,050.10

7,050.10

100.0%

4

372,335

7.5%

13

2,350

2.5%

2,370

100.0%

1,382.35

5,557.05

4,310.43

77.6%

22

155,023

3.1%

16

2,927

3.1%

2,805

100.0%

1,100.59

6,055.56

4,452.00

73.5%

5

135,678

2.7%

16

10,20010.8%

10,85042.1%/52.9%

12,326.30

31,121.71

31,121.71

100.0%

1

672,182

13.5%

16

3,040

3.2%

3,120

64.4%

1,962.18

9,578.60

9,578.60

100.0%

1

153,279

3.1%

21

2,040

2.2%

2,040

100.0%

772.77

4,529.11

2,860.88

63.2%

7

91,059

1.8%

25

920

1.0%

1,080

50.0%

841.712,640.40

2,640.40

100.0%

11

38,9140.8%

27,35729.0%

28,31522,140.91

66,532.53

62,014.12

93.2%

51

1,618,470

32.5%

16

2,140

2.3%

2,190

52.7%

2,706.99

5,206.88

5,206.88

100.0%

18

133,529

2.7%

25

8,300

8.8%

8,330

33.3%

5,999.33

9,588.16

9,588.16

100.0%

20

354,748

7.1%

16

418

0.4%

514

100.0%

642.062,395.12

2,395.12

100.0%

6

59,539

1.2%

16

4,150

4.4%

4,160

64.3%

1,432.64

7,210.25

7,210.25

100.0%

11

271,398

5.5%

16

872

0.9%

831

100.0%

579.992,518.31

1,971.08

78.3%

18

57,386

1.2%

18

2,130

2.3%

1,740

100.0%

1,407.78

5,057.83

3,628.68

71.7%

18

110,478

2.2%

16

2,900

3.1%

2,738

100.0%

1,214.63

6,569.71

5,865.97

89.3%

25

158,911

3.2%

16

2,873

3.0%

2,854

100.0%

2,500.86

8,409.60

7,765.72

92.3%

15

215,595

4.3%

16

1,560

1.6%

1,600

100.0%

959.87

3,947.07

3,736.07

94.7%

13

116,187

2.3%

18

3,700

3.9%

3,690

100.0%

1,382.12

6,642.76

6,303.43

94.9%

15

221,499

4.5%

18

2,150

2.3%

2,360

100.0%

1,808.26

7,647.09

6,708.83

87.7%

19

190,152

3.8%

26

3,150

3.3%

3,270

100.0%

1,895.67

7,046.45

7,046.45

100.0%

10

205,925

4.1%

26

1,670

1.8%

1,690

100.0%

1,128.45

4,892.17

4,734.59

96.8%

16

125,921

2.5%

21

2,810

3.0%

2,820

52.2%

1,164.39

3,292.02

2,862.52

87.0%

9116,658

2.4%

4

947

1.0%

1,011

100.0%

502.412,732.29

2,151.92

78.8%

15

29,6380.6%

39,77042.0%39,79825,325.45

83,155.71

77,175.67

92.8%

228

2,367,564

47.6%

94,597100.0%

94,41351,741.31

168,987.78

157,770.29

93.4%

311

4,972,930

100.0%

d21.0%

JAPAN PRIME REALTY INVESTMENT CORPORATION

13

JPR P1-23 -5/2 03.5.9 5:46 PM ページ 14

OVERVIEW OF PORTFOLIO PROPERTIESTokyo CBDs
A-1

A-3

Kanematsu Bldg.

Yasuda-Life Ningyo-cho Bldg.

Chuo-ku, Tokyo

Chuo-ku, Tokyo

Acquisition Price(millions of yen):
16,276

Acquisition Price (millions of yen):
2,100% of Total:

2.2%% of Total: 17.2%

Site Area (m2):550.06Site Area (m2):
1,751.13

Total Floor Space (m2): 4,117.70

Total Floor Space (m2):
14,995.09
Structure/Floors:
S/RC/SRC B2/13F

Structure/Floors:

SRC/RC
B1/8F

Completed:

December
1989

Completed:February 1993

A-4

Shin-Kojimachi Bldg.
Chiyoda-ku, Tokyo
Acquisition Price (millions of yen):
2,220

A-2

Kanematsu Bldg. Annex% of Total:

2.4%

Site Area (m2):

657.80Total Floor Space (m2): 5,152.98

Chuo-ku, Tokyo

Structure/Floors:

SRC
B1/9F

Completed:

October
1984

Acquisition Price (millions of yen):
2,874% of Total:

3.0%

Site Area (m2):679.06

Total Floor Space (m2): 4,351.46
Structure/Floors:

SRC
B1/8F

Completed:February
1993

Note 1: Acquisition price does not include miscellaneous expenses ofacquisition (real estate agent’s fee and consumption tax)

A-5

Crest Yasuda Bldg.
Chiyoda-ku, Tokyo
Acquisition Price (millions of yen):
4,000% of Total:

4.2%

Site Area (m2):

636.90Total Floor Space (m2): 4,790.68
Structure/Floors:

SRC
B1/9F

Completed:

September
1999

Note 2: Percentages and ratios are rounded to the first decimal point
Note 3: Abbreviations under “Structure/Floors” indicate S: Steelframe, RC: Reinforced concrete and SRC: Steel-frame reinforced concrete

14 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:46 PM ページ 15

Greater Tokyo
B-1

B-1 (Retail)

Arca East

Tanashi ASTA

Sumida-ku, Tokyo

Nishitokyo, Tokyo

Acquisition Price (millions of yen): 10,200% of Total:

10.8%

Site Area (m2):

12,326.30

Total Floor Space (m2):80,675.27

Structure/Floors:

SRC B2/17F

Completed:February 1995

B-2 (Retail)Tsurumi fuga 1
Yokohama, Kanagawa
Acquisition Price (millions of yen): 5,880% of Total:

6.2%

Site Area (m2):

3,755.01

Total Floor Space (m2)34,281.86

Structure/Floors:

S/SRC B3/19F

Completed:

March 1997

Acquisition Price (millions of yen): 3,040% of Total:

3.2%

Site Area (m2):

1,962.18

Total Floor Space (m2):

13,543.32

Structure/Floors:

SRC B2/7F

Completed:

September 1985

JAPAN PRIME REALTY INVESTMENT CORPORATION

15JPR P1-23 -5/2 03.5.9 5:46 PM ページ 16

B-2

B-3

JPR Chiba Bldg.

Asahi-Life Yokohama Nihon Odori Bldg.

Chiba, Chiba

Yokohama, Kanagawa

Acquisition Price(millions of yen):

2,350

Acquisition Price(millions of yen):

2,927% of Total:

2.5%% of Total:

3.1%

1,382.35

Site Area (m2):

1,100.59

Site Area (m2):

Total Floor Space (m2): 9,072.57

Total Floor Space (m2): 9,146.52

Structure/Floors:

S/SRC
B1/13F

Structure/Floors:

SRC
B1/11F

Completed:

January
1991

Completed:

October
1989

B-4

B-5

Yasuda-Life Ikebukuro Bldg.

Shinyokohama 2nd Center Bldg.

Toshima-ku, Tokyo

Yokohama, Kanagawa

Acquisition Price(millions of yen):

2,040

Acquisition Price(millions of yen):% of Total:

2.2%% of Total:

1.0%

Site Area (m2):

772.77Site Area (m2):

841.71

920

Total Floor Space (m2): 6,468.08

Total Floor Space (m2): 7,781.93

Structure/Floors:

SRC
B1/9F

Structure/Floors:

S/SRC
B2/12F

Completed:

October
1980

Completed:

August1991

16 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:46 PM ページ 17

Other Cities — Hokkaido, Tohoku and Hokuriku
C-10

C-11

North 33 Bldg.

Park East Sapporo

Sapporo, Hokkaido

Sapporo, Hokkaido

Acquisition Price(millions of yen):

3,700

Acquisition Price(millions of yen):% of Total:

3.9%% of Total:

2.3%

Site Area (m2):

1,382.12

Site Area (m2):

1,808.26

2,150

Total Floor Space (m2): 10,568.23

Total Floor Space (m2): 10,865.75

Structure/Floors:

SRC
B1/12F

Structure/Floors:

SRC
B1/8F

Completed:February
1992

Completed:

November
1985

C-12

C-1

Sompo Japan Sendai Bldg.

Niigata Ekinan Center Bldg.

Sendai, Miyagi

Niigata, Niigata

Acquisition Price(millions of yen):

3,150

Acquisition Price(millions of yen):% of Total:

3.3%% of Total:

2.3%

Site Area (m2):

1,895.67

Site Area (m2):

2,706.99

2,140

Total Floor Space (m2): 10,783.52

Total Floor Space (m2): 19,950.42

Structure/Floors:

SRC
B1/12F

Structure/Floors:

S/SRC
B1/10F

Completed:

December
1997

Completed:

March
1996

JAPAN PRIME REALTY INVESTMENT CORPORATION

17

JPR P1-23 -5/2 03.5.9 5:46 PM ページ 18

Other Cities — Osaka
C-2

C-3

Yasuda-Life Osaka Bldg.

Yasuda-Life Tenroku Bldg.

Osaka, Osaka

Osaka, Osaka
Acquisition Price(millions of yen):418% of Total:

0.4%

Site Area (m2):642.06

Total Floor Space (m2): 3,851.23
Structure/Floors:

SRC
B1/8F

Completed:

June 1991

C-4
Acquisition Price (millions of yen):

8,300% of Total:

8.8%Site Area (m2):5,999.33

Total Floor Space (m2):

52,982.94

Tokyo Tatemono Honmachi Bldg.
Osaka, Osaka
Acquisition Price(millions of yen):

4,150
4.4%
1,432.64

Structure/Floors:

S/SRC B2/31F% of Total:

Completed:

June 2000

Site Area (m2):

Total Floor Space (m2): 14,619.52

18 JAPAN PRIME REALTY INVESTMENT CORPORATION

Structure/Floors:

SRC
B3/9F

Completed:February
1970

JPR P1-23 -5/2 03.5.9 5:46 PM ページ 19

Other Cities — Kinki, Chugoku and Shikoku
C-13

C-15

Sompo Japan Wakayama Bldg.

SK Hiroshima Bldg.

Wakayama, Wakayama

Hiroshima, Hiroshima

Acquisition Price(millions of yen):

1,670

Acquisition Price(millions of yen):% of Total:

1.8%% of Total:

1.0%

Site Area (m2):

1,128.45

Site Area (m2):

502.41

947

Total Floor Space (m2): 6,715.07

Total Floor Space (m2): 4,268.70

Structure/Floors:

S 9F

Structure/Floors:

SRC B1/9F

Completed:

July 1996

Completed:

December
1989

C-5

C-6

Asahi-Life Takamatsu 2nd Bldg.

JPR Takamatsu Bldg.

Takamatsu, Kagawa

Takamatsu, Kagawa

Acquisition Price(millions of yen):872

Acquisition Price(millions of yen):

2,130% of Total:

0.9%% of Total:

2.3%

Site Area (m2):

579.99Site Area (m2):

1,407.78

Total Floor Space (m2): 3,471.55

Total Floor Space (m2): 7,409.08

Structure/Floors:

SRC 8F

Structure/Floors:

Completed:

August1981

SRC
B1/10F

Completed:

September
1982
March
1984
(extension)JAPAN PRIME REALTY INVESTMENT CORPORATION

19

JPR P1-23 -5/2 03.5.9 5:47 PM ページ 20

Other Cities — Kyushu and Okinawa
C-7

Yasuda-Life Hakata Bldg.
Fukuoka, Fukuoka
Acquisition Price (millions of yen):
2,900% of Total:

3.1%

Site Area (m2):

1,214.63

Total Floor Space (m2): 9,791.91
Structure/Floors:

S/RC
B1/12F

Completed:

June
1985

C-8

Asahi-Life Fukuoka 3rd and 4th Bldg.
Fukuoka, Fukuoka
Acquisition Price (millions of yen):
2,873% of Total:
3.0%
2,500.86
Site Area (m2):
Total Floor Space (m2): 7,683.01 (3rd)
Structure/Floors:
SRC B1/10F(3rd)
Completed:February 1984
(3rd)
Total Floor Space (m2): 3,723.68 (4th)Structure/Floors:
SRC 7F (4th)Completed:
October 1986
(4th)

C-14

C-9

Tenjin 121 Bldg.

Yasuda-Life Naha Bldg.

Fukuoka, Fukuoka

Naha, Okinawa

Acquisition Price(millions of yen):

2,810

Acquisition Price(millions of yen):

1,560% of Total:

3.0%% of Total:

1.6%

1,164.39

Site Area (m2):

959.87Site Area (m2):

Total Floor Space (m2): 8,690.95

Total Floor Space (m2): 5,780.71

Structure/Floors:

S/SRC
13F

Structure/Floors:

S/SRC
12F

Completed:

July 2000

Completed:

October
1991

20 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P1-23 -5/2 03.5.9 5:47 PM ページ 21

R E I T S T R U C T U R E A N D E X T E R N A L S E RV I C E P R O V I D E R S

Asset Management Company

Advisor on Construction
Management/Property Transfer AgentTokyo Realty Investment
Management, Inc.

Tokyo Tatemono Co., Ltd.

Asset Management

Tenant Agents
Investment Corporation

Tokyo Tatemono Co., Ltd.
Yasuda Real Estate Co., Ltd.
Taisei Corporation

Japan Prime Realty
Investment Corporation

Loan

Liabilities

LenderAssetsInvestment

Real Estate etc.

Unitholder

Unitholders’ Equity
Cash Distribution

Property Manager

Unitholder

Asset Custodian

Administrative Agent

Asset Custodian
Mizuho Trust & Banking Co., Ltd.

Administrative Agent
Mizuho Trust & Banking Co., Ltd.

Tokyo Tatemono Co., Ltd. performs agency services for the signing of real estate leasing contracts (“generaltenant agency services”) under a commission from the owners of the real estate, in order to provide uniform
tenant recruitment and sales services for the Company. Tokyo Tatemono also has been commissioned by TRIM
to undertake “property transfer services.” Tokyo Tatemono also provides advice on rental operations management and construction planning management work (“leasing management/construction management services”
or “LM /CM services”) to TRIM.

Yasuda Real Estate Co., Ltd. and Taisei Corporation provide general tenant agency services for the real estate,
as commissioned by the trustees.

JAPAN PRIME REALTY INVESTMENT CORPORATION

21

JPR P1-23 -5/2 03.5.9 5:47 PM ページ 22

Tokyo Realty Investment Management, Inc.
Tokyo Realty Investment Management, Inc. (“TRIM”) concluded the asset management contract with JPR on
September 27, 2001. Based on the contract, TRIM provides asset management services as a REIT Management
Company under the Investment Trust Law.
TRIM is assigned to provide (1) services regarding asset management for JPR (including all decision-making
in connection with the acquisition or leasing of properties and acting as an agent or broker of such transactions
based on the relevant judgement), (2) services regarding funding by JPR, (3) reporting to JPR and (4) any otherservices related to or affiliated with the above (the above services are collectively called “Asset Management
Service” or “AM Service”).

Shareholders’ Meeting
Auditors
Board of Directors
C E O
Investment Committee

Compliance Committee

Investment Management
Division

ResearchGroup

Investment
Group

Corporate Planning/
Administration Division

Financial Division

Asset
Management
Group

FinanceGroup

IR Group

FundManagement
Group

Accounting
Group

Planning/
Human
ResourcesGroup

Shareholders in TRIM (As of December 31, 2002)
Sompo Japan Insurance Inc.

10%

Tokyo Tatemono Co., Ltd.

26%
Taisei Corporation

20%

Total

100％

Yasuda Real Estate Co., Ltd.

20%

22 JAPAN PRIME REALTY INVESTMENT CORPORATIONThe Yasuda Mutual Life
Insurance Company

24%ComplianceGroupJPR P1-23 -5/2 03.5.9 5:47 PM ページ 23

Decision-Making Process of Investment Management
The “Investment Committee” is set as a committee to make investment decisions as well as its sub-organizations,the “Investment Subcommittee” and the “Management Subcommittee.” Members of these organizations include
the CEO, CIO, CFO, CAO, Fund Manager, Research Manager, Asset Manager and Investment Management
Manager.
The “Investment Committee” is a committee which formulates fundamental investment policy for the
medium and long term within two fiscal periods, while the “Investment Subcommittee” or “Management
Subcommittee” has charge of decisions on issues regarding acquisitions, dispositions and management of individual assets respectively. The Board of Directors is given the final authorization on acquisitions or dispositionsof individual assets for a certain amount.

Measures to Prevent Conflicts of Interest
TRIM has rules in place governing transactions with related parties so as to avoid conflicts of interest. “Relatedparties” are defined as specific parties with which transactions have been made or to which commissions orother payments have been made in the relevant term. These include the following parties, which have an investment in TRIM or employees serving as directors or staff at TRIM: Tokyo Tatemono Co., Ltd., The Yasuda MutualLife Insurance Company, Yasuda Real Estate Co., Ltd., Taisei Corporation, Sompo Japan Insurance Inc. (formerly The Yasuda Fire & Marine Insurance Co., Ltd.), and their affiliates.

Such measures include:a) Acquisitions of property or assets from interested parties
The “investment amount” for any real estate or real estate in trust property must be the appraised value
or less (deemed to be the purchase price only, exclusive of taxes and acquisition costs, etc.). Prior approvalof the Board of Directors of the Company is required. For other designated assets, the investment amountmust be at market prices for assets for which market prices are available, otherwise at the appraisedvalue or less.
b) Sales of property or assets to interested parties
The “sales price” for any real estate or real estate in trust property must be the appraised value or more(deemed to be sales price only, exclusive of taxes and selling costs, etc.). Prior approval of the Board of
Directors of the Company is required. For other designated assets, the sales price must be at market
prices for assets for which market prices are available, otherwise at the appraised value or more.
c) Leasing of properties to interested parties
Properties may be leased to interested parties provided that leasing is done under appropriate terms andconditions as determined from the viewpoint of market trends and standard leasing terms for the property.
d) Property management commissions to interested parties
Commissions are based on the Property Management Standards. Prior approval of the Board of Directorsof the Company is required.
e) Trading/leasing intermediation fees paid to interested parties
Trading intermediation fees are limited to up to 3% of the trading price. Prior approval of the Board of
Directors of the Company is required. Leasing intermediation fees are limited to the amount equivalent tothe contracted rent for one month.
f) Commissioning of construction work to interested parties
Commissions of construction work worth ¥10 million or more require a comparison against third-party
estimates and proposals. Prior approval of the Board of Directors of the Company is required.
g) Borrowings from interested parties
Terms of borrowings must be at market levels. Prior approval of the Board of Directors of the Company isrequired.
JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P.24-37-5/7 03.5.9 5:37 PM ページ 24

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S

The following discussion should be read in connection with theselected financial data shown on page 3 and with all of theaccompanying financial statements and notes appearing elsewherein this report.

RESULTS OF OPERATIONS
The table below shows selected operating information for the periods ended June 30, 2002 and December 31, 2002.
yen in thousands

U.S. dollars (Note 2)

2nd Period(July 1, 2002–
Dec. 31, 2002)

1st Period(Sept. 14, 2001–
June 30, 2002)

2nd Period(July 1, 2002–
Dec. 31, 2002)

OPERATING REVENUES

4,972,930

4,469,426

41,475,647

Rental revenues

4,568,144

4,219,368

38,099,615

Non-rental revenues

404,786

250,058

3,376,032

OPERATING EXPENSES

2,684,786

2,520,563

22,391,882

OPERATING PROFITS

2,288,144

1,948,863

19,083,765

NON-OPERATING REVENUES

13,1688,545

109,829

NON-OPERATING EXPENSES

298,463

1,218,814

2,489,267

INCOME BEFORE INCOME TAXES

2,002,849

738,594

16,704,327

NET INCOME

2,001,798

737,072

16,695,561

The Company receives income primarily from rental revenues
from its office, parking, and retail properties including reimbursements from certain tenants for certain operating costs.
The Company’s property holdings for the first fiscal period,
ended June 30, 2002, comprised 25 properties. The Company’s
property holdings as of December 31, 2002 comprised these 25
properties plus two acquisitions (Shinyokohama 2nd Center
Building and SK Hiroshima Building) and one increase in existingownership (Shin-Kojimachi Building). Net operating income (NOI)
contribution from the three additional properties was ¥44 million.
Operating revenues for the six months ended December 31,
2002, JPR’s second fiscal period, totaled ¥4,973 million and comprised rental revenues, common service fees, and non-rental
revenues. Non-rental revenues increased due to an increase inadditional usage fees. Additional usage fees fluctuate subject tomovements in operating expenses, specifically the actual collectionof utility charges. The excess in additional usage fees over usuallevels reflects significant after-hours air-conditioning charges
invoiced to tenants.
Operating and administrative expenses including depreciationof ¥823 million were ¥2,685 million, resulting in operating profits of¥2,288 million.

24 JAPAN PRIME REALTY INVESTMENT CORPORATION

Repairs and maintenance expenses for the second fiscal period
stayed at a lower level compared with usual levels since theCompany pushed back plans to commence earthquake-proofing
maintenance of the Yasuda-Life Ikebukuro Building due to a breakdown in contract negotiations with a prospective tenant.
Management commission expenses also stayed at a lower levelcompared with usual levels attributable to a drop in construction
management commissions included in repairs and maintenance.
As a result of the aforementioned, operating profits rose ¥339
million, to ¥2,288 million from ¥1,949 million in the previous
period.
In non-operating revenues and expenses, the Company
incurred an actual increase in interest expenses due to increased
borrowings for additional property acquisitions. On a comparativebasis, interest expense is distorted due to a disparity between fiscal
periods. Overall non-operating expenses decreased significantly
due to the absence of unit-issuance costs and unit-listing expenses
incurred in the previous fiscal period. The Company also recorded
income and expenses relating to the settlement of acquisitions
completed, however these amounts were insignificant.
Accordingly, income before income taxes surged to ¥2,003
million and net income to ¥2,002 million.

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 25

CASH DISTRIBUTIONS
The cash distribution per unit for the period ended December 31,
2002 was ¥6,912. With 289,600 units outstanding, the total cash

distribution was ¥2,001,715 thousand.
yen in thousands except per unit data

Cash distribution for theperiod ended Dec. 31, 2002

Cash distribution for theperiod ended June 30, 2002

Net Income

2,001,798

737,072

Total Cash Distribution

2,001,715

737,032

6,912

2,545

Cash Distribution per Unit

CAPITALIZATION
Paid-in Capital
The Company was listed on the Tokyo Stock Exchange in June
2002 with an additional issuance of 134,000 units (¥25,862 million)
and ended its first period on June 30, 2002 with unitholders’ equityof ¥57,719 million. For the second period, ended December 31,
2002, the Company reported net income of ¥2,002 million andunitholders’ equity of ¥58,984 million, with 289,600 units
outstanding.
(See page 32 and Notes to Financial Statements)
Market Price
The Company was listed on the Tokyo Stock Exchange under the
securities code 8955. The high and low closing prices for the periods indicated in the table below were:
Month

High

Low

June 2002

202,000

199,000

July 2002

203,000

200,000

August 2002

205,000

202,000

September 2002

205,000

204,000

October 2002

217,000

204,000

November 2002

238,000

217,000

December 2002

238,000

226,000

Debt Financing
The acquisitions of the Shinyokohama 2nd Center Building and SK
Hiroshima Building were funded by an increase in short-term borrowings. Accordingly, short-term borrowings jumped ¥1.93 billion
over the end of the previous period. The decision to utilize shortterm borrowings was taken as a means to curb finance costs.
Interest-bearing liabilities as of December 31, 2002 stood at¥38.93 billion, with interest-bearing liabilities to total assets ratio of
36.5%. The Company considers itself to be well positioned toincrease borrowings as required. The medium- to long-term interest-bearing liabilities ratio fell to 89.9%, in line with the Company’s
debt profile.
The average remaining period on the Company’s outstanding
debt balance as of December 31, 2002 is 5.1 years, bearing an
average interest rate of 1.41%.

JAPAN PRIME REALTY INVESTMENT CORPORATION

25

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 26

Borrowings

Category

Drawdown
Date

Balance as ofJune 30, 2002
(thousands of yen)

Balance as ofDecember 31, 2002
(thousands of yen)

Average
Interest
Rate

Repayment
Date

June 26, 2002

2,000,000

2,000,000

1.950%

June 30, 2003

Lender
Sompo Japan
Insurance Inc.

Short-Term
Borrowings

Aozora Bank, Ltd.

Sept. 25, 2002

0

950,000

0.571%

Sept. 30, 2002

0980,000

0.571%

2,000,000

3,930,000

The Chuo Mitsui Trust andBanking Company, Limited

Dec. 27, 2001

10,000,000

10,000,000

1.234%

Dec. 27, 2006

Sumitomo Life
Insurance Company

Dec. 27, 2001

10,000,000

10,000,000

1.234%

Dec. 27, 2006

The Daiwa Bank, Limited

June 19, 2002

2,000,000

2,000,000

1.295%

Dec. 27, 2006

Aozora Bank, Ltd.

June 19, 2002

3,000,000

3,000,000

1,295%

Dec. 27, 2006

25,000,000

25.000,000

Total

Medium-Term
Borrowings

Total

Long-Term
Borrowings

Sept. 25, 2003

The Yasuda MutualLife Insurance Company

Dec. 27, 2001

5,000,000

5,000,000

1.700%

Dec. 26, 2008

The Yasuda MutualLife Insurance Company

June 21, 2002

5,000,000

5,000,000

2.050%

June 21, 2011

10,000,000

10,000,000

Total

Repayment
MethodPrincipal
lump sum
repayment
on maturity

Principal
lump sum
repayment
on maturity

Principal
lump sum
repayment
on maturity

Remarks
Unsecured•
Unguaranteed•
Subordinated
Secured•
Unguaranteed•
Non-subordinated

Secured•
Unguaranteed•
Non-subordinated

Secured•
Unguaranteed•
Non-subordinated

MAJOR TENANT ROSTER
Ordinary building leases in Japan are usually contracted for relatively short periods (generally two years), and renew automaticallyunless either party gives notice to the contrary. Such leases also
typically allow the tenant to terminate the lease before expiry of
the term with six months prior written notice.
There is, however, a special type of lease for long-term agreements, which the Company has used in its agreements with Seiyu,
contracting for 20-year lease periods in Tanashi ASTA (until#

TenantFebruary 2015), and Tsurumi fuga 1 (until December 2005). These
leases prohibit termination by the tenant before expiry of theterm, and contain provisions requiring payment of damages equivalent to the rental amount for the remainder of the contract period
should the lease be broken.
The table below shows the Company’s 10 major tenants byleased floor space as of December 31, 2002.

Industry

1

The Seiyu, Ltd.

Retail2

Sompo Japan Insurance Inc.

Casualty Insurance

3

Iwatani International Corporation

Wholesale

Property
Tanashi ASTA
Tsurumi fuga 1
Sompo Japan Sendai Bldg.
Sompo Japan Wakayama Bldg.
Tokyo Tatemono Honmachi Bldg.

Leased Floor Space(m2)%

40,700.31

25.8

6,541.71

4.1

5,959.86

3.8

5,015.78

3.2

3,993.50

2.5

3,094.51

2.0

Yasuda-Life Ikebukuro Bldg.
Yasuda-Life Osaka Bldg.
4

The Yasuda Mutual Life Insurance Company

Life Insurance

Yasuda-Life Naha Bldg.
Niigata Ekinan Center Bldg.
Shinyokohama 2nd Center Bldg.

5

Japan Future Information Technology &Systems Co., Ltd.

Other Services

6

Kanematsu Electronics Ltd.

Electronics and Electric Appliances

7

Oki Software Co., Ltd.

Other Services

Asahi-Life Fukuoka 3rd/4th Bldg.

3,054.74

1.9

8

Nippon Life Insurance Company

Life Insurance

North 33 Bldg.

2,848.69

1.8

9ORIX Corporation

Other Services

Yasuda-Life Osaka Bldg.

2,469.88

1.6

2,408.56

1.5

10Asahi Kasei Corporation

Textile26 JAPAN PRIME REALTY INVESTMENT CORPORATION

Arca East
Kanematsu Bldg.
Kanematsu Bldg. Annex

Arca East
Yasuda-Life Osaka Bldg.

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 27

CAPITAL EXPENDITURE
The table below shows the capital expenditures made for realestate and entrusted real estate by the Company during the second fiscal period. Total capital expenditure for the period was ¥150
million, which combined with ¥54 million in upkeep costs and ¥11
million in entrusted construction in progress produced total construction work of ¥216 million.

The main capital expenditures were earthquake-proofing work,
including design, on buildings and facilities to improve safety; renovations and upgrades to common areas to attract tenants andenhance existing tenant satisfaction; and the installation of OA
facilities.

Property

Details

PeriodCapital Expenditure(millions of yen)

Asahi-Life Takamatsu 2nd Bldg.

Earthquake-proofing construction, renovation of common areas

June 2002––Oct. 2002

33

Yasuda-Life Naha Bldg.

Replacement of rooftop air conditioning unit main components,
other major upgrade and improvements

Oct. 2002––Nov. 2002

23

OthersRenovation of common areas, installation of OA, parking, air conditioning,disaster prevention, and other facilities

93

Total

150

The table below shows the major capital expenditures for the
upkeep of real estate and entrusted real estate planned as ofDecember 31, 2002. The estimated construction cost includes

amounts that would be classified as expenses under accounting
standards and rules.
Estimated Construction Amounts(millions of yen)

Property

Details

Estimated
Duration
Total

Payment for
the Period
under Review

Previously
Paid Total

11

11

Yasuda-Life Ikebukuro Bldg.

Earthquake-proofing maintenance, renovation of common areas,
air conditioning systems, and air distribution systems

Oct. 2002–
Mar. 2004

680

Yasuda-Life Hakata Bldg.

Extension of automated parking facilities

Feb. 2003–
Sept. 2003

53

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P.24-37-5/7 03.5.9 5:37 PM ページ 28

BALANCE SHEETS

yen in thousands

U.S. dollars (Note 2)

End of 2nd Period(as of Dec. 31, 2002)

End of 1st Period(as of June 30, 2002)

End of 2nd Period(as of Dec. 31, 2002)

12,157,861

10,842,478

101,400,009

60,09438,458501,197

ASSETS
CURRENT ASSETS:
Cash and bank deposits
Rental receivables
Consumption tax refundable—

596,493—

101,557

80,254

847,015

12,319,512

11,557,683

102,748,221

Buildings and structures

45,689,809

44,307,288

381,065,964

Machinery and equipment

980,507

940,763

8,177,703

49,175,308

47,924,512

410,136,012

11,928—99,483

Other current assets
Total Current Assets

PROPERTY AND EQUIPMENT AT COST:

Land
Entrusted construction in progress
Tools, furniture and fixtures
Less accumulated depreciation

873

—

7,281

95,858,425

93,172,563

799,486,443(1,624,277)(800,941)(13,546,933)

94,234,148

92,371,622

785,939,510

Deposits

10,10010,00084,237Long-term prepaid expenses

14,702

16,665

122,622

106,578,462

103,955,970

888,894,590

Net Property and Equipment

INVESTMENTS AND OTHER ASSETS:TOTAL ASSETS
See Notes to Financial Statements.

28 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P.24-37-5/7 03.5.9 5:37 PM ページ 29

yen in thousands

U.S. dollars (Note 2)

End of 2nd Period(as of Dec. 31, 2002)

End of 1st Period(as of June 30, 2002)

End of 2nd Period(as of Dec. 31, 2002)

Trade accounts payable

434,007708,2033,619,738

Accounts payable

264,850

436,971

2,208,923

Short-term debt

3,930,000

2,000,000

32,777,314

7,296

7,633

60,856

LIABILITIESCURRENT LIABILITIES:

Accrued expenses
Accrued income taxes
Rents received in advance
Other current liabilities
Total Current Liabilities

822

1,381

6,856

339,236

336,5432,829,325

79,959372,774

666,880

5,056,170

3,863,505

42,169,892

35,000,000

35,000,000

291,909,925

LONG-TERM LIABILITIES:Long-term debt

7,538,454

7,373,393

62,872,843

Total Long-Term Liabilities

Deposits received from tenants

42,538,454

42,373,393

354,782,768

TOTAL LIABILITIES

47,594,624

46,236,898

396,952,660

56,982,000

56,982,000

475,246,038

UNITHOLDERS’ EQUITY
Unitholders’ capital
Retained earnings

2,001,838

737,072

16,695,892

Total Unitholders’ Equity

58,983,838

57,719,072

491,941,930

TOTAL LIABILITIES AND UNITHOLDERS’ EQUITY

106,578,462

103,955,970

888,894,590

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P.24-37-5/7 03.5.9 5:37 PM ページ 30

S TAT E M E N T S O F I N C O M E A N D R E TA I N E D E A R N I N G S

yen in thousands

U.S. dollars (Note 2)

2nd Period(July 1, 2002–
Dec. 31, 2002)

1st Period(Sept. 14, 2001–
June 30, 2002)

2nd Period(July 1, 2002–
Dec. 31, 2002)

OPERATING REVENUES

4,972,930

4,469,426

41,475,647

Rental revenues

4,568,144

4,219,368

38,099,615

404,786

250,058

3,376,032

Non-rental revenues
OPERATING EXPENSES

2,684,786

2,520,563

22,391,882

Property-related expenses

2,307,448

2,120,096

19,244,771

Asset management fees

236,635

218,048

1,973,605

Administrative service fees

65,51977,294546,449

Other operating expenses
OPERATING PROFITSNON-OPERATING REVENUES
Interest received
Other non-operating revenues

75,184105,125

627,057

2,288,144

1,948,863

19,083,765

13,1688,545

109,829

1,092

867

9,113

12,076

7,678

100,716

298,463

1,218,814

2,489,267

Interest expense

274,087

367,3882,285,966

Loan arrangement fees

19,393392,873

161,741

New unit-issuance costs—

186,289—

Unit-listing expenses—

227,084—

NON-OPERATING EXPENSES

Amortization of organization expenses—

45,180

—

4,983

0

41,5602,002,849

738,594

16,704,327

Current

1,040

1,554

8,678

Deferred

11

(32)

88

2,001,798

737,072

16,695,561

40

—

331

2,001,838

737,072

16,695,892

Other non-operating expenses
INCOME BEFORE INCOME TAXESINCOME TAXESNET INCOMERETAINED EARNINGS BROUGHT FORWARD
RETAINED EARNINGS AT END OF PERIOD
See Notes to Financial Statements.

30 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P.24-37-5/7 03.5.9 5:37 PM ページ 31

S TAT E M E N T S O F C A S H F L O W S(Unaudited)
yen in thousands

U.S. dollars (Note 2)

2nd Period(July 1, 2002–
Dec. 31, 2002)

1st Period(Sept. 14, 2001–
June 30, 2002)

2nd Period(July 1, 2002–
Dec. 31, 2002)

2,002,849

738,594

16,704,327

823,336

800,941

6,866,857

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income taxes
Depreciation
Interest income(1,093)(867)(9,113)

Interest expense

274,087

367,3882,285,966

Increase in rental receivables(21,636)(38,458)(180,446)

Decrease (Increase) in consumption tax refundable

596,493(596,493)

4,974,923

Increase in prepaid expenses(24,463)(74,380)(204,030)—(16,665)—

Increase (Decrease) in trade accounts payable(274,196)

708,203(2,286,873)

Increase (Decrease) in accounts payable(207,369)

436,971(1,729,516)

Increase in long-term prepaid expenses

Increase (Decrease) in accrued consumption taxes(5,632)47,402(46,976)

Increase in rents received in advance

2,693

336,543

22,458(287,182)

325,372(2,395,184)

5,112(5,842)

42,6382,882,999

3,028,709

24,045,031

1,093

867

9,113

(274,424)(359,755)(2,288,774)(1,600)(173)(13,344)2,608,068

2,669,648

21,752,026(966,304)—(8,059,249)(1,719,557)(93,172,563)(14,341,594)(7,674)—(64,003)

Increase (Decrease) in deposits received from tenants
Change in other current assets/liabilities
Sub-totalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
Purchases of entrusted property and equipment
Payment of leasehold and security deposits received
Proceeds from leasehold and security deposits received

135,870—

1,133,197

Payment of entrusted leasehold and security deposits received(234,488)(148,758)(1,955,698)

Proceeds from entrusted leasehold and security deposits received

271,3527,522,151

2,263,155(100)(10,000)(834)(2,520,901)(85,809,170)(21,025,026)

Proceeds from short-term borrowings

1,930,000

43,000,000

16,096,747

Repayment of short-term borrowings—(41,000,000)—

Proceeds from long-term borrowings—

40,000,000—

Repayment of long-term borrowings—(5,000,000)—

Proceeds from issuance of units—

56,982,000—

Payment of leasehold and security deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIESDistributions to unitholders(701,784)—(5,853,080)

1,228,216

93,982,000

10,243,667

NET INCREASE IN CASH AND CASH EQUIVALENTS

1,315,383

10,842,478

10,970,667

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

10,842,478—

90,429,342

CASH AND CASH EQUIVALENTS AT END OF PERIOD

12,157,861

10,842,478

101,400,009

Net cash provided by financing activities

See Notes to Financial Statements.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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S TAT E M E N T S O F C H A N G E S I N U N I T H O L D E R S ’ E Q U I T Y

unitholders’ equity
sharesyen in thousands

U.S. dollars (Note 2)

BEGINNING
9/14/01 Initial private placement
11/16/01 Private placement240

120,000—

62,00031,000,000—

1/22/02 Unit split

93,360——6/14/02 Initial public offering

134,000

25,862,000—

Net income
BALANCE AS OF JUNE 30, 2002—

737,072—

289,600

57,719,072

481,393,425

Cash distributions paid—

(737,032)(6,147,056)

Net income—

2,001,798

16,695,561

289,600

58,983,838

491,941,930

BALANCE AS OF DECEMBER 31, 2002
See Notes to Financial Statements.

32 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P.24-37-5/7 03.5.9 5:37 PM ページ 33

N O T E S T O F I N A N C I A L S TAT E M E N T S(December 31 and June 30, 2002)

1. ORGANIZATION
Japan Prime Realty Investment Corporation (the “Company”), an
externally managed real estate investment corporation, was incorporated on September 14, 2001 under the Law Concerning
Investment Trusts and Investment Corporations of Japan, or theInvestment Trust Law.
The Company was originally formed byTokyo Tatemono Co.,
Ltd., Taisei Corporation, and Tokyo Realty Investment Management,
Inc. (“TRIM”), and commenced its operation on November 16,
2001 by acquiring 13 properties. TRIM, a licensed asset management company, provides professional asset management services ofoffice and retail properties to the Company. TRIM is currently
owned 26% by Tokyo Tatemono Co., Ltd., 24% by The Yasuda

Mutual Life Insurance Company, 20% by Yasuda Real Estate Co.,
Ltd., 20% by Taisei Corporation, and 10% by Sompo Japan
Insurance Inc.
On June 14, 2002, the Company raised ¥25,862 million
through an initial public offering (unitholders’ capital as ofDecember 31, 2002: ¥56,982 million) and was listed on the Tokyo
Stock Exchange (Securities code: 8955).
The Company was formed to invest primarily in real estate inJapan. As of December 31, 2002, the Company owned a portfolioof 27 properties containing an aggregate of approximately
168,987.78 square meters of leasable area, and leased its officespace to 311 tenants. The occupancy rate is 93.4%.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBASIS OF PRESENTING FINANCIAL STATEMENTS
The Company maintains its accounting records and prepares its
financial statements in accordance with accounting principles andpractices generally accepted and applied in Japan (“Japanese
GAAP”), including provisions set forth in the Investment Trust Law,
the Japanese Commercial Code, the Securities and Exchange Law
of Japan and the related regulations, which may differ in somematerial respects from accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
The accompanying financial statements are a translation of thefinancial statements of the Company which were prepared inaccordance with Japanese GAAP and were presented in the
Securities Report of the Company filed with the Kanto Local
Finance Bureau. In preparing the accompanying financial statements,
certain reclassifications have been made to the financial statements
issued domestically in order to present them in a format which ismore familiar to readers outside Japan. In addition, the notes tofinancial statements include information which might not be
required under Japanese GAAP but is presented herein as additional information.
The Company’s accounting period ends at the end of June andDecember. The Company’s second accounting period began on
July 1, 2002, and ended on December 31, 2002.
Amounts in U.S. dollars are included solely for the convenienceof readers outside Japan. The rate of ¥119.90=US$1.00, the foreign exchange rate on December 31, 2002, has been used fortranslation. The inclusion of such amounts is not intended to imply
that Japanese yen has been or could be readily converted, realized
or settled into U.S. dollars at that rate or any other rate.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation. The costs of land, buildings and building improvements
include the purchase price of the property, legal fees and acquisition costs. Depreciation of property and equipment is calculated
on a straight-line basis over the estimated useful lives of the assets
ranging as stated as follows:

Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–60 years
Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–15 years
Tools, furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–15 years
Expenditures for repairs and maintenance are charged tooperations as incurred. Significant renewals and betterments arecapitalized.
REVENUE RECOGNITION
Revenues from leasing of office space are recognized as rent
accrued over the lease period.
TAXES ON PROPERTY AND EQUIPMENT
Property and equipment is subject to property taxes and city planning taxes on a calendar year basis. These taxes are generally
charged to expense during the period. The sellers of the properties were liable for property taxes for the calendar year including
the period from the date of purchase by the Company through theend of the year since the taxes are imposed on the owner registered in the record as of January 1, based on the assessment madeby the local government. The Company paid the amount equivalent to the property taxes to the sellers applicable to the period
since acquisition and included the amount equivalent to the taxes
in the purchase price of each property and capitalized as cost of
the property.
CONSUMPTION TAXES
Consumption taxes withheld and consumption taxes paid are notincluded in the statements of income. The consumption taxes paid
are generally offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld isincluded in the current assets and the excess of amounts withheld
over payments are included in the current liabilities.
CASH AND CASH EQUIVALENTS
The statement of cash flows is provided for information purposesJAPAN PRIME REALTY INVESTMENT CORPORATION

33

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 34

investments which are highly liquid, readily convertible to cash andwith insignificant risk of price fluctuation, with original maturity of
three months or less.

only since it is not required to be prepared by the Investment Trust
Law, the Japanese Commercial Code, the Securities and Exchange
Law of Japan and the related regulations. Cash and cash equivalents
consist of cash on hand, deposits placed with bank and short-term

3. REAL ESTATE
Real estate at December 31, 2002 and June 30, 2002 consisted of the following:

As of December
31, 2002

yen in thousands

U.S. dollars

As of June30, 2002

As of December
31, 2002

Acquisition Costs

Book Value

Acquisition Costs

Book Value

Acquisition Costs

Book ValueLand

325,393

325,393——

2,713,867

2,713,867

Buildings

629,685——

Accumulated depreciation

7,425

622,260—

Machinery and equipment

11,227—

Accumulated depreciation

559

10,668

Entrusted land

48,849,915

48,849,915

Entrusted buildings and structures

45,060,124—

Accumulated depreciation

1,527,362

5,251,748——

61,927

5,189,821——

93,633

—

—

—

4,663

88,97047,924,512

47,924,512

407,422,145

407,422,145

44,307,288—

375,814,216—

43,532,762

763,634

43,543,654

12,738,631

363,075,585

Entrusted machinery and equipment

969,280—

940,763—8,084,070—

Accumulated depreciation

88,889880,391

37,307

903,456

741,356

7,342,714

Entrusted tools, furniture and fixtures

873

—

—

—

7,281

—

Accumulated depreciation

43

830

—

—

356

6,925

Entrusted construction in progress
Total

11,928

11,928——99,483

99,483—

94,234,148—

92,371,622—

785,939,510

As of June 30, 2002

As ofDecember 31, 2002

4. SHORT-TERM DEBT
Short-term debt at December 31, 2002 and June 30, 2002 consisted of the following:
As of December 31, 2002
Amount(yen inthousands)

Weighted
averageinterest rate

Amount(yen inthousands)

Secured loans from a bank

1,930,000

0.571%—

Unsecured loans from an insurance company

2,000,000

1.950%

2,000,000

Total

3,930,000

Weighted
averageinterest rate

Amount(U.S. dollars)

1.950%

16,680,567

16,096,747

2,000,000

32,777,314

5. MEDIUM-TERM DEBT (1 TO 5 YEARS)
Medium-term debt at December 31, 2002 and June 30, 2002 consisted of the following:
As of December 31, 2002

As of June 30, 2002

As ofDecember 31, 2002

Amount(yen inthousands)

Weighted
averageinterest rate

Amount(yen inthousands)

Weighted
averageinterest rate

Amount(U.S. dollars)

Secured loans from a trust bank and an insurance company

20,000,000

1.234%

20,000,000

1.634%

166,805,671

Secured loans from banks

5,000,000

1.295%

5,000,000

1.295%

Total

25,000,000

34 JAPAN PRIME REALTY INVESTMENT CORPORATION

25,000,000

41,701,418
208,507,089

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 35

6. LONG-TERM DEBT (OVER 5 YEARS)Long-term debt at December 31, 2002 and June 30, 2002 consisted of the following:
As of December 31, 2002

As of June 30, 2002

As ofDecember 31, 2002

Amount(yen inthousands)

Weighted
averageinterest rate

Amount(yen inthousands)

Weighted
averageinterest rate

Amount(U.S. dollars)

Secured loans from an insurance company

5,000,000

1.700%

5,000,000

2.100%

41,701,418

Secured loans from an insurance company

5,000,000

2.050%

5,000,000

2.050%

41,701,418

Total

10,000,000

10,000,000

83,402,836

7. SECURED ASSETSAt December 31, 2002 and June 30, 2002, the following assets were pledged as collateral for the following debt:
Pledged assets:
As of December
31, 2002

yen in thousands

U.S. dollars

As of June30, 2002

As of December
31, 2002

Cash and cash equivalents

8,762,242

7,923,878

73,079,581

Land and land leasehold

42,753,744

38,405,196

356,578,351

Buildings and structures

38,116,814

30,430,040

317,905,035

Machinery and equipment

721,682

401,716

6,019,033

Construction in progress

11,928—99,48390,366,410

77,160,830

753,681,483

Total

Debt secured by pledged assets:

As of December
31, 2002

yen in thousands

U.S. dollars

As of June30, 2002

As of December
31, 2002

Short-term debt

1,930,000—

16,096,747

Medium- and long-term debt

35,000,000

35,000,000

291,909,925

Total

36,930,000

35,000,000

308,006,672

8. UNITHOLDERS’ EQUITY
Under the Investment Trust Law and the related regulations, theappropriations of retained earnings and the declaration of a cash
distribution for the current accounting period are made by the
resolution of the Board of Directors held subsequent to the closeof such accounting period. As such, the retained earnings ofunitholders’ equity at December 31, 2002 included cash distributions of ¥2,001,715 thousand ($16,694,872) subsequently made.

9. INCOME TAXESAt December 31, 2002, the Company’s deferred tax assets consisted mainly of the enterprise tax, which is not deductible for tax purposes. The reconciliation of tax rate difference between the adjusted statutory tax rates and the effective tax rates for the periods
from July 1, 2002 to December 31, 2002 and September 14, 2001
to June 30, 2002 were as follows:
For the period
from July 1, 2002
to December 31, 2002

For the period
from September 14, 2001
to June 30, 2002

Statutory tax rate

39.39%

39.39%

Deductible dividends distribution(39.37%)(39.31%)Others

0.03%

0.13%

Effective tax rate

0.05%

0.21%

The Company is subject to Japanese corporate income taxes
on all of its taxable income. However, under the Special Taxation
Measures Law of Japan, or the STML, an investment corporation isallowed to deduct dividends of accounting profits, or dividend distributions, paid to investors from its taxable income if certain tax
requirements are satisfied. Such tax requirements include dividend
distributions in excess of 90% of its taxable income for theaccounting period as stipulated by Article 67–15 of the STML.
Based on the distribution policy provided by the Articles ofIncorporation, the Company made a dividend distribution of
approximately 100% of retained earnings in the amount of¥2,001,715 thousand ($16,694,872) at December 31, 2002 andtreated it as tax deductible dividend. The Company will not distribute the dividends in excess of accounting profit under the Articles
of Incorporation.
JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P.24-37-5/7 03.5.9 5:37 PM ページ 36

10. PER UNIT INFORMATION
The following table summarizes information about net assets per unit and net income per unit at December 31, 2002 and June 30, 2002,
and for the fiscal periods then ended.

Net assets at period-end per unit
Net income per unit

In calculating the net assets per unit, the amount of the net
assets included the cash distribution declared in the subsequent
period.
Net income per unit is computed by dividing net income by
the weighted average number of units outstanding during eachperiod. The weighted average number of units used in the

yen in thousands

U.S. dollars

For the period
from July 1, 2002
to December 31, 2002

For the period
from September 14, 2001
to June 30, 2002

For the period
from July 1, 2002
to December 31, 2002

203,673

199,306

1,699

6,912

4,449

58

calculation was 289,600 units for the period from July 1, 2002 to
December 31, 2002 and 165,635 units for the period from
November 16, 2001 (the commencement date of operation) toJune 30, 2002. Diluted net income per share has not been presented since no warrants and convertible bonds were issued during theperiod.

11. RELATED PARTY TRANSACTIONSThe Company entered into the following related party transactions.

Purchase of properties

yen in thousands

U.S. dollars

For the period
from July 1, 2002
to December 31, 2002

For the period
from September 14, 2001
to June 30, 2002

For the period
from July 1, 2002
to December 31, 2002—

11,700,000—

Property management fees

93,313126,042778,255

Commissions for property acquisitions

16,500394,000

137,615

129

1,114

1,073

Outsourced property operation

262,619

255,698

2,190,314

Repairs and maintenance

146,976

223,1211,225,821

Leasing commissions

12. BREAKDOWN OF PROPERTY-RELATED REVENUES AND EXPENSES
For the period from July1, 2002 to December 31, 2002 and the period from September 14, 2001 to June 30, 2002.

For the period
from July 1, 2002
to December 31, 2002

Property-Related Revenues

yen in thousands

U.S. dollars

For the period
from September 14, 2001
to June 30, 2002

For the period
from July 1, 2002
to December 31, 2002

4,972,930

4,469,426

41,475,647

4,568,144

4,219,368

38,099,615

Rental revenues

3,562,518

3,395,909

29,712,408

Common area charges

851,041

718,552

7,097,923

Parking revenues

142,523

95,667

1,188,684

Rental Revenues

Other rental revenues
Non-Rental Revenues
Cancellation charges
Other miscellaneous revenues
Property-Related Expenses

12,062

9,240

100,600

404,786

250,058

3,376,032

3,350

2,901

27,940401,436

247,157

3,348,092
19,244,771

2,307,448

2,120,096

Property management fees

104,500

126,301

871,558

Utility expenses

444,611275,461

3,708,183

Property and other taxes

336,958

336,8092,810,321

Casualty insurance

34,261

29,996

285,749

Repairs and maintenance

52,40099,120437,029

Depreciation

823,336

800,941

6,866,857

Other rental expenses
Profits

36 JAPAN PRIME REALTY INVESTMENT CORPORATION

511,382

451,467

4,265,074

2,665,482

2,349,330

22,230,876

JPR P.24-37-5/7 03.5.9 5:37 PM ページ 37

R E P O RT O F I N D E P E N D E N T A U D I T O R S

To the Board of Directors and Unitholders of Japan Prime Realty Investment Corporation

We have audited the accompanying balance sheets of Japan Prime Realty Investment Corporation as of December 31,
2002 and June 30, 2002, the statements of income and retained earnings, and changes in unitholders' equity for the six
months ended December 31, 2002 and the period from September 14, 2001 (the date of incorporation) to June 30,
2002, all expressed in yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the accompanying financial statements, expressed in yen, present fairly the financial position of Japan
Prime Realty Investment Corporation at December 31, 2002 and June 30, 2002, and the results of its operations for thesix months ended December 31, 2002 and for the period from September 14, 2001 (the date of incorporation) to June30, 2002, in conformity with accounting principles and practices generally accepted in Japan applied on a consistent basis.
The U.S. dollar amounts in the accompanying financial statements are presented solely for convenience. We have also
reviewed the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on
the basis described in Note 2 to the financial statements.

Shin Nihon & Co.

Tokyo, Japan
February 27, 2003

See Note 2 to the financial statements, which explains the basis of presentation of the financial statements of Japan Prime
Realty Investment Corporation under Japanese accounting principles and practices.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P38-48-5/1 03.5.9 5:48 PM ページ 38

JPR INVESTMENT POLICIES(Reference)

A. Investment Policies
1) Basic policies
The Company’s basic investment strategy centers on “urban commercial real estate.” The Company will invest primarily inreal estate, which comprises superior office buildings (urban business facilities), retail facilities located in thriving commercial areas, and the land on which these facilities are located, as well as in asset backed securities which have such realestate as their primary investments. In light of the returns and risks of these investments, the Company will invest not
only in Tokyo but will attempt to diversify into other cities so as to maximize the benefits of the portfolio, taking fullaccount of earthquake risks and the risks of each market.
The Company will diversify investments in terms of both tenants and properties, taking into account the amount ofinvestment per property, and will seek thereby to achieve stable medium- and long-term growth. Investment ratio targets
are as shown on page 39 under 3) Investment stance.
2) Types of investment assetsI) “Real estate” refers to the following:i) Real estateii) Real estate leasing rightsiii) Surface rightsiv) Beneficiary rights in the following trusts (includes comprehensive trusts in which cash associated with realestate is also entrusted, but excludes the securities defined in Article 3:1 of Cabinet Order No. 480 of 2000,
including all subsequent amendments, referred to as the “Cabinet Order” hereinafter)a) Real estateb) Surface rights and land leaseholdsv) Beneficiary certificates in monetary trusts (limited to trusts for which the primary purpose is investment in theassets listed in i) to iii) above; excludes equivalents to securities)vi) Investment equity based on a contract that specifies that one party will provide funding to be invested in theassets listed in i) to v) above and the other party will invest these funds in said assets, with the profits fromthese investments distributed to investors (“anonymous partnership equity” hereinafter)II) “Asset backed securities with real estate as their primary investments” refer to the following instruments, thepurpose of which is investing in real estate, which must be in excess of half of all assets backing said security:i) Preferred investment securities as defined in Article 2:8 of the Law Concerning Asset Liquidation (Law No. 105
of 1998; including all subsequent amendments; referred to as the “Asset Liquidation Law” hereinafter)ii) Beneficiary certificates in investment trusts as defined in Article 2:12 of the Law Concerning Investment
Trusts and Investment Corporations (Law No. 198 of June 4, 1951; referred to as the “Investment Trust Law”
hereinafter)iii) Investment securities as defined in Article 2:22 of the Investment Trust Lawiv) Beneficiary certificates in special-purpose trusts as defined in Article 2:12 of the Asset Liquidation Law(excludes beneficiary certificates in trusts listed in I), iv) and v) above)III) The Company may invest in the following designated assets in order to efficiently utilize surplus funds remaining
after the investments listed in I) and II) above:i) Bank depositsii) Call loansiii) Japanese government bondsiv) Municipal bondsv) Commercial paper (refers to instruments defined in Article 2:1:8 of the Securities and Exchange Law)vi) Transferable certificates of depositvii) Designated bonds as defined in the Asset Liquidation Law (refers to instruments defined in Article 2:1:3:2 of

38 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P38-48-5/1 03.5.9 5:48 PM ページ 39

the Securities and Exchange Law. However, this is limited to instruments in which the assets obtained as thebusiness for liquidation by the special purpose company are primarily real estate)viii) Beneficiary certificates in loan credit trusts (refers to instruments defined in Article 2:2:1 of the Securities andExchange Law)ix) Cash credits (excludes securities, promissory notes and other instruments defined in Article 3:12 of the Cabinet
Order) and financial derivatives (instruments defined in Article 3:14 of the Cabinet Order)x) Rights resulting from financial futures trading (refers to the definition in Article 3:13 of the Cabinet Order)xi) Rights resulting from financial derivatives trading (refers to the definition in Article 3:14 of the Cabinet Order)xii) Beneficiary rights in monetary trusts for the purpose of investments such as those described in i) to xi) above.
3) Investment stancei) Investment horizon
The Company will in principle hold assets for the medium- and long-term (one to five years and over five years,
respectively) and will not acquire assets for the purpose of short-term trading (less than one year).
ii) Investment ratio targets
Type of Investment Asset

Target Ratio
Geography

Real Estate

Use

Tokyo CBDs(1) & Greater Tokyo(2)60%Other cities(3)40%Office buildings

80%

Retail properties

20%

The rental revenue from any individual tenant (total rental revenue
Tenantwhen the tenant occupies multiple compartments and/or properties)
will in principle be limited to less than 10% of total rental revenues.(4)Asset backed securities

The total after-investment value of asset backed securities that invest primarily in realwith real estate as theirestate shall in principle be limited to less than 10% of the net worth of the Company.(5)primary investments
Notes: (1) “Tokyo CBDs” (Central Business Districts) includes the Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya
wards.
(2) “Greater Tokyo” includes all other areas of Tokyo and Chiba Prefecture, Kanagawa Prefecture and Saitama Prefecture.
(3) “Other cities” includes all other areas in Japan.
(4) “Rental revenues” includes fees for general service, parking lot fees and warehouse usage fees, but does not include additional usage fees, such as after-hours air-conditioning charges. However, this figure may be exceeded if there is any potential for tenant changes or if warranted by a general consideration of leasing conditions and other factors.
(5) The following criteria will be used in making investment decisions:•An ability to secure opportunity to acquire the real estate invested in by the asset backed security upon maturing of theinvestment period•Ratio of liabilities to the value of the real estate invested in of 70% or lessiii) Investment policies for development projects
The Company will in principle acquire only real estate that generates or is expected to generate stable rental
business revenue or similar revenues at the time of acquisition.
The Company will not engage in development investments (projects in which the Company itself acquires
land and builds buildings). However, the Company may invest in buildings under construction by third parties
prior to the completion of the building if it is determined that there is sufficient potential to secure tenants
after the completion and that the completion and delivery risks are minimized. The Company may also rebuild
acquired properties if it is determined that there is sufficient potential to secure tenants after rebuilding andthat it is confirmed this is not a development investment.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P38-48-5/1 03.5.9 5:48 PM ページ 40iv) Equipment and fixtures investment policies
The Company will invest in equipment and fixtures in accordance with an efficient upkeep plan created foreach property and designed to maintain and improve the competitiveness of the property from medium- andlong-term perspectives. In principle, such investments will be within the scope of the depreciation charges of
the individual property, but final decisions will be made in light of the depreciation charges for the portfolio asa whole. However, repairs to common areas will be implemented quickly by the Company from the perspectiveof tenant operational policies, and reinforcements will be made quickly for buildings requiring anti-seismic
reinforcements in light of the status of tenant operations.
v) Insurance policiesa) Criteria for selecting underwriting insurance companies•The Company will select fair underwriting insurance companies via Marsh Japan, Inc.
Note: Marsh Japan, Inc. is a 100%-owned Japanese subsidiary of Marsh Inc., the core company in the holding
company Marsh & McLennan Companies, Inc. (Headquarters: New York). Its primary businesses are insurance-related services and risk management consulting.
•The underwriting insurance company will in principle have an insurance rating of A3 or A– or better from
Moody’s Investors Service or Standard and Poor’s.
b) Earthquake insurance coverage criteria
The decision to cover earthquake insurance will be made in light of comparisons between the potential
impact of disaster and property insurance premiums based on the PML for the entire portfolio. Earthquake
insurance may be purchased individually for properties that have high PMLs.
Note: “PML” refers to the probable maximum loss in the event of earthquake. PML may be calculated for individual properties or for the portfolio as a whole. While there is no strict definition of PML (valuation methods
will differ depending on the institution conducting the survey), it is generally found by calculating the probable damage from the largest foreseeable earthquake during the expected period of use (50 years is the useful
lifetime ordinarily assigned to buildings; the largest foreseeable earthquake is a major earthquake of a size
seen once every 475 years, having a 10% probability of occurring during any 50 year span). The figure represents the ratio of projected expenses for restoration of damage to price of reacquisition.
vi) Sales policya) The Company will select real estate, asset backed securities with real estate as their primary investments,and other investments in its holdings to be sold based on a general evaluation considering the current statusof the asset to be sold, projections of its future profitability and changes in asset value, and the asset structure of the portfolio as a whole.
b) The Company will determine asset values each settlement period and will study the potential for sale of any
property which has lost more than 20% in appraised value compared to book value. However, the Company
may also consider the sale of other properties as warranted by market environment and other factors. The
following are the main considerations in making sales decisions:•Market forecast•Development forecast for the surrounding area
•Profitability forecast•Estimated cost of future investments•Forecast changes in asset price•Considerations of the portfolio as a whole (diversification by geographical location, tenant and use, etc.;
impact on dividends, etc.)
4) Investment standards
When investing in individual property pieces of real estate, asset backed securities with real estate as their primary
investments, and other investments, the Company will, prior to making the investment, perform a general evaluation

40 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P38-48-5/1 03.5.9 5:48 PM ページ 41

considering the status, future profitability, risk, location, building and facilities maintenance and management, deterioration and obsolescence, earthquake resistance, rights, contracts with current tenants, environment, topography and otherfactors.
After acquisition of the investment, the Company will make ongoing and effective investments in facilities and equipment so as to maintain and improve the value and competitiveness of the asset, and will seek to stabilize and expand profitability by increasing revenues and reducing costs.
Below are the major specific investment criteria for the Company.
i) Geographical location
Real estate to be invested in will be located in the following cities:a) Major urban areas: CBDs in Tokyo, Yokohama, Kawasaki, Chiba, Saitama, Nagoya, Osaka, Kyoto and Kobeb) Other government-designated cities: CBDs in Sapporo, Sendai, Hiroshima, Fukuoka, Kitakyushu and othersc) Other core cities such as prefectural capitals with populations of 300,000 or more
When investing in retail facilities, the Company will identify and determine an appropriate business area for
the facility; analyze the business area from a variety of perspectives, including population, demographic
trends, number of households and average income; appropriately measure the latent buying power andgrowth potential of the business area; and determine the suitability of the tenants and their businesses to thebusiness area. The Company will also study and analyze competitiveness from a variety of perspectives,
including current market competition, plans for the opening of competitive stores in the vicinity, and futureroom for development.
ii) Sizea) Offices
In principle, the Company will invest in office buildings with total floor space of at least 3,300 square metersthat are at least two stories high and have standard floors with floor space of approximately 330 square
meters.
b) Retail facilities
In principle, the Company will invest in retail facilities with total floor space of at least 10,000 square metersof an appropriate size in light of the future growth potential of the region as determined from the local characteristics, size of business area and standard size for similar businesses for each property.
iii) Facilities and equipmenta) Offices
The Company will invest in office buildings with qualifications that are superior to standard qualifications
for the locale in areas such as the following: shape and divisibility of rental spaces; floor and ceiling height;
flooring specifications; common facilities specifications; electrical power capacity; air-conditioning.
b) Retail facilities
The Company will decide on retail properties individually, comparing them against standard qualifications
for the business sector and judging from overall factors, including the characteristics of the local community
in which the facility is located, versatility as a retail facility, potential for conversion to other uses, andmeans of transportation employed by visitors etc.
iv) Earthquake resistance
The Company will in principle invest only in buildings that meet the New Anti-Seismic Standards or for whichanti-seismic reinforcement work has been completed (includes properties for which anti-seismic reinforcement
work has not been done if it is possible to do this work after acquisition).
v) Tenantsa) Offices
In principle, no single tenant will occupy more than 50% of a property (parent companies and their subsidiaries are considered a single tenant). If a tenant occupies more than 50%, the Company will make ageneral evaluation of the tenant’s creditworthiness, suitability and substitution potential.
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JPR P38-48-5/1 03.5.9 5:48 PM ページ 42b) Retail facilities
There is no restriction on the amount of floor space occupied by any single tenant in any single property, but
in the selection of tenants, the Company will make a general evaluation of the tenant’s creditworthiness,suitability and substitution potential.
vi) Rightsa) Joint investments•The Company will in principle seek a joint equity ratio in excess of 50% in order to assure sufficient latitude
in management (leasing, improvements, etc.), but may make individual decisions based on the nature of theother owners, their creditworthiness and other factors.
•The Company will, in order to assure sufficient latitude in disposal of the property, confirm whether special
contracts or other agreements providing for priority purchasing rights among the other owners will be executed, and whether restrictions will be placed on transfer of rights, and if so, the nature of these restrictions.
•The Company will attempt to assure the stability of revenues by fully confirming the nature and creditworthiness of other owners and, where possible, providing for appropriate mechanisms. (This may include, but is
not limited to, signing contracts prohibiting the division of joint equity and reaching agreements on the registration of land rights and the mutual use of land.)b) Unit ownership•The Company will, in principle, reserve to itself at least 75% of voting rights in meetings attended by unit
owners in order to assure sufficient latitude in improvements (pursuant to Article 38 of the Law Concerning
Unit Ownership of Buildings, etc. [Law No. 69 of 1962, including all subsequent amendments; referred to as
the “Unit Ownership Law” hereinafter]. However, it may make individual decisions based on a general evaluation of the nature and creditworthiness of other unit owners.
•The Company shall, in order to assure sufficient latitude in disposal of the property, confirm whether
special contracts or other agreements providing for priority purchasing rights among the other owners will be
executed, and whether restrictions will be placed on transfer of rights, and if so, the nature of these restrictions.
•The Company will attempt to ensure the stability of revenues by confirming the operations of the management union (reserves, liability ratios, insurance, etc.) and will take such individual measures as are required.
(This may include, but is not limited to, increasing reserves within the Company itself, or providing for insurance on the joint areas and registration of land rights separately from the management union.)c) Leaseholds•The Company will, in principle, invest in leaseholds as specified in the old Leasehold Law (Law No. 49 of
April 8, 1921; including all subsequent amendments; referred to as the “Leasehold Law” hereinafter) and theLand and Building Leasing Law (Law No. 90 of 1991; including all subsequent amendments; referred to as
the “Land and Building Leasing Law” hereinafter).
•The Company will carefully study the nature of the proprietary right holder of land and will make its decision after fully studying the impact of the provisions for leasing fee revisions, charges for renewing theleasing contract, charges for approval of rebuilding proposals, charges for the approval of sales proposals andother factors in profitability.
d)Collateral rights and usufructuary rights•The Company will confirm whether there are mortgages or other collateral rights on real estate that it proposes to purchase at the time of purchase, and whether it is possible to extinguish mortgage rights at thetime of purchase.
•The Company will make its decision after confirming whether there are usufructuary rights (for example,
surface rights or easements) set forth by third parties and the impact said rights will have on profitability.

42 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P38-48-5/1 03.5.9 5:48 PM ページ 43vii) Investment amounta) Minimum investment amount per property
The minimum investment amount per property (only the purchasing price, exclusive of taxes, acquisition
costs, etc.) will in principle be ¥1 billion.
b) Maximum investment amount per property
The ceiling on the investment amount per property will be one-third of the “total price of real estate, asset
backed securities and other investments already held.” In making investment decisions, the Company will
fully study the appropriateness of the price for the property. The “total price of real estate, asset backed securities and other investments already held” refers to the total appraised value of investments up to the previous period, plus the purchasing price of investments purchased in the current period (exclusive of taxes,
acquisition costs, etc.), plus the amount to be invested in the new investment (exclusive of taxes, acquisition
costs, etc.).
c) Restrictions on acquisition price
The book value for investments including real estate and asset backed securities will in principle be themarket price for the investments, or, if there is no market price, 105% of the appraised value of the investments. However, in order to eliminate conflicts of interest, purchases from interested parties will be theappraised price or less. (“Interested parties” here refers to investors in the asset management company,
parties nominating directors and/or employees to the asset management company, or their affiliates, which
differs from “interested parties, etc.” as defined in Article 15:2:1 of the Investment Trust Law, meaning
parties owning a majority of stock in the asset management company or other parties deemed by government
ordinance to have close relations with the asset management company.
viii) Selection guidelines concerning real estate acquisition ownership type
The Company acquires real estate under direct ownership or on an entrusted basis, acquiring beneficial rights
to the property. The decision as to which form of ownership JPR will take is determined after considering therequirements of the existing owner, the cost of transferring rights, and a number of other factors.

B. Financial Policies
1) Fund management policies
I) Leasehold and security deposits•For real estate in trust
All leasehold and security deposits by tenants will be accumulated within the trust account, but the Company
may consider reducing the reserve amount if warranted by accumulated historical data, the establishment ofcommitment lines and other provisions.
•For real estate, real estate leaseholds and surface rights
Leasehold and security deposits by tenants will be deposited in full to a commercial bank savings account or time
deposit account. However, the Company may reduce reserves in order to more effectively utilize these funds if
warranted by accumulated historical data, the establishment of commitment lines and other provisions for the
maintenance of efficiency and security.
II) Cash and bank deposits in the trust account (for real estate in trust)
All cash will be deposited in ordinary savings accounts or time deposit accounts at banks with short-term debt
ratings of at least P-2 from Moody’s.
III) Cash and bank deposits in the Company accounts
The provisions of II) above will apply to cash and bank deposits in the Company accounts. However, this will notinclude savings accounts established for use in the execution of loans by financial institutions or the payment ofinterest on loans.
Surplus funds will in principle be paid out in the following order of priority; any balances will be administeredas described above.
JAPAN PRIME REALTY INVESTMENT CORPORATION

43JPR P38-48-5/1 03.5.9 5:48 PM ページ 44•Reinvestment (refers to a use in purchasing properties or capital expenditures)•Cash distribution to investors (however, no cash distributions will be made to investors in excess of profits in theabsence of changes in current tax treatment of cash distributions in excess of profits)•Partial repayment of borrowings (however, this will be given the highest priority when the repayment maturity
date arrives for monetary consumption loan contracts, regardless of the priorities listed above)IV) Derivatives
The Company will use financial futures, options and other derivatives only for the purpose of hedging interest
rate fluctuation risks and other risks generated by the liabilities of the Company.
2) Issuance of additional investment units
The Company may issue additional investment units in a progressive manner for the purpose of assuring stable, long-term
asset growth as warranted by an accurate assessment of the market and upon consideration of the dilution effects to existing units (reduction in equity of existing units from the issuing of new units; reduction in the per-unit net asset value orcash distribution of existing units).
3) Borrowings and issuance of bondsI) Basic policies
The Company will seek to actively expand the size of assets and maintain stable cash distributions to investors byachieving an effective combination of stable long-term fund-raising and dynamic short-term fund-raising.
II) Loan to value (LTV)“Loan to value” (LTV) refers to a ratio calculated as shown below and will be used as a measurement of the ratioof liabilities to total assets of the Company.
LTV=(Borrowings + bonds) / Total assets
Note: For purposes of this calculation, total assets refers to the amount shown in the assets column of the periodend balance sheet for the most recent period prior to the calculation of LTV, and is found by adjusting the periodend book value of tangible fixed assets for the difference between the period-end book value of the tangible fixed
asset and its appraised value or estimated value in a price opinion statement.
The Company will in principle maintain LTV at levels of no higher than 55%, but may temporarily exceed thislevel due to the acquisition of properties or changes in appraised values.

C. Property-Related Business Administration Policies“Property-related business” refers to property management, general tenant agency, lease manager/construction manager
services and property transfers.
This business is necessary and effective for the achievement of growth for the Company. The Company will administer
this business in accordance with the following policies.
1) Importance of the Asset Manager and Property Manager
The growth of the Company requires integrated management by the Asset Manager (AM) and expert management by theProperty Manager (PM), with the PM overseeing the facilities management, leasing management and construction management of individual properties.
In order to achieve more integrated management, the AM may seek the advice of third parties regarding rental business management and construction plans for real estate invested in. The Company initially selected Tokyo Tatemono Co.,
Ltd. as the party to provide this advice (the Lease Manager/Construction Manager).
The AM will select PMs with high degrees of management expertise, seek to concentrate the PMs for each geographicalregion, rigorously seek to homogenize management across the portfolio, and work to maximize unitholder profits.
The following guidelines will, for the foreseeable future, apply in PM selection.

44 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P38-48-5/1 03.5.9 5:48 PM ページ 45•Properties acquired from interested parties: Existing management consignment contracts will be maintained until
their expiration because of the superior knowledge that existing management companies have of tenants and locations.
Thereafter, consideration may be given to changes in the management company as warranted by efficiency andperformance.
•Properties acquired from non-interested parties: The PM will be selected by a comparison of Tokyo Tatemono andother PM specialists.
2) Use of Commissioned General Tenant Agents
General tenant agency will be commissioned to Tokyo Tatemono Co., Ltd., Yasuda Real Estate Co., Ltd., Taisei Corporationand other agents (Commissioned General Tenant Agents).
3) Smooth execution of property purchases and sales
Tokyo Tatemono Co., Ltd. will be commissioned to provide property transfer services in order to ensure the smooth execution of property purchases and sales. This will not be limited to the real estate, real estate leasing rights and surface
rights, but will include real estate in trust as well. Services will include confirmation of leasing status, confirmation ofbuilding and facility maintenance and management, confirmation and establishment of rights, preparation and confirmation of delivery and other ancillary work.
4) Other policies
I) The Company will administer its assets in such a way that the ratio of real estate, real estate leasing rights,
surface rights, real estate in trusts (refers only to trusts covering real estate, surface rights or land leaseholds),
and equity in anonymous partnerships (refers to contracts specifying only investments in real estate, surface
rights or real estate leasing rights), to total assets is 75% or more, which is the ratio established by Ministry of
Finance Ordinance No. 44 of June 6, 2001.
II) The Company will administer its assets in such a way that the ratio of the total price of designated real estate(real estate, real estate leasing rights, surface rights, or real estate in trusts for which real estate, land leaseholds, or surface rights are the entrusted assets) to the total price of designated assets owned by the Company(the “designated real estate ratio” hereinafter) is 75% or more.
III) The Company will administer its assets in such a way that the ratio of the total price of real estate acquired eachyear (from April 1 to March 31 of the following year), between April 1, 2002 and the termination by the special
exceptions to real estate acquisition taxation standards, to the total price of designated assets acquired during
the same year is at least one half of the designated real estate ratio.
IV) The Company may modify the above ratios at any time after investment commences as warranted by factors suchas funding trends, market trends, general economic conditions, and real estate market trends.
V) Lending of assets in portfolioa) The Company may lend (for such purposes as parking space and the installation of billboards) real estate,real estate leasing rights and surface rights from among the assets listed in “A. Investment Policies 2) Typesof investment assets” above in order to more efficiently administer assets and achieve higher investment performance.
b) If the lending of real estate described in a) above results in the acceptance of leasehold and security deposits
or other similar cash funds, the acceptance of these funds will follow the guidelines listed in “B. Financial
Policies 1) Fund management policies I) Leasehold and security deposits” above.
c) The Company shall not lend assets other than real estate, real estate leasing rights and surface rights.

D. Distribution Policies
The Company’s fiscal period is the six months, from January 1 to June 30, and from July 1 to December 31, each year. The
Company makes cash distributions to unitholders listed on the unitholders’ list at the end of each fiscal period, or toJAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P38-48-5/1 03.5.9 5:48 PM ページ 46

eligible registered pledgees.
1) Distributable amount
Income available for distribution by the Company (the “distributable amount”) equals the amount calculated byadding/deducting capital gains/losses and gains/losses on redemption to rent, common expenses, parking charges, additional service charges, facility charges, facility installation fees, late payment penalties, termination penalties or similar
cash related to termination of lease agreements generated from real estate (including beneficial interests and underlying
properties of any other assets acquired by the Company) and other income, interest/dividend income and similar income
generated from other rental business and deducting expenses (including depreciation and amortization), interest payments, asset management fees, and after covering the entire amount of net loss carried forward if it exists.
2) Determining amount of distribution
The Company determines the amount of distribution, which must exceed 90% of the Company’s distributable income as
stipulated in Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including all subsequent amendments). However, the actual amount of distribution may not exceed the distributable amount, as defined above. In addition, the Company can reserve funds for capital expenditure, interest payment, dividend payment, or similar purposes,
which are necessary for maintenance of or increasing the value of assets.
3) Retained earnings
Retained earnings not distributed from the distributable amount will be allocated based on the asset management policy of
the Company.
4) Distribution of cash exceeding earnings
In cases when the distribution is less than 90% of the distributable amount, or when the Company makes an appropriate
decision based on the trend of the economic environment, the real estate market, the leasing market or other conditions,the Company may distribute cash which exceeds earnings for the relevant period, as the sum of the distribution amount
set in 2) above and the amount decided by the Company with the upper limit of the depreciation amount reported at theend of the fiscal period. In such a case, if the cash distribution does not meet the conditions of special tax treatments for
the Company, the amount decided by the Company for the purpose of meeting the conditions may be distributed in cash.
As long as the current tax treatment requires investors to calculate capital gains/losses each time such investors
receive cash distribution exceeding earnings, the Company is not to conduct cash distribution exceeding earnings toinvestors. However, if the board of the Company decides that cash distribution exceeding earnings is required to satisfy the“qualification test of distribution deductible,” the distribution exceeding earnings is allowed following the above distribution policy.
5) Method of distribution
Distributions are paid in cash to unitholders who are listed on the final unitholders’ list at the end of each fiscal period, or
to eligible registered pledgees, based on the number of investment units held within three months, in principle, from theend of each fiscal period.
6) Extinctive prescription
The Company will be released from its payment obligation of distributions after the lapse of three years from the date ofstarting payment. No interest is payable in respect to unpaid distributions in arrears.

46 JAPAN PRIME REALTY INVESTMENT CORPORATIONJPR P38-48-5/1 03.5.9 5:48 PM ページ 47

U N I T H O L D E R I N F O R M AT I O N

Breakdown of Unitholders (As of December 31, 2002)
By Number of Units Held
Individuals and others

15.7%
Financial institutions

Foreign investors

Total

15.4%

42.9%

100%
Other domestic
corporations

26.0%

By Composition
Financial institutions

Other domestic corporations

0.5%

1.5%
Foreign investors

0.2%
Total

100%
Individuals and others

97.8%

Major Unitholders (As of December 31, 2002)
Units

(%)

48,000

16.57

Tokyo Tatemono Co., Ltd.

39,30013.57

Goldman Sachs International

23,932

8.26

Japan Trustee Services Bank, Ltd.

16,426

5.67

Kawasaki Gakuen

10,000

3.45

Yasuda Real Estate Co., Ltd.

10,0003.45

Morgan Stanley International

8,665

2.99

The Daisan Bank, Ltd.

7,000

2.41

The Hiroshima Bank, Ltd.

6,052

2.08

The Chugoku Bank, Ltd.

5,880

2.03

The Yasuda Mutual Life Insurance Company

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR P38-48-5/1 03.5.9 5:48 PM ページ 48

MEMBERS OF THE BOARD

Title

Name
Biography
Number of Investment Units Held

Japan Prime Realty Investment Corporation

Tokyo Realty Investment Management, Inc.

Executive Officer

Hirohito Kaneko

President and CEO

0

Dec. 19, 2001 Executive Officer of Japan Prime Realty Investment
Corporation
Apr. 1, 1979 Representative Counsel (currently on service)of Hirohito Kaneko Law Office
Apr. 1, 1977 Bar admission (Tokyo Bar Association)
Shigeru Yamada Law Office

Toshihiro Hagiwara
2001
1999
1998

1992
1989
Supervising Officer

Sosuke Yasuda0

Sept. 14, 2001 Supervising Officer, Japan Prime Realty Investment
Corporation
Oct. 1, 1999 Director and Senior Partner (currently on service),
Tokyo Hokuto & Co., (Tokyo Akasaka Audit Co.
and Hokuto Audit Co. merged)
July 2, 1993 Senior Partner, Tokyo Akasaka Audit Co.
Feb. 16, 1983 Representative of Tokyo Akasaka CPA Joint Office
June 27, 1980 Sosuke Yasuda Tax Accountant Office(currently on service)
Dec. 1, 1975 Masamitsu Serizawa Accounting Firm
Apr. 1, 1968 Main Store, KK Ohgiya

1985
1968

Director and Chief Financial Officer

Takeshi Maki
2001
2000
1991
1989

Supervising Officer

Shigeru Sugimoto
Sept. 14, 2001 Supervising Officer, Japan Prime Realty Investment
Corporation
June 1, 2001 Auditor, Morimoto Co., Ltd. (currently on service)
Oct. 2, 1999 Representative Director of Tokyo SPC Services(currently on service)
June 24, 1998 Senior Partner (currently on service) of Horwath
Sakura & Co. (ex- Sakura Audit Corporation)
Dec. 1, 1996 Horwath International
Dec. 22, 1995 Sakura Audit Corporation
July 1, 1988 Representative Director of Sakura & Co.
(currently on service)
Nov. 1, 1985 Ohta Showa Audit Corporation
Apr. 1, 1982 Housing and Urban Development Public
Corporation

0
President, Tokyo Realty Investment Management, Inc.
Director and Head of Osaka Branch Office
Head of Development Business Department of
Kinshicho Project (Tokyo) and led negotiations forcity planning of large-scale development of morethan 28,000m2
Director of Secretary’s Office and Human Resources
Planning of redevelopment scheme connecting
Akihabara and Okachimachi (Tokyo) for JR East
Urban Development Corporation (Joint Venture ofJapan Railway East)
Property management and acquisition businesses of
Building Department
Tokyo Tatemono Co., Ltd.

0

1983
1973

0
Director and Chief Financial Officer, Tokyo Realty
Investment Management, Inc.
General Manager of Pension Management Department
Manager of International Investment Department incharge of investments in overseas real estate andfinancing activities
Investment Banking Division of Paine Webber Japan
Inc. in Tokyo, where he was involved with M&A andIPO businesses
New York representative office of Yasuda Life
Finance Department of The Yasuda Mutual Life
Insurance Company

Director and Chief Investment Officer

Yukio Furuya
2000
1999
1998
1993
1990
1981

0
Director and Chief Investment Officer of Tokyo
Realty Investment Management, Inc.
Group leader of the Sales Planning Group
Structured a system of property management services
Tenant-leasing team leader
Took charge of tenant leasing
Tokyo Tatemono of America
Tokyo Tatemono Co., Ltd. Engaged in real estate
investment, leasing to tenants and appraisalsof real estate

Director and Chief Administrative Officer

Shuichi Yoneta
2001
1998

1981

48 JAPAN PRIME REALTY INVESTMENT CORPORATION

Director and Chief Administrative Officer of Tokyo
Realty Investment Management, Inc.
Manager of Real Estate Planning Group of Real
Estate Department
At the same time, responsible for internal rules,
regulations and legal matters
The Yasuda Mutual Life Insurance Company

0JPR C1-4-4/30 03.5.9 5:51 PM ページ 49

PROFILECORPORATE DATA

Established on September 14, 2001, Japan Prime Realty Investment Corporation
is a closed-end, corporate type fund that invests primarily in

Head Office
9-9 Yaesu 1-Chome, Chuo-ku, Tokyo 103-8285, Japan
Tel: 81-3-3231-1051
Fax: 81-3-3274-7775

Mailing Address

high-quality office buildings and retail properties

Date of Establishment
September 14, 2001

located in Tokyo and other major cities in Japan.

Listing
Tokyo Stock Exchange (Securities Code: 8955)

With its geographically diverse portfolio, JPR’s primary objective is to achievesustainable growth and stable cash distribution to its investors.

Location of Records
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo
Main Branch, Stock Transfer Agency Division
Mizuho Trust & Banking Co., Ltd.
1-17-7 Saga, Koto-ku, Tokyo 135-8722
Stock Transfer Agency Division
0570-000324 (Direct)+81-3-3642-4004 (Representative)
Mizuho Trust & Banking Co., Ltd.
(All branches nationwide)
Mizuho Investors Securities Co., Ltd.
(Head Office and all branches nationwide)

Telephone
AgentsFiscal Period Ends
June 30 and December 31 of each year
General Meeting of Unitholders
More than once every two years
Cash Distribution Payment Eligibility
Unitholders of record as of June 30 and December 31 of each year

Note: On March 12, 2003, Mizuho Trust & Banking Co., Ltd. merged with Mizuho
Asset Trust & Banking Co., Ltd., to establish a new trust and banking entity under
the name of Mizuho Trust & Banking Co., Ltd. As a result, Mizuho Trust & Banking's
main branch changed its address on the same date.

Web Site
http://www.jpr -reit .co. jp/jpr_e/index.html

Transfer Agent
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo

English page
This Web site has been created specificallyfor our English-speaking readers.

Performance
Trends in occupancy rate by areaand purpose; trends in investment
conditions. Updated monthly.

FAQ
Answers to commonly asked
questions by our unitholders andinvestors are found here.

Investor Relations

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Note: Performance Information Report is prepared pursuant to the Investment Trust Law of Japan.

CONTENTS To Our Investors 1 Financial Highlights 3 Portfolio Breakdown 5 Activity Highlights 7 Property Portfolio of JPR 10
REIT Structure and External Service Providers 21 Management’s Discussion and Analysis 24 Financial Statements 28 JPR Investment Policies 38
Unitholder Information 47 Members of the Board 48 Corporate Data 49

News releases are posted here as appropriate, as well as information
useful to unitholders and investors in evaluating the status of JPR,
including financial statements and other legally mandated reports.

This document contains a translation of selected information described in the Financial Report (Kessan Tanshin) dated February 28, 2003 prepared under the timely disclosure
requirements of the Tokyo Stock Exchange, as well as the Financial Statements and Performance Information Report prepared pursuant to the Investment Trust Law of Japan, for theperiod from July 1, 2002 to December 31, 2002 of Japan Prime Realty Investment Corporation (“JPR”).
This English language document was prepared solely for the convenience of and reference by non-Japanese investors and is not intended to constitute a disclosure document. The
Japanese language Financial Report, Financial Statements and Performance Information Report for the aforementioned period should be referred to as the originals of this document.
English translations for legal, accounting, tax and business concepts used herein may not convey precisely identical concepts of the equivalent Japanese terms. With respect to any
and all terms herein, including without limitation, financial statements, if there exist any discrepancies in the meaning or interpretation thereof between the original Japanese documents
and English documents contained herein, the original Japanese documents will govern the meaning and interpretation. Neither JPR, Tokyo Realty Investment Management, Inc. nor anyof their respective directors, officers, employees, partners, unitholders, agents or affiliates will be responsible or liable for the completeness, appropriateness or accuracy of English
translations or the selection of the portion(s) of any document(s) translated into English. No person has been authorized to give any information or make any representations other thanas contained in this document in relation to the matters set out in this document, and if given or made, such information or representation must not be relied upon as having beenauthorized by JPR, Tokyo Realty Investment Management, Inc. or any of their respective directors, officers, employees, partners, unitholders, agents or affiliates.
The financial statements of JPR have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP), which may materially differ in certain
respects from generally accepted accounting principles in other jurisdictions.
Many provisions of this document contain information that constitutes forward-looking statements. These forward-looking statements are not a guarantee of future performance andinvolve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors.

JAPAN PRIME REALTY INVESTMENT CORPORATION

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JPR
Japan Prime Realty Investment Corporation
Business Report
July 1, 2002–December 31, 2002

Printed in Japan