Top REIT, Inc.
16th Business Report(Semi-Annual Report 16th)

November 1, 2013 – April 30, 20141

Letter from the Executive Officer of the Investment Corporation and the President of theAsset Management Company
Dear Investors,
Thank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
The Japanese economy is on a gradual recovery trend as can be observed in the significant recovery inperformance of some companies backed by an increase in public investment, expansion in domestic demand andfull-fledged recovery of the U.S. economy. Although personal consumption and housing investment are impacted
by the consumption tax hike, consumer sentiment continues to be strong with expectations for an improvement in
the employment and income environments. In such an economic environment, the business sentiment ofcompanies is on a recovery trend and capital investment by companies is gradually becoming more active.
As for the stock market, although it saw significant on-balance buying by overseas investors last year as foreign
capital continuously flowed into Japanese stocks from the anticipation of an economic recovery, it currently has
temporarily turned to on-balance selling due to the consumption tax hike and uncertainty over the growth strategy,
which is the third arrow of Abenomics.
On the other hand, the J-REIT market has maintained underlying strength backed by the investment appetite fromindividual investors via NISA as its high returns were reaffirmed in addition to the improvement in the vacancy
rates of office buildings and increase in land prices. Against the backdrop of this favorable environment for fundprocurement, many J-REITs also conducted public offerings during the fiscal period.
Top REIT also implemented a capital increase through public offering of new investment units in November 2013
for the first time since listing. In line with the capital increase, Top REIT newly acquired two office buildings andone retail property totaling 12.3 billion yen, which increased the asset size to 197.8 billion yen. Top REIT willcontinue its efforts toward reaching an asset size of 210.0 billion yen that it has targeted since listing (an asset sizethat keeps the investment ratio of NEC Head Office Building, the flagship property, at 20% or less of the entire
portfolio).
Furthermore, Top REIT focused on management of existing assets and realized attracting successor tenants atearly stages into office buildings and residential properties from which tenants had moved-out. Under thesecircumstances, the financial results of Top REIT in the sixteenth fiscal period (fiscal period ended April 30, 2014)
were operating revenue of 5,637 million yen (period-on-period increase of 9.4%), ordinary income of 1,913
million yen (period-on-period increase of 21.0%), net income of 1,913 million yen (period-on-period increase of
21.2%) and dividend per unit of 10,864 yen (period-on-period increase of 6.6%), the dividend which surpassed theforecast announced in December 2013 by 414 yen.
In the current real estate transaction market, the investment appetite from domestic and overseas investors isstrong and real estate prices are on a sharp rising trend. In the real estate leasing market, a rise in rents for officebuildings, etc. is expected due to the recovery in corporate performance. The environment surrounding J-REITs is
becoming increasingly stable due to significant changes including improved credibility from the market due to it
becoming subject to insider trading regulations and investment in J-REITs being initiated by the Government
Pension Investment Fund, Japan (GPIF), one of the world’s largest pension funds, through the adopting of a newindex. Top REIT will continue to conduct management with the aim of maximizing investment value for its
unitholders through collaboration with the asset manager and the sponsor. We want to thank you, our unitholders,for your continued support and understanding.

Junichi Sahara

Nobuhito Endo

Executive Officer
Top REIT, Inc.

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

2

Financial Highlights

CATEGORY

16TH FISCALPERIODPERFORMANCE

17TH FISCALPERIODFORECAST(ANNOUNCED ON
June 16, 2014)18TH FISCALPERIODFORECAST(ANNOUNCED ON
June 16, 2014)

PERIOD OF ASSETMANAGEMENT

181days184days181days

OPERATING REVENUE¥5,637million¥5,758million¥5,454million

OPERATING INCOME¥2,528million¥2,483million¥2,253million

ORDINARY INCOME¥1,913million¥1,866million¥1,637million

NET INCOME¥1,913million¥1,865million¥1,636million

DIVIDEND PER UNIT

¥10,864¥10,600¥9,300NUMBER OF INVESTMENT UNITS

176,000 units

176,000 units

176,000 units

PORTFOLIO SIZE

22 properties

22 properties

22 properties

Preconditions for 17h Fiscal Period and 18th Fiscal Period Forecasts(1) Portfolio Assets
The forecast is based on 22 properties Top REIT owns as of June 16, 2014.
(2) Number of Investment Units Outstanding
It is assumed that the number of investment units outstanding is 176,000 units, the number as of June
16, 2014.
(3) Operating Revenue
For real estate rent revenue related to existing properties, Top REIT takes into consideration executionof new lease agreements and cancellation of lease agreements that have been finalized and scheduled,along with current real estate leasing market conditions, as well as factors that may cause fluctuations
in such aspects as risks associated with rent revision due to fluctuations in rent of tenants reaching
their rent revision period or contract renewal period.
(4) Interest-Bearing Liabilities
It is assumed that the total amount of interest-bearing liabilities is ¥100,430 million, which is theamount as of June 16, 2014.
The ¥4,000 million loan payable due for repayment on June 30, 2014 will be fully refinanced and aloan agreement has already been concluded.
For the seventeenth fiscal period, it is assumed that the ¥67 million in long-term loans payable will be
repaid on June 30, 2014 as agreed upon.
For the eighteenth fiscal period, it is assumed that the ¥67 million in long-term loans payable will be
repaid on December 30, 2014 as agreed upon.
(5) Dividend per Unit
With regard to the internal reserves of ¥78 million, Top REIT will not reverse the amount of internal
reserves for the seventeenth and eighteenth fiscal period.

3

I.

ASSET MANAGEMENT REPORT【1】Overview of Asset Management Operation
1. Operating Results and Financial Position
Fiscal period

12th

13th

14th

15th

16th

As of/for six months endedApril 30,
2012

October 31,
2012

April 30,
2013

October 31,
2013

April 30,
2014.

(1) Operating results
Operating revenue

mil yen

5,693

5,636

5,844

5,154

5,637

(Of which, rental revenue)

mil yen

5,437

5,636

5,844

5,154

5,637

Operating expenses

mil yen

2,921

2,939

3,397

2,981

3,108

(Of which, expenses related to rental
business)mil yen

2,383

2,384

2,848

2,438

2,622

Operating income

mil yen

2,772

2,697

2,447

2,172

2,528

Ordinary income

mil yen

2,029

2,002

1,823

1,580

1,913

Net income

mil yen

1,999

2,001

1,822

1,579

1,913

(2) Assets, etc. (end of period)
Total assets(Period-on-period variation)

mil yen%

188,407
1.6

188,4400.0

187,003(0.8)

186,169(0.4)

200,802
7.9

Interest-bearing liabilities

mil yen

96,97096,902

96,06595,997

100,430

Net assets(Period-on-period variation)

mil yen%84,2590.0

84,3040.1

84,127(0.2)

83,871(0.3)

93,081
11.0

Unitholders’ capitalmil yen82,26082,26082,26082,26091,143mil yen

1,949

2,001

1,822

1,579

1,912

%

97.5

100.0

100.0

100.0

99.9

Number of units Outstanding

units

155,000

155,000

155,000

155,000

176,000

Net assets per unit (Note 3)

yen543,610

543,900

542,758

541,105

528,873

Dividend per unit

yen

12,577

12,912

11,75910,191

10,864(Earnings distribution per unit)

yen

12,577

12,912

11,75910,191

10,864(Distribution in excess of earnings per unit)

yen

－

－

－

－

－

%

1.1<2.2>

1.1<2.1>

1.0<2.0>

0.8<1.7>

1.0<2.0>%

2.4<4.8>

2.4<4.7>

2.2<4.4>

1.9<3.7>

2.2<4.4>

%

44.7
(0.7)

44.7
0.0

45.0
0.3

45.1
0.1

46.4
1.3

%

51.5

51.4

51.4

51.6

50.0

mil yen

4,126

4,368

4,117

3,831

4,207

Number of properties at end of period

cases

18

18

19

19

22

Number of tenants at end of period (Note 6)

cases

40

42

39

40

49

Total rentable area at end of periodm2

300,294.23

300,294.23

301,825.87

301,825.87

331,677.14

%

98.5

99.2

94.5

96.7

98.1

Depreciation and amortization at end of
periodmil yen

1,072

1,116

1,121

1,115

1,193

Capital expenditure at end of period

mil yen

442

108

443

176

511

(3) Cash distributions
Total cash distributions
Dividend payout ratio (Note2)(4) Per unit information(5) Financial indices
Ratio of ordinary income to total assets(Note 4)
Ratio of net income tounitholders’ equity (Note 4)
Ratio of unitholders’ equity to total assets(Period-on-period variation)
LTV
Rental NOI (Note 5)(6) Other referential information

Occupancy rate at end of period(Note 7)Note 1: Operating revenue, etc. do not include consumption taxes, etc.
Note 2: Since fund procurement through public offering was conducted during the period and the number of investment units has changed
accordingly, Dividend Payout Ratio for the 16th FP is calculated as below
Dividend Payout Ratio= Total Amount of Dividends (excluding dividend in excess of earnings) / Net Income ×1004Note 3: Net assets per unit for the 15th fiscal period and before have been rounded to the nearest yen and net assets per unit for the 16th fiscal period
has been rounded down to the nearest yen.
Note 4: The indices above are calculated using the following formulas. In addition, annualized figures derived from the management period are
indicated in brackets<>.
Ratio of ordinary income to total assets ＝ Ordinary income /((Total assets at beginning of period＋Total assets at end of period)/2)×100
Ratio of net income to unitholders’ equity ＝Net income/((Net assets at beginning of period＋Net assets at end of period)/2)×100
Note 5: Rental NOI (Net Operating Income) ＝Rental revenue－Expenses related to rental business＋Depreciation and amortization.
Note 6: Number of tenants at end of period indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units are in the same
property and as multiple tenants if the units are in multiple properties.
Note 7: Occupancy rate at end of period＝Total leased floor areas at end of period/Total leasable floor areas at end of period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants have been used as the leased
floor area.
Note 8: Unless otherwise mentioned in the report, fractions of figures not indicated are rounded off for monetary amounts and rounded for ratios.

52. Overview of Asset Management Operation for the Sixteenth Fiscal Period
A. Brief Background of Top REIT
Top REIT, Inc. (Top REIT) was founded on November 2, 2005 based on the Act on Investment Trusts
and Investment Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co.,
Ltd. (Asset Manager) as the incorporator, and listed on the Real Estate Investment Trust Section of theTokyo Stock Exchange (TSE) (Securities Code: 8982) on March 1, 2006 with the number of investment
units issued and outstanding totaling 145,500 units. As of the end of the sixteenth fiscal period (April 30,2014), the total number of investment units issued and outstanding stands at 176,000 units due to Top
REIT issuing additional investment units through public offering (21,000 units; including a third-party
allotment during the sixteenth fiscal period).
Top REIT works to conduct management with the aim of maximizing the investment value for its
unitholders by securing stable revenues over the medium to long term and achieving steady growth of its
portfolio. To do so, Top REIT focuses on the two strategies of “skilled management of a diversified
portfolio” and “optimal application of the sponsors’ strengths.” As of the end of the sixteenth fiscal
period, its portfolio consists of 22 properties with a total acquisition value of ¥197,855 million.
B. Investment Environment and Management Performance<Investment Environment>(a)Economy in General
The Japanese economy has continued on a mild recovery affected by the government’s dynamic public
spending package and continuous monetary easing by the Bank of Japan. Capital investment bycompanies is beginning to become active with improved corporate earnings and an increase ingovernment investments. Personal consumption and housing investment have maintained underlying
strength with expectations for an improvement in the employment and income environments despite theimpact from the consumption tax hike in April this year. Some companies are showing significant
recovery in performance due to the depreciating yen and high stock prices. Although caution remains,
the business sentiment of companies continues to recover. Going forward, the economy is expected tosustainably improve due to the economic ripple effect from infrastructure construction in line with the
hosting of the 2020 Olympic Games in Tokyo among other factors.
(b)Real Estate Leasing Market[Office Buildings]
A recovery in corporate performance has generated tenant movement for leasing more floor area within
the same property and relocating for expanded spaces. In addition, the supply-demand balance has been
improving due to factors such as relocations to blue-chip office buildings seeking business continuity
plans (BCP) and energy saving measures, thus the vacancy rate of office buildings in central Tokyo
shows a downward trend. As for rent levels, some regions or properties are seeing rises in new asking
rents and the decrease in rents has been easing recently.
[Retail Properties]
In line with the recovery in business sentiment and wage increases centering on major companies,
consumer sentiment continues to improve and personal consumption is going strong. Even the decrease
due to the temporary backlash from the consumption tax hike in April 2014 was relatively small and therecovery in personal consumption is expected to continue going forward. However, with the anticipateddecrease in population on the macro level and the ongoing expansion of the E-commerce market sizedue to factors such as the increased internet penetration rate on the micro level, the demand for retailproperties, which are physical stores, will become more selective regardless of business type in the faceof competition with online businesses.
[Residential Properties]
The residential properties leasing market is experiencing an increase in the number of single-personhouseholds and small households in the Tokyo metropolitan area and other core cities due to population
inflow from other regions. Therefore, the residential properties leasing market has been retaining a6stable occupancy rate. As for the rent levels, rents are stable and generally flat for properties with actual
consumer demand, while the unit rent for high-rent properties is also bottoming out. As such,supply-demand conditions of the residential property leasing market are believed to be favorable.
(c) Real Estate Transaction Market
Against the backdrop of a favorable environment for fund procurement, the real estate transaction
market has become active propelled by the huge appetite for property acquisitions from private funds
such as private placement investment corporations in addition to J-REITs, and also by the appetite forreal estate investments by overseas investors who anticipate Japanese economic recovery. The favorable
equity financing environment and debt financing environment are expected to continue for the time
being, thus it is thought that the real estate transaction market will remain strong. Since market prices
appear to be somewhat overheated for all property types while investments in regional properties arealso expanding, further selection of properties is believed to be essential.
(d) Financial Market
Long-term interest rates are expected to remain at a low level for some time as the financial
environment in Japan is under a situation whereby the monetary easing policies of the Bank of Japansuch as the massive purchase of government bonds, increased amount for the Asset Purchase Programand extension of the remaining period to maturity of government bonds eligible for purchase are being
implemented on an ongoing basis.
Although the stock market requires ongoing attention due to uncertain factors such as the impact ofanother phase of the consumption tax hike, a reduction in corporate taxes and other policies, as well as
overseas economic trends, interest rate trends and exchange rate trends, it is believed to be strong whilea recovery in companies’ performance is expected to become gradually clear from now on.
<Asset Management Performance >(a)Acquisition and Disposition of Assets
Top REIT began the sixteenth fiscal period with 19 properties (total acquisition value: ¥185,555
million). With an aim to acquire highly-competitive and highly-profitable properties, Top REIT
considered possible acquisition of properties through not only the “optimal application of the sponsors’
strengths” but also by utilizing established information channels to collect and carefully select fromproperty sale information, with excellent office buildings located in central Tokyo at the core, as well asother asset classes, by drawing on the characteristics of being a diversified REIT.
As a result, Top REIT acquired a total of three properties (total acquisition value: ¥12,300 million) as ofNovember 28, 2013 during the sixteenth fiscal period. The three properties are Shinjuku EAST Building
and Ginza Oji Building, two office buildings located in central Tokyo, and Kojima×Bic Camera
Kashiwa Store, a retail property located in Kashiwa-shi, Chiba. With these acquisitions, the number ofproperties owned by Top REIT expanded to 22 properties (total acquisition value: ¥197,855 million) asof the end of the sixteenth fiscal period.
Furthermore, with the main objective to partly fund the acquisition of these three properties, Top REIT
conducted fund procurement of ¥8,883 million through issuance of new investment units and ¥4,500
million through borrowings from financial institutions during the sixteenth fiscal period.
(b)Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT is sustaining and increasing revenue over the
medium to long term by maintaining and improving tenant satisfaction (the “Tenants First” policy) andkeeping operational management costs at an appropriate level. Top REIT strived to improve tenantsatisfaction and maintain and improve high occupancy rates while sustaining trusted relationships withtenants and discerning tenant needs via property management companies. During the sixteenth fiscal
period, Top REIT continued to focus on tenant solicitation activities for successor tenants of Harumi
Island Triton Square Office Tower Y. As a result, the occupancy rate reached 87.5% at the end of thesixteenth fiscal period (April 30, 2014), and is expected to further improve to 93.6% in July 2014, thus
likely settling the successor tenant issue. However, since a tenant who is leasing the entire building of
Kanda Nishiki-cho 3-chome Building has notified its intention to terminate the leasing agreement as ofJanuary 2015, solicitation for successor tenants is underway.
7

Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of theoperational management conditions and steady implementation of asset management plans for each
property. Based on asset management plans, Top REIT also carried out renewal construction and repair
work that contributed to enhancing the competitiveness of properties, maintaining and improving thefunctionality of properties, and construction that contributed to improving tenant satisfaction. It also
took steps to keep relevant costs at an appropriate level and conducted efficient management of
resources.
C. Procurement of Funds
Top REIT procures funds under a financial policy based on stable financial management. Top REIT
resolved on the issuance of 20,000 new investment units through public offering and 1,000 new
investment units through third-party allotment. With these issuances of new investment units, Top REIT
procured funds of ¥8,460 million on November 25, 2013 and ¥423 million on December 13, 2013
respectively. In addition, a short-term loan of ¥4,500 million was made on November 28, 2013, and,
together with funds procured through the issuance of new investment units, was used for the acquisitionof the specified assets as of the same day.
Furthermore, Top REIT conducted new borrowings of a long-term loan of ¥4,500 million (repayment
date: March 29, 2019) on March 31, 2014 and the short-term loan of ¥4,500 million which partly funded
the specified assets was repaid ahead of schedule as of the same day while fixing interest rates for theentire amount of the concerned long-term loan through an interest-rate swap transaction. In addition,¥67.5 million in long-term loans payable was repaid on December 30, 2013 as agreed upon using cashon hand.
As a result, at the end of the sixteenth fiscal period, the total amount of interest-bearing liabilities stands
at 100,430 million (¥91,930 million in long-term loans (including the current portion) and ¥8,500
million in investment corporation bonds), and the ratio of interest-bearing liabilities to total assets is
50.0%. Moreover, the ratio of long-term interest-bearing liabilities (including the current portion) is
100%, while interest-bearing liabilities with fixed interest rates account for 46.5%.
The credit rating of Top REIT as of April 30, 2014 was as follows:
Credit Rating Agency
Rating [Outlook]
Issuer rating: A+ [Stable]
Rating and Investment Information, Inc.
Unsecured investment corporation bond rating(R&I)(No. 1 Unsecured Investment Corporation Bonds): A+(Note) Top REIT requested Moody’s Japan, K.K. (“Moody’s”) withdrawal of issuer rating and seniorunsecured long-term debt rating and withdrawal was made April 10, 2014.
Moreover, Top REIT conducted shelf registration for investment corporation bonds, as indicated below,
in order to secure flexible procurement of long-term funds.
[Overview of Shelf Registration]
Object of Shelf Registration
Investment corporation bonds(excluding short-term corporation bonds)

Amount to be Issued

Scheduled Period of Issue¥100,000 million

From May 20, 2014 to May 19, 2016

D. Business Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded asset
management performance during the sixteenth fiscal period of ¥5,637 million in operating revenue,¥2,528 million in operating income and ¥1,913 million in ordinary income after deducting expenses
concerning borrowings, etc., and net income was ¥1,913 million.
As for dividends, with the aim of having an amount equivalent to profit dividends deducted as expenses
based on the application of the special provision on taxation of investment corporations (Article 67-15 of
the Act on Special Measures Concerning Taxation [Act No. 26 of 1957, as amended; hereinafter, the“Special Taxation Measures Act”]), Top REIT decided that the maximum value arrived at when thenumber of units issued and outstanding (176,000 units) is multiplied by an integer, within the limit of thebalance of unappropriated retained earnings of the sixteenth fiscal period and after deducting the amount8

of deferred tax liabilities being corrected due to the change in tax rate which would be transferred to thereserve for reduction entry, would be paid out. Consequently, Top REIT declared a dividend perinvestment unit of ¥10,864.

3. Balance of Paid-in CapitalThe outline of changes in paid-in capital of Top REIT during the past five years is as follows:
Total number of units
Total paid-in capitalissued and outstanding(million yen)
NoteIssue date
Remarks(units)Increase
Balance
Increase
BalanceNovember 25, 2013
Public offering
20,000175,000
8,460
90,720Note 1
December 13, 2013
Third party allotment
1,000
176,000
423
91,143Note 2
Note 1: New investment units were issued at a price of ¥438,750 per unit (issue value of ¥423,000 per unit)
through a public offering in order to raise funds for the acquisition of specified assets.
Note 2: New investment units were issued at a value of ¥423,000 per unit through a third party allocation to raise
funds for the acquisition of specified assets, etc.

[Market Price of Investment Units]
The market price of the investment units on Tokyo Stock Exchange REIT Market during respective fiscal
periods is as follows:
Fiscal period
As of the end of
fiscal period
Highest price
Lowest price

12th

13th

14th

15th

16th

April, 2012

October, 2012

April, 2013

October, 2013

April, 2014

484,000yen

459,000yen

576,000yen

519,000yen

494,000yen

333,000yen

358,500yen

351,000yen

411,000yen

437,500yen

4. Cash Distribution
The dividend per unit for the current period was 10,864 yen. Top REIT expects to distribute almost all thebalance of unappropriated retained earnings of the sixteenth fiscal period after deducting the amount ofdeferred tax liabilities being corrected due to the change in tax rate along with the tax system revision in
fiscal 2014 which would be transferred to the reserve for reduction entry to be eligible for special tax
treatments (Article 67-15 of the Act on Special Measures Concerning Taxation) that allows Top REIT to
deduct an amount equivalent to distributions of retained earnings as expenses from taxable income.
Fiscal period
As the end of fiscal period
Unappropriated retained
earnings
Internal reserves
Total dividends<Dividend per unit>
Of which, dividend ofaccumulated earnings<Per unit>
Of which, repayment ofpaid-in capital<Per unit>

Units

12th
April, 2012

13th
October,2012

14th
April, 2013

15th
October,2013

16th
April, 2014

thousand yen

1,999,419

2,001,377

1,822,649

1,579,617

1,913,997

thousand yen
thousand yen

49,984
1,949,435

17
2,001,360

4
1,822,645

12
1,579,605

1,933
1,912,064<yen><12,577><12,912><11,759><10,191><10,864>

thousand yen

1,949,435

2,001,360

1,822,645

1,579,605

1,912,064<yen><12,577><12,912><11,759><10,191><10,864>

thousand yen

－

－

－

－

－

<yen>

<－>

<－>

<－>

<－>

<－>

9

5. Management Policy and Future Issues(a)Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction (the“Tenants First” policy) and keeping operational management costs at an appropriate level. Under thisstrategy, Top REIT will focus on sustaining relationships of trust with tenants, leasing vacant spaces andsuch, as well as striving to maintain stable occupancy rates over the medium to long term.
Furthermore, Top REIT will also work to ensure an appropriate perception of the operational
management conditions for each property while steadily implementing such measures as to sustain andimprove revenues and keep operational management costs at an appropriate level. In addition, Top REIT
will carry out systematic repair work and such to enhance the competitiveness of properties and tomaintain and improve the functionality of properties, in an aim to secure stable revenues over the
medium to long term.
(b)Investment Strategy for New Properties
Top REIT aims to maintain and increase its dividends over the medium to long term by realizing
external growth through acquisition of new properties. Top REIT will continue to not only further
utilize pipeline support functions from sponsor companies, but also utilize various establishedinformation channels to collect information on new properties based on detailed analysis of market
environment of each asset classes, while placing emphasis on primarily competitive office buildings. By
doing so, Top REIT aims to expand the portfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. For reference,
the acquisition value of the NEC Head Office Building accounts for 21.2% of the total acquisition valueof Top REIT’s properties as of the end of the sixteenth fiscal period. Going forward, Top REIT will
work to reduce the risk of concentration on specific properties by steadily advancing further external
growth.
(c)Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation for acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk involved in fundprocurement by extending borrowing periods and spreading out the repayment dates. At the same time,
Top REIT will manage the risk of interest rate fluctuations by taking into account the balance ofborrowings at floating and fixed interest rates, as it discerns the interest rate trends. Moreover, financial
soundness will be maintained by keeping the leverage at an appropriate level.
(d)Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors’ meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.

106. Significant Subsequent Events
There are none applicable.
[Reference Information]
New borrowings
Top REIT entered into a loan agreement as described below on March 27, 2014 for the repayment oflong-term loan of ¥4,000 million (Lender: Sumitomo Mitsui Trust Bank, Limited., Development
Bank of Japan Inc., The Dai-ichi Life Insurance Company, Limited) due for repayment on June 30,
2014. Funds from Term Loan No. 23-(1) were allocated for the early repayment of a short-term loanof ¥4,500 million on March 31, 2014.
Long-term loan (Term Loan No. 23-(1))

LenderAmount of loan
Interest rate
Execution date
Borrowing method
Principal repayment datePrincipal repayment method
Collateral, etc.

Sumitomo Mitsui Trust Bank, Limited.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation
The Bank of Fukuoka, Ltd.
Aozora Bank, Ltd.
JPY 4,500 million
0.81625%(Interest rate to be actually paid up to March 29, 2019 fixed byan interest-rate swap transaction)
March 31, 2014
Borrowing based on the loan agreement concluded on March 27, 2014
March 29, 2019
Bullet repayment on the principal repayment dateUnsecured and unguaranteed

Long-term loan (Term Loan No. 23-(2))

LenderAmount of loan
Interest rate
Execution date
Borrowing method
Principal repayment datePrincipal repayment method
Collateral, etc.

Sumitomo Mitsui Trust Bank, Limited.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation
The Dai-ichi Life Insurance Company, Limited.
The Bank of Fukuoka, Ltd.
Aozora Bank, Ltd.
JPY 4,000 million
0.89635%
June 30, 2014
Borrowing based on the loan agreement concluded on March 27, 2014
March 29, 2019
Bullet repayment on the principal repayment dateUnsecured and unguaranteed11

【2】Outline of Top REIT
1. Status of Unitholders’Capital
Fiscal period
As of the end of fiscal period
Number of issuable investment units (units)
Number of units issued and outstanding(units)
Unitholders’ capital (million yen)
Number of unitholders

12thApril,2012
2,000,000
155,000
82,260
6,912

13th
October,2012
2,000,000
155,000
82,260
7,823

14thApril,2013
2,000,000
155,000
82,2607,872

15th
October,2013
2,000,000
155,000
82,2607,590

16thApril,2014
2,000,000
176,000
91,1439,163

2. Matters Concerning the Investment Units
Major unitholders as of April 30, 2014 were as follows:
NameJapan Trustee Service Bank (trust account)
The Master Trust Bank of Japan (trust account)
Trust and Custody Services Bank (securities investment trust account)
Nomura Trust and Banking (investment trust account)
THE FUJI FIRE AND MARINE INSURANCE COMPANY,LIMITED
Sumitomo Mitsui Trust Bank, Limited.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
Oji Real Estate Co., Ltd.
MetLife Alico Life Insurance K.K GA Company JPY
The Asahi Fire & Marine Insurance Co., Ltd.
NOMURA BANK (LUXEMBOURG) S.A.
The Iyo Bank, Ltd.
STATE STREET BANK-WEST PENSION FUND CLIENTS-EXEMPTThe Gibraltar Life insurance Co., Ltd (general accounts J-REIT account)
The Minami Nippon Bank, Ltd.
Total

Number of units held
(units)48,101
13,521
10,583
6,950
3,465
3,176
3,162
3,162
2,075
2,010
1,800
1,500
1,424
1,393
1,270
103,592

Share of total(%) (Note)
27.33
7.68
6.01
3.95
1.97
1.80
1.80
1.80
1.18
1.14
1.02
0.85
0.81
0.79
0.72
58.86

Note: The share of total is calculated by rounding to the second decimal place.

3. Officer and Auditor
A: Name of directors and auditor as of April 30, 2014 were as follows:
Post
Executive Officer
Supervisory Director

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

Kunio Tsuneyama(Note1)

Accounting Auditor

KPMG AZSA LLC

Major additional post

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

Adviser, Sumitomo Mitsui Trust
Guarantee Co., Ltd.
Partner Attorney,
City-Yuwa Partners (Note2)
Managing Partner, Tsuneyama
Certified Public Accountants Office
Managing Partner, Tsuneyama Sogo
Accountants Office
Non Executive Director in Kuroda
Electric Co., Ltd.
(Note2)
－

2,700
1,800

1,800

12,500(Note4)Note1: There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
Note2: Although Exective Officer and Supervisory Directors may have additional posts in entities other thanthose listed above, there is no conflict of interest between those companies including those listed above
and Top REIT.
Note3: There was no resignation or dismissal of the Officer, Director and Auditor during the current period.
Note4: Fee paid to Accounting Auditor includes fee of 2,500 thousand yen concerning preparation of comfort
letter associated with issuance of new investment units.

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

12

4. Asset Manager, Asset Custodian and Administrative Agents
Asset manager, etc. as of April 30, 2014 were as follows:Business

Company name

Asset manager

Top REIT Asset Management Co., Ltd.

Assets custodian

Sumitomo Mitsui Trust Bank, Limited.

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

Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.

13【3】 Status of Investment Assets
1. Composition of Assets

Type of assets

Asset class

Real estate

Office building

Office building

Retail property

Area

16th
As of April 30, 2014
Total amount
As a percentage
owned
of total assets(million yen)(%)
(Note 1)
(Note 2)Central Tokyo

5,844

3.1

5,830

2.9

Subtotal

5,844

3.1

5,830

2.9

Central Tokyo

125,80967.6

133,429

66.4

Tokyo
Metropolitan Area

1,624

0.9

1,635

0.8

Subtotal

127,434

68.5

135,064

67.3

22,93412.3

27,445

13.7

1,226

0.7

1,219

0.6

Subtotal

24,16013.0

28,664

14.3

Central Tokyo

2,403

1.3

2,376

1.2

Tokyo
Metropolitan Area

17,5209.4

17,386

8.7

Subtotal

19,923

10.7

19,763

9.8

Central Tokyo

2,700

1.5

2,692

1.3

Subtotal

2,700

1.5

2,692

1.3

180,06496.7

192,014

95.6

6,104

3.3

8,787

4.4

186,169

100.0

200,802100.0<180,064><96.7><192,014><95.6>

Tokyo
Metropolitan Area
Other
Major Cities

Real estatein trust
Residential

15th
As of October 31, 2013
Total amount
As a percentage
owned
of total assets(million yen)(%)
(Note 1)
(Note 2)

Other
Subtotal of real estate and real estate in trust
Cash, deposits and other assets
Total assets (Note 3)

Note 1: Total amount owned is based on the amounts appropriated on the Balance Sheet at the end of each period.
(Real estate and real estate in trust represent the book values after deducting depreciation). Total Amountfigures were rounded down to the nearest million yen.
Note 2: As a percentage of total assets show the ratio of respective assets to total assets and is rounded to firstdecimal place.
Note 3: Figures in brackets <> of total assets represent the portions of actually owned properties in the object
assets.

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

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

―

Tokyo
Metropolitan Area

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

KansaiRegional economic zone centering
on Osaka

Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama Prefectures

ChukyoRegional economic zone centeringon Nagoya

Aichi, Gifu and Mie Prefectures

Major cities
Across thecountry

Cities designated by government ordinance andother major cities (excluding cities belonging to
the above classifications)14―2. Major Properties Owned
The major properties (top ten properties by book value) that Top REIT owns as of April 30, 2014 were as
follows:
Book value

Property name(million yen)

Leasable floor
space(Note 1)

Leased floor
space(Note 2)

Occupancy
rate(Note 3)

Portion ofrentalrevenue

2

2

(%)

(m )

(m )

(%)

Primary use

NEC Head Office
Building

Trust
beneficiaryinterest

42,76972,238.03

72,238.03

100.0

25.1

OfficeHarumi Island
Triton Square
Office Tower Y

Trust
beneficiaryinterest

30,15523,170.40

20,276.97

87.5

13.6

OfficeHarumi Island
Triton Square
Office Tower Z

Trust
beneficiaryinterest

19,348

10,914.20

10,914.20

100.0

OfficeKanda Nishiki-cho
3-chome Building

Trustbeneficiaryinterest

12,655

8,025.65

8,025.65

100.0

OfficeSagamihara Shopping
CenterTrust
beneficiaryinterest

11,231

61,763.28

61,763.28

100.0

5.9

Fukasawa House
Towers H&I

Trust
beneficiaryinterest

10,058

11,357.44

10,547.40

92.9

4.1 Residential

Akasaka Oji
Building

Trust
beneficiaryinterest

9,755

7,301.15

7,301.15

100.0

4.7

OfficeIto-Yokado
Higashi-Narashino Store

Trust
beneficiaryinterest

7,755

51,098.42

51,098.42

100.0

4.2

Retailproperty

Trust
Shinjuku EAST Building beneficiaryinterest

5,832

7,523.04

7,479.09

99.4

3.5

OfficeShiba-Koen Building

5,830

3,060.43

1,908.99

62.4

1.3

Office155,393

256,452.04

251,553.18

98.1

76.0

Total

Real estate

Retailproperty

Note 1: Leasable floor space is total leasable space for each asset as of the end of the sixteenth fiscal period. Furthermore, in thecase of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leasable floor space of
the whole building by the ratio of co-ownership, and rounded to the second decimal place.
Note 2: Leased floor space is floor space based on lease agreements effective as of the end of the sixteenth fiscal period.
Furthermore, in the case of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying theleased floor space of the whole building by the ratio of co-ownership, and rounded to the second decimal place. In thecase of contracting the master-lease agreements as pass-through type, the floor space subleased to end-tenants is
calculated as the leased area.
Note 3: Occupancy rate is the figure given by dividing leased floor space as of the end of the sixteenth fiscal period by leasable
floor space, and rounded to the first decimal place.
Note 4: Portion of rental revenue is rounded to first decimal place. Portion of rental revenue for Harumi Island Triton Square
Office Tower Z and Kanda Nishiki-cho 3-chome Building is not disclosed due to being unable to obtain the consent of
the tenants.

15

Asset class

3. Details of Portfolio Properties① Details of Properties
A. The details of properties owned by Top REIT as of April 30, 2014 were as follows

Area

Property name

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building
Kanda Park Plaza
Office building

Shiba-Koen Building
Central Tokyo

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

Retail property

Tokyo
Metropolitan
Area

Type of title

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

Trust beneficiaryinterest

51,90042,7691-8-11 Harumi, Chuo-ku,
Tokyo

Trust beneficiaryinterest

27,20030,1558-1-22 Akasaka,
Minato-ku, Tokyo
2-2-2 Kajicho,
Chiyoda-ku, Tokyo
3-5-5 Shiba, Minato-ku,
Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

8,850

9,755

5,000

5,058

Real estate

3,410

5,830

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

Trust beneficiaryinterest

12,30019,348

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

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

10,50012,655

5,990

5,773

6,250

5,832

2,050

2,080

2,530

1,635

135,980

140,895

8,480

11,231

5,400

7,755

3,870

3,816

Trust beneficiaryInterest

4,730

4,641

Trust beneficiaryinterest

1,280

1,219

23,76028,664

2,640

2,376

7,230

10,058

5,100

4,897

1,280

1,237

1,200

1,193

17,45019,763

2,610

2,692

Ginza Oji Building

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

Faret East Building

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

Trust beneficiaryinterest

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

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Subtotal (11Properties)
Sagamihara Shopping
Center
Ito-Yokado
Higashi-Narashino StoreTokyo
Musashiurawa Shopping
Metropolitan
SquareArea
Kojima × Bic Camera
Kashiwa Store
Other
Major Cities

Address

Appraisal value
at end of 16th
period(million yen)
(Note)MEL Building

Subtotal (5 Properties)

Residential

Central Tokyo

Tokyo
Metropolitan
Area

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

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

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Other

Subtotal (5 Properties)
Central Tokyo

Total(22 Properties)OAK PLAZA

2-10-6 Kanda Awajicho,
Chiyoda-ku, Tokyo

Subtotal (1 Property)

Trust beneficiaryinterest

Book value at
end of 16th
period(million yen)

2,610

2,692

179,800

192,014

Note: For “Appraisal value at end of period,” Top REIT indicates the assessed value based on the appraisal by real estate appraisers
following the asset evaluation method and standards stipulated in Top REIT’s Articles of Incorporation and rules of The
Investment Trusts Association, Japan (based on real estate appraisal reports prepared by Tanizawa Sogo Appraisal Co, Ltd;
Japan Real Estate Institute and Daiwa Real Estate Appraisal Co, Ltd) as of April 30, 2014 as the points of evaluation.

16

Area

Name ofproperty

1,370

26.6

1

100.0

1,416

25.1

5

68.9

659

12.8

7

87.5

769

13.6

Akasaka Oji Building

6

100.0

268

5.2

6

100.0

266

4.7

Kanda Park Plaza
Shiba-Koen Building

9
2

94.2
62.4

177
78

3.4
1.5

9
2

90.2
62.4

151
70

2.7
1.3

Harumi Island Triton
Square Office Tower Z

1

100.0

1

100.0

Kanda Nishiki-cho
3-chome Building

1

100.0

1

100.0

Shinkawa Chuo Building

1

100.0

201

3.9

1

100.0

212

3.8

Shinjuku EAST Building

-

-

-

-

4

99.4

197

3.5

Ginza Oji Building

-

-

-

-

2

83.8

82

1.5

Faret East
Building

1

100.0

144

2.8

1

100.0

150

2.7

27

93.9

3,693

71.7

35

96.8

4,080

72.4

2

100.0

374

7.3

2

100.0

332

5.9

1

100.0

236

4.6

1

100.0

236

4.2

3

100.0

129

2.5

3

100.0

129

2.3

-

-

-

-

1

100.0

1

100.0

58

1.1

1

100.0

58

1.0

7

100.0

798

15.5

8

100.0

891

15.8

Top Residence
Nihonbashi Kayabacho

1

96.3

89

1.7

1

96.2

89

1.6

Fukasawa House Towers
H&I

1

91.7

234

4.5

1

92.9

231

4.1

Ecology Toyosu
Procentury

1

97.1

162

3.1

1

96.2

168

3.0

Impress Musashi-Koganei

1

97.0

43

0.8

1

94.9

44

0.8

Top Residence Yoga

1

92.6

37

0.7

1

95.5

37

0.7

5

94.3

567

11.0

5

94.6

571

10.1

OAK PLAZA

1

100.0

94

1.8

1

100.0

94

1.7

Subtotal (1 property)
Total (22 properties)

1
40

100.0
96.7

94
5,154

1.8
100.0

1
49

100.0
98.1

94
5,637

1.7
100.0

Central Tokyo

100.0

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

Retail property

Number oftenants(end ofperiod)(case)(Note1)

1

Other
Major
CitiesCentralTokyo
Tokyo Metropolitan
Area

Residential

Number oftenants(end ofperiod)(case)(Note1)

16th Fiscal Period
From November 1, 2013
to April 30, 2014
Occupancy Rent revenue Ratio ofrental- real estate
rate(for period) revenue to(end ofperiod) (million yen) total rental
revenues(Note 2)(%)(%)

Harumi Island Triton
Square Office Tower Y

MEL
Building

Subtotal (5 properties)

CentralTokyo

Subtotal (5 properties)
Other

15th Fiscal Period
From May 1, 2013
to October 31, 2013
Occupancy Rent revenue Ratio ofrental- real estate
rate(for period) revenue to(end ofperiod) (million yen) total rental
revenues(Note 2)(%)(%)

NEC Head Office Building

Tokyo
Metropolitan
Area

Office building

Asset class

B. Operating results for each fiscal period of each property owned were as follows:

Note1: Number of tenants indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units
are in the same property and as multiple tenants if the units are in multiple properties.
Note 2: Rent revenue for Harumi Island Triton Square Office Tower Z, Kanda Nishiki-cho 3-chome Building and Kojima × Bic
Camera Kashiwa Store is not disclosed due to being unable to obtain the consent of the tenants.

17

Note 3: Ratio of rental revenue to total rental revenues is rounded to first decimal place. Ratio of rental revenue to total rental
revenues for Harumi Island Triton Square Office Tower Z, Kanda Nishiki-cho 3-chome Building and Kojima × Bic Camera
Kashiwa Store is not disclosed due to being unable to obtain the consent of the tenants.

② Details of Investment Securities
There are none applicable.

4. Contracted Amount and Market Price of Specified Transactions
The contracted amount and market price of the specified transactions of Top REIT as of April 30, 2014
were as follows:
Contract amount (Note 1) (Note 2)
Segment

Type of transaction

Longer than a year

Transaction other than Interest-rate swap
market transaction(receiving floating-rate, Paying fixed-rate)

31,70029,700(Million yen)
Market price(Note 1)
(Note 3)
(181)

Total
31,70029,700(181)
Note1: The above figures are rounded down to the nearest million yen.
Note2: Contract amounts of interest-rate swap transactions represent figures based on the estimated principal.
Note3: Market price is evaluated at the price calculated by the counterparty of the concerned transaction contract based on theprevailing market rate.

5. Status of Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the “3-① Detailsof Portfolio Properties. ”There were no significant specified assets that are main investment targets of
Top REIT other than those listed above as of April 30, 2014.

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

18

【4】Capital Expenditures for Properties Owned
1. Schedule of Capital Expenditures
The table below lists the estimated amounts of significant capital expenditures for repair andmaintenance work of properties held by Top REIT, planned as of April 30, 2014. The estimatedconstruction costs shown in the table below include those charged to expenses in accounting.

Name of property

NEC Head
Office Building

Location

Minato-ku,
Tokyo

Scheduled term forconstruction
or maintenancePurposeRenewal of fire shutter
equipment

Estimated construction cost
(million yen)
Total of
Payment for
Total
advancethe period
payment

May 2014 toSeptember 2014

41

－

－

2. Capital Expenditures Made During the Period
The following table is an overview of construction work conducted during the sixteenth fiscal periodthat fall under the category of capital expenditures for properties held. Capital expenditures during thesixteenth fiscal period amounted to ¥511 million and combined with ¥99 million in repairs andmaintenance costs that fall under expenses for the sixteenth fiscal period, a total of ¥610 million of
construction work was implemented.
Name of property

NEC Head
Office Building

PurposeScheduled term forconstruction or maintenanceCapital expenditures(million yen)

Renewal of gondola

May 2013 toMarch 201474

Renewal of lighting
SystemMay 2013 toJanuary 201417

Renewal of automatic fire
alarm system

May 2013 toMarch 201446

Renewal of plumbing
equipment

May 2013 toMarch 201420

Renewal of equipment forreuse of waste water

May 2013 toMarch 2014

28

Renewal of air
Condition facility

May 2013 toNovember 2013

22

Renewal of air
conditioning duct

May 2013 toMarch 201415

Renewal of monitoring
deviceMay 2013 toMarch 201446

Renewal of moving roof

May 2013 toMarch 201434

Location

Minato-ku,
TokyoAkasaka Oji Building

Minato-ku,
Tokyo

Renewal ofwaterproof equipment

November 2013 toJanuary 201414

Faret East
Building

Tachikawa-shi,Tokyo

Renewal of external
wall and ceiling

July 2013 to
December 201327

Shinwaka Chuo Building Chuo-ku, Tokyo

Renewal of Emergency
broadcasting equipment

February 2014 toApril 2014

12

Renewal of air
Condition facility

November 2013 toMarch 201420

Renewal of function

November 2013 toApril 2014131

Sagamihara Shopping
CenterOthersSagamihara-shi,
Kanagawa

Total

511

19

3. Funds Reserved for the Long-term Repair and Maintenance Plan
(Million yen)
Fiscal period

12th

13th

14th

15th

16th

From November 1, 2011
to April 30, 2012

From May 1, 2012
to October 31, 2012

From November 1, 2012
to April 30, 2013

From May 1, 2013
to October 31, 2013

From November 1, 2013
to April 30, 2014

Balance of reserved funds at
beginning of current period

443

347

410

375

414

Amount reserved during thecurrent period

197

197

197

197

197

Amount used from reserved
funds during the current period

292

133

232

158

225

Balance carried forward to thenext period

347

410

375

414

385

【5】Condition of Expenses and Liabilities
1. Details of Expenses Related to Management
Fiscal Period
Item(Million yen)
16th
From November 1, 2013
to April 30, 2014

15th
From May 1, 2013
to October 31, 2013(a) Asset management fees (Note)

406

354

Asset custodian fees andadministrative service fees7375(c) Directors’ compensation

66(d) Audit fees1010(e) Other expenses

46

38

542

485

(b)

Total

Note: In addition to the amounts described above, asset management fees consisted of ¥45 million in 16th fiscal
period in association with the acquisition of new properties recorded as book value of the respective
properties.

20

2. Status of Borrowings
Status of borrowings from respective financial institutions as of April 30, 2014 is as follows.
Dateborrowed

Balance at the Balance at the
beginning of theend of thecurrent period current period(million yen)(million yen)

November28, 2013-(Note2)

-

-

2,000

2,000

2.27
(Note4）

1,000

1,000

2.40

1,000

1,000

2.40

135

135

2.42

November30, 2016(Note 6)(Note3)

Unsecured
andunguaranteed

4,135

4,135

2,092

2,025

2.42

November30, 2016(Note 6)(Note3)

Unsecured
andunguaranteed

Sumitomo Mitsui Trust Bank

6,012

6,012

Mizuho Bank

3,841

3,841

3,006

3,006

1.39
(Note4)(Note7)

3,006

3,006

BulletFebruary 29, repayment on
2016
repayment
date

Unsecured
andunguaranteed

835

835

1,700

1,700

3,000

3,000

0.72

BulletFebruary 29, repayment on
2016
repayment
date(Note5)

Unsecured
andunguaranteed

0.53

November30, 2016

Bulletrepayment on
repayment
date(Note7)

Unsecured
andunguaranteed

0.63

BulletOctober 31, repayment on
2016
repayment
date(Note3)

Unsecured
andunguaranteed

Bulletrepayment on
repayment
date(Note7)

Unsecured
andunguaranteed

Short Term
Loans Payable

LenderTerm Loan
No. 22

Sumitomo Mitsui Trust Bank

Subtotal

Current Portion of Long-Term Loans
PayableSumitomo Mitsui Trust Bank
Term Loan
No. 5

Development Bank of Japan

June 29,
2007

The Dai-ichi Life Insurance

Term Loan
No. 11Development Bank of Japan

January 13,
2010

Subtotal

Term Loan
No.11

Term Loan
No. 14Development Bank of Japan

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ.
Mitsubishi UFJ Trust andBanking Corporation

January 13,
2010

March 3,
2011

Long Term Loans Payable

Sumitomo Mitsui Trust Bank
Term Loan
No. 15The Bank of Fukuoka
The Hiroshima Bank

March 31,
2011

1,000

1,000

The Yamaguchi Bank

1,000

1,000

Sumitomo Mitsui Trust Bank.

6,687

6,687

4,440

4,440

3,474

3,474

3,474

3,474

965

965

1,008

1,008

644

644

504

504

504

504

340

340

Sumitomo Mitsui Trust Bank.

5,660

5,660

Mizuho Bank.
Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ
Mitsubishi UFJ Trust andBanking Corporation

4,255

4,255

3,330

3,330

3,330

3,330

925

925

Mizuho Bank.
Term Loan
No. 16

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ
Mitsubishi UFJ Trust andBanking Corporation

November30, 2011

Sumitomo Mitsui Trust Bank
Mizuho Bank
Term Loan
No. 17

Term Loan
No. 18Average interest
rate
Repayment date(%)
(Note 1)

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ.
Mitsubishi UFJ Trust andBanking CorporationMarch
30, 2012

June 29,
2012

21

0.50

0.71
(Note8）

Repayment
methodUse ofproceeds

Remarks

April 30,
2014

Bulletrepayment on(Note3)
repayment
date

Unsecured
andunguaranteed

June 30,
2014

Bulletrepayment on(Note5)
repayment
date

Unsecured
andunguaranteed

June 30,
2017Long Term Loans Payable

Sumitomo Mitsui Trust Bank
Term Loan
No.19-①

Term Loan
No. 20Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ

November30, 2012

1,500

1,500
1,500

Resona Bank

1,000

1,000

Sumitomo Mitsui Trust Bank

1,428

1,428

Mizuho Bank
Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ

1,264

1,264

989

989

989

989

2,355

2,355

March 27,2013

Mizuho Bank

1,800

1,800

Mitsubishi UFJ Trust andBanking Corporation

1,275

1,275

730

730

Sumitomo Mitsui Trust Bank
Resona Bank

April 30,
2013

Sumitomo Mitsui Trust Bank

Term Loan
No.23-①

3,000

1,500

Development Bank of Japan

Term Loan
No. 21

3,000

Sumitomo Mitsui Banking
Corporation
Mizuho Bank

March 31,
2014

Aozora Bank
The Bank of Fukuoka.

500

500

-

1,400

-

1,400

-

1,000

-

500

-

200

Subtotal

83,362

87,795

Total

87,49791,930Note1:
Note2:
Note3:
Note4:
Note5:
Note6:
Note7:
Note8:
Note9:

0.63

0.75

September
30. 2015

March
27, 2018

1.08

Bulletrepayment on
repayment
date(Note7)

Unsecured
andunguaranteed

Bulletrepayment on
repayment
date(Note9)Unsecured
andunguaranteed

0.63

September
30, 2015

0.75

April
30, 2018

Bulletrepayment on
repayment
date(Note3)

Unsecured
andunguaranteed

0.82(Note4)

March 29,2019

Bulletrepayment on
repayment
date(Note5)

Unsecured
andunguaranteed

The average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance
during the period) and rounded to the second decimal place.
Early repayment was made on March 31, 2014.
The use of borrowings is for acquisition of trust beneficiary interest in real estate.
The borrowings are hedged by interest rate swap transactions and the average interest rates show theweighted-average interest rates adjusting the effect of interest rate swap transactions.
The use of borrowings is for repayment of short-term loans payable.
Repayment of ¥67.5 million will be made at the end of June and December each year starting on June 30, 2010, withthe remaining payment of ¥1,822.5 million to be repaid on November 30, 2016, the final repayment date.
The use of borrowings is for repayment of long-term loans payable.
A portion of borrowing amounting to ¥8,500 million is hedged by interest rate swap transaction and the average interest rate
shows the weighted-average interest rate adjusting the effect of interest rate swap transaction.
The use of borrowings is for repayment of short-term and long-term loans payable.

3. Status of Investment Corporation Bonds
Investment corporation bonds issued and outstanding as of April 30, 2014 are as follows.
Name of Bonds

Issue
Date

Balance as of
the beginningof the 16th
fiscal period(million yen)

Balance as ofthe end of the
16th fiscal
period(million yen)Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

No.1
Unsecured
Repayment
June 4,
June 4,
BulletInvestment
8,500
8,500
1.00
of
2010
2015
payment
Corporation
borrowing
Bonds (Note)
Total
8,500
8,500
Note: This bond is equipped with special pari passu conditions among the specified investment corporation bonds.

4. Status of Short-Term Investment Corporation Bonds
There are none applicable.

22

RemarkUnsecured
andunguaranteed【6】Status of Acquisitions and Dispositions During the Period
1. Acquisitions and Dispositions of Real Estate, etc. and Asset Backed Securities
Acquisition
Acquisition
Acquisition
Price
Date
(million yen)
(Note)

Type ofAssetsName of
Property

Trust
BeneficiaryInterest in
Real Estate

Shinjuku EAST
Building

November 28,
2013

Trust
BeneficiaryInterest in
Real Estate

Ginza Oji
Building

Trust
BeneficiaryInterest in
Real Estate

Kojima × Bic
Camera Kashiwa
Store

Disposition
Disposition
Date

DispositionPrice(million yen)Book Value(million yen)

Capital Gainand Loss(million yen)

5,800

－

－

－

－

November 28,
2013

2,000

－

－

－

－

November 28,
2013

4,500

－

－

－

－

Note: Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as real estate transaction
brokerage fees, real estate tax, etc.) required for transaction of the relevant property.

2. Acquisitions and Dispositions of Others Assets
Other major assets besides real estate and asset backed securities stated above consist mostly of bankdeposits or bank deposits within assets held in trust.
3. Research on Prices of Specified Assets
Transactions during the current period that require research on prices of specified assets stipulated by
Article 201 of the Act on Investment Trusts and Investment Corporations are as follows.
① Real estate, etc.
Acquisition
or
Disposition

Name of Properties

Transaction Date

AcquisitionPrice(million yen)
(Note1)

AppraisalPrice(million yen)
(Note2)

Appraisal Institution

Appraised Date

Acquisition

Shinjuku EAST
Building

November 28, 2013

5,800

6,110

Japan Real Estate
Institute

September 30, 2013

Acquisition

Ginza Oji Building

November 28, 2013

2,000

2,000

Daiwa Real EstateAppraisal Co, LTD

September 30, 2013

Acquisition

Kojima × Bic Camera
Kashiwa Store

November 28, 2013

4,500

4,740

Japan Real Estate
Institute

September 30, 2013

Note 1: Acquisition Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as real estate transaction
brokerage fees, real estate tax, etc.) required for transaction of the relevant property.
Note 2: The real estate appraisal is conducted by applying “Real Estate Appraisal Standard Section 3: appraisals concerning prices of real estate
subject to securitization.”② Others
One interest rate swap deal was subjected to the research during the current period and research of
the said deal was entrusted to KPMG AZUSA LLC. We have received the related research reportfrom KPMG AZUSA LLC. In the research, KPMG AZUSA LLC is supposed to report on the nameof counterparty, currency, contractual interest rate, transaction term and other matters pertaining to
the subject interest rate swap deal.

23

4. Transaction with Interested Parties, etc.
① Status of Transaction
Amount of Purchase Price, etc.
Purchase Price, etc.(In millions of yen)
Sale Price, etc.(In millions of yen)
12,300<100.0%>－
Amount of purchases from related parties andAmount of sales to related parties and major
Total Amountmajor shareholders
shareholders
6,500 <52.8%>－
Breakdown of transactions with related parties
Neptune4,500 <36.6%>－
Investment YK
Oji Holdings
2,000 <16.3%>－
Corporation
Category

Total

6,500 <52.8%>－② Amounts of Fees Paid, etc.
Fees paid to interested parties, etc. during the 16th fiscal period are as follows.
Item

Property management fees

Brokerage fee

Transactions with interested parties, etc.
and major unitholders

Total amount offees paid (A)(thousand yen)

Paid toRatio
against total
amount
B/A(%)

Amount ofpayment (B)(thousand yen)

Oji Real Estate Co., Ltd.

33,141

7.3

Sumitomo Mitsui Trust Bank, Limited.

1,250

0.3

Sumitomo Mitsui Trust Bank, Limited.

185,000

75.5

Oji Real Estate Co., Ltd.

60,00024.5

452,977

245,000

Trust compensation

19,767

Sumitomo Mitsui Trust Bank, Limited.

17,267

87.4

Asset custodian fees

8,898

Sumitomo Mitsui Trust Bank, Limited.

8,898

100.0

Administrative service fees

66,861

Sumitomo Mitsui Trust Bank, Limited.

66,861

100.0

Sumitomo Mitsui Trust Bank, Limited.

1,024

9.0

Other fees paid

11,3489

0.1

Oji Real Estate Co., Ltd.
Borrowing related expenses

150,072

Sumitomo Mitsui Trust Bank, Limited.

64,928

43.3

6,678

Sumitomo Mitsui Trust Bank, Limited.

100

1.5

5,574

Sumitomo Mitsui Trust Bank, Limited.

623

11.2

Other non-operating expenses

4,352

Sumitomo Mitsui Trust Bank, Limited.

342

7.9

Other expenses related torent business

5,419

Oji Real Estate Co., Ltd.

488

9.0

Investment unit issuance related
expenses
Investment corporation bondrelated expenses

Note 1:

Note 2:
Note 3:Note 4:

Interested parties, etc. means interested parties, etc. of the asset manager which concluded asset management
entrustment contract with Top REIT as prescribed in Article 123 of the Enforcement Order of the Investment Trust andInvestment Corporations Law. However, the table above also includes transactions with interested parties as provided
in the internal rules of the asset manager (including special purpose companies, etc. to which interested parties, etc.
have been entrusted with asset management). Please note that the parties to which payments were made during thecurrent period were Oji Real Estate Co., Ltd., Oji Holdings Corporation, Neptune Investment YK. and Sumitomo
Mitsui Trust Bank, Limited.
Purchase Price is the amount (acquisition price indicated in the sales agreement) excluding expenses (such as realestate transaction brokerage fees, real estate tax, etc.) required for transaction of the relevant property.
Ratio against total amount is the ratio (%) against respective total amount rounded to the first decimal place.
In addition to the fees paid described above, the amounts paid for repair and maintenance work placed with interested
parties, etc. during the 16th fiscal period are Oji Real Estate Co., Ltd. of ¥57,506 thousand. Furthermore, theconcerned payments include construction management fees.

5. Status of Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd., the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments business, type 2 financial instruments business,24

building lots and buildings transaction business, or real estate specified joint enterprise business, and has
no such transactions with Top REIT.

【7】Overview of Accounting
1. Assets, Liabilities, Principal and Profit / Loss
Please refer to accompanying “Ⅱ.Balance Sheets”, “Ⅲ.Statements of Income”, “Ⅳ.Statements of
Changes in Net assets(Unitholders’ Equity)”, “Ⅴ.Notes to Financial Statements” and “Ⅵ.Statementsof Cash Dividend Distributions”.
2. Change in Depreciation Method
There are none applicable.
3. Change in Valuation Methods of Real Estate, etc.
There are none applicable.
4. Status of Investment Trust Beneficiary Certificates of Top REIT, etc.
There are none applicable.

【8】Others
1. Notice
Board of Directors
Major issues related to the execution and modification of major contracts approved by the board of
directors of Top REIT during the six months ended April 30, 2014 is summarized below.
Approval date
Approved agenda
Description
With issuance of new investment units, anunderwriting agreement for the newConclusion of new investment investment units was concluded with
November 7, 2013
underwriters, entrusting them with generalunits underwriting agreementadministrative duties concerning the offeringof investment units.
Note: Underwriters are Daiwa Securities, Co. Ltd., Nomura Securities Co., Ltd., Mizuho Securities Co., Ltd.,SMBC Nikko Securities Inc., Okasan Securities Co., Ltd. and SMBC Friend Securities Co., Ltd.

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

25

II. Balance Sheets
Fifteenth Fiscal Period(Reference)(as of October 31, 2013)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Consumption taxes receivable
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
Leasehold right in trust
Other intangible assets in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance expenses
Total deferred assets
Total assets

26(Unit: thousand yen)
Sixteenth Fiscal Period(as of April 30, 2014)

903,3143,939,421
103,255
329,13617－
6,586
5,281,731

3,049,986
4,273,472
193,414353,139
16
137,402
1,830
8,009,261

1,150,996(210,309)
940,687
5,559(3,280)2,278
20,309(11,393)
8,915
5,717
(1,724)
3,992
4,888,525
62,810,594(14,921,677)
47,888,916
697,890(298,860)
399,030
256,518(131,514)
125,003
260,147(141,218)
118,928
125,686,918
180,063,196

1,153,573(225,614)
927,958
5,559(3,388)2,170
20,309(11,988)
8,320
5,717
(2,137)
3,579
4,888,525
66,712,538(16,038,443)
50,674,094
801,903(317,387)
484,516
307,426(156,723)
150,702
273,432(156,700)
116,731
134,748,836
192,005,437

－
1,356
85
1,441

7,348
2,198
63
9,610

10,000562,703
231,780
804,484
180,869,122

10,000492,375
229,164
731,540
192,746,588

18,372－
18,372
186,169,227

12,86133,393
46,254200,802,104

Fifteenth Fiscal Period(Reference)(as of October 31, 2013)(Unit: thousand yen)
Sixteenth Fiscal Period(as of April, 2014)

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Deferred tax liabilities
Long-term advances received
Derivatives liabilities
Total noncurrent liabilities
Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total Voluntary retained earnings
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

27

136,532
4,135,000
239,584
131,320859
61,670705,8422,821
5,413,630

296,523
4,135,000
252,726
131,332853－
795,670
9,937
5,622,044

8,500,000
83,362,500
101,016
4,873,415
19,293
122
27,94996,884,297
102,297,927

8,500,000
87,795,000
101,016
5,649,955
13,79979
38,429102,098,279
107,720,324

82,260,100

91,143,100

49,95849,958
1,579,617
1,629,576
83,889,676

49,95849,958
1,913,997
1,963,956
93,107,056(18,376)(18,376)
83,871,299
186,169,227(25,275)(25,275)
93,081,780
200,802,104

III. Statements of Income
Fifteenth Fiscal Period(Reference)(From May 1, 2013
to October 31, 2013)
Operating revenue
Rent revenue – real estate
Other lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee
Administrative service fees
Directors’ compensations
Audit fee
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Reversal of dividends payable
Insurance income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Borrowing related expenses
Amortization of investment unit issuance expenses
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

28(Unit: thousand yen)
Sixteenth Fiscal Period(From November 1, 2013
to April 30, 2014)

5,125,553
28,7485,154,302

5,590,221
47,135
5,637,356

2,438,852
406,366
8,385
64,8066,300
10,00046,9402,981,651
2,172,650

2,622,805
354,776
8,898
66,861
6,300
10,00038,9293,108,571
2,528,785

641
825
10,30471
11,842

675
1,023
191
－
1,891

406,843
42,965
5,511
143,961－
4,639
603,922
1,580,570
1,580,570
958
(0)
957
1,579,612
4
1,579,617

408,933
42,0345,511
150,072
6,678
4,415
617,646
1,913,029
1,913,029
957(1,913)(955)
1,913,985
12
1,913,997

IV. Statements of Changes in Net Assets (Unitholders’ Equity)
For the period from May 1, 2013 to October 31, 2013 (15th fiscal period)(Unit: thousand yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges of items
during the period
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

82,260,100

Voluntary retained earnings
Total
Reserve for
Voluntary
reduction entry
retainedearnings
49,95849,958

Total surplus

Totalunitholders’equity1,822,649

1,872,608

84,132,708(1,822,645)(1,822,645)(1,822,645)

1,579,612

1,579,612

1,579,612－－－(243,032)(243,032)(243,032)

82,260,100

49,95849,958

1,579,617

1,629,576

83,889,676

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges of items
during the period
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

Unappropriatedretainedearnings(undisposed
loss)

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets(5,177)(5,177)

84,127,531(1,822,645)
1,579,612(13,199)(13,199)(13,199)(13,199)(13,199)(256,231)(18,376)(18,376)

83,871,299

29For the period from November 1, 2013 to April 30, 2014 (16th fiscal period)(Unit: thousand yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges of items
during the period
Issuance of new
investment units
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

82,260,100

Voluntary retained earnings
Total
Reserve for
Voluntary
reduction entry
retainedearnings
49,95849,958

Total surplus

Totalunitholders’equity1,579,617

1,629,576

83,889,676

8,883,000

8,883,000(1,579,605)(1,579,605)(1,579,605)

1,913,985

1,913,985

1,913,985

8,883,000－－

334,380

334,380

9,217,380

91,143,100

49,95849,958

1,913,997

1,963,956

93,107,056

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges of items
during the period
Issuance of new
investment units
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

Unappropriatedretainedearnings(undisposed
loss)

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets(18,376)(18,376)

83,871,299

8,883,000(1,579,605)
1,913,985(6,899)(6,899)(6,899)(6,899)(6,899)9,210,480(25,275)(25,275)

93,081,780

30

V. Notes to Financial Statements
Note 1. Premise of the Going Concern
Fifteenth Fiscal Period (Reference)
For the period from May 1, 2013
to October 31, 2013

Sixteenth Fiscal Period
For the period from November 1, 2013
to April 30, 2014

There are none applicable.

There are none applicable.

Note 2. Significant Accounting Policies

Classification

1.

Method ofDepreciation andAmortization of
Property, etc.

Fifteenth Fiscal Period (Reference)

Sixteenth Fiscal Period

For the period
from May 1, 2013
to October 31, 2013

For the period
from November 1, 2013
to April 30, 2014

(1) Property, Plant and Equipment (including trust (1) Property, Plant and Equipment (including trust
assets)assets)Adopts the straight-line method. Further, theAdopts the straight-line method. Further, theestimated useful lives of the major property, plant
estimated useful lives of the major property, plantand equipment are as follows.
and equipment are as follows.
Building
Structures
Machinery and equipment
Tools, furniture and fixtures2.

Treatment
Method ofDiffered Assets

2~59 years
2~54 years
3~15 years
2~12 years

Building
Structures
Machinery and equipment
Tools, furniture and fixtures(2) Intangible Assets
Adopts the straight-line method.

(2) Intangible Assets
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

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

Investment Corporation Bonds Issuance Costs(1) Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over the
Amortized on the straight-line method over thematurity period of the bonds
maturity period of the bonds.
(2)Investment Unit Issuance Expenses
Amortized on the straight-line method over three
years.

3.

Standard for
Posting ofIncome andExpenses

Method of treatment concerning Taxes on Property Method of treatment concerning Taxes on Property
and Equipment
and Equipment
Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 15th fiscal period, there
was no amount equivalent to the property taxes
included as the acquisition costs of real estate.

31

Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 16th fiscal period, theamount equivalent to the property taxes includedin the acquisition costs of real estate totaled 9,946
thousand yen for Shinjuku EAST Building, Ginza
Oji Building and Kojima × Bic Camera Kashiwa
Store.

4.

Method of Hedge (1) Method of Hedge Accounting on Deferred
Accounting
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

(1) Method of Hedge Accounting on Deferred
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

5.

Other Significant
Items
Fundamental toPreparing the
Financial
Statements(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

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

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

1.Cash and Deposits in trust
2.Building in trust, Structures in trust, machineryand equipment in trust, Tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

1.Cash and Deposits in trust
2.Building in trust, Structures in trust, machineryand equipment in trust, Tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

32(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

Note 3. Balance Sheet
Fifteenth Fiscal Period (Reference)

Sixteenth Fiscal Period

As of October 31, 2013

As of April 30, 2014

1. Asset Pledged as Collateral and Secured Liabilities

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows.

Assets pledged as collateral are as follows.

(Thousand yen)
2,293,491
75,7508,892,092
11,261,334

Building in trust
Structures in trust
Land in trust
Total(Thousand yen)
2,266,146
73,0908,892,092
11,231,329

Building in trust
Structures in trust
Land in trust
Total

Secured liabilities are as follows.

Secured liabilities are as follows.
(Thousand yen)(Thousand yen)
Tenant leasehold and security
deposits in trust
Total

Tenant leasehold and security
deposits in trust
Total

326,648
326,648

326,648
326,648

2. Minimum Total Net Asset Designated in Article 67-4 in the 2. Minimum Total Net Asset Designated in Article 67-4 in theInvestment Trust and Investment Corporations Law
Investment Trust and Investment Corporations Law
50,000 thousand yen

50,000 thousand yen

Note 4. Statement of Income and Retained Earnings(Thousand yen)Fifteenth Fiscal Period(Reference)

Sixteenth Fiscal Period

For the period
From May 1, 2013
to October 31, 2013

For the period
From November 1, 2013
to April 30, 2014

A. Revenue related to rent business
Rental and parking revenue

4,824,773

5,255,447

Other lease revenue

300,780

334,773

Other lease business revenue

23,10743,291

Cancellation penalty received

5,640

3,843

5,154,302

5,637,356

Property management costs and fees

388,378

452,977

Utilities expenses

244,453

248,305

Property-related taxes and dues

581,017580,275

Non-life insurance expenses

10,225

10,751

Repair expenses

75,51399,545

1,115,879

1,193,406

23,38537,542

2,438,852

2,622,805

2,715,449

3,014,550

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

Depreciation and amortization
Other
Total expenses related to rent business
C. Revenue and expenses of real estate rent business(A − B)

33

Note 5. Unitholders’ Equity

Number of issuable investment units
Number of investment units issued and outstanding

Fifteenth Fiscal Period(Reference)

Sixteenth Fiscal Period

For the period
From May 1, 2013
to October 31, 2013

For the period
From November 1, 2013
to April 30, 2014

2,000,000 units

2,000,000 units

155,000 units

176,000 units

Note 6. Tax Effect Accounting
1. Breakdown of deferred gains or losses by cause(Deferred Tax Assets)(Thousand yen)Fifteenth Fiscal Period(Reference)

Sixteenth Fiscal Period

For the period
From May 1, 2013
to October 31, 2013

For the period
From November 1, 2013
to April 30, 2014

Current assets
Income taxes – current payable

17

16

9,534

13,114

9,551

13,130Noncurrent assets
Deferred gains or losses on hedges
Total deferred tax assets(Deferred Tax Liabilities)(Thousand yen)Fifteenth Fiscal Period(Reference)

Sixteenth Fiscal Period

For the period
From May 1, 2013
to October 31, 2013

For the period
From November 1, 2013
to April 30, 2014

Noncurrent liabilities
Reserve for reduction entry

28,827

26,913

Total deferred tax liabilities

28,827

26,913

19,276

13,783(Net deferred tax liabilities)

2. Breakdown by main items that caused differences between the effective statutory tax rate and the effective tax rate
after applying tax effect accounting.

Effective statutory tax rate

Fifteenth Fiscal Period(Reference)

Sixteenth Fiscal Period

For the period
From May 1, 2013
to October 31, 2013

For the period
From November 1, 2013
to April 30, 201436.59%

36.59%(36.57%)(36.57%)0.04%(0.07%)

0.06%(0.05%)(Adjustment)
Deductible cash distributions
Other
Effective tax rate after applying tax effect accounting

34

3. Correction of amount of deferred tax assets and deferred tax liabilities due to the change in tax rate of corporatetax, etc.
With the Act on Partial Revision of the Income Tax Act, etc. (Act No. 10 of 2014) being promulgated on March 31,
2014, special reconstruction corporation tax will not be imposed from operating periods that start on April 1, 2014 orafter. As a result, the effective statutory tax rate used to calculate the deferred tax assets and deferred tax liabilities forthe 16th fiscal period have been changed from 36.59% for the 15th fiscal period to 34.16% concerning temporary
differences expected to be reversed during the operating periods which start on May 1, 2014 and November 1, 2014.
Furthermore, the impact from the changed tax rate is minimal.

Note 7. Leases
There are none applicable.

Note 8. Financial Instruments
Information on financial instruments for the periods ended October 31, 2013 and April 30, 2014 required pursuant
to the revised accounting standards are as follows:
1. Matters Concerning Status of Financial Instruments(1) Policy for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units, with the aim of contributing to steady growth of assets managed and stableearnings from a mid-and long-term view in accordance with the financial policy stated by the asset manager.
Although management of surplus funds by using financial instruments targeting securities, monetary claims,
etc. in accordance with the investment limitations stipulated in the Articles of Incorporation, as a general rule,the surplus funds are managed by placing them in deposit.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.
(2) Financial Instruments, Their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (TRAM), the asset management company of Top REIT,
strive for advancing risk management through regular inspection of the adequacy and effectiveness of risk
management systems. Top REIT and TRAM adopt the structure that inspects various risks regularly andreflects the results of inspection on the risk management plan and the management plans. In addition, Top
REIT and TRAM inspect risks and reflect the results of inspection in the decision-making in a timely manner
through various transactions.
Top REIT and TRAM strive for risk management based on the incorporation rules of the asset manager
concerning individual financial instruments and their risks, and risk management system.
①

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

②

Market risk concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and refinance existing loans and bonds.
Loans, especially floating-rate borrowings, are exposed to market risks, Top REIT manages to hedge
against interest-raising risk by fixed-rate interests entered into interest swap transactions and setting thetarget of fixed- rate interest ratios. In addition, when procuring new loans and refinancing, Top REIT
inspects interest-raising risks and studies borrowing methods that minimize risks. For the hedging
instruments and hedged items, hedging policy, method for assessing the effectiveness of hedging, etc. inhedge accounting, please refer to “4. Methods of Hedge Accounting” under “Note 2. Significant
Accounting Policies” above.

③

Liquidity risk concerning borrowings and tenant leasehold used in cash flow, etc

35

Borrowings, investment corporation bonds and tenant leasehold are exposed to liquidity risk at the timeof repayment of borrowing, redemption of investment corporation bonds and return of tenant leaseholds,
but Top REIT manages these risks by preparing monthly fund management plans. In addition, Top
REIT has established a management system for identifying liquidity risks regularly and at the time ofvarious transactions by calculating the total amount of payments assumed, which is arrived at by taking
the total amount of borrowings and tenant leaseholds, etc. that are to become due for repayment in thefiscal period and adding forecast dividends, and conducting a comparative inspection with liquidity on
hand that factors in the liquidity of portfolio real estate properties and other assets under management.
(3) Supplemental Explanation About the Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. Certain assumptions are used for theestimation of fair value. Accordingly, the result of such estimation may change if different assumptions areused. Furthermore, the contractual amounts of derivative transactions stated in “2. Matters Concerning
Estimated Fair Value, etc. of Financial Instruments” below do not represent the market risk involved inthese derivative transactions.
2. Matters Concerning Estimated Fair Value, etc. of Financial Instruments
For the period from May 1, 2013 to October 31, 2013 (15th fiscal period) (Reference)
The following table includes the book value, fair value and valuation difference of financial instruments as of
October 31, 2013. The financial instruments that are recognized to be extremely difficult to estimate the fairvalue are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of October 31, 2013
Book value(1)

Cash and deposits(2)

Fair value

Difference

903,314903,314－

Cash and deposits in trust

3,939,421

3,939,421－

Total assets(3)
Current portion of long-termloans payable(4) Investment corporation bond

4,842,736

4,842,736－

4,135,000

4,177,692

42,6928,500,000

8,557,545

57,54583,362,500

83,630,591

268,091

781,889

781,889－

96,779,389

97,147,717

368,328(27,949)(27,949)－(27,949)(27,949)－(5) Long-term loans payable(6) Tenant leasehold and security
deposits in trust
Total liabilities
Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting36

he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is referential figure disclosedby the financial data provider.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Contract amount
Hedge
Type of
Fair
Method of calculating
accounting
derivative
Hedge item
More thanvalue
the fair value
methodtransactions
one yearCalculated on value
Principal Interest rate swap Long-term
provided bytreatment
loans
8,500,000 8,500,000 (27,949) counterparty financial
Pay fixed /methodpayablereceive floating
institution
SpecialInterest rate swap Long-term
treatment ofloans
18,700,000 16,700,000(*2)―
Pay fixed /interest-ratepayablereceivefloating
swaps(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*3)
4,091,526
Total
4,091,526(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period

Cash and deposits
Cash and deposits in trust
Total(Thousand yen)
Due within one year
903,3143,939,421
4,842,736

37

(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two tothree tofour to five
one yearfive years
years
three years
four yeas
years
Investment
corporation
bonds

―

8,500,000

―

―

―

―

Long-term
loans
payable4,135,000

10,210,000

26,535,000

38,362,500

8,255,000

―

Total

4,135,000

18,710,000

26,535,000

38,362,500

8,255,000―

For the period from November 1, 2013 to April 30, 2014 (16th fiscal period)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2014. The financial instruments that are recognized to be extremely difficult to estimate the fair value
are not included in the table. (Please refer to Note 2).
(Thousand yen)
As of April 30, 2014
Book value

Fair value

Difference(1)

Cash and deposits

3,049,986

3,049,986－(2)

Cash and deposits in trust

4,273,472

4,273,472－

Total assets(3) Current portion of long-term loans
payable(4) Investment corporation bond

7,323,458

7,323,458－

4,135,000

4,171,218

36,2188,500,000

8,555,165

55,16587,795,000

88,004,624

209,624

1,118,943

1,118,943－

101,548,943

101,849,951

301,007(38,429)(38,429)－(38,429)(38,429)

－

(5)
(6)

Long-term loans payable
Tenant leasehold and security
deposits in trust
Total liabilities

Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting
he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.

38Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is referential figure disclosedby the financial data provider.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Contract amount
Hedge
Type of
Fair
Method of calculating
accounting
derivative
Hedge item
More thanvalue
the fair value
methodtransactions
one yearCalculated on value
Principal Interest rate swap Long-term
provided by
Pay fixed /treatment
loans
8,500,000 8,500,000 (38,429) counterparty financial
methodpayablereceive floating
institution
SpecialInterest rate swap Long-term
treatment of
Pay fixed /loans
23,200,000 21,200,000(*2)―
interest-rate receive floating
payableswaps(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*3)
4,531,011
Total
4,531,011(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period

Cash and deposits
Cash and deposits in trust
Total(Thousand yen)
Due within one year
3,049,986
4,273,472
7,323,458

39

(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due after
Due after
Due after
Due after
Due after
Due within
one to two
two tothree tofour to five
one yearfive years
years
three years
four yeas
years
Investment
corporation
bonds

－

8,500,000

－

－

－

－

Long-term
loans
payable4,135,000

33,610,000

23,930,000

25,755,000

4,500,000

－

Total

4,135,000

42,110,000

23,930,000

25,755,000

4,500,000－

Note 9. Investment and Rental Properties
Top REIT owns in the portfolio certain office buildings (including land), etc. located in Tokyo and other areas
which are for lease.
The following table is the amount posted on the balance sheet, amounts of increase (decrease) during the previous
period and fair value of these investment and rental properties as of the settlement date.

For the period from May 1, 2013 to October 31, 2013 (15th fiscal period) (Reference)(Thousand yen)Book value
Balance at the
beginning of the period
181,003,631

Change during the period(939,077)

Balance at the end of
the period
180,064,553

Fair value at end of theperiod170,470,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable to capital expenditures, and decrease is mainly due to the depreciation andamortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended October 31, 2013 ispresented in “Note 4. Statement of Income and Retained Earnings.”

For the period from November 1, 2013 to April 30, 2014 (16th fiscal period)(Thousand yen)Book value
Balance at the
beginning of the period
180,064,553

Change during the period
11,950,431

Balance at the end of
the period
192,014,984

Fair value at end of theperiod179,800,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of Shinjuku EAST Building(5,889,285 thousand yen), Ginza Oji
Building (2,085,743 thousand yen), and Kojima × Bic Camera Kashiwa Store(4,657,682 thousand yen), anddecrease is mainly due to the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended April 30, 2014 ispresented in “Note 4. Statement of Income and Retained Earnings.”

40

Note 10. Transactions with Interested Parties
For the period from May 1, 2013 to October 31, 2013 (15th fiscal period) (Reference)

Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank Ltd.

Business
description
oroccupation

Banking

Ratio ofinvestment
units heldamong total
number ofinvestment
units(Note 1)

Type oftransaction

Interested
Party and
Assetscustodian

Balance atperiod end(thousand yen)
(Note 2)

68,255Administrative
service fee

64,806 Accounts
payable-other

57,554

Trust fee

15,125

Other fees paid

1,102 Operating
accounts payable

29.24% Rent revenue, etc(Note 3)(Note 4)

Other operating
expenses
Banking

Item in balance
sheetsOperatingaccounts
512,902 receivable
Advances
received

Property
management
expensesSumitomo
Mitsui
Trust
Bank,
Limited.

Amount oftransaction(thousand yen)
(Note 2)

2.05% Other
non-operating
expenses
Borrowing
related expenses

Investment
corporation bondrelated expenses

6,722

―

1,250
Accounts
848 payable-other342

59,833―Long-term
prepaid expenses

780

Prepaid expenses

720

Long-term
prepaid expenses

179,536

Prepaid expenses

95,905

Accounts
payable-other54

625 Investment
corporation bondissuance
expenses

1,868(Note1) Ratio of investment units held is rounded down to the second decimal place.
(Note2) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs. Furthermore, transaction
terms are determined based on prevailing market conditions.
(Note3) The described above ratio was held to trust accounts.
(Note4) The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

41

For the period from November 1, 2013 to April 30, 2014 (16th fiscal period)

Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank Ltd.

Business
description
oroccupation

Banking

Ratio ofinvestment
units heldamong total
number ofinvestment
units(Note 1)27.33%(Note3)

Type oftransaction

Rent revenue, etc(Note4)
Administrative
service fee
Brokerage fee

Interested
Party and
Assetscustodian

Sumitomo
Mitsui
Trust
Bank,
Limited.

Banking

1.80%

Trust fee
Other fees paid
Property
management
expensesOther
non-operating
expenses
Borrowing
related expenses
Investment unit
issuance related
expenses
Investment
corporation bondrelated expenses

Amount oftransaction(thousand yen)
(Note 2)Item in balance
sheetsOperatingaccounts
532,353 receivable
Advances
received
Accounts
66,861 payable-other

Balance atperiod end(thousand yen)
(Note 2)

6,239
70,20561,068185,000
17,267

Operating－

1,024 accounts payable
1,250

Long-term

420

342 prepaid expenses

Prepaid expenses
Long-term
64,928 prepaid expenses
Prepaid expenses
Investment unit
100 issuance
expenses
Accounts
payable-other
Investment
623 corporation bondissuance
expenses

720
178,475
106,908(Note1) Ratio of investment units held is rounded down to the second decimal place.
(Note2) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs. Furthermore, transaction
terms are determined based on prevailing market conditions.
(Note3) The described above ratio was held to trust accounts. The ratio is rounded down to the second decimal place.
(Note4) The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

42

500
55
1,308

Note 11. Per Unit Information
Fifteenth Fiscal Period (Reference)

Sixteenth Fiscal Period

For the period
from May 1, 2013
to October 31, 2013

For the period
from November 1, 2013
to April 30, 2014

Net Assets per Unit

541,105yen

Net Assets per Unit

528,873yen

Net Income per Unit

10,191yen

Net Income per Unit

11,056yen

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

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

(Note1) The per unit amounts are rounded down to the nearest yen.
(Note2) Net income per unit is calculated by dividing the net income by the weighted average number of investment units overthe number of days in the period.
(Note3)

Base of calculation of net income per unit is as follows:
Fifteenth Fiscal Period (Reference)

Sixteenth Fiscal Period

For the period
from May 1, 2013
to October 31, 2013

For the period
from November 1, 2013
to April 30, 2014

Net Income (thousand yen)

1,579,612

1,913,985

Amounts not attributable to ordinary unitholders(thousand yen)－－

Net income attributable to ordinary investment
unit (thousand yen)

1,579,612

1,913,985

Weighted-average number of units during theperiod (unit)

155,000

173,11643

Note 12. Significant Subsequent Events
Fifteenth Fiscal Period (Reference)

Sixteenth Fiscal Period

For the period
from May 1, 2013
to October 31, 2013

For the period
from November 1, 2013
to April 30, 2014

Issuance of new investment units
Top REIT resolved on issuance of new investment units,
as described below, at its board of directors meetings
held on November 7 and November 18, 2013. Payment
was completed on November 25, 2013 for issuance of
new investment units through public offering, and on
December 13, 2013 for third-party allotment,
respectively.

There are none applicable.

(Issuance of New Investment Units through Public Offering)Number of investment units to
20,000 units
be offered:
Issue price (offer price):
Total issue price (total offer
price):
Amount to be paid in(purchase price):
Total amount to be paid in(total purchase price):
Payment date:(Third-Party Allotment)
Number of investment
units to be offered:Amount to be paid in(purchase price):
Total amount to be paidin (total purchase price) :438,750 yen per unit
8,775,000,000 yen
423,000 yen per unit
8,460,000,000 yen
November 25, 2013

1,000 units
423,000 yen per unit
423,000,000 yen

Payment date:

December 13, 2013

Allottee:

Daiwa Securities, Co. Ltd.

(Use of funds)
Top REIT allocated the proceeds from the public
offering to part of the funds for the acquisition of
specified assets. The proceeds from the issuance of new
investment units by way of third-party allotment will beallocated to funds for the future acquisition of specified
assets or for the repayment of loans.

44VI. Statements of Cash Dividend Distributions

Classification

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

Fifteenth Fiscal Period (Reference)
For the period
from May 1, 2013
to October 31, 2013

Sixteenth Fiscal Period
For the period
from November 1, 2013
to April 30, 2014

Amount(yen) (Note 1)

Amount(yen) (Note 2)

1,579,617,747
1,579,605,000(10,191)

1,913,997,778
1,912,064,000(10,864)－
12,747

1,914,510
19,268Reserve for reduction entry

IV. Retained earnings brought forward

Note1: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 1,579,605,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings for the fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.
Note2: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation.” Based on these policies, Top REIT decided on a total distribution of 1,912,064,000 yen as
distribution of income for the period. This is the maximum value arrived at when the number of units issued and outstanding(176,000 units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings of thesixteenth fiscal period and after deducting the amount of deferred tax liabilities being corrected due to the change in tax rate
which would be transferred to the reserve for reduction entry.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the Articles
of Incorporation.

Disclaimer:
The accompanying English financial information, comprising of balance sheets, statements of retained
earnings, statements of changes in unitholders’ capital, notes to financial information and statements of cash
dividends, have been translated from the Japanese financial statements of Top REIT prepared in accordancewith the Act on Investment Trusts and Investment Corporations.
Under Article 130 of the Act on Investment Trusts and Investment Corporations, the Japanesefinancial statements for the fiscal period ended April 30, 2014 have been audited by KPMG AZSA LLC, in
accordance with auditing standards generally accepted in Japan. However, this English translation of theJapanese language report of independent auditors is not attached herein because the accompanying English
translation of balance sheets, statements of retained earnings, statements of changes in unitholders’ capital,
notes to financial information and statements of cash dividends are unaudited.

45

VII. Statements of Cash Flows (Reference Information)(Unit: thousand yen)Fifteenth Fiscal Period(Reference)(From May 1, 2013 –to October 31, 2013)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of trademark
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance expenses
Interest income and interest on securities
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) of consumption taxes receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
Subtotal

Sixteenth Fiscal Period(From November 1, 2013 –to April 30, 2014)

1,580,570
1,115,879
21
5,511
－
(641)
449,809(75,812)－(11,887)(9,835)(1,280)40,927(20,537)
143,973(31,711)
3,184,987

1,913,029
1,193,406
21
5,511
6,678
(675)
450,967(90,159)(137,402)(24,002)
15,641
13,142(61,670)
89,82870,327(17,394)
3,427,250

641(449,111)(801)
2,735,714

675(450,954)(963)
2,976,008(549)(290,168)－
95,109(508,214)(703,823)(2,951)(12,961,001)(8,450)1,098,156(321,616)(12,195,863)

Net cash provided by (used in) financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of investment units
Payments for investment unit issuance expenses
Dividends paid
Net cash provided by (used in) financing activities－－－(67,500)－－(1,822,645)(1,890,145)

4,500,000(4,500,000)
4,500,000(67,500)
8,883,000(35,317)(1,579,605)
11,700,577

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

141,745
4,700,990
4,842,736

2,480,722
4,842,736
7,323,458

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Purchase of property, intangible assets in trust
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities

46

Note Concerning Significant Accounting Policy [Reference Information]

Classification

Scope offunds instatementsof cash flows

Fifteenth Fiscal Period
For the period
from May 1, 2013
to October 31, 2013
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Sixteenth Fiscal Period
For the period
from November 1, 2013
to April 30, 2014
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Note Concerning Statements of Cash Flows [Reference Information]*1.

Fifteenth Fiscal Period
For the period
from May 1, 2013
to October 31, 2013
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheetsCash and deposits
Cash and deposits in trust
Cash and cash equivalents

Sixteenth Fiscal Period
For the period
from November 1, 2013
to April 30, 2014
*1. Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets(as of October 31, 2013)(Unit: thousand yen)903,3143,939,421
4,842,736

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

Stock and Unitholders Information47(as of April 30, 2014)(Unit: thousand yen)
3,049,986
4,273,472
7,323,458

No. of Unitholders

No. of Units Held48