This translation of the original Japanese Notice is provided solely for information purposes. Should
there be any discrepancy between this translation and the Japanese original, the latter shall prevail.

REIT Financial Report for the 10th Fiscal Period
Name of REIT Issuer:
Stock Code No.:
Representative:
Name of Asset Manager:
Representative:
Inquiries to:

January 13, 2010
Daiwa Office Investment Corporation
Stock Exchange Listing: TSE
8976
URL: http://www.daiwa-office.co.jp
Kazuo Otaka, Executive Director
Daiwa Real Estate Asset Management Co. Ltd.
Akira Yamanouchi, President and Representative Director
Yoji Ueda, Director and Head of Finance Department
TEL: (03) 6215-9649

Scheduled date of submission of periodic securities report (yuka shoken hokokusho): February 24, 2011
Scheduled date of start of distribution payments:
February 14, 2011
[Amounts are rounded down to the nearest million yen, except for per unit figures]

1. Status of Management and Assets for the 10th Fiscal Period
10th Fiscal Period: Fiscal period ended November 2010 (from June 1, 2010 to November 30, 2010)
9th Fiscal Period: Fiscal period ended May 2010 (from December 1, 2009 to May 31, 2010)(1) Management[% figures show the period-on-period increase (decrease)]

Operating revenue
10th
Period9th
PeriodOperating income

Ordinary income

Net income¥6,424 million(8.0%) ¥2,481 million(16.1%) ¥1,273 million(28.2%) ¥1,282 million(38.2%)¥6,985 million(9.8%) ¥2,959 million(24.2%) ¥1,773 million(34.6%) ¥2,076 million(23.4%)Net income
per unit
10th
Period9th
PeriodRatio ofnet income tounitholders’ equity

Ratio ofordinary income tototal assets

Ratio ofordinary income tooperating revenue¥3,239

0.6%

0.4%

19.8%

¥5,246

1.0%

0.6%

25.4%

(2) Distributions[Total distribution amounts are rounded down to the nearest million yen]

Distribution amount
per unit(excluding distribution
amount in excess of earnings)

10th
Period9th
PeriodTotal
distribution
amountDistribution
amountin excess ofearnings
per unit

Total
distribution
amountin excess ofearnings

Dividend
payoutRatio ofdistribution
amount to
net assets¥3,240¥1,282 million¥0¥– million

100.0%

0.6%¥5,246¥2,076 million¥0¥– million

100.0%

1.0%(Note) Dividend payout = Total distribution amount (excluding total distribution amount in excess of earnings) ÷ Net income × 100(3) Financial Position

10th
Period9th
PeriodRatio ofunitholders’ equity tototal assets

Net assets
per unit

Total assets

Net assets¥294,562 million¥200,063 million

67.9%¥505,468¥283,866 million¥200,857 million

70.8%¥507,474-1-

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period(4) Cash FlowsNet cashprovided by (used in)operating activities
10th
Period9th
PeriodNet cashprovided by (used in)investing activities

Net cashprovided by (used in)financing activities

Cash andcash equivalents
at end of period¥2,852 million(¥8,609 million)¥8,257 million¥18,503 million¥3,193 million(¥6,578 million)(¥2,834 million)¥16,003 million

2. Management Status Forecasts for the 11th Fiscal Period
11th Fiscal Period: Fiscal period ending May 2011 (from December 1, 2010 to May 31, 2011)[% figures show the period-on-period increase (decrease)]

Operating revenue
11th
Period ¥6,650 million

Operating income

3.5% ¥2,546 million

2.6% ¥1,300 million

Distribution amount per unit
(excluding distribution amount in excess of earnings)

11th
Period(Reference)

Ordinary income
2.1%

Net income¥1,298 million

1.2%

Distribution amount in excess of earnings per unit

¥3,280¥0

Estimated net income per unit for 11th Fiscal Period: ¥3,280

3. Other(1) Changes in Accounting Policies(i) Changes accompanying amendments to accounting standards, etc.: Yes(ii) Changes other than (i):None(2) Number of Investment Units Issued and Outstanding(i) Number of investment units issued and outstanding at end of period (including own investment units):
10th Fiscal Period: 395,798 units
9th Fiscal Period: 395,798 units(ii) Number of own investment units at end of period:
10th Fiscal Period:– units
9th Fiscal Period:– units*Explanation on the Appropriate Use of the Management Status Forecasts, and Other Matters of Special Note
The forecast figures set forth herein are the current prospects based on information currently available to the Investment Corporation andcontain elements of uncertainty. Accordingly, the actual operating revenue, operating income, ordinary income, net income anddistribution amount per unit may vary due to changes in the status. Moreover, the forecasts set forth herein should not be construed as aguarantee of distribution amounts. For details on the assumptions underlying the forecast figures above, please refer to “4.2.2. Outlook
for Management Status” in “4. Management Policy and Management Status”.

-2-Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period

4. Management Policy and Management Status
4.1.

Overview of the Fiscal Period under Review

4.1.1.

Management Performance
In view of increasing the long-term EPS (EPS after deducting gain on sales of properties (net income perunit)) over the medium and long term, the Investment Corporation worked on “external growth,” whichaims to boost revenue through acquiring and selling properties, and “internal growth,” which aims tomaximize income generating from existing properties. External growth is imperative to restore the longterm EPS level, the Investment Corporation proactively engaged in property acquisition activities andpurchased “Kyodo Building (Nishi-shimbashi)” (acquisition price: 5.0billion yen) in August and “Kyodo
Building (Kudan Ichigo-kan)”(acquisition price:4.0billion yen) in September.
As a result, the Investment Corporation’s assets under management as of the end of the 10th Fiscal
Period (November 31, 2010) totaled 33 properties, the sum total of acquisition prices of which amounted
to 278,195 million yen. Moreover, this results in investments in the five central wards of Tokyo, which theInvestment Corporation positions as a top priority investment area, accounting for 91.3% of the entire
portfolio (based on acquisition price).
Concerning internal growth, on the other hand, occupancy rate at the end of the 10th Fiscal Period inspite of the severe office leasing market conditions recovered to 95.9% by strengthening the partnershipwith leasing brokers and property managers. Moreover the Investment Corporation proactively pursued
heightened tenant satisfaction levels by strengthening relation with tenants.

4.1.2.

Overview of Fund Procurement
On September 2, 2010 and September 30, 2010, the Investment Corporation borrowed 5,500 million yen in
total from Shinsei Bank, Ltd., The Bank of Fukuoka, Ltd. and ORIX Trust and Banking Corporation toincrease liquidity of cash flow in prospect of acquiring properties. Besides, on June 24, 2010, the Investment
Corporation issued the investment corporation bonds to 5,000million yen to achieve a property, etc.
In addition, contractual repayments of 41.25 million yen in total were made to Development Bank of Japan
Inc. and The Kagawa Bank, Ltd. on August 31,2010. Moreover, a contractual repayment of 7.5 million yen
was made to The 77 Bank, Ltd. on September 17, 2010 and contractual repayments of 84.375 million yen in
total were made to Sumitomo Mitsui Banking Corporation, The Sumitomo Trust and Banking Co., Ltd.,
Development Bank of Japan Inc., The Chuo Mitsui Trust and Banking Company, Limited, Taiyo Life
Insurance Company and The Gunma Bank, Ltd.
As a result, the balance of interest-bearing liabilities outstanding as at the end of the 10th Fiscal Periodstood at 82,775.625 million yen (long-term loans payable: 74,275.625 million yen; investment corporation
bonds: 8,500 million yen). Furthermore, of long-term loans payable, the balance of the current portion ofinterest-bearing liabilities outstanding stood at 14,258.75 million yen (including 258.75 million yen incontractual repayments).

4.1.3.

Overview of Financial Performance and Distributions
As a result of the management described above, the Investment Corporation posted financial performance forthe 10th Fiscal Period of 6,424 million yen in operating revenue, 2,481 million yen in operating income,
1,273 million yen in ordinary income and 1,282million yen in net income.
Concerning distributions, to ensure that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation of
corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)), the Investment Corporation decided
to distribute the entire amount of unappropriated retained earnings, excluding fractions of the distribution
amount per unit that are less than 1 yen. Accordingly, the Investment Corporation declared a distribution
amount per unit of 3,240 yen.

-3-

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period
4.2.
4.2.1.

Outlook for the Next Fiscal Period
Future Management Policy and Tasks(a) Strategy for Managing Existing Properties
The tenants’ sides are expected to become more selective with properties reflecting the current trend in
office rent market. Consequently, the Investment Corporation 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 and long term.
(i) Maintain and raise occupancy rates
Strive to maintain and raise occupancy rates through the provision of office environments of hightenant satisfaction levels by maintaining the quality of buildings and equipment and proactively
implementing renovations, etc. of common-use areas and thereby lowering vacancy risks.
(ii) Maintain and raise profitability
Aim to secure stable revenue over the medium and long term through further strengthening of good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(iii) Reduce operational management costs
Strive to reduce operational management costs based on maintaining office environments of hightenant satisfaction levels through implementing efficient operational management and reviewing
systematic construction work by optimally leveraging the economies of scale achieved fromproactively realizing external growth.
(b) Strategy for New Property Investments
The Investment Corporation will concentrate its investment in Tokyo, with a particular focus on A Class
and B Class buildings in the five central wards of Tokyo, by maintaining a balance with the financing
situation and based on various external growth strategies.
As pipeline support, in addition to expanding its own information-sourcing channels, the Investment
Corporation will search for properties that meet its investment criteria by proactively gathering real estatetransaction market information through greater collaboration with the Asset Manager and Sponsor Groupand utilizing the Group’s extensive network of clients, partners, etc.
During the 10th Fiscal Period, the Investment Corporation acquired Kyodo Building (Nishi-shimbashi)
and Kyodo Building (Kudan Ichigo-kan), which are situated in the five central wards of Tokyo. The
Investment Corporation believes acquisition of these properties will contribute to further stabilization andenhancement of the portfolio, and it will continue to strive to acquire properties that are in line with theinvestment strategy described above.
(c) Financial Strategy
The Investment Corporation will conduct disciplined financial management based on a medium-term
financial strategy of the following basic content.
(i) Keep leverage down at a ratio of interest-bearing liabilities levels within the range of 40% to 50% at
maximum.
(ii) Diversify maturity dates, targeting 20.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period.
(iii) Aim to have long-term loans account for at least 60% to 70% of total loans.
(iv) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(v) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount equivalent to distributions paid, separately from working capital.
While the Investment Corporation will continue to conduct disciplined financial management based on
the medium-term financial strategy, the ratio of interest-bearing liabilities will be kept down at aconservative level of around 35% at maximum in the 11th Fiscal Period.
The Investment Corporation will also continue to diversify lenders, which shall mainly be Japanesefinancial institutions.

-4-Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period

4.2.2.

Outlook for Management Status
The Investment Corporation forecasts the following management status for the 11th Fiscal Period (fiscal
period ending May 2011 (from December 1, 2010 to May 31, 2011)). For the assumptions underlying themanagement status forecasts, please refer to the “Assumptions for the Management Status Forecasts for the
11th Fiscal Period and 12th Fiscal Period” on page 6.
Operating revenue
Ordinary income
Net income
Distribution amount per unit
Distribution amount in excess of earnings per unit

6,650 million yen
1,300 million yen
1,298 million yen
3,280 yen
0 yen

In addition, on the basis that the “Assumptions for the Management Status Forecasts for the 11th Fiscal
Period and 12th Fiscal Period” will remain unchanged, the Investment Corporation forecasts the following
management status for the 12th Fiscal Period (fiscal period ending November 2011 (from June 1, 2011 toNovember 30, 2011)).
Operating revenue
Ordinary income
Net income
Distribution amount per unit
Distribution amount in excess of earnings per unit

6,757 million yen
1,427 million yen
1,425 million yen
3,600 yen
0 yen

(Note) The forecast figures above are the current forecasts calculated based on certain assumptions.
Accordingly, the actual operating revenue, operating income, ordinary income, net income,
distribution amount per unit and distribution amount in excess of earnings per unit may vary due tochanges in the status. Moreover, the forecasts set forth herein should not be construed as a guaranteeof distribution amounts.

-5-

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period
Assumptions for the Management Status Forecasts for the 11th Fiscal Period and 12th Fiscal Period
Item
Assumptions• 11th Fiscal Period:
Assets under management are assumed to be the 33 properties.
• 12th Fiscal Period:
Assets under
Assets under management are assumed to be the 33 properties.
management• It is assumed that there are no changes in the assets under management (new property
acquisitions, sale of portfolio properties, etc.) through to the end of the 12th Fiscal Period.
• The actual number of properties may vary due to changes in the assets under management.
• Rent revenue from existing properties is calculated based on historical data and taking into
Operatingaccount variable factors.
revenue• It is assumed that there is no gain (loss) on sales of real estate properties.
• Expenses related to rent business, which constitute a major component of operating
expenses, are calculated based on historical data and taking into account variable factors.
• Repair expenses for buildings are recorded as expenses in the amount expected to benecessary in the respective fiscal period based on the medium- and long-term repair planestablished by the Asset Manager.
• Operating income from property leasing (excluding gain on sales of real estate properties)
Operatingafter deducting expenses related to rent business (including depreciation) is expected to be
expenses
3,343 million yen in the 11th Fiscal Period and 3,457 million yen in the 12th Fiscal Period.
• Consignment expenses are expected to be 518 million yen in the 11th Fiscal Period and 453
million yen in the 12th Fiscal Period.
• Taxes and dues (fixed property tax, city planning tax, etc.) are expected to be 596 million
yen in the 11th Fiscal Period and 599 million yen in the 12th Fiscal Period.
• Depreciation is expected to be 1,279 million yen in the 11th Fiscal Period and 1,285 million
yen in the 12th Fiscal Period.
• Non-operating expenses in the 11th Fiscal Period are expected to be 1,245 million yen, of
which the interest expenses and borrowing related expenses are expected to be 1,234 millionyen.
Non-operating
expenses• Non-operating expenses in the 12th Fiscal Period are expected to be 1,228 million yen, of
which the interest expenses and borrowing related expenses are expected to be 1,216 million
yen.

Interest-bearing
liabilities• The total amount of interest-bearing liabilities is assumed to be 82,650 million yen at the endof the 11th Fiscal Period and 82,516.875 million yen at the end of the 12th Fiscal Period.
• The total amount of interest-bearing liabilities in the 11th Fiscal Period is based on theassumption that, of the 2,000 million yen that is to become due for repayment, 2,000 million
yen (due by March 18, 2011) will be refinanced in the entire amount. The total amount ofinterest-bearing liabilities in the 11th Fiscal Period is also based on the assumption that the125.625 million yen that is to become due for contractual repayment (41.25 million yen due
by February 28, 2011; 84.375 million yen due by May 31, 2011) will be repaid using cash
reserves.
• The total amount of interest-bearing liabilities in the 12th Fiscal Period is based on theassumption that, of the 12,000 million yen that is to become due for repayment, 12,000
million yen (due by March 18, 2011, August 31, 2011, and September 30, 2011) will be
refinanced in the entire amount. The total amount of interest-bearing liabilities in the 12th
Fiscal Period is also based on the assumption that the 133.125 million yen that is to becomedue for contractual repayment (41.25 million yen due by August 31, 2011; 7.5 million yen
due by September 16, 2011; 84.375million yen due by November 30, 2011) will be repaid
using cash reserves.

Number ofinvestment units
issued andoutstanding• The number of investment units issued and outstanding is assumed to be the 395,798 units
issued and outstanding as of the date of submission of this document, and there is assumed to
be no additional issuance of investment units through to November 30, 2011.

-6-

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period
Item
Distribution amount
per unit

Assumptions• The distribution amount per unit is calculated based on the cash distribution policy as set out
in the articles of incorporation of the Investment Corporation.
• The distribution amount per unit may vary depending on a variety of factors, such as changes
in the assets under management, changes in the rent revenue due to tenant changes and othercauses, and incurrence of unforeseen repairs.

Distribution amount• At present, there is no plan to make any distribution in excess of earnings (distribution
in excess of earnings
amount in excess of earnings per unit).
per unit• It is assumed that there are no changes to laws and ordinances, the tax system, accounting
standards, listing regulations, the rules of The Investment Trusts Association, Japan, etc. that
Other
will affect the abovementioned forecast figures.
• It is assumed that there will be no major unforeseen changes in general economic trends, realestate market conditions, etc.

-7-

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period

5. Financial Statements
5.1. Balance Sheets

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Consumption taxes receivable
Prepaid expenses
Deferred tax assets
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Other
Accumulated depreciation
Other, net
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Other in trust
Accumulated depreciation
Other in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment
Intangible assets
Right of trademark
Leasehold rights in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits in trust
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets-8-

9th Fiscal Period(Unit: thousand yen)
10th Fiscal Period[As of May 31, 2010][As of Nov 30, 2010]

11,290,130
4,713,508
142,101
32,529766,10322
234,103
17,178,499

13,191,204
5,312,762
176,919
119,735
766,50318
224,878
19,792,022

1,875(1,576)299
3,456(3,456)–55,023,264(8,094,959)
46,928,304
756,065(59,692)
696,373
702,855(193,111)
509,744
41,688(13,076)
28,612
6,302(6,302)–
212,726,823
11,190260,901,349

4,058(1,854)2,204
3,456(3,456)–58,527,997(9,284,724)
49,243,272
779,508(69,839)
709,669
743,396(225,280)
518,116
64,513(16,678)
47,835
6,302(6,302)–
218,730,714
22,408269,274,222

1,517
4,970,290
998
4,972,807

1,383
4,970,290
7,047
4,978,722

113,684
654,267
21,427789,379
266,663,536

113,684
334,655
18,107466,448274,719,392

24,73824,738283,866,774

51,03751,037
294,562,452

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – other
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Other
Total noncurrent liabilities
Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets-9-

9th Fiscal Period(Unit: thousand yen)
10th Fiscal Period[As of May 31, 2010][As of Nov 30, 2010]

510,8122,258,750
269,094663
40,750652,719150,078
3,882,869

593,106
14,258,750
237,901794
28,537807,721
176,938
16,103,749

3,500,000
66,650,000
4,892,275
4,075,204
8,980
79,126,460
83,009,329

8,500,000
60,016,875
5,375,088
4,496,746
6,527
78,395,236
94,498,986

198,780,951

198,780,951

2,076,493
2,076,493
200,857,444
200,857,444
283,866,774

1,282,514
1,282,514
200,063,466
200,063,466
294,562,452

Daiwa Office Investment Corporation (8976) Financial Report for the 10th Fiscal Period

5.2. Statements of Income

Operating revenue
Rent revenue – real estate
Other lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Reversal of distribution payable
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bond
Borrowing expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Settlements received
Gain on donation of noncurrent assets
Total extraordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)- 10 -

9th Fiscal Period(Unit: thousand yen)
10th Fiscal Period[From: December 1, 2009
To: May 31, 2010][From: June 1, 2010
To: November 30, 2010]

6,610,024
375,937
6,985,961

6,374,684
49,803
6,424,488

3,248,661
560,092
14,251
84,37025,5674,200
89,491
4,026,635
2,959,325

3,194,661
516,632
14,57583,794
27,773
4,880
100,667
3,942,984
2,481,503

4,791
1,981
81
6,855

1,788
1,903
1,142
4,834

768,933–
420,565
2,867
1,192,366
1,773,814

719,395
92,015
391,405
9,866
1,212,683
1,273,655

45,844
257,880
303,724
2,077,538
1,075
(5)
1,069
2,076,468
24
2,076,493

–
9,713
9,713
1,283,368
986
4
991
1,282,377
137
1,282,514