15th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2012 - May 31, 2013

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 15th Fiscal Period, DOI posted operating revenues of 7,615 million yen and operating income of 3,308 million yen. Our
distribution per unit for the 15th Fiscal Period is 6,542 yen, an increase by 556 yen from the 14th Fiscal Period.
See page 4 for financial and management highlights
As for new property acquisitions in the 15th Fiscal Period, DOI acquired shinyon curumu (9,650 million yen), Honshu Meieki Building(5,300 million yen), Kamiooka Eye Mark Building (2,000 million yen) and Sunline Building No. 7 (230 million yen) additional
acquisition of compartmentalized ownership for a total of 17,180 million yen. Furthermore, in the 16th Fiscal Period DOI acquired
two properties, Tosen Dogenzaka Daini Building (4,500 million yen) and Akasaka Business Place (9,200 million yen), for a total of
13,700 million yen.

See page 8 for details of external growth

The occupancy rate as of the end of the 15th Fiscal Period was 95% as the acquisition of low-occupancy rate properties (shinyon
curumu and Honshu Meieki Building) brought down the overall occupancy rate. However, all properties are relatively new and close
to train stations and have strong ability to attract customers in addition to being located in areas where growth can be expected
through large-scale developments and such, and DOI will work to improve the performance of
these properties, thereby leading to improvement of the entire portfolio.
See page 12 for details of internal growthIn financial matters, DOI will aim to reduce future refinancing risk by extending
borrowing periods and diversifying repayment dates while also reducing financial costs.
See page 14 for details of financial condition
DOI will continue to focus on establishing its portfolio with a particular emphasis
on office buildings in favorable locations centering on Tokyo, and aim to achieve
an asset size of 350 billion yen while striving to increase the competitivenessof existing properties.
We wish for the continued success of our unitholders and ask for yourcontinued support of DOI.

Nobuaki Omura Executive Director of Daiwa Office Investment Corporation
Contents

I.

Overview of Daiwa Office Investment Corporation
To Our Investors……………………………………………… 2
Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3

II. Asset Management Report………………………… 16
III. Balance Sheets… …………………………………… 22
IV. Statements of Income……………………………… 24

Financial and Management Highlights………………………… 4
Overview of Portfolio (portfolio list)…………………………… 5

V.

Statements of Changes in Unitholders’ Equity …… 25

Overview of Portfolio (portfolio distribution)…………………… 6

VI. Notes to Financial Statements…………………… 26

External Growth Measures…………………………………… 8VII.

Independent Auditors’ Report…………………… 36

Internal Growth Measures… ……………………………… 12
Financial Conditions… …………………………………… 14
Description of Asset Manager……………………………… 15

2

VIII. Statements of Cash Flows [Information Only]… … 37
IX. Investor Information… ……………………………… 38

Characteristics and Strategies of Daiwa Office Investment Corporation

3 Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT focused on the Five
Central Wards of Tokyo

Portfolio comprised of
A Class and B Class buildings

Effective application of operational
knowhow specialized in office buildings

Places priority on owning office buildings
in favorable locations for which there ishigh demand

Operates Shinjuku Maynds Tower at thecore and blue-chip medium-sized officebuildings

Office buildings 100.0%

Major Regional Cities 3.0%
Greater TokyoA Class buildings

Five Central
Wards of Tokyo(Shinjuku Maynds Tower)

40.3%

90.1%

6.9%

B Classbuildings
Based on acquisition price

59.7%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of May 31, 2013.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 350 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%(billion yen)
350

Proactive investment inselectively chosencompetitive properties
311.3

300

313.2

350.0
332.0

314.9

287.3

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Improve occupancy rate and increase rent
revenue
Further strengthen relations with tenants

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals and lease-up activities

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

250

200

15th Fiscal Period(fiscal period ended May 2013)(Note) The forecasts on distribution arecalculated based on certain
assumptions and may vary due tochanges in the status and otherconstrued as a guarantee of
distribution amounts.

6,542 yen
7,200 yen
7,300 yen

Acquisition
target(actual)3500

16th Fiscal Period(fiscal period ending November 2013)

factors. Moreover, the forecasts
set forth herein should not be

Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period
ended
ended
ended
ended
ended
May 2011 November 2011 May 2012 November 2012 May 2013

17th Fiscal Period(fiscal period ending May 2014)

3000(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation
2500

3

Financial and Management Highlights
Steady increase of distributions even in a severe office market environment■ Operating Revenues■ Operating Income(million yen)
10,000(million yen)
4,000

7,500

5,000

3,000

7,605

6,758

7,431

7,615

7,566

3,308

3,090

3,146

13th Period

14th Period

2,000

2,500

1,000

0

0
11th Period

12th Period

13th Period

14th Period

15th Period

11th Period■ Net Income

12th Period

15th Period■ Distribution Per Unit

(million yen)
3,000

(yen)
7,000

6,542

2,589

2,369

2,000

5,986

5,000

5,107

2,021

1,766
1,000

3,317
2,823

4,464

1,453

3,000

3,671

1,000

0
11th Period

12th Period

13th Period

14th Period

15th Period

11th Period■ Asset Size

12th Period

13th Period

14th Period

15th Period■ Period End Occupancy Rate(billion yen)
350

(%)
100

95.4
332.0
300

313.2

311.3

314.9

96.4

94.3

92.4

95.0

90

287.3
80

250

70

200
11th Period

12th Period

13th Period

15th Period

11th Period

12th Period

13th Period

14th Period

15th Period

15th Period

14th Period

13th Period

12th Period

11th Period(May 2013)(November 2012)(May 2012)(November 2011)(May 2011)

Operating revenues (million yen)

7,615

7,566

7,431

7,606

6,759

Operating income (million yen)

3,308

3,147

3,090

3,317

2,824

Ordinary income (million yen)

2,590

2,365

2,022

1,767

1,587

Net income (million yen)

2,589

2,369

2,021

1,767

1,453

10000
Total number of units issued (units)395,798

395,798

395,798

Net assets per unit (yen)508,707508,132

507,331

Distribution per unit (yen)Total assets (million yen)
Loan-to-value (LTV)(based on total asset value) (%)
Number of investment properties
Asset size (billion yen)
Total rentable area (m2)Occupancy rate (%)

4

14th Period

4000

395,798

395,798

506,693505,900

6,542

5,986

5,107

4,464

3,671

342,572

325,665

325,315

323,217

298,626

37.5

34.4

34.2

34.0

28.9

41

38

37

36

35

332.0

314.9

313.2

311.3

287.3

225,651.87

208,733.38

207,277.34

205,318.62

191,346.43

95.0

96.4

94.3

92.4

95.4

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 40 B Class buildings(as of May 31, 2013)
Property Name

Address

Appraisal
Acquisition
Execution
Rentable Structure andValue at End
Priceof Period
Area (m2) No. of Floors Completion of Major(Note 2)
(Note 3)
Repairs mm Share (mm yen)
yen(%)
(Note 4)

Ownership TypeLand

Building

PML (%)(Note 5)

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza
2 Daiwa Ginza Annex

Ginza, Chuo-ku, Tokyo

8,267.13 SRC B3/12F

July 1963

2003

14,1004.2

simple and14,700 Feeleasehold

Fee simple

9.17

Ginza, Chuo-ku, Tokyo

2,032.99

SRC B3/8F

Aug. 1972

2003

3,050

0.9

3,100 Fee simple

Fee simple

7.46

3 Daiwa Shibaura

Shibaura, Minato-ku, Tokyo

9,626.38 SRC B1/12F

Oct. 1987

8,265

2.5

7,470 Fee simple

Fee simple

5.09

4 Daiwa Minami-Aoyama

Minami Aoyama, Minato-ku, Tokyo

2,715.54 S SRC B2/5F Sept. 1990

4,550

1.4

4,010 Fee simple

Fee simple

12.79

5 Daiwa Sarugakucho
6 Daiwa A Hamamatsucho

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

June 1985

3,190

1.0

3,090 Fee simple

Hamamatsucho, Minato-ku, Tokyo

3,663.38 SRC B2/10F

July 1993

2,865

0.9

Fee simple
2,830 Fee simple Compartmentalized
ownership

6.03

7 Daiwa Jingumae

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

0.8

2,050 Fee simple

Fee simple

12.01

8 Daiwa Shibadaimon
9 Daiwa Misakicho

Shibadaimon, Minato-ku, Tokyo

2,386.02 SRC RC B1/7F Nov. 1996

2,578

0.8

2,640 Fee simple

Fee simple

2.99

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

2,346

0.7

2,480 Fee simple

Fee simple

6.68

10 Daiwa Shimbashi 510

Shimbashi, Minato-ku, Tokyo

2,693.06

SRC B1/8F

Apr. 1974

2,080

0.6

2,310 Fee simple

Fee simple

8.13

11 Daiwa Tsukijiekimae
12 Daiwa Tsukiji
13 Daiwa Tsukiji 616
14 Daiwa Tsukishima

Tsukiji, Chuo-ku, Tokyo

2,659.59

SRC 10F

Jan. 1996

1,560

0.5

1,400 Fee simple

Fee simple

7.67

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,420 Fee simple

Fee simple

9.70

Tsukiji, Chuo-ku, Tokyo

2,931.93

SRC B1/9F

Mar. 1994

2,440

0.7

2,370 Fee simple

Fee simple

7.69

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.4

7,850 Fee simple

Fee simple

10.89

15 Nihombashi MS Bldg.
16 Daiwa Azabudai
17 Daiwa Shibuya SS
18 Daiwa Nihombashi Honcho

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,850.81

SRC B2/7F

Apr. 1993

2,520

0.8

2,410 Fee simple

Fee simple

7.84

Azabudai, Minato-ku, Tokyo

1,697.38

SRC B2/9F

Apr. 1984

1,600

0.5

1,730 Fee simple

Fee simple

9.57

Shibuya, Shibuya-ku, Tokyo

2,969.11 SRC S B1/9F

July 1977

2003

3,930

1.2

3,830 Fee simple Compartmentalized
ownership (100%)

8.67

Nihombashi-Honcho, Chuo-ku, Tokyo

7,418.61 SRC B1/10F

Jan. 1964

2006

7,420

2.2

6,980 Fee simple

Fee simple

8.49

19 Daiwa Ginza 1-chome
20 Daiwa Kyobashi
21 Sunline Building No. 7
22 Daiwa Onarimon

Ginza, Chuo-ku, Tokyo

3,758.43 SRC B2/11F

Jan. 1962

2005

4,620

1.4

4,480 Fee simple

Fee simple

10.16

Hachobori, Chuo-ku, Tokyo

3,265.83

SRC B1/8F

Oct. 1974

2005

3,460

1.0

3,030 Fee simple Compartmentalized
ownership (100%)

10.04

Kojimachi, Chiyoda-ku, Tokyo

2,690.90

SRC B2/9F

Oct. 1987

2,910

0.9

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,86023 Shinjuku Maynds Tower (Note 7)

Yoyogi, Shibuya-ku, Tokyo

45,544.00 S SRC B3/34F Sept. 1995

24 SHIBUYA EDGE

Udagawacho, Shibuya-ku, Tokyo

2,480.65

RC B1/9F

Aug. 2006

5,900

1.8

4,040 Fee simple

Fee simple

3.14

25 Daiwa Kodenmacho
26 Daiwa Jimbocho

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

SRC 8F

Mar. 1985

2,460

0.7

simple and1,960 Feeleasehold

Fee simple

7.71

Kanda-Jimbocho, Chiyoda-ku, Tokyo

3,164.26

S B1/8F

Mar. 1997

4,150

1.2

2,780 Fee simple

Fee simple

5.58

27 Daiwa Nishi-Shimbashi

Nishi-Shimbashi, Minato-ku, Tokyo

4,815.84 SRC B1/10F

July 1993

5,000

1.5

4,710 Fee simple

Fee simple

6.76

2,882.61

Mar. 1987

4,000

1.2

2,830 Fee simple Compartmentalized
ownership (100%)

7.96

Kudan Minami, Chiyoda-ku, Tokyo
28 Daiwa Kudan
Nihonbashi-Kayabacho, Chuo-ku, Tokyo
29 Daiwa Kayabacho Building
Kanda-Jimbocho, Chiyoda-ku, Tokyo
30 Jimbocho Place
Maruyamacho, Shibuya-ku, Tokyo
31 E SPACE TOWER
32 Nihonbashi Hongokucho Tosei Building Nihombashi Hongokucho, Chuo-ku, Tokyo

33 shinyon curumu

Shinjuku, Shinjuku-ku, Tokyo

Subtotal

SRC 8FRC B1/4F

SRC 9F

July 1996
2006

2003

9.79

2,600 Fee simple Compartmentalized
ownership (100%)

8.62

4.2

13,300 Fee simple Compartmentalized
ownership (100%)

5.45

133,800 40.3

113,000 Co-ownership Co-ownership

6.42

5,899.11 S SRC B1/8F

Apr. 2010

5,600

1.7

6,300 Fee simple

Fee simple

5.58

2,889.34

Feb. 2010

3,550

1.1

3,670 Fee simple

Fee simple

6.13

13,960.85 S SRC B1/15F

Oct. 2002

24,0007.2

26,500 Fee simple

Fee simple

5.78

2,143.08

May 2010

1,721

0.5

1,830 Fee simple

Fee simple

6.93

Jan. 2012

9,650

2.9

10,100 Right of site Compartmentalized
ownership (100%)

6.50

S 9F
S 8F

6,756.45 S RC B2/11F
184,066.20

299,055 90.1

273,800

Greater Tokyo Area (Note 1)

34 Daiwa Kinshicho

Kameido, Koto-ku, Tokyo

5,378.02

Jan. 1992

3,653

1.1

3,320 Fee simple

Fee simple

7.42

35 Daiwa Higashi-Ikebukuro
36 Benex S-3
37 Daiwa Shinagawa North
38 West Park Osaki
39 Kamiooka Eye Mark Building

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,589.17 SRC S B1/9F June 1993

2,958

0.9

3,480 Fee simple

Fee simple

5.56

Shin-Yokohama, Kohoku-ku, Yokohama City, Kanagawa

7,470.18 S SRC B1/12F Feb. 1994

4,950

1.5

3,260 Fee simple

Fee simple

5.66

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,549.98 SRC B1/11F

July 1991

7,710

2.3

5,820 Fee simple

Fee simple

5.56

Osaki, Shinagawa-ku, Tokyo

1,786.58

S RC B1/6F

Sept. 2007

1,650

0.5

1,930 Fee simple

Fee simple

10.93

Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa

2,630.30 S SRC B3/7F

May 2011

2,000

0.6

2,040 Fee simple

Fee simple

12.30

22,921

6.9

19,850Subtotal

S B1/5F

28,404.23

Major Regional Cities (Note 1)

40 Daiwa Minami-Semba
41 Honshu Meieki Building

Minami-Semba, Chuo-ku, Osaka City, Osaka

5,719.54

SRC B1/8F

Sept. 1986

4,810

1.4

2,860 Fee simple

Fee simple

11.56

Meieki-Minami, Nakamura-ku, Nagoya City, Aichi

7,461.90

S 12F

Dec. 2007

5,300

1.6

6,000 Fee simple

Fee simple

12.11

Subtotal

13,181.44

10,110

3.0

8,860

Total

225,651.87

332,086 100.0

302,5105.53 (Note 6)(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.
(Note 2) The Rentable Area are indicated as of May 31, 2013 (end of 15th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2013 (end of 15th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2013) prepared by Sompo Japan Nipponkoa Risk Management Inc.
(Note 6) The PML total shows the portfolio PML.
(Note 7) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation

5Overview of Portfolio (portfolio distribution)
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya

Shibuya-ku

Shinjuku-ku

33 shinyon curumu

35 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

35

Toshima-ku

23 Shinjuku Maynds Tower

31 E SPACE TOWER

17 Daiwa Shibuya SS

7 Daiwa Jingumae

24 SHIBUYA EDGE

Shinjuku-ku

Minato-ku
Shinjuku Sta.
33

23

4 Daiwa Minami-Aoyama

3 Daiwa Shibaura

6 Daiwa A Hamamatsucho

Yotsuya Sta.

Shibuya-ku

8 Daiwa Shibadaimon

Aoyamaitchome Sta.

7

4
Omotesando Sta.

JR

Tokyo Metro

36
40 Daiwa Minami-Semba

36 Benex S-3

40

Ginza Line
Marunouchi Line
Hibiya Line
Tozai Line
Chiyoda Line
Yurakucho Line
Hanzomon Line
Namboku Line
Fukutoshin Line

Toei Subway

31

Line

ne n
-Tosh
i

27 Daiwa Nishi-Shimbashi

17
Shibuya Sta.

De

22 Daiwa OnarimonyuTokNaka-meguro Sta.

Line

16 Daiwa Azabudai

24

To
kyu
To
yok
o

10 Daiwa Shimbashi 510

Yamanote Line
Saikyo Line
Chuo Line
Sobu Line
JR Yokosuka Lineand
Sobu Rapid Line

Meguro Sta.

Oedo Line
Asakusa Line
Mita Line
Shinjuku Line

41

6

39

41 Honshu Meieki Building

39 Kamiooka Eye Mark Building

Osaki Sta.
38

Wards)(as of May 31, 2013)

Chuo-ku

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

14 Daiwa Tsukishima

15 Nihombashi MS Bldg.

18 Daiwa Nihombashi Honcho

19 Daiwa Ginza 1-chome

20 Daiwa Kyobashi

25 Daiwa Kodenmacho

1 Daiwa Ginza

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.

Kudanshita Sta.

9

Akihabara Sta.

5

25

Chiyoda-ku

Hibiya Sta.

12

Shimbashi Sta.
27
10
22

6

16
Shibakoen Sta.

Ningyocho Sta.

Koto-ku

Nihombashi Sta.

Tokyo Sta.

Toranomon Sta.

15

18

Otemachi Sta.

Akasakamitsuke Sta.

32 Nihonbashi Hongokucho Tosei Bldg.

34
32

21

29 Daiwa Kayabacho Building

Kinshicho Sta.

30 26
28

19
Ginza Sta.

12

29

20

34 Daiwa Kinshicho

Chuo-ku
11
13

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo
Major Regional Cities

Tsukishima Sta.

14

Chiyoda-ku

8Minato-ku
3

5 Daiwa Sarugakucho

9 Daiwa Misakicho

21 Sunline Building No. 7

26 Daiwa Jimbocho

28 Daiwa Kudan

30 Jimbocho Place

Shinagawa Sta.

37

Shinagawa-ku

37 Daiwa Shinagawa North

38 West Park Osaki

I. Overview of Daiwa Office Investment Corporation

7

External Growth Measures
Proactive investment in selectively chosen competitive properties

Real Estate Transaction Market and Acquisition Performance
The appetite to sell office buildings continues to be sluggish with the continuation of the favorable financing stance of financial institutions, but DOI will aim
for total investment of 350 billion yen in acquisition price by utilizing its low LTV and by accumulating properties that are highly competitive.
30(transactions) 800
Lending Stance DI (large enterprises/real estate industry)

Lending Stance DI (large enterprises/all industries)

20

600

10

500

0

400

-10

300

-20

200

-30

100

-40
-50

0
2008
2nd Half

2009
1st Half

2009
2nd Half

2010
1st Half

2010
2nd Half

2011
1st Half

2011
2nd Half

2012
1st Half

2012
2nd Half

2013
1st Half
80 (%)(billion yen) 400
350

Total acquisition price

Estimated LTV (based on acquisition price)

300
250

265.0

265.0

311.3

287.3

278.1

269.1

265.0

LTV (based on acquisition price)

150

25.4

22.0

34.0

28.9

28.1

25.5

25.3

314.9

313.2

332.0

345.7

37.5

39.9

70

350.0

60
50

200

100

below zero is severe)

No. of transactions

DI (Above zero is favorable andNumber of transactions

700

34.4

34.2

40.7

40
30
20

Proactive investment in selectively
chosen competitive properties

50
0
End of 6th
PeriodEnd of 7th
PeriodEnd of 8th
PeriodEnd of 9th
Period100

End of 10th End of 11th End of 12th End of 13th End of 14th End of 15th End of 16th
PeriodPeriodPeriodPeriodPeriodPeriodPeriod (planned)(Source) Data from the Real Estate Transactions Study of Urban Research Institute Corporation (a think tank of Mizuho Trust and Banking) and the website of the Bank of Japan.

Current Portfolio and Acquisition Policy
DOI receives a large amount of information on potential acquisition opportunities because of our low LTV and huge capacity for further investment. We intend tocontinue selective investment in properties that will remain competitive after discerning the long-term projections for rent of individual properties brought to us.
■ Acquisition Policy■ Chart of Distribution of Portfolio Properties*(Age: years)• Focused investment on the Five Central Wards of Tokyo and equivalent areas.

60• Selectively choose properties from the view of actual demand toward locations(distance to station, station appeal, popularity, customer attraction).

55• Acquisition of properties that will heighten the stability and profitability of the existing
portfolio.

50• Invest in buildings that are less than 25 years old.

45

and indicate properties acquired after sponsor changes, and distanceto station is measured by the distance to the nearest station.

40■ Status after 16th Fiscal Period Acquisitions
End of 15th Fiscal Period
Greater Tokyo

6.9%

Major Regional Cities
3.0%

35
30

After acquisition
Greater Tokyo

Daiwa Kudan

Major Regional Cities

6.6%

2.9%

Tosen Dogenzaka Daini Building

25

Akasaka Business Place

20
Daiwa Nishi-Shimbashi

15

Daiwa Jimbocho
E SPACE TOWER

10
Kamiooka
Eye Mark
Building

5
Five Central Wards of Tokyo
90.1%

8

Five Central Wards of Tokyo
90.5%

0

Jimbocho West Park Osaki

Daiwa Kayabacho Building Honshu Meieki Building
Nihonbashi Hongokucho Tosei Building

Placeshinyon curumu

0

1

2

3

4

5

6

7

8

9

10

11

Distance to station (minutes)

Properties Acquired During the 15th Fiscal Period
shinyon curumu (acquired on December 3, 2012 / April 12, 2013)• 4-minute walk from the new south exit of Shinjuku Station on JR Lines, directly connected to the passageway of Shinjuku 3-chome Station on
the Tokyo Metro Marunouchi Line and the Fukutoshin Line.
• The property is located where the office and commercial areas intersect. In the future, with further development of the area, medium- tolong-term demand from tenants can be expected.
9,650 million yen
4-2-23 Shinjuku, Shinjuku-ku, Tokyo

Site area

1,144.63m

29,234.99m2

Appraisal price

10,100 million yen (as of May 2013)

Completion

January 25, 2012

Occupancy rate

55.9% (as of May 2013)

Isetan Main Building

Keio
Department
Store
Shinjuku Post Office

juku

Shin

Toei
Line
Shinjuku.
ujuk Sta
Shin home
3-cTo
Ma kyo M
run etr
ouc o
hi L
ine

Sta.
shinyon curumu
Takashimaya
Metro
Tokyo shin
FukutoLine

Total floor area.

Shinjuku Sta

Toei Oedo Lineu Sta.
Shinjuk

Structure and floors S RC B2/11F

Studio ALTASh
3-c injuku
hom
eS
ta.

Address

Shinjuku Ward OfficeeMain Lin

Expected NOI yield 4.3%

JR Chuoeanote LinJR YamuShinjuk chi Sta.
Nishigu

Acquisition priceShinjuku Maynds Tower

Shinjuku Gyoen

Honshu Meieki Building (acquisition on February 1, 2013)• 6-minute walk from Nagoya Station on JR and Nagoya Municipal Subway lines and 2-minute walk from underground doorway leading to Nagoya
Station’s underground shopping arcade.
• Three skyscrapers are planned to be completed in the Meieki (Nagoya Station) area by the end of 2015 and the area’s business accumulation is
expected to grow.
5,300 million yen-Dori

Sakurane

Meieki-dori

in Li

Lin
e

eno

Ma

Na
go
ya
su

ns
ai

85.4% (as of May 2013)ay
ne
Subw hiyama Li
Higas
-Dori
Nishiki DorijiHiroko

Honshu Meieki Building

NagoyaCentral Hospitaltet

Occupancy rate

Nakamura
Police Station

Nakamura
Kuyakusho Sta.

Kin

December 20, 2007

ya Sta.

6,000 million yen (as of May 2013)

Completionu NagoAppraisal price

Meitets

10,416.96m2

Sta.

Total floor areaoya

Structure and floors S 12F

Nakamura
Ward OfficeNag2,059.56m2

Sta.

1-21-19 Meieki-Minami, Nakamura-ku, Nagoya-shi

Site areaoya

Address

Nag

Expected NOI yield 6.0%.
Center Sta
Kokusai
Subway-Dori Line
SakuraKa

Acquisition price

a a.
im St
sh u
sa Raib

.

Sta

Kom

Sa

Kamiooka Eye Mark Building (acquisition on March 1, 2013)• 1-minute walk from Kamiooka Station on Keikyu Line and Yokohama Municipal Subway.
• Relatively new property in front of the station with a high level of competitiveness and high office demand from companies that provide services
for local residents around Kamiooka Station.
2,000 million yen

Ooka River

Acquisition price

Expected NOI yield 6.1%
1-14-6 Kamiooka Nishi, Konan-ku, Yokohama-shi

Site area

689.12m2

Hotel Torianon
Kamiooka EyeMark Building
KeikyuDepartment Store

Appraisal price

2,040 million yen (as of May 2013)

Completion

May 13, 2011

Occupancy rate

100.0% (as of March 2013)

Sta.
Fuji
Shopping Center

Mioka

Blue Line

3,755.36m2

Keikyu Main Line

Total floor area

Kamiooka Sta.

Structure and floors S SRC B3/7F

Kamiooka

Address

I. Overview of Daiwa Office Investment Corporation

9External Growth Measures

Properties Acquired During the 15th Fiscal Period
Sunline Building No. 7 (Additional Acquisition) [Acquisition Date: March 29 and May 29, 2013]•2-minute walk from Kojimachi Station on the Tokyo
Metro Yurakucho Line, 7-minute walk from Hanzomon
Station on the Tokyo Metro Hanzomon Line, and7-minute walk from Yotsuya Station on the JR Lineand the Tokyo Metro Marunouchi and Namboku Lines.
• Having come to own the entire compartmentalized
ownership of the property due to the additional
acquisition, the efficiency of management operations
and liquidity of the property are expected to beenhanced and, accompanying this, the cap rate will
significantly improve and contribute to increasing
appraisal value.

Acquisition Price

230 million yen

Address

4-7-2 Kojimachi, Chiyoda-ku, Tokyo

Site area

608.42m2 (additional acquisition: approx. 8.5%)

Total floor area

3,942.61m2

Total floor area of the
260.89m2 (additional acquisition)
exclusive space
Co-ownership interestof the common space 8.93 % (additional acquisition)
236 million yen(additional acquisition, Jan. 2013)

Appraisal Price

Acquisition of Properties after Sponsor Change
Acquisition
timing9th Period
Daiwa Jimbocho

10th Period

11th Period

Daiwa NishiShimbashi

Daiwa Kudan

Daiwa Kayabacho
Building

12th Period

13th Period

Jimbocho PlaceE SPACE TOWER

Nihonbashi Hongokucho
Tosei Bldg.

Property nameArea

Chiyoda-ku, Tokyo

Minato-ku, Tokyo

Chiyoda-ku, Tokyo

Chuo-ku, Tokyo

Chiyoda-ku, Tokyo

Shibuya-ku, Tokyo

Chuo-ku, Tokyo

Acquisition price

4,150 million yen

5,000 million yen

4,000 million yen

5,600 million yen

3,550 million yen

24,000 million yen

1,721 million yen

Seller

ORIX JREIT Inc.

Japan Core Asset 2 YK

Shining Nova No. 5 B(SPC)

Acquisition dateMar. 10, 2010

Aug. 13, 2010

Sep. 2, 2010

Mar. 25, 2011

Mar. 29, 2011

Jul. 8, 2011

May 11, 2012

Building age(Note 1)13.0 years

17.0 years

23.4 years

0.9 years

1.1 years

8.7 years

2.0 years

NOI yield (Note 1)

6.0%

5.5%

5.3%

5.1%

5.1%

4.8%

5.3%

Acquisition
timing14th Period

15th PeriodWest Park Osaki

shinyon curumu

Honshu Meieki
Building

Kamiooka Eye Mark
Building

Tosen Dogenzaka
Daini Building

Daiwa Property Co, Ltd. Tokyu Land Corporation Endeavor Realty Fund YK

Tosei Corporation

16th Period
Akasaka Business
Place
Total

Property nameArea

Shinagawa-ku, Tokyo

Shinjuku-ku, Tokyo

Nagoya-shi, Aichi

Yokohama-shi, Kanagawa

Shibuya-ku, Tokyo

Minato-ku, Tokyo-

Acquisition price

1,650 million yen

9,650 million yen

5,300 million yen

2,000 million yen

4,500 million yen

9,200 million yen

80,321 million yen

SellerMCR Six GK

Two domestic industrial
companies

Domestic special
purpose company

Shimizu Corporation

Domestic special
purpose company

Hakuba Capital 1 TMK-Acquisition date

Sep. 18, 2012

Dec. 3, 2012
Apr. 12, 2013

Feb. 1, 2013

Mar. 1, 2013

Jul. 3, 2013

Aug. 9, 2013-

Building age(Note 1)

5.0 years

1.0 year

5.1 years

1.8 years

25.3 years

22.9 years

10.9 years (Note 2)

NOI yield (Note 1)

6.1%

4.3%

6.0%

6.1%

4.6%

4.8%

-

(Note 1) The building age and NOI yield are based on the time of acquisition.
(Note 2) The building age is calculated using the weighted average of the acquisition price.

10

Properties Acquired During the 16th Fiscal Period
Tosen Dogenzaka Daini Building (acquired on July 3, 2013)■ Convenient transportation access• 9-minute walk from Shibuya Station on the
JR Line, 3-minute walk from a major
business, commercial and hotel complex
directly connected to Shibuya Station, and3-minute walk from Shinsen Station on the
Keio Inokashira Line.
• Access to multiple lines such as JR, Tokyo
Metro, Tokyu, and Keio.

■ Characteristics of the local area

■ Demand for office space in Shibuya,
Dogenzaka, Sakuragaoka, and Nanpeidai
Other

20.0%

10.0%

Information andCommunication,and IT
54.0%

Services
16.0%

Source: Sanko Estate

Commercial(Wholesale & Retail)

Seibu

Tokyu

JR Yamanote Line

Shibuya Edge

Tokyo Metro
Fukutoshin Line

• Further development is expected since
Shibuya area enjoys abundant demand for
office space primarily from IT and IT-relatedcompanies, and redevelopment of the areaaround Shibuya Station is planned.

roTokyo Met Line
HanzomonSeibu
tro
Shibuya Sta. Blocko MeToky a Line
Ginz
Shibuya Sta.
Shibuya Sta.

To
To kyush De
i L neine n

109

Total floor area 5,644.91m2

Expected NOI yield

4.6%

Appraisal price 4,630 million yen (as of May 2013)

Address

28-1 Maruyama-cho,Shibuya-ku, Tokyo

Completion

March 11, 1988 (newly built)
October 6, 1988 (expansion)

Site area

721.34m2

Occupancy rate

100% (as of July 2013 (the time ofacquisition))

Shinsen
Sta.

Daiwa
ShibuyaSS

Mark City
Tokyu Plaza
Keio shira Linea
ShibuyaSta. Dogenzaka Blockk
InoShibuya Sta. South BlockTosen Dogenzaka
Cerulean Tower
To
Daini Building
Tokyu Hotel
ky
u

To

Tokyu

e

Lin

Structure and floors SRC B1/11F

E SPACE
TOWER

ko

4,500 million yen

yoAcquisition Price

Akasaka Business Place (acquired on August 9, 2013)■ Property close to Akasaka Station• 2-minute walk from Akasaka Station on the Tokyo Metro Chiyoda Line.
• There are major subway stations, such as Akasaka-mitsuke Station on the Tokyo Metro
Marunouchi and Ginza Lines and Tameikesanno Station on the Ginza and Namboku
Lines, around the property, and there is access to other multiple lines.

■ Characteristics of the local area

Total floor area

13,554.49m2

Appraisal price

10,200 million yen (as of June 2013)

Completion

September 13, 1990

Occupancy rate

89.2% (as of August 2013
(the time of planned acquisition))• Multiple redevelopment
plans are underway
around the property.

Tokyo Metro
Namboku Line

■ Redevelopment
plansaround the property

Akasaka
Biz Tower
akasaka
TBS Sacas
tro e
Me in
yo da Lk
To hiyoC

TameikeSanno Sta.

Structure and floors SRC B2/7Fa.

2,521.95m2

St

2-14-5 Akasaka, Minato-ku, Tokyo

Site area

as
ak
a

4.8%

Address

Ak

9,200 million yen

Expected NOI yieldaka- .
Akas uke Sta
mits

Acquisition Price• There are many leading domestic corporations and foreign companies, and it is one of
the foremost popular areas in Tokyo packed with many commercial and service-relatedcompanies.
• There are commercial TV
stations, major advertising（Tentative Name）Kioicho Project
Tokyo MNa
agencies, and IT/media
Na
gat
Marunou etro
ach
o
S ga
chi Lineo S ta. tacho Tokyo Metr Linerelated companies around
ta.
ucho
Yurak
o ne
Akasaka Excelrti
the property, and it has ae LHotel TokyuoM nky mo oNational
high concentration of
To anzo Metr
HibiyaH yo ine
Diet
k L
High
Building
companies related to such
To inza
SchoolG
ae
Hie jinja shrine
industries.
um
ido
ij

aig
kk
Ko ta.
S
gijidoumae

KokkaiSta. Kantei

AkasakaBusiness Place

Akasaka Ichome ProjectI. Overview of Daiwa Office Investment Corporation

11

Internal Growth Measures
Committed to heightening tenant satisfaction and proactive leasing activities

Office Market Trends
Vacancy rates have stopped increasing and it is believed that, as the large supply of offices has settled down, rents are starting to bottom out.

■ Office Building Rental Market of Tokyo■ Large-scale Office Building (Note) Supply in 23 Wards of Tokyo(yen/tsubo)
25,000(%)
10(thousand m2)
2,500

23,0008

2,000

21,0006

1,500

19,000

4

1,000

2,160

1,250

17,000
Average rents ofexisting buildings (left axis)

15,000Vacancy rate ofexisting buildings (right axis)

2

500

0

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1,750

1,540
1,210

910

1,190
770

1,170
650

910

860 850

1,160

1,020
590

580

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source) Miki Shoji

Completed properties

Incomplete properties(Note) Large-scale office buildings: Total office floor areas of 10,000m2 or more.
(Source) Mori Building

Rental Business Status

We strived to improve the occupancy rate as well as diversifying tenants in leased areas.

■ Occupancy Rate

■ Average Contract Rents and Market Rents (monthly)

(％)
100

(yen/tsubo)
25,000
97.7
95.9

95

96.4

95.4
94.3

92.8

95.0

94.8

94.3

94.6

94.3
20,00092.4
90Occupancy rate (actual)
Average contract rents

Occupancy rate (forecast in Jul. 2013)
Occupancy rate (previous forecast in Jan. 2013)

85.7

85

Average office rents (according to Miki Shoji for five central wards of Tokyo)

15,000End of End of End of End of End of End of End of End of End of End of End of
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
Period Period Period Period Period Period Period Period Period Period Period

End of End of End of End of End of End of End of End of End of End of End of
4th
5th
6th
7th
8th
9th
10th
11th
12th
13th
14th
Period Period Period Period Period Period Period Period Period Period Period

End of15th
Period(Note) Average monthly contracted rents with tenants at the end of each fiscal period.

■ Tenant Diversification in Leased Area

■ Changes and Reasons for Tenants Moving In/Out (Note)(%)(No. of cases)
500

100.0

(No. of cases)
60
50
40

80.0

400
1,000m2 or more (left axis)
300m2 or more, less than 1,000m2 (left axis)
Less than 300m2 (left axis)
Occupancy rate (right axis)

300

200

32
115

42

43

42

127

127

133

30
20
10

41
41
145

38

174

0
60.0

-10
-20

159

33
24

17

-20

-30
40.0

38

31

6

5
-19

30

-14

16
4
-12

-24

18

13

44
18

24
9

-2
-20

-15
-25

-26

-40
-50

-53

-60
100

97

105

107

103

110

119

139

0.0

0
End of
9th Period

End of
End of
End of
End of
End of
End of10th Period 11th Period 12th Period 13th Period 14th Period 15th Period(Note) Office and retail are the target tenants (excluding residence and warehouse).

12

20.0

7th
8th
9th
10th
11th
12th
13th
14th
15th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period
Number of Move Ins

Number of Move Outs

Difference

Breakdown of 15th
Cost
Space
BetterConsolidation Downsizing
Reduction Expansion
Location
PeriodMoving inMoving out

2
2

13
0

0
4

0
5

4
0

Other

Total

5
4

24
15

(Note) Figures above exclude new moving in/out for residential and warehouse properties.

Internal Growth Policy
Results have been steadily surfacing as we have engaged in internal growth based on the motto of “Bonji-Tettei”

Bonji-Tettei■ Leasing: Attract New Tenants through Good Terms■ Engineering: Verification of Construction Plans andEnvironmental Responses• Further strengthen collaboration with leasing agents by holding various
regular meetings and regular visits with said agents.
• Regularly visit leasing agents and enhance recognition of properties
subject to leasing improvement and confirm the amount of feedback andresponses.
• Implement prompt and smooth leasing by Daiwa Real Estate AssetManagement being present at the time of property viewing and directly
grasping the status of negotiations.
• Properties that can aim for unit price recovery will confirm the status ofneighboring properties and perform term adjustments that can produce
good results with the people in charge of each company (face-to-faceleasing).

• Introduce effective principles of competition so that maintaining fair costand price level will be enabled, and continue to look into construction costsof heat, light and water supply and management cost.
• Work to systematically perform “work that can be performed on the side of
the ordering party that enables costs to be reduced while the quality of
construction is maintained, such as separate orders,” centering onlarge-scale construction accompanying the long-term repair plan.
• Raise the added value and competitiveness by advancing initiatives forenvironmental certification systems such as GRESB and environmental
responses at existing properties.

■ Collaboration with Group■ Relations with Tenants: Strengthening Communication
with Tenants• Reinforce leasing by utilizing Daiwa Securities’ branch network.
• Implement leasing that utilizes Daiwa Securities Group’s network of
corporate clients.

• Further strengthen relations with tenants by deepening interaction amongpeople by visiting all tenants on a regular basis, etc.
• Implement communication with and satisfaction surveys for existing
tenants and aim for mutual communication.

Occupancy Rate of the Properties Subject to Leasing Improvement in the 15th Fiscal Period■ shinyon curumu (acquisition price: 9,650 million yen)

■ Honshu Meieki Building (acquisition price: 5,300 million yen)

■ Daiwa Tsukijiekimae (acquisition price: 1,560 million yen)

100.0 (%)

100.0 (%)

100.0 (%)

78.4
50.0

55.9

51.9

0.0
Time of Acquisition(Dec. 2012)

15th
Period• Highly convenient property located a 4-minute
walk from JR Shinjuku Station’s new south exit anddirectly connected to the passageway of Shinjuku
3-chome subway station.
• Local development can be expected with
development of station building scheduled to open
in the spring of 2016 as well as with infrastructuredevelopment.

85.4

50.0

50.0

0.0

0.0

Time of Acquisition(Feb. 2013)

100.0

0.0

0.0

10.3

15th
Period

12th
13th
14th
15th
Period Period Period Period• Located a 6-minute walk from Exit 7 of Nagoya
Station on the JR and Nagoya Municipal Subway
lines and a 2-minute walk from the underground
100doorway which leads to the underground shopping
arcade.
• A large-scale redevelopment is planned in the
50future and business accumulation is growing year
by year.

• Highly convenient property located a 1-minute
walk from Tsukiji Station on the Tokyo Metro Hibiya
Line and located right outside the subway exit.
100• There are many affiliate companies of parent
companies which have headquarters in the areaaround Tokyo Station and Ginza area.
50

Implement Strategic Renewals Aimed at Improving Property Specifications
00■ Daiwa Ginza■ Daiwa Azabudai■ Shinjuku Maynds Tower

Introduced “LED lighting” incommon areas

Renewal construction (entrance
ceiling)

Introduced “LED lighting” inbasement parking area

100

50

0

■ Total portfolio
Long-period earthquake
countermeasure construction onelevators (five)

Installed disaster prevention
cabinets (total of 28) in
preparation for disasters

I. Overview of Daiwa Office Investment Corporation

13

Financial Conditions
Reduce refinancing risk by extending borrowing periods and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of May 31, 2013)
During the 15th Fiscal Period, DOI conducted debt financing of 21.7 billion yen, extended borrowing periods, diversified repayment dates andincreased the number of financial institutions from which it borrows. Going forward, DOI will continue to focus on stable financial management
and support further growth.
■ Interest-Bearing Liabilities■ Changes in Remaining Years at the Time of
Procurement of Interest-Bearing Liabilities(billion yen) 280

70.0(％) (Year) 8.0
LTV (based on acquisition price) (Note) (right axis)

240
200

60.0
50.0

Medium-to-long term, upper-limit LTV target range
160

40.0

120

30.0

80

20.0

40
0
End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

4.0 (Year)

Average year remaining at the period end (right axis)

Interest-bearing liabilities (left axis)

7.0

Average remaining years at the time of
3.5
procurement during the 15th Fiscal period (left axis)

6.0

5.9

3.0

5.0

2.5

2.5

4.0

2.0

3.0

1.5

2.0

1.0

10.0

1.0

0.5

0.0

0.0

0.0
8th
9th
10th 11th 12th 13th 14th 15th 16th
Period Period Period Period Period Period Period Period Period(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties■ Diversification of Repayment Dates■ Balance of Borrowings by Financial Institution(including investment corporation bonds)(million yen)
25,000Financial institution
20,00015,00010,00021,7005,000

015th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Long- to
Short-Term Liabilities
End of 15th Fiscal Period■ Ratio of Fixed- to
Floating-Rate Borrowings
End of 15th Fiscal Period
19.5%

29.2%

70.8%
Long-term borrowings, etc.
Current portion of long-term borrowings(Includes current portion of investment corporation bonds)

14

80.5%
Fixed interest rates
Floating interest rates

Sumitomo Mitsui Banking Corporation
Development Bank of Japan
Sumitomo Mitsui Trust Bank
Shinsei Bank
Resona Bank
Mizuho Bank
Aozora Bank
Kansai Urban Banking Corporation
Mizuho Trust and Banking
Mitsubishi UFJ Trust and Banking
The Bank of Fukuoka
ORIX Bank Corporation
The Gunma BankThe Shizuoka Bank
The Musashino Bank
The Hiroshima Bank
The Kagawa Bank
The 77 Bank
Tokio Marine & Nichido Fire Insurance
The Bank of Yokohama
The Yamaguchi Bank
The Higashi-Nippon Bank
Taiyo Life Insurance Company
Nippon Life Insurance Company
Fukoku Mutual Life Insurance
Investment corporation bonds
Total

Balance(mm yen)Share

23,500 18.3%
16,750 13.1%
16,350 12.7%
10,000
7.8%
9,000
7.0%
7,900
6.2%
6,000
4.7%
5,000
3.9%
4,500
3.5%
3,000
2.3%
3,000
2.3%
2,500
1.9%
2,500
1.9%
2,000
1.6%
1,500
1.2%
1,000
0.8%
1,000
0.8%
1,000
0.8%
1,000
0.8%
500
0.4%
500
0.4%
500
0.4%
300
0.2%
300
0.2%
200
0.2%
8,500
6.6%
128,300 100.0%(Note) Balances less than a million yen have been rounded down.
Financial institutions from which borrowings were newly procured during
the 15th Fiscal Period are boxed in red.

Description of Asset Manager

Organization of Asset Manager (as of June 26, 2013)■ Description■ Directors and Auditor

Name

Daiwa Real Estate Asset Management Co., Ltd.

Address

6-2-1 Ginza, Chuo-ku, Tokyo

Established

October 21, 2004

Paid-in Capital

200 million yen

Employees
Registration of Financial Instruments
Business Operator
Building Lots and Buildings Transaction
Business License
Discretionary Agent for Real EstateTransaction Approval47
No. 355 (Kinsho), Director-General, Kanto Local
Finance Bureau

Association Membership

President and Representative
Akira Yamanouchi
DirectorNo. (2)-83920, Governor of Tokyo
No. 34, Minister of Land, Infrastructure, Transport andTourism
Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association■ Organizational Chart

Vice President andRepresentative Director

Yuji Shinotsuka (Business Planning Dept.)

Vice President andRepresentative Director

Yoshiki Nishigaki (Head of Fund Management Dept.)

Director

Naoyuki Owa (Head of Administrative Dept.)

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

Auditor (non-executive)

Masaru Shirataki

Shareholders’ Meeting
Auditors
Board of Directors

Compliance Committee
Investment Committee

President andRepresentative Director

Acquisition
Department
Office Investment
Team
Residential Investment
Team

Asset Management
Department
Office Management
Team
Residential
Management Team
Investment Planning
Team
Construction
Management Team

Customer Relations

Finance Department

Compliance Officer
Internal Control Office
Administration
Department

Corporate Planning
Department

Private FundManagement Department

Finance Team

Advisory Team

Accounting Team

Operational TeamManagement Team

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd.

①

Investment Corporation

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers④②

Executive Director: Nobuaki Omura
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

KPMG AZSA LLC① Asset management contract / General administration affairs contract related to operationof administrative instruments② General administrative affairs contract / Asset custodian contract③ Unitholder register, etc. management contract / Special account management contract③

Manager of Unitholder
Registry, etc.
Special Account Management
Institution
Sumitomo Mitsui Trust Bank, Limited⑤

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation④ Sponsor support agreement⑤ Fiscal agency agreement

I. Overview of Daiwa Office Investment Corporation15

II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

15th Period 14th Period 13th Period 12th Period 11th Period

Dec. 1, 2012 From June 1, 2012 From Dec. 1, 2011 From June 1, 2011 From Dec. 1, 2010
( FromTo May 31, 2013 )( To Nov. 30, 2012 )( To May 31, 2012 )( To Nov. 30, 2011 )( To May 31, 2011 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
7,615
7,566
7,431
7,606
6,759
Rental revenues
7,520
7,384
7,338
7,551
6,715
Operating expenses
4,306
4,419
4,341
4,289
3,935
Property-related expenses
3,499
3,602
3,533
3,472
3,166
Operating income
3,309
3,147
3,090
3,317
2,824
Ordinary income
2,590
2,365
2,022
1,768
1,588
Net income
2,589
2,369
2,021
1,767
1,453
(2) Properties, etc. (as of end of period)
Total assets
342,573
325,666
325,316
323,218
298,626[period-on-period percentage changes][+5.2%][+0.1%][+0.6%][+8.2%][+1.4%]
Interest-bearing liabilities
128,300
112,081111,391
109,917
86,250Net assets
201,345
201,118
200,800
200,548
200,234[period-on-period percentage changes][+0.1%][+0.2%][+0.1%][+0.2%][+0.1%]
Unitholders’ capital
198,781
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
2,589
2,369
2,021
1,767
1,453
Dividend payout
100.0%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)395,798
395,798
395,798
395,798
395,798
Net assets per unit (yen)508,707508,132
507,331506,693505,900
Distribution per unit (yen)
6,542
5,986
5,107
4,464
3,671
Distribution amount from earnings per unit (yen)
6,542
5,986
5,107
4,464
3,671
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
0.8%
0.7%
0.6%
0.6%
0.5%
Notes 2and3[annual rate][1.6%][1.5%][1.2%][1.1%][1.1%]
ROE
1.3%
1.2%
1.0%
0.9%
0.7%
Notes 3and 4[annual rate][2.6%][2.4%][2.0%][1.8%][1.5%]
Capital ratio
58.8%
61.8%
61.7%
62.0%
67.1%
[period-on-period percentage changes][−3.0%][0.0%][−0.3%][−5.0%][−0.9%]LTV (loan to value)
37.5%
34.4%
34.2%
34.0%
28.9%
Property leasing cash flows (NOI)
Note 5
5,300
5,088
5,172
5,427
4,830
(6) Other Referential Information
Number of investment properties
41
38
37
36
35
Number of tenants
Note 6
410
376
355
340
334
225,651.87 208,733.38 207,277.34 205,318.62 191,346.43
Total rentable area (m2)Occupancy rate
Note 7
95.0%
96.4%
94.3%
92.4%
95.4%
Depreciation
1,280
1,306
1,367
1,348
1,281
Capital expenditures
278
357
641
240
540
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

16

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 11th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 12th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 13th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 14th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 15th Fiscal Period are the annualized figures calculated based on 182 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (former DA Office Investment Corporation; hereinafter “DOI”) was establishedon July 11, 2005 in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951;
including amendments thereto) with Daiwa Real Estate Asset Management Co., Ltd. (hereinafter “DREAM”; former, K.K.
daVinci Select) as the organizer. After its establishment, DOI implemented an additional issuance of investment units
through a public offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (“TSE”)
Real Estate Investment Trust Section (securities code: 8976) the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition prices), subsequent
activities, such as the additional acquisition of properties and replacement of portfolio properties, resulted in theassets under management amounting to 332,086 million yen (sum total of acquisition prices) as of the last day of May
2013.
DOI strives to secure stable revenues and achieve sustainable growth of investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on investment inbuildings with a total floor area of 2,000m2 or more situated in downtown Tokyo, as well as through dedicated efforts
to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from December 1, 2012 to May 31, 2013)
During the 15th Fiscal Period, owing to economic policy especially focusing on financial, theappreciation of the yen was quickly corrected and stock prices rose. In addition, there has been arecovery in consumer spending due to the improvement in consumer confidence, and improvement incorporate performance and employment.
In the office rental market in central Tokyo, initially, vacancy rates were on a downward trend, but there
was a bottoming out in the latter half. On the other hand, for office rents there was a rise in large buildings
in some areas, but slightly downward is the main trend in the overall market.
In the office transaction market, property acquisitions by real estate companies and funds (including
REITs) have increased significantly as a result of the ongoing favorable equity financing environment andproactive lending attitudes of financial institutions.
(B) Management Performance
To increase the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties)
over the medium to long term, DOI has sustained the strategy for “external growth” which aims toincrease revenue through property acquisitions, and “internal growth” which aims to maximize income
generated from existing properties.
For external growth, DOI proactively engaged in property acquisition activities and purchased “shinyon
curumu” (acquisition price: 9,650 million yen) in December 2012 and April 2013 with some floors
unoccupied, “Honshu Meieki Building” (acquisition price: 5,300 million yen) in February 2013 and“Kamiooka Eye Mark Building” (acquisition price: 2,000 million yen) in March 2013. Moreover, DOI
acquired additional sectional ownership of existing property “Sunline Building No. 7” (acquisition price:
230 million yen), and owns all sectional ownership for the property. As a result, DOI’s assets undermanagement at the end of the 15th Fiscal Period (as of May 31, 2013) totaled 41 properties, the sum totalof acquisition prices amounted to 332,086 million yen.
For internal growth, in spite of the severe office rental market, acquisitioning properties with low
occupancy rates, DOI tried to improve tenant satisfaction through developing good relations with tenants
and strengthen cooperation with leasing brokers and property managers. As a result of proactive leasing
activities, the contract area of occupancy for the 15th Fiscal Period was higher than the previous and theoccupancy rate at the end of the 15th Fiscal Period (as of May 31, 2013) was maintained at 95.0%.

II. Asset Management Report17

(3) Overview of Capital Procurement(A) Procurement of Funds for Acquisitions
DOI implemented the following financing activities during the 15th Fiscal Period to acquire “shinyon
curumu,” “Honshu Meieki Building” and “Kamiooka Eye Mark Building,” and acquire additional sectional
ownership of an existing property “Sunline Building No. 7.”(a) On December 3, 2013, DOI borrowed 4,000 million yen from Development Bank of Japan Inc. andShinsei Bank, Ltd. to acquire the new property (“shinyon curumu” delivered on December 3, 2013).
(b) On February 1, 2013, DOI borrowed 5,500 million yen from Sumitomo Mitsui Banking Corporation,
Sumitomo Mitsui Trust Bank, Limited, Tokio Marine & Nichido Fire Insurance Co., Ltd., Yamaguchi
Bank, Ltd., and The Higashi-Nippon Bank, Limited. to acquire the new property (“Honshu Meieki
Building” delivered on February 1, 2013).
(c) On March 1, 2013, DOI borrowed 2,000 million yen from Resona Bank, Ltd. to acquire the new property(“Kamiooka Eye Mark Building” delivered on March 1, 2013).
(d) On March 29, 2013, DOI borrowed 200 million yen from Fukoku Mutual Life Insurance Company toacquire the additional sectional ownership of an existing property (“Sunline Building No. 7” deliveredon March 29, 2013 and May 29, 2013).
(e) On April 12, 2013, DOI borrowed 4,500 million yen from Sumitomo Mitsui Trust Bank, Limited,
Development Bank of Japan Inc., Aozora Bank, Ltd., The Gunma Bank, Ltd. and The Musashino Bank,
Ltd. to acquire the new property (“shinyon curumu” delivered on April 12, 2013).
(B) Procurement of Funds for Repayment of Borrowings (Refinancing)
DOI implemented the following financing activities during the 15th Fiscal Period for repayment of borrowings.
(a) On January 10, 2013, DOI borrowed 1,000 million yen from ORIX Bank Corporation for repayment of
1,000 million yen due on January 10, 2013.
(b) On February 28, 2013, DOI borrowed 4,500 million yen in total from Aozora Bank, Ltd. and Kagawa
Bank, Ltd. for repayment of 4,481 million yen due on February 28, 2013.
(C) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding at the end of the 15th Fiscal
Period (as of May 31, 2013) stood at 128,300 million yen (long-term debt: 119,800 million yen; investment
corporation bonds: 8,500 million yen). The balance of long-term debt due within one year and investment
corporation bonds redeemable within one year stood at 32,400 million yen and 5,000 million yen, respectively.
During the 15th Fiscal Period, DOI promoted the diversification of lenders by borrowing from new lenders(such as life insurance companies, non-life insurance companies and regional banks). In addition, the averageremaining repayment period has been extended from 2.25 years (14th Fiscal Period) to 2.49 years (15th Fiscal
Period) because DOI changes borrowing period to 5~7 years. Furthermore, borrowing costs were reduced
through the reduction of credit spread.

18

(4) Capital Expenditures During the 15th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 15th
Fiscal Period. Capital expenditures amounted to 278 million yen, and combined with the 215 million yen in
repair expenses, total of 493 million yen in construction work was implemented.
Name of Property(location)

Expenditure(millions of yen)

Purpose

PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renovation of the
4F, 15F, 17F and common areas

From: Nov. 2012
To: Dec. 201222

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renovation of the
3F, 18F, 21F and common areas

From: Apr. 2013
To: May 201321

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of theelectricity meter

From: Apr. 2013
To: May 2013

19

From: Nov. 2012
To: May 2013

216

Other Buildings
Total

278

(5) Overview of Financial Performance and Distributions
As a result of the management described above, for the 15th Fiscal Period, DOI recorded 7,615 million yen in
operating revenue, 3,309 million yen in operating income, 2,590 million yen in ordinary income and 2,589 million
yen in net income.
Concerning distributions, to ensure that the cash dividend would be deducted from taxable income (Article
67-15 of the Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments, hereinafter“Special Taxation Measures Act”)), DOI decided to distribute the entire retained earnings at the 15th Fiscal
Period end, excluding fractions of the distribution amount per unit that are less than 1 yen. Accordingly, DOI
declared a distribution of 6,542 yen per unit.

II. Asset Management Report193. Future Management Policy and Tasks(1) Investment Environment
The Japanese economy is expected to recover gradually with the improvement of corporate performance
mainly focusing on export-related companies and public investment as well as a recovery in personal
spending due to the effects of various economic stimulus and monetary easing as well as the recovery inoverseas economies. However, there still is a need to pay attention to the possibility in rising of long-term
interest rates, the uncertainty in overseas economies and financial markets, the relations with various
countries and the consumption tax rate hike because they might put downward pressure on the economy.
In the office rental market, with the improvement of corporate performance and the employment situation,
decrease in the supply and vacancies of new office buildings and undervalued rents boost demand, bothvacancy rates and rents are expected to make a gradual recovery centering on prime properties.
In the office transaction market, acquisition demand of real estate companies and funds (including REITs) is
expected to be stronger against the backdrop of the favorable financing environment, decline in expected
yields, and expectations for rents to bottom out.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the above office leasing market conditions, tenants are also expected to be more selective withproperties. Consequently, DOI will carry out operational management under the following policy in an aim
to enhance the competitiveness of existing properties and thereby increase the long-term EPS over the
medium to long term.
(a) Maintain and raise occupancy rates
For existing tenants, strive to reduce vacancy risks through improving the quality of buildings,
equipment and management systems. For new tenants, strive to maintain and raise occupancy rates
through the provision of more comfortable services than competitors by aggressively participating in
the market.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining the high level of tenantsatisfaction with office environments. To achieve this, DOI will implement efficient operational
management by leveraging the economies of scale obtained from external growth and reviewing
planned construction work.
(B) Investment Strategy for New Properties
Based on various external growth strategies, DOI will concentrate its investment in buildings with a total
floor area of 2,000m2 or more considering a balance between the financing and purchasing market
situation. In principal, DOI will invest in properties around Tokyo, but will also look into investment incompetitive properties in areas other than Tokyo to diversify investments.
As pipelines, in addition to expanding its own information-sourcing channels, DOI will search forproperties that meet its investment criteria by proactively gathering real estate transaction market
information through expanding partnerships with DREAM and the Sponsor Group, and utilizing theGroup’s extensive network of clients.
During the 15th Fiscal Period, DOI additionally acquired “shinyon curumu” which is situated in Tokyo,“Honshu Meieki Building” which is situated in Nagoya City, Aichi, and “Kamiooka Eye Mark Building”
which is situated in Yokohama City, Kanagawa. In addition, DOI acquired additional sectional ownershipof the existing property “Sunline Building No. 7” and owns all sectional ownership of the property. DOI
believes the acquisitions will contribute to further stabilization and enhancement of the portfolio. DOI willcontinue to strive to acquire properties that are in line with the investment strategy described above.

20

(C) Financial Strategy
DOI will conduct disciplined financial management based on the following content.
From the 16th Fiscal Period, the control index for financial management will be changed from theexisting ratio of interest-bearing liabilities to acquisition price to the ratio of interest-bearing liabilities
to total assets (LTV).
(a) In principle, control leverage by keeping the LTV ratio (based on total asset value) within the range of
40% to 50% at maximum in consideration of the substantial LTV (ratio) and other factors.
(b) In principle, diversify the payment date, targeting 30 billion yen as the maximum amount of interestbearing liabilities that shall become due during any single fiscal period.
(c) In principle, aim to have long-term loans be at least 70% of total loans.
(d) Diversify lenders, which shall mainly be domestic financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by separatingnecessary funds, such as the amount of distributions paid, from working funds.
(D) Schedule of Capital Expenditures
The following table lists major capital expenditures in conjunction with the refurbishment or renewal
work planned for the future on the properties held as of May 31, 2013. Please note that the amounts
below include costs that will be recognized as expenses.
Estimated Cost
(millions of yen)
Name of Property(location)

PurposeShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renovationof common areas

From: Aug. 2013
To: Oct. 2013

41

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of
exclusive part lighting

From: Aug. 2013
To: Oct. 2013

40

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for
replacement of vessel valves of
CO2 fire extinguishingequipment

From: Aug. 2013
To: Oct. 2013

27

–

–

Daiwa Shibuya SS(Shibuya-ku, Tokyo)

Construction work for renovationof north side curtain wall

From: Oct. 2013
To: Nov. 2013

23

–

–

Daiwa Ginza(Chuo-ku, Tokyo)

Construction work for renovationof basement ventilation

From: Sep. 2013
To: Nov. 2013

20

–

–

Estimated Period
Total

Payment
Cumulative
for theamountcurrent
paid
periodII. Asset Management Report21III. Balance Sheets
As of May 31, 2013 and November 30, 2012
(Thousands of yen)

As of
May 31, 2013

As ofNovember 30, 2012

AssetsCurrent Assets:
Cash and cash equivalents [Note 10]

16,057,773

16,046,965

Tenant receivables

230,151

261,650

Consumption tax refundable

248,782–

Prepaid expenses

262,955

246,573

3,167

18

Other current assets

119,179

94,278

Total Current Assets

16,922,007

16,649,484

Land including trust accounts

260,705,094

248,877,227

Buildings and structures including trust accounts [Note 4]

76,824,423

70,528,102

Machinery and equipment in trust

822,580802,224

Tools, furniture and fixtures including trust accounts

93,366

88,625Construction in progress including trust accounts

39,828353,449

Other tangible fixed assets including trust accounts

9,759

9,759

(16,191,817)(14,911,383)

2,713,986

2,713,986

325,017,219

308,461,989

1,637

1,825

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

483,943

387,956

Deferred tax assets [Note 8]

11,321

18,818Deferred investment corporation bond issuance costs

8,216

16,752Derivative assets [Note 10]

1,234

1,119

Others13,604

14,077

Total Other Assets

633,639554,231

342,572,865

325,665,704

Deferred tax assets [Note 8]

Investment Properties, at cost: [Notes 3 and 11]

Less: accumulated depreciation
Leasehold rights including trust accounts
Total Investment Properties, net
Other Assets:
Right of trademark

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

22

(Thousands of yen)

As of
May 31, 2013

As ofNovember 30, 2012

Liabilities
Current Liabilities:
Operating accounts payable571,325

546,346

Investment corporation bond due within one year [Notes 6 and 10]

5,000,000

5,000,000

Long-term debt due within one year [Notes 6 and 10]

32,400,000

22,981,250

261,091

258,426

779

798

Accrued consumption taxes

32,42885,803

Rent received in advance

874,930

831,967

Other current liabilities

120,599

207,903

Total Current Liabilities

39,261,152

29,912,493

Investment corporation bond [Notes 6 and 10]

3,500,000

3,500,000

Long-term debt [Notes 6 and 10]

87,400,000

80,600,000

Tenant security deposits including trust accounts [Note 10]

11,034,249

10,482,828

32,094

52,639101,966,343

94,635,467

141,227,495

124,547,960

198,780,951

198,780,951

2,589,422

2,369,494

201,370,373

201,150,445(25,003)(32,701)(25,003)(32,701)

Total Net Assets

201,345,370

201,117,744

Total Liabilities and Net Assets

342,572,865

325,665,704

Accounts payable – other
Income taxes payable

Long-Term Liabilities:

Derivative liabilities [Note 10]
Total Long-Term Liabilities
Total Liabilities

Net Assets [Notes 5 and 9]
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 395,798 units
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total Valuation and Translation Adjustments

The accompanying notes are an integral part of these financial statements.
III. Balance Sheets

23

IV. Statements of Income
For the six months ended May 31, 2013 and November 30, 2012
(Thousands of yen)

For the six months ended
May 31, 2013

For the six months ended
November 30, 2012

7,519,691
95,384

7,384,164
182,050

7,615,075

7,566,214

3,499,438
634,586
16,65561,0783,601,887
621,489
16,26463,886

20,657
5,400
68,52623,1375,400
87,363

4,306,340
3,308,735

4,419,426
3,146,788

924
1,024
13,275

1,386
1,083
2,938

15,223

5,407

492,197
95,533
135,546
10,632534,556
97,319142,688
12,685733,908

787,248

Ordinary Income
Extraordinary Income:Gain on donation of tangible fixed asset
Total Extraordinary Income

2,590,050

2,364,947

–

5,315

–

5,315

Income Before Income Taxes
Income taxes – current

2,590,050

2,370,262

Income taxes – deferred
Total Income Taxes [Note 8]
Net Income

870
5

977
(1)

875
2,589,175

976
2,369,286

Retained Earnings Brought Forward
Retained Earnings at End of Period

247
2,589,422

208
2,369,494

Operating Revenues and Expenses
Operating Revenues: [Note 7]
Rental revenues
Other revenues related to property leasing
Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 7]
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
Other non-operating expenses
Total Non-Operating Expenses

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

24

IV. Statements of Income

V. Statements of Changes in Unitholders' Equity(For the six months ended May 31, 2013)(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,369,494(32,701)

201,117,744

Cash dividends declared––(2,369,247)–(2,369,247)

Net income––

2,589,175–

2,589,175

Net changes of items other thanunitholders’ equity

–

–

–

7,698

7,698

395,798

198,780,951

2,589,422(25,003)

201,345,370

Balance as of November 30, 2012

Balance as of May 31, 2013

Total

(For the six months ended November 30, 2012)		

(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,021,548(2,031)200,800,468

Cash dividends declared––(2,021,340)–(2,021,340)

Net income––

2,369,286–

2,369,286

Net changes of items other thanunitholders’ equity

–

–

–

(30,670)(30,670)

395,798

198,780,951

2,369,494(32,701)

201,117,744

Balance as of May 31, 2012

Balance as of November 30, 2012

Total

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

V. Statements of Changes in Unitholders' Equity

25

VI. Notes to Financial Statements
For the six months ended May 31, 2013 and November 30, 2012

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (former DA Office Investment Corporation: hereinafter, “DOI”) wasestablished on July 11, 2005 as an investment corporation under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter, the “Investment Trust Law of Japan”) by the founder (the former
daVinci Select; presently, Daiwa Real Estate Asset Management (hereinafter, “DREAM”)).
DOI is an externally managed real estate fund, established as an investment corporation. DREAM, as DOI’s
asset management company, is engaged in acquiring, managing, leasing, and renovating office properties.
Daiwa Securities Group Inc. currently owns 100% of DREAM.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2013, DOI had ownership or beneficiary interests in 41 office properties with approximately
225,652 square meters of rentable office space and had leased office space to 410 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 95.0%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (hereinafter, “Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP. Some supplementary information included in
the statutory Japanese language financial statements, but not required for fair presentation, is not presented in
the accompanying financial statements. DOI does not prepare consolidated financial statements, as DOI has no
subsidiaries.

Note 2 – Summary of Significant Accounting Policies
Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The
estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

As of May 31, 2013
2-64 years
2-23 years
5-18 years

As of November 30, 2012
2-56 years
2-23 years
5-18 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add to the value of a property or prolong its useful life are expensed as incurred.
Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary
differences between the amounts of assets and liabilities for financial statements and for income tax purposes isrecognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from the purchasedate of each property until the end of the calendar year as part of the acquisition cost of the relevant property.
Capitalized real estate taxes amounted to 49,317 thousand yen for the six months ended May 31, 2013 and 7,948
thousand yen for the six months ended November 30, 2012.

26

Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and otheroperating revenues such as utility charge reimbursements, parking space rental revenues and other income.
Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge
reimbursements are recognized when earned and their amounts are reasonably estimated.
Hedge Accounting
DOI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation
based on its risk management policy. DOI utilizes derivative financial instruments such as interest-rate swap
agreements only for the purpose of hedging its exposure to changes in interest rates. DOI deferred recognitionof gains or losses resulting from changes in fair value of interest-rate swap agreements because its interest-rateagreements met the criteria for deferral hedging accounting.
However, DOI applies special treatment to the interest-rate swap agreements that meet the criteria for suchspecial treatment. Under the special treatment, interest-rate swaps are not remeasured at fair value: instead, thenet amount paid or received under the interest-rate swap agreements is recognized and included in interest
expense. The hedge effectiveness for interest-rate swap agreements is assessed each fiscal period except for
those that meet the criteria of special treatment.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well
as all income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheet
and income statement accounts.
Consumption Taxes
Consumption taxes are excluded from transaction amount. Non-deductible consumption taxes are recognized
as expenses.

Note 3 – Schedule of Tangible Fixed Assets of Investment Properties(Thousands of yen)
Investment properties as of May 31, 2013 and November 30, 2012 consisted of the following:
As of May 31, 2013
As of November 30, 2012
Acquisition
Accumulated
Acquisition
AccumulatedBook value
Book value
costs
depreciation
costs
depreciationLand
260,705,094– 260,705,094 248,877,227– 248,877,227
including trust accounts

Buildings andstructures

76,824,423(15,761,706)

61,062,717

70,528,102(14,516,629)

56,011,473

822,580(370,946)

451,634

802,224(342,213)

460,01193,366(49,406)

43,96088,625(42,782)

45,843

Construction inprogress

39,828–39,828353,449–

353,449

Other tangible
fixed assets

9,759(9,759)–9,759(9,759)–338,495,050(16,191,817)

322,303,233

320,659,386(14,911,383)

305,748,003

including trust accounts

Machinery andequipment in trust
Tools, furniture andfixturesincluding trust accounts

including trust accounts

including trust accounts

Total

Note 4 – Advanced Depreciation for Tangible Fixed Assets Acquired by Government
Subsidies, Etc.
Government subsidies of 32,898 thousand yen are deducted from the acquisition cost of the buildings in trust
as of May 31, 2013 and November 30, 2012.

Note 5 – Net Assets
DOI issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue
prices of new units are designated as stated capital. DOI maintains at least 50,000 thousand yen as the minimum
amount of net assets, as required by the Investment Trust Law of Japan.
VI. Notes to Financial Statements

27

Note 6 – Long-Term Debt and Investment Corporation Bonds
Long-term debt and investment corporation bonds as of May 31, 2013 and November 30, 2012 consisted of(Thousands of yen)
the following:
As of
As of
May 31,
November 30,
2013
2012
Unsecured loans due 2013 to 2020, principally from banks and insurance
119,800,000
103,581,250
companies with interest rates mainly ranging from 0.4% to 1.4%
2.8% unsecured bond due 20193,500,000
3,500,000
1.9% unsecured bond due 2013
5,000,000
5,000,000
Total
128,300,000
112,081,250[Note] The interest rate presented is the spot rate as of May 31, 2013. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of long-term debt and investment corporation bonds as of May 31, 2013
(Thousands of yen)were as follows:
Due within one year
37,400,000
Due after one to two years
29,500,000
Due after two to three years
8,300,000
Due after three to four years
18,200,000
Due after four to five years
19,400,000
Due after five years
15,500,000

Note 7 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended May 31, 2013 and November 30,(Thousands of yen)2012 were as follows:
For
the
six
monthsended
For the six months ended
May 31, 2013
November 30, 2012
A. Operating revenues
Rental revenues
7,519,691
7,384,164
Other revenues related to property leasing
95,384
182,050
Total operating revenues
7,615,075
7,566,214
B. Property-related expenses
Consignment expenses
591,514549,516
Utilities expenses
678,874
737,021
Taxes and dues
671,599
652,110Non-life insurance expenses
12,101
11,848
Repair expenses
215,111
280,099
Depreciation
1,280,207
1,305,782
Other property-related expenses
50,03265,511
Total property-related expenses
3,499,438
3,601,887
C. Operating income from property leasing [A – B]
4,115,637
3,964,327

Note 8 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.03% for the six months ended May 31, 2013 and 0.04% for the six months ended
November 30, 2012. The following table summarizes the significant differences between the statutory tax rates
and DOI’s effective tax rates for financial statement purposes.

Statutory tax rate
Deductible dividends
Others
Effective tax rate

For the six months ended
May 31, 201336.59%(36.58)0.02
0.03%

For the six months ended
November 30, 201236.59%(36.57)0.02
0.04%

DOI was established as an investment corporation under the Investment Trust Law of Japan, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period andother requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment corporation isallowed to deduct the total amount of dividends in calculating its taxable income under Japanese tax regulations.

28

The significant components of deferred tax assets and liabilities as of May 31, 2013 and November 30, 2012 were as(Thousands of yen)follows:
As of May 31, 2013
As of November 30, 2012
Deferred tax assets:
Accrued enterprise tax
13
18
Deferred losses on hedges
14,897
19,227
Total deferred tax assets
14,91019,245
Deferred tax liabilities:
Deferred gains on hedges
422
409
Total deferred tax liabilities422
409
Net deferred tax assets
14,48818,836Note 9 – Per Unit Information
Information about net assets per unit and net income per unit as of May 31, 2013 and November 30, 2012 andfor the period then ended were as follows. The computation of net income per unit is based on the weighted
average number of units outstanding during the period. The computation of net assets per unit is based on thenumber of units outstanding at each period end.
For the six months ended
For the six months ended
May 31, 2013
November 30, 2012
Net assets at period end per unit
508,707 yen
508,132 yen
Net income per unit
6,541.66 yen
5,986.10 yen
Net income per unit is calculated by dividing the net income by the daily weighted average number of investment
units issued and outstanding. The diluted net income per unit is not stated as there are no diluted investment units.
(Note) The basis for calculating the net income per unit is as follows.

Net income (thousands of yen)Amount not available to ordinary unitholders(thousands of yen)
Net income available to ordinary unitholders(thousands of yen)
Average number of units during the period (units)

For the six months ended
May 31, 2013
2,589,175

For the six months ended
November 30, 2012
2,369,286––

2,589,175

2,369,286

395,798

395,798

Note 10 – Financial Instruments(For the six months ended May 31, 2013 and November 30, 2012)(1) Status of Financial Instruments(A) Policy for financial instruments
DOI procures various financing methods (such as borrowings, issuance of investment corporation bonds,
issuance of investment units) for acquisition and renovation of investment properties, payments of dividends andreimbursement of bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, DOI secures long-term fixed-rate borrowings with well-diversified maturities.
DOI manages surplus funds with safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are conducted only for the purpose of reducing risk of future interest rate fluctuations.

VI. Notes to Financial Statements

29

(B) Types and risks of financial instruments and related risk management system
Proceeds from the financing of debts and investment corporation bonds are used mainly to acquisitionof investment properties and reimbursement of current debts and bonds. While these debts and bonds
are exposed to liquidity risk, DOI manages the risk by maintaining the LTV ratio at low levels, diversifying
maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders withparticular focus on domestic financial institutions. Bank borrowings with floating interest rates are
exposed to the risk of future interest rate fluctuations and DOI manages that by using derivativetransactions such as interest-rate swap agreements.
DOI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes ofhedged items and that of hedging items, and then verifies the ratio of both amounts of changes.
Furthermore, DOI omits assessment of hedge effectiveness for the interest-rate swap agreements whichmeet the criteria of special treatment.
Execution and management of derivative transactions have been carried out based on the regulations
defined in the basic policy of risk management.
Security deposits represent funds deposited by tenants, and DOI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving
some parts of the funds.
Deposits are used for investing DOI’s surplus funds. These deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by restricting the tenor of thedeposit relatively short and setting a minimum credit rating requirement for the depository financial
institutions.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there isno quoted market price available, fair value is reasonably estimated. As certain assumptions are used forthe estimation of fair value, the result of such estimation may differ if different assumptions are used. Also,
the contractual amounts of derivative transactions do not represent the market risk involved in thesederivative transactions.
(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of May 31, 2013 and November 30, 2012 are
as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(As of May 31, 2013)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,057,773
16,057,773–
Total
16,057,773
16,057,773–
Investment corporation bond due within one year
5,000,000
5,005,500
5,500
Long-term debt due within one year
32,400,000
32,400,577
577
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
87,400,000
87,010,906(389,094)
Total
128,300,000
127,916,983(383,017)
Derivative transactions(*)(39,478)(39,478)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis indicating the net liability position.
(As of November 30, 2012)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,046,965
16,046,965–
Total
16,046,965
16,046,965–
Investment corporation bond due within one year
5,000,000
5,004,000
4,000
Long-term debt due within one year
22,981,250
22,983,567
2,317
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
80,600,000
80,596,241(3,759)Total
112,081,250
112,083,808
2,558
Derivative transactions(*)(51,520)(51,520)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis indicating the net liability position.
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions

30

Assets(1) Cash and cash equivalents
As these instruments are settled in short period of time, their fair value and book value are nearly identical.
Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Investment corporation bond due within one year and investment corporation bond
The fair value of investment corporation bond is based on their quoted market price, if available.
When there is no quoted market price available, their book value is assumed as their fair value, as their fairvalue and book value are nearly identical because of floating interest rates and no significant changes in
DOI’s credit risk after issuing the bonds.
(2) Long-term debt due within one year and long-term debt
For long-term debt with floating interest rates, their fair value and book value are nearly identical and there
are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items, their book value isassumed as their fair value. For long-term debt with fixed interest rates, their fair value is based on thepresent value of principle and interest cash flows discounted at the current interest rate estimated to be
applied if similar new debt is entered into. However, the fair value of certain floating-rate long term debt that
qualifies for the special treatment of interest-rate swaps is determined by discounting the sum of its principal
and interest payments net of any cash flows from the interest-rate swaps.
Derivative Transactions(1) Derivatives to which hedge accounting is not applied
Not applicable.
(2) Derivatives to which hedge accounting is applied(As of May 31, 2013)
Method of Hedge
Accounting(Thousands of yen)Type of Derivative Transactions

Interest rate swap transactions
Receive floating
and pay fixedSpecial treatment
Interest rate swap transactions
for interest rate swap Receive floatingtransactions
and pay fixed
Deferral hedge
accounting method

AmountHedged Items Contract(due after one year)

Fair
Value(*)

Long-term debt

43,900,000(26,000,000)(39,478)

Long-term debt

27,350,000(27,350,000)–(**)

71,250,000(53,350,000)(39,478)

Total(As of November 30, 2012)
Method of Hedge
Type of Derivative Transactions
Accounting
Interest rate swap transactions
Deferral hedge
Receive floating
accounting method
and pay fixedSpecial treatment
Interest rate swap transactions
for interest rate swap Receive floatingtransactions
and pay fixed
Total(Thousands of yen)Contract Amount
Hedged Items (dueafter one year)

Fair
Value(*)

Long-term debt

43,900,000(37,900,000)(51,520)

Long-term debt

27,350,000(27,350,000)–(**)

71,250,000(65,250,000)(51,520)*The fair value is provided by the financial institution.
**The values of derivatives qualifying for special treatment of interest rate swap transactions are included in that of related long-term debt. Thisis because such swaps are handled together with hedged long-term debt.

2. Financial instruments whose fair value is extremely difficult to estimate.
Tenant security deposits including trust accounts (with a book value of 11,034,249 thousand yen as of May
31, 2013 and 10,482,828 thousand yen as of November 30, 2012) that have been deposited from tenants are
not marketable and the actual deposit period cannot be reliably determined, thus making it impossible toreasonably estimate their future cash flows, and therefore, it is considered to be extremely difficult to estimate
their fair value.

VI. Notes to Financial Statements

31

3. Redemption schedule for money claims(As of May 31, 2013)

Cash and cash equivalents
Total(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
16,057,773––––
16,057,773––––(As of November 30, 2012)

Cash and cash equivalents
Total

Due after
5 years––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
16,046,965––––
16,046,965––––

Due after
5 years––

4. Redemption schedule for investment corporation bond and long-term debt
(As of May 31, 2013)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Investment corporation bond due
5,000,000–
within one year
Long-term debt due within one year 32,400,000–
Investment corporation bond––Long-term debt
– 29,500,000
Total
37,400,000 29,500,000––

Due after
5 years

–

–

–
–
–
–
–
–
– 3,500,000
8,300,000 18,200,000 19,400,000 12,000,000
8,300,000 18,200,000 19,400,000 15,500,000(As of November 30, 2012)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Investment corporation bond due
5,000,000––
within one year
Long-term debt due within one year 22,981,250––
Investment corporation bond–––Long-term debt
– 33,900,000 16,600,000
Total
27,981,250 33,900,000 16,600,000–

Due after
5 years

–

–

–
–
–
–
2,000,000 22,750,000
2,000,000 22,750,000–
3,500,000
5,350,000
8,850,000

Note 11 – Investment and Rental Properties

DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as
follows.
(Thousands of yen)(For the six months ended May 31, 2013)
Book Value
Fair value as of
As of
ChangeAs of
May 31, 2013
November 30, 2012
during the period(*1)
May 31, 2013
308,107,273
16,869,080
324,976,353
302,510,000(For the six months ended November 30, 2012)
Book Value
As of
ChangeMay 31, 2012
during the period(*2)
307,324,542
782,731(Thousands of yen)

As ofNovember 30, 2012
308,107,273

Fair value as ofNovember 30, 2012
276,330,000(Note 1)		 The book value represents the acquisition cost less accumulated depreciation.
(Note 2)		 Significant changes(*1) For the six months ended May 31, 2013, the major reasons of increase are acquisitions of “shinyon curumu” (9,650,000 thousandyen), “Honshu Meieki Building” (5,300,000 thousand yen) and “Kamiooka Eye Mark Building” (2,000,000 thousand yen). The
major reason of decrease is depreciation (1,280,206 thousand yen).
(*2) For the six months ended November 30, 2012, the major reason of increase is acquisition of “West Park Osaki” (1,650,000
thousand yen). The major reason of decrease is depreciation (1,305,782 thousand yen).
(Note 3)		 The fair values as of May 31, 2013 and November 30, 2012 represent the sum of appraisal values estimated by external real estateappraisers.

Income and loss from investment and rental properties for the six months ended May 31, 2013 and November
30, 2012 are disclosed in Note 7.

32

Note 12 – Transactions with Related Parties(For the six months ended May 31, 2013)
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party

Parent company, interested party
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company
14.99%
directly held in DOI
32.57%
indirectly held in DOI

Asset custodian
Sumitomo Mitsui Trust Bank, Limited
Chiyoda-ku, Tokyo342 billion yen
BankRelationship withrelated party

Provision of capital

Provision of capital

Nature of transaction

Payment of interest expense on
investment corporation bonds Borrowing of capital(Notes 1 and 2)

Payment of interest
expense(Note 3)

Amount of transaction

48,52759,198

Account

Investment
corporationbonds(held in DOI)

(thousands of yen)

Balance at end of period 3,500,000(thousands of yen)–

3,000,000
Other
current
liabilities

Long-term
debt due
within one
year

Long-term
debt–

20,3055,000,000

11,350,000–(For the six months ended November 30, 2012)
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party

Parent company, interested party
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company
13.11%
directly held in DOI
32.57%
indirectly held in DOI

Asset custodian
Sumitomo Mitsui Trust Bank, Limited
Chiyoda-ku, Tokyo342 billion yen
BankRelationship withrelated party

Provision of capital

Provision of capital

Nature of transaction

Payment of interest expense on Borrowing Repayment Payment
ofof interest Payment
investment corporation bonds ofofborrowing expense
expense(Notes 1 and 2)
capitalcapital(Note 3)(Note 3)

Amount of transaction

50,313

Account

Investment
corporationbonds(held in DOI)

(thousands of yen)

Balance at end of period 3,500,000(thousands of yen)–

5,350,000 5,383,750 76,523

20,682Other
current
liabilities

Long-term
debt due Long–
within one term debt
year

LongPrepaid term
expenses prepaid
expenses

21,1675,000,000 8,350,000 –

23,584

63,831

Consumption taxes are not included in transaction amounts.
(Note 1) Issuance conditions for the investment corporation bonds were decided by analyzing the spread of similar bonds, the difference of
spread between senior bonds and subordinated bonds, and the past track record of similar bonds.
(Note 2) Terms of transactions with interested parties were determined based on the assets manager’s office regulation which was establishedto prevent the conflict of interest.
(Note 3) Terms of transaction were determined based on market trends.

VI. Notes to Financial Statements

33

Note 13 – Significant Subsequent Events(1) Acquisition of Assets(A) DOI acquired the trust beneficial interest in real estate on July 3, 2013.
Overview of the Asset(a) Type of asset acquired(b) Property name(c) Location(d) Acquisition price(e) Date of agreement(f) Date of delivery(g) Seller

Trust beneficial interest in real estate
Tousen Dogenzaka Daini Building
28-1 Maruyamacho Shibuya-ku, Tokyo
4,500,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
June 25, 2013
July 3, 2013
Undisclosed(B) DOI acquired the trust beneficial interest in real estate on August 9, 2013
Overview of the Asset(a) Type of asset acquired(b) Property name(c) Location(d) Acquisition price(e) Date of agreement(f) Date of delivery(g) Seller

Trust beneficial interest in real estate
Akasaka Business Place
2-14-5 Akasaka Minato-ku, Tokyo
9,200,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
July 19, 2013
August 9, 2013
Hakuba Capital 1 TMK(2) Borrowing of Funds(A) DOI borrowed funds on July 3, 2013.
These funds were allocated to acquisition of the property described in “(1) Acquisition of Assets (A)” andits related costs.
LenderDate of
Loan

Balance(thousandsof yen)Interest Rate

Date ofMaturity

Repayment
MethodNotes

3 month Japanese Nov. 30,
Bullet payment Unsecured
Yen LIBOR
2020+0.35% (Note 1)
1 month Japanese Nov. 30,
The Higashi-Nippon Jul. 3, 2013 1,000,000
Bullet payment Unsecured
Yen TIBOR
2020
Bank, Limited+0.35% (Note 2)
1 month Japanese Aug. 31,
Sumitomo Mitsui
Bullet payment Unsecured
Jul.
3,
2013
1,600,000
Yen TIBOR
2020
Banking Corporation+0.35% (Note 2)

Shinsei Bank, Ltd.

Jul. 3, 2013 1,000,000

Development Bankof Japan Inc.

Jul. 3, 2013 1,000,000

0.833%

Aug. 31, Bullet payment Unsecured
2018(Note 1) Interest payments shall be paid at the end of February, May, August and November (if any such date is not a business day, it
will be the following business day, if such date falls within the next month, then the preceding business day will be thepayment day) and the repayment date. Interest rate is calculated based on the 3 month Japanese Yen LIBOR which the
British Banker’s Association (“BBA”) announces two business days prior to the first day of the applicable period.
(Note 2) Interest payments shall be paid at the end of every month (if any such date is not a business day, it will be the following
business day, if such date falls within the next month, then the preceding business day will be the payment day) and therepayment date. Interest rate is calculated based on the 1 month Japanese Yen TIBOR which the Japanese Bankers
Association (“JBA”) announces two business days prior to the first day of the applicable period.

34

(B) DOI borrowed funds on August 9, 2013.
These funds were allocated to the acquisition of the property described in “(1) Acquisition of Assets (B)”and its related costs.
LenderDate of
Loan

Balance(thousandsof yen)Interest Rate

Date ofMaturity

Repayment
MethodNotes

1 month Japanese May 31,
Sumitomo Mitsui
Bullet payment Unsecured
Aug.
9,
2013
1,400,000
Yen TIBOR
2021
Banking Corporation+0.35% (Note 1)
Sumitomo Mitsui
Trust Bank, Limited
The Bank ofFukuoka, Ltd.
Tokio Marine &Nichido Fire
Insurance Co., Ltd.
The Bank ofTokyo-Mitsubishi
UFJ, Ltd.
The Bank ofTokyo-Mitsubishi
UFJ, Ltd.

1 month Japanese
Yen TIBOR+0.35% (Note 1)
1 month JapaneseAug. 9, 2013 1,000,000
Yen TIBOR+0.27% (Note 1)
3 month JapaneseAug. 9, 2013 1,000,000
Yen LIBOR+0.27% (Note 2)
1 month JapaneseAug. 9, 2013 3,000,000
Yen TIBOR+0.33% (Note 1)
1 month JapaneseAug. 9, 2013 2,000,000
Yen TIBOR+0.25% (Note 1)
Aug. 9, 2013 1,000,000

Feb. 26, Bullet payment Unsecured
2021
Aug. 31, Bullet payment Unsecured
2018Jul. 31,2018

Bullet payment Unsecured

Aug. 31, Bullet payment Unsecured
2020
Aug. 31, Bullet payment Unsecured
2018(Note 1) Interest payments shall be paid at the end of every month (if any such date is not a business day, it will be the following
business day, if such date falls within the next month, then the preceding business day will be the payment day) and therepayment date. Interest rate is calculated based on the 1 month Japanese Yen TIBOR which the Japanese Bankers
Association (“JBA”) announces two business days prior to the first day of the applicable period.
(Note 2) Interest payments shall be paid at the end of February, May, August and November (if any such date is not a business day, it
will be the following business day, if such date falls within the next month, then the preceding business day will be thepayment day) and the repayment date. Interest rate is calculated based on the 3 month Japanese Yen LIBOR which the British
Banker’s Association (“BBA”) announces two business days prior to the first day of the applicable period.

VI. Notes to Financial Statements35

VII. Independent Auditors’ Report36

VII. Independent Auditors’ ReportVIII. Statements of Cash Flows [Information Only]
For the six months ended May 31, 2013 and November 30, 2012
(Thousands of yen)

For the six months
ended
May 31, 2013

For the six months
ended
November 30, 2012

Income before income taxes

2,590,050

2,370,262

Depreciation and amortization

1,281,374

1,306,936

8,536

8,583

Interest expense

587,730

631,875(Increase) Decrease in tenant receivables

31,49923,151

Increase (Decrease) in accounts payable(69,736)(26,822)

Increase (Decrease) in rent received in advance

42,963(44,959)

Cash payments of interest expense(604,368)(634,769)(Increase) Decrease in consumption taxes refundable(248,782)–

Other, net(270,170)(168,337)

3,349,096

3,465,920––(17,738,286)(2,755,849)

(279)

–

Proceeds from tenant security deposits

1,070,901

646,300

Payments for tenant security deposits(519,479)(780,352)

Net Cash Used in Investing Activities(17,187,143)(2,889,901)

Cash Flows from Financing Activities:––

Proceeds from long-term debt

21,700,000

17,500,000

Repayments of long-term debt

(5,481,250)(16,810,000)

Payment of dividends(2,369,895)(2,020,153)

13,848,855(1,330,153)

10,808(754,134)

Cash and Cash Equivalents at Beginning of Period

16,046,965

16,801,099

Cash and Cash Equivalents at End of Period

16,057,773

16,046,965

Cash Flows from Operating Activities:

Amortization of bond issuance costs

Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Payments for purchases of intangible assets

Net Cash Provided by (Used in) Financing Activities
Net Change in Cash and Cash Equivalents

The statements of cash flows are not audited by any independent auditor.
Summary of Significant Accounting Policies [Information Only]
Cash and Cash Equivalents
DOI considers all highly liquid investments with original maturity of three months or less to be cash and cash
equivalents.

VIII. Statements of Cash Flows [Information Only]37

IX. Investor Information
History of Investment Unit Price
6,000 (units)(yen) 600,000
Investment unit price (left axis)

Trading volume (right axis)

500,000

5,000

400,000

4,000

300,000

3,000

200,000

2,000

100,000

1,000

0

0

2011
June July

Aug. Sept. Oct.

Nov.

2012
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

2013
Dec. Jan. Feb.

Nov.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2013)
146×57■ No. of investment units by investor type
Individuals/others
31,108 units (7.9%)■ No. of unitholders
by investor type

Financial institutions
143,739 units (36.3%)

Foreigners 28,192 units (7.1%)

15th
Fiscal Period
Total: 395,798 units

Securities firms 1,521 units (0.4%)

Other domestic corporations 191,238 units (48.3%)
Individuals/others
34,742 units (8.8%)

Financial institutions
148,487 units (37.5%)

Foreigners 27,016 units (6.8%)

14th
Fiscal Period
Total: 395,798 units

Top Ten Unitholders (as of May 31, 2013)
Number ofUnits Owned

Percentage
Share

1.

Daiwa Investment Management Inc.

128,905 units

6000
32.6%

2.

Japan Trustee Services Bank, Ltd. (trust account)

67,897 units

17.2%

3.

Daiwa Securities Group Inc.

59,321 units

4.

Trust & Custody Services Bank, Ltd. (securities
investment trust account)

28,640 units

4000
7.2%

5.

The Master Trust Bank of Japan, Ltd. (trust account)

23,543 units

3000

6.

The Nomura Trust and Banking Co., Ltd. (investment
trust account)

20,681 units

5.2%

7.

Nomura Bank (Luxembourg) S.A.

3,686 units

0.9%

8.

MSIP CLIENT SECURITIES

2,265 units

0.6%

9.

Individual

1,940 units

0.5%

1,789 units

0.5%

0

40

10. State Street Bank and Trust Company 505223

18(0.2%)

Other domestic
corporations

168(1.5%)

Foreigners

149(1.4%)

Securities firms

22(0.2%)

Total

10,924・Announcement of financial results for
15th Fiscal Period

60

August 9, 2013

・Sending of Japanese version Business
Report for 15th Fiscal Period(Statement of Financial Performance)

August 12, 2013 ・Start paying distributions for
15th Fiscal Period

5000

15.0%

6.0%

Note: The percentage share figures are rounded to the first decimal place.

38

Financial institutions

IR Calendar
July 19, 201320

10,567(96.7%)

Securities firms 1,766 units (0.5%)

Other domestic corporations 183,787 units (46.4%)

Name of Investor

Individuals/others

May
End offiscal period

Feb.

80

Jan

July

100

Aug.
Nov.

End offiscal period
January 2014 ・Announcement of financial results for
16th Fiscal Period
February 2014 ・Sending of Japanese version Business
Report for 16th Fiscal Period(Statement of Financial Performance)
February 2014 ・Start paying distributions for
16th Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Investors

Held at least once every two years

Date for finalizing Unitholders with voting rights
for the General Meeting of Unitholders

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

May 31 and November 30 of each year
(distributions are paid within three months of this reference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted

Nihon Keizai Shimbun

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi,
Suginami-ku, Tokyo 168-0063 Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and All branches of the Sumitomo Mitsui Trust Bank nationwide.

Provision of Information via Website
Daiwa Office Investment Corporation conducts information distribution via its website as an important tool for IR activities. DOI also provides an
e-mail delivery service, “IR mail Delivery Service,” which informs the subscribers of updates in website content such as press releaseannouncements via e-mail free of charge. The website will be continually enhanced and enriched so that the current situation and future
strategies of DOI are clearly communicated.

Daiwa Office Investment Corporation

http://www.daiwa-office.co.jp/en/

Important information is
distributed via e-mail. Please
access and follow the simple
steps if you wish to receive
our IR mail Delivery Service.

IX. Investor Information

39

The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a brightand open investment corporation. We will continue to aim to be a highly-transparent investment corporation that isfurther cherished and trusted by our investors and tenants.