14th

Fiscal Period Business Report(Statement of Financial Performance)

June 1, 2012 ~ November 30, 2012

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

I. Overview of Daiwa Office Investment Corporation

Toward a New Stage of Growth
Daiwa Office Investment Corporation (DOI) has focused on recovering the occupancy rates of existing properties during
the 14th Fiscal Period, and as a result the occupancy rates have been steadily recovering. Due to this, we believe thatthe environment of DOI is becoming such that we can begin taking on new challenges.
Therefore, we will challenge to grow our portfolio by daringly acquiring low-occupancy properties and suburban
properties and then improving their performance.

Honshu Meieki Building

shinyon curumu

Kamiooka Eye Mark Building

Contents
I.

Overview of Daiwa Office Investment Corporation

II. Asset Management Report………………………… 17

Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3

III. Balance Sheets… …………………………………… 22

To Our Investors……………………………………………… 4

IV. Statements of Income……………………………… 24

Financial and Management Highlights………………………… 5
Overview of Portfolio (portfolio distribution)…………………… 6

V.

Statements of Changes in Unitholders’ Equity …… 25

Internal Growth Measures… ………………………………… 8

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

External Growth Measures………………………………… 10VII.

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

Overview of Portfolio (portfolio list)………………………… 14
Financial Conditions… …………………………………… 15
Description of Asset Manager……………………………… 16

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 1.5%
Greater Tokyo

Five Central
Wards of TokyoA Class buildings(Shinjuku Maynds Tower)

91.8%

6.6%

42.5%

B Classbuildings
Based on acquisition price57.5%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of November 30, 2012.

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

311.3
300

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 risk of rising interests by extending
borrowing periods and increase the ratio ofborrowings with fixed interest rates

Distribution per Unitchanges in the status and other14th Fiscal Period

construed as a guarantee of
distribution amounts.

Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period
ended
ended
ended
ended
ended
November 2010 May 2011 November 2011 May 2012 November 2012

5,986 yen

Acquisition
target(actual)3500

15th Fiscal Period(fiscal period ending May 2013)

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

287.3

200

(Note) The forecasts on distribution are
assumptions and may vary due to

314.9

250

(fiscal period ended November 2012)
calculated based on certain

313.2

278.1

Establishment of stable revenue base・Property management
activities

350.0

Proactive investment inselectively chosencompetitive properties

16th Fiscal Period(fiscal period ending November 2013)

6,250 yen
6,550 yen
3000

(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation
2500

3

To Our Investors
Toward Further Growth

We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
I am Nobuaki Omura, the Executive Director elected at the 7th General Meeting of Unitholders held on August 20, 2012. I humbly ask
for your support as we make efforts in furthering the growth of DOI.
In the 14th Fiscal Period, DOI posted operating revenues of 7,566 million yen and operating income of 3,146 million yen. Our
distribution per unit for the 14th Fiscal Period is 5,986 yen, an increase by 879 yen from the 13th Fiscal Period.
The office building leasing market had been experiencing a continually severe environment due to the large supply in central
Tokyo during 2012. However, trends of improvements in the vacancy rates and rents could be seen starting with highly competitive
properties in the second half of 2012. In terms of DOI’s existing properties, there have been an increasing number of inquiries
regarding new moving-in and space expansion at Shinjuku Maynds Tower and E SPACE TOWER. We have also worked to improve theoccupancy rates of other existing properties at an early stage to avoid secondary vacancies, and the occupancy rate as of the end of
the 14th Fiscal Period significantly exceeded initial forecasts at 96.4%.
During the 14th Fiscal Period we acquired West Park Osaki in September 2012 for 1,650 million yen. Though relatively small, we
believe the property is excellent due to a lack of competitive properties nearby and partner and group companies, etc. of major
companies with headquarters in the Osaki area have strong needs for offices there. Also, three properties are scheduled for
acquisition in the 15th Fiscal Period with a total acquisition price of 16,950 million yen. These properties are shinyon curumu (9,650
million yen), Honshu Meieki Building (5,300 million yen) and Kamiooka Eye Mark Building (2,000 million yen). Unlike our previous
property acquisitions, these include properties with low occupancy and properties outside Tokyo. However, all properties are relatively
new and close to train stations. In addition to the fact that office needs are strong, we believe that we were able to acquire properties
in areas where growth can be expected through large-scale developments and such. Following these acquisitions, we will work to
improve the performance of these properties, thereby leading to improvement of the entire portfolio.
In financial matters, we will aim to reduce the risk of rising interest rates by increasing
the ratio of borrowings with fixed interest rates and reducing financial costs while also
extending our borrowings.
As we were able to bring the occupancy rate up to over 96% during the 14th Fiscal Period,
our leasing capabilities have become very solid. As such, we will be able to riseto the next stage of growth as we take on the challenge of acquiring lowoccupancy properties and improving their performance.
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
4

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

3,000

7,500

5,000

7,606

6,759

6,424

7,431

2,824

2,482

2,000

3,090

3,147

13th Period

14th Period

1,000

2,500

0

0
10th Period

11th Period

12th Period

13th Period

14th Period

10th Period■ Net Income

11th Period

12th Period■ Distribution Per Unit
(yen)
6,000

(million yen)
2,500

5,986

2,369

2,000

5,107

2,021

4,000

1,767

1,500
1,000

3,317

7,566

4,464

1,453

1,282

3,671

3,240
2,000

500
0

0
10th Period

11th Period

12th Period

13th Period

14th Period

10th Period■ Asset Size

11th Period

12th Period

13th Period

14th Period■ Period End Occupancy Rate(billion yen)
350

(%)
100

95.9

95.4

94.3

92.4
300

311.3

313.2

314.9

96.4

90

287.3

278.1

80

250

70

200
10th Period

11th Period

12th Period

13th Period

10th Period

14th Period

11th Period

12th Period

13th Period

14th Period

14th Period

13th Period

12th Period

11th Period

10th Period(November 2012)(May 2012)(November 2011)(May 2011)(November 2010)

Operating revenues (million yen)

7,566

7,431

7,606

6,759

6,424

Operating income (million yen)

3,147

3,090

3,317

2,824

2,482

Ordinary income (million yen)

2,365

2,022

1,767

1,587

1,273

Net income (million yen)

2,369

2,021

1,767

1,453

1,282

Total number of units issued (units)395,798

395,798

395,798

395,798

395,798

Net assets per unit (yen)508,132

507,331506,693505,900

505,469

Distribution per unit (yen)

5,986

5,107

4,464

3,671

3,240

325,665

325,315

323,217

298,626

294,562

34.4

34.2

34.0

28.9

28.1

10000

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 (%)

4000

38

37

36

35

33

314.9

313.2

311.3

287.3

278.1

208,733.38

207,277.34

205,318.62

191,346.43

182,548.82

96.4

94.3

92.4

95.4

95.9

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

34 Daiwa Higashi-Ikebukuro

34

Ikebukuro Sta.

Toshima-ku
23 Shinjuku Maynds Tower

31 E SPACE TOWER

17 Daiwa Shibuya SS

7 Daiwa Jingumae

Tokyo
Metropolitan
Government
Buildings

24 SHIBUYA EDGE

Shinjuku-ku
Shinjuku Sta.

23

Yotsuya Sta.

35

38

Shibuya-ku

74

38 Daiwa Minami-Semba

35 Benex S-3

24
31

17
Shibuya Sta.

JR Yamanote Line
JR Saikyo Line
JR Chuo Line
JR Sobu Line
3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

6 Daiwa A Hamamatsucho

8 Daiwa Shibadaimon

JR Yokosuka Line andSobu Rapid Line
Expressway

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo
Major Regional Cities
10 Daiwa Shimbashi 510

616 Daiwa Azabudai

22 Daiwa Onarimon

27 Daiwa Nishi-Shimbashi

Shinagawa-ku
37

Wards)(as of November 30, 2012)

2 Daiwa Ginza Annex

11 BPS SQUARE

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

Tokyo Skytree
Tokyo Dome

9

5

Akihabara Sta.

28

32

25

1

19

12
Shimbashi Sta.
22

16

2

10

Koto-ku

29

Tokyo Sta.

27

32 Nihonbashi Hongokucho Tosei Bldg.

1518

Imperial Palace

National
Diet Building

29 Daiwa Kayabacho Building

33

Chiyoda-ku
21

Kinshicho Sta.

30 26

20

Chuo-ku
33 Daiwa Kinshicho

11
13
14

6
Tokyo Tower
8

Minato-ku

3

Rainbow Bridge

5 Daiwa Sarugakucho

9 Daiwa Misakicho

21 Sunline Building No. 7

26 Daiwa Jimbocho

28 Daiwa Kudan

30 Jimbocho Place

Shinagawa Sta.

36
36 Daiwa Shinagawa North

37 West Park Osaki

I. Overview of Daiwa Office Investment Corporation

7

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

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

8

2,000

21,0006

1,500

19,0004

1,000(yen/tsubo)
25,000
Average rents ofexisting buildings (left axis)

23,000Vacancy rate ofexisting buildings (right axis)

2,160
1,810
1,540
1,250

17,0002500

15,000002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1,210

910

1,190
770

1,170
870 900

860 850

650

570
340

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

Completed properties(Source) Miki Shoji

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)(yen/tsubo)
25,000

(%)
100
99.0
97.0

97.4

98.2 98.3

97.6 97.7
95.9

95

96.4 96.1 96.1

95.4

94.3
94.6

94.3
92.8

92.4

20,000Occupancy rate (actual)90

Occupancy rate (forecast in Jan. 2013)
Occupancy rate
(previous forecast in Jul. 2012)
Occupancy rate of 38 existing properties(forecast in Jan. 2013)85

Average contract rents
85.7

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 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

End of4th
PeriodEnd of5th
PeriodEnd of6th
PeriodEnd of7th
PeriodEnd of8th
PeriodEnd of9th
PeriodEnd of10th
PeriodEnd of11th
PeriodEnd of12th
PeriodEnd of13th
PeriodEnd of14th
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

(%)

(No. of cases)

100

60
50
40

80

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

41

42

41

129

129

134

30
20
10

33
24

17

5

6

40
146

38

-10
-20

159

-20

-24

-30

13

-2

-12

-14

-20

-19

18

18

16
4

0
60

44

38

31

30

-25

-26

-40
40

-50

-53

-60
7th
8th
9th
10th
11th
12th
13th
14th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

100

97

105

108

106

113

119

0
End of
9th Period

End of10th Period

End of11th Period

End of12th Period

End of13th Period

Number of Move Ins

Number of Move Outs

Difference

Breakdown of 14th
Cost
Space
BetterConsolidation Downsizing
Reduction Expansion
Location
Period0820

End of14th PeriodMoving inMoving out

9
3

16
7

7
4

2
6

7
4

Other

Total

3
2

44
26

(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■ Improve occupancy rate through lease-up■ Measures to reduce costs• Hold regular meetings and regular visits with various leasing agents.
• Person in charge of asset management to be present at time of new
property viewing, and establish a point of contact and collaboration andmeans of communication with the property management company.
• Implement face-to-face leasing by visiting leasing agents with regularlyupdated vacancy information and property information.

• Maintain the fair cost and price levels by introducing effective competition
principles in continually reviewing and verifying utility (supply) construction
and management expenses.

■ Implement strategic renewals aimed atboosting competitiveness• Scrutinize construction content and ensure appropriate construction costs.
• Implement environmentally friendly construction and equipment at
existing properties.

■ Prevent cancellations by strengthening relations
with existing tenants• Enhance tenant satisfaction by strengthening communication with existing
tenants.
• Visit all tenants on a regular basis and ensure timely response bydeepening interaction among people and respond to tenants face-to-face.

■ Strengthen collaboration with Daiwa Securities Group• Reinforce leasing by utilizing Daiwa Securities’ branch network.
• Implement leasing that utilizes Daiwa Securities Group’s network of
corporate clients.

Occupancy Rate of the Properties Subject to Leasing Improvement in the 14th Fiscal Period■ Daiwa Kudan (acquisition price: 4,000 million yen)

■ Daiwa Jimbocho (acquisition price: 4,150 million yen)

■ BPS SQUARE (acquisition price: 1,560 million yen)

100.0 (%)

100.0 (%)

100.0 (%)

88.1

100.0

88.0 100.0

50.0

100.0

86.7

50.0

50.0

51.2
0.0

20.6

0.0
12th
Period13th
Period14th
Period12th
Period13th
Period0.0
14thPeriod12th
Period

0.0

0.0

13th
Period14th
PeriodProperties Subject to Leasing Improvement in 15th Fiscal Period100■ shinyon curumu (acquisition price: 9,650 million yen)
• Highly convenient property
located a 4-minute walk from
Shinjuku Station’s new south exit
and directly connected to thepassageway of Shinjuku 3-chomesubway station.
• Local development can be
expected with development ofstation building scheduled to open
in the spring of 2016 as well aswith infrastructure development.

100■ Honshu Meieki Building (acquisition price: 5,300 million yen )50

0• 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 undergrounddoorway which leads to theunderground shopping arcade.
• A large-scale redevelopment isplanned in the future andbusiness accumulation is
growing year by year.

100■ BPS SQUARE (acquisition price: 1,560 million yen)
50

0

• Highly convenient property
located a 1-minute walk from
Tsukiji Station on the Tokyo Metro
Hibiya Line and located rightoutside the subway exit.
• There are many affiliatecompanies of parent companies
which have headquarters in thearea around Tokyo Station and
Ginza area.

50

0

Actions Taken for Environmental Efforts■ Daiwa Ginza Acquires SMBC Sustainable Building Certification
Even though Daiwa Ginza is just approaching 50 years old, it has earned “Gold” from a certification based on SMBC Sustainable Building
Assessment Loan because of a high evaluation including “the policy and implementation of sustainable management,” “the sustainableutilization of site” and “the risk management.”
Daiwa Ginza■ Daiwa Real Estate Asset Management Awarded “Green Star” in GRESB 2012
Daiwa Real Estate Asset Management participated in the 2012 Global Real Estate Sustainability Benchmark (GRESB) survey for the portfolio of
Daiwa Office Investment Management and earned the best rating of "Green Star" from GRESB Survey 2012. Daiwa Real Estate AssetManagement received a high evaluation on sustainability from both "Management and Policy" and "Implementation and Measurement"
aspects.

I. Overview of Daiwa Office Investment Corporation

9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 (all industries)

20

600

10

500

0

400

-10

300

-20

200

-30

100

-40

below zero is severe)

Number of transactions

Lending stance DI (real estate)

DI (Above zero is favorable andNo. of transactions

700

-50

0
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half(billion yen) 400

80 (%)
Total acquisition price350

Estimated LTV (based on acquisition price)

300
250

54.4

200

54.4

150
100

79.5

50

110.8

59.0

130.4

60.8

287.0
54.0

283.4

265.0

265.0

LTV (based on acquisition price)

265.0

269.1

278.1

287.3

313.2

314.9

331.8

70
60
50

52.2

138.4
26.4

22.6

27.4

26.9

29.8

35.6

35.3

30.0

35.6

40

42.1

38.7

30
20

Proactive investment in selectively
chosen competitive properties

0
IPO

311.3

350.0

10
0

End of 1st End of 2nd End of 3rd End of 4th End of 5th End of 6th End of 7th End of 8th End of 9th End of 10th End of 11th End of 12th End of 13th End of 14th End of 15th
PeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriod (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.
■ Chart of Distribution of Portfolio Properties■ Acquisition Policy

DOI portfolio properties
Properties acquired in 14th Fiscal Period and 15th Fiscal Period(Total floor area: m2 )105,000

Presently targeted
investment zone

100,000

A Class buildings

Shinjuku Maynds
Tower

95,000■ Status after 15th Fiscal Period Acquisitions
End of 14th Fiscal Period

25,000•Investment Areas

1

20,0002

010

Five Central
Wards of Tokyo

6.9%

90.1%

B Class

A Class

B Class

A Class

57.5%

42.5%

59.7%

40.3%

•Weighted average of the building age
21.5 years

West Park Osaki

0

Greater Tokyo

B Class buildings

shinyon curumu
Kamiooka
Eye Mark
Building

5,000

91.8%

Major Regional Cities
3.0%•Property Class

HonshuMeieki Building

10,000Five Central
Wards of Tokyo

6.6%

E SPACE TOWER

After acquisition

Major Regional Cities
1.5%

Greater Tokyo

15,00010• Focused investment on the Five Central Wards of Tokyo and equivalent areas.
• Focused investment on A Class buildings and B Class buildings in Zone 1 that are lessthan 20 years old.
• Acquisition of properties that will heighten the stability and profitability of the existing portfolio.
• Constantly study the replacement and sale of properties in Zone 2 .

20

30

40

50

60

20.5 years(Note) A class buildings are buildings with a total floor area of 30,000m2 or more and B class buildings are buildings with
(Age: years)
a total floor area of over 2,000m2 but less than 30,000m2.

Properties Acquired During the 14th Fiscal PeriodWest Park Osaki (acquired on September 18, 2012)■ Osaki area’s stable market■ Stable demand from tenants• The Osaki area has a low vacancy rate

• Major Corporations Based in the Osaki Area

PeriodMar. 2012

Jun. 2012

Sep. 2012

Vacancy
rate

1.5%

1.6%

0.9%

Sony, Fuji Electric, Lawson, Japan SteelWorks, Toshiba Tec, Adobe Systems,
Mitsui Mining & Smelting, Meidensha,
Sumitomo Construction Machinery,
Nippon Meat Packers, Mos Food
Services and Puma Japan, etc.

(Source) CBRE

■ Relatively new property near Osaki Station• 3-minute walk from west exit of Osaki Station on the JR Yamanote, Saikyo, Shonan-Shinjuku andRinkai lines• Close to Shinagawa Station and Haneda Airport with good access to major cities throughout Japan• Building is a relatively new property at only 5 years old and there is a limited supply of competitive
middle class office buildings in the area
1,650 million yen

Expected NOI

101 million yen

Address

3-6-28 Osaki, Shinagawa-ku, Tokyo

Site area

749.63m2

JRTo
ko Ikeg kyu
ji S am
ta. i
Lin

e

Acquisition price

iro
iH

e

ine

Lin

te L

yo

ano

Saik

Yam

JR

Os

ak

Art Village Osaki

Rissho University

Structure and floors S RC B1/6F

Ohsaki New City

2,243.36m2

Appraisal price

1,910 million yen (as of August 2012)

Completion

September 14, 2007

Occupancy rate

100.0% (as of November 30, 2012)

Osa

West Park Osaki

Total floor area

ta.

ki S

Irugi Temple

Gate City Ohsaki

New Osaki Building

ThinkPark Tower

ine

iL

ka

Rin

Acquisition of Properties after Sponsor Change
Acquisition timing

9th Period

10th Period

11th Period

12th Period

Daiwa Kudan

Daiwa Kayabacho
Building

Jimbocho PlaceE SPACE TOWER

Chiyoda-ku, Tokyo

Chuo-ku, Tokyo

Chiyoda-ku, Tokyo

Shibuya-ku, Tokyo

5,000 million yen

4,000 million yen

5,600 million yen

3,550 million yen

24,000 million yen

ORIX JREIT Inc.

Japan Core Asset 2 YK

Shining Nova No. 5 B (SPC)

Daiwa Property Co, Ltd.

Tokyu Land Corporation

Endeavor Realty Fund YK

Property nameDaiwa Jimbocho

Daiwa Nishi-Shimbashi

Area

Chiyoda-ku, Tokyo

Minato-ku, Tokyo

Acquisition price

4,150 million yen

SellerAcquisition dateMar. 10, 2010

Aug. 13, 2010

Sep. 2, 2010

Mar. 25, 2011

Mar. 29, 2011

Jul. 8, 2011

Building age (Note 1)

13.0 years

17.0 years

23.4 years

0.9 years

1.1 years

8.7 years

NOI yield (Note 1)

6.0%

5.5%

5.3%

5.1%

5.1%

4.8%

Total

Acquisition timing

13th Period

14th Period

Property nameNihonbashi Hongokucho
Tosei Bldg.

West Park Osaki

shinyon curumu

15th Period (scheduled)Honshu Meieki Building

Kamiooka Eye Mark
Building

Area

Chuo-ku, Tokyo

Shinagawa-ku, Tokyo

Shinjuku-ku, Tokyo

Nagoya-shi, Aichi

Yokohama-shi, Kanagawa-

Acquisition price

1,721 million yen

1,650 million yen

9,650 million yen

5,300 million yen

2,000 million yen

66,621 million yen

SellerTosei Corporation

MCR Six GK

Shimizu Corporation-

Acquisition date

May 11, 2012

Sep. 18, 2012

Mar. 1, 2013 (scheduled)-

Building age (Note 1)

2.0 years

5.0 years

1.0 year

5.1 years

1.8 years

7.5 years (Note 2)

NOI yield (Note 1)

5.3%

6.1%

4.3%

6.0%

6.1%

5.1% (Note 2)

Two domestic industrial Domestic special purpose
companies
company
Dec. 3, 2012
Apr. 12, 2013 (scheduled) Feb. 1, 2013 (scheduled)(Note 1) The building age and NOI yield are based on the time of acquisition.
(Note 2) The age at acquisition and NOI yield at acquisition are calculated using the weighted average of the acquisition price.

I. Overview of Daiwa Office Investment Corporation

11

External Growth Measures

Properties Scheduled for Acquisition in the 15th Fiscal Period
shinyon curumu [acquired on December 3, 2012 / April 12, 2013 (scheduled)]■ Relatively new property with sufficient specs• Newly-built property completed in January 2012
• Has latest crime-prevention system on each floor■ Largest number of commuters in Japan■ Shared operation with
Tokyo Metro
Fukutoshin Line

(10,000 people/day)
400

Kawagoe

365
302

200

252
Tobu Tojo Line
Wakoshi

110

Tokorozawa

0Shinjuku Sta.

Shibuya Sta. Ikebukuro Sta.

Tokyo Sta.

Seibu Yurakucho Line

(Source) Office Japan, Number of commuters a day, Spring 2012

Ikebukuro■ New supply in Shinjuku Ward to
decrease significantly(tsubo)Shinjuku 3-chome

50,00040,000

Shibuya

30,000■ Property close to Shinjuku Station• 4-minute walk from the new south exit of JR lines• Directly connected to passageway of Shinjuku
3-chome Station

Musashi-Kosugi

20,00010,00050000

Tokyu Toyoko 40000
Line

Yokohama

30000

02008 2009(Source) Sanko Estate

2010

2011

2012

2013

2014

2015

Motomachi-Chukagai■ Located at intersection of office and commercial arease
Main LinJR Chuoeanote LinJR YamuShinjuk chi Sta.
Nishigu

Isetan Main Building

Expected NOI

411 million yen

Address

4-2-23 Shinjuku, Shinjuku-ku, Tokyo

Site area

1,144.63m2

Structure and floors S RC B2/11F
9,234.99m2

Appraisal price

10,000 million yen (as of October 2012)

Completion

January 25, 2012

Occupancy rate

51.9% (as of December 2012) (Note)(Note) Indicates occupancy rate of whole building.

12

juku

Shin

.

ku Sta.
nju
Shi homec3To
Ma kyo M
run etr
ouc o
hi L
ine

Sta.

Shinjuku Maynds Tower

Development of
Shinjuku Station’s
new south exit

shinyon curumu
Takashimaya
Metro
Tokyo shin
FukutoLine

Total floor area

Office Area

Toei u Line
ShinjukSh
3-c injuku
hom
eS
ta

9,650 million yen

Commercial Areau Sta.
Shinjuk

Acquisition price0

Studio ALTA

Toei Oedo Line

Keio
Department
Store
Shinjuku Post Office

10000

Shinjuku Ward Office

Shinjuku Sta.

20000

Shinjuku Gyoen

Honshu Meieki Building [acquisition on February 1, 2013 (Scheduled)]■ The Meieki (Nagoya Station) area has
a low vacancy rate with an ongoingdecreasing trend■ Three skyscrapers are planned to be completed
by the end of 2015 in the area and the area’s
business accumulation is expected to grow(%)18.0
Marunouchi area

12.0

Meieki 1-chome plan

Nagoya business area

10.0

Honshu Meieki
Building

Meieki-Dori

Nagoya Station
new building

Sakae area

8.0
6.0

Meieki 3-chome plan

Fushimi area

14.0

SakuraDori

16.0

Nagoya Sta.

Meieki area

Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov.
2011
2012
(Source) Miki Shoji

5,960 million yen (as of November 2012)

Completion

December 20, 2007

Occupancy rate

78.4% (as of February 2013 (scheduled))

e
Lin
ya
go
Na

ns

ai

su
tet

Ka

Kin

eno

ne

Appraisal price

Honshu Meieki Building

NagoyaCentral Hospitalin Li

10,416.96m2

Ma

Total floor areaeaySubw iyama Lin
HigashiorD
iNishik
Dori
Hirokoji-.

Nakamura
Police Station

Nakamura
Kuyakusho Sta.

Structure and floors S 12F

a.
Center St
Kokusai
Subway-Dori Line
ra
ku
Sa

Meieki-dori

2,059.56m2

oya Sta

Site area

Nakamura
Ward Officeu Nag

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

Meitets

AddressSta.

• 6-minute walk from Nagoya Station
on JR and Nagoya Municipal
Subway lines and 2-minute walkfrom underground doorway leading
to Nagoya Station’s underground
shopping arcade• A number of railroads including JR,
Nagoya Municipal Subway(Higashiyama Line and Sakura-doriLine), Nagoya Railroad and Kintetsu
are availableoya

318 million yen

Nag

Expected NOI-Dori

SakuraSta.

5,300 million yenoyaAcquisition priceNag■ Convenienttransportation access

a a.
im St
sh u
sa Raib

.

Sta

Kom

Sa

Kamiooka Eye Mark Building [acquisition on March 1, 2013 (Scheduled)]

113,423

Acquisition price

2,000 million yen

Expected NOI

122 million yen

Address

1-14-6 Kamiooka Nishi,
Konan-ku, Yokohama-shi

Site area

689.12m2

Structure and floors S SRC B3/7F
Total floor area

3,755.36m2
2,030 million yen (as of November 2012)

Completion

May 13, 2011

Occupancy rate

100.0% (as of March 2013 (planned))

Fuji
Shopping Center

Mioka

Keikyu Main Line

Appraisal priceHotel Torianon
Kamiooka EyeMark Building
KeikyuDepartment Store
Kamiooka Sta.

• 1-minute walk from Kamiooka
Station on Keikyu Line andYokohama Municipal Subway• Keikyu Line’s “super limited
express train” and “limited
express train” stop at Kamiooka
Station from which it is convenient
to go to terminal areas such as
the 9-minute ride to Yokohama
Station or the 26-minute ride to
Shinagawa Station.
• The adjacent bus terminal is large
in size and so transportation
access is good

120,483

0
Keikyu Main Line, Keikyu Main Line, Odakyu Line,
Keio Line,
Yokohama Sta. Kamioooka Sta. Shin-Yurigaoka Sta. Chofu Sta.
(Source) Number of commuters in fiscal 2011 from websites of eachrailroad company.

Ooka River■ Convenienttransportation access

140,230

Current tenants
Real estate agency
Telemarketing center
Music school
Real estate agency
English conversation school
Preparatory school
Financial institution
Financial institution
Financial institution
Financial institution

Sta.

303,890
200,000

Floor
7F
6F
6F
5F
5F
4F
3F
2F
1F
B2F

Kamiooka(people/day)
400,000■ Tenants providing services for local residents

Blue Line■ In terms of number of commuters,
Kamiooka Station ranks second after
Yokohama Station of all Keikyu MainLine stations in Kanagawa Prefecture

I. Overview of Daiwa Office Investment Corporation

13

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 37 B Class buildings(as of November 30, 2012)
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

Ginza, Chuo-ku, Tokyo

8,267.17 SRC B3/12F

July 1963

2003

14,1004.5

simple and14,300 Feeleasehold
Fee simple

9.17

2 Daiwa Ginza Annex

Ginza, Chuo-ku, Tokyo

2,032.99

SRC B3/8F

Aug. 1972

2003

3,050

1.0

3,010 Fee simple

Fee simple

7.46

3 Daiwa Shibaura

Shibaura, Minato-ku, Tokyo

9,626.38 SRC B1/12F

Oct. 1987

8,265

2.6

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

3,950 Fee simple

Fee simple

12.79

5 Daiwa Sarugakucho

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

June 1985

3,190

1.0

2,980 Fee simple

Fee simple

9.79

6 Daiwa A Hamamatsucho

Hamamatsucho, Minato-ku, Tokyo

3,663.38 SRC B2/10F

July 1993

2,865

0.9

2,830 Fee simple Compartmentalized
ownership

6.03

7 Daiwa Jingumae

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

0.9

1,990 Fee simple

Fee simple

12.01

8 Daiwa Shibadaimon

Shibadaimon, Minato-ku, Tokyo

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

2,578

0.8

2,620 Fee simple

Fee simple

2.99

9 Daiwa Misakicho

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

2,346

0.7

2,470 Fee simple

Fee simple

6.68

10 Daiwa Shimbashi 510

Shimbashi, Minato-ku, Tokyo

2,715.61

SRC B1/8F

Apr. 1974

2,080

0.7

2,340 Fee simple

Fee simple

8.13

11 BPS SQUARE

Tsukiji, Chuo-ku, Tokyo

2,852.97

SRC 10F

Jan. 1996

1,560

0.5

1,430 Fee simple

Fee simple

7.67

12 Daiwa Tsukiji

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,420 Fee simple

Fee simple

9.70

13 Daiwa Tsukiji 616

Tsukiji, Chuo-ku, Tokyo

2,931.93

SRC B1/9F

Mar. 1994

2,440

0.8

2,320 Fee simple

Fee simple

7.69

14 Daiwa Tsukishima

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.5

7,810 Fee simple

Fee simple

10.89

15 Nihombashi MS Bldg.

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,850.81

SRC B2/7F

Apr. 1993

2,520

0.8

2,380 Fee simple

Fee simple

7.84

16 Daiwa Azabudai

Azabudai, Minato-ku, Tokyo

1,697.34

SRC B2/9F

Apr. 1984

1,600

0.5

1,740 Fee simple

Fee simple

9.57

17 Daiwa Shibuya SS

Shibuya, Shibuya-ku, Tokyo

2,969.11 SRC S B1/9F

July 1977

2003

3,930

1.2

3,710 Fee simple Compartmentalized
ownership (100%)

8.67

18 Daiwa Nihombashi Honcho

Nihombashi-Honcho, Chuo-ku, Tokyo

7,418.61 SRC B1/10F

Jan. 1964

2006

7,420

2.4

6,790 Fee simple

Fee simple

8.49

19 Daiwa Ginza 1-chome

Ginza, Chuo-ku, Tokyo

3,758.43 SRC B2/11F

Jan. 1962

2005

4,620

1.5

4,340 Fee simple

Fee simple

10.16

20 Daiwa Kyobashi

Hachobori, Chuo-ku, Tokyo

3,265.83

SRC B1/8F

Oct. 1974

2005

3,460

1.1

2,930 Fee simple Compartmentalized
ownership (100%)

10.04

21 Sunline Building No. 7

Kojimachi, Chiyoda-ku, Tokyo

2,405.04

SRC B2/9F

Oct. 1987

2,680

0.9

22 Daiwa Onarimon

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,86023 Shinjuku Maynds Tower (Note 7)

Yoyogi, Shibuya-ku, Tokyo

45,544.04 S SRC B3/34F Sept. 1995

24 SHIBUYA EDGE

Udagawacho, Shibuya-ku, Tokyo

2,480.65

RC B1/9F

Aug. 2006

5,900

1.9

3,930 Fee simple

Fee simple

3.14

25 Daiwa Kodenmacho

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

SRC 8F

Mar. 1985

2,460

0.8

simple and1,910 Feeleasehold
Fee simple

7.71

26 Daiwa Jimbocho

Kanda-Jimbocho, Chiyoda-ku, Tokyo

3,164.48

S B1/8F

Mar. 1997

4,150

1.3

2,730 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

1.6

4,900 Fee simple

Fee simple

6.76

28 Daiwa Kudan

Kudan Minami, Chiyoda-ku, Tokyo

2,882.61

Mar. 1987

4,000

1.3

2,730 Fee simple Compartmentalized
ownership (100%)

7.96

29 Daiwa Kayabacho Building

Nihonbashi-Kayabacho, Chuo-ku, Tokyo

5,899.11 S SRC B1/8F

Apr. 2010

5,600

1.8

6,260 Fee simple

Fee simple

5.58

30 Jimbocho Place

Kanda-Jimbocho, Chiyoda-ku, Tokyo

2,889.34

Feb. 2010

3,550

1.1

3,660 Fee simple

Fee simple

6.13

31 E SPACE TOWER

Maruyamacho, Shibuya-ku, Tokyo

13,960.85 S SRC B1/15F

Oct. 2002

24,0007.6

26,000 Fee simple

Fee simple

5.78

2,143.08

May 2010

1,721

0.5

1,810 Fee simple

Fee simple

6.93

32 Nihonbashi Hongokucho Tosei Building Nihombashi Hongokucho, Chuo-ku, Tokyo
Subtotal

SRC 8FRC B1/4F

SRC 9F
S 9F
S 8F

July 1996

177,240.08

2006

2003

2,110 Co-ownership Compartmentalized
ownership

8.62

4.4

13,000 Fee simple Compartmentalized
ownership (100%)

5.45

133,800 42.5

108,000 Co-ownership Co-ownership

6.42

289,175 91.8

255,870

Greater Tokyo Area (Note 1)

33 Daiwa Kinshicho

Kameido, Koto-ku, Tokyo

5,378.02

Jan. 1992

3,653

1.2

3,300 Fee simple

Fee simple

7.42

34 Daiwa Higashi-Ikebukuro

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,589.17 SRC S B1/9F June 1993

2,958

0.9

3,510 Fee simple

Fee simple

5.56

35 Benex S-3

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

7,470.01 S SRC B1/12F Feb. 1994

4,950

1.6

3,200 Fee simple

Fee simple

5.66

36 Daiwa Shinagawa North

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,549.98 SRC B1/11F

July 1991

7,710

2.4

5,690 Fee simple

Fee simple

5.56

37 West Park Osaki

Osaki, Shinagawa-ku, Tokyo

1,786.58

Sept. 2007

Fee simple

10.93

Fee simple

11.56

Subtotal

S B1/5F

S RC B1/6F

25,773.76

1,650

0.5

1,910 Fee simple

20,921

6.6

17,6104,810

1.5

2,850 Fee simple

4,810

1.5

2,850

314,906 100.0

276,330

Major Regional Cities (Note 1)

38 Daiwa Minami-Semba

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

5,719.54

Subtotal

5,719.54

Total

208,733.38

SRC B1/8F

Sept. 1986

5.64 (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 November 30, 2012 (end of 14th 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 November 30, 2012 (end of 14th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (December 2012) prepared by NKSJ 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.

14

Financial Conditions
Reduce risk of rising interest rates by extending borrowing periods andincreasing the ratio of borrowings with fixed interest rates

Status of Interest-Bearing Liabilities (as of November 30, 2012)
DOI refinanced 16.8 billion yen in 14th Fiscal Period, improving borrowing costs. Going forward, DOI will continue focusing on stable financial
management to support further growth.
■ Interest-Bearing Liabilities■ Debt Cost Rate (Note)
70 (％)(%) 8

Interest-bearing liabilities (left axis)
LTV (based on acquisition price) (Note) (right axis)

60
50

Medium-to-long term, upper-limit LTV target range(billion yen)160

Debt cost rate
Expected debt cost rate

7
6
5

40
4
30

120

3
80

20

40

10

1

0

0

0

2

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

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
Period Period Period Period Period 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(Note) Debt cost rate annualized: ((Interest expense + Financial related expenses)/ Interest-bearing liabilities)■ Balance of Borrowings by Financial Institution(including investment corporation bonds)(million yen)
30,000Financial institution
25,0001,000

20,000

3,500
2,000

15,000

6,000

10,0008,900
16,81019,000 2,500

5,000

5,000
4,481

0

8,500

2,000
5,000 4,000

5,000 1,600
2,500

6,500
6,050

1,950

3,400
3,000 2,000 2,000
1,700
1,000
14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Long- to
Short-Term Liabilities
End of 14th Fiscal Period
25.0
%

3,500
28th
Period■ Ratio of Fixed- to
Floating-Rate Borrowings
End of 14th Fiscal Period
13.8%

Ratio oflong-term
liabilities
at the end of
13th Fiscal Period

Ratio ofborrowings with
fixed interest rates
at the end of
13th Fiscal Period

80.0%

84.3%

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

86.2%
Fixed interest rates

Share

Sumitomo Mitsui Banking Corporation

21,50019.2%

Development Bank of Japan

13,75012.3%

Sumitomo Mitsui Trust Bank

13,350

11.9%

Shinsei Bank

8,000

7.1%

Mizuho Corporate Bank

7,900

7.0%

Resona Bank

7,000

6.2%

Aozora Bank

5,000

4.5%

Kansai Urban Banking Corporation

5,000

4.5%

Mizuho Trust and Banking

4,500

4.0%

Mitsubishi UFJ Trust and Banking

3,000

2.7%

The Bank of Fukuoka

3,000

2.7%

ORIX Bank Corporation

2,500

2.2%

The Gunma Bank

2,000

1.8%

The Shizuoka Bank

2,000

1.8%

The Hiroshima Bank

1,000

0.9%

The 77 Bank

1,000

0.9%

The Musashino Bank

1,000

0.9%

The Kagawa Bank

981

0.9%

The Bank of Yokohama

500

0.4%

Taiyo Life Insurance Company

300

0.3%

Nippon Life Insurance Company

300

0.3%

Investment corporation bonds

8,500

7.6%

112,081100.0%

Total

75.0%

Balance(mm yen)(Note) Balances less than a million yen have been rounded down.
Financial institutions from which borrowings were newly procured during
the 14th Fiscal Period are boxed in red.

Floating interest rates

I. Overview of Daiwa Office Investment Corporation

15

Description of Asset Manager

Organization of Asset Manager (as of December 17, 2012)■ 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 Approval42
No. 355 (Kinsho), Director-General, Kanto Local Finance
BureauAssociation 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

Yoshiki Nishigaki (Head of Fund Management Dept.)

Vice President andRepresentative Director

Yuji Shinotsuka (Business Planning Dept.)

Director

Naoyuki Owa (Head of Administrative Dept.)

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

Auditor (non-executive)

Toshihiko Onishi

Shareholders’ Meeting
Auditors
Board of Directors
Compliance Committee
Investment Committee
President andRepresentative Director

Construction Manager

Investment Management
Department

Marketing Department

Acquisitions Team
Asset Management
Team
Investment Planning
Team

Finance Department

Compliance Officer
Internal Control Office
Administrative
Department

Business Planning
Department

Fund Management
Department

Finance and IR 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 Meeting of Unitholders

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 contract

16

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

Officers④②③

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

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

14th Period 13th Period 12th Period 11th Period 10th Period

June 1, 2012 From Dec. 1, 2011 From June 1, 2011 From Dec. 1, 2010 From June 1, 2010
( From
To Nov. 30, 2012 )( To May 31, 2012 )( To Nov. 30, 2011 )( To May 31, 2011 )( To Nov. 30, 2010 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
7,566
7,431
7,606
6,759
6,424
Rental revenues
7,384
7,338
7,551
6,715
6,375
Operating expenses
4,419
4,341
4,289
3,935
3,942
Property-related expenses
3,602
3,533
3,472
3,166
3,195
Operating income
3,147
3,090
3,317
2,824
2,482
Ordinary income
2,365
2,022
1,768
1,588
1,274
Net income
2,369
2,021
1,767
1,453
1,282
(2) Properties, etc. (as of end of period)
Total assets
325,666
325,316
323,218
298,626
294,562[period-on-period percentage changes][+0.1%][+0.6%][+8.2%][+1.4%][+3.8%]
Interest-bearing liabilities
112,081111,391
109,917
86,25082,776
Net assets
201,118
200,800
200,548
200,234
200,063[period-on-period percentage changes][+0.2%][+0.1%][+0.2%][+0.1%][−0.4%]
Unitholders’ capital
198,781
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
2,369
2,021
1,767
1,453
1,282
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)508,132
507,331506,693505,900
505,469
Distribution per unit (yen)
5,986
5,107
4,464
3,671
3,240
Distribution amount from earnings per unit (yen)
5,986
5,107
4,464
3,671
3,240
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
0.7%
0.6%
0.6%
0.5%
0.4%
Notes 2and3[annual rate][1.5%][1.2%][1.1%][1.1%][0.9%]
ROE
1.2%
1.0%
0.9%
0.7%
0.6%
Notes 3and 4[annual rate][2.4%][2.0%][1.8%][1.5%][1.3%]
Capital ratio
61.8%
61.7%
62.0%
67.1%
67.9%
[period-on-period percentage changes][0.0%][−0.3%][−5.0%][−0.9%][−2.8%]LTV (loan to value)
34.4%
34.2%
34.0%
28.9%
28.1%
Property leasing cash flows (NOI)
Note 5
5,088
5,172
5,427
4,830
4,416
(6) Other Referential Information
Number of investment properties
38
37
36
35
33
Number of tenants
Note 6
376
355
340
334
324
208,733.38 207,277.34 205,318.62 191,346.43 182,548.82
Total rentable area (m2)Occupancy rate
Note 7
96.4%
94.3%
92.4%
95.4%
95.9%
Depreciation
1,306
1,367
1,348
1,281
1,236
Capital expenditures
357
641
240
540
364
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

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 10th Fiscal Period are the annualized figures calculated based on 183 days of management.
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.
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

II. Asset Management Report17

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 314,906 million yen (sum total of acquisition prices) as of the last day of
November 2012.
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 June 1, 2012 to November 30, 2012)
At first the Japanese economy during the fiscal period under review was recovering modestly with thedemand accompanying the post-earthquake reconstruction etc. but it became weakened toward the endof the period due to a slowdown in overseas economies.
In terms of the office leasing market, vacancy rates in the whole market showed signs of improvement
despite the obvious secondary vacancies increase along with the decrease of primary vacancies due to alarge supply in the first half of 2012 improved in central Tokyo. However, new advertised rents are still on
a downward trend.
In the office transaction market, the purchase demand by real estate companies and funds (including
REITs) remained steady as a result of the easing attitudes of financial institutions toward lending.
(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 worked on “external growth” which aims to boost revenue throughacquiring and selling properties, and “internal growth” which aims to maximize income generated fromexisting properties.
Concerning external growth, DOI proactively engaged in property acquisition activities and purchased“West Park Osaki” (acquisition price: 1,650 million yen) on September 18, 2012. As a result of theacquisition, DOI’s assets under management at the end of the 14th Fiscal Period (as of November 30,2012) totaled 38 properties, the sum total of acquisition prices amounted to 314,906 million yen.
Concerning internal growth, in spite of the severe office leasing market conditions and tenant
relocations in part, DOI tried to improve tenant satisfaction through developing good relations withtenants and strengthening cooperation with leasing brokers and property managers. As a result, theoccupancy rate at the end of the 14th Fiscal Period (as of November 30, 2012) was maintained at 96.4%.

18

(3) Overview of Capital Procurement
On August 29, 2012, DOI concluded a loan agreement of 2,000 million yen with The Shizuoka Bank, Ltd.,and the loan was carried out on August 31, 2012. Out of the 2,000 million yen, 1,000 million yen of the funds
were allocated to refinance the loan from the same bank ahead of schedule and the remaining funds wereallocated to the repayment of loans on September 18, 2012.
On September 13, 2012, DOI concluded loan agreements of 11,950 million yen in total with Sumitomo
Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, Development Bank of Japan Inc., The 77
Bank, Ltd., Mizuho Corporate Bank, Ltd., The Hiroshima Bank, Ltd. and The Musashino Bank, Ltd. and theloan was carried out on September 18, 2012. The funds were allocated to repay the borrowings of 11,843.75
million yen from Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, Development
Bank of Japan Inc. and The 77 Bank, Ltd. for which repayment was due on September 18, 2012 and toacquire property, etc. Remaining amounts were repaid using cash on hand.
On November 28, 2012, DOI concluded loan agreements of 3,550 million yen in total with Sumitomo Mitsui
Trust Bank, Limited on September 13, 2012, with Taiyo Life Insurance Company, The Gunma Bank, Ltd. andNippon Life Insurance Company and the loan was carried out on November 30, 2012. The funds wereallocated to repay the borrowings of 3,925 million yen from Sumitomo Mitsui Trust Bank, Limited, Taiyo Life
Insurance Company and The Gunma Bank, for which repayment was due on November 30, 2012. Remaining
amounts were repaid using cash on hand.
In addition, contractual repayments of 41.25 million yen in total were made to the Development Bank ofJapan Inc. and The Kagawa Bank, Ltd. on August 31, 2012.
As a result, the balance of interest-bearing liabilities outstanding at the end of the 14th Fiscal Period (as ofNovember 30, 2012) stood at 112,081.25 million yen (long-term debt: 103,581.25 million yen; investment
corporation bonds: 8,500 million yen). The balance of the current portion of long term debt and investment
corporation bonds stood at 22,981.25 million yen and 5,000 million yen.
During the 14th Fiscal Period, for the purpose of hedging the exposure to rising interest rates, several
interest rate swap agreements for borrowings of 16,350 million yen in total which fixes the interest rate in the
future were signed.
(4) Capital Expenditures During the 14th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 14th
Fiscal Period. Capital expenditures amounted to 357 million yen, and combined with the 280 million yen in
repair expenses, totals 638 million yen in construction work implemented.
Name of Property(location)
Daiwa Sarugakucho(Chiyoda-ku, Tokyo)
BPS SQUARE(Chuo-ku, Tokyo)
Shinjuku Maynds Tower(Shibuya-ku, Tokyo)
Daiwa Ginza 1-chome(Chuo-ku, Tokyo)

PurposeRenovation work in common areas
Updating package air conditioners
and Renovation work
Installation of sound barrier
Updating air conditionerson B1F and B2F

Other Buildings
Total

Expenditure(millions of yen)

PeriodFrom: Mar. 2012
To: June 2012
From: July 2012
To: Sep. 2012
From: Feb. 2012
To: Aug. 2012
From: Sep. 2012
To: Nov. 2012
From: June 2012
To: Nov. 2012

127
50
30
14
136
357

(5) Overview of Financial Performance and Distributions
As a result of the management described above, for the 14th Fiscal Period, DOI recorded 7,566 million yen in
operating revenue, 3,147 million yen in operating income, 2,365 million yen in ordinary income and 2,369 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 current period
end, excluding fractions of the distribution amount per unit that are less than 1 yen. Accordingly, DOI declared a
distribution amount per unit of 5,986 yen.
II. Asset Management Report193. Future Management Policy and Tasks(1) Investment Environment
The Japanese economy is expected to continue to be moderate for the time being. Furthermore, while
being continuously supported by the demand accompanying the post-earthquake reconstruction, theJapanese economy is expected to enter a gradual recovery as overseas economies escape from theirdownward trend. However, there are still great uncertainties in overseas economies, which have the risk ofplacing downward pressure on the Japanese economy and a close watch should be placed on the future
employment and income environment.
In the office leasing market, as decrease in new supply and undervalued rents boost demand, both vacancy
rates and rents are expected to make a gradual recovery toward late this year at prime properties.
In the office transaction market, acquisition demand of real estate companies and funds (including REITs) is
expected to be strong.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under above office leasing market conditions, the tenant is 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 system. For new tenants, strive to maintain and raise occupancy rates
through the provision of more comfortable service than competitor by participating in the market
aggressively.
(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. In
principal, DOI will invest in properties around Tokyo, but will also look into investment in competitive
properties in the 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 Sponsor Group and utilizing the Group’s
extensive network of clients.
During the 14th Fiscal Period, DOI additionally acquired “West Park Osaki” which is situated in Tokyo.
DOI believes the acquisitions will contribute to further stabilization and enhancement of the portfolio. DOI
will continue 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:(a) In principle, control leverage by keeping LTV ratio within the range of 40% to 50% at maximum.
(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 at least 70% to 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 November 30, 2012. Please note that theamounts below include costs that will be recognized as expenses.

Name of Property(location)

Estimated Cost
(millions of yen)
Payment Cumulative
for theamountTotal
current
paid
periodPurposeEstimated Period

Daiwa Tsukishima(Chuo-ku, Tokyo)

Construction work for installation
hydraulic damper

From: Feb. 2013
To: May 2013

150

–

–

BPS SQUARE(Chuo-ku, Tokyo)

Construction work for renovation

From: Jan. 2013
To: Apr. 2013

60

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for painting
iron parts of rooftop, etc.

From: Jan. 2013
To: May 2013

42

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renovationcommon areas

From: Dec. 2012
To: Apr. 2013

37

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for
replacement of electricity meter

From: June 2013
To: Feb. 2013

21

–

–

II. Asset Management Report21III. Balance Sheets
As of November 30, 2012 and May 31, 2012
(Thousands of yen)

As ofNovember 30, 2012

As of
May 31, 2012

AssetsCurrent Assets:
Cash and cash equivalents [Note 10]

16,046,965

16,801,099

Tenant receivables

261,650

284,801

Prepaid expenses

246,573244,404

18

17

Other current assets

94,278

101,782

Total Current Assets

16,649,484

17,432,103

Land including trust accounts

248,877,227

247,785,634

Buildings and structures including trust accounts [Note 4]

70,528,102

69,544,514

Machinery and equipment in trust

802,224

793,278

Tools, furniture and fixtures including trust accounts

88,62584,238Construction in progress including trust accounts

353,449

22,722Other tangible fixed assets including trust accounts

9,759

9,759

(14,911,383)(13,605,373)

2,713,986

2,713,986

308,461,989

307,348,758

1,825

2,013

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

387,956

368,077

Deferred tax assets [Note 8]

18,8181,173

Deferred investment corporation bond issuance costs

16,75225,336

Derivative assets [Note 10]

1,119

9,959

Others

14,077

14,813

Total Other Assets

554,231535,055

325,665,704

325,315,916

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 ofNovember 30, 2012

As of
May 31, 2012

Liabilities
Current Liabilities:
Operating accounts payable546,346

911,636

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

5,000,000–

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

22,981,250

22,291,250

258,426

261,882798

697

Accrued consumption taxes

85,803

163,147

Rent received in advance

831,967

876,926

Other current liabilities

207,903279,867

Total Current Liabilities

29,912,493

24,785,405

Investment corporation bonds [Notes 6 and 10]

3,500,000

8,500,000

Long-term debt [Notes 6 and 10]80,600,000

80,600,000

Tenant security deposits including trust accounts [Note 10]

10,482,828

10,616,879

52,63913,164

94,635,467

99,730,043

124,547,960

124,515,448

198,780,951

198,780,951

2,369,494

2,021,548

201,150,445

200,802,499(32,701)(2,031)(32,701)(2,031)

Total Net Assets

201,117,744

200,800,468

Total Liabilities and Net Assets

325,665,704

325,315,916

Accounts payable – other
Income taxes payable

Long-Term Liabilities:

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

Net Assets [Note 5]
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 November 30, 2012 and May 31, 2012
(Thousands of yen)

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

For the six months ended
November 30, 2012

For the six months ended
May 31, 2012

7,384,164
182,050

7,338,153
93,3607,566,214

7,431,513

3,601,887
621,489
16,26463,886

3,533,104
605,809
16,14757,647

23,1375,400
87,36330,302
5,400
93,062

4,419,426
3,146,788

4,341,471
3,090,042

1,386
1,083
2,938

2,014
6,825
3,494

5,407

12,333

534,556
97,319142,688
12,685703,955
96,326
266,813
12,983

787,248

1,080,077

2,364,947

2,022,298–
5,315

32,898–5,315

32,898–32,898–2,370,262

32,8982,022,298

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
Ordinary Income
Extraordinary Income:Subsidy income
Gain on donation of tangible fixed asset
Total Extraordinary Income
Extraordinary Losses:
Loss on reduction of tangible fixed asset [Note 4]
Total Extraordinary Losses
Income Before Income Taxes
Income taxes – current
Income taxes – deferred
Total Income Taxes [Note 8]
Net Income

977
(1)

979
3

976
2,369,286

982
2,021,316

Retained Earnings Brought Forward
Retained Earnings at End of Period

208
2,369,494

232
2,021,548

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 November 30, 2012 and May 31, 2012
(Thousands of yen)

Number of
Units

Unitholders’CapitalRetained
Earnings

Deferred gains
or losseson hedges

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)

Balance as of November 30, 2012

395,798

198,780,951

2,369,494(32,701)

201,117,744

Balance as of May 31, 2012

		

Total

(Thousands of yen)

Number of
Units

Unitholders’CapitalRetained
Earnings

Deferred gains
or losseson hedges

395,798

198,780,951

1,767,075–

200,548,026

Cash dividends declared––(1,766,843)–(1,766,843)

Net income––

2,021,316–

2,021,316

Net changes of items other thanunitholders’ equity

–

–

–

(2,031)(2,031)

395,798

198,780,951

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

Balance as of November 30, 2011

Balance as of May 31, 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 November 30, 2012 and May 31, 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 November 30, 2012, DOI had ownership or beneficiary interests in 38 office properties with approximately
208,733 square meters of rentable office space and had leased office space to 376 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 96.4%.
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 November 30, 2012
2-56 years
2-23 years
5-18 years

As of May 31, 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 the respective
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 purchase dateof 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 7,948 thousand yen for the period ended November 30, 2012 and 6,196 thousand yen
for the period ended May 31, 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 basedon 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 andincome 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 November 30, 2012 and May 31, 2012 consisted of the following:
As of November 30, 2012
As of May 31, 2012
Acquisition
Accumulated
Acquisition
AccumulatedBook value
Book value
costs
depreciation
costs
depreciation
Land248,877,227– 248,877,227 247,785,634– 247,785,634
including trust accounts

Buildings andstructures

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

56,011,473

69,544,514(13,245,933)

56,298,581

802,224(342,213)

460,011793,278(313,458)

479,820

88,625(42,782)

45,843

84,238(36,223)

48,015Construction inprogress

353,449–

353,449

22,722–

22,722Other tangible
fixed assets

9,759(9,759)–9,759(9,759)–320,659,386(14,911,383)

305,748,003

318,240,145(13,605,373)

304,634,772

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 asof November 30, 2012 and May 31, 2012 and presented on statement of income as loss on reduction of tangible
fixed assets for the period ended May 31, 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 November 30, 2012 and May 31, 2012 consisted of the(Thousands of yen)following:
As of
As of
November 30,
May 31,
2012
2012
Unsecured loans due 2012 to 2018, principally from banks and insurance
103,581,250
102,891,250
companies with interest rates mainly ranging from 0.6% to 1.8%
2.8% unsecured bond due 20193,500,000
3,500,000
1.9% unsecured bond due 2013
5,000,000
5,000,000
Total
112,081,250
111,391,250[Note] The interest rate presented is the spot rate as of November 30, 2012. 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 November 30, 2012
(Thousands of yen)were as follows:
Due within one year
27,981,250
Due after one to two years
33,900,000
Due after two to three years
16,600,000
Due after three to four years
2,000,000
Due after four to five years
22,750,000
Due after five years
8,850,000

Note 7 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended November 30, 2012 and May 31, 2012
(Thousands of yen)were as follows:
For
the
six
monthsended
For the six months ended
November 30, 2012
May 31, 2012
A. Operating revenues
Rental revenues
7,384,164
7,338,153
Other revenues related to property leasing
182,050
93,360Total operating revenues
7,566,214
7,431,513
B. Property-related expenses
Consignment expenses
549,516
573,208
Utilities expenses
737,021654,823
Taxes and dues
652,110
637,797
Non-life insurance expenses
11,848
11,832
Repair expenses
280,099
233,868
Depreciation
1,305,782
1,367,438
Other property-related expenses
65,511
54,138
Total property-related expenses
3,601,887
3,533,104
C. Operating income from property leasing [A – B]
3,964,327
3,898,409

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 0.04% for the period ended November 30, 2012 and 0.05% for the period ended May
31, 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
November 30, 201236.59%(36.57)0.02
0.04%

For the six months ended
May 31, 201239.33%(39.31)
0.03
0.05%

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 November 30, 2012 and May 31, 2012 were as(Thousands of yen)follows:
As of November 30, 2012
As of May 31, 2012
Deferred tax assets:
Accrued enterprise tax
18
17
Deferred losses on hedges
19,227
4,816
Total deferred tax assets
19,245
4,833
Deferred tax liabilities:
Deferred gains on hedges
409
3,643
Total deferred tax liabilities
409
3,643
Net deferred tax assets
18,836
1,190
Adjustments of Deferred Tax Assets and Liabilities for Enacted Changes in Effective Statutory Tax Rate
The Act to Revise the Income Tax Act, etc., in Order to Construct a Tax System Addressing Changes in theSocio-Economic Structure (Act No. 114 of 2011) and the Act on Special Measures for Securing Necessary
Financial Resources to Implement Measures to Rebuild Areas Devastated by the Great East Japan Earthquake(Act No. 117 of 2011) were promulgated on December 2, 2011. In accordance with the promulgation, theeffective statutory tax rate used to calculate the deferred tax assets and deferred tax liabilities concerning the
temporary differences, etc. expected to be reversed in the accounting periods starting on and after April 1, 2012,
was changed to 36.59%, and the effective statutory tax rate used to calculate the deferred tax assets anddeferred tax liabilities concerning the temporary differences, etc. expected to be reversed in the accounting
periods starting on and after April 1, 2015, will be changed to 34.16%, respectively.
The effect of these changes is immaterial.

Note 9 – Per Unit Information
Information about net income per unit for the periods ended November 30, 2012 and May 31, 2012 and net
assets per unit as of November 30, 2012 and May 31, 2012 were as follows. The computation of net income perunit is based on the weighted average number of units outstanding during the period. The computation of net
assets per unit is based on the number of units outstanding at each period end.
As of November 30, 2012
As of May 31, 2012
Net assets per unit
508,132 yen
507,331 yen
Net income per unit
5,986.10 yen
5,106.94 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)

As of November 30, 2012
2,369,286

As of May 31, 2012
2,021,316––

2,369,286

2,021,316

395,798

395,798

Note 10 – Financial Instruments(For the six months ended November 30, 2012 and May 31, 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 ofdividends and reimbursement 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 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 acquisition of
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 using derivative transactions
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 November 30, 2012 and May 31, 2012 are as
follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(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 bonds 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 bonds
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.
(As of May 31, 2012)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,801,099
16,801,099–
Total
16,801,099
16,801,099–
Long-term debt due within one year
22,291,250
22,327,560
36,310Investment corporation bonds
8,500,000
8,507,500
7,500
Long-term debt
80,600,000
80,377,338(222,662)
Total
111,391,250
111,212,398(178,852)
Derivative transactions(*)(3,205)(3,205)–(*) 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 bonds due within one year and investment corporation bonds
The fair value of investment corporation bonds 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 the
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 the DOI’s credit risk after borrowing. Therefore, for these items, their book value
is assumed 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 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(Thousands of yen)AmountHedged Items Contract(due after 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)

Total*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.

(As of May 31, 2012)
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

Total

AmountHedged Items Contract(due after one year)

Fair
Value(*)

Long-term debt

41,900,000(41,900,000)(3,205)Long-term debt

13,000,000(13,000,000)–(**)

54,900,000(54,900,000)(3,205)*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 (with a book value of 10,482,828 thousand yen in November 30, 2012 and
10,616,879 thousand yen in May 31, 2012) that have been deposited from tenants are not marketable and theactual deposit period cannot be reliably determined, thus making it impossible to reasonably 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 November 30, 2012)

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
16,046,965––––
16,046,965––––(As of May 31, 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
16,801,099––––
16,801,099––––

Due after
5 years––

4. Redemption schedule for investment corporation bonds and long-term debt
(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 bonds due
5,000,000––
within one year
Long-term debt due within one year 22,981,250––
Investment corporation bonds–––
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(As of May 31, 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
Long-term debt due within one year 22,291,250––––
Investment corporation bonds– 5,000,000–––
Long-term debt
– 32,400,000 29,500,000 2,000,000 16,700,000
Total
22,291,250 37,400,000 29,500,000 2,000,000 16,700,000

Due after
5 years–
3,500,000–
3,500,000

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 November 30, 2012)
Book Value
Fair value as of
As of
Change
As ofNovember 30, 2012
May 31, 2012
during the period(*1)
November 30, 2012
307,324,542
782,731
308,107,273
276,330,000(For the six months ended May 31, 2012)
Book Value
As of
ChangeNovember 30, 2011
during the period(*1)
305,878,733
1,445,809(Thousands of yen)

As of
May 31, 2012
307,324,542

Fair value as of
May 31, 2012
273,530,000(Note 1) The book value represents the acquisition cost less accumulated depreciation.
(Note 2) Significant changes(*1) 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).
(*2) For the six months ended May 31, 2012, the major reason of increase is acquisition of the limited proprietary rights for the land of“Daiwa Sarugakucho” (190,000 thousand yen) and “Nihonbashi Hongokucho Tosei Building” (1,721,000 thousand yen). The major
reason of decrease is depreciation (1,367,438 thousand yen).
(Note 3) The fair values as of November 30, 2012 and May 31, 2012 represent the sum of appraisal values estimated by external real estateappraisers.

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

32

Note 12 – Transactions with Related Parties(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
Payment of interest expense on
Repayment of interest Payment of
Borrowing
investment corporation bonds
borrowing expense
expenseof capital of capital(Notes 1 and 2)(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(For the six months ended May 31, 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 [Note 4]
Chiyoda-ku, Tokyo342 billion yen
BankRelationship withrelated party

Provision of capital

Provision of capital

Nature of transaction

Payment Payment ofPayment of interest expense oninterest borrowing expense
investment corporation bonds Borrowing of capital of
expense(Notes 1 and 2)(Note 3)(Note 3)

Amount of transaction

49,576

Account

Investment
corporationbonds(held in DOI)

(thousands of yen)

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

3,000,000

58,51016,671Other
current
liabilities

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

LongPrepaid term
expenses prepaid
expenses

20,4305,383,750 8,000,000 –

28,48325,157

Consumption taxes are not included in transaction amounts.
(Note 1) Issuance conditions of 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 and conditions 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 the market trend.
(Note 4) The Sumitomo Trust and Banking Co., Ltd, The Chuo Mitsui Trust and Banking Company, Limited, and Chuo Mitsui Asset Trust andBanking Company, Limited merged on April 1, 2012, and the company name was changed to Sumitomo Mitsui Trust Bank, Limited.

VI. Notes to Financial Statements

33

Note 13 – Significant Subsequent Events(1) Acquisition of Assets(A) DOI acquired a trust beneficial interest in real estate on December 3, 2012.
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 (Compartmentalized ownership*)(*Percentage of voting rights 359,323/685,495)
shinyon curumu
4-2-23 Shinjuku, Shinjuku-ku, Tokyo
5,090,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
November 27, 2012
December 3, 2012
Undisclosed(B) DOI acquired a trust beneficial interest in real estate on February 1, 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
Honshu Meieki Building
1-21-19 Meieki-Minami Nakamura-ku, Nagoya-shi, Aichi Prefecture
5,300,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
December 26, 2012
February 1, 2013
Undisclosed(C) DOI decided to acquire trust beneficial interests in real estate on December 26, 2012.
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
Kamiooka Eye Mark
1-14-6 Kamiooka Nishi, Konan-ku Yokohama-shi, Kanagawa Prefecture
2,000,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
December 26, 2012
March 1, 2013 (expected)
Shimizu Corporation(2) Borrowing of Funds(A) DOI borrowed funds on December 3, 2012.
These funds were allocated to acquisition of the property described in “(1) Acquisition of Assets (A)” andits related costs.
LenderDate ofloan

Balance(thousandsof yen)Development Bankof Japan Inc.

Dec. 3, 2012 2,000,000

Shinsei Bank,
LimitedDec. 3, 2012 2,000,000

Interest rate
0.847%

Date ofmaturity

Repayment
methodNotes

Nov. 30, Bullet payment Unsecured
2017

3 month Japanese Nov. 30,
Bullet payment Unsecured
Yen LIBOR
2017+0.40% (Note)(Note) Interest payment dates are the last business day of February, May, August and November, and the date of maturity. Interest rateis calculated based on the 3-month Japanese Yen LIBOR which Japanese Bankers Association (“JBA”) releases two businessdays prior to the interest payment date.

34

(B) DOI borrowed funds on February 1, 2013.
These funds were allocated to acquisition of the property described in “(1) Acquisition of Assets (B)” andits related costs.
Balance

Date ofloan

Lender(thousandsof yen)Interest rate

Date ofmaturity

Repayment
methodNotes

1 month Japanese Feb. 28,
Sumitomo Mitsui
Bullet payment Unsecured
Feb.
1,
2013
2,000,000
Yen TIBOR(*)
2020
Banking Corporation+ 0.43% (Note)
Sumitomo Mitsui
Trust Bank, Limited
Tokio Marine &Nichido Fire
Insurance Co., Ltd.
The Yamaguchi
Bank, Ltd.

Feb. 1, 2013 1,500,000

1 month Japanese Feb. 28,
Bullet payment Unsecured
Yen TIBOR(*)
2020+ 0.43% (Note)Feb. 1, 2013 1,000,000

0.6899%Nov. 30, Bullet payment Unsecured
2017

Feb. 1, 2013

500,000

0.6899%Nov. 30,
Bullet payment Unsecured
2017

The Higashi-Nippon Feb. 1, 2013
Bank, Limited

500,000

1 month Japanese Feb. 28,
Bullet payment Unsecured
Yen TIBOR(*)
2018+ 0.35% (Note)(Note) Interest payment shall be paid at the end of every month (If any such date is not a business day, the immediately following
business day, and if such date falls within the next month, the immediately last business day) and the repayment date. Interest
Rate is calculated based on 1 month Japanese Yen TIBOR which Japanese Bankers Association (“JBA”) announces twobusiness days prior to the first day of the applicable period.

(C) DOI decided to borrow funds on January 28, 2013.
These funds will be allocated to acquisition of the property described in “(1) Acquisition of Assets (C)” andits related costs.

Resona Bank
LimitedBalance

Date ofloan

Lender(thousandsof yen)Feb. 1, 2013 2,000,000

Interest rate

Date ofmaturity

Repayment
methodNotes

1 month Japanese Feb. 28,
Bullet payment Unsecured
Yen TIBOR(*)
2020+ 0.43% (Note)(Note) Interest payment shall be paid at the end of every month (If any such date is not a business day, the immediately following
business day, and if such date falls within the next month, the immediately last business day) and the repayment date. Interest
Rate is calculated based on 1 month Japanese Yen TIBOR which Japanese Bankers Association (“JBA”) announces twobusiness days prior to the first day of the applicable period.
(*) Please refer to Japanese Yen TIBOR from the website of JBA. (http://www.zenginkyo.or.jp/en/tibor/)

Note 14 – Additional Information

Acquisition of Assets
DOI determined to acquire a trust beneficial interest in real estate on November 27, 2012.
Overview of the Asset(a) Type of asset(b) Property name(c) Location(d) Acquisition price(e) Date of agreement(f) Date of delivery(g) Seller

Trust beneficial interest in real estate (Compartmentalized ownership*)(*Percentage of voting rights 326,172/685,495)
shinyon curumu
4-2-23 Shinjuku, Shinjuku-ku, Tokyo
4,560,000 thousand yen (excluding acquisition costs and consumption tax, etc.)
November 27, 2012
April 12, 2013 (expected)
Undisclosed

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 November 30, 2012 and May 31, 2012
(Thousands of yen)

For the six months
ended
November 30, 2012

For the six months
ended
May 31, 2012

Income before income taxes

2,370,262

2,022,298

Depreciation and amortization

1,306,936

1,368,584

8,583

8,583

Interest expense

631,875

800,281(Increase) Decrease in tenant receivables

23,151(99,513)

Subsidy income–(32,898)

Loss on reduction of tangible fixed asset–

32,898

Increase (Decrease) in accounts payable(26,822)226,354

Increase (Decrease) in rent received in advance(44,959)

14,922

Cash payments of interest expense(634,769)(805,822)–

84,178(168,337)

200,460

3,465,920

3,820,325(2,755,849)(2,637,291)–(125,534)

Proceeds from tenant security deposits

646,300

547,574

Payments for tenant security deposits(780,352)(779,948)–

32,898(2,889,901)(2,962,301)

Proceeds from long-term debt

17,500,000

21,200,000

Repayments of long-term debt

(16,810,000)(19,725,625)

Payment of dividends(2,020,153)(1,766,483)(1,330,153)(292,108)(754,134)

565,916

Cash and Cash Equivalents at Beginning of Period

16,801,099

16,235,183

Cash and Cash Equivalents at End of Period

16,046,965

16,801,099

Cash Flows from Operating Activities:

Amortization of bond issuance costs(Increase) Decrease in consumption taxes refundable
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Payments for purchases of intangible assets

Proceeds from subsidy
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

Net Cash 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(yen) 400,000

8,000 (units)
Investment unit price (left axis)

350,000

Trading volume (right axis)

7,000

300,000

6,000

250,000

5,000

200,000

4,000

150,000

3,000

100,000

2,000

50,0000

1,000

0

0

2010 2011
Dec. Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2012
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

Overview of Investment Units and Unitholders (as of November 30, 2012)■ No. of investment units by investor type
Individuals/others
34,742 units (8.8%)■ No. of unitholders
by investor type

Financial institutions
148,487 units (37.5%)

14th
Fiscal Period

Foreigners 27,016 units (6.8%)

146×57

Total: 395,798 units

Securities firms 1,766 units (0.5%)

Other domestic corporations 183,787 units (46.4%)
Individuals/others
37,409 units (9.5%)

Financial institutions
133,482 units (33.7%)

Foreigners 38,833 units (9.8%)

13th
Fiscal Period
Total: 395,798 units

Other domestic corporations 131,832 units (33.3%)

Number ofUnits Owned

Percentage
Share

Daiwa Investment Management Inc.

128,905 units

8000
32.6%

2.

Japan Trustee Services Bank, Ltd. (trust account)

82,708 units

7000
20.9%

3.

Daiwa Securities Group Inc.

51,893 units

13.1%
6000

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

5.
6.

18
(0.2%)

Other domestic
corporations

175(1.5%)

Foreigners

122(1.1%)

Securities firms

15(0.1%)

Total

11,354January 16, 2013 ・Announcement of financial results for
14th Fiscal Period
February 12, 2013 ・Sending of Japanese version Business
Report for 14th Fiscal Period(Statement of Financial Performance)
February 13, 2013 ・Start paying distributions for
14th Fiscal PeriodNov.
End offiscal periodAug.

23,769 units

6.0%
5000

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

20,150 units

4000

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

19,212 units

4.9%

May
End offiscal period

0

20

40

Jan.

July

60

5.1%

7.

Nomura Bank (Luxembourg) S.A.

7,359 units

1.9%

8.

Individual

2,520 units

0.6%

9.

State Street Bank and Trust Company 505104

1,668 units

0.4%

10. State Street Bank and Trust Company 505223

1,593 units

0.4%

80

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

38

Financial institutions

IR Calendar

1.

4.

11,024(97.1%)

Securities firms 54,242 units (13.7%)

Top Ten Unitholders (as of November 30, 2012)
Name of Investor

Individuals/others

Feb.

100

July 2013 ・Announcement of financial results for
15th Fiscal Period
August 2013 ・Sending of Japanese version Business
Report for 15th Fiscal Period(Statement of Financial Performance)
August 2013 ・Start paying distributions for
15th 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 has been created. The logo symbolizes hospitality with an open door and thedesire to be a bright and open investment corporation. We will continue to aim to be a highly-transparent investment
corporation that is further cherished and trusted by our investors and tenants.