13th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2011 ~ May 31, 2012

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

I. Overview of Daiwa Office Investment Corporation

Enhancing Portfolio Management
Focused Mainly on Well-Located Office
Buildings in Tokyo
Daiwa Office Investment Corporation (DOI) is a REIT (real estate investment trust) specializing in investment in officebuildings, focused on the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards). Through aportfolio comprised of A Class buildings (buildings with a total floor area of 30,000m2 or more) and B Class buildings(buildings with a total floor area of 2,000m2 or more, but less than 30,000m2), DOI strives to earn stable revenues bymeeting the diverse needs of a broad range of tenants and flexibly responding to market changes.
Photo: Daiwa Ginza
Contents
I.

Overview of Daiwa Office Investment Corporation

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

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

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

To Our Investors……………………………………………… 4
Financial and Management Highlights………………………… 5
Overview of Portfolio (portfolio distribution)…………………… 6
Internal Growth Measures… ………………………………… 8External Growth Measures………………………………… 11
Overview of Portfolio (portfolio list)………………………… 13
Financial Conditions… …………………………………… 14
Investment Unit and Investor Information…………………… 15
Description of Asset Manager……………………………… 16

2

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

Statements of Changes in Unitholders’ Equity …… 25

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

Independent Auditors’ Report…………………… 37

VIII. Statements of Cash Flows [Information Only]… … 38
IX. Investor Information… ……………………………… 39

Characteristics and Strategies of Daiwa Office Investment Corporation

3 Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT focused on the Five
Central Wards of Tokyo

Portfolio comprised of
A Class and B Class buildings

Effective application of operational knowhow specialized in office buildings

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

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

Office buildings 100.0%

Regional Cities 1.5%
Greater Tokyo

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

92.3%

6.2%

42.7%

B Classbuildings
Based on acquisition price57.3%

Based on acquisition priceNote: Please note that the percentages in the above graphs are as of May 31, 2012.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 350 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%(billion yen)
350

350.0
Proactive investment
in selectively chosencompetitive
properties

300

Establishment of stable revenue base・Property management
activities

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

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals focused on improvingbuilding capabilities

・Financial activities

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

Distribution per unitchanges in the status and other200

13th Fiscal Period

construed as a guarantee of
distribution amounts.

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

5,107 yen(actual)3500

14th Fiscal Period(fiscal period ending November 2012)

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

278.1

250

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

313.2

287.3
269.1

(fiscal period ended May 2012)
calculated based on certain

311.3

15th Fiscal Period(fiscal period ending May 2013)

5,500 yen
5,500 yen
3000

(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation
2500

3

To Our Investors
Towards Further Growth

We would like to express our deep gratitude to all our unitholders for their support of Daiwa Office Investment Corporation(DOI).
In the 13th Fiscal Period, DOI posted operating revenues of 7,431 million yen and operating income of 3,090 million yen. Our
distribution per unit for the 13th Fiscal Period is 5,107 yen, an increase by 643 yen from the 12th Fiscal Period.
The 13th Fiscal Period featured the acquisition of the Nihonbashi Hongokucho Tosei Building for 1,721 million yen and thesite in Daiwa Sarugakucho for 190 million yen. Willingness to sell office real estate continues to be weak, but because of ourlow loan-to-value (LTV) and ample room to make further investments, we have been introduced to a relatively large numberof sale proposals. DOI will continue to selectively invest in properties that can maintain competitiveness over the long term,with the aim of achieving total investment of 350 billion yen.
With regard to the management of existing assets, though there are signs of improvement in the office market as vacancy
rates are beginning to stop increasing and the large supply of offices has settled down, the situation still needs to bewatched with caution. Based on the motto of “Bonji-Tettei” (accomplishing ordinary tasks thoroughly and carefully) which
was established in the previous fiscal period, DOI has strived to “improve occupancy rate through lease-up,” “strengtheningof relations with existing tenants,” “reduce costs,” “implement strategic renewals aimed at boosting competitiveness”
and “strengthen collaboration with the Daiwa Securities Group.” As a result, the number of inquiries from potential new
tenants increased significantly and, by decreasing the rate of cancellations by tenants reviewing contracts, we realized an
occupancy of 94.3% as of the end of the 13th Fiscal Period, far exceeding initial forecasts. DOI will continue to strive toheighten tenant relations, maintain the occupancy rate and improve the profitability of existing properties.
In financial matters, we have aimed to reduce the risk of rising interest rates by increasing the ratio of borrowings with
fixed interest rates by implementing swap contracts while also extending our borrowings. We will continue to strengthen
cooperation with our financial institutions and thereby reinforce our financial foundation.
As the groundwork for improving profitability of existing properties has made progress in the 13th Fiscal Period, DOI will aim
to further increase distributions through property acquisitions and other measures while leading the positive effects into the
14th and 15th Fiscal Periods.
We wish for the continued success of our unitholders and ask for your continued support of DOI.

Kazuo Otaka Executive Director of Daiwa Office Investment Corporation
4

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

3,000

7,500

6,986

6,424

5,000

6,759

7,606

3,090

2,824

2,482

2,000

1,000

2,500

0

0
9th Period

10th Period

11th Period

12th Period

13th Period

9th Period■ Net Income

10th Period

11th Period

12th Period

13th Period■ Distribution Per Unit
(yen)
6,000

(million yen)
2,500
2,000

3,317
2,959

7,431

2,076

5,246

2,021
1,767

1,500

1,282

1,000

5,107

4,000

4,464

1,453

3,671

3,240
2,000

500
0

0
9th Period

10th Period

11th Period

12th Period

13th Period

9th Period■ Asset Size

11th Period

12th Period

13th Period■ Period End Occupancy Rate(billion yen)
350

(%)
100
90

300

250

10th Period

313.2

311.3
278.1

269.1

80

287.3

95.9

95.4

10th Period

11th Period

94.3

92.4

85.7

70
60
50

200
9th Period

10th Period

11th Period

12th Period

9th Period

13th Period

12th Period

13th Period

13th Period

12th Period

11th Period

10th Period

9th Period(May 2012)(November 2011)(May 2011)(November 2010)(May 2010)

Operating revenues (million yen)

7,431

7,606

6,759

6,424

6,986

Operating income (million yen)

3,090

3,317

2,824

2,482

2,959

Ordinary income (million yen)

2,022

1,768

1,588

1,274

1,774

Net income (million yen)

2,021

1,767

1,453

1,282

2,076

10000
Total number of units issued (units)395,798

395,798

395,798

395,798

395,798

Net assets per unit (yen)507,331506,693505,900

505,469

507,475

Distribution per unit (yen)

5,107

4,464

3,671

3,240

5,246

325,316

323,218

298,626

294,562

283,867

34.2

34.0

28.9

28.1

25.5

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

4000

37

36

35

33

31

313.2

311.3

287.3

278.1

269.1

207,277.34

205,318.62

191,346.43

182,548.82

174,928.31

94.3

92.4

95.4

95.9

85.7

I. Overview of Daiwa Office Investment Corporation

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

34 Daiwa Higashi-Ikebukuro

34

Ikebukuro

Toshima-ku
23 Shinjuku Maynds Tower

7 Daiwa Jingumae

31 E SPACE TOWER

17 Daiwa Shibuya SS

Shinjuku-ku

24 SHIBUYA EDGE

Shinjuku
Shinjuku Maynds Tower 23

35 Benex S-3

Shibuya-ku
Daiwa Jingumae 7

37 Daiwa Minami-Semba

Daiwa Minami-Aoyama 4
37 Daiwa Minami-Semba

35 Benex S-3

Daiwa Shibuya SS

SHIBUYA EDGE 24

17

E SPACE TOWER 31

Shibuya

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

4 Daiwa Minami-Aoyama

6 Daiwa A Hamamatsucho

8 Daiwa Shibadaimon

JR Yokosuka Line andSobu Rapid Line

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo Area
10 Daiwa Shimbashi 510

616 Daiwa Azabudai

22 Daiwa Onarimon

27 Daiwa Nishi-Shimbashi

Tokyo

Shinagawa-ku

Wards)(as of May 31, 2012)

2 Daiwa Ginza Annex

11 BPS SQUARE

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

14 Daiwa Tsukishima

15 Nihombashi MS Bldg.

18 Daiwa Nihombashi Honcho

1 Daiwa Ginza

19 Daiwa Ginza 1-chome

20 Daiwa Kyobashi

25 Daiwa Kodenmacho

29 Daiwa Kayabacho Building

Daiwa Higashi-Ikebukuro

Daiwa

Daiwa Misakicho
JimbochoPlace

5 Sarugakucho

928

30 26 Daiwa

Jimbocho
Daiwa Kudan

25 Daiwa Kodenmacho

Chiyoda-ku
21 Sunline Building

No. 7

Chuo-ku

22

10

Daiwa Onarimon
16

8

6

Daiwa Kinshicho

Koto-ku
33 Daiwa Kinshicho

19 20 Daiwa Kyobashi
2
1

Daiwa Nishi-Shimbashi

Kameido33

18 Daiwa Nihombashi Honcho

Tokyo 29 Daiwa Kayabacho Building

BPS SQUARE
Daiwa Tsukiji
Daiwa Ginza Annex

27

15 Nihombashi MS Bldg.

Nihonbashi
Hongokucho 32
Tosei Bldg.

Kinshicho

32 Nihonbashi Hongokucho Tosei Bldg.

11
12

Daiwa Ginza 1-chome

Daiwa Ginza
13 Daiwa Tsukiji 616
14
ShimbashiDaiwa Tsukishima
Daiwa Shimbashi 510
Daiwa A Hamamatsucho

Daiwa Azabudai

Daiwa Shibadaimon

Minato-ku

3 Daiwa Shibaura

5 Daiwa Sarugakucho

9 Daiwa Misakicho

21 Sunline Building No. 7

26 Daiwa Jimbocho

28 Daiwa Kudan

30 Jimbocho Place

Shinagawa
36 Daiwa Shinagawa North

36 Daiwa Shinagawa North

I. Overview of Daiwa Office Investment Corporation

7

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

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

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

8

2,000

21,0006

1,500

19,0004

1,000

17,0002500

15,00000(yen/tsubo)
25,000
Average rents ofexisting buildings (left axis)

23,000Vacancy rate ofexisting buildings (right axis)

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

1,210

910

1,190
770

1,170
650

870 900

860 850
570

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

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

(Source) Miki Shoji

Completed properties

Incomplete properties(Note) Large-scale office buildings: Total office floor areas of 10,000m or more
2

(Source) Miki Shoji and Mori Building

Rental Business Status

We strived to improve the occupancy rate as well as diversifying tenants in leased areas.

■ Occupancy Rate

■ Average Contract Rents and Market Rents(yen/tsubo)
25,000

(%)
100
99.0
97.0

97.4

98.2 98.3

97.6 97.7
95.9

95

95.4
94.3 94.3

92.8

93.5
20,00092.4

9090.8 90.7
Occupancy rate (actual)
Occupancy rate (current forecast)

85

Average contract rents

Occupancy rate (previous forecast)

85.7

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

15,000End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

End of4th
PeriodEnd of5th
PeriodEnd of6th
PeriodEnd of7th
PeriodEnd of8th
PeriodEnd of9th
PeriodEnd of10th
PeriodEnd of11th
PeriodEnd of12th
PeriodEnd of13th
Period(Note) Average monthly contracted rents with tenants at the end of each fiscal period■ Tenant Diversification in Leased Area

■ Changes and Reasons for Tenants Moving In/Out (Note)(No. of cases)
500

(%)

(No. of cases)

100

60
50
40

80

400

300

200

1,000m2 or more (of property acquisition (Note)) (left axis)
1,000m2 or more (excluding that of property acquisition (Note)) (left axis)
300m2 or more, less than 1,000m2 (left axis)
Less than 300m2 (left axis)
6
Occupancy rate (right axis)

1
31
115

4
37

129

5
37

129

7
34

134

30
20
10

33

30

24

38

31
17

5

0
60

-10

34

-20

146

-40

-14

-20

-19

-50

13

-2

-12

-20

-24

-30
40

18

16
4

6

-25

-53

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

100

97

105

108

106

113

20

0

0
End of 9th Period End of 10th Period End of 11th Period End of 12th Period End of 13th Period(Note) Limited to properties acquired after March 2010, which were acquired after the sponsor change

8

Number of Move Ins

Number of Move Outs

Difference

Breakdown of 13th
Cost
Space
BetterConsolidation Downsizing
Reduction Expansion
Location
PeriodMoving inMoving out

11
4

13
3

3
5

2
6

4
2

Other

Total

5
5

38
25

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

Internal Growth Policy Results have been steadily surfacing as we have engaged in internal growth based on the motto of “Bonji-Tettei”
Bonji-Tettei■ Improve occupancy rate through lease-up■ Implement strategic renewals aimed atboosting competitiveness•Reinforce collaboration with leasing agents
Hold regular meetings and regular visits with various leasing agents.

•Scrutinize construction content and ensure appropriate construction costs.

•Implement prompt and smooth leasing•Implement environmentally friendly construction and equipment at existing
properties.

Person in charge of asset management to be present at time of new
property viewing, and establish a point of contact and collaboration andmeans of communication with the property management company.
•Enhance property recognition with up-to-date information
Implement face-to-face leasing by visiting leasing agents with regularlyupdated vacancy information and property information.

■ Prevent cancellations by strengthening relations
with existing tenants■ Strengthen collaboration with Daiwa Securities Group• Reinforce leasing by utilizing Daiwa Securities’ branch network.
• Implement leasing that utilizes Daiwa Securities Group’s network of
corporate clients.
◦Leasing Activities(No. of cases)
100

(%)
100
Number of inquiries (left axis)
Number of new contracts (left axis)

Occupancy rate (right axis)•Enhance tenant satisfaction by strengthening communication with existing
tenants75
50

90•Visit all tenants on a regular basis and ensure timely response bydeepening interaction among people and respond to tenants face-to-face

25

85

0

80
Dec. 2011■ Measures to reduce costs•Maintain the fair cost and price levels by introducing effective competition
principles in continually reviewing and verifying utility (supply) construction
and management expenses.

Jan. 2012

Feb.

Mar.

Apr.

10

95

7

5

2

May

◦Reinforce Collaboration with Leasing Agents

Reinforce collaboration withan additional new 100
agentsCurrently working with about
100 agents

Properties Subject to Leasing Improvement

Occupancy rates of the 13th period’s properties subject to leasing
improvement have been improving through proactive leasing activities.

■ Daiwa Sarugakucho■ Daiwa Kyobashi

(%)
100.0

100.0

100.0

88.6

50.0

50.0

0.0

0.0
11th Period

12th Period• A tenant which suits the characteristics of the local area moved in in March2012 and the property recovered to 100% occupancy.

11th Period

68.1

53.7

12th Period

13th Period• The property’s recovery of occupancy rate following the earthquake was delayed
due in part to the building age but the occupancy rate improved after DOI promoted
its convenient access and implementation of seismic reinforcement work.
• The occupancy rate is expected to be up to 100% in the near future.

■ Daiwa Jimbocho

(%)
100.0

79.7

42.1

0.0
13th Period• The occupancy rate temporarily fell to 0.0% because the former tenant, towhom the entire building was leased, vacated the property in September 2011.

■ Sunline Building No. 7

(%)
100.0

(%)
100.0

100.0

100.0

88.4

50.0

50.0

0.0

0.0

20.6
11th Period

12th Period

13th Period

7.4
11th Period

12th Period

13th Period• Foreign tenant vacated the property in June 2011 due to withdrawal of its
business from the Japanese market.

• The main tenant vacated the building in January 2012 to improve floor
efficiency and the occupancy rate fell to 7.4%.

• The occupancy rate recovered by appealing the convenient location and its
superior property design in this area with few office supply.

• The occupancy rate is steadily recovering by appealing the convenient locationand superior property design, so it is expected to further recover.
I. Overview of Daiwa Office Investment Corporation

9

Internal Growth Measures

Properties Subject to Leasing Improvement■ Daiwa Kudan

We will also aim for the early recovery of occupancy rates for the 14th
period’s properties subject to leasing improvement.

■ Daiwa Jimbocho■ BPS SQUARE

・1-minute walk from Kudanshita
Station on the Tokyo Metro
Tozai Line, Hanzomon Line andToei Subway Shinjuku Line.

・1-minute walk from Jimbocho
Station on the Tokyo Metro
Hanzomon Line, the Toei Subway
Mita Line and Shinjuku Line.

・1-minute walk from Tsukiji
Station on the Tokyo Metro Hibiya
Line. The building is located in
front of the subway exit.

・The area has a concentrationof office buildings centered on
middle-scale office building
and demand for offices has
always been high.

・The area has a concentrationof many middle-scale officebuildings, universities,
vocational college and stores in
the area.

・There are man y affilia tecompanies of parent companies
which have headquarters aroundthe Tokyo Station and Gizna
areas.

• The main tenant will vacate the property in the
14th period to improve floor efficiency and theoccupancy rate will fall to 39.6%.
• DOI will appeal the property’s convenient accessand proactively conduct renewal work in an aim forearly improvement of the occupancy rate.

• The main tenant vacated the property in the 13th
period to improve floor efficiency and theoccupancy rate decreased significantly.
• DOI will aim for an early recovery of the occupancy
rate as it appeals the property’s closeness tostations and traffic convenience such as theavailability of three subway lines.

• The tenant vacated the property during the 13th
period due to a business slump.
• DOI will aim for an early recovery of the occupancy
rate as it appeals the property’s closeness to Tokyo
Station and the Ginza area.

Strategic Renewals Focused on Improving Building Capabilities■ Daiwa Kudan■ Shinjuku Maynds Tower■ Daiwa Nishi-Shimbashi■ Nihombashi MS Bldg.

Installation of CT soundproof wall

Replacement of outside ventsof air conditioners

5th floor value enhancement

Renewal of common areas

BeforeAfter

Actions Taken for Environmental Efforts■ Shinjuku Maynds Tower – Introduction of Individual Heat Sources
Individual heat sources were installed in part to get cool water for air-conditioning at● Image of CO2 reduction at Shinjuku Maynds Tower

from Introduction of Individual Heat Sources

use of the ESCO service which guarantees a reduction of emissions. It is estimated thatannual CO2 emissions will be reduced by 833t-CO2 (equivalent to CO2 emissions of abuilding with a total floor area of at least 7,000m2). Due to this DOI expects that Shinjuku
Maynds Tower will be able to meet its CO2 emissions reduction goal for the first plan periodof the Tokyo Metropolitan Ordinance on Environmental Preservation

CO2 emissions (t-CO2)

Shinjuku Maynds Tower and were put into operation in June 2012. This introduction makes

Guarantee of 833t-CO2
annual reduction

11,50011,00010,50010,000
9,500
9,000
8,500
8,000

Individual heat source at Shinjuku
Maynds Tower
Before introduction ofindividual heat sources

After introduction ofindividual heat sources■ E SPACE TOWER Acquires SMBC Sustainable Building Certification
E SPACE TOWER received the certification ranking of “Silver” in the evaluation for SMBC Sustainable Building Assessment Loan as it was deemed11500
to have
11000

high standards in policy and practice of sustainable management as well as sustainability in site use, indoor environment and conservation of water.
10500
10000

The SMBC Sustainable Building Assessment Loan is a loan given to buildings owned or constructed by companies that have been certified based on 9500
9000

8500
environmental performance in energy, water, materials, etc., initiatives on risk management necessary for securing sustainability, including earthquake

resistance, BCP and BCM, and sustainability management policy and implementation to promote these initiatives.

8000

E SPACE TOWER■ Joining the Green Purchasing Network, etc.
In order to promote the procurement of commodities with low environmental burden (green procurement), Daiwa Real Estate AssetManagement, DOI’s asset management company, joined the Green Purchasing Network and also established the Green Procurement
Guidelines.

10

Daiwa Real Estate Asset Management isa member of the Green Purchasing Network

External Growth Measures
Proactive investment in selectively chosen competitive properties

Real Estate Transaction Market and Acquisition Performance
The appetite to sell office buildings continues to be sluggish with the continuation of the favorable financing stance of financial institutions, but DOI will aim
for total investment of 350 billion yen in acquisition price by utilizing its low LTV and by accumulating properties that are highly competitive.

Number of transactions

Lending stance DI (real estate)

Lending stance DI (all industries)

20

600

10

500

0

400

-10

300

-20

200

-30

100

-40

below zero is severe)

No. of transactions

700

DI (Above zero is favorable and30(transactions) 800

-50

0
2005
2nd Half

2006
1st Half

2006
2nd Half

2007
1st Half

2007
2nd Half

2008
1st Half

2008
2nd Half

2009
1st Half

2009
2nd Half

2010
1st Half

2010
2nd Half

2011
1st Half

2011
2nd Half

2012
1st Half

2012
2nd Half

800
700
600
500
400
300
200
100
0

2013
1st Half(billion yen) 400

80 (%)
Total acquisition price350

Estimated LTV (based on acquisition price)

300
250

54.4

200

54.4

150
100

79.5

50

60.8

59.0

110.8

130.4

287.0
54.0

283.4

LTV (based on acquisition price)

265.0

265.0

269.1

278.1

287.3

311.3

313.2

50

42.3

138.4
26.4

22.6

27.4

26.9

29.8

70
60

52.2

30.0

35.3

35.6

Proactive investment in selectively
chosen competitive properties

0
IPO

265.0

350.0

40
30
20

30
20
10
0
-10
-20
-30
-40
-50

10
0

End of 1st End of 2nd End of 3rd End of 4th End of 5th End of 6th End of 7th End of 8th End of 9th End of 10th End of 11th End of 12th End of 13th
PeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriod(Source) Data from the Real Estate Transactions Study of Urban Research Institute Corporation (a think tank of Mizuho Trust and Banking) and the website of the Bank of Japan.

Current Portfolio and Acquisition Policy
DOI receives a large amount of information on potential acquisition opportunities because of our low LTV and huge capacity for further investment. We intend tocontinue selective investment in properties that will remain competitive after discerning the long-term projections for rent of individual properties brought to us.
■ Chart of Distribution of Portfolio Properties■ Acquisition Policy
DOI portfolio properties(Total floor area: m2 )120,000

A Class buildings
Shinjuku Maynds Tower

100,000

Investment breakdown
Share
Five Central Wards 92.3%
6.2%
Greater Tokyo
1.5%
Regional Cities
Share
Classification
A Class buildings 42.7%
B Class buildings 57.3%■ Amendment of the Asset Management Guidelines (amended on August 21, 2012)

Area
80,000Presently targeted
investment zone
60,000Clarified Investment Targets

In the case of properties intended for other uses but readily convertible to offices(such as educational institutions and data centers), such properties may be set as atarget of investment as use as offices.
In cases where several real estate can be used in an integrated manner insocioeconomic terms, if it is deemed that these are primarily used as offices thenthese may be targets of investment.

0

10

B Class buildings

20

30

Clarified Investment in Silent Partnership Equity Interest, Real
Estate-backed Securities, etc.

2

40

50

80
70
60
50
40
30
20
10
0

Maintain investment ratio of 60% or more for the Five Central Wards of Tokyo.
Investment ratio in each of the Greater Tokyo Area and Regional Cities will bechanged from 20% or less to a combined investment ratio of 40% or less for both theGreater Tokyo Area and Regional Cities.

1
E SPACE TOWER

4000
3500
3000
2500
2000
1500
1000
500
0

Reviewed Scope of Investment Areas

40,00020,000Focused investment on the Five Central Wards of Tokyo and equivalent areas.
Focused investment on A Class buildings and B Class buildings in Zone 1 that areless than 20 years old.
Acquisition of properties that will heighten the stability and profitability of the existing
portfolio.
Constantly study the replacement and sale of properties in Zone 2 .

Clarified investment in silent partnership equity interest, real estate-backed securities
and such for the primary reason of expanding future property acquisition
opportunities.

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

I. Overview of Daiwa Office Investment Corporation

11

External Growth Measures

Properties Acquired During the 13th Fiscal Period
Daiwa Sarugakucho (Site) [acquired on March 30, 2012]
DOI acquired the land ownership of the site in Daiwa Sarugakucho Building, which it already owned, for 190 million yen. Due to this, DOI no longer
has to pay the previous owner for lease and the profits of the property are expected to contribute to raising profit. Furthermore, the liquidity of theexisting property increased and its asset value also increased.

Nihonbashi Hongokucho Tosei Building [acquired on May 11, 2012]• The property is located in the area adjacent to Japan's representative office area of Otemachi,
Marunouchi and Nihonbashi. This area is a traditional commercial area where there are many
relatively small stores and office buildings and the concentration of small and medium-sizedenterprises is high. Stable profitability is expected considering the strong office demand trackrecord of this area.

1,721 million yen

Occupancy

100.0% (as of May 31, 2012)

Kan
da S
ta.
Toho
ku L
ine

n Line

eihin
JR K

o Mai

e LineJR Ya

JR ChuOtemacmanot

Tokyo M
Marunou etrochi Line

tro Chiyo
Tokyo MeAcquisition price

obu

JR S

Communication Museum
hi Sta.
Tokyo Metro
HanzomOtemachi Building
on L
ine

eet

May 25, 2010

a Str

Development
Bank of Japan
KDDI Otemachi
NTT Building
Building

Completion

Main

Line

Bank of Japan

ta.

shi S

onba

-Nih

Shin

hiukos
Mits Sta.
mae

Rentable floor area 2,143.08m2

Nihonbashi
Hongokucho
Tosei Building
The Norinchukin
Trust and BankingLine2,386.51m2

inza

Total floor area

tro G

Structure and floors S 8F

Show

393.01m2

o Me

Nihombashi Hongokucho,Chuo-ku, Tokyo

Site area

Toky

Addressda Line• A 4-minute walk from Kanda Station on the JR Chuo, JR Yamanote, JR Keihin-Tohoku lines andthe Tokyo Metro Ginza Line; a 6-minute walk from Otemachi Station on the Tokyo Metro
Marunouchi Line, Chiyoda Line, Tozai Line, Hanzomon Line and Toei Mita Line.

Nihombashi
Mitsui Tower
Mitsui Honkan

Acquisition of Properties after Sponsor Change
Acquisition
timing9th Period
Daiwa Jimbocho

10th Period
Daiwa NishiShimbashi

11th Period

Daiwa Kudan

Daiwa Kayabacho
Building

Jimbocho Place

12th Period

13th Period

E SPACE TOWER

Nihonbashi
Hongokucho Tosei
Bldg.
Total

Property
name

Area

Kanda-Jimbocho,
Chiyoda-ku, Tokyo

Nishi-Shimbashi,
Minato-ku, Tokyo

Kudan Minami,
Chiyoda-ku, Tokyo

Nihombashi-Kayabacho,
Chuo-ku, Tokyo

Kanda-Jimbocho,
Chiyoda-ku, Tokyo

Maruyamacho,
Shibuya-ku, Tokyo

Nihombashi
Hongokucho, Chuo-ku,
Tokyo

-

Acquisition
price

4,150 million yen

5,000 million yen

4,000 million yen

5,600 million yen

3,550 million yen

24,000 million yen

1,721 million yen

48,021
millionyen

Seller

ORIX JREIT Inc.

Japan Core Asset
2 YKShining Nova
No. 5 B (SPC)

Daiwa Property
Co, Ltd.

Tokyu Land
Corporation

Endeavor Realty
Fund YK

Tosei Corporation-

Acquisition
dateMar. 2010

Aug. 2010

Sep. 2010

Mar. 2011

Mar. 2011

Jul. 2011

May 2012-

Age atacquisition

13.0 years

17.0 years

23.4 years

0.9 years

1.1 years

8.7 years

2.0 years

9.4 years

NOI yield at
acquisition

6.0%

5.5%

5.3%

5.1%

5.1%

4.8%

5.3%

5.1%

(Note) The age at acquisition and NOI return at acquisition are calculated using the weighted average of the acquisition price.

12(Note)(Note)

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 36 B Class buildings(as of May 31, 2012)

Property Name

Address

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

Ownership TypeLand

Building

PML (%)(Note 5)

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza

Ginza, Chuo-ku, Tokyo

8,273.05 SRC B3/12F

July 1963

2003

14,1004.5

simple and14,000 Feeleasehold

Fee simple

9.17

2 Daiwa Ginza Annex

Ginza, Chuo-ku, Tokyo

2,032.99

SRC B3/8F

Aug. 1972

2003

3,050

1.0

2,960

Fee simple

Fee simple

7.46

3 Daiwa Shibaura

Shibaura, Minato-ku, Tokyo

9,626.35 SRC B1/12F

Oct. 1987

8,265

2.6

7,400

Fee simple

Fee simple

5.09

4 Daiwa Minami-Aoyama

Minami Aoyama, Minato-ku, Tokyo

2,715.54 S·SRC B2/5F Sept. 1990

4,550

1.5

3,930

Fee simple

Fee simple

12.79

5 Daiwa Sarugakucho

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

June 1985

3,190

1.0

2,720

Fee simple

Fee simple

9.79

6 Daiwa A Hamamatsucho

Hamamatsucho, Minato-ku, Tokyo

3,663.38 SRC B2/10F

July 1993

2,865

0.9

2,870

Fee simple Compartmentalized
ownership

6.03

7 Daiwa Jingumae

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

0.9

1,930

Fee simple

Fee simple

12.01

8 Daiwa Shibadaimon

Shibadaimon, Minato-ku, Tokyo

2,385.58 SRC·RC B1/7F Nov. 1996

2,578

0.8

2,620

Fee simple

Fee simple

2.99

9 Daiwa Misakicho

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

July 1996

2,346

0.7

2,470

Fee simple

Fee simple

6.68

10 Daiwa Shimbashi 510

Shimbashi, Minato-ku, Tokyo

2,715.61

SRC B1/8F

Apr. 1974

2,080

0.7

2,320

Fee simple

Fee simple

8.13

11 BPS SQUARE

Tsukiji, Chuo-ku, Tokyo

2,852.97

SRC 10F

Jan. 1996

1,560

0.5

1,510

Fee simple

Fee simple

7.67

12 Daiwa Tsukiji

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,420

Fee simple

Fee simple

9.70

13 Daiwa Tsukiji 616

Tsukiji, Chuo-ku, Tokyo

2,932.65

SRC B1/9F

Mar. 1994

2,440

0.8

2,400

Fee simple

Fee simple

7.69

14 Daiwa Tsukishima

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.5

7,660

Fee simple

Fee simple

10.89

15 Nihombashi MS Bldg.

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,850.81

SRC B2/7F

Apr. 1993

2,520

0.8

2,340

Fee simple

Fee simple

7.84

16 Daiwa Azabudai

Azabudai, Minato-ku, Tokyo

1,705.44

SRC B2/9F

Apr. 1984

1,600

0.5

1,740

Fee simple

Fee simple

9.57

17 Daiwa Shibuya SS

Shibuya, Shibuya-ku, Tokyo

2,967.65 SRC·S B1/9F

July 1977

2003

3,930

1.3

3,790

Fee simple Compartmentalized
ownership (100%)

8.67

18 Daiwa Nihombashi Honcho

Nihombashi-Honcho, Chuo-ku, Tokyo

7,419.75 SRC B1/10F

Jan. 1964

2006

7,420

2.4

6,780

Fee simple

Fee simple

8.49

19 Daiwa Ginza 1-chome

Ginza, Chuo-ku, Tokyo

3,758.43 SRC B2/11F

Jan. 1962

2005

4,620

1.5

4,270

Fee simple

Fee simple

10.16

20 Daiwa Kyobashi

Hachobori, Chuo-ku, Tokyo

3,255.01

SRC B1/8F

Oct. 1974

2005

3,460

1.1

2,900

Fee simple Compartmentalized
ownership (100%)

10.04

21 Sunline Building No. 7

Kojimachi, Chiyoda-ku, Tokyo

2,405.04

SRC B2/9F

Oct. 1987

2,680

0.9

2,170 Co-ownership Compartmentalized
ownership

8.62

22 Daiwa Onarimon

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,860

4.4

13,000Fee simple Compartmentalized
ownership (100%)

5.45

23 Shinjuku Maynds Tower (Note 7)

Yoyogi, Shibuya-ku, Tokyo

45,544.04 S·SRC B3/34F Sept. 1995

108,000 Co-ownership Co-ownership

6.42

24 SHIBUYA EDGE

Udagawacho, Shibuya-ku, Tokyo

2,480.65

RC B1/9F

Aug. 2006

5,900

1.9

3,940

Fee simple

Fee simple

3.14

25 Daiwa Kodenmacho

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

SRC 8F

Mar. 1985

2,460

0.8

simple and1,900 Feeleasehold

Fee simple

7.71

26 Daiwa Jimbocho

Kanda-Jimbocho, Chiyoda-ku, Tokyo

3,166.62

S B1/8F

Mar. 1997

4,150

1.3

2,760

Fee simple

Fee simple

5.58

27 Daiwa Nishi-Shimbashi

Nishi-Shimbashi, Minato-ku, Tokyo

4,815.84 SRC B1/10F

July 1993

5,000

1.6

4,860

Fee simple

Fee simple

6.76

28 Daiwa Kudan

Kudan Minami, Chiyoda-ku, Tokyo

3,072.87

Mar. 1987

4,000

1.3

2,820

Fee simple Compartmentalized
ownership (100%)

7.96

29 Daiwa Kayabacho Building

Nihonbashi-Kayabacho, Chuo-ku, Tokyo

5,899.11 S·SRC B1/8F

Apr. 2010

5,600

1.8

6,110

Fee simple

Fee simple

5.58

30 Jimbocho Place

Kanda-Jimbocho, Chiyoda-ku, Tokyo

2,889.34

Feb. 2010

3,550

1.1

3,660

Fee simple

Fee simple

6.13

31 E SPACE TOWER

Maruyamacho, Shibuya-ku, Tokyo

13,960.85 S SRC B1/15F Oct. 2002

24,0007.7

26,000Fee simple

Fee simple

5.78

2,143.08

1,721

0.5

1,810

Fee simple

Fee simple

6.93

289,175 92.3

255,060

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

SRC 8FRC B1/4F

SRC 9F
S 9F
S 8F

May 2010

177,435.57

2006

2003

133,800 42.7

Greater Tokyo Area (Note 1)

33 Daiwa Kinshicho

Kameido, Koto-ku, Tokyo

5,468.85

Jan. 1992

3,653

1.2

3,220

Fee simple

Fee simple

7.42

34 Daiwa Higashi-Ikebukuro

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,631.75 SRC·S B1/9F June 1993

2,958

0.9

3,510

Fee simple

Fee simple

5.56

35 Benex S-3

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

7,470.30 S·SRC B1/12F Feb. 1994

4,950

1.6

3,200

Fee simple

Fee simple

5.66

36 Daiwa Shinagawa North

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,551.33 SRC B1/11F

7,710

2.5

5,690

Fee simple

Fee simple

5.56

19,271

6.2

15,620

4,810

1.5

2,850

Fee simple

Fee simple

11.56

4,810

1.5

2,850

313,256 100.0

273,530

Subtotal

S B1/5F

July 1991

24,122.23

Regional Cities (Note 1)

37 Daiwa Minami-Semba

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

5,719.54

Subtotal

5,719.54

Total

207,277.34

SRC B1/8F

Sept. 1986

5.64 (Note 6)(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo Prefectures), Nagoya area (Aichi and Mie Prefectures), ordinance designated cities (Sapporo, Sendai, Niigata, Shizuoka, Hamamatsu, Okayama,
Hiroshima, Kita Kyushu, Fukuoka and Kumamoto), and the cities of Hakodate, Asahikawa, Aomori, Morioka, Akita, Koriyama, Iwaki, Utsunomiya, Maebashi, Toyama, Kanazawa, Nagano, Gifu, Otsu, Nara,
Wakayama, Kurashiki, Fukuyama, Shimonoseki, Takamatsu, Matsuyama, Kochi, Kurume, Nagasaki, Oita, Miyazaki and Kagoshima.
(Note 2) The Rentable Area are indicated as of May 31, 2012 (end of 13th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2012 (end of 13th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2012) prepared by NKSJ Risk Management, Inc.
(Note 6) The PML total shows the portfolio PML.
(Note 7) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total Rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation

13

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

Status of Interest-Bearing Liabilities (as of May 31, 2012)
DOI refinanced 19.6 billion yen in May 2012, significantly improving borrowing costs. Going forward, DOI will continue focusing on stablefinancial management to support further growth.
■ Interest-Bearing Liabilities■ Debt Cost Rate (Note)
70 (%)(%) 8

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

60
50

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

Debt cost rate
Expected debt cost rate

7
6
5

40
4
30

120

3
80

20

40

10

1

0

0

0

2

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

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties(Note) Debt cost rate annualized: ((Interest expense + Financial related expenses)/ Interest-bearing liabilities)■ Diversification of Repayment Dates■ Balance of Borrowings by Financial Institution(including investment corporation bonds)(million yen)
30,000

Balance(mm yen)

Share

Period-onperiod

Sumitomo Mitsui Banking
Corporation

24,38721.9%+19.5%

1,000

Development Bank of Japan

13,78712.4%+143.5%3,500

Sumitomo Mitsui Trust Bank

13,38312.0%+28.6%

2,000

Shinsei Bank

8,000

7.2%

+33.3%

Resona Bank

7,000

6.3%

0.0%

Mizuho Corporate Bank

6,900

6.2%

+40.8%

Aozora Bank

5,000

4.5%

−79.7%

Kansai Urban Banking Corporation

5,000

4.5%

0.0%

Mizuho Trust and Banking

4,500

4.0%

+50.0%

3,500

Mitsubishi UFJ Trust and Banking

3,000

2.7%

0.0%

28th
PeriodFukuoka Bank

3,000

2.7%

0.0%

ORIX Bank

2,500

2.2%

0.0%
–0.2%

Financial institution
25,00020,00041

15,000

3,925

10,000

5,000

6,000
8,900

19,6008,500
19,000 2,500

5,000

11,843
5,481

0

1,700

2,000

5,000
6,500

5,000 4,000
3,000
2,000
1,000
13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd
Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Long- to
Short-Term Liabilities
End of 13th Fiscal Period■ Ratio of Fixed- to
Floating-Rate Borrowings

Gunma Bank

1,981

1.8%

Shizuoka Bank

1,000

0.9%

0.0%

End of 13th Fiscal Period

Kagawa Bank

985

0.9%

–0.4%

77 Bank

985

0.9%

0.0%

Taiyo Life Insurance

981

0.9%

–0.4%

15.7%

20.0%

The Bank of Yokohama
Ratio oflong-term
liabilities
at the end of
12th Fiscal Period

67.7%

80.0%

14

Ratio ofborrowings with
fixed interest rates
at the end of
12th Fiscal Period

28.2%

84.3%

Long-term borrowings, etc.

Fixed interest rates

Current portion of long-term borrowings

Floating interest rates

Investment corporation bonds

Total

500

0.4%

–

8,500

7.6%

0.0%

111,391

100.0%+1.3%(Note) Balances less than a million yen have been rounded down.

Investment Unit and Investor Information

History of Investment Unit Price(yen) 400,000

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

350,000

Trading volume (right axis)

7,000

300,000

6,000

250,000

5,000

200,000

4,000

150,000

3,000

100,000

2,000

50,000

1,000

0

2010
June

0

July

Aug. Sept. Oct.

Nov.

2011
Dec. Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2012
Dec. Jan.

Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2012)■ No. of investment units by investor type
Individuals/others
37,409 units (9.5%)■ No. of unitholders
by investor type146×57

Financial institutions 133,482 units (33.7%)

Foreigners 38,833 units (9.8%)

13th Period
Total: 395,798 units
Securities firms 54,242 units (13.7%)

Other domestic corporations 131,832 units (33.3%)

12th Period

Individuals/others
37,326 units (9.4%)

Financial institutions 126,308 units (31.9%) Foreigners 44,577 units (11.3%)

Total: 395,798 units
Other domestic corporations 132,560 units (33.5%)

Securities firms 55,027 units (13.9%)

Top Ten Unitholders (as of May 31, 2012)
Name of Investor

Individuals/others

11,425(97.2%)

Financial institutions

20(0.2%)

Other domestic
corporations

175(1.5%)

Foreigners

111(0.9%)

Securities firms

19(0.2%)

Total

11,750IR Calendar
Number ofUnits Owned

Percentage
Share

1.

Daiwa Investment Management Inc.

128,905 units

32.6%

2.

Japan Trustee Services Bank, Ltd. (trust account)

70,159 units

17.7%

3.

Daiwa Securities Group Inc.

51,893 units

13.1%

4.

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

24,574 units

6.2%
8000

5.

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

23,674 units

6.

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

10,740 units

7.

JP Morgan Chase
Bank 38018020
0

8.
9.

July 13, 2012 ・Announcement of financial results for13th Fiscal Period
August 2, 2012 ・Sending of Japanese version
Business Report for 13th Fiscal Period(Statement of Financial Performance)
August 3, 2012 ・Start paying distributions for13th Fiscal Period
August 20, 2012 ・Seventh General Meeting of Unitholders

July

40

Aug.

7000

6.0%

May
End offiscal period

End offiscal period

6000

Nov.

2.7%

60
8,392 units

5000
2.1%

Nomura Bank (Luxembourg) S.A.

4,428 units

1.1%
4000

Individual

2,917 units

0.7%

February 2013 ・Sending of Japanese version
Business Report for 14th Fiscal Period(Statement of Financial Performance)

2,515 units

0.6%

February 2013 ・Start paying distributions for
14th Fiscal Period

10. The Bank of New York, Treaty Jasdec Account

80

Feb.
Jan.

100
of financial results for
January 2013・Announcement
14th Fiscal Period

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

I. Overview of Daiwa Office Investment Corporation

15

Description of Asset Manager

Organization of Asset Manager (as of July 13, 2012)■ Description■ Directors and Auditor

Name

Daiwa Real Estate Asset Management Co., Ltd.

Address

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

Established

October 21, 2004

Paid-in Capital

200 million yen

Employees
Registration of Financial Instruments
Business Operator
Building Lots and Buildings
Transaction Business License
Discretionary Agent for Real EstateTransaction Approval

43
No. 355 (Kinsho), Director-General, Kanto Local Finance
BureauAssociation Membership

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

Vice President andRepresentative Director

Yoshiki Nishigaki (Head of Fund Management Dept.)

Vice President andRepresentative Director

Yuji Shinozuka (Head of Finance & Business Planning Dept.)

Director

Naoyuki Owa (Head of Administrative Dept.)

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

Auditor (non-executive)

Toshihiko Onishi

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

Construction Manager

Investment Management
Department

Marketing Department

Acquisitions Team
Asset Management
Team
Investment Planning
Team

Finance Department

Compliance Officer
Internal Control Office
Administrative
Department

Business Planning
Department

Fund Management
Department

Finance and IR Team

Advisory Team

Accounting Team

Operational TeamManagement Team

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

①

Investment Corporation

General Meeting of Unitholders

Executive Director: Kazuo Otaka
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

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

16

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

Officers④②③

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

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation④ Sponsor support agreement⑤ Fiscal agency agreement

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

13th Period 12th Period 11th Period 10th Period 9th Period

Dec. 1, 2011 From June 1, 2011 From Dec. 1, 2010 From June 1, 2010 From Dec. 1, 2009
( FromTo May 31, 2012 )( To Nov. 30, 2011 )( To May 31, 2011 )( To Nov. 30, 2010 )( To May 31, 2010 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
7,431
7,606
6,759
6,424
6,986
Rental revenues
7,338
7,551
6,715
6,375
6,610
Operating expenses
4,341
4,289
3,935
3,942
4,027
Property-related expenses
3,533
3,472
3,166
3,195
3,249
Operating income
3,090
3,317
2,824
2,482
2,959
Ordinary income
2,022
1,768
1,588
1,274
1,774
Net income
2,021
1,767
1,453
1,282
2,076
(2) Properties, etc. (as of end of period)
Total assets
325,316
323,218
298,626
294,562
283,867[period-on-period percentage changes][+0.6%][+8.2%][+1.4%][+3.8%][−1.1%]
Interest-bearing liabilities
111,391
109,917
86,25082,776
72,409Net assets
200,800
200,548
200,234
200,063
200,857[period-on-period percentage changes][+0.1%][+0.2%][+0.1%][−0.4%][−0.3%]
Unitholders’ capital
198,781
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
2,021
1,767
1,453
1,282
2,076
Dividend payout
100.0%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)395,798
395,798
395,798
395,798
395,798
Net assets per unit (yen)507,331506,693505,900
505,469
507,475
Distribution per unit (yen)
5,107
4,464
3,671
3,240
5,246
Distribution amount from earnings per unit (yen)
5,107
4,464
3,671
3,240
5,246
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
1.0%
0.6%
0.5%
0.4%
0.6%
Notes 2and3[annual rate][2.0%][1.1%][1.1%][0.9%][1.2%]
ROE
0.6%
0.9%
0.7%
0.6%
1.0%
Notes 3and 4[annual rate][1.2%][1.8%][1.5%][1.3%][2.1%]
Capital ratio
61.7%
62.0%
67.1%
67.9%
70.8%
[period-on-period percentage changes][−0.3%][−5.0%][−0.9%][−2.8%][+0.6%]LTV (loan to value)
34.2%
34.0%
28.9%
28.1%
25.5%
Property leasing cash flows (NOI)
Note 5
5,172
5,427
4,830
4,416
4,546
(6) Other Referential Information
Number of investment properties
37
36
35
33
31
Number of tenants
Note 6
355
340
334
324
298
207,277.34 205,318.62 191,346.43 182,548.82 174,928.31
Total rentable area (m2)Occupancy rate
Note 7
94.3%
92.4%
95.4%
95.9%
85.7%
Depreciation
1,367
1,348
1,281
1,236
1,185
Capital expenditures
641
240
540
364
568
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 9th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 10th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 11th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 12th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 13th Fiscal Period are the annualized figures calculated based on 183 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation

Daiwa Office Investment Corporation (former DA Office Investment Corporation; hereinafter “DOI”) was establishedon July 11, 2005 in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951;
including amendments thereto) with Daiwa Real Estate Asset Management Co., Ltd. (hereinafter “DREAM”; former, K.K.
daVinci Select) as the organizer. After its establishment, DOI implemented an additional issuance of investment units
through a public offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (“TSE”)
Real Estate Investment Trust Section (securities code: 8976) the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition prices), subsequent
activities, such as the additional acquisition of properties and replacement of portfolio properties, resulted in theassets under management amounting to 313,256 million yen (sum total of acquisition prices) as of the last day of May
2012.
DOI strives to secure stable revenues and achieve sustainable growth of investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on investment inbuildings with a total floor area of 2,000m2 or more situated in downtown Tokyo, as well as through dedicated efforts
to heighten tenant satisfaction levels.

(2) Investment Environment and Management Performance(A) Investment Environment (from December 1, 2011 to May 31, 2012)
Despite concerns over the sovereign risk in Europe, the Japanese business conditions were on amodest recovery during the fiscal period under review, partly due to an increase in demand forreconstruction following the Great East Japan Earthquake.
In terms of the office leasing market, supply and demand was not well-balanced because of
construction completion of development projects primarily in central Tokyo from 2011 to 2012. Vacancy
rates remain high and new advertised rents are on a downward trend due to uncertainty of forecasting on
the economy.
In the office transaction market, postponements and such of transactions, etc. were seen immediately
following the Great East Japan Earthquake, but the purchase demand by real estate companies andfunds (including REITs) remained high as a result of the easing attitudes of financial institutions towardlending, and the supply shortage of high-grade properties shows the recovery of market conditions.
(B) Management Performance
To increase the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties)
over the medium to long term, DOI worked on “external growth” which aims to boost revenue throughacquiring and selling properties, and “internal growth” which aims to maximize income generating fromexisting properties.
Concerning external growth, DOI proactively engaged in property acquisition activities and purchased
the limited proprietary rights for the land of “DAIWA SARUGAKUCHO Building” (acquisition price: 190
million yen) on March 30, 2012 and “NIHONBASHI HONGOKUCHO TOSEI Building” (acquisition price:
1,721 million yen) on May 11, 2012.
As a result of the acquisition, DOI’s assets under management at the end of the 13th Fiscal Period (asof May 31, 2012) totaled 37 properties, the sum total of acquisition prices amounted to 313,256 million
yen.
Concerning internal growth, in spite of the severe office leasing market conditions and occurrence oftenant relocations in part, DOI tried to improve tenant satisfaction through developing good relations withtenants and strengthening cooperation with leasing brokers and property managers. As a result, theoccupancy rate at the end of the 13th Fiscal Period was maintained at 94.3%.

18

(3) Overview of Capital Procurement
On May 11, 2012, DOI borrowed 1,700 million yen from the Development Bank of Japan to acquire a
property, etc.
Further, on May 21, 2012, DOI borrowed 19,500 million yen in total from the Development Bank of Japan,
Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, Mizuho Trust & Banking Co.,
Ltd., Shinsei Bank, Mizuho Corporate Bank, and The Bank of Yokohama, to refinance the borrowing of 19,600
million yen from Aozora Bank, Ltd. on May 21, 2009. Moreover, other repayments were paid using cash on
hand.
In addition, contractual repayments of 41.25 million yen in total were made to the Development Bank ofJapan Inc. and The Kagawa Bank, Ltd. on February 29, 2012, and contractual repayments of 84.375 million
yen in total were made to Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, theDevelopment Bank of Japan, Taiyo Life Insurance and The Gunma Bank, Ltd. on May 31, 2012.
As a result, the balance of interest-bearing liabilities outstanding at the end of the 13th Fiscal Period stoodat 111,391.25 million yen (long-term loans payable: 102,891.25 million yen; investment corporation bonds:
8,500 million yen). Furthermore, of long-term loans payable, the balance of the current portion of interestbearing liabilities outstanding stood at 22,291.25 million yen (including 41.25 million yen in contractual
repayments).
During the 13th Fiscal Period, for the purpose of hedging the exposure to rising interest rates, several
interest rate swap agreements for borrowings of 54,900 million yen in total which fixes the interest rate in the
future were signed.
(4) Capital Expenditures During the 13th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 13th
Fiscal Period. Capital expenditures amounted to 641 million yen and, combined with the 234 million yen in
repair expenses, totals 875 million yen in construction work implemented.
Name of Property(location)
Shinjuku Maynds Tower(Shibuya-ku, Tokyo)
Daiwa Nishi-Shimbashi
Building (Minato-ku, Tokyo)
Daiwa Jimbocho Building(Chiyoda-ku, Tokyo)
Nihombashi MS Building(Chuo-ku, Tokyo)

PurposeInstallation of heat source
Updating work for energy conservation
Renovation work in common areas
Construction work for value enhancement
on 5th floor

Other buildings
Total

Expenditure(millions of yen)

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

Dec. 2011
May 2012
Aug. 2011
Dec. 2011
Jan. 2012
Feb. 2012
Dec. 2011
Jan. 2012
Dec. 2011
May 2012

245
132
41
11
212
641

(5) Overview of Financial Performance and Distributions
As a result of the management described above, for the 13th Fiscal Period, DOI recorded 7,431 million yen in
operating revenue, 3,090 million yen in operating income, 2,022 million yen in ordinary income and 2,021 million
yen in net income.
Concerning distributions, to ensure that the cash dividend would be deducted from taxable income (Article
67-15 of the Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments, hereinafter“Special Taxation Measures Act”)), DOI decided to distribute the entire retained earnings at the current period
end, excluding fractions of the distribution amount per unit that are less than 1 yen. Accordingly, DOI declared a
distribution amount per unit of 5,107 yen.

II. Asset Management Report193. Future Management Policy and Tasks(1) Investment Environment
Boosted by the increasing demand accompanying the post-earthquake reconstruction efforts, the Japanese
economy is expected to make a gradual recovery, as production activities and consumption will recover fromthe drop caused by the Great East Japan Earthquake. On the other hand, there are still some risks in theJapanese economy due to the increased sovereign risk in Europe, the rapid appreciation of the yen and thepower supply restrictions.
Under such an outlook, the office leasing market seems to maintain an excess of supply because a large
number of development projects in central Tokyo will be completed by the end of 2012. In the officetransaction market, acquisition demand of real estate companies and funds (including REITs) is expected to
be strong due to the easing attitudes of financial institutions toward lending.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under such office leasing market conditions, the tenant is also expected to be more selective withproperties. Consequently, DOI will carry out operational management under the following policy in an aim
to enhance the competitiveness of existing properties and thereby increase the long-term EPS over the
medium to long term.
(a) Maintain and raise occupancy rates
Strive to reduce vacancy risks through improving the quality of buildings, equipment and management
system toward existing tenants. And strive to maintain and raise occupancy rates through theprovision of more comfortable service than competitor by participating in the market aggressively for
new tenants.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining the high level of tenantsatisfaction with office environments. To achieve this, DOI will implement efficient operational
management and reviewing systematic construction work leveraging the economies of scale obtained
from external growth.
(B) Investment Strategy for New Properties
Based on various external growth strategies, DOI will concentrate its investment in buildings with a total
floor area of 2,000m2 or more considering a balance between the situation in the financing and purchasing
market situation. In principal, DOI will invest in properties around Tokyo, but will also look into investment
in competitive properties in the areas other than Tokyo from a viewpoint of territorially-distributed
investments.
As pipelines, in addition to expanding its own information-sourcing channels, DOI will search forproperties that meet its investment criteria by proactively gathering real estate transaction market
information through expanding partnerships with DREAM and Sponsor Group and utilizing the Group’s
extensive network of clients.
During the 13th Fiscal Period, DOI additionally acquired the limited proprietary right of the land of“DAIWA SARUGAKUCHO Building” and acquired NIHONBASHI HONGOKUCHO TOSEI Building which issituated in the five central wards of Tokyo. DOI believes the acquisitions will contribute to further
stabilization and enhancement of the portfolio. DOI will continue to strive to acquire properties that are inline with the investment strategy described above.

20

(C) Financial Strategy
DOI will conduct disciplined financial management based on the following:(a) In principle, control leverage by keeping LTV ratio within the range of 40% to 50% at maximum.
(b) In principle, diversify the payment date, targeting 30 billion yen as the maximum amount of interestbearing liabilities that shall become due during any single fiscal period.
(c) In principle, aim to have long-term loans at least 70% to total loans.
(d) Diversify lenders, which shall mainly be domestic financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by separatingnecessary funds, such as the amount of distributions paid, from working capital.
(D) Schedule of Capital Expenditures
The following table lists major capital expenditures in conjunction with the refurbishment or renewal
work planned for the future on the properties held as of May 31, 2012. Please note that the amounts
below include costs that will be recognized as expenses.

Name of Property(location)

PurposeEstimated Period

Estimated Cost
(millions of yen)
Payment Cumulative
for theamountTotal
current
paid
periodDaiwa Sarugakucho(Chiyoda-ku, Tokyo)

Renovation work in common
areas

From: Mar. 2012
To: June 2012

187

–

–

BPS Square(Chuo-ku, Tokyo)

Updating package air
conditioners

From: July 2012
To: Sep. 2012

75

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Painting work on iron parts ofrooftop, etc.

From: Sep. 2012
To: Nov. 2012

40

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Installation of CT sound barrier

From: June 2012
To: Aug. 2012

36

–

–

Daiwa A Hamamatsucho(Minato-ku, Tokyo)

Updating package air
conditioners

From: July 2012
To: Nov. 2012

32

–

–

II. Asset Management Report21III. Balance Sheets
As of May 31, 2012 and November 30, 2011
(Thousands of yen)

As of
May 31, 2012

As ofNovember 30, 2011

AssetsCurrent Assets:
Cash and cash equivalents [Note 11]

16,801,099

16,235,183

284,801

185,289–

84,178244,404

391,089

17

20

Other current assets

101,782

70,241

Total Current Assets

17,432,103

16,966,000

Land including trust accounts

247,785,634

244,177,050

Buildings and structures including trust accounts [Note 5]

69,544,514

68,103,138

Machinery and equipment in trust

793,278

781,924

Tools, furniture and fixtures including trust accounts

84,23876,000Construction in progress in trust

22,722

16,149Other tangible fixed assets including trust accounts

9,759

9,759

(13,605,373)(12,237,707)

2,713,986

4,970,291

307,348,758

305,896,604

2,013

1,286

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

368,077

190,532

Deferred tax assets [Note 9]

1,173

–

Deferred investment corporation bond issuance costs

25,33633,919Derivative assets [Note 11]

9,959

–

Others14,813

15,551

Total Other Assets

535,055

354,972

325,315,916

323,217,576

Tenant receivables
Consumption taxes refundable
Prepaid expenses
Deferred tax assets [Note 9]

Investment Properties, at cost: [Notes 4 and 12]

Less: accumulated depreciation
Leasehold rights including trust accounts
Total Investment Properties, net
Other Assets:
Right of trademark

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

22

(Thousands of yen)

As of
May 31, 2012

As ofNovember 30, 2011

Liabilities
Current Liabilities:
Operating accounts payable

911,636546,670

22,291,250

35,535,625

261,882309,642697

988

Accrued consumption taxes

163,147

9,217

Rent received in advance

876,926

862,005

Other current liabilities

279,867

173,277

Total Current Liabilities

24,785,405

37,437,424

Investment corporation bonds [Notes 7 and 11]

8,500,000

8,500,000

Long-term debt [Notes 7 and 11]80,600,000

65,881,250

Tenant security deposits including trust accounts [Note 11]

10,616,879

10,849,254

13,164–

Other long-term liabilities

–

1,622

Total Long-Term Liabilities

99,730,043

85,232,126

124,515,448

122,669,550

198,780,951

198,780,951

2,021,548

1,767,075

200,802,499

200,548,026(2,031)–(2,031)–

Total Net Assets

200,800,468

200,548,026

Total Liabilities and Net Assets

325,315,916

323,217,576

Long-term debt due within one year [Notes 7 and 11]
Accounts payable – other
Income taxes payable

Long-Term Liabilities:

Derivative liabilities [Note 11]

Total Liabilities

Net Assets [Note 6]
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 395,798 units
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total Valuation and translation adjustments

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

23

IV. Statements of Income
For the six months ended May 31, 2012 and November 30, 2011
(Thousands of yen)

For the six months ended
May 31, 2012

For the six months ended
November 30, 2011

7,338,153
93,3607,550,598
55,1827,431,513

7,605,780

3,533,104
605,809
16,147

3,471,700
607,648
15,84557,64730,302
5,400
93,062

66,47940,4605,400
81,2284,341,471
3,090,042

4,288,760
3,317,020

2,014
6,825
3,494

712
5,492
5,269

12,333

11,473703,955
96,326
266,813
12,983

761,640
96,951
692,9239,080

1,080,077
2,022,298

1,560,594
1,767,899

32,898–32,898–32,898–32,898–

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

2,022,298

1,767,899

979
3

1,019
1

Total Income Taxes [Note 9]
Net Income
Retained Earnings Brought Forward982
2,021,316
232

1,020
1,766,879
196

Retained Earnings at End of Period

2,021,548

1,767,075

Operating Revenues and Expenses
Operating Revenues: [Note 8]
Rental revenues
Other revenues related to property leasing
Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 8]
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
Other non-operating expenses
Total Non-Operating Expenses
Ordinary Income
Extraordinary Income:Subsidy income
Total Extraordinary Income
Extraordinary Losses:
Loss on reduction of tangible fixed asset [Note 5]
Total Extraordinary Losses

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

24

IV. Statements of Income

V.

Statements of Changes inUnitholders' Equity

For the six months ended May 31, 2012 and November 30, 2011
(Thousands of yen)

Number of
Units

Unitholders’CapitalRetained
Earnings

Deferred gains
or losseson hedges

395,798

198,780,951

1,767,075–

200,548,026

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

Net income––

2,021,316–

2,021,316

Net changes of items other thanunitholders’ equity

–

–

–

(2,031)(2,031)

395,798

198,780,951

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

Balance as of November 30, 2011

Balance as of May 31, 2012

		

Total

(Thousands of yen)

Number of
Units

Unitholders’CapitalRetained
Earnings

Deferred gains
or losseson hedges

395,798

198,780,951

1,453,170–

200,234,121

Cash dividends declared––(1,452,974)–(1,452,974)

Net income––

1,766,879–

1,766,879

Net changes of items other thanunitholders’ equity

–

–

–

–

–

Balance as of November 30, 2011

395,798

198,780,951

1,767,075–

200,548,026

Balance as of May 31, 2011

Total

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

V. Statements of Changes in Unitholders' Equity

25

VI. Notes to Financial Statements
For the six months ended May 31, 2012 and November 30, 2011

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (former DA Office Investment Corporation: hereinafter, “DOI”) wasestablished on July 11, 2005 as an investment corporation under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter, the “Investment Trust Law of Japan”) by the founder (the former
daVinci Select; presently, Daiwa Real Estate Asset Management (hereinafter, “DREAM”)).
DOI is an externally managed real estate fund, established as an investment corporation. DREAM, as DOI’s
asset management company, is engaged in acquiring, managing, leasing, and renovating office properties.
Daiwa Securities Group Inc. currently owns 100% of DREAM.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2012, DOI had ownership or beneficiary interests in 37 office properties with approximately
207,277 square meters of rentable office space and had leased office space to 355 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 94.3%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (hereinafter, “Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP. Some supplementary information included in
the statutory Japanese language financial statements, but not required for fair presentation, is not presented in
the accompanying financial statements. DOI does not prepare consolidated financial statements, as DOI has no
subsidiaries.

Note 2 – Summary of Significant Accounting Policies
Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The
estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

As of May 31, 2012
2-56 years
2-23 years
5-18 years

As of November 30, 2011
2-56 years
2-23 years
3-18 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add to the value of a property or prolong its useful life are expensed as incurred.
Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of
temporary differences between the amounts of assets and liabilities for financial statements and for income tax
purposes is recognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from thepurchase date of each property until the end of the calendar year as part of the acquisition cost of the relevant
property. Capitalized real estate taxes amounted to 6,196 thousand yen for the period ended May 31, 2012 and57,362 thousand yen for the period ended November 30, 2011.

26

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

Note 3 – Additional Information
Accounting Standards for Accounting Changes and Error Corrections
DOI has applied the “Accounting Standard for Accounting Changes and Error Corrections” (AccountingStandards Board of Japan (hereinafter, “ASBJ”) Statement No. 24; December 4, 2009) and the “Guidance on
Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24; December 4,2009), starting with accounting changes and corrections of past errors to be conducted after the beginning of
the fiscal period ended November 30, 2011.

Note 4 – Schedule of Tangible fixed Assets of Investment Properties
Investment properties as of May 31, 2012 and November 30, 2011 consisted of the following:
As of May 31, 2012

(Thousands of yen)

As of November 30, 2011

Acquisition
costs

Accumulated
depreciation

Book value

Acquisition
Costs

Accumulated
depreciation

Book valueLand

247,785,634–

247,785,634

244,177,050–

244,177,050

Buildings andstructures

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

56,298,581

68,103,138(11,912,860)

56,190,278

Machinery andequipment in trust
Tools, furniture andfixtures793,278(313,458)

479,820

781,924(285,121)

496,803

84,238(36,223)

48,01576,000(29,967)

46,033

Construction inprogress in trust
Other tangible
fixed assets

22,722–

22,722

16,149–16,1499,759(9,759)–9,759(9,759)–318,240,145(13,605,373)

304,634,772

313,164,020(12,237,707)

300,926,313

including trust accounts

including trust accounts

including trust accounts

including trust accounts

Total

VI. Notes to Financial Statements

27

Note 5 – Advanced depreciation for tangible fixed assets acquired by government
subsidies, etc.
Government subsidies of 32,898 thousand yen are deducted from the acquisition cost of the buildings in trust
and presented on statement of income as loss on reduction of tangible fixed asset.

Note 6 – Net Assets
DOI issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue
prices of new units are designated as stated capital. DOI maintains at least 50,000 thousand yen as the minimum
amount of net assets, as required by the Investment Trust Law of Japan.

Note 7 – Long-Term Debt and Investment Corporation Bonds
Long-term debt and investment corporation bonds as of May 31, 2012 and November 30, 2011 consisted of the(Thousands of yen)following:
As of
As of
May 31,
November 30,
2012
2011
Unsecured loans due 2012 to 2017, principally from banks and insurance
102,891,250
101,416,875
companies with interest rates mainly ranging from 0.7% to 2.5%
2.8% unsecured bond due 20193,500,000

3,500,000

1.9% unsecured bond due 2013

5,000,000

5,000,000

111,391,250

109,916,875

Total[Note] The interest rate presented is the spot rate as of May 31, 2012. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of long-term debt and investment corporation bonds as of May 31, 2012 were(Thousands of yen)
as follows:
Due within one year
Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years

28

22,291,250
37,400,000
29,500,000
2,000,000
16,700,000
3,500,000

Note 8 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended May 31, 2012 and November 30, 2011
(Thousands of yen)were as follows:A.

For the six months ended
May 31, 2012

For the six months ended
November 30, 2011

7,338,153

7,550,598

93,36055,1827,431,513

7,605,780

Consignment expenses

573,208

509,446

Utilities expenses

654,823649,283

Taxes and dues

637,797604,538

Operating revenues
Rental revenues
Other revenues related to property leasing
Total operating revenues

B.

Property-related expenses

Non-life insurance expenses

11,832

12,752

Repair expenses

233,868

290,406

1,367,438

1,347,972

54,13857,303

Total property-related expenses

3,533,104

3,471,700

Operating income from property leasing [A – B]

3,898,409

4,134,080

Depreciation
Other property-related expenses
C.

Note 9 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.05% for the period ended May 31, 2012 and 0.06% for the period ended November
30, 2011. The following table summarizes the significant differences between the statutory tax rates and DOI’s
effective tax rates for financial statement purposes.
For the six months ended
May 31, 2012

For the six months ended
November 30, 2011

Statutory tax rate

39.33%

39.33%

Deductible dividends(39.31)(39.31)Others0.03

0.04

Effective tax rate

0.05%

0.06%

DOI was established as an investment corporation under the Investment Trust Law of Japan, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period andother requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment corporation isallowed to deduct the total amount of dividends in calculating its taxable income under Japanese tax regulations.
The significant components of deferred tax assets and liabilities as of May 31, 2012 and November 30, 2011 were as(Thousands of yen)follows:
As of May 31, 2012

As of November 30, 2011

Deferred tax assets:
Accrued enterprise tax

17

20

4,816

-

4,833

20

3,643

-

Total deferred tax liabilities

3,643

-

Net deferred tax assets

1,190

20

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

VI. Notes to Financial Statements

29

Adjustments of Deferred Tax Assets and Liabilities for Enacted Changes in Effective Statutory Tax Rate
The Act to Revise the Income Tax Act, etc., in Order to Construct a Tax System Addressing Changes in theSocio-Economic Structure (Act No. 114 of 2011) and the Act on Special Measures for Securing Necessary
Financial Resources to Implement Measures to Rebuild Areas Devastated by the Great East Japan Earthquake(Act No. 117 of 2011) were promulgated on December 2, 2011. In accordance with the promulgation, theeffective statutory tax rate used to calculate the deferred tax assets and deferred tax liabilities concerning the
temporary differences, etc. expected to be reversed in the accounting periods starting on and after April 1, 2012,
will be changed to 36.59%, and the effective statutory tax rate used to calculate the deferred tax assets anddeferred tax liabilities concerning the temporary differences, etc. expected to be reversed in the accounting
periods starting and after on April 1, 2015, will be changed to 34.16%, respectively.
The effect of these changes is immaterial.

Note 10 – Per Unit Information
Information about net income per unit for the periods ended May 31, 2012 and November 30, 2011 and net
assets per unit as of May 31, 2012 and November 30, 2011 were as follows. The computation of net income perunit is based on the weighted average number of units outstanding during the period. The computation of net
assets per unit is based on the number of units outstanding at each period end.
As of
May 31, 2012

As ofNovember 30, 2011

Net assets per unit

507,331 yen

506,693 yen

Net income per unit

5,106.94 yen

4,464.09 yen

Net income per unit is calculated by dividing the net income by the daily weighted average number of investment
units issued and outstanding. The diluted net income per unit is not stated as there are no diluted investment
units.
(Note) The basis for calculating the net income per unit is as follows.

As of
May 31, 2012
Net income (thousands of yen)

2,021,316

1,766,879

Amount not available to ordinary unitholders(thousands of yen)––

Net income available to ordinary unitholders(thousands of yen)

2,021,316

1,766,879

395,798

395,798

Average number of units during the period (units)

30

As of
November 30, 2011

Note 11 – Financial Instruments(For the six months ended May 31, 2012 and November 30, 2011)(1) Status of Financial Instruments(A) Policy for financial instruments
DOI procures various financing methods (such as borrowings, issuance of investment corporation bonds,
issuance of investment units) for acquisition and repair of investment properties, payments of dividends
and reimbursement of bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, DOI secures long-term fixed-rate borrowings with well-diversified maturities.
DOI manages surplus funds through safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are only for the purpose of reducing risk of future interest rate fluctuations.

(B) Types and risks of financial instruments and related risk management system
Proceeds from the financing of debts and investment corporation bonds are used mainly to acquisition of
investment properties and reimbursement of current debts and bonds. While these debts and bonds are
exposed to liquidity risk, DOI manages the risk by maintaining the LTV ratio at low levels, diversifying
maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders withparticular focus on domestic financial institutions. Bank borrowings with floating interest rates are
exposed to the risk of future interest rate fluctuations and DOI manages that using derivative transactions
such as interest-rate swap agreements.
DOI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes of hedged
items and which of hedging items, and then verifying the ratio of both amount of changes. Meanwhile DOIomits assessment of hedge effectiveness for the interest-rate swap agreements which meet the criteria ofspecial treatment.
Execution and management of derivative transactions have been carried out based on the regulation
which defined the basic policy of risk management.
Security deposits represent funds deposited by tenants, and DOI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving
some parts of the funds.
Deposits are used for investment of DOI’s surplus funds. These deposits are exposed to credit risks suchas bankruptcy of the depository financial institutions. DOI manages credit risk by restricting the tenor ofthe deposit relatively short and setting a minimum credit rating requirement for the depository financial
institutions.

(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there isno quoted market price available, fair value is reasonably estimated. As certain assumptions are used forthe estimation of fair value, the result of such estimation may differ if different assumptions are used. Also,
the contractual amounts of derivative transactions do not represent the market risk involved in thesederivatives.

VI. Notes to Financial Statements31

(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of May 31, 2012 and November 30, 2011 are as
follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(As of May 31, 2012)
Cash and cash equivalents
Total
Long-term debt due within one year
Investment corporation bonds
Long-term debt
Total
Derivative transactions (*)(Thousands of yen)Book Value
16,801,099
16,801,099
22,291,250
8,500,000
80,600,000
111,391,250(3,205)

Fair Value
16,801,099
16,801,099
22,327,560
8,507,500
80,377,338
111,212,398(3,205)Difference––
36,3107,500(222,662)(178,852)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis reporting net liability position.
(As of November 30, 2011)
Book Value
Fair Value
Cash and cash equivalents
16,235,183
16,235,183
Total
16,235,183
16,235,183
Long-term debt due within one year
35,535,625
35,591,428
Investment corporation bonds
8,500,000
8,505,500
Long-term debt
65,881,250
65,838,142
Total
109,916,875
109,935,070
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions.

(Thousands of yen)

Difference––
55,8035,500(43,108)
18,195

Assets(1) Cash and Cash Equivalents
As these instruments are settled in short period of time, their fair value and book value are nearly identical.
Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Long-Term Debt
For long-term debt with floating interest rates, their fair value and book value are nearly identical.
Therefore, for these items, their book value is assumed as their fair value. For long-term debt with fixedinterest rates, their fair value is based on the present value of principle and interest cash flows discounted at
the current interest rate estimated to be applied if similar new debt is entered into. However, the fair value ofcertain floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is determinedby discounting the sum of its principal and interest payments net of any cash flows from the interest-rate
swaps.
(2) Investment Corporation Bonds
The fair value of investment corporation bonds is based on their quoted market price, if available.
When there is no quoted market value available, their book value is assumed as their fair value, as their fairvalue and book value are nearly identical because their interest rates are floating rate.
Derivative transactions(1) Derivatives to which hedge accounting is not applied
Not applicable.

32

(2) Derivatives to which hedge accounting is applied(As of May 31, 2012)
Method of Hedge
Accounting(Thousands of yen)Type of Derivative Transactions

Interest rate swap transactions
Receive floating
and Pay fixedInterest rate swap transactions
Special treatment for
Receive floating
Interest rate swap
and Pay fixed
Deferral hedge
accounting method

AmountHedged Items Contract(due after one year)

Fair
Value(*)

Long-term debt

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

13,000,000(13,000,000–(**)

54,900,000(54,900,000)(3,205)

Total*The fair value is provided by the financial institution.

** The values of derivatives qualifying for special treatment of interest rate swaps are included in that of related
long-term debt. This is because such swaps are handled together with hedged long-term debt.
(As of November 30, 2011)
Not applicable.
2. Financial instruments for which it is very difficult to estimate the fair value
Tenant security deposits (with a book value of 10,616,879 thousand yen in May 31, 2012 and 10,849,254
thousand yen in November 30, 2011) that have been deposited from tenants are not marketable and theactual deposit period cannot be reliably determined, thus making it impossible to reasonably estimate their
future cash flows, and therefore, it is considered to be extremely difficult to estimate their fair value.
3. Redemption schedule for money claims(As of May 31, 2012)(Thousands of yen)

Due within
1 yearDue after
1 to 2 years

Due after
2 to 3 years

Due after
3 to 4 years

Due after
4 to 5 years

Due after
5 years

Cash and cash equivalents 16,801,099

–

–

–

–

–

–

–

–

–

–

Total

16,801,099(As of November 30, 2011)(Thousands of yen)

Due within
1 yearDue after
1 to 2 years

Due after
2 to 3 years

Due after
3 to 4 years

Due after
4 to 5 years

Due after
5 years

Cash and cash equivalents 16,235,183

–

–

–

–

–

–

–

–

–

–

Total

16,235,183

4. Redemption schedule for investment corporation bonds and long-term debt
(As of May 31, 2012)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years

Long-term debt due within one year 22,291,250

Due after
5 years

–

–

–

–

–

5,000,000–––

3,500,000

Investment corporation bonds–

Long-term debt

– 32,400,000 29,500,000

2,000,000 16,700,000–

22,291,250 37,400,000 29,500,000

2,000,000 16,700,000

3,500,000

Total

VI. Notes to Financial Statements

33

(As of November 30, 2011)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years

Long-term debt due within one year 35,535,625

Due after
5 years

–

–

–

–

–

5,000,000

Investment corporation bonds

–

–

–

–

3,500,000

Long-term debt

– 23,981,250 33,900,000

8,000,000––

35,535,625 28,981,250 33,900,000

8,000,000–

3,500,000

Total

Note 12 – Investment and Rental Properties(For the six months ended May 31, 2012)
DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as(Thousands of yen)follows.
Book Value
As of
November 30, 2011
305,878,733

Changeduring the period(*1)
1,445,809

As of
May 31, 2012
307,324,542

Fair value as of
May 31, 2012
273,530,000(For the six months ended November 30, 2011)
DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as
follows.
(Thousands of yen)Book Value
As of
May 31, 2011
282,758,576

Changeduring the period(*2)
23,120,157

As ofNovember 30, 2011
305,878,733

Fair value as ofNovember 30, 2011
272,300,000(Note 1) The book value represents the acquisition cost less accumulated depreciation.
(Note 2) Significant changes(*1) For the six months ended May 31, 2012, the major reason of increase is acquisition of the limited proprietary rights for the land of“DAIWA SARUGAKUCHO Building” (190,000 thousand yen) and “NIHONBASHI HONGOKUCHO TOSEI Building” (1,721,000
thousand yen). The major reason of decrease is depreciation (1,367,438 thousand yen).
(*2) For the six months ended November 30, 2011, the major reason of increase is the acquisition of E SPACE TOWER (24,000,000
thousand yen). The major reason of decrease is depreciation (1,347,972 thousand yen).
(Note 3) The fair values as of May 31, 2012 and November 30, 2011 represent the sum of appraisal values estimated by external real estateappraisers.

Income and loss from investment and rental properties for the period ended May 31, 2012 and November 30,
2011 are disclosed in Note 8.

34

Note 13 – Transactions with Related Parties(For the six months ended May 31, 2012)
Classification Parent company, interested party

Asset custodian

Name ofcompany,etc.

Daiwa Securities Group Inc.

Sumitomo Mitsui Trust Bank, Limited [Note 4]

Location

Chiyoda-ku, Tokyo

Chiyoda-ku, Tokyo

Capital stock 247.3 billion yen

342 Billion yen

Business
description

Holding company

Bank

Percentage
of votingrights, etc.
held byrelated party(held in DOI)

13.11%
directly held in DOI
32.57%
indirectly held in DOI–

Relationshipwith
Provision of capital
related party

Provision of capital

Nature oftransaction

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

Payment Payment ofinterest borrowing expense
Borrowing of capital of
expense(Note 3)(Note 3)

Amount oftransaction(thousandsof yen)49,5763,000,000

Investment
corporation bonds

Othercurrent liabilities

Longterm
Longdebt due term
withindebt
one year

20,4305,383,750 8,000,000 –Account

Balance at
end of period 3,500,000(thousandsof yen)58,51016,671–Longterm
Prepaid
expenses prepaid
expenses
28,48325,157

VI. Notes to Financial Statements35

(For the six months ended November 30, 2011)
Other affiliatedClassification company, interested
partyInterested Asset custodian
party

Name ofcompany,etc.

Daiwa Securities
Group Inc.

Endeavor
RealtyFund Ltd.

Location

Chiyoda-ku, Tokyo

Minato-ku, Osaka city, OsakaTokyo

The Sumitomo Trust andBanking Co., Ltd.
[Note 4]

Capital stock 247.3 billion yen

3.01
342 Billion yen
million yen

Business
description

Holding company

RealestateBank

Percentage
of votingrights, etc.
held byrelated party(held in DOI)

13.11%
directly held in DOI
15.16%
indirectly held in DOI––

Relationshipwith
Provision of capital
related party

Purchaseof trust
beneficial Provision of capitalinterest inreal estate

Nature oftransaction

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

Purchaseof trust
beneficial
interest in Borrowing of capital
real estate(Notes 2
and 3)

Amount oftransaction(thousandsof yen)49,94524,000,000 5,000,000

Account

Investment Other
corporation current
bonds
liabilities

Balance at
end of period 3,500,000 20,430(thousandsof yen)Payment Payment of borrowing
of interest expense
expense(Note 3)(Note 3)47,335

13,629–Long-term
debt due Long-term –within one debt
year

Prepaid
expensesLong-term
prepaid
expenses–

3,434,375 5,000,000 –

26,243

7,514

Consumption taxes are not included in transaction amounts.
(Note 1) Issuance conditions of the investment corporation bonds were decided by analyzing the spread ofsimilar bonds, the difference of spread between senior bonds and subordinated bonds, and the past
track record of similar bonds.
(Note 2) Terms and conditions with interested parties were determined based on the assets manager’s officeregulation which was established to prevent the conflict of interest.
(Note 3) Terms of transaction were determined based on the market.
(Note 4) The Sumitomo Trust and Banking Co., Ltd, The Chuo Mitsui Trust and Banking Company, Limited, andChuo Mitsui Asset Trust and Banking Company, Limited merged on April 1, 2012, and the company
name was changed to Sumitomo Mitsui Trust Bank, Limited.

Note 14 – Significant Subsequent Events
Not applicable.

36VII. Independent Auditors’ ReportVII. Independent Auditors’ Report37

VIII. Statements of Cash Flows [Information Only]
For the six months ended May 31, 2012 and November 30, 2011
(Thousands of yen)

For the six months
ended
May 31, 2012

For the six months
ended
November 30, 2011

Income before income taxes

2,022,298

1,767,899

Depreciation and amortization

1,368,584

1,349,080

8,583

8,583

800,281858,591–(63,721)(Increase) Decrease in tenant receivables(99,513)(10,619)

Subsidy income(32,898)–

Loss on reduction of tangible fixed asset

32,898–

Increase (Decrease) in accounts payable

226,354(49,763)

Increase (Decrease) in rent received in advance

14,922

145,987(805,822)(848,350)(Increase) Decrease in consumption taxes refundable

84,178(84,178)

Other, net

200,460

191,173

3,820,325

3,264,682––(2,637,291)(24,671,360)

Payments for purchases of intangible assets(125,534)(179)

Proceeds from tenant security deposits

547,574

1,573,021

Payments for tenant security deposits(779,948)(680,524)

32,898–Net Cash Used in Investing Activities(2,962,301)(23,779,042)

Cash Flows from Financing Activities:––

Proceeds from long-term debt

21,200,000

47,900,000

Repayments of long-term debt

(19,725,625)(24,233,125)

Payment of dividends(1,766,483)(1,452,656)

Net Cash Provided by Financing Activities(292,108)

22,214,219

Net Change in Cash and Cash Equivalents

565,916

1,699,859

Cash and Cash Equivalents at Beginning of Period

16,235,183

14,535,324

Cash and Cash Equivalents at End of Period

16,801,099

16,235,183

Cash Flows from Operating Activities:

Amortization of bond issuance costs
Interest expense
Increase (Decrease) in provision for loss on disaster

Cash payments of interest expense

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

Proceeds from subsidy

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

38

VIII. Statements of Cash Flows [Information Only]IX. Investor Information
Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Investors

Held at least once every two years

Date for finalizing Unitholders with voting rights
for the General Meeting of Unitholders

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

May 31 and November 30 of each year (distributions are paid within three months of thisreference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted

Nihon Keizai Shimbun

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi,
Suginami-ku, Tokyo 168-0063 Phone 0120-782-031 (toll-free in Japan)

Service counter

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

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

Daiwa Office Investment Corporation

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

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

IX. Investor Information

39

The Daiwa Office Investment Corporation logo has been created. The logo symbolizes hospitality with an open door and thedesire to be a bright and open investment corporation. We will continue to aim to be a highly-transparent investment
corporation that is further cherished and trusted by our investors and tenants.