19th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2014 – May 31, 2015

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-of_ce.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 19th Fiscal Period, DOI posted operating revenues of 10,387 million yen and operating income of 4,770 million yen. Our
distribution per unit for the 19th Fiscal Period is 9,142 yen, an increase by 886 yen from the 18th Fiscal Period.
See page 4 for financial and management highlights
Average contract rent at the end of the 19th Fiscal Period increased 875 yen from the end of the previous fiscal period to 18,674 yen
and greatly contributed to further internal growth.
Rent revisions contributed to 5 million yen increase in monthly contracted rents from the end of the previous fiscal period, which
was a 5.2% increase rate for the average monthly rent. Tenants moving in/out led to 14 million yen of net increase in monthly
contracted rents from the end of the previous fiscal period, and the increase rate for the average monthly rent increased 9.2% due toreplacement of tenants. Occupancy rate improved 0.1 percentage points from the end of the previous fiscal period to 97.3%. We willrealize sustainable internal growth by thorough implementation of hands-on approach that continuously apply“Bonji-Tettei” as thecode of conduct.
See page 8 for details of internal growth
During the 19th Fiscal Period, we acquired 6 properties of Daiwa Ebisu 4-chome, LAQUAS Higashi Shinjuku, Concept Aoyama,
Shinsen Place, Glass City Shibuya and Meguro Place Tower (total acquisition price: 48,785 million yen) and divested 5
properties of Daiwa Nihombashi Honcho, Daiwa Ginza 1-chome, Daiwa Kinshicho, Daiwa Tsukiji 616 and Benex S-3 (total sale price:
21,810 million yen). Through such asset replacement, DOI improved the quality of its portfolio.
In addition to Glass City Shibuya and Meguro Place Tower mentioned above, we acquired
River Gate (acquisition during 20th Fiscal Period) using funds raised through public
offering implemented in June 2015.
DOI will continue to selectively acquire office properties centering on the five central
wards of Tokyo in an effort to further improve the value of its portfolio.
See page 12 for details of external growthIn financial matters DOI promoted the lengthening of maturities, increaseof rate of loans with fixed interest rates, diversification of repayment dates
and decrease of LTV. DOI will continue striving to further strengthen financial
structure while working to reduce future refinancing risks.
See page 16 for details of financial condition
DOI will continue to increase the competitiveness of its properties and aim toachieve its medium- to long-term goal of an asset size of 500 billion yen throughthe utilization of investment capacity from capital increase, etc. while increasing
long-term EPS (net income after deducting gain on sales of properties). We wish
for the continued success of our unitholders and ask for your continued supportof 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
Financial and Management Highlights………………………… 4
Overview of Portfolio (portfolio list)…………………………… 5

II. Asset Management Report…………………………… 17
III. Balance Sheet…………………………………………… 22
IV. Statements of Income and Retained Earnings…… 24
V. Statements of Changes in Unitholders’ Equity ……… 25
VI. Statements of Cash Flows … ………………………… 26

Overview of Portfolio (portfolio distribution)…………………… 6
Internal Growth Measures… ………………………………… 82VII. Notes to Financial Statements……………………… 27

External Growth Measures…………………………………… 12

VIII. Independent Auditors’ Report……………………… 40

Financial Conditions… ……………………………………… 16

IX. Investor Information… ………………………………… 41

Characteristics and Strategies of Daiwa Office Investment Corporation

Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT Focused on the Five
Central Wards of Tokyo

Effective application of operational knowhow specialized in officebuildings

Places priority on owning office buildings in favorable locations forwhich there is high demand

Office buildings 100.0%

Major Regional Cities 4.4%
Greater Tokyo

Five Central
Wards of Tokyo

87.6%

8.0%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of June 2, 2015

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%(billion yen)
500

Investment inselectively chosencompetitive properties

400

332.0

352.7 364.0

387.5

500.0
413.2

441.2

300

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Thorough implementation of hands-on
approach
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 After public Medium-term
ended
ended
ended
ended
ended
offeringgoal
May 2013 November 2013 May 2014 November 2014 May 2015

Fiscal period ended May 2015
(19th Fiscal Period)

Fiscal period ending November 2015
(Note) The forecasts on distribution are calculated based(20th Fiscal Period)on certain assumptions and may vary due tochanges in the status and other factors. Moreover,the forecasts set forth herein should not be
construed as a guarantee of distribution amounts.

Fiscal period ending May 2016
(21st Fiscal Period)

9,142 yen
9,350 yen
9,750 yen(actual)(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation

3

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

9,763
7,500

7,615

(million yen)
5,000

10,387

4,000

8,587

8,432

4,770

4,438

3,000

3,308

5,000

3,677

3,760

16th Period

17th Period

2,000
2,500

1,000
0

0
15th Period

16th Period

17th Period

18th Period

19th Period

15th Period■ Net Income■ Asset Size(million yen)
4,000

(billion yen)400

18th Period

413.2

4,031
350

364.0

352.7

3,016

2,959
2,000

387.5

3,641

3,000

2,589

300

1,000

332.0

250

0

200
15th Period

16th Period

17th Period

18th Period

19th Period

15th Period

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

Forecast from one year earlier

Forecast from six months earlier

8,000
6,000
4,000

19th Period

4,850
4,850
5,107

3,600
4,100
4,464

3,180
3,280
3,671

Actual dividends

5,500
6,250
6,542

5,350
5,500
5,986

7,570
7,820
8,256

6,550
7,200
7,478

7,300
7,540
7,621

16th Period

17th Period

17th Period

18th Period

8,328
8,700
9,142

19th Period

9,000
9,350

9,750

2,000
0
11th Period

12th Period

13th Period

15th Period

18th Period

19th Period

20th Period 21st Period

19th Period

18th Period

17th Period

16th Period

15th Period(May 2015)(November 2014)(May 2014)(November 2013)(May 2013)

Operating revenues (million yen)

10,387

9,763

8,587

8,432

7,615

Operating income (million yen)

4,770

4,438

3,760

3,677

3,308

Ordinary income (million yen)

4,032

3,642

3,005

2,955

2,590

Net income (million yen)

4,031

3,641

3,016

2,959

2,589

Total number of units issued (units)

441,000

441,000

395,798

395,798

395,798
508,707

Net assets per unit (yen)505,566

504,746

509,490

509,560

Distribution per unit (yen)

9,142

8,256

7,621

7,478

6,542

Total assets (million yen)432,232

399,555

380,723

363,653

342,572

44.3

40.2

43.0

40.6

37.5

47

46

44

44

41

4,132

3,875

3,640

3,527

3,320

288,833.07

286,088.89

259,381.62

244,877.17

225,651.87

97.3

97.2

96.4

96.3

95.0

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

4

14th Period

Overview of Portfolio (portfolio list)(as of June 2, 2015)
Property Name

Address

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

Five Central Wards of Tokyo (Note 1)
Ginza, Chuo-ku, Tokyo
8,175.26 SRC B3/12F July 1963
Ginza, Chuo-ku, Tokyo
2,032.11 SRC B3/8F Aug. 1972
Shibaura, Minato-ku, Tokyo
9,619.67 SRC B1/12F Oct. 1987
Minami Aoyama, Minato-ku, Tokyo
2,715.53 S SRC B2/5F Sept. 1990
Sarugakucho, Chiyoda-ku, Tokyo
3,657.43
SRC 8F
June 1985
Hamamatsucho, Minato-ku, Tokyo
3,663.38 SRC B2/10F July 1993
Jingumae, Shibuya-ku, Tokyo
2,198.61 RC B1/4F
Dec. 1997
Shibadaimon, Minato-ku, Tokyo
2,386.48 SRC RC B1/7F Nov. 1996
Misakicho, Chiyoda-ku, Tokyo
2,137.53
S 8F
July 1996
Shinbashi, Minato-ku, Tokyo
2,676.52 SRC B1/8F
Apr. 1974
Tsukiji, Chuo-ku, Tokyo
2,659.59
SRC 10F
Jan. 1996
Tsukiji, Chuo-ku, Tokyo
1,487.82 SRC B1/7F
Jan. 1990
Tsukishima, Chuo-ku, Tokyo
8,426.85
S 5F
July 1996
Nihombashi-Horidomecho, Chuo-ku, Tokyo
2,850.81 SRC B2/7F
Apr. 1993
Azabudai, Minato-ku, Tokyo
1,697.88 SRC B2/9F
Apr. 1984
Hatchobori, Chuo-ku, Tokyo
3,265.83 SRC B1/8F
Oct. 1974
Kojimachi, Chiyoda-ku, Tokyo
2,690.90 SRC B2/9F
Oct. 1987
Shinbashi, Minato-ku, Tokyo
11,614.92
SRC 9F
Apr. 1973
Yoyogi, Shibuya-ku, Tokyo
45,543.97 S SRC B3/34F Sept. 1995
Udagawacho, Shibuya-ku, Tokyo
2,480.65 RC B1/9F
Aug. 2006
Nihombashi-Odenmacho, Chuo-ku, Tokyo
2,379.31
SRC 8F
Mar. 1985
Kanda-Jimbocho, Chiyoda-ku, Tokyo
3,164.26
S B1/8F
Mar. 1997
Nishi-Shimbashi, Minato-ku, Tokyo
4,815.84 SRC B1/10F July 1993
Kudan Minami, Chiyoda-ku, Tokyo
2,882.61
SRC 9F
Mar. 1987
Nihombashi-Kayabacho, Chuo-ku, Tokyo
5,899.11 S SRC B1/8F Apr. 2010
Kanda-Jimbocho, Chiyoda-ku, Tokyo
2,889.34
S 9F
Feb. 2010
Maruyamacho, Shibuya-ku, Tokyo
13,960.87 S SRC B1/15F Oct. 2002
Nihombashi Hongokucho, Chuo-ku, Tokyo
2,143.08
S 8F
May 2010
Shinjuku, Shinjuku-ku, Tokyo
6,751.31 S RC B2/11F Jan. 2012
Maruyamacho, Shibuya-ku, Tokyo
4,144.90 SRC B1/11F Mar. 1988
Akasaka, Minato-ku, Tokyo
8,794.51 SRC B2/7F Sept. 1990
Shibuya, Shibuya-ku, Tokyo
6,327.95 S B1/12F
Dec. 1988
Minami Azabu, Minato-ku, Tokyo
13,234.39 S RC B1/6F Sept. 2009
Ebisu, Shibuya-ku, Tokyo
2,743.93 SRC B1/9F Dec. 1997
Okubo, Shinjuku-ku, Tokyo
7,498.33
S10F
Aug. 2010
Jingumae, Shibuya-ku, Tokyo
4,420.18 S RC B1/7F Nov. 2001
Shinsen-cho, Shibuya-ku, Tokyo
2,811.35 RC B1/9F Sept. 2001
Nanpeidaicho, Shibuya-ku, Tokyo
8,566.73 S SRC B1/11F Feb. 2004
Nihonbashi Hakozakicho, Chuo-ku, Tokyo
32,062.96 S SRC RC B2/20F Feb. 1994
Subtotal
257,472.70
Greater Tokyo Area (Note 1)
Higashi-Ikebukuro, Toshima-ku, Tokyo
4,461.47 SRC S B1/9F June 1993
40 Daiwa Higashi-Ikebukuro
Kita-Shinagawa, Shinagawa-ku, Tokyo
6,548.82 SRC B1/11F July 1991
41 Daiwa Shinagawa North
Osaki, Shinagawa-ku, Tokyo
1,786.06 S RC B1/6F Sept. 200742 Daiwa Osaki 3-chome
Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa 2,630.30 S SRC B3/7F May 201143 Daiwa Kamiooka
Kamiogi, Suginami-ku, Tokyo
17,778.14 S SRC B2/18F June 1993
44 Integral Tower
Meguro, Meguro-ku, Tokyo
3,519.50 S SRC B2/14F July 200945 Meguro Place Tower
Subtotal
36,724.29
Major Regional Cities (Note 1)
Minami-Senba, Chuo-ku, Osaka City, Osaka
5,719.52 SRC B1/8F Sept. 1986
46 Daiwa Minami-Senba
Meieki-Minami, Nakamura-ku, Nagoya City, Aichi 7,461.90
S 12F
Dec. 2007
47 Daiwa Meieki
Awaji-cho, Chuo-ku, Osaka City, Osaka
13,517.62 S SRC B1/16F Feb. 2008
48 Kitahama Grand Building
Subtotal
26,699.04
Total
320,896.03

1 Daiwa Ginza
2 Daiwa Ginza Annex
3 Daiwa Shibaura
4 Daiwa Minami-Aoyama
5 Daiwa Sarugakucho
6 Daiwa A Hamamatsucho
7 Daiwa Jingumae
8 Daiwa Shibadaimon
9 Daiwa Misakicho
10 Daiwa Shimbashi 510
11 Daiwa Tsukijiekimae
12 Daiwa Tsukiji
13 Daiwa Tsukishima
14 Daiwa Nihonbashi Horidomecho
15 Daiwa Azabudai
16 Daiwa Kyobashi
17 Daiwa Kojimachi 4-chome
18 Daiwa Onarimon
19 Shinjuku Maynds Tower (Note 6)
20 SHIBUYA EDGE
21 Daiwa Kodenmacho
22 Daiwa Jimbocho
23 Daiwa Nishi-Shimbashi
24 Daiwa Kudan
25 Daiwa Kayabacho Building
26 Daiwa Jinbocho 3-chome
27 E SPACE TOWER
28 Daiwa Nihonbashi Hongokucho
29 shinyon curumu
30 Daiwa Shibuya Dogenzaka
31 Daiwa Akasaka
32 Daiwa Shibuya Miyamasuzaka
33 Azabu Green Terrace
34 Daiwa Ebisu 4-chome
35 LAQUAS Higashi Shinjuku
36 Concept Aoyama
37 Shinsen Place
38 Glass City Shibuya
39 River Gate

2003
2003

14,100 3.2
3,050 0.7
8,265 1.9
4,550 1.0
3,190 0.7
2,865 0.62,800 0.6
2,578 0.6
2,346 0.5
2006
2,080 0.5
1,560 0.4
1,240 0.3
7,840 1.8
2,520 0.6
1,600 0.4
2005
3,460 0.8
2,910 0.7
2003 13,860 3.1
133,800 30.3
5,900 1.3
2,460 0.6
4,150 0.95,000 1.1
4,000 0.95,600 1.3
3,550 0.8
24,000 5.4
1,721 0.4
9,650 2.2
4,500 1.0
9,200 2.1
7,000 1.6
14,000 3.2
4,135 0.98,450 1.99,800 2.2
4,800 1.1
16,000 3.6
28,000 6.3
386,530 87.6
2,958
7,710
1,650
2,000
15,2205,600
35,138

0.7
1.7
0.4
0.5
3.4
1.3
8.0

4,810 1.1
5,300 1.2
9,481 2.1
19,591 4.4
441,259 100.0(Note 4)

Ownership TypeLand

Building

PML (%)(Note 5)

simple and15,500 Feeleasehold
Fee simple
3,170 Fee simple Fee simple
7,240 Fee simple Fee simple
4,140 Fee simple Fee simple
3,270 Fee simple Fee simple
3,070 Fee simple Compartmentalized
ownership
2,180 Fee simple Fee simple
2,700 Fee simple Fee simple
2,560 Fee simple Fee simple
2,400 Fee simple Fee simple
1,490 Fee simple Fee simple
1,330 Fee simple Fee simple
8,940 Fee simple Fee simple
2,410 Fee simple Fee simple
1,700 Fee simple Fee simple
3,120 Fee simple Compartmentalized
ownership (100%)
2,600 Fee simple Compartmentalized
ownership (100%)
12,600 Fee simple Compartmentalized
ownership (100%)113,000 Co-ownership Co-ownership
4,520 Fee simple Fee simple
simple and Fee simple
2,020 Feeleasehold
3,110 Fee simple Fee simple
5,060 Fee simple Fee simple
3,220 Fee simple Compartmentalized
ownership (100%)
7,080 Fee simple Fee simple
4,170 Fee simple Fee simple
31,000 Fee simple Fee simple
2,000 Fee simple Fee simple
11,400 Right of site Compartmentalized
ownership (100%)
5,790 Fee simple Fee simple
11,200 Fee simple Fee simple
7,840 Fee simple Fee simple
15,600 Fee simple Fee simple
4,720 Fee simple Fee simple
9,400 Fee simple Compartmentalized
ownership (100%)
10,600 Fee simple Fee simple
5,720 Fee simple Fee simple
17,000 Fee simple Fee simple
29,700 Fee simple Fee simple
384,570

4.53
3.97
3.82
9.19
7.14
3.79
13.33
3.72
4.24
5.51
4.23
4.98
4.87
4.68
6.64
4.51
6.19
3.89
2.03
1.56
4.19
5.05
3.76
5.51
4.50
5.33
3.11
3.80
4.44
3.77
7.14
5.64
2.67
2.44
4.46
4.42
6.21
1.61
1.76

3,340
5,780
2,120
2,260
16,8005,810
36,110Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple

Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple

3.55
7.19
6.14
6.29
1.18
1.68

2,570 Fee simple
6,840 Fee simple
10,600 Fee simple
20,010440,690

Fee simple
Fee simple
Fee simple

5.25
10.31
3.48

(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 is indicated as of May 31, 2015 (end of 19th Fiscal Period). The Rentable Area of River Gate is indicated as of June 2, 2015.
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2015 (end of 19th Fiscal Period). The values
entered in the Appraisal Value at End of Period column of River Gate indicated as of April 1, 2015
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2015) prepared by Sompo Japan Nipponkoa Risk Management Inc.
(Note 6) 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

7 Daiwa Jingumae

20 SHIBUYA EDGE

30 Daiwa Shibuya Dogenzaka

32 Daiwa Shibuya Miyamasuzaka

40 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

40

Toshima-ku
19 Shinjuku Maynds Tower

27 E SPACE TOWER

44
Ogikubo Sta.

34 Daiwa Ebisu 4-chome

Suginami-ku

36 Concept Aoyama

37 Shinsen Place

38 Glass City Shibuya

Nakano Sta.

35
HigashiShinjuku Sta.

Shinjuku-ku

Shinjuku-ku
Shinjuku Sta.
29

19
44 Integral Tower

Tokyo Metro
Ginza Line

29 shinyon curumu

Yotsuya Sta.

35 LAQUAS Higashi
Honancho
Sta. Shinjuku

Shibuya-ku

Minato-ku

Aoyamaitchome Sta.

7
36

Marunouchi Line
Hibiya Line

Omotesando Sta.

Tozai Line20

Chiyoda Line

Gaienmae Sta.

4

Yurakucho Line
Hanzomon Line
Fukutoshin Line

3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

6 Daiwa A Hamamatsucho

Toei Subway

ine
hi L
Tos
n
e
Den
yu
Tok

Oedo Line
Asakusa Line
Mita LineJR

Shinjuku Line
Yamanote Line
Saikyo Line
Chuo Line
Sobu Line32
Shibuya Sta.

To
ky
uT
oy
ok
oL
ine

27
30
37
38

Namboku Line

Naka-meguro Sta.

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

15 Daiwa Azabudai

JR Yokosuka Lineand
Sobu Rapid Line45

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

634
Ebisu Sta.

18 Daiwa Onarimon

23 Daiwa Nishi-Shimbashi

31 Daiwa Akasaka

33 Azabu Green Terrace

45 Meguro Place Tower

Meguro Sta.

Osaki Sta.
42

(as of June 2, 2015)

Chuo-ku

1 Daiwa Ginza

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukishima

14 Daiwa Nihonbashi Horidomecho

16 Daiwa Kyobashi

21 Daiwa Kodenmacho

25 Daiwa Kayabacho Building

28 Daiwa Nihonbashi Hongokucho 39 River Gate

Chiyoda-ku

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.
Kudanshita Sta.

9

Akihabara Sta.

5

28

21

Hibiya Sta.

12

Toranomon Sta.

31

Shibakoen Sta.

22 Daiwa Jimbocho

24 Daiwa Kudan

26 Daiwa Jinbocho 3-chome

43 Daiwa Kamiooka

46 Daiwa Minami-Senba

47 Daiwa Meieki

48 Kitahama Grand Building

25 Suitengumae39
Sta.

16
Ginza Sta.

Shimbashi Sta.
23
10
18

6

15

17 Daiwa Kojimachi 4-chome

Nihombashi Sta.

Tokyo Sta.

Akasaka Sta.

9 Daiwa Misakicho

Ningyocho Sta.

Chiyoda-ku
Akasakamitsuke Sta.

5 Daiwa Sarugakucho

14

Otemachi Sta.

17

Kinshicho Sta.

26 22
24

12

Chuo-ku
11
Tsukishima Sta.

13

8Minato-ku
33

3

46
ShinagawaSta.

41

Shinagawaku

41 Daiwa Shinagawa North

42 Daiwa Osaki 3-chome

48 47

43

I. Overview of Daiwa Office Investment Corporation

7

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

Office Market Trends
Further improvements in vacancy rate are observed and rent levels are showing signs of recovery.

■ Office Building Rental Market of Tokyo■ Transition of the Supply and Demand Balance in 23 Wards of Tokyo(yen/tsubo)
25,000(%)
10.0(tsubo)400,000

23,0008.0

300,000

6.0

21,00019,000

4.5
Average rents ofexisting buildings (left axis)

15,000Vacancy rate ofexisting buildings (right axis)

Predicted figures

7.5

200,000

6.0

100,000

4.5

0

3.0

4.0

17,178 2.0

17,000

(%)
9.0

1.5

-100,000

0.0-200,000

Floor area of new supplies
Floor area of new demands

Vacancy rate

0.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(Source) Miki Shoji(Source) CBRE “Mid-term Office Market Outlook 2014~2020”

Rental Business Status■ Average Contract Rents and Market Rents (monthly)(yen/tsubo)
30,000100

Breakdown: Changes in Contract Rents for 5 Central Wards of Tokyo

27,000

90

(％)
2.25

80

1.75

70

1.25

60

0.75

50

0.25

24,000

78.06
78.22

18,215+2.18

Shibuya Ward

+1.01

Minato Ward
Shinjuku Ward
Chuo Ward

+0.22
+0.00
−0.02

78.52

21,00018,000Chiyoda Ward

18,674

17,799Average contract rents*
Unit rent index(Period-on-period comparison, right axis)**15,0000.00
40

12,000-0.25
End of 18th Period

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

End of 19th Period

Among 5 central wards of Tokyo, rent increased in Chiyoda Ward,
Shibuya Ward and Minato Ward.

(Note) Average contract rent of the existing 41 properties at the end of May 2015 is 18,513 yen (amount ofchange from the previous period: +156 yen)
* Average contract rents are average monthly contracted rents with tenants at the end of each fiscal period.
** Unit rent index is the earning rates of unit rent of individual properties indexed with the 7th Fiscal Period as 100.

■ Attribution Analysis / Monthly Contract Rent*+169(Million Yen) 1,700

–94

1,650

1,595

1,600
1,550
1,500

1,500

1,450
1,400

+5

0

Increaseby Rent
Revisions

Decreaseby Rent
Revisions

+35

–20

Increaseby New Leases

Decrease by
Tenants’Cancellations

Decreaseby Property
Sales
Increaseby New
Acquisition

1,350
1,300
End of 18th FP
Monthly Contract Rent

* Monthly Contact Rent is a total of final rent from tenants contracting at the end of the Fiscal Period.
Monthly Contract Rent for Shinjuku Maynds Tower was adjusted on June 7.

8

End of 19th FP
Monthly Contract Rent

Status of Contract Renewal■ 19th Fiscal Period Contract Renewal Tenants
Cancellation fromContract Renewal Area 0.6■ Changes in Rent Increase/Decrease Rate of Contract
Renewal Tenants (sections)

Cancellation from
Non-Contract Renewal Area 0.9(%) 15.0

21.7
Contract Renewal
Area (Excluding
cancellation)

19th Period

0.0

26.5

18th Period 4.8
17th Period

Non-Contract Renewal Area (Excluding cancellation) 76.9

70.8

8.6

8.5

10.0

66.7

7.9*

19.9

14.1*

57.4

12.1

10.0 4.6

77.1

8.2

15th Period

14.4

70.3

12.3

67.3

13.8

14th Period

18.9

0.0

13th Period

40.6

0.8

20

40

0
Decrease

54.6
60

Increase

4.5

0.0

0.0

16th Period

3.1

5.0

2.7

80

Unchanged

Cancellation

2.5
-6.5

-7.0

-15.0

100
（%）

-20.0

(Note) *The ratio of areas for which contract was renewed in the 19th FP to the total rentable area
(278,311.51 m2) at the end of November 2014. (Non-contract renewal area includes properties
scheduled to be sold in the 19th FP)* Of the increase in the 17th FP, 14.1% is due to some tenants switching from sublease agreements tomaster lease agreements and 7.9% is due to negotiations with tenants.

5.2

-4.9

-7.0

-10.2

-10.0

4.0

5.2

0.0

-5.2

-5.0

9.8
4.3

5.0
1.0

Increase rate
Decrease rate

-22.7
-22.7

-25.0

14th Period

Rent increase / decrease rate

15th Period

16th Period

17th Period

18th Period

19th Period*The above indicates rent increase/decrease rates against contract rents before renewals for lease contracts
whose contract renewal periods have arrived in the above periods and whose rent renewals have been
agreed. Rent increase/decrease rate is calculated by netting rent increase and decrease.

■ Monthly Rent Increase/Decrease Due to New Leases and Cancellations (compared to the previous period)
Breakdown (%) of Increased Portion of Rent (35 million yen) Due to New Leases

Breakdown (%) of Decreased Portion of Rent (20 million yen) Due to Cancellations

（%）
100.0

Integral Tower 0.7

（%）
100.0

Daiwa Onarimon 0.6

Daiwa Minami-Senba 1.8

Daiwa Meieki 2.6

Daiwa Shibaura 2.7

Daiwa Nishi-Shimbashi 4.6
Daiwa Shinagawa North 5.0
Daiwa Kudan 5.1
Daiwa Kamiooka 5.2
Daiwa Ginza 6.8

Daiwa Azabudai 3.0
Daiwa Nihonbashi Horidomecho 3.8

Daiwa Shibaura 2.7

80.0

Daiwa Kudan 7.3

Daiwa Tsukiji 2.8

80.0

Daiwa Nishi-Shimbashi 10.6

Daiwa Azabudai 3.4

Daiwa Ginza 10.9

60.0

Daiwa Osaki 3-chome 10.6

60.0

Daiwa Osaki 3-chome 19.0
40.0

Shinjuku Maynds Tower 50.3

40.0

E SPACE TOWER 19.1
20.0

20.0

Daiwa Shinagawa North 21.0
0.0

0.0

■ Occupancy Rate

■ Rate of New Leases and Cancellations*

(%)
100.0

(%)
20.0
97.7
95.9

95.0

96.3 96.4

96.4

95.4

95.0

97.2 97.3

96.7 96.6

13.4
10.0

96.0 96.3

7.2
3.9

94.3

8.2

3.2 3.3

5.7

4.4

6.1

6.2
2.0

2.2

0.0

92.8
92.4
90.0

85.0

9.8

7.4

-3.4 -3.9

-3.9

85.7

Occupancy rate (actual)
Occupancy rate (forecast)Occupancy rate (forecast)(as of disclosure in January 2015)

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
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

-10.0
-12.0
-20.0

-14.7

-5.9

-7.3

-6.3

-5.3

Rate of new leases
Rate of cancellations

-2.4

-2.8
-6.1

-1.2

-5.7

Expected rate of new leases
Expected rate of cancellations

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
7th
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period*Transition of rate of new leases and cancellations areas to the total rentable area.

I. Overview of Daiwa Office Investment Corporation

9

Internal Growth Measures

Internal Growth Strategies
Continuous internal growth and maximization of asset value through “Bonji-Tettei”“Bonji-Tettei”
Accurate grasp of present
situations◦Accurate understanding of the leasing market◦Catching real opinions of occupying tenants◦ Understanding features of portfolio properties◦ Thorough budget control

Activities for internal growth◦Proactive exchanges with brokers◦Accompanying new tenant candidates to a viewing◦Frequent visit to tenants◦ Conducting tenant satisfaction surveys◦ Full examination of properties◦ In-depth numerical analysis

Realization of internal growth◦Prompt and accurate strategic lease-up◦Realizing stable revenue over a long-term by building solid relationship with tenants◦Reliable cost control based on rigorous repair plans, etc.

Aim to maximize asset value
Office Management Team (9 members)This team aims to maximize asset value with the specialists group by placing personnel in charge of allproperties in the investment corporation’s portfolio.

Investment Planning Team (2 members)

Middle office work: Budget and performance management for the portfolios

Construction Management Team

Engineering: Formulation and implementation of construction planning of the assets(2 members)(Note) Numbers of members are as of June 30, 2015

Status of Properties Subject to Strategic Leasing Improvement

Strategic Renewal■ Daiwa Ebisu 4-chome (acquisition price: 4,135 million yen)

■ Daiwa Akasaka (acquisition price: 9,200 million yen)

Rinsen Elementary School
o
etr
oM e
ky LinTo iyaHib,
ikyo, Sa Linenote kuama hinju
JR Y onan S
Sh

Ebisu Sta.
Mizuho Bank
Shibuya Ebisu
Post OfficeDaiwa Ebisu 4-chome

Kakezuka
Elementary School
Ebisu Garden Place

Overview
・The property is near to railway stations being an approx.
4-minute walk from Ebisu Station on the JR Yamanote,
Saikyo and Shonan-Shinjuku Lines as well as an approx.
6-minute walk from Ebisu Station on the Tokyo Metro
Hibiya Line.
・On the 1st floor is a freight handling space and on the 2nd
floor is a multi-purpose space that can be used as a pressroom, show room and studio among other things.

Changes in occupancy rate
◦ Acquired the property which had been used by the seller company for itself at the beginning ofDecember 2014. The seller concluded a
100.0(%)
periodical leasing agreement even after
100.0
100.0
100.0
the sale and occupied the property until
the end of March 2015. The occupancy
50.0
rate became 0% after their move-out.
◦ New tenant leasing the entire building isscheduled to move in in September 2015
0.0
0.0
0.0
Upon Acquisitionand occupancy rate is expected to be‘14/12
‘15/3
‘15/6
‘15/9
100%.
Initiatives for leasing◦ By narrowing down a target to IT/apparel companies located in neighboring wards, explored demands
for both leasing of the entire building and floor-by-floor leasing at the same time. (Advertised that800+ tsubos of empty floor space was very rare in Shibuya Ward where the vacancy rate was trending
downwards.)◦ Since the building had been recognized by brokers as having specifications of a company-owned andoccupied building, held a property viewing for several brokers after renovating it into a building suitablesectional leasing. By correcting the image of the building and encouraging understanding of it, raised
an appeal to end tenants.
◦ As a result, received many responses for both leasing of the entire building and floor-by-floor leasing,leading to a conclusion with a quality tenant for leasing of the entire building.
◦The initial expected NOI of 4.2% is expected to be NOI 5.3% on a normal basis**NOI on a normal basis is calculated based on costs at the time of acquisition (excluding new leasing fees).

10

akasaka Sacas

Tokyo

e

a Lin

iyod

o Ch

Metr

Daiwa Akasaka

Overview
・The property is located a2-minute walk from
Akasaka Station on Tokyo
Metro Chiyoda Line.
・The area has a number ofleading domestic
companies, foreign capitalcompanies, etc. and is oneof the largest downtown in
the Tokyo metropolitan
area. It is a popular area
where commercial andservice-related companies
are densely located.

Akasaka Sta.
Kokusai
New Akasaka Building,
East Building

Formerentrance
New entrance

Kokusai
New Akasaka Building,West Building

Strategy to enhance property value throughrenewal works◦ By making an opening and installing a new entrance
in addition to the former one, distance from thestation was further shortened to 1-minute walk. With
this improved convenience, will seek to attract new
tenants with favorable terms.
◦ The newly constructed entrance allows people tocome and leave the building without going throughthe bustling area and offers more quiet businessenvironment to those working in the building or tovisitors. Due to such, will raise tenant satisfaction
and stabilize occupancy rate of the property in orderto improve profits through favorable rent revisions.

Measures to Increase Portfolio Value■ Measures to Improve Customer Satisfaction
Installation of digital signage at shinyon
curumu1F windbreak room

■ Coexistence with Local Societies
B2F Door to the passageway
to subway stations

Cooperated in holding “Marché to Support Reconstruction of Tohoku” organized by EMC
Japan K.K. and “Parade Calling for Eradication of Drunk Driving” organized by Harajuku
Police Station at Shinjuku Maynds Tower

Displaying a floor map, introducing
tenants and shops nearby, etc. withdigital signage■ Renewal of Restrooms
Daiwa Azabudai

Daiwa Shinagawa North“Marché to Support Reconstruction of Tohoku” “Parade Calling for Eradication of Drunk Driving”
Date of the event: July 1, 2015 (Wednesday)■ Strategic Tenant Attraction (Daiwa Ginza)

BeforeBrought in tenants that give existing shop tenants
the opportunity to increase customers. As it faces
busy Corridor Dori, awareness of the building willgrow as well with the increase of visitors.
Mon Loire
Premium chocolate brand which is opening its
shops mainly in Hyogo (Kobe in particular) and
Osaka

After

Environmental Efforts■ Concluded Green Lease Agreement with Tenant of Shinjuku Maynds Tower
The Investment Corporation concluded a green lease agreement with a tenant of Shinjuku Maynds Tower as part of environmental measures and measures for enhancing tenantsatisfaction, and installed LED lightings in the space occupied by the tenant. As a result, the tenant’s electricity bill was reduced by more than a half compared to before theinstallment and the owner was able to reduce investment burden by receiving a green lease fee.
Shinjuku Maynds Tower

Reduction of Costs Borne by Tenants(%) 100.0 Cost for exchanging light bulbs

6.2

80.0
60.0

Electricity bill
40.0
20.0
0.0

93.8

Benefits for Tenants
Reduced cost

21.8

Cost for purchasing/installing LED lightings

Green lease fee
to be paid to theInvestment Corporation Allocated to

36.4

Electricity bill

41.8

Expected
repair cost

・Reducing utility bills and maintenance costs
・Improving working environment in offices
・Contributing to corporate social responsibility(CSR)
・Enhancing the company´s image

Benefits for the Investment Corporation
・Reducing maintenance costs
・Enhancing property value by making
energy-saving investments
・Receiving green lease fees

Costs borne by the tenant
Costs borne by the tenant
Costs borne by the owner(before)(after the installment)(after the installment)*A green lease is a method to realize facility renewals of a section occupied by a tenant under a scheme which brings merits to both the tenant and the owner.

■ Acquired Glass City Shibuya which was Awarded "A rank" in CASBEE for Market Promotion Certification System
Glass City Shibuya was awarded "A rank" in CASBEE for Market Promotion (2012 edition) certification system.
Comprehensive Assessment System for Built Environment Efficiency (CASBEE) is a system established under the leadership of Ministry of Land,
Infrastructure, Transport and Tourism in 2001 with an aim to comprehensively recognize and assess highly environmental and well-managed real estate
properties such as office buildings.
"CASBEE for Market Promotion" was developed for utilization of CASBEE' s building assessment results when making appraisals, and evaluation
standards are drawn up so that real estate developers and dealers would be able to utilize CASBEE.
Evaluation items are comprised of five categories of "energy/greenhouse gases," "water," "utilization of sources/safety,""biodiversity/land" and "indoor environment." These are similar to environmental performance evaluation items in LEED, which is a
global environmental assessment program.

Glass City Shibuya

I. Overview of Daiwa Office Investment Corporation

11

External Growth Measures
Investment in selectively chosen competitive properties

Summary and Content of Public Offering■ Summary of Public Offering
Insurance type
Number of investment units offered
Issue price
Paid-in priceTotal paid-in amountPublic offering (Global offering)
Total: 43,000 units, Primary offering: 41,045 units, Third-party allocation: 1,955 units
583,050 yen
563,914 yen
24,248 million yen (including third-party allocation)■ Changes in Major Indices Due to Public Offering
End of the 18th FP
Major Indices(Ended November 2014)

Number of properties
Total assets (total of acquisition prices) (million yen)
NOI yield (Annualized) (%)
NAV per unit (yen)Average building age (years)
Average distance from the nearest station

End of March 2015

Properties Acquired
Upon Public Offering

45 properties
391,659
3.67
484,462
20.1

3 properties
49,6004.61
16.4

46 properties
387,557
3.65
478,051
21.4(minutes on foot)Number of tenants
Occupancy rate (%)
Loan-to-value ratio (%)

After Public
Offering
48 properties
441,2593.80
515,278
19.9

3.8

3.6

4.5

3.7

479
97.2
40.2

427
98.2
41.4

113
86.0
-

537
95.7
41.2

(Note 1) Figures for end of the 18th FP and end of March 2015 are figures at those points of time.
(Note 2) NOI yield for properties acquired upon public offering is obtained using expected NOI at the time of acquisition. Average building age is as of the end of May 2015. The number of tenants and occupancy rate
are calculated by using figures as of the end of May 2015 for Glass City Shibuya and Meguro Place Tower and figures as of June 2, 2015 for River Gate.
(Note 3) NAV per unit = (Total assets + Total appraisal value at the end of the period - Total book value at the end of the period) / Number of issued investment units(Note 4) Figures for after the public offering are calculated based on actual figures at the end of May 2015. Average building age is as of the end of June 2015. LTV is as of the end of July 2015.
(Note 5) LTV after the public offering = (Interest-bearing liabilities at the end of May 2015 -Short-term loans planned to be repaid with part of proceeds from the public offering (5.5 billion yen)) / (Total assets as of theend of the 19th FP + Total paid-in capital for the public offering, etc. - Short-term loans planned to be repaid with part of proceeds from the public offering (5.5 billion yen)). LTV after the public offering
remains unchanged thereafter.

■ Improvement of Portfolio’s Quality through Asset Replacements in 19th FP (ended May 2015)

Properties
acquiredin the 19thFP

Shibuya Ward

Shinjuku Ward

Shibuya Ward

Shibuya Ward

Shibuya Ward

Meguro Ward

Daiwa Ebisu 4-chome
Building age: 17.5 years
4-minute walk from Ebisu
StationAcquisition price:
4.13 billion yen
NOI yield: 4.5%

LAQUAS Higashi Shinjuku
Building age: 4.8 years
3-minute walk from Higashi
Shinjuku Station
Acquisition price:
8.45 billion yen
NOI yield: 4.4%

Concept Aoyama
Building age: 13.5 years
4-minute walk from Gaienmae
StationAcquisition price:
9.8 billion yen
NOI yield: 4.2%

Shinsen Place
Building age: 13.7 years
4-minute walk from Shinsen
StationAcquisition price:
4.8 billion yen
NOI yield: 4.7%

Glass City Shibuya
Building age: 11.3 years
9-minute walk from Shibuya
StationAcquisition price:
16.0 billion yen
NOI yield: 4.1%

Meguro Place Tower
Building age: 5.9 years
6-minute walk from Meguro
StationAcquisition price:
5.6 billion yen
NOI yield: 4.4%

Total acquisition price 6 properties: 48.78 billion yen

Assetreplacement

Properties
sold in the
19th FP

Chuo Ward

Chuo Ward

Koto Ward

Chuo Ward

Yokohama City

Daiwa Nihonbashi Honcho
Building age: 51.4 years
4-minute walk from
Mitsukoshimae Station

Daiwa Ginza 1-chome
Building age: 53.4 years
2-minute walk from Ginza
1-chome Station

Daiwa Kinshicho
Building age: 23.4 years
9-minute walk from Kinshicho
StationDaiwa Tsukiji 616
Building age: 21.1 years

Benex S-3
Building age: 21.3 years
4-minute walk from ShinYokohama Station

8-minute walk from Tsukiji Station

Total transfer price 5 properties: 21.81 billion yen*Building ages are as of May 31, 2015. Distance of 80m from the nearest station is regarded as one-minute walk. NOI yield indicates expected NOI yield.

12

Newly Acquired Properties■ 20th Fiscal Period

River Gate (acquired on June 2, 2015)
Medium-term asset management strategy• Early lease-up taking advantage of property
features
6
Aim for early lease-up by showcasing multiple
ute
n
o
a
lit R )
po ay ine
tro ssw a L
convenient transportation means such as highly
Me xpre ojim
a
k
E
u
iy
(M
Hib
Suitengu-mae Sta.
convenient subway lines available at the nearest
troe
The Royal Park
M
yo
Hotel
Tok
station, T-CAT enabling an easy access to the airport,
Tokyo CityAir Terminal
metropolitan expressway with its interchange closelynelita yoinpRiver Gatea pL
tro
Me pressw y Loo
located as well as taking in the needs for consolidation
Ex er Cit
Inn
of district offices of companies which control vast areas
with the size of standard floor being as big as
approximately 600 tsubo.
Nihonbashi
Hakozakicho•
Enhancement of relationship with occupying
Location
Chuo-ku, Tokyotenants
Site area
7,088.66 m2
Aim for stable property occupancy by realizing longer
Structure and floors S SRC RC B2/20F
term occupancy through enhancing tenant services byTotal floor area 53,790.26 m2
grasping the tenant needs at an early stage and making
29,700 million yen
timely responses while keeping periodical contact with
Appraisal price(as of April 1, 2015)
tenants.
Completion
February 1994
Occupancy rate 80.8% (as of June 2, 2015) • Reduction of LCC with accurate construction works
Work to improve LCC by conducting maintenance works
Number of tenants 87 (as of June 2, 2015)(Note)appropriate for the building age(Note) Including 71 rental units.
ive

Su
mid
aR

ine
nL
mo
nzo
n
Ha
lita
tro
po y
Me
tro swayo
Me pres te 9Tok
Ex Rou wa
ga
ka e)(Fu Lin

r

Lin
e

ei sa
To akuNingyocho As e
Lin
Sta.

■ 19th Fiscal Period

Glass City Shibuya (acquired on May 1, 2015)

Tok
yu
De
n-e

Meguro Place TowerT
To oky
yo u
ko
Lin

Meg

uro

tro
Tokyo Meu Line
NambokLine
Toei Mita

Doriatre MeguroeMeguro Sta.

Me

m
Ya

ro
gu

e

Lin

Nanpeidaicho Shibuya-ku,
Tokyo
Site area
2,452.64 m2
Structure and floors S SRC B1/11F
Total floor area 10,639.97 m2
million yen
Appraisal price 17,000(as of April 1, 2015)
Completion
February 2004
Occupancy rate 100.0% (as of May 31, 2015)
Number of tenants 11 (as of May 31, 2015)
Location

Medium-term asset management strategy• Conduct sales strategy reading the trend of the leasing market in
Shibuya area
• Aim for improved profits through terms revisions in accordance withthe market trend by realizing enhanced relationship with existing
tenants and stable occupancy over a long-term.
• Aim for reduction of operational management costs by collaboratingwith nearby buildings owned by the Investment Corporation

Location

Tokyu o Line
Megur

Arco Tower Annex

yo

aik
/S

er
Riv

ote

an

Glass City
Shibuya

HINODEHigh School2nlita ute
po Ro
tro way ine)
Me press ro L
Ex egu(M

Shibuya Mark City

JR

Daiwa Shibuya
Dogenzaka
Shinsen Place

Shibuya Sta.

o
Metr
Tokyo Line
Ginza

Shibuya Sta.

ne

Keio hiraInokasLine

tro
Tokyo Meon
HanzomLine

anote LiE SPACE
TOWER
Shinsen Sta.

SEIBU

National Museumof Nature andScience, Institutefor Nature
Study

JR Yam

109
e
i Lin
osh
n-t

Tokyo Metro
Fukutoshin Line

SEIBU

Tokyu

Meguro Place Tower (acquired on May 1, 2015)

Meguro Meguro-ku, Tokyo

Site area
899.99 m2
Structure and floors S SRC B2/14F
Total floor area 4,807.48 m2
million yen
Appraisal price 5,810(as of April 1, 2015)
Completion
July 2009
Occupancy rate 100.0% (as of May 31, 2015)
Number of tenants 15 (as of May 31, 2015)

Medium-term asset management strategy• Conduct sales activities that take in various office needs by taking
advantage of property features• By building functions as an office building with diversified tenants,
accommodate needs of each tenant to realize stable occupancy• Aim for improved profits by realizing the needs of existing tenants
and revising terms in accordance with the market

I. Overview of Daiwa Office Investment Corporation

13

External Growth Measures

Changes in Asset Size and Trading Performance
Aim to achieve medium-term goal of asset size of 500 billion yen by utilizing acquisition capability earned through capital increase
80.0 (%)(billion yen) 550
Total Acquisition Price

LTV (based on total assets)

500.0

500

Investment for competitive
properties after thorough selection

450
400
350
300
250
200

287.3

278.1

269.1

265.0

25.5

150
100
50

28.9

28.1

Acquisition properties
Acquisition property

Acquisition properties

Acquisition property• Daiwa Nishi-Shimbashi• Daiwa Kudan• E SPACE TOWER• Daiwa Osaki
3-chomeAcquisition properties

Acquisition property• Daiwa Jimbocho• Daiwa Kayabacho• Daiwa Jinbocho 3-chome• Daiwa Nihonbashi
Hongokucho

8th
Fiscal Period

44.3

40.2

41.2

Acquisition properties

Acquisition property• Azabu Green Terrace• Kitahama
Grand Building• River Gate

40.0

30.0

20.0
Acquisition properties

Acquisition property0• Daiwa Shibuya Dogenzaka• Daiwa Akasaka• Daiwa Shibuya Miyamasuzaka

60.0

50.0

43.0

40.6

37.5

34.4

34.2

34.0
25.3

314.9

313.2

311.3

413.2

387.5

364.0

352.7

332.0

70.0

441.2

Acquisition properties

Acquisition property• shinyon curumu• Daiwa Meieki• Daiwa Kamiooka• Integral Tower• Daiwa Ebisu 4-chome• LAQUAS Higashi Shinjuku• Concept Aoyama• Shinsen Place• Glass City Shibuya• Meguro Place Tower

10.0

0

9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
After
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Public Offering

Mediumterm goal

Current Portfolio and Acquisition Policy
DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among the vast information on properties obtained
through diverse sourcing.
■ Acquisition Policy■ Distribution Chart of Portfolio Properties* is for properties acquired upon public offering, is for properties acquired in the 19th Fiscal

Building age (years) Period, is for properties acquired after the sponsor change and is for properties sold in the 19th
Fiscal Period. Distance to station is indicated by calculating 80m as one minute.
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.
• Target properties to improve stability and profitability of our existing portfolio.

55

Daiwa Ginza 1-chome
Daiwa Nihombashi Honcho

50• 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.

■ Number of Properties Reviewed for Acquisition

400

427

Number of properties reviewed (left axis)
Number of properties reviewed in detail (right axis) 416

335

300
200

35

44 221
30

100
0

14

11th
FiscalPeriod12th
FiscalPeriod13th
FiscalPeriod

268
25

14th
FiscalPeriod

300
28

15th
FiscalPeriod

264

100

15

356

16th
FiscalPeriod17th
FiscalPeriod

80
60

26

18th
FiscalPeriodDaiwa KinshichoRiver Gate

20

Benex S-3

Daiwa Tsukiji 616

Daiwa Ebisu 4-chome

296

17

30
25

* Number of gross proposals. (cases)(cases)
500

35

15

Shinsen Place
Concept Aoyama

10

Glass City Shibuya

40

23
19th
FiscalPeriod2005LAQUAS Higashi Shinjuku

0

0

1

2

3

4

5

Meguro Place Tower

6

7

11
8
9
10
Distance to station (minutes)

Acquisition of Properties after Sponsor Change
Acquisition
timing9th Period

10th Period

Total acquisition price: 202, 807 million yen

11th Period

12th Period

13th Period

14th Period

15th Period

E SPACE TOWER

Daiwa Nihonbashi
Hongokucho

Daiwa
Osaki 3-chome

shinyon curumu

Chiyoda Ward, Tokyo

Shibuya Ward, Tokyo

Chuo Ward, Tokyo

Shinagawa Ward, Tokyo Shinjuku Ward, Tokyo

5,600 million yen

3,550 million yen

24,000 million yen

1,721 million yen

1,650 million yen

9,650 million yen

Daiwa Property Co,
Ltd.

Tokyu Land
Corporation

Endeavor Realty
Fund YK (Note 1)

Tosei Corporation

MCR Six GK

Two domestic
industrial companies

Mar. 25, 2011

Mar. 29, 2011

July 8, 2011

May 11, 2012

Sept. 18, 2012

Dec. 3, 2012
Apr. 12, 2013

Daiwa Kayabacho
Daiwa
Building
Jinbocho 3-chome

Daiwa Jimbocho

Daiwa NishiShimbashi

Daiwa Kudan

Area

Chiyoda Ward, Tokyo

Minato Ward, Tokyo

Chiyoda Ward, Tokyo

Chuo Ward, Tokyo

Acquisition price

4,150 million yen

5,000 million yen

4,000 million yen

Seller

ORIX JREIT Inc.

Japan Core Asset 2 Shining Nova No. 5
YK (Note 1)
B (SPC)

Acquisition dateMar. 10, 2010

Property nameAcquisition
timingAug. 13, 2010

Sept. 2, 2010

15th Period

16th Period

17th Period

Daiwa Meieki

Daiwa Kamiooka

Daiwa Shibuya
Dogenzaka

Daiwa Akasaka

Daiwa Shibuya
Miyamasuzaka

Integral Tower

18th Period
Azabu Green
Terrace19th Period

Kitahama Grand
Building

Daiwa Ebisu
4-chome

Property nameArea

Nagoya City, Aichi

Yokohama City, Kanagawa Shibuya Ward, Tokyo

Minato Ward, Tokyo

Shibuya Ward, Tokyo

Suginami Ward, Tokyo

Minato Ward, Tokyo

Osaka City, Osaka

Shibuya Ward, Tokyo

Acquisition price5,300 million yen

2,000 million yen

4,500 million yen

9,200 million yen

7,000 million yen

15,220 million yen

14,000 million yen

9,481 million yen

4,135 million yen

SellerDomestic special
purpose company

Shimizu Corporation

Domestic special
purpose company

Hakuba Capital 1
TMK (Note 1)

E Buildings Limited Ogikubo Building YK Azabu Green Terrace(Note 1)
Liability Company
GK

GK North Beach

Domestic industrial
company

Acquisition dateFeb. 1, 2013

Mar. 1, 2013

July 3, 2013

Aug. 9, 2013

Sept. 27, 2013

Aug. 1, 2014

Dec. 1, 2014

Acquisition
timing19th Period
LAQUAS Higashi
Shinjuku

Concept Aoyama

Shinsen Place

May 29, 2014

July 4, 2014

20th Period
Glass City Shibuya

Meguro Place
Tower

River Gate

Total
Property nameArea

Shinjuku Ward, Tokyo

Shibuya Ward, Tokyo

Shibuya Ward, Tokyo

Shibuya Ward, Tokyo

Meguro Ward, Tokyo

Chuo Ward, Tokyo

Acquisition price8,450 million yen

9,800 million yen

4,800 million yen

16,000 million yen

5,600 million yen

28,000 million yen

SellerHigashi Shinjuku
Building TMK

Domestic special
purpose company

Domestic special
purpose company

Glass City TMK

Meguro Place TMKThames TMK

Dec. 3, 2014

Mar. 2, 2015

Mar. 2, 2015

May 1, 2015

May 1, 2015

Jun. 2, 2015

(Note 1)

Acquisition date

(Note 1)

(Note 1)

202,807 million yen(Note 1)

(Note 1) "YK" stands for limited liability company and TMK (tokutei mokuteki kaisha) stands for special purpose company.
(Note 2) The sum of i) the total acquisition price from the time of the above sponsor change on June 2, 2015 and ii) prices for additional acquisition of existing properties or of the site in existing properties during thesame period, is 203,227 million yen.

I. Overview of Daiwa Office Investment Corporation

15

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

Status of Interest-Bearing Liabilities (as of May 31, 2015)
During the 19th Fiscal Period, DOI conducted debt financing of 43.5 billion yen in total for the repayment of 13 billion yen of loans and to raise
funds for the acquisition of new properties. Although part of the debt financing was short-term borrowings due to strategic reasons, DOI wasable to make effort to extend borrowing periods and diversify repayment dates for long-term borrowings. DOI will continue to focus on stablefinancial management.
■ Interest-Bearing Liabilities■ Change in Remaining Years at the Time of(billion yen) 280

70.0 (%)
Interest-bearing liabilities (left axis)

240

60.0

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

200

50.0

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

160

40.0

(year) 10.0 Procurement of Interest-Bearing Liabilities
Average year remaining at the period end (right axis)

9.0

Average remaining years at the time ofprocurement during the 19th Fiscal Period (left axis)

8.0

7.1

7.0
6.0

6.4

3.5
3.0

5.0

2.5

120

30.0

4.0

2.0

80

20.0

3.0

1.5

2.0

1.0

1.0

0.5

0.0

0.0

40

10.0

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 End of End of End of After
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th public
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period offering(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties■ Diversification of Repayment Dates
Investment Corporation Bond

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th 37th 38th
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Fixed- to
Floating-Rate Borrowings■ Ratio of Long- to
Short-Term Liabilities

After Public
Offering

After Public
Offering

29.0
31.1
%
% End of

6.6
%
9.3%

19th Fiscal
Period 68.9
%

71.0
%

8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th
Period Period Period Period Period Period Period Period Period Period Period Period(Note) Dotted line indicates average remaining years at the time of procurement
during the 19th Fiscal Period excluding short-term borrowings■ Balance of Borrowings by Financial Institution(million yen)
18,000End of19th Fiscal
Period90.7%
93.4%

Fixed interest rates
Long-term borrowings
Floating interest rates
Short-term borrowings, etc.
(Note) “After public offering” indicates assumed figures as of July 31, 2015.

Financial institution

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank
Development Bank of Japan
Mizuho Bank
Shinsei Bank
The Bank of Tokyo-Mitsubishi UFJ
Resona Bank
Mitsubishi UFJ Trust and Banking
The Bank of Fukuoka
Kansai Urban Banking Corporation
Mizuho Trust and Banking
Aozora BankORIX Bank Corporation
The Gunma BankThe Shizuoka Bank
Tokio Marine & Nichido Fire Insurance
The Musashino Bank
The 77 Bank
The Higashi-Nippon Bank
The Hiroshima Bank
The Kagawa BankThe Yamaguchi Bank
Taiyo Life Insurance Company
Nippon Life Insurance Company
Fukoku Mutual Life Insurance
No. 3 Unsecured Investment Corporation Bonds
No. 4 Unsecured Investment Corporation Bonds
Total

Balance (mm yen)

41,90025,85020,25017,40013,00012,50011,500
6,000
5,500
5,000
5,000
4,500
2,500
2,500
2,000
2,000
2,000
2,000
1,500
1,000
1,000
500
300
300
200
3,000
2,100
191,300■ Status of Rating
Rating agency

Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

16

5.0 (year)

4.7 4.5
4.4
8.1(Note)
4.0

Target rating

RatingRating outlook

Issuer rating

A+

StableLong-term issuer rating

AA−

Stable

Share

21.9%
13.5%
10.6%
9.1%
6.8%
6.5%
6.0%
3.1%
2.9%
2.6%
2.6%
2.4%
1.3%
1.3%
1.0%
1.0%
1.0%
1.0%
0.8%
0.5%
0.5%
0.3%
0.2%
0.2%
0.1%
1.6%
1.1%
100.0%

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

19th Period 18th Period 17th Period 16th Period 15th Period

Dec. 1, 2014 From June 1, 2014 From Dec. 1, 2013 From June 1, 2013 From Dec. 1, 2012
( FromTo May 31, 2015 )( To Nov. 30, 2014 )( To May 31, 2014 )( To Nov. 30, 2013 )( To May 31, 2013 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
10,387
9,764
8,588
8,432
7,615
Rental revenues
10,112
9,693
8,491
8,367
7,520
Operating expenses
5,617
5,325
4,827
4,755
4,306
Property-related expenses
4,487
4,325
3,931
3,870
3,499
Operating income
4,770
4,439
3,761
3,677
3,309
Ordinary income
4,032
3,642
3,006
2,956
2,590
Net income
4,032
3,641
3,016
2,960
2,589
(2) Properties, etc. (as of end of period)
Total assets
432,233
399,555
380,723
363,654
342,573[period-on-period percentage changes][+8.2%][+4.9%][+4.7%][+6.2%][+5.2%]
Interest-bearing liabilities
191,300
160,800
163,700
147,700
128,300
Net assets
222,955
222,593
201,655
201,683
201,345[period-on-period percentage changes][+0.2%][+10.4%][−0.0%][+0.2%][+0.1%]
Unitholders’ capital
219,156
219,156
198,781
198,781
198,781(3) Distributions
Total distribution amount
4,032
3,641
3,016
2,960
2,589
Dividend payout
100.0%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)
441,000
441,000
395,798
395,798
395,798
Net assets per unit (yen)505,566
504,746
509,490
509,561
508,707
Distribution per unit (yen)
9,142
8,256
7,621
7,478
6,542
Distribution amount from earnings per unit (yen)
9,142
8,256
7,621
7,478
6,542
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
1.0%
0.9%
0.8%
0.8%
0.8%
Notes 2and3[annual rate][1.9%][1.9%][1.6%][1.7%][1.6%]
ROE
1.8%
1.7%
1.5%
1.5%
1.3%
Notes 3and 4[annual rate][3.6%][3.4%][3.0%][2.9%][2.6%]
Capital ratio
51.6%
55.7%
53.0%
55.5%
58.8%
[period-on-period percentage changes][−4.1%][+2.7%][−2.5%][−3.3%][−3.0%]LTV (loan to value)
44.3%
40.2%
43.0%
40.6%
37.5%
Property leasing cash flows (NOI)
Note 5
7,180
6,866
5,916
5,826
5,300
(6) Other Referential Information
Number of investment properties
47
46
44
44
41
Number of tenants
Note 6
450
479
458
442
410
288,833.07 286,088.89 259,381.62 244,877.17 225,651.87
Total rentable area (m2)Occupancy rate
Note 7
97.3%
97.2%
96.4%
96.3%
95.0%
Depreciation
1,554
1,497
1,356
1,329
1,280
Capital expenditures
905
570
454
294
278
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 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.
Figures for the 17th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 18th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 19th Fiscal Period are the annualized figures calculated based on 182 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as “DOI”)
was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the “Investment TrustAct”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management (hereinafter referred to as
the “Asset Manager”)).
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 (stock code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition price), subsequent
activities, such as additional acquisition of properties and replacement of portfolio properties, resulted in the assets
under management amounting to 413,259 million yen as of the last day of May 2015.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear portfolio
development policy of specializing in investment in office buildings, with a particular focus on investment in a total
floor area of more than about 2,000m2 situated in downtown Tokyo, as well as through dedicated efforts to heighten
tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from December 2014 to May 2015)
The Japanese economy during the fiscal period under review saw a modest recovery as the reboundfrom the rush demand that accompanied the consumption tax hike implemented in April 2014 recededagainst the backdrop of improving employment and income environments. Moreover, an improvement ofcorporate performance and increase of capital investment were seen, boosted by the advancing yen
depreciation and high stock prices from the Bank of Japan’s large-scale additional monetary easing
measures as well as the decision to postpone the additional consumption tax hike and depression ofprices due to low crude oil prices. The GDP in the period of January to March 2015 announced by the
Cabinet Office indicated a two-quarter consecutive growth, and the Japanese economy is expected togradually recover as improvements are seen in the employment and income environments andunderpinning from private consumption is expected.
In the office building leasing market in central Tokyo, with new supply having settled down, the vacancy
rate took a turn after peaking in June 2013, dropping to 5.17% at the end of May 2015. Led by
improvement in the vacancy rate for large buildings, the overall vacancy rate that includes small- to
medium-sized buildings also continues to be on an improving trend. The drop in the vacancy rate isleading to a stronger sense that office rent is also bottoming out, and rent increases were seen for large
buildings in some areas. The market as a whole continues to see increase in rent, albeit slight.
For the office building transaction market, an appetite for property acquisitions continued to be strong
among real estate companies, funds (including J-REITs) and oversea investors with the continuing
favorable equity procurement environment and proactive lending attitude by financial institutions backed
by the forecast of an increase in property prices in accordance with expectations for economic recovery.
(B) Management Performance
In view of increasing the long-term EPS (EPS (net income per unit) after deducting gain on sales ofproperties) over the medium to long term, DOI continued to work on “external growth,” which aims toboost revenue through acquisition of properties, and “internal growth,” which aims to maximize income
generating from existing properties.
Concerning external growth, DOI acquired “Daiwa Ebisu 4-chome Building” (acquisition price: 4,135
million yen) and “LAQUAS Higashi Shinjuku” (acquisition price: 8,450 million yen) in December 2014 and“Concept Aoyama” (acquisition price: 9,800 million yen) and “Shinsen Place” (acquisition price: 4,800
million yen) in March 2015, “Glass City Shibuya” (acquisition price: 16,000 million yen) and “Meguro Place
Tower” (acquisition price: 5,600 million yen) in May 2015. Moreover, DOI sold five properties (Daiwa
Nihombashi Honcho, Daiwa Ginza 1-chome, Daiwa Kinshicho, Daiwa Tsukiji 616 and Benex S-3). As aresult, DOI’s assets under management as of the end of the 19th Fiscal Period (May 31, 2015) totaled 47
properties, the sum total of acquisition prices of which amounted to 413,259 million yen.
Concerning internal growth, while the office leasing market weakened, DOI conducted proactive
leasing, such as capturing needs for floor expansion within the same property through strengthening
relationships with existing tenants and reinforcing collaboration with leasing brokers and property
managers. As a result, the occupancy rate as of the end of the 19th Fiscal Period (May 31, 2015) was 97.3%.

18

(3) Overview of Capital Procurement(A) Procurement of Capital for New Property Acquisitions
In the 19th Fiscal Period, DOI made the following borrowings to fund the acquisition of new properties.
(a) A total of 4,000 million yen was borrowed from Sumitomo Mitsui Banking Corporation, the Bank ofTokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd. and Shinsei Bank, Ltd. on December 1, 2014 to fund theacquisition of a new property (Daiwa Ebisu 4-chome Building) acquired on the same day.
(b) A total of 8,500 million yen was borrowed from Sumitomo Mitsui Banking Corporation, the Bank ofTokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, the Development
Bank of Japan Inc., Resona Bank, Ltd. and Mitsubishi UFJ Trust and Banking Corporation on
December 3, 2014 to fund the acquisition of a new property (LAQUAS Higashi Shinjuku) acquired on
the same day.
(c) A total of 22,500 million yen was borrowed from Sumitomo Mitsui Banking Corporation, Sumitomo
Mitsui Trust Bank, Limited, Mizuho Bank, Ltd., Shinsei Bank, Ltd., Resona Bank, Ltd., the Bank ofFukuoka, Ltd., the Development Bank of Japan Inc. and the 77 Bank, Ltd. on May 1, 2015 to fund theacquisition of new properties (Glass City Shibuya and Meguro Place Tower) acquired on the same day.
Furthermore, new investment units were issued through public offering with June 2, 2015 as the payment
date to fund the acquisition of a new property (River Gate) acquired on the same date, but a commitmenttype term loan agreement with a 20,500 million yen maximum available borrowing amount was concluded
with Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, Resona
Bank, Ltd. and Shinsei Bank, Ltd. on April 27, 2015 as a measure against a situation in which the actual
proceeds from the public offering would be less than the initial estimated amount (the agreement ended withthe expiration of the borrowing period on June 17, 2015).
(B) Procurement of Capital for Repayment of Borrowings
In the 19th Fiscal Period, DOI made the following borrowings to fund the repayment of borrowings that were
due for repayment.
(a) A total amount of 2,500 million yen was borrowed from Resona Bank, Ltd. on February 27, 2015 tofund part of the repayment of the 3,000 million yen borrowed from the same bank that was due forrepayment on the same day. The remaining 500 million yen was allocated from cash on hand.
(b) A total amount of 3,500 million yen was borrowed from the Development Bank of Japan Inc. andShinsei Bank, Ltd. on March 31, 2015 to fund part of the repayment of the 7,500 million yen borrowed
from the Development Bank of Japan Inc., Shinsei Bank, Ltd., the Bank of Tokyo-Mitsubishi UFJ, Ltd.,
Sumitomo Mitsui Banking Corporation and Mizuho Bank, Ltd. that was due for repayment on the sameday. The remaining 4,000 million yen was allocated from cash on hand.
(c) A total amount of 2,500 million yen was borrowed from Mizuho Bank, Ltd. and the Bank of TokyoMitsubishi UFJ, Ltd. on May 29, 2015 to fund the repayment of the 2,500 million yen borrowed from
Mizuho Bank, Ltd. and the Bank of Yokohama, Ltd. due for repayment on the same day.
(C) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 19th
Fiscal Period (May 31, 2015) stood at 191,300 million yen (short-term loans payable: 9,500 million yen; longterm loans payable: 176,700 million yen; investment corporation bonds: 5,100 million yen). The balance of thecurrent portion of long-term loans payable stood at 8,300 million yen.
Concerning borrowings in the 19th Fiscal Period, DOI made borrowings centering on periods of between 7
years and 8.5 years with the maximum being 9 years and extend the average remaining period from 4.39
years (18th Fiscal Period) to 4.63 years (19th Fiscal Period). Furthermore, liabilities costs were lowered by
reducing credit spreads.

II. Asset Management Report19

(4) Capital Expenditures during the 19th Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures implemented
during the 19th Fiscal Period. Capital expenditures for the 19th Fiscal Period amounted to 905 million yen
and, when combined with the 228 million yen in repair expenses charged to the 19th Fiscal Period expenses,
totals 1,133 million yen in construction work implemented.
Name of real estate
properties (Location)
Shinjuku Maynds Tower(Shibuya-ku, Tokyo)
Daiwa Tsukishima Building(Chuo-ku, Tokyo)
Daiwa Jimbocho(Chiyoda-ku, Tokyo)

PurposeCVCF upgrading work and renovation
work for disaster prevention facilities
Upgrading of air-conditioning system
Upgrading of air-conditioning system

Other
Total

Period
From:
To:
From:
To:
From:
To:
From:
To:

Oct. 2013
Mar. 2015
Mar. 2015
May 2015
Apr. 2015
May 2015
Dec. 2014
May 2015

Construction
amount paid
(millions of yen)
373
90
58
384
905

(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 19th Fiscal Periodof 10,387 million yen in operating revenue, 4,770 million yen in operating income, 4,032 million yen in ordinary
income and 4,032 million 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”)), DOI decided to distribute the entire
amount of unappropriated retained earnings, excluding fractions of the distribution amount per unit that are lessthan 1 yen. Accordingly, DOI declared a distribution amount per unit of 9,142 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment
The Japanese economy ahead is expected to see the ongoing various economic measures, centering on
the public works projects and financial policies promoted by the Abe administration, and the large-scalemonetary easing policy implemented by Bank of Japan as well as pickup in overseas economies, centering
on developed countries, lead to moderate economic recovery through improvement in corporate
performance, centering on public-investment- and exports-related companies, and recovery in personal
spending. However, factors such as the confusion of the Japanese financial market given the postponementof the consumption tax hike and the turmoil in overseas economies / overseas financial markets with the
emergence of geopolitical risks pose potential risks of disrupting the Japanese real economy and financial
environment and are thus thought to require attention
In the office building leasing market, while new supply is on a low note, factors such as improvement in
employment are stimulating demand, resulting in the vacancy rate dropping. Improvement in corporate
performance is forecast to increase demand for office floor space and rent is expected to improve as aconsequence. In the office building transaction market, backed by the favorable financing environment andexpectations of rent rising, among other factors, property acquisition appetite among investors overseas, realestate companies and funds (including J-REITs) is thought to grow even stronger.
(2) Future Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the office leasing market conditions described above, the tenant side is also expected to become
more selective with properties. Consequently, DOI will carry out operational management under thefollowing policy with 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
Concerning existing tenants, strive to reduce vacancy risks by improving the quality of buildings,
equipment and management system. In addition, concerning new tenants, strive to maintain and raiseoccupancy rates through the provision of services that are of higher satisfaction levels than competing
properties through proactive participation in the market.

20

(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 office environments of high tenantsatisfaction levels by implementing efficient operational management and reviewing systematicconstruction work by optimally leveraging the economies of scale achieved from proactively realizing
external growth.
(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on various
external growth strategies, while maintaining a balance with the asset acquisition environment andfinancing situation. In principle, considerations will focus on Tokyo as the investment target area, but DOI
will also consider investing in competitive properties in cities other than Tokyo from a viewpoint ofterritorially-distributed investments.
As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue tosearch for properties that meet its investment criteria by proactively gathering real estate transaction
market information through greater collaboration with the Asset Manager and Sponsor Group and utilizing
the Group’s extensive network of clients, partners, etc.
In the 19th Fiscal Period, DOI acquired “Daiwa Ebisu 4-chome Building,” “LAQUAS Higashi Shinjuku,”“Concept Aoyama,” “Shinsen Place,” “Glass City Shibuya” and “Meguro Place Tower” which is located inTokyo. DOI believes that acquisition of these properties will contribute to further stabilization andenhancement of the portfolio. DOI will continue to strive to acquire properties in line with the investment
strategy described above.
(C) Financial Strategy
DOI will conduct disciplined financial management of the following basic content.
(a) Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within the rangeof 40% to 50% at maximum, taking into consideration also the real LTV, etc., as a principle.
(b) Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period as a principle.
(c) Aim to have long-term loans account for at least 70% of total loans as a principle.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) 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.
(D) Schedule of Capital Expenditures
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the expected construction amountincludes portions that are expensed as a separate account item of accounting costs.
Expected construction amount(millions of yen)
Name of real estate
properties(Location)

PurposeScheduled
implementation
periodTotalamountAmountpaid
duringcurrent
periodTotalamountalready
paid

Shinjuku Maynds Tower Renovation work for central(Shibuya-ku, Tokyo)
supervisory system

From: Oct. 2013
To: Sept. 2015

297

74

131

Daiwa Ebisu 4-chome
Building(Shibuya-ku, Tokyo)

From: July 2015
To: Nov. 2015

121

–

–

From: Oct. 2013
To: Sept. 2015

110

33

49

Establishment of entrance on the From: Jan. 2015
public open space side
To: Sept. 2015

101

65

–

Renovation work for airconditioning system

of main central
Shinjuku Maynds Tower Upgrading
supervisorysystem VAV and(Shibuya-ku, Tokyo)
controller
Daiwa Akasaka(Minato-ku, Tokyo)

II. Asset Management Report21III. Balance Sheets
As of November 30, 2014 and May 31, 2015

(Thousands of yen)

As ofNovember 30, 2014

As of
May 31, 2015

AssetsCurrent Assets:
Cash and cash equivalents (Notes 4 and 5)

17,767,864

22,790,814

Tenant receivables

303,995

275,792

Consumption taxes receivable

243,389-

Prepaid expenses

322,520

403,225

Deferred tax assets (Note 15)

1,489

185

Other current assets

62,83872,379Total Current Assets

18,702,095

23,542,395

Land

12,302,227

12,302,227

Buildings and structures

3,109,305

3,130,285

Tools, furniture and fixtures

18,53818,958Construction in progress

4,032

3,449

Land in trust accounts

289,916,770

314,767,115

Buildings and structures in trust accounts

90,038,856

91,803,763

Machinery and equipment in trust accounts

826,879

707,599

Tools, furniture and fixtures in trust accounts

116,863

150,965

Construction in progress in trust accounts

548,059

408,642

Other tangible fixed assets in trust accounts

5,909

4,337

(20,113,897)(18,900,000)

2,407,102

2,407,102

306,884

306,884

379,487,527

407,111,326

1,072

883

113,684

113,684

Long-term prepaid expenses

1,094,350

1,304,602

Deferred tax assets (Note 15)104,136

110,868

Deferred investment corporation bond issuance costs

38,28235,344

Others13,87913,5391,365,403

1,578,920

399,555,025

432,232,641

Investment Properties, at cost (Notes 6 and 7):

Less: accumulated depreciation
Leasehold rights
Leasehold rights in trust accounts
Total Investment Properties, net
Other Assets:
TrademarkLease and guarantee deposits in trust

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

22

(Thousands of yen)

As ofNovember 30, 2014

As of
May 31, 2015

Liabilities
Current Liabilities:
Accounts payable

941,245889,756

Short-term debt (Notes 5 and 10)

2,500,000

9,500,000

Long-term debt due within one year (Notes 5 and 10)

16,600,000

8,300,000

336,673

632,432

975

825

-

342,585

Rent received in advance

1,156,701

1,298,772

Other current liabilities

95,502357,535

Total Current Liabilities

21,631,096

21,321,905

5,100,000

5,100,000

Long-term debt (Notes 5 and 10)

136,600,000

168,400,000

Tenant security deposits including trust accounts (Note 5)

13,325,899

14,112,797

Derivative liabilities (Note 5)

304,938

343,138

Total Long-Term Liabilities

155,330,837

187,955,935

176,961,933

209,277,840

219,155,572

219,155,572

3,641,156

4,031,830

222,796,728

223,187,402

Deferred gains or losses on hedges(203,636)(232,601)

Total valuation and translation adjustments(203,636)(232,601)

Total Net Assets

222,593,092

222,954,801

Total Liabilities and Net Assets

399,555,025

432,232,641

Accounts payable – other
Income taxes payable
Accrued consumption taxes

Long-Term Liabilities:
Investment corporation bond (Notes 5 and 10)

Total Liabilities

Net Assets (Notes 9 and 16)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 441,000 units as ofNovember 30, 2014 and May 31, 2015
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments

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

III. Balance Sheets

23

IV. Statements of Income and Retained Earnings
For the fiscal periods ended November 30, 2014 and May 31, 2015

(Thousands of yen)

For the fiscal period ended For the fiscal period ended
November 30, 2014
May 31, 2015
Operating Revenues:
Rental revenues (Note 8)
Other revenues related to property leasing (Note 8)
Gain on sale of investment properties (Note 13)
Total Operating Revenues
Operating Expenses:
Property-related expenses (Note 8)
Asset management fees
Asset custody fees
Administrative service fees

9,693,133
70,578–

10,112,468
34,235240,547

9,763,711

10,387,250

4,324,674
802,292
19,65471,491

4,486,646
838,944
20,432
67,73822,6785,400
78,52921,2785,400
176,7885,324,718
4,438,993

5,617,226
4,770,024

611
638
1,689

798
868
11,653

2,938

13,319546,61135,642
166,054
46,104
5,514

566,001
16,892
159,621–
8,366

Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
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
New investment units issuance costs
Other non-operating expenses
Total Non-Operating Expenses

799,925

750,880

Ordinary Income
Income Before Income Taxes
Income taxes – current
Income taxes – deferred

3,642,006
3,642,006

4,032,463
4,032,463

987
(4)

887
6

Total Income Taxes (Note 15)
Net Income
Retained Earnings Brought Forward

983
3,641,023
133
3,641,156

893
4,031,570
260
4,031,830

Retained Earnings at End of Period

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

24

IV. Statements of Income and Retained Earnings

V. Statements of Changes in Net Assets
For the fiscal periods ended November 30, 2014 and May 31, 2015
Number of
Units(Thousands of yen)

Unitholders’ Equity
Unitholders’CapitalRetained
Earnings

Deferred Gains
or Losses on
HedgesTotal Net
AssetsBalance as of May 31, 2014

395,798

198,780,951

3,016,511(142,335)

201,655,127

Issuance of new investment units

45,202

20,374,621––

20,374,621

Cash distributions declared––(3,016,378)–(3,016,378)

Net income––

3,641,023–

3,641,023

Net changes of items other thanunitholders’ equity

–

–

–

(61,301)(61,301)

441,000

219,155,572

3,641,156(203,636)

222,593,092

Cash distributions declared––(3,640,896)–(3,640,896)

Net income––

4,031,570–

4,031,570

Net changes of items other thanunitholders’ equity

–

–

–

(28,965)(28,965)

441,000

219,155,572

4,031,830(232,601)

222,954,801

Balance as of November 30, 2014

Balance as of May 31, 2015

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

V. Statements of Changes in Net Assets

25VI. Statements of Cash Flows
For the fiscal periods ended November 30, 2014 and May 31, 2015

(Thousands of yen)

For the fiscal period
endedNovember 30, 2014

For the fiscal period
ended
May 31, 2015

Income before income taxes

3,642,006

4,032,463

Depreciation and amortization

1,498,702

1,555,389

Amortization of bond issuance costs

3,009

2,938

New investment units issuance costs

46,104–

Interest expense582,253

582,893(Increase) decrease in tenant receivables(11,607)28,203

Increase (decrease) in accounts payable

60,918(38,144)

Increase in rent received in advance

185,224

142,070–

21,334,755

Interest payments(592,677)(578,393)(Increase) decrease in consumption taxes refundable(108,337)

243,389

Other, net(418,762)

272,853

4,886,833

27,578,416(24,912,162)(50,200,715)

–

(780)

Proceeds from tenant security deposits

1,606,469

1,805,797

Refunds of tenant security deposits(724,367)(1,018,898)

Net Cash Used in Investing Activities(24,030,060)(49,414,596)

Proceeds from short-term debt–

9,500,000

Repayment of short-term debt

(3,000,000)(2,500,000)

Proceeds from long-term debt

17,500,000

34,000,000

Repayments of long-term debt

(19,000,000)(10,500,000)

Proceeds from issuance of investment corporation bonds

5,060,426–

Redemption of investment corporation bonds(3,500,000)–

Proceeds from issuance of new investment units

20,328,517–

Distributions paid

(3,015,579)(3,640,870)

Net Cash Provided by Financing Activities

14,373,364

26,859,130

Net Change in Cash and Cash Equivalents(4,769,863)

5,022,950

Cash and Cash Equivalents at Beginning of Period

22,537,727

17,767,864

Cash and Cash Equivalents at End of Period (Note 4)

17,767,864

22,790,814

Cash Flows from Operating Activities:

Decrease in investment properties due to sale

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

Cash Flows from Financing Activities:

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

26

VI. Statements of Cash Flows

VII. Notes to Financial Statements
For the fiscal periods ended November 30, 2014 and May 31, 2015

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as“DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the“Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management(hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager,
as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating officeproperties. Daiwa Securities Group Inc. currently owns 100% of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2015, DOI had ownership or trust beneficiary interests in 47 office properties with approximately
288,833 m2 of rentable office space and had leased office space to 450 tenants engaged in a variety ofbusinesses. The occupancy rate for the office properties was approximately 97.3%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
DOI maintains its accounting records in Japanese yen.
DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

Note 2 – Summary of Significant Accounting Policies(a) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
(b) 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 trust beneficiary interests in trust. Investment property
balances are depreciated using the straight-line method over the estimated useful lives as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

As of November 30, 2014
2-64 years
3-23 years
5-18 years

As of May 31, 2015
2-64 years
4-23 years
5-18 years

Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs andmaintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.
VII. Notes to Financial Statements

27

(c) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective
terms of the bonds.
(d) New Investment Units Issuance Costs
The issuance costs of new investment units are expensed when incurred.
(e) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements andincome tax bases of assets and liabilities using the statutory rate.
(f) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of theproperties are registered by records maintained in each jurisdiction by the local government. The taxes are imposedon the registered record owner as of January 1 of each year, based on an assessment made by the local government.
When a property is purchased within the calendar year, the taxes for corresponding calendar year are imposedon the seller. DOI pays the seller the corresponding amount of the taxes for the period from property acquisition
date to December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property,rather than expensing them. In subsequent calendar years, such taxes on investment properties are charged as
operating expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.

Capitalized real estate taxes

For the fiscal period ended
November 30, 2014
59,352(Thousands of yen)

For the fiscal period ended
May 31, 2015
92,108(g) Consumption Taxes
Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset against thebalance of consumption taxes withheld. As such, the excess of payments over amounts withheld is included in thecurrent assets while the excess of amounts withheld over payments is included in the current liabilities. Nondeductible consumption taxes relating to investment properties are amortized equally over five years.
(h) Hedge Accounting
DOI enters into derivative transactions for the purpose of hedging risks in the Articles of Incorporation of DOI in
accordance with its general risk management policy. DOI uses interest-rate swaps as hedging instruments in order tohedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DOI applies the special
accounting treatment to interest-rate swaps which qualify for hedge accounting and meet specific criteria. Under the
special accounting treatment, the related differentials paid or received under such swap contracts can be recognized
and included in interest expense or income of the hedged assets or liabilities, and the interest-rate swaps are notrequired to be measured at fair value separately. The assessment of hedge effectiveness has been made each fiscal
period except for interest-rate swaps which meet the special criteria.
(i) Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating
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 recognizedwhen earned and their amounts can be reasonably estimated.
(j) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, all assets and liabilities with respect to assets in trust, as well as all
income generated and expenses incurred with respect to assets in trust, are recorded in the relevant balance sheet
and income statement accounts of the accompanying financial statements.

28

Note 3 – Changes in presentation
Balance sheets
Land, buildings and structures, tools, furniture and fixtures, construction in progress and leasehold rights,
owned by DOI were each included in ”Land in trust accounts,” “Buildings and structures in trust accounts,”“Tools, furniture and fixtures in trust accounts,” “Construction in progress in trust accounts” and “Leasehold
rights in trust accounts” under “Investment Properties, at cost” in the fiscal period ended November 30, 2014.
In order to better clarify accountable events and others in financial statements, they were changed topresented separately as “Land,” “Buildings and structures,” “Tools, furniture and fixtures”, “Construction inprogress” and “Leasehold rights” under the same category from the fiscal period ended May 31, 2015. To reflect
this change in presentation, reclassification of accounts has been made for the financial statement for the fiscal
period ended November 30, 2014.

Note 4 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as ofNovember 30, 2014 and May 31, 2015 consisted of the following:(Thousands of yen)

As of November 30, 2014

As of May 31, 2015

Cash and deposits

12,984,950

16,703,953

Cash and deposits in trust

4,782,914

6,086,861

Cash and cash equivalents

17,767,864

22,790,814

VII. Notes to Financial Statements

29

Note 5 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units
for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bankborrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and welldiversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets and securities(in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties andrepay or redeem outstanding borrowings and bonds. These borrowings and bonds are exposed to liquidity risk. Suchrisk is managed in ways such as 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. For the floating-rate borrowings exposed to therisk of future interest rate fluctuations, DOI uses derivative transactions (interest-rate swap) as hedging instruments, inorder to avoid interest rate fluctuations and to fix the amount of interest payments for floating-rate borrowings. DOI
also uses commitment-type term loans in order to mitigate funding risk at acquisitions of properties through forward
commitments and other means.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash
flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The
assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the
special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in the risk
management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits in theevent of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds.
Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term deposit andsetting a minimum credit rating requirement for the depository financial institutions (excluding deposits for settlement
purposes).
Supplemental Explanation regarding Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price. When there is no quoted market priceavailable, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in a different value. Also, the contractual amounts of derivativetransactions do not represent the market risk involved in these derivative transactions.

30

(b) Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of November 30, 2014 and May 31, 2015 were as follows:(Thousands of yen)

As of November 30, 2014

As of May 31, 2015

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents
Total

17,767,864

17,767,864–

22,790,814

22,790,814–

17,767,864

17,767,864–

22,790,814

22,790,814–

2,500,000

2,500,000–

9,500,000

9,500,000–

16,600,000

16,603,735

3,735

8,300,000

8,303,753

3,753

5,100,000

5,121,660

21,6605,100,000

5,081,325(18,675)

136,600,000

136,741,916

141,916

168,400,000

168,552,648

152,648

160,800,000

160,967,311

167,311

191,300,000

191,437,726

137,726(309,242)(309,242)–(343,642)(343,642)–

Liabilities
Short-term debt
Long-term debt
due within one
year
Investment
corporation bondLong-term debt
Total
Derivativetransactions (*)(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parenthesis indicating the net liability
position.

The financial instruments whose fair values are deemed extremely difficult to determine are excluded from theabove table (See Note 2 below).
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets:(1) Cash and cash equivalents
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of the fairvalue.
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, theirbook value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, theirfair value is calculated based on the present value of principle and interest cash flows discounted at the current
interest rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain
floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is calculated based on
the present value of principle and interest cash flows which are processed as a single unit with the interest-rate
swap.
(2) Investment corporation bond
The fair value of investment corporation bond is based on their quoted market price.

VII. Notes to Financial Statements

31

Derivative Transactions:
The Company applies the hedge accounting for all derivative transactions. Contractual amount and fair value
were as follows:(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

Hedged item

As of November 30, 2014
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

71,400,000

64,400,000(309,242)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

35,350,000

29,350,000– (*2)

106,750,000

93,750,000(309,242)(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

Hedged item

As of May 31, 2015
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

66,400,000

64,400,000(343,642)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

32,850,000

27,350,000– (*2)

99,250,000

91,750,000(343,642)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps andhedged debt are processed as single unit with the hedged long-term debt.

2. Financial instruments whose fair value are deemed extremely difficult to determine
Tenant security deposits including trust accounts (with a book value of 13,325,899 thousand yen as ofNovember 30, 2014 and 14,112,797 thousand yen as of May 31, 2015) that have been deposited by tenants
were excluded from the scope of fair value disclosure because they are not marketable, and the actual deposit
period is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.
3. Redemption schedule for monetary claims(Thousands of yen)

As of November 30, 2014

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
17,767,864––––
17,767,864––––
Due within
one year

Due after
five years––(Thousands of yen)

As of May 31, 2015

Cash and cash equivalents
Total

32

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
22,790,814––––
22,790,814––––
Due within
one year

Due after
five years––

4. Redemption schedule for short-term debt, investment corporation bond and long-term debt
(Thousands of yen)

As of November 30, 2014

Due within
one year

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Short-term debt
Investment corporation bondLong-term debt
Total

2,500,000–
16,600,000
19,100,000

–
–
–
–
–
–
–
– 3,000,000 2,100,000
3,700,000 28,250,000 17,350,000 21,000,000 66,300,000
3,700,000 28,250,000 17,350,000 24,000,000 68,400,000

Due after
five years(Thousands of yen)

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due within
one year

As of May 31, 2015

Short-term debt
Investment corporation bondLong-term debt
Total

Due after
five years

9,500,000
–
–
–
–
–
–
–
–
– 3,000,000 2,100,000
8,300,000 18,200,000 19,400,000 21,500,000 24,000,000 85,300,000
17,800,000 18,200,000 19,400,000 21,500,000 27,000,000 87,400,000

Note 6 – Investment Properties
Investment properties as of November 30, 2014 and May 31, 2015 consisted of the following:
As of November 30, 2014

(Thousands of yen)

As of May 31, 2015

Acquisition
cost

Accumulated
depreciation

Book value

Acquisition
cost

Accumulated
depreciation

Book valueLand

12,302,227–

12,302,227

12,302,227–

12,302,227

Buildings andstructures

3,109,305(1,545,059)

1,564,246

3,130,285(1,632,652)

1,497,633

Tools, furnitureand fixtures

18,538(6,638)

11,90018,958(7,646)

11,312

Construction inprogress

4,032

–

4,032

3,449

–

3,449

Land in trust
accounts

289,916,770–

289,916,770

314,767,115–

314,767,115

Buildings andstructuresin trust accounts

90,038,856(18,066,807)

71,972,049

91,803,763(16,821,666)

74,982,097

Machinery andequipmentin trust accounts

826,879(425,370)

401,509707,599(367,021)

340,578

Tools, furnitureand fixturesin trust accounts

116,863(64,114)52,749150,965(66,678)

84,287

Construction inprogressin trust accounts

548,059–

548,059

408,642–

408,642

Other tangible
fixed assets
in trust accounts

5,909(5,909)–4,337(4,337)–

396,887,438(20,113,897)

376,773,541

423,297,340(18,900,000)

404,397,340

Total

VII. Notes to Financial Statements

33

Note 7 – Fair Value of Investment and Rental Properties
The book value, net changes in the book value and the fair value of the investment were as follows:(Thousands of yen)

As of / For the fiscal period
endedNovember 30, 2014

As of / For the fiscal period
ended
May 31, 2015

Balance at beginning of period

355,783,760

378,935,081

Change during the period (Note 2)

23,151,321

27,764,026

Balance at end of period

378,935,081

406,699,107

Fair value (Note 3)

370,600,000

410,990,000

Book value: (Note 1)

Notes:
1. The book value represents the acquisition cost less accumulated depreciation.
2. Significant changes
For the fiscal period ended November 30, 2014, the major reasons of increase are acquisitions of “Azabu Green Terrace” (14,000,000 thousand yen)and “Kitahama Grand Building” (9,481,500 thousand yen). The major reason of decrease is depreciation (1,497,218 thousand yen).
For the fiscal period ended May 31, 2015, the major reasons of increase are acquisitions of six assets (48,785,200 thousand yen). The major reasonof decrease is disposition of five assets (21,325,541 thousand yen) and depreciation (1,553,853 thousand yen).
3. The fair values as of November 30, 2014 and May 31, 2015 were determined by the sum of appraisal values provided by external real estateappraisers.

Note 8 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended November 30, 2014 and May 31, 2015 were as
follows:(Thousands of yen)

For the fiscal period ended
November 30, 2014

For the fiscal period ended
May 31, 2015

9,693,133

10,112,468

70,57834,235

9,763,711

10,146,703

769,361

791,273

Utilities expenses

1,072,401

1,024,278

Taxes and dues

792,627

811,788

Insurance expenses

14,425

14,355

Repair expenses

125,021

227,519

1,497,218

1,553,853

53,621

63,580Total rental expenses

4,324,674

4,486,646

Income from property leasing

5,439,037

5,660,057

Revenues from property leasing:
Rental revenues
Other revenues related to property leasing
Total revenues from property leasing
Rental expenses:
Consignment expenses

Depreciation
Other

Note 9 – Net Assets
DOI issues non-par value units in accordance with the Investment Trust Act and all of the amounts issued aredesignated as stated capital. DOI maintains a minimum of 50 million yen of net assets as required by theInvestment Trust Act.

34

Note 10 – Short-Term Debt, Long-Term Debt and Investment Corporation Bonds
Short-term debt, Long-term debt and investment corporation bonds as of November 30, 2014 and May 31,2015 consisted of the following:(Thousands of yen)

As of November 30, 2014
Unsecured loans due 2015 to 2024, principallyfrom banks and insurance companies with interest
rates mainly ranging from 0.3% to 1.1%

As of May 31, 2015

155,700,000

186,200,000

0.4% unsecured bond due 2019

3,000,000

3,000,000

1.0% unsecured bond due 2024

2,100,000

2,100,000

160,800,000

191,300,000

Total

Note:The interest rates presented are daily weighted average interest rates. 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 to calculate daily weighted average interest rates.

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of May 31, 2015
were as follows:(Thousands of yen)

Due within
one year

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due after
five years

Short-term debt, long-term debt
17,800,000 18,200,000 19,400,000 21,500,000 27,000,000 87,400,000
and investment corporation bonds

Note 11 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of November 30, 2014
and May 31, 2015 were as follows:(Thousands of yen)

As of November 30, 2014

As of May 31, 2015

Due within one year

7,534,798

8,320,103

Due after one year

11,321,134

16,533,506

Total

18,855,932

24,853,609

Note 12 – Commitment-Type Term Loans
DOI has entered into credit facilities in the form of commitment-type term loan agreements with five banks asof May 31, 2015 as follows:(Thousands of yen)

As of November 30, 2014

As of May 31, 2015

Total amount of commitment-type term loans–

20,500,000

Borrowing execution balance––

Net unused balance–

20,500,000

Note 13 – Gain on Sale of Investment Properties
Gain on sale of investment properties for the fiscal period ended May 31, 2015 was as follows:(Thousands of yen)

Proceeds from sale of investment properties

21,846,254

Cost of selling investment properties(21,325,541)

Other expenses related to sale(280,166)

Gain on sale of investment properties

240,547

VII. Notes to Financial Statements

35

The sales prices for individual properties are not disclosed because consents from the counterparties have notbeen obtained. The net gain on sale of investment properties is presented after offsetting gain on sale ofinvestment properties of 685,892 thousand yen with loss on sale of investment properties of 445,345 thousandyen.
No investment properties were sold during the fiscal period ended November 30, 2014.

Note 14 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings intrust as of November 30, 2014 and May 31, 2015.

Note 15 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement
to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation
Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable
income of DOI will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able
to deduct such amount from taxable income.
The following table summarizes the significant difference between the statutory tax rate and DOI’s effective tax
rate for financial statement purposes.

(%)

For the fiscal period ended
November 30, 2014

For the fiscal period ended
May 31, 2015

Statutory tax rate

34.16

34.15

Deductible cash distributions(34.15)(34.14)

Others0.02

0.01

Effective tax rate

0.03

0.02

The significant components of deferred tax assets and liabilities as of November 30, 2014 and May 31, 2015
were as follows:(Thousands of yen)

As of November 30, 2014

As of May 31, 2015

Deferred tax assets:
Accrued enterprise tax

19

13

134,312

126,411

134,331

126,424Deferred gains on hedges

28,706

15,371

Total deferred tax liabilities

28,706

15,371

Net deferred tax assets

105,625

111,053

Deferred losses on hedges
Total deferred tax assets
Deferred tax liabilities:

36

Correction of amount of deferred tax assets and deferred tax liabilities due to the change in tax rate ofcorporate tax, etc.
In line with the promulgation on March 31, 2015 of the “Act for Partial Revision of the Income Tax Act, etc.” (ActNo. 9 of 2015) and the “Act for Partial Revision of the Local Tax Act, etc.” (Act No. 2 of 2015), the corporate tax
rates have been reduced effective from fiscal periods beginning on or after June 1, 2015. Accordingly, for
temporary differences expected to be reversed in the fiscal periods beginning on or after June 1, 2015, thestatutory tax rate used to calculate deferred tax assets and liabilities has been changed from 34.15% to 32.31%
for the fiscal period ended May 31, 2015. The effect of this change is immaterial.

Note 16 – Per Unit Information
Information about earnings per unit for the fiscal periods ended November 30, 2014 and May 31, 2015 and net
assets per unit as of November 30, 2014 and May 31, 2015 were as follows:(Yen)

For the fiscal period ended
November 30, 2014

For the fiscal period ended
May 31, 2015

Net income per unit

8,414.41

9,141.88

Weighted average number of units outstanding (units)432,713441,000

Earnings per Unit:(Yen)

As of November 30, 2014
Net Assets per Unit

504,746

As of May 31, 2015
505,566

The computation of earnings per unit is based on the weighted average number of units outstanding during theperiod. The computation of net assets per unit is based on the number of units outstanding at each period end
as stated on the balance sheets.
The diluted net income per unit is not stated as there are no diluted investment units.
There is no amount that is not available to ordinary unitholders.

Note 17 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, thetotal amount of dividends that DOI has determined to pay out is 3,640,896,000 yen for the fiscal period ended
November 30, 2014 and 4,031,622,000 yen for the fiscal period ended May 31, 2015 that are a multiple of
441,000 — the number of units outstanding as of May 31, 2015 and November 30, 2014. Furthermore, DOI does
not pay out dividends that exceed accounting profits as outlined in Article 32-2 of DOI’s Articles of Incorporation.
(Yen)

Unappropriated retained earnings
Cash distributions declared
Retained earnings brought forward

For the fiscal period ended
November 30, 2014
3,641,156,268

For the fiscal period ended
May 31, 2015
4,031,830,382

3,640,896,000

4,031,622,000

260,268

208,382

VII. Notes to Financial Statements

37

Cash distributions are declared by the board of directors after the end of each period. Such distributions arepayable to unitholders of record at the end of each period. Information of cash distributions per unit and theboard of directors meeting dates when the distributions were proposed and approved were as follows:(Yen)

Cash distributions per unit
Board of directors meeting dates

For the fiscal period ended
November 30, 2014
8,256

For the fiscal period ended
May 31, 2015
9,142

January 23, 2015

July 15, 2015

Note 18 – Related-Party Transactions
Related-party transactions for the fiscal periods ended November 30, 2014 and May 31, 2015 were as follows:
For the fiscal period ended November 30, 2014
Classification
Name
Location
Capital stock (billions of yen)
Principal business
Ratio of voting rights
Relation to the related party
Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at the end of period (thousands of yen)

Parent company, interested party
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3
Holding company
13.45% directly held in DOI 29.23%indirectly held in DOI
Provision of capital
Payment of interest expense
Redemption of investment
on investment corporation
corporation bonds
bonds (Notes 1 and 2)
3,500,000
28,278––Notes:
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.
2. Terms of transactions with interested parties were determined based on the assets manager’s office regulation which was established to prevent
conflict of interest.

For the fiscal period ended May 31, 2015
No related-party transaction was entered into for the fiscal period ended May 31, 2015.

Note 19 – Segment Information
For the fiscal period ended November 30, 2014 and May 31, 2015
Segment Information
Segment information has been omitted as DOI has only one segment, which is property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements of income
and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for more than 90% of
total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for more than 90%of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of theoperating revenues recorded in the statements of income and retained earnings.

38

Note 20 – Significant Subsequent Events(a) Issuance of New Investment Units
At the meetings of the board of directors held on April 27, 2015 and May 20, 2015, DOI resolved on theissuances of new investment units as described below. The payments for the issues were completed on June 1,2015 and June 24, 2015, respectively.
(1) Issuance of new investment units through public offering (general issue)i) Number of investment units issued:

41,045 units(19,545 units for domestic offering and 21,500 units for overseas
offering)ii) Paid-in amount:

563,914 yen per unitiii) Total paid-in amount:

23,145,850,130 yeniv) Payment date:June 1, 2015v) Use of proceeds:

To use for acquisition of River Gate and its related costs, and as apart of funds for repayment of borrowings for acquisition of GlassCity Shibuya and Meguro Place Tower(2) Issuance of new investment units through third-party allotmenti) Number of investment units issued:

1,955 unitsii) Paid-in amount:

563,914 yen per unitiii) Total paid-in amount:

1,102,451,870 yeniv) Allottee and number of units allotted:

1,955 units allotted to Daiwa Securities Co. Ltd.

v) Payment date:June 24, 2015vi) Use of proceeds:

To use for acquisition of River Gate and its related costs, and as apart of funds for repayment of borrowings for acquisition of GlassCity Shibuya and Meguro Place Tower(b) Acquisition of Assets
DOI acquired a trust beneficial interest in real estate on June 2, 2015.
Asset type

Trust beneficial interest in real estate

Property nameRiver Gate

Location36-2 Nihonbashi Hakozaki-cho, Chuo-ku, Tokyo

Acquisition price

28,000,000 thousand yen (excluding acquisition costs andconsumption tax, etc.)

Agreement date

April 27, 2015

Acquisition dateJune 2, 2015

SellerThames Special Purpose Company

VII. Notes to Financial Statements

39

VIII. Independent Auditors’ Report40

VIII. Independent Auditors’ Report

IX. Investor Information
Organization of Asset Manager (as of June 1, 2015)■ Description■ Directors and Auditors

Company Name

Daiwa Real Estate Asset Management Co., Ltd.

President and Representative Director

Akira Yamanouchi

Address

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

Established

October 21, 2004

Vice President and Representative
Director

Yuji Shinotsuka

Paid-in Capital

200 million yen
Akira Yamanouch

Vice President and Representative
Director

Yoshiki Nishigaki

Representative Director

9Executive directors: 4 / Executive auditors: 1
Non-executive directors: 2 / Non-executive auditors: 2

Director

Naoyuki Owa

Board of Directors

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

AuditorTamaki Shibayama

Auditor (non-executive)

Masaru Shirataki

Auditor (non-executive)

Shinji Kiso

No. of Employees

65 (excluding dispatched employees)

Registered Financial Investments
Firm

Registration No. 355 (Financial Instruments), Director-General,
Kanto Local Finance Bureau (Kinsho)

Building Lots and Buildings
Transaction Business License

License No. (3) 83920, Governor of Tokyo

Discretionary Agent for Real
Estate Transaction Approval

License No. 34, Minister of Land, Infrastructure, Transport andTourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association■ Organizational Chart

Shareholders’ Meeting
Corporate Auditors
Compliance Committee

Board of Directors

Investment Committee（*）*Set up separately for each
investment corporation

Acquisition
Department
Office Investment
Team
Residential
Investment Team
Healthcare
Investment Team

Origination
Department

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

President andRepresentative Director

Private FundManagement Department

Compliance Officer
Internal Control Office

Customer Relations
Department

Finance Department

Advisory Team

Finance Team

Operational Team

Accounting Team

Administration
Department

Corporate Planning
Department

Management 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 LLC① Asset management contract / General administration affairs contract related to operationof administrative instruments② General administrative affairs contract / Asset custodian contract③ Unitholder register, etc. management contract / Special account management contract③⑤

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

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation
Resona Bank, Ltd.

④ Sponsor support agreement⑤ Fiscal agency agreement(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified
Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc.
Daiwa Securities Group Inc. is the Asset Management Company’s parent company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation
Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No. 59 of 1963; including amendments thereto))

IX. Investor Information

41

History of Investment Unit Price
14,000 (units)(yen) 700,000
Investment unit price (left axis)

Trading volume (right axis)

600,000

12,000500,000

10,000400,000

8,000

300,000

6,000

200,000

4,000

100,000

2,000

0

0

2013
June

July

Aug. Sept. Oct.

Nov.

2014
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2015
Dec. Jan.

Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2015)■ No. of investment units by investor type
19th
Fiscal Period

Individuals/others
23,982 units (5.4%)

Financial institutions
187,794 units (42.6%)■ No. of unitholders
by investor type
Foreigners 36,593 units (8.3%)

Total: 441,000 units
Securities firms 973 units (0.2%)

Other domestic corporations 191,658 units (43.5%)

18th
Fiscal Period

Individuals/others
24,046 units (5.5%)

Financial institutions
184,044 units (41.7%)

Foreigners 39,517 units (9.0%)

Total: 441,000 units
Other domestic corporations 191,577 units (43.4%)

Number ofPercentage
Units Owned
Share(units)

128,905

29.2%

2. Japan Trustee Services Bank, Ltd. (Trust Account)

78,07917.7%

3. Daiwa Securities Group Inc.

59,321

13.5%

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

44,349

10.1%

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

44,268

10.0%

The Nomura Trust and Banking Co., Ltd.
6.
(Investment Trust Account)

12,9872.9%

7. Nomura Bank (Luxembourg) S.A.

3,715

0.8%

8. State Street Bank West Client-Treaty 505234

1,552

0.4%

9. BNY for GCM Client Accounts (E) ISG

1,424

0.3%

10. UBS AG London Asia Equities

1,351

0.3%

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

42

Financial institutions

51(0.5%)

Other domestic
corporations

165(1.7%)

Foreigners

198(2.1%)

Securities firms

18(0.2%)

Total

9,504

IR Calendar

1. Daiwa Investment Management Inc.

5.

9,072
(95.5%)

Securities firms 1,816 units (0.4%)

Top Ten Unitholders (as of May 31, 2015)
Name of Investor

Individuals/others

July 15, 2015 : Announcement of financial results for
19th Fiscal Period
August 10, 2015 : Sending of Japanese version Business
Report for 19th Fiscal Period(Statement of Financial Performance)
August 11, 2015 : Start paying distributions for
19th Fiscal PeriodMay
End offiscal period

Feb.
Jan.

July
End offiscal period

Aug.

Nov.
January 2016 : Announcement of financial results for20th Fiscal Period
February 2016: Sending of Japanese version Business
Report for 20th Fiscal Period(Statement of Financial Performance)
February 2016: Start paying distributions for20th Fiscal Period

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

Nikkei Inc.

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

43

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.