16th

Fiscal Period Business Report(Statement of Financial Performance)

June 1, 2013 - November 30, 2013

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

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 16th Fiscal Period, DOI posted operating revenues of 8,432 million yen and operating income of 3,677 million yen. Our
distribution per unit for the 16th Fiscal Period is 7,478 yen, an increase by 936 yen from the 15th Fiscal Period.
See page 4 for financial and management highlights
As for new acquisitions in the 16th Fiscal Period DOI acquired Tousen Dogenzaka Daini Building (4,500 million yen), Akasaka
Business Place (9,200 million yen) and Nisseki Shibuya Building (7,000 million yen) for a total of 20,700 million yen. With this, theasset size has arrived at 350 billion yen.
See page 8 for details of external growth
The overall portfolio occupancy rate increased to 96.3% in the 16th Fiscal Period with the recovery of the occupancy rates of Daiwa
Tsukijiekimae, shinyon curumu and other properties subject to leasing improvement. Furthermore, DOI was awarded the best ratingof “Green Star” from the GRESB Survey for sustainability for the second consecutive year.
See page 11 for details of internal growthIn financial matters, DOI’s issuer rating was upgraded from A (stable) to A+ (stable)
due to DOI’s steady external growth, maintenance of a high occupancy rate, conservative
leverage and debt structure, the significant improvement in debt costs, etc. DOI willcontinue to aim to reduce future refinancing risk by extending borrowing periods anddiversifying repayment dates.
See page 14 for details of financial condition

DOI will continue to focus on establishing its portfolio with a particularemphasis on office buildings in favorable locations centering on Tokyo,
and aim to achieve an asset size of 500 billion yen while striving toincrease the competitiveness of existing properties.
We wish for the continued success of our unitholders and ask for yourcontinued support of DOI.

Nobuaki Omura Executive Director of Daiwa Office Investment Corporation
Contents

I.

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

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

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

V.

Statements of Changes in Unitholders’ Equity …… 25

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

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

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

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

Internal Growth Measures… ……………………………… 11
Financial Conditions… …………………………………… 14
Description of Asset Manager……………………………… 15

2

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

Characteristics and Strategies of Daiwa Office Investment Corporation

3 Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT focused on the Five
Central Wards of Tokyo

Portfolio comprised of
A Class and B Class buildings

Effective application of operational
knowhow specialized in office buildings

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

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

Office buildings 100.0%

Major Regional Cities 2.9%
Greater Tokyo

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

90.6%

6.5%

37.9%

B Classbuildings
Based on acquisition price62.1%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of November 30, 2013.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 500 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%

500.0

Proactive investment inselectively chosencompetitive properties(billion yen)
500

400

311.3

313.2

314.9

332.0

352.7

300

Establishment of stable revenue base・Property management
activities

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

・Maintain andimprove property
value

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

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

200

100

0
Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period
ended
ended
ended
ended
ended
November 2011 May 2012 November 2012 May 2013 November 2013

Fiscal period ended November 2013
(16th Fiscal Period)(Note) The forecasts on distribution arecalculated based on certain

Fiscal period ending May 2014changes in the status and other(17th Fiscal Period)

factors. Moreover, the forecasts
construed as a guarantee of
distribution amounts.

7,540 yen
7,570 yen(actual)5000

assumptions and may vary due toset forth herein should not be

7,478 yen

Acquisition
target(forecast)

4000

Fiscal period ending November 2014
(18th Fiscal Period)(forecast)

3000

I. Overview of Daiwa Office Investment Corporation
2000

3

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

8,432

7,500

7,605

7,615

7,566

7,431

3,000

5,000

2,000

2,500

1,000

3,677
3,317

3,308

3,090

3,146

13th Period

14th Period0012th Period

13th Period

14th Period

15th Period

16th Period

12th Period■ Net Income■ Asset Size(million yen)
3,000

(billion yen)350

15th Period

16th Period

352.7

2,959
2,369

2,000

332.0

2,589
300

2,021

1,766
1,000

311.3

313.2

314.9

12th Period

13th Period

14th Period

250

0

200
12th Period

13th Period

14th Period

15th Period

16th Period

15th Period

16th Period■ Distribution Per Unit(yen)
10,000
8,000

7,400
6,009
6,874

Forecast from one year earlier

4,154
3,903
5,246

6,000
4,000

Forecast from six months earlier

3,180
3,280
3,671

2,843
3,176
3,240

Actual dividends

4,850
4,850
5,107

3,600
4,100
4,464

6,550
7,200
7,478

5,500
6,250
6,542

5,350
5,500
5,986

7,300
7,540

7,570

2,000
0
8th Period

9th Period

11th Period

12th Period

13th Period

14th Period

15th Period

16th Period

17th Period 18th Period

16th Period

15th Period

14th Period

13th Period

12th Period(November 2013)(May 2013)(November 2012)(May 2012)(November 2011)

Operating revenues (million yen)

8,432

7,615

7,566

7,431

7,605

Operating income (million yen)

3,677

3,308

3,146

3,090

3,317

Ordinary income (million yen)

2,955

2,590

2,364

2,022

1,767

Net income (million yen)

2,959

2,589

2,369

2,021

1,766

Total number of units issued (units)395,798

395,798

395,798

395,798

395,798

Net assets per unit (yen)509,560

508,707508,132

507,330

506,692

Distribution per unit (yen)

7,478

6,542

5,986

5,107

4,464

363,653

342,572

325,665

325,315

323,217

40.6

37.5

34.4

34.2

34.0

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

4

10th Period

44

41

38

37

36

352.7

332.0

314.9

313.2

311.3

244,877.17

225,651.87

208,733.38

207,277.34

205,318.62

96.3

95.0

96.4

94.3

92.4

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 43 B Class buildings(as of November 30, 2013)
Property Name

Address

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

Ownership TypeLand

Building

PML (%)(Note 5)

Five Central Wards of Tokyo (Note 1)
Ginza, Chuo-ku, Tokyo
1 Daiwa Ginza
Ginza, Chuo-ku, Tokyo
2 Daiwa Ginza Annex
Shibaura, Minato-ku, Tokyo
3 Daiwa Shibaura
Minami Aoyama, Minato-ku, Tokyo
4 Daiwa Minami-Aoyama
Sarugakucho, Chiyoda-ku, Tokyo
5 Daiwa Sarugakucho
Hamamatsucho, Minato-ku, Tokyo
6 Daiwa A Hamamatsucho
Jingumae, Shibuya-ku, Tokyo
7 Daiwa Jingumae
Shibadaimon, Minato-ku, Tokyo
8 Daiwa Shibadaimon
Misakicho, Chiyoda-ku, Tokyo
9 Daiwa Misakicho
Shimbashi, Minato-ku, Tokyo
10 Daiwa Shimbashi 510
Tsukiji, Chuo-ku, Tokyo
11 Daiwa Tsukijiekimae
Tsukiji, Chuo-ku, Tokyo
12 Daiwa Tsukiji
Tsukiji, Chuo-ku, Tokyo
13 Daiwa Tsukiji 616
Tsukishima, Chuo-ku, Tokyo
14 Daiwa Tsukishima
Nihombashi-Horidomecho, Chuo-ku, Tokyo
15 Nihombashi MS Bldg.
Azabudai, Minato-ku, Tokyo
16 Daiwa Azabudai
Shibuya, Shibuya-ku, Tokyo
17 Daiwa Shibuya SS
Nihombashi-Honcho, Chuo-ku, Tokyo
18 Daiwa Nihombashi Honcho
Ginza, Chuo-ku, Tokyo
19 Daiwa Ginza 1-chome
Hachobori, Chuo-ku, Tokyo
20 Daiwa Kyobashi
Kojimachi, Chiyoda-ku, Tokyo
21 Sunline Building No. 7
Shimbashi, Minato-ku, Tokyo
22 Daiwa Onarimon
Yoyogi, Shibuya-ku, Tokyo
23 Shinjuku Maynds Tower (Note 7)
Udagawacho, Shibuya-ku, Tokyo
24 SHIBUYA EDGE
Nihombashi-Odenmacho, Chuo-ku, Tokyo
25 Daiwa Kodenmacho
Kanda-Jimbocho, Chiyoda-ku, Tokyo
26 Daiwa Jimbocho
Nishi-Shimbashi, Minato-ku, Tokyo
27 Daiwa Nishi-Shimbashi
Kudan Minami, Chiyoda-ku, Tokyo
28 Daiwa Kudan
Nihonbashi-Kayabacho, Chuo-ku, Tokyo
29 Daiwa Kayabacho Building
Kanda-Jimbocho, Chiyoda-ku, Tokyo
30 Jimbocho Place
Maruyamacho, Shibuya-ku, Tokyo
31 E SPACE TOWER
32 Nihonbashi Hongokucho Tosei Building Nihombashi Hongokucho, Chuo-ku, Tokyo
Shinjuku, Shinjuku-ku, Tokyo
33 shinyon curumu
Maruyamacho, Shibuya-ku, Tokyo
34 Tosen Dogenzaka Daini Building
Akasaka, Minato-ku, Tokyo
35 Akasaka Business Place
Shibuya, Shibuya-ku, Tokyo
36 Nisseki Shibuya Building
Subtotal

8,246.64 SRC B3/12F

July 1963

2003

14,1004.0

14,900Fee simple andleaseholdFee simple

9.17

2,032.99

SRC B3/8F

Aug. 1972

2003

3,050

0.9

3,140 Fee simple

Fee simple

7.46

9,626.38 SRC B1/12F

Oct. 1987

8,265

2.3

7,470 Fee simple

Fee simple

5.09

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

4,550

1.3

4,100 Fee simple

Fee simple

12.79

3,657.43

June 1985

3,190

0.9

3,160 Fee simple

Fee simple

9.79

3,663.38 SRC B2/10F

SRC 8F

July 1993

2,865

0.8

2,850 Fee simple

Compartmentalized
ownership

6.03

2,198.61

12.01

Dec. 1997

2,800

0.8

2,100 Fee simple

Fee simple

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

RC B1/4F

2,578

0.7

2,640 Fee simple

Fee simple

2.99

2,137.53

S 8F

2,346

0.7

2,450 Fee simple

Fee simple

6.68

2,676.14

SRC B1/8F

Apr. 1974

2,080

0.6

2,400 Fee simple

Fee simple

8.13

2,659.59

SRC 10F

Jan. 1996

1,560

0.4

1,400 Fee simple

Fee simple

7.67

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,460 Fee simple

Fee simple

9.70

2,931.93

SRC B1/9F

Mar. 1994

2,440

0.7

2,410 Fee simple

Fee simple

7.69

8,426.85

S 5F

July 1996

7,840

2.2

8,010 Fee simple

Fee simple

10.89

2,850.81

SRC B2/7F

Apr. 1993

2,520

0.7

2,480 Fee simple

Fee simple

7.84

1,697.38

SRC B2/9F

Apr. 1984

1,600

0.5

1,740 Fee simple

Fee simple

9.57

2,969.11 SRC S B1/9F

July 1977

2003

3,930

1.1

3,840 Fee simple

Compartmentalized
ownership (100%)

9.61

7,418.61 SRC B1/10F

Jan. 1964

2006

7,420

2.1

7,130 Fee simple

Fee simple

8.49

3,758.43 SRC B2/11F

Jan. 1962

2005

4,620

1.3

4,590 Fee simple

Fee simple

10.16

3,265.83

SRC B1/8F

Oct. 1974

2005

3,460

1.0

3,100 Fee simple

SRC B2/9F

Oct. 1987

2,910

0.8

2,640 Fee simple

11,615.37

SRC 9F

Apr. 1973

13,8603.9

13,600 Fee simple

Compartmentalized
ownership (100%)Compartmentalized
ownership (100%)Compartmentalized
ownership (100%)

10.04

2,690.90

113,000 Co-ownership Co-ownership

6.42

July 1996

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

2006

2003

133,800 37.9

8.62
5.45

2,480.65

RC B1/9F

Aug. 2006

5,900

1.7

4,260 Fee simple

Fee simple

3.14

2,379.31

SRC 8F

Mar. 1985

2,460

0.7

1,980

Fee simple andleaseholdFee simple

7.71

3,164.26

S B1/8F

5.58

Mar. 1997

4,150

1.2

2,860 Fee simple

Fee simple

4,815.84 SRC B1/10F

July 1993

5,000

1.4

4,710 Fee simple

Fee simple

6.76

2,882.61

Mar. 1987

4,000

1.1

2,920 Fee simple

Compartmentalized
ownership (100%)

7.96

SRC 9F

5,899.11 S SRC B1/8F

Apr. 2010

5,600

1.6

6,460 Fee simple

Fee simple

5.58

2,889.34

Feb. 2010

3,550

1.0

3,760 Fee simple

Fee simple

6.13

13,960.87 S SRC B1/15F

Oct. 2002

24,0006.8

27,100 Fee simple

Fee simple

5.78

2,143.08

May 2010

1,721

0.5

1,850 Fee simple

Fee simple

6.93

6,756.45 S RC B2/11F

Jan. 2012

9,650

2.7

10,300 Right of site Compartmentalized
ownership (100%)

6.50

4,144.90 SRC B1/11F

Mar. 1988

4,500

1.3

4,750 Fee simple

Fee simple

5.89

8,789.84

SRC B2/7F

Sept. 1990

9,200

2.6

10,400 Fee simple

Fee simple

9.81

6,327.95

S B1/12F

Dec. 1988

7,000

2.0

7,280 Fee simple

Fee simple

6.60

S 9F
S 8F

203,291.50

319,755 90.6

299,240

Greater Tokyo Area (Note 1)

37 Daiwa Kinshicho
38 Daiwa Higashi-Ikebukuro
39 Benex S-3
40 Daiwa Shinagawa North
41 West Park Osaki
42 Kamiooka Eye Mark Building

Kameido, Koto-ku, Tokyo

5,378.02

Jan. 1992

3,653

1.0

3,340 Fee simple

Fee simple

7.42

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,589.17 SRC S B1/9F June 1993

2,958

0.8

3,330 Fee simple

Fee simple

5.56

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

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

4,950

1.4

3,290 Fee simple

Fee simple

5.66

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,549.98 SRC B1/11F

July 1991

7,710

2.2

5,890 Fee simple

Fee simple

5.56

Osaki, Shinagawa-ku, Tokyo

1,786.58

S RC B1/6F

Sept. 2007

1,650

0.5

1,980 Fee simple

Fee simple

10.93

Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa

2,630.30 S SRC B3/7F

May 2011

2,000

0.6

2,070 Fee simple

Fee simple

12.30

22,921

6.5

19,900Subtotal

S B1/5F

28,404.23

Major Regional Cities (Note 1)

43 Daiwa Minami-Semba
44 Honshu Meieki Building

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

5,719.54

SRC B1/8F

Sept. 1986

4,810

1.4

2,780 Fee simple

Fee simple

11.56

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

7,461.90

S 12F

Dec. 2007

5,300

1.5

6,370 Fee simple

Fee simple

12.11

Subtotal

13,181.44

10,110

2.9

9,150

Total

244,877.17

352,786 100.0

328,290

5.62 (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, 2013 (end of 16th 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, 2013 (end of 16th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (December 2013) prepared by Sompo Japan Nipponkoa Risk Management Inc.
(Note 6) The PML total shows the portfolio PML.
(Note 7) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation

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

Shibuya-ku

Shinjuku-ku

33 shinyon curumu

38 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

38

Toshima-ku

23 Shinjuku Maynds Tower

31 E SPACE TOWER

17 Daiwa Shibuya SS

7 Daiwa Jingumae

24 SHIBUYA EDGE

34 Tosen Dogenzaka Daini Building

36 Nisseki Shibuya Building

Minato-ku
Shinjuku Sta.
33

23

4 Daiwa Minami-Aoyama

3 Daiwa Shibaura

6 Daiwa A Hamamatsucho

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

Yotsuya Sta.

Shibuya-ku

Aoyamaitchome Sta.

7

4
Omotesando Sta.

24
22 Daiwa Onarimon

27 Daiwa Nishi-Shimbashi

35 Akasaka Business Place

31
34

Line

36 17
Shibuya Sta.

De

ne n
-Tosh
i

16 Daiwa Azabudai

39
43 Daiwa Minami-Semba

39 Benex S-3Naka-meguro Sta.

To
kyu
To
yok
o

Lin
e

yu
Tok

43

Meguro Sta.

44

6

42

44 Honshu Meieki Building

42 Kamiooka Eye Mark Building

40 Daiwa Shinagawa North

41 West Park Osaki

Osaki Sta.

41

(As of November 30, 2013)

Chuo-ku

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

14 Daiwa Tsukishima

15 Nihombashi MS Bldg.

18 Daiwa Nihombashi Honcho

19 Daiwa Ginza 1-chome

20 Daiwa Kyobashi

25 Daiwa Kodenmacho

1 Daiwa Ginza

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.

Kudanshita Sta.

9

Akihabara Sta.

5

25

Chiyoda-ku

35

Hibiya Sta.

12

Toranomon Sta.

Shimbashi Sta.
27
10
22

6

16
Shibakoen Sta.

8

Ningyocho Sta.

Nihombashi Sta.

Tokyo Sta.

Akasaka Sta.

15

18

Otemachi Sta.

Akasakamitsuke Sta.

19
Ginza Sta.

12

Koto-ku

29

Chiyoda-ku

20

3

11
13

Tsukishima Sta.

14

Oedo Line

Marunouchi Line

Asakusa Line

Hibiya Line

Mita Line

Tozai Line
Yurakucho Line
Hanzomon Line
Namboku Line
Fukutoshin Line40

Shinagawa-ku

5 Daiwa Sarugakucho

9 Daiwa Misakicho

21 Sunline Building No. 7

26 Daiwa Jimbocho

28 Daiwa Kudan

30 Jimbocho PlaceToei Subway

Ginza Line

Chiyoda Line

Shinagawa Sta.

37 Daiwa Kinshicho

Chuo-ku

Tokyo Metro

Minato-ku

32 Nihonbashi Hongokucho Tosei Bldg.

37
32

21

29 Daiwa Kayabacho Building

Kinshicho Sta.

30 26
28

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

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

I. Overview of Daiwa Office Investment Corporation

7

External Growth Measures
Proactive investment in selectively chosen competitive properties

Properties Acquired During the 16th Fiscal Period
Tosen Dogenzaka Daini Building (acquisition on July 3, 2013)• 9-minute walk from JR Shibuya Station, 3-minute walk from a large-scale commercial complex directly connected to Shibuya Station and a
4-minute walk from Shinsen Station on the Keio Inokashira Line.
• Further development is expected as the Shibuya area enjoys abundant demand for office space primarily from IT and IT-related companies, and
SHIBUYA
redevelopment of the area around Shibuya Station is planned.
EDGE
4.6%

Address

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

Site area

721.34m2

Seibu
Tokyu
Seibu

Structure and floors SRC B1/11F
Appraisal price

4,750 million yen (as of November 2013)

Completion

March 11, 1988 (initial construction)
October 6, 1988 (extension)

Occupancy rate

100.0% (as of November 2013)

神泉駅

Cerulean Tower
Tokyu Hotel

Akasaka Business Place (acquisition on August 9, 2013)• 2-minute walk from Akasaka Station on the Tokyo Metro Chiyoda Line. There are major subway stations, such as Akasaka-mitsuke Station on theTokyo Metro Marunouchi and Ginza lines and Tameikesanno Station on the Ginza and Namboku lines, around the property, and there is access tomultiple other lines.
• There are many leading domestic and foreign companies, and it is one of the foremost popular areas in Tokyo, packed with many commercial
and service-related companies. Multiple redevelopment plans are underway around the property.

2,521.95m2

yoHo M etrooM eky LinTo inza
G

ky

To

o
etr

HibiyaHigh Schoole Sta

National Diet
Building

Hie Shrine.

Structure and floors SRC B2/7F
Total floor area

13,597.97m2

Appraisal price

10,400 million yen (as of November 2013)

Completion

September 13, 1990

Occupancy rate

95.6% (as of November 2013)

Ak

ta.

as

ak

aS

TBS

Tameike-sanno Sta.

Akasaka Biz Tower
Akasaka Sacas

Metro
Tokyo cho Line
YurakuTokyo Metro
Namboku Line

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

Site area(tentative name) Kioicho Project
Na
gata
cho
Na
gata
hi Line
Sta
cho
.
e
Sta
Lin
n
.
o
AkasakaomzExcel Hotel Tokyuan

Marunoucitsuk

Address

tro

ka-m

4.8%

Me

Akasa

Expected NOI yieldTok

9,200 million yen

ta.

eS

ma

ou

ijid

ig
ka

k
Ko
.
oumae Sta

Kokkaigijid

Prime Minister´s
Official Residence

AkasakaBusiness Placeo
etr ineoM L
ky da
To hiyoC

Akasaka 1-chome Area
Redevelopment

Acquisition of Properties after Sponsor Change
12th Period

13th Period

Daiwa Jimbocho

Daiwa NishiShimbashi

Daiwa Kudan

Daiwa Kayabacho
Building

Jimbocho PlaceE SPACE TOWER

Nihonbashi Hongokucho
Tosei Bldg.

Acquisition price

Chiyoda-ku, Tokyo
4,150 million yen

Minato-ku, Tokyo
5,000 million yen

Chiyoda-ku, Tokyo
4,000 million yen

Chuo-ku, Tokyo
5,600 million yen

Chiyoda-ku, Tokyo
3,550 million yen

Shibuya-ku, Tokyo
24,000 million yen

Chuo-ku, Tokyo
1,721 million yen

Seller

ORIX JREIT Inc.

Japan Core Asset 2 YK

Shining Nova No. 5 B(SPC)

Endeavor Realty Fund
YK

Tosei Corporation

Acquisition dateMar. 10, 2010

Aug. 13, 2010

Sep. 2, 2010

Mar. 25, 2011

Mar. 29, 2011

Jul. 8, 2011

May 11, 2012

Building age(Note 1)

13.0 years

17.0 years

23.4 years

0.9 years

1.1 years

8.7 years

2.0 years

Acquisition timing

9th Period

10th Period

11th Period

Property name

Area

8

Daiwa Property Co, Ltd. Tokyu Land Corporation

Daiwa
渋谷SS
ビル

Shibuya Mark City

Keio shira Line
Inoka
Tosen Dogenzaka
Daini Building

Acquisition price

日石渋谷ビル

急
東 横線
東5,644.91m2

ロ
メト
東京蔵門線
半

Line
inza
tro G
o Me
y
k
o
T
Shibuya Hikarie
Shibuya Sta.

Shibuya Sta.

E SPACE
TOWER

Total floor area

Tokyo Metro
Fukutoshin Line

4,500 million yen

Expected NOI yield

JR Yamanote Line

Acquisition priceNisseki Shibuya Building (acquisition on September 27, 2013)• 4-minute walk from Shibuya Station, the largest-class terminal in central Tokyo.
• High visibility facing intersection of Miyamasuzaka and Route 246.
• A redevelopment centering on Shibuya Station is planned, and further development is
expected for this area in the future.
• While the property is 25 years old, appropriate maintenance and management isconducted and the property was deemed to be able to maintain competitiveness evenafter acquisition through the implementation of planned upgrades of facilities and
such.

Seibu

Tokyo Metro
Fukutoshin Line

Seibu
Tokyu

JR Yamanote LineSHIBUYAEDGE

NissekiShibuya
Buildingtroo Me

Acquisition price 7,000 million yen

E SPACE
TOWER

Expected NOI yield 4.6%
Address

2-16-1 Shibuya, Shibuya-ku, Tokyo

Site area

1,106.47m2

神泉駅

Structure and floors S B1/12F
8,340.48m2

Appraisal price

7,280 million yen (as of November 2013)

Completion

December 21, 1988

Occupancy rate

100.0% (as of November 2013)

14th PeriodWest Park Osaki

Shibuya Mark City
Keio shira Line
Inoka
Shibuya Station Dogenzaka Block

Tosen
Dogenzaka
Daini Building

Redevelopment Project

Honshu Meieki
Building

Daiwa
Shibuya SS
Building

Shibuya Hikarie
Shibuya Station Block

Shibuya Station
South Block

Cerulean Tower
Tokyu Hotel

Sakuragaokacho 1 Area
Redevelopment(Data): Compiled by DOI based on press releases of Tokyu Corporation and 4 other15th Period
shinyon curumu

Toky

Line

e
u Lin
ky o
To oyokT

Total floor area

Shibuya Sta.

Shibuya Sta.

Ginza

tro
Me ineyo on LTok nzomHa

16th Period
Kamiooka Eye Mark
Building

Tosen Dogenzaka
Daini Building

Akasaka Business
Place

Nisseki Shibuya
Building
Total

Shinagawa-ku, Tokyo
1,650 million yen
MCR Six GK
Sep. 18, 2012
5.0 years

Shinjuku-ku, Tokyo
9,650 million yen
Two domestic industrial
companies
Dec. 3, 2012
Apr. 12, 2013
1.0 year

87,321 million yen

Nagoya-shi, Aichi
5,300 million yen
Domestic special
purpose company

Yokohama-shi, Kanagawa
2,000 million yen

Feb. 1, 2013

Mar. 1, 2013

Jul. 3, 2013

Aug. 9, 2013

Sept. 27, 2013-

5.1 years

1.8 years

25.3 years

22.9 years

24.8 years

12.1 years (Note 2)

Shimizu Corporation

Shibuya-ku, Tokyo
4,500 million yen
Domestic special
purpose company

Minato-ku, Tokyo
9,200 million yen
Hakuba Capital 1 TMK

Shibuya-ku, Tokyo
7,000 million yen
E Buildings Limited
Liability Company-(Note 1) The building age is based on the time of acquisition. (Note 2) The building age is calculated using the weighted average of the acquisition price.

I. Overview of Daiwa Office Investment Corporation

9External Growth Measures

Changes in Asset Size and Trading Performance
Achieved asset size of 350 billion yen. Aim to achieve medium-term goal of asset size of 500 billion yen
80.0（%）(Billion yen) 550
Total Acquisition Price

LTV (Total Asset)

500.0

500

70.0

After change of sponsors

450
400

Active investment for competitive
properties after thorough selection

60.0

352.7

50.0

40.6

40.0

350
300

265.0

250

265.0

265.0

269.1

311.3

287.3

278.1

34.0

200

22.0

150

25.4

314.9

34.2

34.4

37.5

28.9

28.1

25.5

25.3

313.2

332.0

30.0
Acquisition property
Acquisition property

100

Acquisition property

Acquisition property• Daiwa Nishi-Shimbashi• Daiwa Kudan• E SPACE TOWER• Tosen Dogenzaka Daini Building• Akasaka Business Park
• Nisseki Shibuya• West Park Osaki

20.0

10.0

Acquisition property

50

Acquisition property

Acquisition property

Acquisition property• Daiwa Jimbocho• Daiwa Kayabacho• Jimbocho Place• Nihonbashi Hongokucho
Tosei Building0• shinyon curumu• Honshu Meieki• Kamiooka Eye Mark

0

6th
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

Medium-term goal

Current Portfolio and Acquisition Policy
DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among vast information on properties obtained throughdiverse sourcing.
■ Acquisition Policy■ Distribution Chart of Portfolio Properties
Building Age (Year)60• Invest heavily in the five central wards of Tokyo and equivalent area.
• Thoroughly select properties in view of actual demand toward location (distance tostation, station power, crowd attraction, surrounding environment), building specs, etc.

55

• Target properties to improve stability and profitability of our existing portfolio.

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

• Invest in buildings less than 25 years of building age.
45

■ Sale Policy

40• Consider replacement of properties if necessary by sales in light of properties’ futurecompetitiveness, profitability, etc.

35
30
Daiwa Kudan■ Number of Properties Reviewed for Acquisition* Number of gross proposals. (Cases)(Cases)500

Number of properties reviewed (left axis)
Number of properties reviewed in detail (right axis)

400
300
200
100
0

10

100
80
60

32

35

44
30

25

Tosen Dogenzaka Daini Building
Nisseki Shibuya Building
Akasaka Business Place

25

28

20

Daiwa Nishi-Shimbashi

15

Daiwa Jimbocho
E SPACE TOWER

10

40

20

10th
11th
12th
13th
14th
15th
16th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

200Kamiooka
Eye Mark
Building

50

Jimbocho
Place

West Park Osaki
Honshu Meieki Building
Daiwa Kayabacho Building
Nihonbashi Hongokucho Tosei Building

shinyon curumu

0

1

2

3

4

5

6

7

8

9

10

11

Distance to station (minutes)

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

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

■ Office Building Rental Market of Tokyo■ Transition of the supply and demand balance in 23 Wards of Tokyo(yen/tsubo)
25,000(％)
10(tsubo)400,000

23,0008

300,000

21,0006

19,0004

17,0002
Average rents ofexisting buildings (left axis)

15,000Vacancy rate ofexisting buildings (right axis)(%)
9.0
Supply anddemand gap

6.0

100,000

4.5

0

3.0
Predicted figures 1.5-100,0000

7.5

200,000

Floor area of new supplies
Floor area of new demands-200,000

Vacancy rate

0.0

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

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

(Source) Miki Shoji(Source) CBRE “Mid-term Office Market Outlook 2012 Tokyo 23 Wards”

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
97.7
95.9
95

96.4

95.4

96.3
95.0

94.3

94.8
94.8

92.8

95.3

94.3

20,00092.4

18,564 18,468

90
Occupancy rate (actual)
Average contract rents

Occupancy rate (forecast in Jan. 2014)
Occupancy rate (previous forecast in Jul. 2013)

85.7

85

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

15,000End of End of End of End of End of End of End of End of End of End of End of End of
7th
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th
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
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(Note) Average monthly contracted rents with tenants at the end of each fiscal period.

■ Tenant Diversification in Leased Area
(No. of cases)
700

27.5
600

25.5

28.6

■ Changes and Reasons for Tenants Moving In/Out (Note)(％) (No. of cases)
60
30

28.4

25.2

50

24.9

22.8

40
30

23.4

20

500

10
3,000m2 or more (left axis)
1,000m2 or more, less than 3,000m2 (left axis)
300m2 or more, less than 1,000m2 (left axis)
Less than 300m2 (left axis)
Ratio of tenants leasing 3,000m2 or more (%) (right axis)

400

300

200

8
24
115

8
34

9
34

10
32

127

127

133

11
30
145

11
27

159

20

-10

10
31
174

10
34

-20

97

24

-19

30

38

31
17

16
4

-14

-12

6

5
-20

-30

107

103

110

119

139

13

18

24

25

9

12

-15

-13

-2
-20

-24

187

10

-50

-25

-26

-53

-60
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
7th Period 8th Period 9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period
Number of Move Ins

105

18

44

-40

100

0

0

33

147

End of
End of
End of
End of
End of
End of
End of
End of
9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period(Note) Office and retail are the target tenants (excluding residence and warehouse)0

Number of Move Outs

Difference

Breakdown of 16th
Cost
Space
BetterConsolidation Downsizing
PeriodReduction Expansion
LocationMoving inMoving out

2
0

19
2

1
2

0
7

1
0

Other

Total

2
2

25
13

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

I. Overview of Daiwa Office Investment Corporation

11

Internal Growth Measures

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

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

• Maintain fair cost and price level by introducing the principle ofcompetition and continue to look into construction costs of heat light andwater supply and management cost.
• Work to systematically perform “work that can be performed on the side of
the ordering party that enables costs to be reduced while the quality of
construction is maintained, such as separate orders,” centering onlarge-scale construction accompanying the long-term repair plan.
• Engage in sustainability certification systems, advance environmental
measures at existing properties and increase added value.

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

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

Occupancy Rate of the Properties Subject to Leasing Improvement in the 16th Fiscal Period■ shinyon curumu (acquisition price: 9,650 million yen)

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

100.0(%)

50.0

100.0(%)

51.9

55.9

78.4

67.5

100.0(%)

81.3

50.0

0.0
Time of Acquisition 15th
(Dec. 2012) Period

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

• Highly convenient property located a 4-minute
walk from JR Shinjuku Station’s new south exit anddirectly connected to the passageway of Shinjuku
3-chome subway station.
• Local development can be expected with developmentof station building scheduled to open in the spring of2016 as well as with infrastructure development.

Time of Acquisition 15th
(Feb. 2013) Period

100.0

50.0

0.0
16th
Period

100.0

0.0

0.0

0.0

10.3

16th
Period12th 13th 14th 15th 16th
Period Period Period Period Period• Located a 6-minute walk from Exit 7 of Nagoya
Station on the JR and Nagoya Municipal Subway
lines and a 2-minute walk from the underground100
doorway which leads to the underground shopping
arcade.
• A50large-scale redevelopment is planned in the futureand business accumulation is growing year by year.

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

Properties Subject to Leasing Improvement in the 17th Fiscal Period0■ shinyon curumu (acquisition price: 9,650 million yen)
• Highly convenient property
located a 4-minute walk from
JR Shinjuku Station’s new
south exit and directly
connected to the passagewayof Shinjuku 3-chome subway
station.
• Local development can be
expected with development ofstation building scheduled toopen in the spring of 2016 as
well as with infrastructuredevelopment.

12

0

100

50

0

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

■ Daiwa Higashi-Ikebukuro (Acquisition Price: 2,958 million yen)

• 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.

• Middle-scale property locateda 10-minute walk from
Higashi-Ikebukuro Station on
the Tokyo Metro YurakuchoLine and a 12-minute walkfrom JR Ikebukuro Station.
• The property is close toSunshine City and it has acharacteristic solid exterior.

Measures to Increase Portfolio Value■ BCP Measures■ Energy–Saving Measures

AED installed at 11 portfolio properties

Introduced entrance “LED lighting” at Daiwa Tsukiji

Daiwa Minami-Aoyama

Sunline Building No. 7■ CS Improving Measures
Renewal construction (common area) at Shinjuku Maynds Tower

BeforeBeforeDistribution of amenity goods tooffice worker

AfterRenovated Daiwa Ginza’s smoking room

After

■ Coexistence with Local Societies
Participated in “Shinjuku
Minamirumi,” an illumination
event in the south Shinjuku
area, in collaboration with
Odakyu Electric Railway,
Takashimaya and the East
Japan Railway Company.

Shinjuku Maynds Tower

The festival of lights greets
visitors to Shinjuku.

Held Ishinomaki reconstructionrelated event[Period]
BeforeAfter

Shinjuku Maynds Tower

November 13, 2013 (Wed)to February 16, 2014 (Sun)Actions Taken for Environmental Efforts■ Acquired “Green Star” rating for 2nd consecutive year at GRESB 2013
Acquired “Green Star” rating for 2nd consecutive year at GRESB 2013
Following the participation in 2012, Daiwa Real Estate Asset Management participated in the 2013 Global Real Estate Sustainability
Benchmark (GRESB) survey for the portfolio of Daiwa Office Investment Corporation and earned the best rating of “Green Star” fromGRESB Survey 2013. For the second consecutive year, Daiwa Real Estate Asset Management received a high evaluation onsustainability from both “Management and Policy” and “Implementation and Measurement” aspects.
GRESB is an industry-led international organization which intends to evaluate sustainability performance of real estate portfolios.
Daiwa Real Estate Asset Management will continue to make efforts to improve sustainability performance.

■ Environmental efforts for Shinjuku Maynds Tower
Shinjuku Maynds Tower, which was completed in 1995, is approaching its first major challenge with the physical, economic and social

Shinjuku Maynds Tower

degradation of various facilities.
In the past, we have continually planned and implemented works of high added value, such as:• Introduction of individual heat sources with ESCO projects (14th Fiscal Period ended November 2012)• Introduction of LED lighting to underground parking lots and common areas (15th Fiscal Period ended May 2013)
In order to improve added value from the perspectives of environment, CS, BCP, etc. rather than simple replacements when it comes tothe updates that become inevitably required with the aging, we continue to advance deliberations ahead of the milestone of 20 years
since completion (2015) starting with the introduction of BEMS through the renewal of the central monitor.
I. Overview of Daiwa Office Investment Corporation

13

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

Status of Interest-Bearing Liabilities (as of November 30, 2013)
During the 16th Fiscal Period, DOI conducted debt financing of 22.5 billion yen, extended borrowing periods, diversified repayment dates andincreased the number of financial institutions from which it borrows. Going forward, DOI will continue to focus on stable financial management
and support further growth.
■ Interest-Bearing Liabilities■ Changes in Remaining Years at the Time of

Procurement of Interest-Bearing Liabilities
70.0 (%) (Year) 8.0(billion yen) 280
Interest-bearing liabilities (left axis)240

LTV (based on acquisition price) (Note) (right axis) 60.0

200

50.0

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

160

40.6 40.0

7.0

4.0 (Year)

3.4
5.5

3.5
3.0

5.0

2.5

4.0

2.0

3.0

1.5

2.0

1.0
0.5

30.0

80

20.0

40

10.0

1.0

0.0

0.0

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

Average remaining years at the time ofprocurement during the 16th Fiscal period (left axis)

6.0

120

0

Average year remaining at the period end (right axis)

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

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

20,00015,00010,00022,5005,000

016th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Long- to
Short-Term Liabilities■ Ratio of Fixed- to
Floating-Rate Borrowings

End of 16th
Fiscal25.0%
PeriodEnd of 16th 16.2%
FiscalPeriod

75.0%

83.8%

Long-term borrowings, etc.

Fixed interest rates

Short-term borrowings, etc.

Floating interest rates

Balance (mm yen)Share29,90018,35017.75011,90011,000
9,000
6,000
5,000
5,000
5,000
4,500
4,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
1,000
500
500
300
300
200
3.500
147,700(Note) Balances less than a million yen have been rounded down.
Financial institutions from which borrowings were newly procured during
the 16th Fiscal Period are boxed in red.

■ Status of Rating

DOI’s credit rating was upgraded in September 2013 due to such factors as conservative leverage and significant reduction of debt costs.
Rating agency

Rating and Investment Information, Inc. (R&I)

14

Target rating

Issuer rating

20.2%
12.4%
12.0%
8.1%
7.4%
6.1%
4.1%
3.4%
3.4%
3.4%
3.0%
2.7%
1.7%
1.7%
1.4%
1.4%
1.0%
1.0%
0.7%
0.7%
0.7%
0.3%
0.3%
0.2%
0.2%
0.1%
2.4%
100.0%

RatingBefore change

After change

AA+

Rating outlook

StableDescription of Asset Manager

Organization of Asset Manager (as of January 8, 2014)■ 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 Approval

51
No. 355 (Kinsho), Director-General, Kanto Local
Finance Bureau

Association Membership

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

Vice President andRepresentative Director

Yuji Shinotsuka (Head of Corporate Planning Dept.)

Vice President andRepresentative Director

Yoshiki Nishigaki (Head of Customer Relations Dept. and Private
Fund Management Dept.)

Director

Naoyuki Owa (Head of Administration Dept.)

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

Auditor (non-executive)

Masaru Shirataki

Shareholders’ Meeting
Auditors
Board of Directors

Compliance Committee
Investment Committee

President andRepresentative Director

Acquisition
Department
Office Investment
Team
Residential Investment
Team
Healthcare Investment
Team

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

Customer Relations
Department

Finance Department

Compliance Officer
Internal Control Office
Administration
Department

Corporate Planning
Department

Private FundManagement Department

Finance Team

Advisory Team

Accounting Team

Operational TeamManagement Team

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd④①

Investment Corporation②

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers
Executive Director: Nobuaki Omura
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

KPMG AZSA LLC③

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

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation① 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 contract④ Sponsor support agreement⑤ Fiscal agency agreement

I. Overview of Daiwa Office Investment Corporation15

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

16th Period 15th Period 14th Period 13th Period 12th Period

June 1, 2013 From Dec. 1, 2012 From June 1, 2012 From Dec. 1, 2011 From June 1, 2011
( From
To Nov. 30, 2013 )( To May 31, 2013 )( To Nov. 30, 2012 )( To May 31, 2012 )( To Nov. 30, 2011 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
8,432
7,615
7,566
7,431
7,606
Rental revenues
8,367
7,520
7,384
7,338
7,551
Operating expenses
4,755
4,306
4,419
4,341
4,289
Property-related expenses
3,870
3,499
3,602
3,533
3,472
Operating income
3,677
3,309
3,147
3,090
3,317
Ordinary income
2,956
2,590
2,365
2,022
1,768
Net income
2,960
2,589
2,369
2,021
1,767
(2) Properties, etc. (as of end of period)
Total assets
363,654
342,573
325,666
325,316
323,218[period-on-period percentage changes][+6.2%][+5.2%][+0.1%][+0.6%][+8.2%]
Interest-bearing liabilities
147,700
128,300
112,081111,391
109,917
Net assets
201,683
201,345
201,118
200,800
200,548[period-on-period percentage changes][+0.2%][+0.1%][+0.2%][+0.1%][+0.2%]
Unitholders’ capital
198,781
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
2,960
2,589
2,369
2,021
1,767
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)509,561
508,707508,132
507,331506,693
Distribution per unit (yen)
7,478
6,542
5,986
5,107
4,464
Distribution amount from earnings per unit (yen)
7,478
6,542
5,986
5,107
4,464
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
0.8%
0.8%
0.7%
0.6%
0.6%
Notes 2and3[annual rate][1.7%][1.6%][1.5%][1.2%][1.1%]
ROE
1.5%
1.3%
1.2%
1.0%
0.9%
Notes 3and 4[annual rate][2.9%][2.6%][2.4%][2.0%][1.8%]
Capital ratio
55.5%
58.8%
61.8%
61.7%
62.0%
[period-on-period percentage changes][−3.3%][−3.0%][0.0%][−0.3%][−5.0%]LTV (loan to value)
40.6%
37.5%
34.4%
34.2%
34.0%
Property leasing cash flows (NOI)
Note 5
5,826
5,300
5,088
5,172
5,427
(6) Other Referential Information
Number of investment properties
44
41
38
37
36
Number of tenants
Note 6
442
410
376
355
340
244,877.17 225,651.87 208,733.38 207,277.34 205,318.62
Total rentable area (m2)Occupancy rate
Note 7
96.3%
95.0%
96.4%
94.3%
92.4%
Depreciation
1,329
1,280
1,306
1,367
1,348
Capital expenditures
294
278
357
641
240
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

16

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 12th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 13th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 14th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 15th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 16th 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

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 352,786 million yen (sum total of acquisition prices) as of the last day of
November 2013.
DOI strives to secure stable revenues and achieve sustainable growth of investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on investment inbuildings with a total floor area of 2,000m2 or more situated in downtown Tokyo, as well as through dedicated efforts
to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from June 1, 2013 to November 30, 2013)
During the 16th Fiscal Period, a recovery trend was seen in the Japanese economy owing to
improvement in market sentiment and corporate performance mainly by export-related companies
associated with the depreciation of the yen and rise in stock prices against the backdrop of financefocused economic policies of the Abe Administration and large-scale monetary easing by the Bank ofJapan. In addition, movements that give the expectation of economic expansion were confirmed includinga recovery in consumer spending due to the improvement in consumer confidence and improvement in
employment.
In the office rental market in central Tokyo, vacancy rates turned downward after peaking in June 2013and declined to 7.52% at the end of November 2013 due to the calming down in new supply. Led by the
improvement in vacancy rates of large buildings, overall vacancy rates including that of small and midsized buildings were also on an improving trend. On the other hand, there was a rise in office rents oflarge buildings in some areas, but slightly downward is the main trend in the overall market.
In the office transaction market, property prices were anticipated to rise due to expectations of theeconomy recovering and property acquisitions by real estate companies and funds (including REITs)
remained high amid the ongoing favorable equity financing environment and proactive lending attitudes offinancial institutions.
(B) Management Performance
To increase the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties)
over the medium to long term, DOI has sustained the strategy for “external growth” which aims toincrease revenue through property acquisitions, and “internal growth” which aims to maximize income
generated from existing properties.
For external growth, DOI proactively engaged in property acquisition activities and purchased “Tosen
Dogenzaka Daini Building” (acquisition price: 4,500 million yen) in July 2013, “Akasaka Business Place”(acquisition price: 9,200 million yen) in August 2013 and “Nisseki Shibuya Building” (acquisition price:
7,000 million yen) in September 2013. As a result, DOI’s assets under management at the end of the 16th
Fiscal Period (as of November 30, 2013) totaled 44 properties, the sum total of acquisition prices
amounted to 352,786 million yen.
For internal growth, in spite of the severe office rental market, DOI tried to meet the demands of tenants
to expand rental space through developing good relations with existing tenants and strengthening
cooperation with leasing brokers and property managers. As a result of proactive leasing activities, theoccupancy rate at the end of the 16th Fiscal Period (as of November 30, 2013) was maintained at 96.3%,
increasing by 1.3 percentage points from the previous fiscal period.

II. Asset Management Report17

(3) Overview of Capital Procurement(A) Procurement of Funds for Acquisitions
DOI implemented the following financing activities during the 16th Fiscal Period to acquire “Tosen
Dogenzaka Daini Building,” “Akasaka Business Place” and “Nisseki Shibuya Building.”(a) On July 3, 2013, DOI borrowed 4,600 million yen in total from Sumitomo Mitsui Banking Corporation,
Development Bank of Japan Inc., Shinsei Bank, Ltd. and The Higashi-Nippon Bank, Limited to acquire
the new property (“Tosen Dogenzaka Daini Building” delivered on July 3, 2013).
(b) On August 9, 2013, DOI borrowed 9,400 million yen in total from The Bank of Tokyo-Mitsubishi UFJ,
Ltd., Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, The Bank ofFukuoka, Ltd. and Tokio Marine & Nichido Fire Insurance Co., Ltd. to acquire the new property(“Akasaka Business Place” delivered on August 9, 2013).
(c) On September 27, 2013, DOI borrowed 7,400 million yen in total from Mizuho Bank, Ltd., Mitsubishi
UFJ Trust and Banking Corporation and Sumitomo Mitsui Banking Corporation, Ltd. to acquire the newproperty (“Nisseki Shibuya Building” delivered on September 27, 2013).
(B) Procurement of Funds for Redemption of Investment Corporation Bonds (Refinancing)
DOI implemented the following financing activities during the 16th Fiscal Period for redemption of investment
corporation bonds.
(a) On June 21, 2013, DOI borrowed 5,000 million yen from Sumitomo Mitsui Banking Corporation and
Sumitomo Mitsui Trust Bank, Limited for redemption of 5,000 million yen of the second series of
unsecured investment corporation bonds due on June 24, 2013.
(C) Procurement of Funds for Repayment of Borrowings (Refinancing)
DOI implemented the following financing activities during the 16th Fiscal Period for repayment ofborrowings.
(a) On June 28, 2013, DOI borrowed 5,000 million yen from Kansai Urban Banking Corporation for
repayment of 5,000 million yen due on June 28, 2013.
(b) On July 8, 2013, DOI borrowed 6,000 million yen in total from Sumitomo Mitsui Trust Bank, Limited and
The Bank of Fukuoka, Ltd. for repayment of 6,000 million yen due on July 8, 2013.
(c) On July 31, 2013, DOI borrowed 2,000 million yen from Shinsei Bank, Ltd. for repayment of 2,000
million yen due on July 31, 2013.
(d) On September 30, 2013, DOI borrowed 3,500 million yen in total from The Bank of Fukuoka, Ltd. and
ORIX Bank Corporation, Ltd. for repayment of 3,500 million yen due on September 30, 2013.
(e) On November 29, 2013, DOI borrowed 4,000 million yen in total from Sumitomo Mitsui Banking
Corporation, Sumitomo Mitsui Trust Bank, Limited and Shinsei Bank, Ltd. for repayment of 6,000
million yen due on November 29, 2013.
(D) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding at the end of the 16th Fiscal
Period (as of November 30, 2013) stood at 147,700 million yen (short-term debt: 3,000 million yen; long-term
debt: 141,200 million yen; investment corporation bonds: 3,500 million yen). The balance of long-term debt
due within one year stood at 33,900 million yen.
During the 16th Fiscal Period, the average remaining repayment period has been extended from 2.49 years(15th Fiscal Period) to 3.43 years (16th Fiscal Period) because DOI conducted borrowings mainly with periodsof between 5 years and 7 years. Furthermore, borrowing costs were reduced through the reduction of credit
spread interest. Meanwhile, DOI concluded interest-rate swap agreements in the 16th Fiscal Period to fix
future interest payments for borrowings of 32,500 million yen in total in order to offset the risks of the possible
increase of interest rates.

18

(4) Capital Expenditures During the 16th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 16th
Fiscal Period. Capital expenditures amounted to 294 million yen, and combined with the 251 million yen in
repair expenses, total of 545 million yen in construction work was implemented.
Name of Property(location)

PurposeExpenditure(millions of yen)

PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation work for common area

From: Aug. 2013
To: Nov. 201339

Daiwa Kinshicho(Koutou-ku, Tokyo)

Maintenance work for multistory parking
lot equipment

From: Oct. 2013
To: Nov. 201314

Sunline Building No. 7(Chiyoda-ku, Tokyo)

Construction work for alteration to an
office at the 9F

From: Jul. 2013
To: Sep. 201314

From: Jun. 2013
To: Nov. 2013

227

Other Buildings
Total

294

(5) Overview of Financial Performance and Distributions
As a result of the management described above, for the 16th Fiscal Period, DOI recorded 8,432 million yen in
operating revenue, 3,677 million yen in operating income, 2,956 million yen in ordinary income and 2,960 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 16th Fiscal
Period end, excluding fractions of the distribution amount per unit that are less than 1 yen. Accordingly, DOI
declared a distribution of 7,478 yen per unit.

II. Asset Management Report193. Future Management Policy and Tasks(1) Investment Environment
The Japanese economy is expected to recover gradually with the improvement of corporate performance
mainly focusing on export-related companies and public investment as well as a recovery in personal
spending due to the effects of various finance focused economic stimulus measures of the Abe administrationand large-scale monetary easing by the Bank of Japan as well as the recovery in overseas economies
centering on advanced countries. However, there still is a need to pay attention to the possibility of a rise inlong-term interest rates, the uncertainty in overseas economies and financial markets and the change indemand due to the consumption tax rate hike because they might put downward pressure on the Japanese
economy.
In the office rental market, vacancy rates declined with the boost in demand from the decrease in the
supply of new office buildings, undervalued rents and improvement of the employment situation. In addition,
rents are anticipated to make a gradual recovery as an increase in demand for office floor is expected alongwith improvement of corporate performance with the improvement in the balance of supply and demand.
In the office transaction market, the appetite for acquisitions by real estate companies and funds (including
REITs) is expected to be stronger against the backdrop of the favorable financing environment andexpectations for rents to bottom out.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the above office leasing market conditions, tenants are also expected to be more selective withproperties. Consequently, DOI will carry out operational management under the following policy in an aim
to enhance the competitiveness of existing properties and thereby increase the long-term EPS over the
medium to long term.
(a) Maintain and raise occupancy rates
For existing tenants, strive to reduce vacancy risks through improving the quality of buildings,
equipment and management systems. For new tenants, strive to maintain and raise occupancy rates
through the provision of more comfortable services than competitors by aggressively participating in
the market.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining the high level of tenantsatisfaction with office environments. To achieve this, DOI will implement efficient operational
management by leveraging the economies of scale obtained from external growth and reviewing
planned construction work.
(B) Investment Strategy for New Properties
Based on various external growth strategies, DOI will concentrate its investment in buildings with a total
floor area of 2,000m2 or more considering a balance between the financing and purchasing market
situation. In principal, DOI will invest in properties around Tokyo, but will also look into investment incompetitive properties in areas other than Tokyo to diversify investments.
As pipelines, in addition to expanding its own information-sourcing channels, DOI will search forproperties that meet its investment criteria by proactively gathering real estate transaction market
information through expanding partnerships with DREAM and the Sponsor Group, and utilizing theGroup’s extensive network of clients.
During the 16th Fiscal Period, DOI additionally acquired “Tosen Dogenzaka Daini Building”, “Akasaka
Business Place” and “Nisseki Shibuya Building” which are situated in Tokyo. DOI will continue to strive toacquire properties that are in line with the investment strategy described above.

20

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

PurposeShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of
CVCF and renovation work fordisaster- prevention equipment

From: Oct. 2013
To: Mar. 2015

406

2

5

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation work for central
supervisory system

From: Oct. 2013
To: Sep. 2015

297

1

4

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for painting ofiron material of atrium

From: Sep. 2013
To: Mar. 2014

134

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for Upgradingof main central supervisorysystem VAV and controller

From: Oct. 2013
To: Sep. 2015

110

0

1

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of
the store in B1F and common
area

From: Dec. 2013
To: Apr. 2014

85

–

–

Estimated Period
Total

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

As ofNovember 30, 2013

As of
May 31, 2013

AssetsCurrent Assets:
Cash and cash equivalents [Note 10]

16,924,972

16,057,773

299,238

230,151–

248,782289,695

262,955

7,426

3,167

Other current assets

108,601

119,179

Total Current Assets

17,629,932

16,922,007

Land including trust accounts

279,089,504

260,705,094

Buildings and structures including trust accounts [Note 4]

79,791,214

76,824,423

Machinery and equipment in trust account861,302822,580

Tools, furniture and fixtures including trust accounts

102,157

93,366

Construction in progress including trust accounts

42,001

39,828Other tangible fixed assets including trust accounts

6,017

9,759

(17,517,216)(16,191,817)

2,713,986

2,713,986

345,088,965

325,017,219

1,448

1,637

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

778,748

483,943

Deferred tax assets [Note 8]

23,706

11,321

Deferred investment corporation bond issuance costs

4,585

8,216

–

1,234

Others12,83913,604

Total Other Assets

935,010

633,639

363,653,907

342,572,865

Tenant receivables
Consumption tax refundable
Prepaid expenses
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

Derivative assets [Note 10]

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

22

(Thousands of yen)

As ofNovember 30, 2013

As of
May 31, 2013

Liabilities
Current Liabilities:
Operating accounts payable

772,417571,325

3,000,000––

5,000,000

33,900,000

32,400,000

286,983

261,091811

779

Accrued consumption taxes

96,30932,428Rent received in advance

977,470874,930

Other current liabilities

164,119

120,599

Total Current Liabilities

39,198,109

39,261,152

3,500,000

3,500,000

Long-term debt [Notes 6 and 10]

107,300,000

87,400,000

Tenant security deposits including trust accounts [Note 10]

11,904,030

11,034,249

68,57632,094

122,772,606

101,966,343

161,970,715

141,227,495

198,780,951

198,780,951

2,959,948

2,589,422

201,740,899

201,370,373(57,707)(25,003)(57,707)(25,003)

Total Net Assets

201,683,192

201,345,370

Total Liabilities and Net Assets

363,653,907

342,572,865

Short-term debt [Notes 6 and 10]
Investment corporation bond due within one year [Notes 6 and 10]
Long-term debt due within one year [Notes 6 and 10]
Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bond [Notes 6 and 10]

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

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

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

23

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

For the six months ended
November 30, 2013

For the six months ended
May 31, 2013

8,367,068
65,0027,519,691
95,3848,432,070

7,615,075

3,870,374
696,225
17,657
63,1073,499,438
634,586
16,65561,07821,7185,400
80,56020,657
5,400
68,526

4,755,041
3,677,029

4,306,340
3,308,735

1,424
1,101
2,465

924
1,024
13,275

4,990

15,223522,251
53,610144,285
5,935

492,197
95,533
135,546
10,632726,081733,908

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

2,955,938

2,590,050

4,884

–

4,884

–

Income Before Income Taxes
Income taxes – current

2,960,822

2,590,050

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

992
(6)

870
5

986
2,959,836

875
2,589,175

Retained Earnings Brought Forward
Retained Earnings at End of Period

112
2,959,948

247
2,589,422

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

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

24

IV. Statements of Income

V. Statements of Changes in Unitholders' Equity
For the six months ended November 30, 2013
(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,589,422(25,003)

201,345,370

Cash dividends declared––(2,589,310)–(2,589,310)

Net income––

2,959,836–

2,959,836

Net changes of items other thanunitholders’ equity

–

–

–

(32,704)(32,704)

Balance as of November 30, 2013

395,798

198,780,951

2,959,948(57,707)

201,683,192

Balance as of May 31, 2013Total

For the six months ended May 31, 2013
		

(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,369,494(32,701)

201,117,744

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

Net income––

2,589,175–

2,589,175

Net changes of items other thanunitholders’ equity

–

–

–

7,698

7,698

395,798

198,780,951

2,589,422(25,003)

201,345,370

Balance as of November 30, 2012

Balance as of May 31, 2013

Total

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, 2013 and May 31, 2013

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, 2013, DOI had ownership or beneficiary interests in 44 office properties with approximately
244,877 square meters of rentable office space and had leased office space to 442 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 96.3%.
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, 2013
2-64 years
2-23 years
5-18 years

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

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add to the value of a property or prolong its useful life are expensed as incurred.
Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary
differences between the amounts of assets and liabilities for financial statements and for income tax purposes isrecognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from the purchasedate of each property until the end of the calendar year as part of the acquisition cost of the relevant property.
Capitalized real estate taxes amounted to 71,391 thousand yen for the six months ended November 30, 2013 and49,317 thousand yen for the six months ended May 31, 2013.

26

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

Note 3 – Schedule of Tangible Fixed Assets of Investment Properties(Thousands of yen)
Investment properties as of November 30, 2013 and May 31, 2013 consisted of the following:
As of November 30, 2013
As of May 31, 2013
Acquisition
Accumulated
Acquisition
AccumulatedBook value
Book value
costs
depreciation
costs
depreciation
Land279,089,504– 279,089,504 260,705,094– 260,705,094
including trust accounts

Buildings andstructures

79,791,214(17,055,415)

62,735,799

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

61,062,717

Machinery andequipment

861,302(399,706)

461,596

822,580(370,946)

451,634

Tools, furniture andfixtures102,157(56,078)

46,07993,366(49,406)

43,960Construction inprogress

42,001–42,001

39,828–39,828Other tangible
fixed assets

6,017(6,017)–9,759(9,759)–359,892,195(17,517,216)

342,374,979

338,495,050(16,191,817)

322,303,233

including trust accounts

in trust accountincluding trust accounts

including trust accounts

including trust accounts

Total

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

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 – Short-term debt, Long-Term Debt and Investment Corporation Bonds
Short-term debt, long-term debt and investment corporation bonds as of November 30, 2013 and May 31,(Thousands of yen)2013 consisted of the following:
As of
As of
November 30,
May 31,2013
2013
Unsecured loans due 2013 to 2021, principally from banks and insurance
144,200,000
119,800,000
companies with interest rates mainly ranging from 0.4% to 1.1%
2.7% unsecured bond due 20193,500,000
3,500,000
1.9% unsecured bond due 2013–
5,000,000
Total
147,700,000
128,300,000[Note] The interest rate presented is the spot rate as of November 30, 2013. As for long-term debts which were hedged by interest-rate swaps
for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of November 30,(Thousands of yen)2013 were as follows:
Due within one year
36,900,000
Due after one to two years
16,600,000
Due after two to three years
3,700,000
Due after three to four years
28,250,000
Due after four to five years
17,350,000
Due after five years
44,900,000

Note 7 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended November 30, 2013 and May 31,(Thousands of yen)2013 were as follows:
For
the
six
monthsended
For the six months ended
November 30, 2013
May 31, 2013
A. Operating revenues
Rental revenues
8,367,068
7,519,691
Other revenues related to property leasing
65,002
95,384
Total operating revenues
8,432,070
7,615,075
B. Property-related expenses
Consignment expenses
654,832
591,514
Utilities expenses
877,332
678,874
Taxes and dues
692,431
671,599
Non-life insurance expenses
12,928
12,101
Repair expenses
251,074
215,111
Depreciation
1,328,913
1,280,207
Other property-related expenses
52,86450,032
Total property-related expenses
3,870,374
3,499,438
C. Operating income from property leasing [A – B]
4,561,696
4,115,637

Note 8 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.03% for the six months ended November 30, 2013 and 0.03% for the six months
ended May 31, 2013. 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, 201336.59%(36.58)0.02
0.03%

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

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, 2013 and May 31, 2013 were as(Thousands of yen)follows:
As of November 30, 2013
As of May 31, 2013
Deferred tax assets:
Accrued enterprise tax
19
13
Deferred losses on hedges
31,367
14,897
Total deferred tax assets
31,386
14,910
Deferred tax liabilities:
Deferred gains on hedges
254
422
Total deferred tax liabilities
254
422
Net deferred tax assets
31,132
14,488Note 9 – Per Unit Information
Information about net assets per unit and net income per unit as of November 30, 2013 and May 31, 2013 andfor the period then ended were as follows. The computation of net income per unit is based on the weighted
average number of units outstanding during the period. The computation of net assets per unit is based on thenumber of units outstanding at each period end.
For the six months ended
For the six months ended
November 30, 2013
May 31, 2013
Net assets at period end per unit
509,561 yen
508,707 yen
Net income per unit
7,478.15 yen
6,541.66 yen
Net income per unit is calculated by dividing the net income by the daily weighted average number of investment
units issued and outstanding. The diluted net income per unit is not stated as there are no diluted investment units.
(Note) The basis for calculating the net income per unit is as follows.

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

For the six months ended
November 30, 2013
2,959,836

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

2,959,836

2,589,175

395,798

395,798

Note 10 – Financial Instruments(For the six months ended November 30, 2013 and May 31, 2013)(1) Status of Financial Instruments(A) Policy for financial instruments
DOI procures funds through 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 of risinginterests, DOI secures long-term fixed-rate borrowings with well-diversified maturities.
DOI manages surplus funds with safe and highly liquid money claims and securities (in principle, deposits).
Derivative transactions are conducted only for the purpose of reducing risk of future interest rate fluctuations.

VI. Notes to Financial Statements

29

(B) Types and risks of financial instruments and related risk management system
Proceeds from the financing of debts and investment corporation bonds are used mainly to acquisitionof investment properties and reimbursement of current debts and bonds. While these debts and bonds
are exposed to liquidity risk, DOI manages the risk by maintaining the LTV ratio at low levels, diversifying
maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders withparticular focus on domestic financial institutions. Bank borrowings with floating interest rates are
exposed to the risk of future interest rate fluctuations and DOI manages that by using derivativetransactions such as interest-rate swap agreements.
DOI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes ofhedged items and that of hedging items, and then verifies the ratio of both amounts of changes.
Furthermore, DOI omits assessment of hedge effectiveness for the interest-rate swap agreements whichmeet the criteria of special treatment.
Execution and management of derivative transactions have been carried out based on the regulations
defined in the basic policy of risk management.
Security deposits represent funds deposited by tenants, and DOI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving
some parts of the funds.
Deposits are used for investing DOI’s surplus funds. These deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by restricting the tenor of thedeposit relatively short and setting a minimum credit rating requirement for the depository financial
institutions.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there isno quoted market price available, fair value is reasonably estimated. As certain assumptions are used forthe estimation of fair value, the result of such estimation may differ if different assumptions are used. Also,
the contractual amounts of derivative transactions do not represent the market risk involved in thesederivative transactions.
(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of November 30, 2013 and May 31, 2013 are
as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(As of November 30, 2013)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,924,972
16,924,972–
Total
16,924,972
16,924,972–
Short-term debt
3,000,000
3,000,000–
Long-term debt due within one year
33,900,000
33,902,830
2,830
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
107,300,000
107,324,155
24,155
Total
147,700,000
147,726,985
26,985Derivative transactions(*)(88,820)(88,820)–(*) 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, 2013)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,057,773
16,057,773–
Total
16,057,773
16,057,773–
Investment corporation bond due within one year
5,000,000
5,005,500
5,500
Long-term debt due within one year
32,400,000
32,400,577
577
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
87,400,000
87,010,906(389,094)
Total
128,300,000
127,916,983(383,017)
Derivative transactions(*)(39,478)(39,478)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis indicating the net liability position.
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)Short-term debt, long-term debt due within one year and long-term debt
For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly
identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items,
their book value is assumed as their fair value. For short-term debt and long-term debt with fixed interest
rates, their fair value is based on the present value of principle and interest cash flows discounted at thecurrent interest rate estimated to be applied if similar new debt is entered into. However, the fair value ofcertain floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is determinedby discounting the sum of its principal and interest payments net of any cash flows from the interest-rate
swaps.
(2) Investment corporation bond due within one year and investment corporation bond
The fair value of investment corporation bond is based on their quoted market price, if available.
When there is no quoted market price available, their book value is assumed as their fair value, as their fairvalue and book value are nearly identical because of floating interest rates and no significant changes in
DOI’s credit risk after issuing the bonds.
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, 2013)
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)

Hedged Items Contract Amount(due after one year)

Fair
Value(*)

Long-term debt

65,400,000(34,500,000)(88,820)

Long-term debt

32,350,000(32,350,000)–(**)

97,750,000(66,850,000)(88,820)

Total(As of May 31, 2013)
Method of Hedge
Accounting(Thousands of yen)Type of Derivative Transactions

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

Total

Contract Amount
Hedged Items (dueafter one year)

Fair
Value(*)

Long-term debt

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

Long-term debt

27,350,000(27,350,000)–(**)

71,250,000(53,350,000)(39,478)*The fair value is provided by the financial institution.
**The values of derivatives qualifying for special treatment of interest rate swap transactions are included in that of related long-term debt. Thisis because such swaps are handled together with hedged long-term debt.

2. Financial instruments whose fair value is extremely difficult to estimate.
Tenant security deposits including trust accounts (with a book value of 11,904,030 thousand yen as ofNovember 30, 2013 and 11,034,249 thousand yen as of May 31, 2013) that have been deposited fromtenants are not marketable and the actual 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, 2013)

Cash and cash equivalents
Total(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
16,924,972––––
16,924,972––––(As of May 31, 2013)

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
16,057,773––––
16,057,773––––

Due after
5 years––

4. Redemption schedule for short-term debt, investment corporation bond and long-term debt
(As of November 30, 2013)
Short-term debt
Long-term debt due
within one year
Investment corporation bondLong-term debt
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
3,000,000––––
33,900,000–––– 16,600,000
36,900,000 16,600,000

–

–

–

–

–

–
–
– 3,500,000
3,700,000 28,250,000 17,350,000 41,400,000
3,700,000 28,250,000 17,350,000 44,900,000(As of May 31, 2013)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Investment corporation bond due
5,000,000–
within one year
Long-term debt due within one year 32,400,000–
Investment corporation bond––Long-term debt
– 29,500,000
Total
37,400,000 29,500,00032

Due after
5 years–––

Due after
5 years
–

–
–
–
–
–
–
– 3,500,000
8,300,000 18,200,000 19,400,000 12,000,000
8,300,000 18,200,000 19,400,000 15,500,000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, 2013)
Book Value
Fair value as of
As of
Change
As ofNovember 30, 2013
May 31, 2013
during the period(*1)
November 30, 2013
324,976,353
20,069,800
345,046,153
328,290,000(For the six months ended May 31, 2013)
Book Value
As of
ChangeNovember 30, 2012
during the period(*2)
308,107,273
16,869,080(Thousands of yen)

As of
May 31, 2013
324,976,353

Fair value as of
May 31, 2013
302,510,000(Note 1)		 The book value represents the acquisition cost less accumulated depreciation.
(Note 2)		 Significant changes(*1) For the six months ended November 30, 2013, the major reasons of increase are acquisitions of “Tosen Dogenzaka Daini
Building” (4,500,000 thousand yen), “Akasaka Business Place” (9,200,000 thousand yen) and “Nisseki Shibuya Building”(7,000,000 thousand yen). The major reason of decrease is depreciation (1,328,913 thousand yen).
(*2) For the six months ended May 31, 2013, the major reasons of increase are acquisitions of “shinyon curumu” (9,650,000 thousandyen), “Honshu Meieki Building” (5,300,000 thousand yen) and “Kamiooka Eye Mark Building” (2,000,000 thousand yen). The
major reason of decrease is depreciation (1,280,206 thousand yen).
(Note 3)		 The fair values as of November 30, 2013 and May 31, 2013 represent the sum of appraisal values estimated by external real estateappraisers.

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

VI. Notes to Financial Statements

33

Note 12 – Transactions with Related Parties(For the six months ended November 30, 2013)
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party

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

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

Provision of capital

Provision of capital

Nature of transaction

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

Repayment of
capitalPayment ofinterest expense(Note 3)

Amount of transaction

48,1027,000,000

5,000,000

70,725

Account

Investment
corporation
bonds

Other
current
liabilities

Short-term debt

Long-term debt–

19,3591,000,000

17,350,000–(held in DOI)

(thousands of yen)

Balance at end of period 3,500,000(thousands of yen)34–

(For the six months ended May 31, 2013)
Classification
Name of company, etc.

Parent company, interested party Asset custodian
Daiwa Securities Group Inc.
Sumitomo Mitsui Trust Bank, Limited

Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party

Chiyoda-ku, Tokyo
247.3billion yen
Holding company
14.99%
directly held in DOI
32.57%
indirectly held in DOI

Chiyoda-ku, Tokyo342 billion yen
BankRelationship withrelated party

Provision of capital

Provision of capital

Nature of transaction

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

Payment of interest
expense(Note 3)

Amount of transaction

48,52759,198

Account

Investment
corporationbonds(held in DOI)

(thousands of yen)

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

3,000,000
Other
current
liabilities

Long-term debt
due within one
year

Long-term debt –20,3055,000,000

11,350,000–

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

Note13 – Significant Subsequent Events
Not applicable.

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, 2013 and May 31, 2013
(Thousands of yen)

For the six months
ended
November 30, 2013

For the six months
ended
May 31, 2013

Income before income taxes

2,960,822

2,590,050

Depreciation and amortization

1,330,094

1,281,374

3,631

8,536

Interest expense

575,861

587,730(Increase) Decrease in tenant receivables(69,087)

31,499

Increase (Decrease) in accounts payable

230,681(69,736)

Increase (Decrease) in rent received in advance

102,540

42,963

Cash payments of interest expense(615,391)(604,368)(Increase) Decrease in consumption taxes refundable

248,782(248,782)

Other, net(186,076)(270,170)

4,581,857

3,349,096(21,395,958)(17,738,286)

–

(279)

Proceeds from tenant security deposits

1,208,132

1,070,901

Payments for tenant security deposits(338,351)(519,479)(20,526,177)(17,187,143)

Proceeds from short-term debt

8,000,000–

Repayment of short-term debt

(5,000,000)–

Proceeds from long-term debt

38,900,000

21,700,000

Repayments of long-term debt

(17,500,000)(5,481,250)

Redemption of investment corporation bonds(5,000,000)–

Payment of dividends(2,588,481)(2,369,895)

Net Cash Provided by Financing Activities

16,811,519

13,848,855

Net Change in Cash and Cash Equivalents

867,199

10,808Cash and Cash Equivalents at Beginning of Period

16,057,773

16,046,965

Cash and Cash Equivalents at End of Period

16,924,972

16,057,773

Cash Flows from Operating Activities:

Amortization of bond issuance costs

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

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

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

VIII. Statements of Cash Flows [Information Only]37

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

Trading volume (right axis)

500,000

5,000

400,000

4,000

300,000

3,000

200,000

2,000

100,000

1,000

0

0

2011 2012
Dec. Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

Dec.

2013
Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

Overview of Investment Units and Unitholders (as of November 30, 2013)■ No. of investment units by investor type
Individuals/others
28,742 units (7.3%)

16th
Fiscal Period

146×57■ No. of unitholders
by investor type

Financial institutions
151,918 units (38.4%)

Foreigners 23,041 units (5.8%)

Total: 395,798 units
Securities firms 1,117 units (0.3%)

Other domestic corporations 190,980 units (48.3%)
Individuals/others
31,108 units (7.9%)

15th
Fiscal Period

Financial institutions
143,739 units (36.3%)

Foreigners 28,192 units (7.1%)

Total: 395,798 units

Top Ten Unitholders (as of November 30, 2013)

Financial institutions

20(0.2%)

Other domestic
corporations

166(1.6%)

Foreigners

128(1.2%)

Securities firms

17(0.2%)

Total

10,325

IR Calendar
Number ofUnits Owned

Percentage
Share

January 17, 2014 ・Announcement of financial results for
16th Fiscal Period

1.

Daiwa Investment Management Inc.

128,905 units

32.6%

February 13, 2014 ・Sending of Japanese version Business
Report for 16th Fiscal Period(Statement of Financial Performance)

2.

Japan trustee Services Bank, Ltd. (Trust Account)

62,707 units

15.8%

February 14, 2014 ・Start paying distributions for
16th Fiscal Period

3.

Daiwa Securities Group Inc.

59,321 units

15.0%
5000

4.

The Master Trust Bank of Japan, Ltd. (Investment
Trust Account)

32,259 units

8.2%

5.

Trust & Custody Services Bank, Ltd. (Securities
Investment Trust Account) 20
40

28,524 units

60

3000

6.

The Nomura Trust and Banking Co., Ltd. (Investment
Trust Account)

20,857 units

5.3%

7.

Nomura Bank (Luxembourg) S.A.

4,969 units

1.3%

8.

The Fuji Fire and Marine Insurance Co., Ltd.

4,212 units

1.1%

9.

Individuals

1,940 units

0.5%

1,503 units

0.4%

0

10. State Street Bank and Trust Company 505223

6000

Nov.

7.2%

End offiscal period

Aug.

4000

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

38

9,994
(96.8%)

Securities firms 1,521 units (0.4%)

Other domestic corporations 191,238 units (48.3%)

Name of Investor

Individuals/others

80

July

100

Jan.
End offiscal period

Feb.

May
July 2014

・Announcement of financial results for17th Fiscal Period

August 2014

・Sending of Japanese version Business
Report for 17th Fiscal Period(Statement of Financial Performance)

August 2014

・Start paying distributions for17th Fiscal Period

August 2014

・8th General Meeting of Unitholders

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

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, Suginamiku, Tokyo 168-0063 Phone 0120-782-031 (toll-free in Japan)

Service counter

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

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

Daiwa Office Investment Corporation

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

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

IX. Investor Information

39

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