Top REIT Investment Corporation
13th Business Report(Semi-Annual Report 13th)

May 1, 2012 – October 31, 2012

Letter from the Executive Officer of the Investment Corporation
Dear Investors,
Thank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
The Japanese economy, which was anticipated to see recovery backed by robust domestic
demand arising from restoration/reconstruction from the Great East Japan Earthquake, is in aseesaw state due to the still simmering European debt problem, exports-related stagnation owing
to the U.S., Chinese and other economic slowdown, sense of personal consumption settling
down and other factors. The outlook is that recovery is expected in the U.S., China, etc. and so
gradual recovery is anticipated even in the domestic economy, but the situation remains
unpredictable since it is largely dependent on overseas circumstances.
On the other hand, concerning J-REITs, the Bank of Japan maintaining/expanding its monetaryeasing policy led to an ongoing stable financing environment, along with it continuing to alsopurchase investment units. Furthermore, discussion of system reform for revitalization of the
J-REIT market is also underway. These developments resulted in strong J-REIT market
conditions, with the Tokyo Stock Exchange REIT Index recovering to 1,000 points in
September 2012 and on an upward trend.
Under such circumstances, the financial results of Top REIT in the thirteenth fiscal period wereoperating revenue of 5,636 million yen (period-on-period decrease of 1.0%), ordinary income of
2,002 million yen (period-on-period decrease of 1.3%), net income of 2,001 million yen(period-on-period increase of 0.1%) and dividend per unit of 12,912 yen. Moreover, Top REIT
completed the task of soliciting successor tenants to Akasaka Oji Building and achievedenhancement of occupancy rates. As a result, Top REIT managed to increase dividends by 512
yen compared to the forecast.
However, having received lease agreement termination notices from a major tenant, Top REIT
faces major issues that must be addressed in the immediate future, including solicitation of
successor tenants and large rent revisions.
With real estate market conditions still in a state of uncertainty and full-fledged recovery
forecast to require a substantial amount of time yet, it will be the start of a difficult phase for
Top REIT, too. Nevertheless, Top REIT will remain committed to prudent management of
portfolio assets and will also steadily address these issues through collaboration with the asset
manager and sponsor companies.

2Please note that Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa Real Estate Co.,
Ltd.), which was a shareholder of the asset manager with which ties have been pursued as apipeline support company of Top REIT since listing, has withdrawn, but there is no change fromthe existing investment policy and management structure, etc.
We thank you and ask for your continued support and understanding.

Executive Officer
Top REIT, Inc.
Jumpei Norimatsu

Letter from the President of the Asset Management Company
Dear Investors,
Thank you very much for your strong support for Top REIT, Inc. (Top REIT) and our activities.
We also sincerely appreciate the great response to the questionnaire of investors that we
conducted last time. Representing the asset manager Top REIT Asset Management Co., Ltd.
(TRAM), I would like to explain the overview of the performance of Top REIT and its
management strategy for the future in light of also the comments, inquiries, etc. received frominvestors.
In the thirteenth fiscal period (May 1, 2012 – October 31, 2012), brisk domestic demand
stemming from post-quake reconstruction demand supported the economy, but the prolonged
European debt problem, the slowdown in the U.S. and Chinese economy and other impact
caused the Japanese economy to be on a weak note. In the situation described above, the Bankof Japan continued its monetary easing policy in an aim to pull out of the deflationary economy
early and for sustainable economic growth under price stability, but the future is still forecast to
remain uncertain. However, with the “Comprehensive Strategy for the Rebirth of Japan” being
approved by the Cabinet in July 2012, system improvements, etc. are underway forrevitalization of the J-REIT market and expansion of real estate securitization methods in viewof pulling out of the asset deflation through revitalization of the real estate investment market,
which are anticipated to largely boost the J-REIT industry in the future.

3

Meanwhile, the domestic corporate earnings environment is still severe. Concerning the realestate leasing market in central Tokyo, the vacancy rate continued to rise until around thesummer of 2012 when there was a large supply of newly-built office buildings and then showedsigns of gradual improvement trends thereafter, but the market is in a seesaw state. In addition,although the range of decrease in the rent level is narrowing, it is yet to show signs of bottoming
out and recovery is thought to require some time yet.
Under such circumstances, Top REIT steadily implemented the “Strategy for Recovery of
Dividend Level,” such as completing the immediate task of soliciting successor tenants to
Akasaka Oji Building, enabling it to present a June 2012 forecast on business results for the
fiscal period ending April 2013 (fourteenth fiscal period) that forecasts dividend to be 13,000
yen. However, as lease agreement termination notices with the end of January, end of February
and end of March of 2013 as termination dates were received from a major tenant of Harumi
Island Triton Square Office Tower Y, Sumitomo Metal Industries, Ltd. (currently Nippon Steel& Sumitomo Metal Corporation), in July and September 2012, the forecast on business results
for the fourteenth fiscal period has been revised downward.
In addition, a Top REIT sponsor Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa
Real Estate Co., Ltd.) withdrew as sponsor in September 2012, but we will strive to overcome
the challenges facing Top REIT and seek further growth by pursuing greater collaboration withthe ongoing sponsors Sumitomo Mitsui Trust Bank, Limited and Oji Real Estate Co., Ltd.

Nobuhito Endo
President and Representative Director

4

Q1. Please describe recent results.
Since receiving a lease agreement termination notice from a major tenant of Akasaka Oji
Building, Top REIT has been focusing on activities to solicit successor tenants throughcollaboration with sponsors and in partnership with property managers. While there was one
floor remaining vacant at the time of announcement of the financial results for the previous
fiscal period (twelfth fiscal period), the office portion became fully occupied in the current
fiscal period (thirteenth fiscal period). A high occupancy rate managed to be maintained
throughout the entire fiscal period for the residential portion, too, resulting in stable
management at a period-average occupancy rate of 95.6%. The period-average occupancy rate
for the entire portfolio also improved from the twelfth fiscal period’s 97.7% to 99.1% in thethirteenth fiscal period. In addition, eight office building tenants were due for rent revisions in
the thirteenth fiscal period, of which the rent amount remained unchanged for six tenants andthe rent amount was revised downward for two tenants, thereby managing to minimize the range
of decrease in the rent amount.
On the other hand, as lease agreement termination notices were received from a major tenant ofHarumi Island Triton Square Office Tower Y in the thirteenth fiscal period, the occupancy rate is
expected to fall in the future. Accordingly, along with focusing on tenant solicitation activities
for vacant spaces as an immediate top priority issue, efforts will be made to keep tenants frommoving out of properties based on the spirit of “Tenants First” (maintaining and improving
tenant satisfaction) that has been adopted since listing.

Occupancy
Occupancy Rate
Rate (Portfolio)(Portfolio)
Gross rentable floor space

Occupancy rate
(Ｏｃｃｕｐａｎｃｙ ｒａｔｅ)(gross rentable 99.8% 99.9%
floor space: ㎡)

99.5% 99.7% 99.5% 99.5% 99.2% 99.2% 99.2% 99.5% 99.7%

97.3%

98.5% 99.2% 99.0% 99.0% 99.0% 98.9% 99.2% 99.2%

325,000

100%
95%

276,833

275,000

283,622 283,622 283,622

291,648 291,628 291,628

295,215300,294 300,294300,294 300,294 300,294 300,294 300,294 300,294

90%

261,672 261,672

85%
80%

229,232
225,00075%
178,10470%

175,00065%
125,000

Apr. 2012 May.2012
Apr. 2011
Oct. 2011
Apr.2010
Oct.2010
Oct.2009
Oct.2008
Apr.2009
Apr.2008
Oct.2006
Apr.2007
Oct.2007
March 2006
End of 1st FP End of 2nd FP End of 3rd FP End of 4th FP End of 5th FP End of 6th FP End of 7th FPEnd of 8th FP End of 9th FP End of 10th FPEnd of 11th FPEnd of 12th FP
(IPO)

5

Jun. 2012

Jul. 2012

Aug. 2012

Sep. 2012

Oct. 2012
End of 13th FP

Nov. 201260%

Q2. Please provide a detailed description of the sponsor change in concrete terms.
For REITs, a “sponsor” is a shareholder of the asset manager. Top REIT has been conducting
management with Sumitomo Mitsui Trust Bank, Limited (formerly The Sumitomo Trust andBanking Co., Ltd.), Oji Real Estate Co., Ltd. and Nippon Steel City Produce, Inc. (currently
Nippon Steel Kowa Real Estate Co., Ltd.) as sponsors and optimal application of the sponsors’
strengths as a pillar of the growth strategy. During the thirteenth fiscal period (on September 28,2012), Nippon Steel City Produce withdrew from the position of sponsor with the transfer of its
entire stake in the asset manager to Sumitomo Mitsui Trust Bank. After the transfer, the sponsor
composition will be Sumitomo Mitsui Trust Bank with a 69% stake and Oji Real Estate with a
31% stake. In conjunction, the “agreement on information provision on real estate, etc.” (Note1) and “agreement on provision of warehousing functions, etc.” (Note 2), which were concluded
with Nippon Steel City Produce for the purpose of provision of property acquisition
opportunities to Top REIT, have been cancelled by consent. Going forward, based on the
structure of Sumitomo Mitsui Trust Bank and Oji Real Estate as sponsors, we will strive forsteady and stable growth of the portfolio through optimal application of the functions andnetworks of sponsor companies and sponsor companies’ Group companies. Please note that
there is no change from the existing investment policy and management structure, etc.
(Note 1) An agreement for the purpose of prompt provision of information, if any, on the saleof real estate, etc. held by sponsors and its Group companies of which are real estatethat are likely to meet Top REIT’s investment criteria(Note 2) An agreement for the purpose of sponsor companies providing a function totemporarily hold, etc. real estate, etc. that Top REIT cannot immediately acquire
Q3. Please describe the status of solicitation of successor tenants to Harumi Island Triton
Square Office Tower Y.
Lease agreement termination notices with the end of January, end of February and end of Marchof 2013 as termination dates were received from a major tenant of Harumi Island Triton Square
Office Tower Y, Sumitomo Metal Industries, Ltd. (currently Nippon Steel & Sumitomo Metal
Corporation (NSSMC)), in July and September 2012. Details of the lease agreement termination
are as follows.
January 31, 2013

: Vacate approx. 2,340 tsubos

February 28, 2013

: Vacate approx. 1,175 tsubos

March 31, 2013

: Vacate approx. 85 tsubos

6

Approx. 3,600 tsubos

This termination by NSSMC is extremely unfortunate, but NSSMC is relocating its office forgreater operational efficiency and consolidation due to its merger. With NSSMC’s leased floorarea equivalent to about half of Harumi Island Triton Square Office Tower Y held by Top REIT,
this relocation will have an extremely large impact on Top REIT’s earnings and earlysolicitation of successor tenants is recognized as a top priority issue for early recovery from thedecrease in earnings caused by this impact.
●Ratio of Revenue related to rent business（13th FP）

In view of early prospects of such solicitation of

Residential
11.5％

successor tenants, a “Leasing Project Team (PT)”

Retailproperty
13.8％

has been formed of human resources appointed
from the asset manager and sponsors to focus on
exploring relocation needs, making individual

NEC Head
Office Building
24.5％

Other
Officebuildings
28.5％

approaches and other solicitation activities while
sharing information.

Harumi Island
Triton Square
Office Tower Y
21.7％

In the solicitation of successor tenants, Harumi Island Triton Square Office Tower Y has beenhighly rated for its competitive advantages and a series of property viewings, etc. have been
held for potential successor tenants, but there are limitations to property viewing before thecurrent tenant’s relocation and during the period of work for restoring the property to theoriginal condition.
Until January 2013 when work for restoring the property to the original condition is completed
for some floors, approaches are being made to tenants requiring relatively large floor area and it
is being considered by potential tenants looking for about 1,000 to 3,000 tsubos in leased floor
area. Once work for restoring the property to the original condition is completed, property
viewing for potential successor tenants will become smooth and, as layout proposals will also beable to be proactively made to potential tenants, solicitation activities will be implemented withan eye on also floor partitioning. The status of tenant solicitation activities are as follow. Whilecontinuing to approach currently-considering potential tenants, focus will continue to be placedon activities to solicit successor tenants based on collaboration with sponsors and in partnershipwith property managers.
Leasing Status

as of Nov. 30, 2012

・ Number of inquiries： 66 cases
・ Property viewings for brokers: Held for 2 days
・ Number of property viewings for potential candidates: 14 cases
・ Candidate tenants currently considering: 6 cases

7

【Superior Point of Harumi Island Triton Square Office Tower Y】
1.

A large-scale multi-use complex completed in 2001
through coordinated redevelopment led by Sumitomo
Corporation and The Dai-ichi Life Insurance Co., Ltd.,etc. in the Harumi district of the Tokyo Bay area, it has
three landmark office skyscrapers, as well as a concert
hall, over 60 shops and restaurants and other commercial
facilities, and a group of high-rise condominiums.

2.

The office building is an approximately four-minute walk from Kachidoki Station on the
Toei Subway Oedo Line and approximately nine-minute walk from Tsukishima Stationon the Tokyo Metro Yurakucho Line and Toei Subway Oedo Line, and is additionallyaccessible by many bus routes. Furthermore, October 2012 saw the start of “Harumi
Liner,” which connects Harumi Triton Square with Tokyo Station and Yurakucho Station,
meaning even greater convenience.

3.

Features include symmetrical column-free space with standard floor area ofapproximately

565

tsubos,2.7m

ceilingheight,100mm

raisedflooring,

individually-controllable air-conditioning systems dividing the office portion into 12
zones, power outlet capacity that can be increased to 40VA/m2 and other highspecifications in no way inferior to the latest office buildings.
4.

Even in terms of business continuity planning (BCP) measures, which are initiatives thatcompanies have been strengthening in the wake of the Great East Japan Earthquake, it isequipped with an emergency power generator and heat storage tank, etc., securing power
supply and water supply and drainage to cover a certain period in the event of an
emergency. In addition, environmental and energy conservation measures are also taken
by recycling water and setting up lush greenery spaces.

● Map● Locator diagram: Harumi Island Triton Square

8Q4. Please describe measures against tenant and property concentration risks.
Top REIT builds a portfolio of primarily large-scale office buildings in central Tokyo. Many of
the tenants are companies listed on the first section or related companies of such, etc. leasing
space as headquarters or main bases. These are the characteristics of Top REIT’s portfolio andthe stable earnings to date are largely attributable to these. However, even the real estate leasing
market has been hard hit by operating companies’ recent cost reduction efforts through businessintegration, large-scale downsizing, consolidation of offices, etc. for improvement of theearnings base, resulting in tenants terminating their leasing of space as headquarters or mainbases at Akasaka Oji Building and recently Harumi Island Triton Square Office Tower Y in thecase of Top REIT, too.
In the solicitation of tenants to Akasaka Oji Building, diversification of tenants has beenachieved as illustrated in the graph below. In the solicitation of successor tenants to Harumi
Island Triton Square Office Tower Y, too, while first prioritizing early tenant solicitation, efforts
will be made to diversify tenants as well.
In addition, concerning property concentration risks, the investment ratio (based on acquisition
price) of Top REIT’s flagship property NEC Head Office Building was high at about 40% at thetime of listing in 2006, but has been lowered to about 23% as of the end of the thirteenth fiscal
period by steadily expanding asset size thereafter. An asset size (210 billion yen) that would
lower the investment ratio of NEC Head Office Building to 20% or less will be aimed bycontinuing to steadily expand asset size.
● Diversification of tenants in Akasaka Oji Bulding
Tenant A
Tenant F
Tenant E
Tenant A
Tenant D

Sony ComputerEntertainment Inc.
Tenant C

9

Tenant B

Q5. Please describe future rent revisions.
For Top REIT, the fourteenth fiscal period is the time for biennial major rent revisions, at whichtime about 25% of the portfolio will be due for rent revisions on April 1, 2013. The main rent
revisions will be Harumi Island Triton Square Office Tower Y in part and Office Tower Z as
well as Kanda Nishiki-cho 3-chome Building, and the results of these rent revisions are thought
to largely impact dividends. The central Tokyo office building leasing market shows signs ofsupply of newly-built buildings settling down and the vacancy rate recovering in advance of therent level. However, in a situation where domestic companies’ earnings concerns are yet to clear,tenant requests for decrease in the rent amount are still strong and rent is generally on a weaknote despite the range of decrease in the rent level narrowing. Under such circumstances, severe
conditions are forecast for also the rent revisions this time, but negotiations will be diligently
conducted by taking advantage of the tenant relations fostered through daily operations, so as tominimize the range of decrease in the rent amount.

Monthly Schedule of Rent Revisions (excluding residential)（mn yen）*Based on monthly rent

220
240
200
200
80
80
60
60
40
40
20
20
00

Nov. 2012 Dec. 2012

Jan. 2013

Feb. 2013

Mar. 2013

Apr. 2013

May. 2013

Jun. 2013

14th FPJul. 2013

Aug. 2013 Sep. 2013

15th FP

Harumi Island Triton Y (parts of tenants)
Harumi Island Triton Z
Kanda Nishiki-cho 3-chome Building
14th
FP

Akasaka Oji Building (parts of tenants)
Shiba-Koen Building (parts of tenants)
Kanda Park Plaza (parts of tenants)

12
Tenants
24.2% oftotal rents(as of end of
13th FP)

Faret East Building (parts of tenants)
Shinkawa Chuo Building (parts of tenants)
Shiba-Koen Building (parts of tenants)
15th
FP

Kanda Park Plaza (parts of tenants)
Faret East Building (parts of tenants)
Sagamihara Shopping Center （IY）

10

7
Tenants
9.7% oftotal rents(as of end of
13th FP)

Oct. 2013

Q6. Please provide a more detailed description of the forecast on business results for the
fourteenth and fifteenth fiscal periods.
The following are assumptions on which the projections of performance for the fourteenth andfifteenth fiscal periods are based.
① Portfolio assets
The forecast is based on 18 properties Top REIT owns as of December 14, 2012.
② Operating revenue
For real estate rent revenue related to existing properties, Top REIT takes into
consideration execution of new agreements, early termination of agreements, etc. that havebeen finalized as of December 14, 2012, along with current real estate leasing market
conditions, and also takes into account factors that may cause fluctuations in such aspects
as risks of reductions in revenue due to decreased amounts of rent of tenants when theyreach their rent revision period hereafter.
For Harumi Island Triton Square Office Tower Y, it is assumed that the spaces subject tolease agreement termination and not executed newly lease agreement with successor
tenants finalized as of December 14, 2012 will be vacant.
③ Interest-bearing liabilities
It is assumed that the total amount of interest-bearing liabilities is 94,835 million yen at theend of the fourteenth fiscal period and 94,767 million yen at the end of the fifteenth fiscal
period. Of the 12,100 million yen in loans payable due for repayment during the fourteenthfiscal period (March 27, 2013), it is assumed that a part of the principal (2,000 million yen)will be repaid and then the remaining 10,100 million yen will be refinanced. Moreover, it isassumed that 67 million yen of long-term loans payable will be paid in each of the
fourteenth and fifteenth fiscal periods as agreed upon. Furthermore, the long-term loan
payable (9,800 million yen) due for repayment on November 30, 2012 (fourteenth fiscal
period) has been refinanced.
④ Dividend per unit
For the dividend per unit of the fifteenth fiscal period, it is assumed that Top REIT willreverse the all of the reserve for reduction entry of 49 million yen. In addition, the deferred
tax liability will decrease in tandem with the amount allocated for dividends from thereversal of the reserve for reduction entry; the applicable amount of decrease will be acontributing factor to a rise in net income (deferred income taxes of 28 million yen).

11As explained earlier, the recent withdrawal of NSSMC, major rent revisions and other impact
have made presentation of a current forecast on business results of decreased dividends over the
fourteenth and fifteenth fiscal periods unavoidable. This forecast on business results assumes
that the spaces terminated by a tenant of Harumi Island Triton Square Office Tower Y (about
4,100 tsubos) will be vacant and, after bottoming out in this forecast on business results,
earnings will be accumulated through early solicitation of successor tenants.
Top REIT adopts a growth policy of “implementing a growth strategy with extensive focus on
the dividend level,” based on which management has been conducted with a focus on a dividendlevel of between 13,000 yen and 14,000 yen. Even when earnings fell due to a major tenant
moving out of Akasaka Oji Building, earnings were accumulated through early solicitation of
successor tenants and new property acquisitions by adopting the “Strategy for Recovery of
Dividend Level.”This time, too, focus will be placed not only on solicitation of successor tenants to Harumi
Island Triton Square Office Tower Y, but also on minimizing the range of decrease in rent
revisions and new property acquisitions. However, reflecting the earnings environment ofoperating companies that will become tenants and stagnation of real estate leasing market
conditions, the rent level is envisioned to become lower than the current level in the solicitationof successor tenants to Harumi Island Triton Square Office Tower Y. Furthermore, combinedwith downward rent revisions at the time of rent revisions with existing tenants, the state is one
in which it would be difficult to secure earnings like that to date. Nevertheless, the stance ofextensive focus on the dividend level will continue in an aim for early recovery of the dividendlevel. This may cause concerns and inconveniences to investors, but your continued
understanding and support is greatly appreciated.
14TH FISCALPERIODFORECAST

15TH FISCALPERIODFORECAST(ANNOUNCED ON
December 14, 2012)(ANNOUNCED ON
December 14, 2012)

184days181days184days

OPERATING REVENUE￥5,636 million￥5,828 million￥4,935 million

OPERATING INCOME￥2,697 million￥2,407 million￥1,990 million

ORDINARY INCOME￥2,002 million￥1,783 million￥1,394 million

NET INCOME￥2,001 million￥1,782 million￥1,422 million

DIVIDEND PER UNIT￥

CATEGORY

13TH FISCALPERIODPERFORMANCEPERIOD OF ASSETMANAGEMENT

12,912￥

11,500￥9,500

NUMBER OF INVESTMENT UNITS

155,000 units

155,000 units

155,000 units

PORTFOLIO SIZE

18 properties

18 properties

18 properties

12Q7. Please describe the external growth (new property acquisition) strategy.
With the financing environment being relatively favorable, J-REITs and other buyers show
strong willingness to acquire. On the other hand, the volume of information on sale of properties
that could possibly become Top REIT’s investment target is extremely limited and the central
Tokyo office building acquisition environment particularly continues to be in a severe state. In
addition, there continues to be a gap in the price perspective (level) between sellers and buyers
and office building transaction market conditions are sluggish. Rental housing is strong, butslightly overheating and prices are rising (cap rates are falling).
Under such circumstances, Top REIT investigated possible acquisition of properties based on
property sale information collected with an aim to acquire highly competitive and highly
profitable properties, but none led to the decision to acquire properties in the thirteenth fiscal
period. Acquisition of excellent properties will continue to be difficult, but with the forecast on
business results for the fourteenth and fifteenth fiscal period being severe as explained earlier,
new earnings must be accumulated through new property acquisitions for recovery in thedividend level. By utilizing not only sponsor networks, but also the diverse information
channels established by the asset manager, Top REIT will focus on acquiring competitive
properties, primarily office buildings located in central Tokyo and major urban areas as to date,as well as aim to steadily expand asset size.
Financial Standing
Adopting a financial policy that is based on stable financial management, Top REIT hascontinued to implement prudent and solid financial operations.
In the current fiscal period (thirteenth fiscal period), the debt financing (fund procurement
through borrowing funds from banks, issuing bonds and other liabilities) environment can be
described to have been good, considering that the market interest rate remained stable at a low
level due to the Bank of Japan continuing and expanding its monetary easing policy and that
financial institutions also kept positive lending attitudes. During the period, a total of 17.5
billion yen in loans payable became due for repayment on June 29, which Top REIT refinanced
as described in (1) below in an effort to reduce interest costs and extend the average remaining
period of interest-bearing liabilities as well as maintain the ratio of fixed-rate interest-bearing
liabilities. As a result, at the end of the thirteenth fiscal period, the balance of interest-bearing
liabilities stands at 96.9 billion yen and the ratio of interest-bearing liabilities to total assets(LTV) is 51.4%.

13

Changes in Fund Procurement Status (Debt)

Short-Term

LTV(billion yen)(billionLong-Term

120

60%
47.4%

100
37.1%

80
60

27.8%

37.3%

10.3

47.3%

9.3

47.3%

13.3

47.3%

50.5%

6.7

6.7

50.5%

50.7%

51.5%

51.4%
50%
40%

13.3

28.0%

30%
20.9

40

87.5

2.5

72.7

72.7

54.4
20

50.6%

33.4

33.4

33.4

IPO

1st FP

2nd FP

68.5

87.5

94.1

94.0

97.0

96.9
20%

68.5

Conduct operation with a target ratio of loans to total assets(LTV) of around 50% in contrast to the 60% ceiling

0

10%
0%

3rd FP

4th FP

5th FP

6th FP

7th FP

8th FP

9th FP

10th FP

11th FP

12th FP

13th FP

Moreover, after the end of the thirteenth fiscal period (October 31, 2012), 9.8 billion yen in loan
payable became due for repayment on November 30, which Top REIT completed therefinancing of as described in (2) below. In this manner, Top REIT continues to transact basedon the stable bank formation with three major megabanks and leading trust banks that has been
formed since listing.
(1) Refinanced total amount of 17.5 billion yen in long-term loans payable due forrepayment

・

Repayment date: June 29, 2012

・

Fully refinanced with 5-year long-term loans payable
8.5 billion yen: Fixed interest rate through execution of interest rate swap agreement
9.0 billion yen: Borrowed with floating interest rate(2) Refinanced 9.8 billion yen in long-term loans payable due for repayment
・Repayment date: November 30, 2012

・

Fully refinanced with floating-rate loans payable as follows
7.0 billion yen: Refinanced with 2-year-10-month long-term loan payable
2.8 billion yen: Refinanced with 4-month short-term loan payableWell-Balanced Refinancing While Considering Cost Reduction

In the recent refinancing, while placing emphasis on “cost reduction,” efforts were also madeto “extend the average remaining period of interest-bearing liabilities,” “maintain the ratio of
fixed-rate interest-bearing liabilities” and “spread out repayment dates” on the other hand, toimplement refinancing that takes balance into consideration. The average remaining period,
which was 2 years and 7 months at the end of the twelfth fiscal period, was extended further to14

3 years at the end of the thirteenth fiscal period. In addition, Top REIT worked to reduce
financing costs by taking advantage of the current status of the market interest rate remaining
stable at a low level while maintaining the ratio of fixed interest rates at around 50%. Goingforward, Top REIT will investigate raising the ratio of fixed-rate interest-bearing liabilities
while considering factors such as the future trends of the Bank of Japan’s monetary policy andthe lending attitude of financial institutions as well as paying attention to the timing of interest
rates starting to rise.
Extending Borrowing Periods

Short-Term
Long-Term
Long-Term*Scheduled repayment of 67.5 million yen each period between 13th FP and 21th FP(million yen)

25,0006,700

20,00015,0009,000

No. 1 Unsecured
Investment
Corporation Bonds

2,800

10,000

7,000

-



8,500

13th FP

9,800

8,500

6,300

14th FP

17,50016,700

3,000
5,000

19,040

4,000
15th FP

16th FP

17th FP

18th FP

19th FP

20th FP

3,000

1,823

21th FP

22th FP

23th FP

Future Financial Strategy

In the fourteenth fiscal period, aside from the 9.8 billion yen that has been refinanced as
explained already, a total of 12.1 billion yen in loans payable will also become due forrepayment in March 2013. Top REIT will conduct well-balanced refinancing for this, too. As
immediate issues, top priority is to firstly complete tenant solicitation for vacant spaces andrecover the dividend level. Subsequent financing means for expansion of asset size will beselected after fully considering the market conditions, cap rates of properties to be newly
acquired and other factors. In its financial policy, Top REIT has placed the ceiling of the ratio
of interest-bearing liabilities to total assets (LTV) at 60%, and targets to set the figure at around
50% in ordinary management. The LTV was 51.4% at the end of the thirteenth fiscal period,
reaching a relatively high level. Among means to lower the LTV level, capital increase
generally comes first. However, the basic stance of Top REIT in planning and implementing
capital increase through public offering of investment units is to make investigations after fully
considering the market conditions, cap rates of properties to be newly acquired and otherfactors, in order to minimize the impact of dilution in its commitment to be considerate ofexisting investors. As such, the decision is heavily dependent on the market conditions.

15However, with real estate leasing market conditions still on a weak note, it is essential for Top
REIT to accumulate earnings by acquiring new properties in order to recover its dividends.
Therefore, in acquiring new properties in the future, Top REIT will consider the possibility of
temporarily raising LTV slightly by borrowing funds from banks while attaching importance todiscussions with the market, so that Top REIT can keep up its prudent and solid financial
management.

16

I.

ASSET MANAGEMENT REPORT【1】Overview of Asset Management Operation
1. Operating Results and Financial Position
Fiscal period

9th

10th

11th

12th

13th

As of/for six months ended

October 31,
2010

April 30,
2011

October 31,
2011

April 30,
2012

October 31,
2012(1) Operating results
Operating revenue
mn yen
6,060
5,967
5,812
5,693
5,636
(Of which, rental revenue)
mn yen
6,060
5,967
5,812
5,437
5,636
Operating expenses
mn yen
3,041
2,995
3,033
2,921
2,939
(Of which, expenses related to rental
mn yen
2,451
2,414
2,479
2,383
2,384
business)
Operating income
mn yen
3,019
2,971
2,779
2,772
2,697
Ordinary income
mn yen
2,204
2,194
1,986
2,029
2,002
Net income
mn yen
2,204
2,157
1,985
1,999
2,001
(2) Assets, etc. (end of period)
186,336
185,459
Total assets
mn yen186,459
188,407
188,440(Period-on-period variation)
%
(0.1)
(1.6)
(0.0)
(−0.1)(−0.5)
Interest-bearing liabilities
mn yen94,172
94,10594,037
96,97096,902
84,41884,245
Net assets
mn yen84,43884,25984,304(Period-on-period variation)
%
(0.2)
(0.0)
(0.1)
(−0.0)(−0.2)
Unitholders’ capitalmn yen82,26082,26082,26082,26082,260(3) Cash distributions
Total cash distributions
mn yen
2,204
2,157
1,985
1,949
2,001
Dividend payout ratio
%
100.0
100.0
100.0
97.5
100.0
(4) Per unit information
Number of units
units
155,000
155,000
155,000
155,000
155,000
Outstanding
Net assets per unit
yen544,768
544,632
543,520543,610
543,900(Note 2)
Dividend per unit
yen
14,22013,922
12,80912,577
12,912(Earnings distribution per unit)
yen
14,22013,922
12,80912,577
12,912(Distribution in excess of earnings
yen
－
－
－
－
－
per unit)(5) Financial indices
Ratio of ordinary income to%
1.2 (2.3)
1.2 (2.4)
1.1 (2.1)
1.1（2.2）
1.1（2.1）
total assets (Note 3)
Ratio of net income to%
2.6 (5.2)
2.6 (5.2)
2.4 (4.7)
2.4（4.8）
2.4（4.7）
unitholders’ equity (Note 3)
Ratio of unitholders’ equity to total
45.3
45.3
45.4
44.7
44.7
%
assets
(0.1)
(0.0)
(0.1)
(−0.7)(0.0)(Period-on-period variation)
LTV
%
50.5
50.5
50.7
51.5
51.4
Rental NOI (Note 4)
mn yen
4,691
4,639
4,393
4,126
4,368
(6) Other referential information
Number of properties at end of period
cases
15
15
17
18
18
Number of tenants at end of period
cases
46
46
48
40
42
(Note 5)
Total rentable area at end of periodm2
291,627.72
291,627.72
295,215.03
300,294.23
300,294.23
Occupancy rate at end of period
%
99.5
99.7
97.3
98.5
99.2
(Note 6)
Depreciation and amortization at end
mn yen
1,081
1,086
1,060
1,072
1,116
of period
Capital expenditure at end of period
mn yen
83
464
234
442
108
Note 1: Operating revenue, etc. do not include consumption taxes.
Note 2: Net assets per unit have been rounded to the nearest yen.
Note 3: The indices above are calculated using the following formulas. In addition, annualized figures derived from the management period are
indicated in brackets.
Ratio of ordinary income to total assets ＝ Ordinary income /((Total assets at beginning of period＋Total assets at end of period)/2)×100
Ratio of net income to unitholders’ equity ＝Net income/((Net assets at beginning of period＋Net assets at end of period)/2×100
Note 4: Rental NOI (Net Operating Income) ＝Rental revenue－Expenses related to rental business＋Depreciation and amortization.
Note 5: Number of tenants at end of period indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units are in the same
property and as multiple tenants if the units are in multiple properties.
Note 6: Occupancy rate at end of period＝Total leased floor areas at end of period/Total leasable floor areas at end of period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants have been used as the leased
floor area.
Note 7: Unless otherwise mentioned in the report, fractions of figures not indicated are rounded off for monetary amounts and rounded for ratios.

172. Overview of Asset Management Operation for the Thirteenth Fiscal Period
A. Brief Background of Top REIT
Top REIT, Inc. (Top REIT) was founded on November 2, 2005 based on the Act on Investment Trusts
and Investment Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co.,
Ltd. (Asset Manager) as the incorporator, and listed on the Real Estate Investment Trust Section of theTokyo Stock Exchange (TSE) (Securities Code: 8982) on March 1, 2006 with the number of investment
units issued and outstanding totaling 145,500 units. Later, Top REIT issued additional investment units(9,500 units) through a third-party allotment on March 23, 2006. As of the end of the thirteenth fiscal
period (October 31, 2012), the total number of investment units issued and outstanding stands at 155,000
units.
Top REIT works to conduct management with the aim of maximizing the investment value for its
unitholders by securing stable revenues over the medium to long term and achieving steady growth of its
portfolio. To do so, Top REIT focuses on the two strategies of “skilled management of a diversified
portfolio” and “optimal application of the sponsors’ strengths.” As of the end of the thirteenth fiscal
period, its portfolio consists of 18 properties with a total acquisition value of ¥184,345 million.

B. Investment Environment and Management Performance<Investment Environment>(a) Economy in General
The Japanese economy generally continued to be weak during the fiscal period due to thefollowing factors. Domestic demand maintained underlying strength with public investment andhousing investment on a recovery trend due to expansion of post-quake reconstruction demand.
Meanwhile, steady personal consumption was settling down because of the end of eco-car
subsidies and other factors, and exports and production moved downward due to concerns over theEuropean debt problem and slowdown in the U.S. and Chinese economies, as well as the prolonged
appreciation of the yen associated with these, and other factors.
The prospects of the Japanese economy are expected to gradually recover with the continued
steady domestic reconstruction demand, as well as overseas economic recovery and easing of thepressures on the appreciation of the yen. However, recovery of the Japanese economy is likely toremain unpredictable with downward swing risks due to the still high uncertainty over theEuropean debt problem, further downward swings in the global economy, fluctuations in thefinancial and capital markets, as well as future trends in Japan-China relations.
(b) Real Estate Leasing Market[Office Buildings]
With respect to the office building leasing market in central Tokyo, the vacancy rate was hovering
at a high level with the demand for quality large-scale newly built buildings expanding due toundervalued rent levels, and their being equipped with high earthquake resistance performance,
emergency power systems and such, as well as relocation movements of tenants was appearing
among office buildings due to cost reductions at tenant firms and consolidation as a result ofcorporate reorganization, etc. However, the large volume supply of newly built office buildings in
the first half of this year caused an imbalance in the supply-demand and an after-relocation
vacancy problem. Going forward, the vacancy rate has been showing signs of gradual improvement
due to the decrease in the supply of new office buildings in the year from the second half of thisyear, but full-fledged recovery is expected to require a little more time. Recovery in the rent level,
which is said to recover as the vacancy rate improves, will likely require a substantial amount oftime due in part to the uncertainty in the outlook of corporate earnings, as the bottoming out of rent
levels will not be confirmed until recovery of corporate earnings.
18

[Retail Properties]
According to the Ministry of Economy, Trade and Industry’s Current Survey of Commerce, despitea temporary drop immediately after the earthquake in 2011, overall retail store sales headed for a
gradual recovery. Personal consumption remained steady, backed not only by the recovery in salesof necessities due to post-earthquake demand, but also the steady consumption of elderly
households. However, heightened economic uncertainty caused the current state to show adownturn in consumer confidence. On the other hand, major retailers also focused on selling
private brands, along with striving to improve business profitability by pursuing the closure of
unprofitable stores and cost reductions.
[Residential Properties]
With respect to the residential property leasing market in central Tokyo and Tokyo Metropolitan
Area, the number of households continued to increase due to the population influx from other areasand increase of one-person and married-couple households, demand for rental residential properties
is expected to remain stable for the time being. Meanwhile, on the supply side, since the number ofhousing starts has remained at a low level, the supply-demand conditions are expected to continue
to be relatively favorable. In addition, while residential properties such as those primarily
comprised of highly-convenient studio units maintain a relatively steady occupancy rate and stable
rent level, rent level adjustment continues to be underway in residential properties for foreigners
and other high-rent properties.
(c) Real Estate Transaction Market
Backed by the stable lending attitude of financial institutions, along with fund inflow to the
J-REIT market continuing with the recovery of the TSE REIT Index, the favorable financing
environment continues. Under such circumstances, the capital increase through public offeringand new listings of J-REITs are on the rise, resulting in an increase in the real estate transaction
amount. However, buyers continue to maintain harsh price perspectives reflecting the current
status of the real estate leasing market, while sellers continue to hold a bullish position in light of
expectations of an economic and real estate market conditions recovery as well as the favorable
financing environment. As a result, with the gap in the price perspective between sellers andbuyers not narrowing, the supply-demand situation of blue-chip properties, etc. remains tight andthe number of transactions continues to be limited.
<Asset Management Performance >(a) Acquisition and Disposition of Assets
Top REIT began the thirteenth fiscal period with 18 properties (total acquisition value: ¥184,345
million) and, with an aim to acquire highly competitive and highly profitable properties,
investigated possible acquisition of properties based on property sale information collected andcarefully selected with a focus on excellent office buildings located in central Tokyo andresidential properties located in central Tokyo and Tokyo metropolitan area through not only the“optimal application of sponsors’ strengths,” but also utilizing established information channels,
but none led to a decision to acquire properties. Thus, the number of properties owned by Top
REIT remained unchanged from the twelfth fiscal period at 18 properties (total acquisition value:¥184,345 million) as of the end of the thirteenth fiscal period.
(b) Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT centers on sustaining and increasing revenue
over the medium to long term by maintaining and improving tenant satisfaction (the “Tenants
First” policy) and keeping operational management costs at an appropriate level. Top REIT
strived to improve tenant satisfaction by sustaining relationships of trust with tenants anddiscerning tenant needs via property management companies in order to maintain and improvehigh occupancy rates.
In the thirteenth fiscal period, successful solicitation of successor tenants to Akasaka Oji Building
has solidified the prospects of its leasable office space being fully occupied, except for a part of
the underground storage. In addition, Top REIT managed to maintain a high occupancy rate
19

throughout the period for residential properties, with the average occupancy rate during thethirteenth fiscal period at 95.6%. As a result of such undertakings, the occupancy rate of Top
REIT’s entire portfolio recovered from the 98.5% at the end of the twelfth fiscal period to 99.2%.
Furthermore, as lease agreement termination notices with termination dates of January 31,
February 28 and March 31 of 2013 were received from Sumitomo Metal Industries, Ltd.
(currently Nippon Steel & Sumitomo Metal Corporation), a tenant of Harumi Island Triton
Square Office Tower Y, on July 23 and September 28, 2012, Top REIT is currently focusing on
successor tenant solicitation and leasing activities.
Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of theoperational management conditions and steady implementation of asset management plans foreach property. Top REIT also carried out renewal construction and repair work that contribute toenhancing the competitiveness of properties and maintaining and improving the functionality ofproperties based on asset management plans, took steps to keep relevant costs at an appropriate
level, and conducted efficient management of resources.
C. Procurement of Funds
Top REIT procures funds by adopting a financial policy that is based on stable financial management.
In the thirteenth fiscal period, ¥17,500 million in borrowings was due for repayment on June 29, 2012,
and Top REIT refinanced with long-term loans (repayment date: June 30, 2017) on the same date inorder to extend the remaining period of interest-bearing liabilities, and fixed the interest rate for ¥8,500
million of the ¥17,500 million through an interest rate swap transaction. Top REIT also repaid ¥67
million of the long-term loans payable as agreed using cash on hand on June 29, 2012.
As a result, at the end of the thirteenth fiscal period, the total amount of interest-bearing liabilities stands
at ¥96,902 million (¥88,402 million in long-term loans (including the current portion) and ¥8,500
million in investment corporation bonds), and the ratio of interest-bearing liabilities to total assets is
51.4%. Moreover, the ratio of long-term interest-bearing liabilities (including the current portion) is
100%, while interest-bearing liabilities with fixed interest rates account for 50.9%.
Furthermore, ¥9,800 million in long-term loans payable due for repayment on November 30, 2012 wasrefinanced with ¥7,000 million in long-term loans payable (loan period: 2 years and 10 months,
repayment date: September 30, 2015) and ¥2,800 million in short-term loans payable (loan period: 4months, repayment date: March 27, 2013) on the same date. This changed the ratio of long-term
interest-bearing liabilities to 97.1%.
The credit ratings of Top REIT as of October 31, 2012 are as follows:
Credit Rating Agency
Moody’s Japan K.K.
(Moody’s)
Rating and Investment Information, Inc.
(R&I)

Rating [Outlook]
Issuer rating: Baa1 [Negative]
Senior unsecured long-term rating (No. 1 Unsecured
Investment Corporation Bonds): Baa1 [Negative]
Issuer rating: A+ [Stable]
Unsecured investment corporation bond rating (No.
1 Unsecured Investment Corporation Bonds): A+

Note: Rating and Investment Information, Inc. downgraded the issuer rating and the Unsecured investment
corporation bond rating (No 1 Unsecured Investment Corporation Bonds) of Top REIT to A+ [rating
outlook: Stable] as of October 10, 2012.

Moreover, Top REIT conducted shelf registration for investment corporation bonds, as indicated below,
in order to secure flexible procurement of long-term funds.
[Overview of Shelf Registration]
Object of Shelf Registration
Investment corporation bonds(excluding short-term corporation bonds)

Amount to be Issued

Scheduled Period of Issue¥100,000 million

From May 20, 2012 to May 19, 201420

D. Business Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded asset
management performance during the thirteenth fiscal period of ¥5,636 million in operating revenue,¥2,697 million in operating income and ¥2,002 million in ordinary income after deducting expenses
concerning borrowings, etc., and net income was ¥2,001 million.
As for dividends, with the aim of having an amount equivalent to profit dividends deducted as expenses
based on the application of the special provision on taxation of investment corporations (Article 67-15
of the Act on Special Measures Concerning Taxation [Act No. 26 of 1957, as amended; hereinafter, the“Special Taxation Measures Act”]), Top REIT decided that the entire amount of unappropriated retained
earnings of the thirteenth fiscal period, excluding fractions of the dividend per investment unit that areless than ¥1, would be paid out. Consequently, Top REIT declared a dividend per investment unit of¥12,912.
3. Balance of Paid-in Capital
There was no change in paid-in capital for the 13th fiscal period. The outline of changes in paid-in capitalfrom the establishment of Top REIT to the end of the current fiscal period is as follows:
Issue date

Remarks

Total number of units
issued and outstanding(units)Increase
Balance

Total paid-in capital(million yen)

Note

Increase
Balance
Incorporation
November 2, 2005
200
200
100
100
Note 1(private)
February 28, 2006
Public offering
145,300
145,500
77,117
77,217Note 2
March 23, 2006
Third party allotment
9,500
155,000
5,042
82,260Note 3Note 1: Top REIT was established with initial capital of ¥500,000 per unit.
Note 2: New investment units were issued at a price of ¥550,000 per unit (issue value of ¥530,750 per unit)
through a public offering in order to raise funds for acquiring new properties.
Note 3: New investment units were issued at a value of ¥530,750 per unit through a third party allocation to raise
funds for acquired properties.

Market Price of Investment Units
The market price of the investment units on Tokyo Stock Exchange REIT Market during respective fiscal
periods is as follows:
Fiscal period
9th
10th
11th
12th
13th
As of the end of fiscal
October, 2010
April, 2011
October, 2011
April, 2012
October, 2012
periodHighest price489,000yen
567,000yen
490,000yen
484,000yen
459,000yen
Lowest price
388,000yen
410,000yen
384,000yen
333,000yen
358,500yen

4. Cash Distribution
The dividend per unit for the current period was 12,912yen. Top REIT expects to distribute almost all
unappropriated retained earnings at the current period end to be eligible for special tax treatments (Special
Taxation Measures Law Article 67-15) that allows Top REIT to deduct an amount equivalent to
distributions of retained earnings as expenses from taxable income.
Fiscal period
As the end of fiscal
periodUnappropriatedretained earnings
Internal reserves
Total dividends(Dividend per unit)

Units
thousandyen
thousandyen
thousand
yen
(yen)

9th
October,2010

10thApril, 2011

11th
October,2011

12thApril, 2012

13th
October,
2012

2,204,126

2,157,918

1,985,468

1,999,419

2,001,377

26

8

73

49,98417

2,204,100

2,157,910

1,985,395

1,949,435

2,001,360(14,220)(13,922)(12,809)(12,577)(12,912)21

Of which, dividend ofaccumulated earnings(Per unit)
Of which, repaymentof paid-in capital(Per unit)

thousandyen(yen)
thousandyen(yen)

2,204,100

2,157,910

1,985,395

1,949,435

2,001,360(14,220)(13,922)(12,809)(12,577)(12,912)

－

－

－

－

－

－

－

－

－

－

5. Management Policy and Future Issues(a) Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction(the “Tenants First” policy) and keeping operational management costs at an appropriate level. Under
this strategy, Top REIT will focus on sustaining relationships of trust with tenants, leasing vacant
spaces and such, as well as striving to maintain stable occupancy rates over the medium to long term.
Positioning the successor tenant solicitation activities associated with the tenant exit at Harumi Island
Triton Square Office Tower Y as a top priority issue, Top REIT will focus on solicitation activities inorder to solidify the prospects of a successor tenant as early as possible by selecting frombroad-ranging and highly-potential candidates while continuing to approach candidates that are
currently considering tenancy.
Furthermore, Top REIT will also work to ensure an appropriate perception of the operational
management conditions for each property while steadily implementing such measures as to sustain andimprove revenues and keep operational management costs at an appropriate level. In addition, Top
REIT will carry out systematic repair work and such to enhance the competitiveness of properties andto maintain and improve the functionality of properties, in an aim to secure stable revenues over the
medium to long term.
(b) Investment Strategy for New Properties
Top REIT aims to increase its dividends over the medium to long term by realizing external growththrough acquisitions of new properties. Along with continuing to further utilize pipeline support
functions from sponsor companies and utilizing various cultivated information channels, Top REIT
will collect information on new properties from a wide range of sources. Based on this information,
Top REIT will consider investment targets centering on highly competitive office buildings in central
Tokyo including residential properties that are expected to have stable occupancy. By doing so, Top
REIT aims to expand the portfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. For
reference, the acquisition value of the NEC Head Office Building accounts for 22.8% of the totalacquisition value of Top REIT’s properties as of the end of the thirteenth fiscal period. Going forward,
Top REIT will work to reduce the risk of concentration on specific properties by steadily advancing
further external growth.
(c) Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation for acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk involved in fundprocurement by extending borrowing periods and spreading out the repayment dates. At the same time,
Top REIT will manage the risk of interest rate fluctuations by taking into account the balance ofborrowings at floating and fixed interest rates, as it discerns the interest rate trends. Moreover,financial soundness will be maintained by keeping the leverage at an appropriate level.
22

(d) Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.

6. Significant Subsequent Events
There are none applicable.

23

【2】Outline of Top REIT
1. Status of Unitholders’ Capital
Fiscal period
As of the end of fiscal period
Number of issuable investment units (units)
Number of units issued and outstanding(units)Unitholders’ capital (million yen)
Number of unitholders

9th
October,
2010
2,000,000

10thApril,
2011
2,000,000

11th
October,
2011
2,000,000

12thApril,
2012
2,000,000

13th
October,
2012
2,000,000

155,000

155,000

155,000

155,000

155,000

82,2606,830

82,2607,090

82,2607,031

82,2606,912

82,2607,823

2. Matters Concerning the Investment Units
Major unitholders as of October 31, 2012 were as follows:
Name

Number of units held
(units)28,658
8,155
6,402
6,139
4,829
4,540
3,848
3,757
3,176
3,162
3,162
2,464
2,389

Share of total(%) (Note)
18.49
5.26
4.13
3.96
3.12
2.93
2.48
2.42
2.05
2.04
2.04
1.59
1.54

1,750

1.13

1,550
83,981

1.00
54.18

Japan Trustee Services Bank (trust account)
Nomura Trust and Banking (investment trust account)
Trust & Custody Services Bank (securities investment trust account)North Pacific Bank, LTD.
The Master Trust Bank of Japan (trust account)
The Senshu Ikeda Bank, Ltd.
THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUNT
Metlife Alico Life Insurance K.K GA Company JPY
Sumitomo Mitsui Trust Bank, Limited.
Oji Real Estate Co., Ltd.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
NOMURA BANK (LUXEMBOURG) S.A.
Trust and Custody Services Bank (money trust tax account)
The Gibraltar Life Insurance Co., Ltd. (general accounts J-REIT
account)
The Minami Nippon Bank, Ltd.
Total
Note: The share of total is calculated by rounding to the second decimal place.

3. Officer and Auditor
A: Name of directors and auditor as of October 31, 2012 were as follows:
Post

Name

Major additional post

Jumpei Norimatsu(Note 1)
Yasuyuki Kuribayashi
Supervisory Director(Note 1)
Executive Officer－

Total amount of fee paid
during the current period(thousand yen)
2,700

Partner
Attorney,City-Yuwa
1,800
Partners (Note 2)
Managing
Partner,
Tsuneyama
Certified Public Accountants Office
Managing Partner, Tsuneyama Sogo
Kunio Tsuneyama
Supervisory Director
Accountants Office
1,800(Note 1)Non Executive Director in Kuroda
Electric Co., Ltd(Note 2)
Accounting Auditor KPMG AZSA LLC
10,000－Note 1: There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
Note 2: Although Supervisory Directors may have additional posts in entities other than those listed above, there
is no conflict of interest between those companies including those listed above and Top REIT.

24

Note 3: There was no resignation or dismissal of the Officer and Auditor during the current period.

B: Policy on determination of dismissal and denial of reappointment of accounting auditor
The Board of Directors shall decide after taking various factors into consideration.
4. Asset Manager, Asset Custodian and Administrative Agents
Asset manager, etc. as of October 31, 2012 were as follows:Business
Company name
Asset manager
Top REIT Asset Management Co., Ltd. (Note)
Assets custodian services
Sumitomo Mitsui Trust Bank Limited.
Administrative agent services (running of theSumitomo Mitsui Trust Bank Limited.
organization, accounting matters, etc.)
Administrative agent services (unitholders’ register,
Sumitomo Mitsui Trust Bank Limited.
special accounts)
Administrative agent services (investment corporation
Sumitomo Mitsui Trust Bank Limited.
bonds)
Note: All shares of the Asset Manager held by Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa
Real Estate Co., Ltd.) were transferred to Sumitomo Mitsui Trust Bank, Limited as of September 28, 2012.
As a result, the composition ratio of shareholders changed to 69% for Sumitomo Mitsui Trust Bank,
Limited and 31% for Oji Real Estate Co., Ltd.

【3】 Status of Investment Assets
1. Composition of Assets
12th
As of April 30, 2012
Type ofassetsAsset class

Officebuildings

Area

Central Tokyo
Subtotal
Central Tokyo
Tokyo
OfficeMetropolitan
buildings
Area
Subtotal
Tokyo
Metropolitan
Retailfacilities
Area
Real estate
Subtotalin trust
Central Tokyo
Tokyo
Residential
Metropolitan
Area
Subtotal
Central Tokyo
OthersSubtotal
Subtotal of real estate and real estate in trust
Cash, deposits and other assets
Real estate

13th
As of October 31, 2012
As a
Total amountpercentage of
owned
total assets(million yen)(%)
(Note 1)
(Note 2)
5,870
3.1
5,870
3.1
126,718
67.3

Total amountowned(million yen)
(Note 1)As apercentage of
total assets(Note 2)

5,882
5,882
127,291

3.1
3.1
67.6

1,712

0.9

1,678

0.9

129,004

68.5

128,397

68.2

23,406

12.4

23,23812.3

23,406
2,478

12.4
1.3

23,238
2,459

12.3
1.3

17,937

9.6

17,795

9.5

20,415
10.9
20,254
10.8
2,695
1.4
2,684
1.4
2,695
1.4
2,684
1.4
181,405
96.3
180,446
95.8
7,001
3.7
7,994
4.2
188,407100.0
188,440
100.0
Total assets (Note 3)(181,405)(96.3)(180,446)(95.8)
Note 1: Total amount owned is based on the amounts appropriated on the Balance Sheet at the end of each period.
(Real estate and real estate in trust represent the book values after deducting depreciation). Total Amountfigures were rounded down to the nearest million yen.

25

Note 2: (Total amount owned) As a percentage of total assets is rounded to first decimal place.
Note 3: Figures in parenthesis of total assets represent the portions of actually owned properties in the object
assets.

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

Chiyoda, Chuo, Minato, Shibuya, Shinjuku―
and Shinagawa Wards

Tokyo
Metropolitan
Area

Tokyo
(excluding
centralTokyo),―
Kanagawa, Saitama and Chiba Prefectures

KansaiRegional economic zone centering on Osaka, Kyoto, Hyogo,
Osaka
Wakayama Prefectures

ChukyoMajor cities
Across thecountry

Shiga,

Regional economic zone centering on
Aichi, Gifu and Mie Prefectures
NagoyaCities designated by government ordinanceand other major cities (excluding cities ―
belonging to the above classifications)

26

Nara

and

2. Major Properties Owned
The principal properties (top ten properties by book value) that Top REIT owns as of October 31, 2012were as follows:
Property nameBook value(million yen)

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y(Note 4)
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Sagamihara
Shopping Center
Fukasawa House
Towers H&I
Akasaka Oji
Building
Ito-Yokado
Higashi-NarashinoStore
Shiba-Koen
Building
Shinkawa
Chuo Building
Total

Leasable floor Leased floor Occupancy Portion of
space
space
rate
rental(Note 1)
(Note 2)
(Note 3)revenue Primary use
(m2)

(m2)

(%)

(%)

(Trustbeneficiaryinterest)

42,794

72,238.03

72,238.03

100.0

24.3

Office(Trustbeneficiaryinterest)

30,76923,219.46

23,219.46

100.0

21.6

Office19,69010,914.20

10,914.20

100.0

7.3

Office12,755

8,025.65

8,025.65

100.0

7.6

Office11,36061,763.28

61,763.28

100.0

7.2

Retailproperty

10,242

11,357.44

11,107.05

97.8

4.2 Residential

9,807

7,301.15

7,213.41

98.8

2.4

Office7,926

51,098.42

51,098.42

100.0

4.2

Retailproperty(Real estate)

5,870

3,060.43

2,372.45

77.5

1.8

Office(Trustbeneficiaryinterest)

5,817

6,032.24

6,032.24

100.0

3.6

Office157,034

255,010.30

253,984.19

99.6

84.2

(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)(Trustbeneficiaryinterest)

Note 1: Leasable floor space is total leasable space for each asset as of the end of the current period. Furthermore, in the case ofco-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leasable floor space of thewhole building by the ratio of co-ownership, and rounded to the second decimal place.
Note 2: Leased floor space is floor space based on lease agreements effective as of the end of the current fiscal period.
Furthermore, in the case of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying theleased floor space of the whole building by the ratio of co-ownership, and rounded to the second decimal place. In thecase of contracting the master-lease agreements as pass-through type, the floor space subleased to end-tenants is
calculated as the leased area.
Note 3: Occupancy rate is the figure given by dividing leased floor space as of the end of the current fiscal period by leasable
floor space, and rounded to the first decimal place.
Note 4: Lease agreement termination notices with termination dates of January 31, February 28 and March 31 of 2013 werereceived from Sumitomo Metal Industries, Ltd. (currently Nippon Steel & Sumitomo Metal Corporation) on July 23 andSeptember 28, 2012.

27

3. Details of Portfolio Properties① Details of Properties

Asset class

A. The details of properties owned by Top REIT as of October 31, 2012 were as follows:

Area

Property name

Address

Type of title

Appraisalvalue at endof 13thperiod(million yen)

(Note 1)

Residential

Retail property

Office building

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building
Kanda Park PlazaCentral Tokyo

Shiba-Koen
Building
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo
Building

Tokyo
Metropolitan
Faret East Building
Area
Subtotal (9 Properties)
Sagamihara
Shopping
CenterTokyo
Ito-Yokado
Metropolitan
Higashi-Narashino
Area
Store
Musashiurawa
Shopping Square
Subtotal (3 Properties)
Top ResidenceCentral Tokyo Nihonbashi
Kayabacho
Fukasawa House
Towers H&I
Ecology Toyosu
Tokyo
Procentury
Metropolitan
Impress
Area
Musashi-Koganei
Top Residence Yoga

Other
Total

(18 Properties)OAK PLAZA(million yen)

5-7-1 Shiba, Minato Ward,Tokyo

Trust beneficiaryinterest

49,45042,7941-8-11 Harumi, Chuo Ward,Tokyo

Trust beneficiaryinterest

32,10030,7698-1-22 Akasaka,
Minato Ward, Tokyo
2-2-2 Kajicho,
Chiyoda Ward, Tokyo
3-5-5 Shiba, Minato Ward,Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

7,990

9,807

4,900

5,084

Real estate

3,420

5,870

1-8-12 Harumi, Chuo Ward,Tokyo

Trust beneficiaryinterest

14,30019,6903-11-1 Kanda Nishiki-cho,
Chiyoda Ward, Tokyo
1-17-24, Shinkawa,
Chuo Ward, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

14,10012,755

5,790

5,817

2-34-7 Akebonocho,
Tachikawa City, Tokyo

Trust beneficiaryinterest

2,390

1,678

134,440

134,268

3-13-33 Kobuchi, Minami
Ward, Sagamihara City,
Kanagawa

Trust beneficiaryinterest

10,40011,3607-3-1 Higashi Narashino,
Narashino City, Chiba

Trust beneficiaryinterest

5,610

7,926

7-3-1 Bessho, Minami Ward,
Saitama City, Saitama

Trust beneficiaryinterest

3,860

3,951

19,87023,238

2,580

2,459

7,060

10,242

4,970

5,030

1,270

1,289

1,160

1,233

17,04020,254

2,450

2,684

2,450

2,684

173,800

180,446

3-4-1 Nihonbashi
Kayabacho, Chuo Ward,Tokyo
2-1-2 Fukasawa,
Setagaya Ward, Tokyo
4-8-8 Toyosu, Koto Ward,Tokyo
4-14-18 Nakamachi Koganei
City, Tokyo
1-14-12 Tamagawadai,
Setagaya Ward, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Subtotal (5 Properties)
Central Tokyo

Book value
atend of 13th
period

2-10-6 Kanda Awajicho,
Chiyoda Ward, Tokyo

Subtotal (1 Property)

Trust beneficiaryinterest

Note 1: For “Appraisal value at end of period,” Top REIT indicates the assessed value based on the appraisal by real estateappraisers following the asset evaluation method and standards stipulated in Top REIT’s Articles of Incorporation and rulesof The Investment Trusts Association, Japan (based on real estate appraisal reports prepared by Tanizawa Sogo Appraisal
Co, Ltd; Japan Real Estate Institute and Daiwa Real Estate Appraisal Co, Ltd) as of October 31, 2012 as the points ofevaluation.

28

Operating results for each fiscal period of each property owned were as follows:

Area

Asset class

B.

Name of property

Twelfth Fiscal Period

Thirteenth Fiscal Period

From November 1, 2011
to April 30, 2012

From May 1, 2012
to October 31, 2012

Number ofOccupancy

tenantsrate- real estaterevenue totenantsrate- real estaterevenue to(end of(end of(for period)

total rental(end of(end of(for period)

total rental

period)period)period)period)revenues(case)(million yen)

(Note1)
NEC Head Office
Building

Rent revenue Ratio of rental Number of(%)(Note 2)

Occupancy Rent revenue Ratio of rental

revenues(case)(%)(million yen)

(Note1)(%)(Note 2)

(%)

1

100.0

1,370

25.2

1

100.0

1,370

24.3

7

100.0

1,294

23.8

7

100.0

1,217

21.6

4

63.6

54

1.0

6

98.8

135

2.4

10

100.0

174

3.2

10

100.0

176

3.1

2

92.7

107

2.0

2

77.5

98

1.8

1

100.0

7.4

1

100.0

7.3

1

100.0

8.1

1

100.0

7.6

1

100.0

34

0.7

1

100.0

204

3.6

1

100.0

153

2.8

1

89.6

151

2.7

―

―

13

0.3

―

―

―

―

28

98.0

4,050

74.5

30

99.0

4,191

74.4

2

100.0

407

7.5

2

100.0

407

7.2

1

100.0

236

4.3

1

100.0

236

4.2

3

100.0

129

2.4

3

100.0

129

2.3

6

100.0

772

14.2

6

100.0

772

13.7

1

96.8

42

0.8

1

96.9

90

1.6

1

93.0

235

4.3

1

97.8

240

4.2

1

94.4

159

3.0

1

95.7

164

2.9

1

94.5

44

0.8

1

93.4

44

0.8

1

89.2

36

0.7

1

92.7

37

0.7

5

93.8

519

9.6

5

96.4

576

10.2

Harumi Island
Triton Square
Office Tower Y(Note 3)

Office building

Central Tokyo

Akasaka Oji
Building
Kanda Park Plaza
Shiba-Koen
Building
Harumi Island
Triton Square
Office Tower Z
Kanda Nishiki-cho
3-chome Building
Shinkawa Chuo

KansaiTokyo
Metropolitan
Area

Building

Faret East Building

Nittetsu Honmachi
Building (Note 4)

Tokyo Metropolitan
Area

Retail property

Subtotal (10 properties)
Sagamihara
Shopping Center
Ito-Yokado
Higashi-NarashinoStore
Musashiurawa
Shopping Square
CentralTokyo

Subtotal (3 properties)
Top Residence
Nihonbashi
Kayabacho

Tokyo Metropolitan Area

Residential

Fukasawa House
Towers H&I
Ecology Toyosu
Procentury
Impress
Musashi-Koganei
Top Residence
Yoga
Subtotal (5 properties)

29

Central
Tokyo

Other

OAK PLAZA

1

100.0

94

1.7

1

100.0

94

1.7

Subtotal (1 property)

1

100.0

94

1.7

1

100.0

94

1.7

40

98.5

5,437

100.0

42

99.2

5,636

100.0

Total (19 properties)

Note 1: Number of tenants indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if theunits are in the same property and as multiple tenants if the units are in multiple properties.
Note 2: Rent revenue for Harumi Island Triton Square Office Tower Z and Kanda Nishiki-cho 3-chome is not disclosed due tobeing unable to obtain the consent of the tenants.
Note 3: Lease agreement termination notices with termination date on January 31, February 28 and March 31 of 2013 werereceived from Sumitomo Metal Industries, Ltd. (currently Nippon Steel & Sumitomo Metal Corporation) on July 23
and September 28, 2012.
Note 4: This property was disposed to the third party on November 25, 2011. Moreover, rental revenue of Nittetsu Honmachi
Building during 12th FP did not include capital gains on disposition.

② Details of Investment Securities
There are none applicable.
4. Contracted Amount and Market Price of Specified Transactions
The contracted amount and market price of the specified transactions of Top REIT as of October 31,
2012 were as follows:
Contract amount (Note 1) (Note 2)
Segment

Type of transaction

Longer than a year

Transaction other than Interest-rate swap
market transaction(receiving floating-rate, Paying fixed-rate)

33,50027,200(Million yen)
Market price(Note 1)
(Note 3)
(298)

Total
33,50027,200(298)
Note 1: The above figures are rounded down to the nearest million yen.
Note 2: Contract amounts of interest-rate swap transactions represent figures based on the estimated principal.
Note 3: Market price is evaluated at the price calculated by the counterparty of the concerned transaction contract based on theprevailing market rate.

5. Status of Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the “3-① Detailsof Portfolio Properties. ”There were no significant specified assets that are main investment targets of
Top REIT other than those listed above as of October 31, 2012.
6. Status of Assets by Country and Region
There are none applicable.

30

【4】Capital Expenditures for Properties Owned(1) Schedule of Capital Expenditures
The table below lists the estimated amounts of significant capital expenditures for repair andmaintenance work of properties held by Top REIT, planned as of October 31, 2012.
The estimated construction costs shown in the table below include those charged to expenses inaccounting.

Name ofproperty

Scheduled term
for construction or
maintenancePurposeLocation

Renewal of external
wall and ceilingMay 2012 toNovember 2012
May 2012 toRenewal of gondola
January 2013
Renewal of waterproof
May 2012 toequipment
March 2013
Renewal of lighting
May 2012 to
SystemJanuary 2013
Renewal of automatic
May 2012 tofire alarm system
March 2013
NEC Head
Minato Ward, Renewal of coolingMay 2012 to
Office Building Tokyo
tower
March 2013
May 2012 toRenewal of Refrigerator
March 2013
Renewal of
May 2012 toheat source pumpJanuary 2013
Renewal of air
May 2012 to
Condition facility
January 2013
Construction works of
May 2012 toair condition pipe units
March 2013
Renewal of central
May 2012 tomonitor system
March 2013
Harumi Island
Chuo Ward, Renewal of common
November 2012 to
Triton SquareTokyo
spacesFebruary 2013
Office Tower Y
Shinkawa Chuo Chuo Ward, Renewal of common
November 2012 to
BuildingTokyo
restrooms
January 2013
ChiyodaRenewal of external
June 2012 to
OAK PLAZA
Ward, Tokyo wall and ceiling
November 2012

Estimated construction cost
(million yen)
Payment Total of
Total
for theadvanceperiodpayment
26

―

―

23

―

―

12

―

―

10

―

―

33

―

―

23

―

―

45

―

―

10

―

―

42

―

―

15

―

―

44

―

―

51

―

―

18

―

―

37

―

―

(2) Capital Expenditures Made During the Period
The following table is an overview of construction work conducted during the fiscal period that fallunder the category of capital expenditures for properties held.
Capital expenditures during the fiscal period amounted to ¥108 million and combined with ¥46
million in repairs and maintenance costs that fall under expenses for the fiscal period, a total of ¥155
million of construction work was implemented.
Name of property
Shinkawa Chuo
Building
OthersLocation
Chuo Ward,Tokyo

PurposeRenewal of common
spacesRenewal of function
Total

31

Scheduled term forconstruction or maintenance
April 2012 toJune 2012
May 2012 to October 2012

Capitalexpenditures(million yen)
27
81
108

(3) Funds Reserved for the Long-term Repair and Maintenance Plan
(Million yen)

Fiscal period

9thFrom May 1,
2010 to
October 31,
2010

Balance of reserved funds at
beginning of current period
Amount reserved during thecurrent period
Amount used from reserved
funds during the current
periodBalance carried forward to
the next period

10th
From
November 1,
2010
to April 30,
2011

11th
From May 1,
2011
to October 31,
2011

12th
From
November 1,
2011
to April 30,
2012

13th
From May 1,
2012
to October 31,
2012

346

530

330

443

347

197

197

197

197

197

13

396

84

292

133

530

330

443

347

410

【5】Condition of Expenses and Liabilities(1) Details of Expenses Related to Management(Million yen)

12th
From November 1, 2011
to April 30, 2012

Fiscal period
Item(a) Asset management fees (Note)(b) Asset custodian fees and administrative

service fees(c) Directors’ compensation(d) Audit fees(e) Other expenses
Total

13th
From May 1, 2012
to October 31, 2012
409

430

71

72

6
10
41

6
10
36
554

538

Note: In addition to the amounts described above, asset management fees consisted of ¥40 million in 12th fiscal
period in association with the acquisition of new properties recorded as book value of the respective
properties. Moreover, asset management fees consisted of ¥3 million in 12th fiscal period in association withthe disposition of property recorded as capital gains on disposition.

32

(2) Status of Borrowings
Status of borrowings from respective financial institutions as of October 31, 2012 is as follows.
Category

Current Portion of Long-Term Loans Payable

LenderDateborrowed

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
Corporation
June 29, 2007
No. 4
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
The Bank of Tokyo-Mitsubishi March 27,
2008
Term Loan UFJ, Ltd.
No. 7
Mitsubishi UFJ Trust andBanking Corporation
Development Bank of Japan,
Inc.
Subtotal

Averageinterest
Repayment Repayment Use of
rate
date
method proceeds(%)(Note 1)

Remarks

June 29, 2012

Bulletrepayment on(Note 2)
repayment
date

Unsecured
and without
guarantee

March 27,2013

Bulletrepayment on(Note 3)
repayment
date

Unsecured
and without
guarantee

Bulletrepayment on(Note 3)
repayment
date

Unsecured
and without
guarantee

8,500

―

1.95

6,300

6,300

1.48

3,000

3,000

1.53

9,300

9,300

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Term Loan Mitsubishi UFJ Trust andNo. 11 Banking Corporation
Resona Bank, Limited

January 13,
2010

9,800

9,800

1.23

November30, 2012

Development Bank of Japan,
Inc.

January 13,
2010

135

135

2.42

November30, 2016

9,935

9,935

9,000

―

1.16

36,735

19,235

2,000

2,000

2.27

1,000

1,000

2.40

1,000

1,000

2.40

SubtotalLong Term Loans Payable

Balance at the Balance at the
beginning of theend of thecurrent period current period(million yen)(million yen)

Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
March 26,
Corporation
No. 132010
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Total
Sumitomo Mitsui Trust Bank
Limited.
Development Bank of Japan,
June 29, 2007
Term Loan Inc.
No. 5
The Dai-ichi Life InsuranceCo., Ltd.
Subtotal
Term Loan Development Bank of Japan,
No. 11 Inc.
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan Corporation
No. 14 The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation(Note 3)

Unsecured
and without
guarantee

June 29, 2012

Bulletrepayment on(Note 4)
repayment
date

Unsecured
and without
guarantee

June 30, 2014

Bulletrepayment on(Note 2)
repayment
date

Unsecured
and without
guarantee(Note 5)

4,000

4,000

January 13,
2010

2,295

2,227

2.42

November30, 2016(Note 3)

Unsecured
and without
guarantee

March 3,
2011

16,70016,7001.39

BulletFebruary 29, repayment on(Note 4)2016
repayment
date

Unsecured
and without
guarantee

33(Note 5)

Sumitomo Mitsui Trust Bank
LimitedTerm Loan
March 31,
The Bank of Fukuoka, Ltd.
No. 152011
The Hiroshima Bank, Ltd.
The Yamaguchi Bank, Ltd.
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
November
Corporation
No. 1630, 2011
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
March 30,
Corporation
No. 172012
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Trust Bank
Limited.
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Term Loan
Corporation
June 29, 2012
No. 18The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corporation
Subtotal
Total

6,700

6,700

0.83

BulletFebruary 29, repayment on(Note 2)
2016
repayment
date

19,04019,0400.56

November30, 2016

Bulletrepayment on(Note 4)
repayment
date

Unsecured
and without
guarantee

BulletOctober 31, repayment on(Note 3)2016
repayment
date

Unsecured
and without
guarantee

Bulletrepayment on(Note 4)
repayment
date

Unsecured
and without
guarantee

3,000

3,000

0.66

―

9,000

0.66
June 30, 2017

―

8,500

51,73588,47069,16788,402

Unsecured
and without
guarantee

0.79

Note 1: The average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance
during the period) and rounded to the second decimal place. Furthermore, the average interest rate related to theborrowing hedged by an interest rate swap transaction for the purpose of reducing interest rate fluctuation risk isweighted by considering the effect of the relevant interest rate swap.
Note 2: The use of borrowings is for repayment of short-term loans payable.
Note 3: The use of borrowings is for acquisition of trust beneficiary interest in real estate.
Note 4: The use of borrowings is for repayment of long-term loans payable.
Note 5: Repayment of ¥67.5 million will be made at the end of June and December each year starting on June 30, 2010, with theremaining payment of ¥1,822.5 million to be repaid on November 30, 2016, the final repayment date.

(3) Status of Investment Corporation Bonds
Investment corporation bonds issued and outstanding as of October 31, 2012 are as follows.
Balance as ofthe end of thecurrent
period(million yen)Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

Remark

1.00

June 4,2015

Bulletpayment

Repaymentofborrowing

Unsecured
and without
guarantee

Name of Bonds

Issue Date

Balance as of
the beginningof the current
period(million yen)

No.1
Unsecured Investment
Corporation Bonds(Note)

June 4,
2010

8,500

8,500

8,500

8,500

Total

Note: This bond is equipped with special pari passu conditions among the specified investment corporation bonds.

(4) Status of Short-Term Investment Corporation Bonds
There are none applicable.

34

【6】Status of Acquisitions and Dispositions During the Period(1) Acquisitions and Dispositions of Real Estate, etc. and Asset Backed Securities
There are none applicable.
(2) Acquisitions and Dispositions of Others Assets
Other major assets besides real estate and asset backed securities stated above consist mostly ofbank deposits or bank deposits within assets held in trust.
(3) Research on Prices of Specified Assets
Transactions during the current period that require research on prices of specified assets stipulated
by Article 201 of the Investment Trusts and Investment Corporations Law are as follows.
① Real estate, etc
There are none applicable② Others
One interest rate swap deal was subjected to the research during the current period and research of thesaid deal was entrusted to KPMG AZUSA LLC. We have received the related research report fromKPMG AZUSA LLC. In the research, KPMG AZUSA LLC is supposed to report on the name ofcounterparty, currency, contractual interest rate, transaction term and other matters pertaining to thesubject interest rate swap deal.
(4) Transaction with Interested Parties, etc. and Major Unitholders① Status of Transaction
There are none applicable.
② Amounts of Fees Paid, etc.
Fees paid to interested parties, etc. and major unitholders during the current period are as follows.

Item

Total amount offees paid (A)(thousand yen)

Property management fees

392,283

Trust compensation
Asset custodian fees
Administrative service fees

17,288
8,464
63,979Other fees paid

12,227

Transactions with interested parties, etc. and major
Ratio against
unitholders
total amountAmount of
B/A
Paid topayment (B)(%)(thousand yen)
Oji Real Estate Co., Ltd.
25,008
6.4
Sumitomo Mitsui Trust Bank Limited.
1,250
0.3
Sumitomo Mitsui Trust Bank Limited.
15,138
87.6
Sumitomo Mitsui Trust Bank Limited.
8,464
100.0
Sumitomo Mitsui Trust Bank Limited.
63,979100.0
Sumitomo Mitsui Trust Bank Limited.
1,303
10.7
Oji Real Estate Co., Ltd.
6
0.0
Sumitomo Mitsui Trust Bank Limited.
57,544
40.7

Borrowing related expenses
141,551
Investment corporation bond
5,576 Sumitomo Mitsui Trust Bank Limited.
624
11.2
related expenses
Other non-operating expenses
4,106 Sumitomo Mitsui Trust Bank Limited.
342
8.3
Other expenses related to rent
5,707 Oji Real Estate Co., Ltd.
498
8.7
business
Note 1: Interested parties, etc. and major unitholders means interested parties, etc. of the asset manager which concluded asset
management entrustment contract with Top REIT as prescribed in Article 123 of the Enforcement Order of theInvestment Trust and Investment Corporations Law and major unitholders of the asset manager as defined in Article
29-4, Paragraph 2 of the Financial Instruments and Exchange Law (Law No. 25, 1948. including the amendments
thereafter). However, the table above also includes transactions with interested parties as provided in the internal rulesof the asset manager (including special purpose companies, etc. to which interested parties, etc. have been entrustedwith asset management). Please note that the parties to which payments were made during the current period were The
Sumitomo Trust and Banking Co., Ltd. and Oji Real Estate Co., Ltd.
Note 2: In addition to the fees paid described above, the amounts paid for repair and maintenance work placed with interested
parties, etc. during the current period are Oji Real Estate Co., Ltd. of ¥16,324 thousand. Furthermore, the concerned
payments include construction management fees.
Note 3: Although Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa Real Estate Co., Ltd.) and Nippon Steel

35

Community Service Co., Ltd. were subjected to the interested parties as provided in the internal rules of the asset
manager, entire shares of the asset manager held by Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa Real
Estate Co., Ltd.) were transferred to Sumitomo Mitsui Trust Bank, Limited as of September 28, 2012 and the said
company was not subjected to the interested parties. Furthermore, Top REIT paid to the said two companies’ property
management fees, other fees, expenses of repair and maintenance work placed with interested parties during the current
period. Moreover, the concerned payments include construction management fees.
Nippon Steel City Produce, Inc. (currently Nippon Steel Kowa Real Estate Co., Ltd.)
Property management fees:
34,297thousand yen
Other fees paid:
21thousand yen
Repair work, etc.:
14,947thousand yen
Nippon Steel Community Service Co., Ltd.
Property management fees:
3,981thousand yen(5) Status of Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd. the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments transaction business, type 2 financial
instruments transaction business, land and building transaction business, or real estate syndication
business, and has no such transactions with Top REIT.

【7】Overview of Accounting(1) Assets, Liabilities, Principal and Profit / Loss
Please refer to accompanying Balance Sheets, Statements of Income and Retained Earnings,
Statements of Unitholders’ Equity, Notes to Financial Statements and Statements of Cash Dividends.
(2) Change in Depreciation Method
There are none applicable.
(3) Change in Valuation Methods of Real Estate, etc.
There are none applicable.
(4) Status of Investment Trust Beneficiary Certificates of Top REIT, etc.
There are none applicable.

【8】Others(1) Notice①Board of Directors
Execution or modification of significant agreements approved by the Board of Directors of the
Top REIT during the fiscal period were as followings.
Approval date
September 28, 2012

Approval agenda
Item of conclusion regarding cancellationby consent of the “agreement on
information provision on real estate, etc.”
and the “agreement on provision of
warehousing functions, etc.”

Description
Nippon Steel City Produce, Inc. (currently Nippon
Steel Kowa Real Estate Co., Ltd.) withdrew from theposition as Top REIT’s sponsors due to all held sharesof the asset manager being transferred to Sumitomo
Mitsui Trust Bank, Limited. Regarding the respective
agreements described on the left concluded among
Top REIT, Asset Manager and Sponsors dated
December 28, 2005, the said companies concluded
memorandums of understanding
concerning withdrawing from being a contract party.

②Notice Concerning Relocation of Top REIT Head Office
Top REIT Head Office relocated to new address (1-3-7 Yaesu Chuo Ward, Tokyo) on August 11,
2012.
(2) Others
Unless otherwise stated, fractions less than the specified unit are rounded down to the nearest
specified unit for monetary amounts and rounded to the nearest specified unit for percentage figures.
36

II. Balance Sheets(Unit: thousand yen)
Twelfth Fiscal Period(as of April 30, 2012)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Income taxes receivable
Consumption taxes receivable
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
Other intangible assets in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

37

Thirteenth Fiscal Period(as of October 31, 2012)

1,669,299
4,299,045
30,250234,094
16
150
608
1,845
6,235,311

2,306,624
4,538,595
35,841
261,404
16
－
－
1,830
7,144,313

1,145,185(161,620)
983,564
4,452(2,867)
1,584
17,235(9,825)
7,410
2,522
(846)
1,676
4,888,525
61,867,568(11,762,594)
50,104,973
696,187(238,906)
457,281
232,455(92,043)
140,412
237,583(98,037)
139,546
124,678,411
181,403,387

1,148,529(177,991)
970,537
4,760(3,012)
1,748
17,235(10,398)
6,837
4,058
(1,028)3,029
4,888,525
61,987,617(12,813,533)
49,174,083
697,367(259,630)
437,737
237,480(105,241)132,238
246,048(111,964)
134,083
124,695,656
180,444,479

2,096
148
2,245

1,850
127
1,977

10,000537,134
184,406
731,541
182,137,174

10,000613,286
197,185
820,471
181,266,928

34,90834,908
188,407,394

29,39629,396
188,440,638

(Unit: thousand yen)
Twelfth Fiscal Period(as of April 30, 2012)

Thirteenth Fiscal Period(as of October 31, 2012)

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities

80,127

225,91136,735,000
233,949
221,849566―
804,500
3,877

19,235,000
252,992
174,072688
102,725
945,950
2,785

38,225,655

20,794,342

8,500,000
51,735,000
144,487
5,513,903
28,827―65,922,219
104,147,874

8,500,000
69,167,500
125,901
5,512,599
25,243
10,525
83,341,769
104,136,112

Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total Voluntary retained earnings

82,260,100

82,260,100――

49,95849,958Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity

1,999,419
1,999,419
84,259,519

2,001,377
2,051,336
84,311,436――(6,909)(6,909)Total net assets

84,259,519

84,304,526

Total liabilities and net assets

188,407,394

188,440,638

Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Deferred tax liabilities
Derivatives liabilities
Total noncurrent liabilities
Total liabilities
Net Assets
Unitholders’ equity

Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments38

III. Statements of Income(Unit: thousand yen)
Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)

Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)

Operating revenue
Rent revenue – real estate
Other lease business revenue
Gain on sales of real estate properties
Total operating revenue

5,420,035

5,605,257

17,26530,966

256,002－

5,693,303

5,636,223

2,383,013

2,384,258

Operating expenses
Expenses related to rent business
Asset management fee

409,169

430,000

Asset custody fee

8,348

8,464

Administrative service fees

63,19963,979Directors’ compensations

6,300

6,300

Audit fee

10,00010,000

Other operating expenses

41,222

36,195

Total operating expenses
Operating income

2,921,252

2,939,198

2,772,050

2,697,025

2,880

1,448

Non-operating income
Interest income
Reversal of dividends payable

800

606

Insurance income－

774

Reversal of provision for loss on disaster

391

－

Other

119

198

4,192

3,027

Interest expenses

553,431503,691

Interest expense on investment corporation bonds

42,26742,827

Amortization of investment corporation bond issuance costs

5,511

5,511

140,627

141,551

Total non-operating income
Non-operating expenses

Borrowing related expenses
Other

5,262

4,171

747,101

697,753

Ordinary income

2,029,141

2,002,299

Income before income taxes

2,029,141

2,002,299

Income taxes – current

962

949

Income taxes – deferred

28,833(0)Total non-operating expenses

Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

39

29,795948

1,999,346

2,001,351

73

26

1,999,419

2,001,377

IV. Statements of Changes in Net Assets (Unitholders’ Equity)(Unit: thousand yen)

Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)
Unitholders’ equity
Unitholders’ capital
Balance at the beginning of the period
Changes of items during the period
Total changes of items during the period
Balance at the end of current period
Surplus
Voluntary retained earnings
Reserve for reduction entry
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Total changes of items during the period
Balance at the end of current period
Total Voluntary retained earnings
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Total changes of items during the period
Balance at the end of current period
Unappropriated retained earnings (undisposed loss)
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Total surplus
Balance at the beginning of the period
Changes of items during the period
Provision of reserve for reduction entry
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Total unitholders’ equity
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Total changes of items during the period
Balance at the end of current period
Valuation and translation adjustments
Deferred gains or losses on hedges
Balance at the beginning of the period
Changes of items during the period
Changes of items other than unitholders’ equity(net)
Total changes of items during the period
Balance at the end of current period
Total valuation and translation adjustments
Balance at the beginning of the period

40

Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)

82,260,100

82,260,100－
82,260,100－
82,260,100

－

－

－
－
－

49,95849,95849,958

－

－

－
－
－

49,95849,95849,9581,985,468

1,999,419－(1,985,395)
1,999,346
13,951
1,999,419(49,958)(1,949,435)
2,001,351
1,957
2,001,377

1,985,468

1,999,419－(1,985,395)
1,999,346
13,951
1,999,419－(1,949,435)
2,001,351
51,916
2,051,336

84,245,568

84,259,519(1,985,395)
1,999,346
13,951
84,259,519(1,949,435)
2,001,351
51,91684,311,436

－

－

－

(6,909)－－(6,909)(6,909)－－Changes of items during the period
Changes of items other than unitholders’ equity(net)
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of the period
Changes of items during the period
Dividends from surplus
Net income
Changes of items other than unitholders’ equity (net)Total changes of items during the period
Balance at the end of current periodV.

－(6,909)－－(6,909)(6,909)84,245,568

84,259,519(1,985,395)
1,999,346－
13,951
84,259,519(1,949,435)
2,001,351(6,909)45,00684,304,526

Notes to Financial Statements

Note 1. Premise of the Going Concern
Twelfth Fiscal Period (Reference)
For the period
from November 1, 2011
to April 30, 2012
There are none applicable

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
There are none applicable

Note 2. Significant Accounting Policies
Twelfth Fiscal Period
Classification

1.

Method ofDepreciation andAmortization of
Property, etc.

(Reference)

For the period
from November 1, 2011
to April 30, 2012

Treatment Methodof Differed Assets

For the period
from May 1, 2012
to October 31, 2012

(1) Property, Plant and Equipment (including trust (1) Property, Plant and Equipment (including trust
assets)assets)Adopts the straight-line method. Further, theAdopts the straight-line method. Further, theestimated useful lives of the major property, plant
estimated useful lives of the major property, plantand equipment are as follows.
and equipment are as follows.
Building
Structures
Machinery and equipment
Tools, furniture and fixtures2.

Thirteenth Fiscal Period

2~59 years
2~54 years
2~15 years
2~12 years

Building
Structures
Machinery and equipment
Tools, furniture and fixtures

2~59 years
2~54 years
3~15 years
2~12 years(2) Intangible Assets
Adopts the straight-line method.

(2) Intangible Assets
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

(3) Long-Term Prepaid Expenses
Adopts the straight-line method.

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bonds

Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over thematurity period of the bonds

41

3.

Standard for
Method of treatment concerning Taxes on Property Method of treatment concerning Taxes on Property
Posting of Income and Equipment
and Equipment
and Expenses
Top REIT adopts the method of treating property
Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountrelated to the rent business in the amountcorresponding to the management period out ofcorresponding to the management period out of
the assessed and determined taxation amount. In
the assessed and determined taxation amount. In
addition, as for the acquisition of real estate or
addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, thebeneficiary interests in trust in real estate, theadjustments equivalent to property tax for the
adjustments equivalent to property tax for theacquired fiscal year paid to the transferor will beacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
recorded as expenses in the corresponding period.
Furthermore, during the 12th fiscal period, there
Furthermore, during the 13th fiscal period, theamount equivalent to the property taxes included
was no amount equivalent to the property taxes
as the acquisition costs of real estate totaled
included as the acquisition costs of real estate that
was applicable.
28,530 thousand yen for Top Residence
Nihonbashi Kayabacyo and Shinkawa Chuo
Building that were acquired in 12th fiscal period.

4.

Treatment Method (lessee)(lessee)for Lease
Among finance lease transactions other than those Among finance lease transactions other than thoseTransaction
recognized as being a transfer of ownership of the recognized as being a transfer of ownership of theleased property to the lessee, equipment lease leased property to the lessee, equipment leasetransactions with a commencement date which transactions with a commencement date whichfalls under the fiscal period that starts before April falls under the fiscal period that starts before April
1, 2008 are treated by accounting methods in 1, 2008 are treated by accounting methods inaccordance with ordinary rent transactions.
accordance with ordinary rent transactions.

5.

Method of Hedge
Accounting(1) Method of Hedge Accounting on Deferred
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

42(1) Method of Hedge Accounting on Deferred
Hedge, etc.
Deferred hedge accounting is adopted.
However, special treatment is adopted for thosethat meet the requirements for special treatment
of interest rate swaps.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Interest rate swap transactions
Hedged items:
Borrowing interest rates(3) Hedging Policy
Top REIT enters into derivative transactions tohedge against risks stipulated in the Articles ofIncorporation in accordance with the financial
policy.
(4) Method for Assessing the Effectiveness of
Hedging
The effectiveness of hedging is assessed bycomparing the cumulative change in hedged
items and the cumulative change in hedging
instruments and then examining the ratio of theamount of change in both.

6.

Other Significant
Items
Fundamental toPreparing the
Financial
Statements(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust(1) Accounting Treatment Method on Trust
Beneficiary Interest in Real Estate as Property in
Trust

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

For the trust beneficiary interest in owned realestate, all accounts of assets and liabilities held in
trust as well as all income generated and expenses
incurred from the trust are recorded in theconcerned items accounts on the balance sheet
and statements of income and retained earnings,
respectively.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

Furthermore, the following significant accounts
are separately stated in the balance sheet for
properties in trust recorded in relevant accounts.

1.Cash and Deposits in trust
2.Building in trust, Structures in trust,machinery and equipment in trust, Tools,
furniture and fixtures in trust, otherproperties in trust, land in trust, otherintangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

1.Cash and Deposits in trust
2.Building in trust, Structures in trust,machinery and equipment in trust, Tools,
furniture and fixtures in trust, otherproperties in trust, land in trust, otherintangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits intrust(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

43(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

Note 3. Balance Sheet
Twelfth Fiscal Period (Reference)
As of

Thirteenth Fiscal Period

April 30, 2012

As of October 31, 2012

1. Asset Pledged as Collateral and Secured Liabilities

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows.

Assets pledged as collateral are as follows.
(Thousand yen)
2,435,871
83,755
8,892,092
11,411,719

Building in trust
Structures in trust
Land in trust
Total

Secured liabilities are as follows.

(Thousand yen)
2,387,558
81,0838,892,092
11,360,733

Building in trust
Structures in trust
Land in trust
Total

Secured liabilities are as follows.
(Thousand yen)
719,800

Tenant leasehold and security
deposits in trust
Total

719,800(Thousand yen)
719,800

Tenant leasehold and security
deposits in trust
Total

719,800

2. Minimum Total Net Asset Designated in Article 67-4 in the 2. Minimum Total Net Asset Designated in Article 67-4 in theInvestment Trust and Investment Corporations Law
Investment Trust and Investment Corporations Law
50,000thousand yen

44

50,000thousand yen

Note 4. Statement of Income and Retained Earnings
1. Breakdown of Property Rental Business Revenues and Expenses(Thousand yen)

Twelfth Fiscal
Period(Reference)

Thirteenth Fiscal Period

For the period
From November 1, 2011
to April 30, 2012

For the period
From May 1, 2012
to October 31, 2012

A. Revenue related to rent business
Rental and parking revenue

5,097,051

5,268,670

Other lease revenue

322,984

336,587

Other lease business revenue

15,986

23,645Cancellation penalty received

1,279

7,321

5,437,301

5,636,223

Property management costs and fees

398,124392,283

Utilities expenses

189,024

230,976

Property-related taxes and dues

608,042

565,466

Non-life insurance expenses

9,094

9,369

Repair expenses

80,887

46,7201,072,349

1,116,306

25,491

23,1352,383,013

2,384,258

3,054,287

3,251,965

Total revenue related to rent business
B. Expenses related to rent business:

Depreciation and amortization
Other
Total expenses related to rent business
C. Revenue and expenses of real estate rent business(A − B)
2. Breakdown of capital gains of the disposition of real estate

Breakdown of capital gainsof the disposition of realestateTwelfth Fiscal Period (Reference)
For the period
from November 1, 2011
to April 30, 2012

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012

Capital gains of disposition of Nitetsu
Honmachi Building(Thousand yen)
Revenue of disposition:
1,300,000
Disposition costs:
1,001,145
Other expenses for disposition:
42,852
Capital Gains
256,002―45

Note 5. Unitholders’ Equity(1) Number of units

Number of issuable investment units
Number of investment units issued and outstanding

Twelfth Fiscal Period(Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

2,000,000 units

2,000,000 units

155,000 units

155,000 units

Note 6. Tax Effect Accounting
1. Breakdown of deferred gains or losses by cause(Deferred Tax Assets)(Thousand yen)

Twelfth Fiscal Period(Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

Current assets
Income taxes – current payable1616

Noncurrent assets
Deferred gains or losses on hedges

3,584

Total deferred tax assets

16

3,601

(Deferred Tax Liabilities)(Thousand yen)

Twelfth Fiscal Period(Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

Noncurrent liabilities
Reduction reserves

28,827

28,827

Total deferred tax liabilities

28,827

28,827

28,811

25,226(Net deferred tax liabilities)

2. Breakdown by main items that caused differences between the effective statutory tax rate and the effective tax
rate after applying tax effect accounting.

Effective statutory tax rate

Twelfth Fiscal Period(Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 201239.33%

36.59%

Deductible cash distributions(37.79%)(36.57%)

Other(0.08%)

0.03%

1.47%

0.05%

(Adjustment)

Effective tax rate after applying tax effect accounting46

3. Content and Impact of Changes in Income Tax, Etc. if Such Changes Were Made after the Settlement Dates

Content and Impact ofChanges in Income Tax,
Etc. if Such Changes Were
Made after the Settlement
Dates

Twelfth Fiscal Period (Reference)
For the period
from November 1, 2011
to April 30, 2012
The Act to Partially Revise the Income Tax
Act, etc., in Order to Construct a Tax
System Addressing Changes in theSocio-Economic Structure (Act No. 114 of
2011) and the Act on Special Measures for
Securing Necessary Financial Resources to
Implement Measures to Rebuild Areas
Devastated by the Great East Japan
Earthquake (Act No. 117 of 2011) were
promulgated on December 2, 2011.
In accordance with the promulgation, theeffective statutory tax rate used to calculate
the deferred tax assets and deferred tax
liabilities concerning the temporary
differences, etc. expected to be reversedin the accounting periods ending October,2012 (13th fiscal period) to April, 2015
(18th fiscal period) will be changed to
36.59%, and temporary differences
expected to be reserved in the accounting
periods ending October, 2015 (19th fiscal
period) and after will be changed to 34.16%
from the historic 39.33%.
Furthermore, the amount of impact from thechanged tax rate may is minimal.

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012―

Note 7. Leases
1. Finance lease transactions other than those recognized as being a transfer of ownership of the leased property to
the lessee
As lessee:(1)Amount equivalent to acquisition value, amount equivalent to accumulated depreciation and amortization,
and amount equivalent to the balance at the end of the fiscal period for leased properties(Thousand yen)
Twelfth Fiscal Period (Reference)
Thirteenth Fiscal Period
For the period
For the period
From November 1, 2011
From May 1, 2012
to April 30, 2012
to October 31, 2012
AmountAmountAmountAmountAmountAmountequivalent toequivalent toequivalent toequivalent toequivalent toaccumulated
equivalent toaccumulatedbalance atbalance atacquisitionacquisition
depreciation
depreciation
end of period
end of period
value
value
and
and
amortizationamortization
Machinery and equipment
4,950
4,655
294
―
―
―
Total
4,950
4,655
294
―
―
―
(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

(2) Amount equivalent to the balance of future lease payments at the end of the fiscal period(Thousand yen)

Twelfth Fiscal Period(Reference)
For the period
from November 1, 2011
to April 30, 2012
Due within 1 year
Due over 1 year
Total

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
326
－
326

(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

47

－
－
－

(3) Lease fees payable, amount equivalent to depreciation and amortization and amount equivalent to interest
expenses(Thousand yen)

Twelfth Fiscal Period(Reference)
For the period
from November 1, 2011
to April 30, 2012
Lease fees payable
Amount equivalent to depreciation andamortization
Amount equivalent to interest expenses

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
395

329

353

294

8

2

(Note) The amounts are shown for Top REIT’s portion. The amounts are rounded down to the nearest thousand yen.

(4) Method for calculating amount equivalent to depreciation and amortization and amount equivalent tointerest expenses• The amounts are calculated by the straight-line method, with the lease period as the useful life and zeroas the residual value.
• The amount equivalent to interest expenses is calculated as the amount of difference in the total amountof lease fees and amount posted as lease assets, with the method for allocation to the respective fiscal
periods based on the interest method.

Note 8. Financial Instruments
Effective from the fiscal period ended October 31, 2010, Top REIT adopted the revised Accounting Standard,“Accounting Standard for Financial Instruments” (Accounting Standards Board of Japan (“ASBJ”) Statement
No.10 revised on March 10, 2080) and the “Guidance on Disclosures about Fair Value of Financial Instruments”(ASBJ Guidance No.19 revised on March 10, 2080).
Information on financial instruments for the periods ended April 30, 2012 and October 31, 2012 required pursuant
to the revised accounting standards are as follows:
1. Matters Concerning Status of Financial Instruments(1) Policy for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units, with the aim of contributing to steady growth of assets managed and stableearnings from a mid-and long-term view in accordance with the financial policy stated by the asset manager.
Although management of surplus funds by using financial instruments targeting securities, monetary claims,
etc. in accordance with the investment limitations stipulated in the Articles of Incorporation, as a general rule,the surplus funds are managed by placing them in deposit.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.
(2) Financial Instruments, Their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (TRAM), the asset management company of Top
REIT, strive for advancing risk management through regular inspection of the adequacy and effectivenessof risk management systems. Top REIT and TRAM adopt the structure that inspects various risks regularly
and reflects the results of inspection on the risk management plan and the management plans. In addition,
Top REIT and TRAM inspect risks and reflect the results of inspection in the decision-making in a timely
manner through various transactions.
Top REIT and TRAM strive for risk management based on the incorporation rules of the asset manager
concerning individual financial instruments and their risks, and risk management system.
①

Credit risk concerning deposit and derivative transaction
Deposits, especially time deposits of large amounts, are used for investment of Top REIT’s surplus funds,
these deposits are exposed to credit risk of bankruptcy of the depository financial institutions and others.
Top REIT minimizes the risk through such measures as limiting them to short term deposits and setting
the standard of credit rating for depository financial institutions and establishing rules for the ceilingamounts of deposit. Derivative transactions are exposed to credit risks of transaction parties, Top REIT
limits credit risks by setting the standard of credit rating in transaction financial institutions and putting
in place a structure to monitor deals, the amount of estimated values and credit status of transaction
partners.

48

②Market risk concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and refinance existing loans and bonds.
Loans, especially floating-rate borrowings, are exposed to market risks, Top REIT manages to hedge
against interest-raising risk by fixed-rate interests entered into interest swap transactions and setting thetarget of fixed- rate interest ratios. In addition, when procuring new loans and refinancing, Top REIT
inspects interest-raising risks and studies borrowing methods that minimize risks. For the hedging
instruments and hedged items, hedging policy, method for assessing the effectiveness of hedging, etc. inhedge accounting, please refer to “5. Methods of Hedge Accounting” under “Note 2. Significant
Accounting Policies” above.

③

Liquidity risk concerning borrowings and tenant leasehold used in cash flow, etc
Borrowings, investment corporation bonds and tenant leasehold are exposed to liquidity risk at the timeof repayment of borrowing, redemption of investment corporation bonds and return of tenant leaseholds,
but Top REIT manages these risks by preparing monthly fund management plans. In addition, Top
REIT has established a management system for identifying liquidity risks regularly and at the time ofvarious transactions by calculating the total amount of payments assumed, which is arrived at by taking
the total amount of borrowings and tenant leaseholds, etc. that are to become due for repayment in thefiscal period and adding forecast dividends, and conducting a comparative inspection with liquidity on
hand that factors in the liquidity of portfolio real estate properties and other assets under management.

(3) Supplemental Explanation About the Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. Certain assumptions are used for theestimation of fair value. Accordingly, the result of such estimation may change if different assumptions areused. Furthermore, the contractual amounts of derivative transactions stated in “2. Matters Concerning
Estimated Fair Value, etc. of Financial Instruments” below do not represent the market risk involved inthese derivative transactions.

49

2. Matters Concerning Estimated Fair Value, etc. of Financial Instruments
For the period from November 1, 2011 to April 30, 2012 (12th fiscal period) (Reference)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2012. The financial instruments that are recognized to be extremely difficult to estimate the fair value
are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of April 30, 2012
Book value

Fair value

Difference(1)

Cash and deposits

1,669,299

1,669,299－(2)

Cash and deposits in trust

4,299,045

4,299,045－

5,968,345

5,968,345－

36,735,000

36,763,620

28,6208,500,000

8,550,150

50,15051,735,000

52,210,908

475,908

37,00237,002－97,007,002

97,561,681

554,679

－

－

－

－

－

－

Total assets(3) Current portion of long-term loans
payable(4) Investment corporation bond
(5)
(6)

Long-term loans payable
Tenant leasehold anddeposits in trust
Total liabilities

security

Derivative transactions
Applied hedge accounting
Total derivative transactions(Note 1) Methods for calculating the fair value of financial instruments and matters related to derivative transactions

Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the sameas the book value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost
equal to the book value because such loans reflect the market interest rate in a short-term
period and thus are based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated bydiscounting the sum total amount of its principal and interest payment on a rate reasonably
estimated to be applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special
treatment of interest-rate swap (refer to Derivative Transactions below) is the present
value calculated by the discounted sum total of its principal and interest payments net
calculated from the interest-rate swap on a rate reasonably estimated to be applicable tosimilar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference
trading statistics of the Japan Securities Dealers Association.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as
the book value and is thus stated at that book value.

50

Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated bycontracts for derivative transactions as of date of settlement for each hedge accounting method applied.
(Thousand yen)Hedge
accounting
methodType ofderivative
Hedge item
transactions
Interest rate
Specialtreatment ofLong-termswapinterest-rateloans payable
Pay fixed /swaps
receive floating

Contract amountMore than
one year

Fair
value

33,500,000 18,700,000

Method of calculating thefair value(*1)(*1) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one
transaction together with long-term loans payable which is the hedged item, the fair value is included in the fairvalue of the said long-term loans payable (refer to Note 1(5)).
(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*2)
5,476,901
Total
5,476,901(*2) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value
disclosure because arriving at the fair value is extremely difficult due to the fact that the contract termination
period, which is the repayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or
re-signed even if a lease term is set in the lease contract, making a reasonable estimate of future cash flows
difficult.
(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
1,669,299
4,299,045
5,968,345

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after the end of
the period(Thousand yen)
Due
after
Due after
Due after
Due after
Due after
Due withinthreefour to five
two to three
one to two
five years
one yearto four
years
years
years
Investment
corporation
bonds

－

－

－

8,500,000－－

Long-term
loans
payable36,735,000

135,000

4,135,000

23,535,000

23,930,000

－

Total

36,735,000

135,000

4,135,000

32,035,000

23,930,000－

51

For the period from May 1, 2012 to October 31, 2012 (13th fiscal period)
The following table includes the book value, fair value and valuation difference of financial instruments as of
October 31, 2012. The financial instruments that are recognized to be extremely difficult to estimate the fairvalue are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of October 31, 2012
Book value

Fair value

Difference(1)

Cash and deposits

2,306,624

2,306,624－(2)

Cash and deposits in trust

4,538,595

4,538,595－

Total assets(3) Current portion of long-term loans
payable(4) Investment corporation bond

6,845,219

6,845,219－

19,235,000

19,255,366

20,3668,500,000

8,563,750

63,75069,167,500

69,609,387

441,887

415,658

415,658－

97,318,158

97,844,162

526,004(10,525)(10,525)－(10,525)(10,525)－(5) Long-term loans payable(6) Tenant leasehold and security
deposits in trust
Total liabilities
Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.
(Note 1) Methods for calculating the fair value of financial instruments and matters related to derivative transactions

Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the sameas the book value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost
equal to the book value because such loans reflect the market interest rate in a short-term
period and thus are based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated bydiscounting the sum total amount of its principal and interest payment on a rate reasonably
estimated to be applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special
treatment of interest-rate swap (refer to Derivative Transactions below) is the present
value calculated by the discounted sum total of its principal and interest payments net
calculated from the interest-rate swap on a rate reasonably estimated to be applicable tosimilar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is based on reference
trading statistics of the Japan Securities Dealers Association.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as
the book value and is thus stated at that book value.

52

Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated bycontracts for derivative transactions as of date of settlement for each hedge accounting method applied.
(Thousand yen)Hedge
accounting
methodType ofderivative
Hedge item
transactions
Interest rate
Principal
swap
Long-term
treatment
loans
payablePay
fixed/methodreceive floating
Interest rate
Specialtreatment ofLong-termswapinterest-rateloans
payablePay fixed /swaps
receive floating

Contract amountMore than
one year
8,500,000

Fair
value

Method of calculating thefair value

Calculated on value
provided by counterparty
8,500,000 (10,525) financial institution

25,000,000 18,700,000

(*2)

―

(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one
transaction together with long-term loans payable which is the hedged item, the fair value is included in the fairvalue of the said long-term loans payable (refer to Note 1(5)).
(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*3)
5,096,941
Total
5,096,941(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value
disclosure because arriving at the fair value is extremely difficult due to the fact that the contract termination
period, which is the repayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or
re-signed even if a lease term is set in the lease contract, making a reasonable estimate of future cash flows
difficult.
(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period(Thousand yen)
Due within one year
2,306,624
4,538,595
6,845,219

Cash and deposits
Cash and deposits in trust
Total(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after the end of
the period(Thousand yen)
Due
after
Due after
Due after
Due after
Due after
Due withinthreefour to five
two to three
one to two
five years
one yearto four
years
years
years
Investment
corporation
bonds

－

－

8,500,000－－－

Long-term
loans
payable19,235,000

4,135,000

135,000

26,535,000

38,362,500

－

Total

19,235,000

4,135,000

8,635,000

26,535,000

38,362,500－

53Note 9. Investment and Rental Properties
Top REIT owns in the portfolio certain office buildings (including land), etc. located in Tokyo and other areas
which are for lease.
The following table is the amount posted on the balance sheet, amounts of increase (decrease) during the previous
period and fair value of these investment and rental properties as of the settlement date.
For the period from November 1, 2011 to April 30, 2012 (12th fiscal period) (Reference)(Thousand yen)Book value
Balance at the
beginning of the period
174,745,154

Change during the period
6,660,329

Balance at the end of
the period
181,405,484

Fair value at end of theperiod179,000,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of Top Residence Nihonbashi Kayabacho (2,491,698 thousand yen)and Shinkawa Chuo Building (5,779,255 thousand yen), and decrease is mainly due to the disposition of Nitetsu
Honmachi Building (1,001,145 thousand yen) , and the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended April 30, 2012 ispresented in “Note 5. Statement of Income and Retained Earnings.”
For the period from May 1, 2012 to October 31, 2012 (13th fiscal period)(Thousand yen)Book value
Balance at the
beginning of the period
181,405,484

Change during the period(959,154)

Balance at the end of
the period
180,446,329

Fair value at end of theperiod173,800,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable to capital expenditures, and decrease is mainly due to the depreciation andamortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended October 31, 2012 ispresented in “Note 4. Statement of Income and Retained Earnings.”

54

Note 10. Transactions with Interested Parties
For the period from November 1, 2011 to April 30, 2012 (12th fiscal period) (Reference)
Attribution

Company
nameRatio ofBusiness investment
units
description heldamong totalor
number ofoccupation investment
units

Type oftransaction

63,199 Accounts
payable-otherBrokerage fee

39,060Trust fees
(disposition)

300

Other fees paid

Assetscustodian

Item in balance
sheetsAdministrative
service fee

Trust fee

Sumitomo
Mitsui
Trust
Banking
Bank
Limited.

Amount oftransaction(thousand yen)
(Note)

Property
management
expenses
2.05% Other
non-operating
expenses

Borrowing
related expenses

Investment
corporationbond related
expenses

Operating
16,524 accounts
payable1,374

Balance atperiod end(thousand yen)
(Note)
57,318―1,250
Long-term
prepaid
342 expenses

1,860

Prepaid
expenses

720

Long-term
prepaid
48,850 expenses

201,363

Prepaid
expenses

76,730Accounts
payable-other54

624 Investment
corporation
3,550
bond issuance
expenses(Note) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs.
Furthermore, transaction terms are determined based on prevailing market conditions.

55

For the period from May 1, 2012 to October 31, 2012 (13th fiscal period)
Attribution

Company
nameInterested
party

Japan
Trustee
Services
Bank,Ltd.

Ratio ofBusiness investment
units
description heldamong totalor
number ofoccupation investment
units

Banking

18.49%(Note 2)Type oftransaction

Amount oftransaction(thousand yen)
(Note 1)

Rent revenue,
etc(Note 3)

Interested
Party and
Assetscustodian

7,615

Advances
received

72,160Administrative
service fee

63,979 Accounts
payable-other

Trust fee

15,138Other fees paid

1,303 Operating
accounts
payable1,250

58,048―Long-term
prepaid
342 expenses

1,500

Prepaid
expenses

720

Long-term
prepaid
57,544 expenses

220,700

Prepaid
expenses

80,053Other
non-operating
2.05% expenses

Borrowing
related expenses

Balance atperiod end(thousand yen)
(Note 1)

Operatingaccounts
96,622 receivable

Property
management
expensesSumitomo
Mitsui
Trust
Banking
Bank
Limited.

Item in balance
sheets

Accounts
payable-other

Investment
corporationbond related
expenses54

624 Investment
corporation
2,990
bond issuance
expenses(Note 1): Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs.
Furthermore, transaction terms are determined based on prevailing market conditions.
(Note 2): The described above ratio was held to trust accounts.
(Note 3): The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

Note 11. Per Unit Information
Twelfth Fiscal Period (Reference)

Thirteenth Fiscal Period

or the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

Net Assets per Unit

543,610 yen

Net Assets per Unit

543,900 yen

Net Income per Unit

12,899 yen

Net Income per Unit

12,912 yen

Diluted net income per unit has not been presented since
there are no outstanding warrants or convertible bonds.
(Note)

Diluted net income per unit has not been presented since
there are no outstanding warrants or convertible bonds.

The per unit amounts are rounded to the nearest yen.

56

(Note)Base of calculation of net income per unit is as follows:
Twelfth Fiscal Period (Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

Net Income (thousand yen)

1,999,346

2,001,351

Amounts not attributable to ordinary unitholders(thousand yen)――

Net income attributable to ordinary investment
unit (thousand yen)

1,999,346

2,001,351

Weighted-average number of units during theperiod (unit)

155,000

155,000

Note 12. Significant Subsequent Events
Twelfth Fiscal Period (Reference)

Thirteenth Fiscal Period

For the period
from November 1, 2011
to April 30, 2012

For the period
from May 1, 2012
to October 31, 2012

There are none applicable.

There are none applicable.

57VI. Statements of Cash Dividend Distributions

Classification

Twelfth Fiscal Period(Reference)
For the period
from November 1, 2011
to April 30, 2012
Amount(yen) (Note 1)

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
Amount(yen) (Note 2)

I. Unappropriated retained earnings

1,999,419,960

2,001,377,610

II. Total Amount of Dividends(Dividend per unit)

1,949,435,000(12,577)

2,001,360,000(12,912)49,958,494―

26,466

17,610III. Voluntary retained earnings
Provision of reserve for reduction
entry
IV. Retained earnings brought
forwardNote 1: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 1,949,435,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings after deducting thereserve for reduction entry, which was reserved pursuant to Article 66-2 of the Special Taxation Measures Act, for the
fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.
Note 2: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Special Taxation
Measures Law.” Based on these policies, Top REIT decided on a total distribution of 2,001,360,000 yen as distribution ofincome for the period. This is the maximum value arrived at when the number of units issued and outstanding (155,000
units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings for the fiscal period.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the
Articles of Incorporation.

Disclaimer:
The accompanying English financial information, comprising of balance sheets, statements of retained
earnings, statements of changes in unitholders’ capital, notes to financial information and statements of cash
dividends, have been translated from the Japanese financial statements of Top REIT prepared in accordancewith the Law Concerning Investment Trusts and Investment Corporations of Japan.
Under Article 130 of the Law Concerning Investment Trusts and Investment Corporations of Japan, theJapanese financial statements for the fiscal period ended October 31, 2011 have been audited by KPMG
AZUSA, in accordance with auditing standards generally accepted in Japan. However, this English translationof the Japanese language report of independent auditors is not attached herein because the accompanying
English translation of balance sheets, statements of retained earnings, statements of changes in unitholders’capital, notes to financial information and statements of cash dividends are unaudited.

58

VII. Statements of Cash Flows (Reference Information)(Unit: thousand yen)
Twelfth Fiscal Period(November 1, 2011 –April 30, 2012)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of right of trademark
Amortization of investment corporation bond issuance costs
Interest income and interest on securities
Interest expenses
Reversal of provision for loss on disaster
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in income taxes receivable
Decrease (increase) in prepaid expenses
Decrease due to sale of property plant and equipment in trust
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
Subtotal

Thirteenth Fiscal Period(May 1, 2012 –October 31, 2012)

2,029,141
1,072,349
21
5,511(2,880)595,699(391)（2,975）
（608）
168
2,410
1,001,145
7,256（11,901）（63,072）（137,486）（233,072）（106,072）
4,155,244

2,002,299
1,116,306
21
5,511(1,448)546,518―（5,590）608
150（27,309）―(14,939)
14,526
102,725
141,449（76,152）（23,270）
3,781,407

2,880（635,382）
（355）
（908）
3,521,477

1,448（594,264）―（826）
3,187,764

Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities――（3,190）（8,586,136）―
468,502（297,240）（8,418,065）(70,500)
70,500（10,058）（264,006）(18,586)
66,667（67,971）（293,955）

Net cash provided by (used in) financing activities
Proceeds from long-term loans payable
Repayment of long-term loans payable
Dividends paid
Net cash provided by (used in) financing activities

22,040,000（19,107,500）（1,985,395）
947,105

17,500,000（17,567,500）（1,949,435）(2,016,935)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period（3,949,482）
9,917,828
5,968,345

876,874
5,968,345
6,845,219

Interest income received
Interest expenses paid
Payment for Loss on disaster
Income taxes paid
Net cash provided by (used in) operating activities

59

Note Concerning Significant Accounting Policy [Reference Information]

Classification
Scope offunds instatements ofcash flows

Twelfth Fiscal Period (Reference)
For the period
from November 1, 2011
to April 30, 2012
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Thirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Note Concerning Statements of Cash Flows [Reference Information]*1.

Twelfth Fiscal Period (Reference)
For the period
from November 1, 2011
to April 30, 2012
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheetsThirteenth Fiscal Period
For the period
from May 1, 2012
to October 31, 2012
*1. Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets(as of April 30, 2012)(Unit: thousand yen)
1,669,299
4,299,045
5,968,345

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents(as of October 31, 2012)(Unit: thousand yen)
2,306,624
4,538,595
6,845,219

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

Stock and Unitholders Information
Trading Volume

Unit Price
Top REIT
東証REIT指数（指数化後）

Top REIT Trading Volume
TOP出来高
TOP

（円）
(yen)

TOPIX

TSE
REIT Index
TOPIX（指数化後）

(U
nit)
（口）

1,000,000

10,00013th FP

14th FP

900,000
8,000
800,000

700,000

6,000

600,000

4,000

500,000

400,000
2,000
300,000

200,000

Apr
2006

Oct
2006

Apr
2007

Oct
2007

Apr
2008

Oct
2008

Apr
2009

Oct
2009

60

Apr
2010

Oct
2010

Apr
2011

Oct
2011

Apr
2012

Oct
2012

0

No. of Units Held

Other domestic corporations:
13,120 [8.5%]

Individuals / other:
20,516 [13.2%]
11th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Individuals / other:
21,159 [13.7%]

12th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Other domestic corporations:
13,264 [8.6%]
Overseas
corporations /individuals:
19,218 [12.4%]

Financial institutions (incl. securities firms):
101,359 [65.4%]
Other domestic corporations:
13,572 [8.8%]

Individuals / other:
24,392 [15.7%]

13th Fiscal Period
Total number of units
issued andoutstanding at end of
period: 155,000

Overseas
corporations /individuals:
20,427 [13.2%]

Financial institutions (incl. securities firms):
100,937 [65.1%]

Overseas
corporations /individuals:
22,600 [14.6%]

Financial institutions (incl. securities firms):
94,436 [60.9%]

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

90%

100%

No. of Unitholders

11th Fiscal Period
Total number ofunitholders at endof period: 7,031

12th Fiscal Period
Total number ofunitholders at endof period: 6,912

13th Fiscal Period
Total number ofunitholders at endof period:7,823

0%

Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

111 [1.6%]
140 [2.0%]
105 [1.5%]

Individuals / other 6,675[94.9%]
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

99 [1.4%]
140 [2.0%]
90 [1.3%]

Individuals / other 6,583 [95.2%]
Financial institutions (incl. securities firms):
Other domestic corporations:
Overseas corporations / individuals:

106[1.4%]
154[2.0%]108[1.4%]

Individuals / other 7,455[95.3%]

10%

20%

30%

40%

61

50%

60%

70%

80%