Top REIT, Inc.

17th Business Report(Semi-Annual Report 17th)

May 1, 2014 – October 31, 20141

Letter from the Executive Officer of the Investment Corporation and the President of theAsset Management Company
Dear Investors,
Thank you for your continued loyal patronage to Top REIT, Inc. (Top REIT).
The Japanese economy showed a gradual recovery trend during the fiscal period under review (seventeenth fiscal
period), as illustrated by a significant rebound in the performance of some companies. The trend was bolstered by
the improving employment and income environments, although negatively impacted by the consumption tax rate
hike in April 2014. Meanwhile, personal consumption and production activities remained weak due to the impactof the decrease in demand in reaction to the hurried purchases ahead of the consumption tax increase andunseasonable weather. In addition, housing investment dropped steeply and companies kept a cautious attitude
toward capital investment. These and other factors led to unexpected negative growth in the real GDP for the July
– September period, indicating that a full-on recovery is yet to take place.
In the domestic stock market, strong corporate performance centering on export-oriented companies had brought
the Nikkei Stock Average upward. However, the stock prices showed high volatility and continued to remain
unstable, as they were prone to be affected by such external factors as movements in the foreign exchange market
and overseas stock prices, on top of the termination of the quantitative easing policy in the U.S. Subsequently,
given the surprising announcement of additional monetary easing by the Bank of Japan and the disclosure of the
new asset mix policy by the Government Pension Investment Fund (GPIF), the Nikkei Stock Average renewed its
yearly high, while the yen weakened acceleratedly in the foreign exchange market. In the J-REIT market, The
Tokyo Stock Exchange REIT Index continued to climb, backed by the capital inflow from individual investors
utilizing the NISA (the Japanese version Individual Savings Account) system, in addition to the expectations forbetter performances due to the improving vacancy rates of office buildings and rising land prices, among otherfactors.
Looking at the real estate leasing market, tenants noticeably started relocating to blue-chip office buildings in
preparation for the anticipated increase in office rents going forward, and expansion of leased floors in the samebuildings in association with the recovery of corporate performance and an increase in new hiring also became
evident. Under these circumstances, Top REIT focused on attracting successor tenants into its office buildings andresidential properties from which tenants had moved out. Consequently, contracts with successor tenants wereconcluded for all floors Top REIT owns in Harumi Island Triton Square Office Tower Y, excluding somewarehousing areas. Moreover, as an issue for us to tackle, we worked to invite successor tenants as soon as
possible to Kanda Nishiki-cho 3-chome Building. As a result of these activities, Top REIT achieved aperiod-on-period increase in the financial results in the seventeenth fiscal period (fiscal period ended October 31,2014), posting operating revenue of 5,792 million yen (up 2.8%), ordinary income of 1,955 million yen (up 2.2%)
and net income of 1,954 million yen (up 2.1%). Dividend per unit stood at 11,107 yen, successfully surpassing theforecast by 4.8%.
In the current real estate transaction market, real estate prices are soaring partly due to the inflow of foreign
capital with a strong appetite to invest, while information of excellent properties for sale is limited in volume.
Under such a tough environment, Top REIT will implement its strategy of focusing on internal growth ofproperties it owns. At the same time, considering that the current market provides good opportunities for portfolio
replacement, we aim to achieve growth based on the twin pillars of external growth and internal growth throughcollaboration with the asset manager and the sponsor. By doing so, we will continue our endeavors to maximize
the investment value of our unitholders. We appreciate your continued support and understanding.
December 15, 2014

Junichi Sahara

Nobuhito Endo

Executive Officer
Top REIT, Inc.

President and Representative Director
Top REIT Asset Management Co., Ltd.

2

Financial Highlights

CATEGORY

17TH FISCALPERIODPERFORMANCE

18TH FISCALPERIODFORECAST(ANNOUNCED ON
December 15, 2014)19TH FISCALPERIODFORECAST(ANNOUNCED ON
December 15, 2014)

PERIOD OF ASSETMANAGEMENT

184 days

181 days

184 days

OPERATING REVENUE¥5,792 million¥5,600 million¥5,164 million

OPERATING INCOME¥2,563 million¥2,424 million¥2,051 million

ORDINARY INCOME¥1,955 million¥1,840 million¥1,482 million

NET INCOME¥1,954 million¥1,839 million¥1,481 million

DIVIDEND PER UNIT

¥11,107¥9,300¥9,000NUMBER OF INVESTMENT UNITS

176,000 units

176,000 units

176,000 units

PORTFOLIO SIZE

22 properties

Until Nov. 12: 22 properties
Nov. 13 onward: 20properties

20 properties

Assumptions of forecasts for 18th and 19th Fiscal Period(1) Portfolio Assets
The forecast is based on 20 properties comprising the 22 properties Top REIT owns as of the end of
the seventeenth fiscal period (October 31, 2014) minus the 2 properties disposed as of November 13,
2014. The actual circumstances may change depending on the acquisition or disposal of otherproperties.
(2) Number of Investment Units Outstanding
The number of investment units issued and outstanding is based on the number as of December 15,
2014, which is 176,000 units, and assumes that no issuance of new investment units will be madethrough October 31, 2015.
(3) Operating Revenue
For rent revenue from existing properties, Top REIT takes into account the execution of new leaseagreements and cancellation of lease agreements that have been finalized and scheduled as ofDecember 15, 2014, as well as such factors that may cause fluctuations as risks associated with rent
revision with tenants due for rent revision or contract renewal, in light of recent real estate leasing
market conditions.
For Kanda Nishiki-cho 3-chome Building, the forecast assumes revenue for the spaces to be leased forwhich lease agreements have been executed or planned to be executed as of December 15, 2014.
Furthermore, it is assumed that the occupancy rate of the property stands at 49.7% as of April 30,
2015 and 49.7% as of October 31, 2015.
For the eighteenth fiscal period, the forecast assumes approximately ¥300 million in gains on disposalof properties associated with the disposition of two properties (Kanda Park Plaza and OAK PLAZA).
(4) Interest-Bearing Liabilities
It is assumed that the balance of interest-bearing liabilities is ¥100,362 million, which is the amount asof October 31, 2014.
The balance of interest-bearing liabilities as of December 15, 2014 stands at ¥90,665 million, as aresult of making early repayment of borrowing for ¥9,697 million on November 28, 2014.
For the eighteenth fiscal period, it is assumed that the ¥67 million in long-term loans payable will be
repaid on December 30, 2014 as agreed upon.
For the nineteenth fiscal period, it is assumed that the ¥8,500 million in investment corporation bonds
due for redemption on June 4, 2015 and the ¥4,251 million in borrowings due for repayment on
September 30, 2015 will be fully refinanced through borrowings or issuance of investment
corporation bonds. It is also assumed that the ¥67 million in long-term loans payable will be repaid on
June 30, 2015 as agreed upon.
3

(5) Dividend per Unit
Dividends (dividend per unit) are calculated based on the dividend policy stipulated in Top REIT’s
Articles of Incorporation.
For the eighteenth fiscal period, approximately ¥300 million in gains on disposal of properties isforecasted to accrue in association with the disposition of Kanda Park Plaza and OAK PLAZA. Top
REIT intends to reserve the gains on disposal of land as internal reserve, etc. (approx. ¥200 million) byapplying “The Special Measures on Taxation in Case Land or Other Property is Acquired in Advancein 2009 or 2010” as stipulated in Article 66-2 of the Act on Special Measures Concerning Taxation, forthe purpose of strengthening its financial standing. The actual amount of the internal reserve may vary,
though.
For the nineteenth fiscal period, it is assumed that part (approximately ¥100 million) of the reserve for
reduction entry totaling approximately ¥280 million (estimated balance as of April 30, 2015) will bereversed and added to net income for dividend. The reserve for reduction entry has accrued as a resultof applying to the above-mentioned Special Measures on Taxation with regard to the gains on disposalof the land of Nittetsu Honmachi Building disposed as of November 25, 2011 as well as Kanda Park
Plaza and OAK PLAZA that were disposed as of November 13, 2014.

4

I.

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

13th

14th

15th

16th

17th

As of/for six months ended

October 31,
2012

April 30,
2013

October 31,
2013

April 30,
2014.

October 31,
2014.

(1) Operating results
Operating revenue

mil yen

5,636

5,844

5,154

5,637

5,792

(Of which, rental revenue)

mil yen

5,636

5,844

5,154

5,637

5,792

Operating expenses

mil yen

2,939

3,397

2,981

3,108

3,229

(Of which, expenses related to rental
business)mil yen

2,384

2,848

2,438

2,622

2,721

Operating income

mil yen

2,697

2,447

2,172

2,528

2,563

Ordinary income

mil yen

2,002

1,823

1,580

1,913

1,955

Net income

mil yen

2,001

1,822

1,579

1,913

1,954

(2) Assets, etc. (end of period)
Total assets(Period-on-period variation)

mil yen%

188,4400.0

187,003(0.8)

186,169(0.4)

200,8027.9

200,551(0.1)

Interest-bearing liabilities

mil yen

96,902

96,06595,997

100,430

100,362

Net assets(Period-on-period variation)

mil yen%84,3040.1

84,127(0.2)

83,871(0.3)

93,081
11.0

93,1200.0

Unitholders’ capitalmil yen82,26082,26082,26091,143

91,143mil yen

2,001

1,822

1,579

1,912

1,954

%

100.0

100.0

100.0

99.9

100.0

Number of units Outstanding

units

155,000

155,000

155,000

176,000

176,000

Net assets per unit (Note 3)

yen

543,900

542,758

541,105

528,873

529,095

Dividend per unit

yen

12,912

11,75910,191

10,864

11,107(Earnings distribution per unit)

yen

12,912

11,75910,191

10,864

11,107(Distribution in excess of earnings per unit)

yen

－

－

－

－

－

%

1.1<2.1>

1.0<2.0>

0.8<1.7>

1.0<2.0>

1.0<1.9>%

2.4<4.7>

2.2<4.4>

1.9<3.7>

2.2<4.4>

2.1<4.2>

%

44.7
0.0

45.0
0.3

45.1
0.1

46.4
1.3

46.4
0.0

%

51.4

51.4

51.6

50.0

50.0

mil yen

4,368

4,117

3,831

4,207

4,274

Number of properties at end of period

cases

18

19

19

22

22

Number of tenants at end of period (Note 6)

cases

42

39

40

49

50

Total rentable area at end of periodm2

300,294.23

301,825.87

301,825.87

331,677.14

331,709.64

%

99.2

94.5

96.7

98.1

98.9

Depreciation and amortization at end of
periodmil yen

1,116

1,121

1,115

1,193

1,202

Capital expenditure at end of period

mil yen

108

443

176

511

143

(3) Cash distributions
Total cash distributions
Dividend payout ratio (Note2)(4) Per unit information(5) Financial indices
Ratio of ordinary income to total assets(Note 4)
Ratio of net income tounitholders’ equity (Note 4)
Ratio of unitholders’ equity to total assets(Period-on-period variation)
LTV
Rental NOI (Note 5)(6) Other referential information

Occupancy rate at end of period(Note 7)Note 1: Operating revenue, etc. does not include consumption taxes, etc.
Note 2: Since fund procurement through public offering was conducted during the 16th fiscal period and the number of investment units has changed
accordingly, dividend payout ratio for the 16th fiscal period is calculated as below
Dividend Payout Ratio= Total Amount of Dividends (excluding dividend in excess of earnings) / Net Income ×1005Note 3: Net assets per unit for the 15th fiscal period and before have been rounded to the nearest yen and net assets per unit for the 16th fiscal period
onward have been rounded down to the nearest yen.
Note 4: The indices above are calculated using the following formulas. In addition, annualized figures derived from the management period are
indicated in brackets <>.
Ratio of ordinary income to total assets = Ordinary income /((Total assets at beginning of period + Total assets at end of period)/2)×100
Ratio of net income to unitholders’ equity = Net income/((Net assets at beginning of period + Net assets at end of period)/2)×100
Note 5: Rental NOI (Net Operating Income) = Rental revenue - Expenses related to rental business + Depreciation and amortization.
Note 6: Number of tenants at end of period indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units are in the same
property and as multiple tenants if the units are in multiple properties.
Note 7: Occupancy rate at end of period = Total leased floor areas at end of period/Total rentable floor areas at end of period
When a pass-through type master lease agreement has been concluded, the area subleased to the end tenants have been used as the leased
floor area.
Note 8: Unless otherwise mentioned in the report, fractions of figures not indicated are rounded off for monetary amounts and rounded for ratios.

62. Overview of Asset Management Operation for the Sixteenth Fiscal Period
A. Brief Background of Top REIT
Top REIT was founded on November 2, 2005 based on the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951, as amended) with Top REIT Asset Management Co., Ltd. (AssetManager) as the incorporator, and listed on the Real Estate Investment Trust Section of the Tokyo Stock
Exchange (TSE) (Securities Code: 8982) on March 1, 2006 with the number of investment units issued
and outstanding totaling 145,500 units. As of the end of the seventeenth fiscal period (October 31, 2014),
the total number of investment units issued and outstanding stands at 176,000 units as a result of theissuance of additional investment units through the public offering (20,000 units) on November 25, 2013
and the third-party allotment (1,000 units) on December 13, 2013.
Top REIT works to conduct management with the aim of maximizing the investment value for its
unitholders by securing stable revenues over the medium to long term and achieving steady growth of its
portfolio. To do so, Top REIT focuses on the two strategies of “skilled management of a diversified
portfolio” and “optimal application of the sponsors’ strengths.” As of the end of the seventeenth fiscal
period, its portfolio consists of 22 properties with a total acquisition value of ¥197,855 million.
B. Investment Environment and Management Performance<Investment Environment>(a)Economy in General
The Japanese economy for the moment shows weakness, primarily in personal consumption andproduction, as illustrated by the real GDP for the July – September period unexpectedly marking
negative growth under the impact of a decrease in demand in reaction to the hurried purchases ahead of
the consumption tax hike in April this year, on top of unseasonable weather and other factors.
Nevertheless, the economy has stayed on a modest recovery trend, amid ongoing improvements incorporate earnings as well as in the employment and income environments.
While close attention must continuously be paid to the risk factors that may impact the Japanesebusiness climate, such as downside swings in overseas economies, mainly in the U.S., and the trends ofthe emerging and resource-rich economies, the Japanese economy is likely to continue to show a mild
recovery going forward, partly due to the effects of the additional monetary easing by the Bank of Japan(BOJ) and the government’s various policies proving effective, along with the anticipated pickups inpersonal consumption and capital investment associated with the postponement of the second
consumption tax hike.
(b)Real Estate Leasing Market[Office Buildings]
The vacancy rate has remained on a downward trend, given that the new supply of office buildings has
been kept a low level in recent years, in addition to a notable increase in demand for relocations to
expand spaces, etc. associated with a recovery in corporate performance. Rents have also shown a trendof stopping to drop, with even a reversal being seen in some areas. As such, the market is gradually
signaling a recovery, including a reduction in rent-free periods, primarily for blue-chip office buildings
in central Tokyo.
[Retail Properties]
Despite a temporary drop due to repercussions from the rush demand prior to the consumption tax hikeand other factors being observed, personal consumption is anticipated to recover gradually and remain
solid going forward, backed by improvements in the employment and income environments. Meanwhile,
delays in the recovery of demand are observed in some industries, business types and locations, andretailers continue to face harsh business conditions including the increased competition against online
shopping operators. Accordingly, disparities may arise in performance and the ability to bear rent
burdens, depending on the economic trends and the characteristics of individual retail properties.

7

[Residential Properties]
Demand for well-located and quality rental residential properties has remained solid, given the ongoing
population inflow into the Tokyo metropolitan area and other major urban areas around Japan. With theconstruction starts of new residential properties also been kept at a low level, the supply-demandconditions continue to be favorable. Going forward, the rental residential property market is anticipatedto see both the occupancy rate and rent levels remain in good shape, primarily for single-personhouseholds and small households.
(c) Real Estate Transaction Market
In the current real estate transaction market, not only J-REITs but also private placement funds,
industrial corporations and overseas investors who anticipate a full-on recovery of the Japanese
economy continue to have a proactive investment attitude, against the backdrop of a favorable fundprocurement environment including low interest rates as a result of the monetary easing. This, alongwith the activities of such core investors as pension funds, has led to ongoing capital inflow into themarket. On the other hand, competition over property acquisitions in the real estate transaction market
has been increasingly intensified, as information on properties for sale (especially those in central
Tokyo and in other good locations) is limited. Since rents as income sources have not yet shown any
full-on increase while sales prices of properties are soaring, it is expected that investment returns willcontinue to stay on a downward trend for some time.
(d) Financial Market
During the fiscal period under review, the financial market saw the BOJ continue its “quantitative andqualitative monetary easing,” which kept both short-term and long-term interest rates at a low level. In
addition, the BOJ decided on additional monetary easing measures at its Monetary Policy Meeting heldon October 31, 2014. Due to this development, it is anticipated that interest rates will remain low in astable manner for a certain period of time, and that financial institutions will continue to maintain theirproactive lending attitude.
<Asset Management Performance >(a)Acquisition and Disposition of Assets
Top REIT began the seventeenth fiscal period with 22 properties (total acquisition value: ¥197, 855
million). With an aim to acquire highly-competitive and highly-profitable properties, Top REIT
considered possible acquisition of properties through not only the “optimal application of the sponsors’
strengths” but also by utilizing established information channels to collect and carefully select fromproperty sale information, with excellent office buildings located in central Tokyo at the core, as well asother asset classes, by drawing on the characteristics of being a diversified REIT. The number ofproperties owned by Top REIT remained unchanged from the sixteenth fiscal period since Top REIT did
not make a decision to acquire properties in the seventeenth fiscal period.
After closing the seventeenth fiscal period, Top REIT executed sales agreements for Kanda Park Plazaand OAK PLAZA as of November 12, 2014, with their disposition being completed on November 13,
2014. Top REIT used part of the proceeds from the disposition of these properties to repay existing
borrowings, making early repayment of certain borrowings on November 28, 2014.
(b)Management and Maintenance of Portfolio Assets
The basic asset management strategy of Top REIT is sustaining and increasing revenue over the medium
to long term by maintaining and improving tenant satisfaction (the “Tenants First” policy) and keeping
operational management costs at an appropriate level. Top REIT strived to improve tenant satisfaction
and maintain and improve high occupancy rates while sustaining trusted relationships with tenants anddiscerning tenant needs via property management companies. During the seventeenth fiscal period, Top
REIT continued to focus on tenant solicitation activities for successor tenants of Harumi Island Triton
Square Office Tower Y. As a result, the occupancy rate reached 93.6% at the end of the seventeenthfiscal period (October 31, 2014), and is expected to further improve to 99.8% in February 2015. On theother hand, a tenant to whom the entire building of Kanda Nishiki-cho 3-chome Building has beenleased notified its intention to terminate the lease agreement as of January 2015. Of the spaces to bevacated, new lease agreements covering 965 tsubos have already been executed as of December 15,
2014, and Top REIT continues its effort to solicit successor tenants for the remaining spaces.
Regarding maintenance, Top REIT followed up on ensuring that it had an appropriate grasp of theoperational management conditions and steady implementation of asset management plans for each8

property. Based on asset management plans, Top REIT also carried out renewal construction and repair
work that contributed to enhancing the competitiveness of properties, maintaining and improving thefunctionality of properties, and construction that contributed to improving tenant satisfaction. It also
took steps to keep relevant costs at an appropriate level and conducted efficient management of
resources. Furthermore, with regard to Harumi Island Triton Square Office Tower Y, Top REIT isinvestigating implementation of construction works to convert an entire floor, which has been used as
cafeteria for the employees of tenants, to office spaces for lease in order to increase the rent revenue.
C. Funding
Top REIT procures funds under a financial policy based on stable financial management. During theseventeenth fiscal period, Top REIT refinanced the ¥4,000 million in long-term loans due for repayment
on June 30, 2014 by borrowing ¥4,000 million in long-term loans (repayment date: March 29, 2019) asof the same date. Top REIT also repaid ¥67.5 million in long-term loans as agreed upon on June 30,
2014 by using cash on hand.
As a result, at the end of the seventeenth fiscal period, the balance of interest-bearing liabilities amounts
to 100,362 million (¥91,862 million in long-term loans (including the current portion) and ¥8,500
million in investment corporation bonds), and the ratio of interest-bearing liabilities to total assets is
50.0%. Moreover, the ratio of long-term interest-bearing liabilities (including the current portion) is
100%, while interest-bearing liabilities with fixed interest rates account for 46.5%.
Furthermore, after closing the seventeenth fiscal period, Top REIT disposed Kanda Park Plaza and OAK
PLAZA as of November 13, 2014. Top REIT used the proceeds from the disposition and cash on handto make early repayments totaling ¥9,697 million for certain existing borrowings on November 28, 2014.
This resulted in the balance of interest-bearing liabilities amounting to ¥90,665 million (¥82,165 million
in long-term loans (including the current portion) and ¥8,500 million in investment corporation bonds)
as of the date of the early repayment.
The credit rating of Top REIT as of October 31, 2014 is as follows:
Credit Rating Agency
Rating [Outlook]
Issuer rating: A+ [Negative]
Rating and Investment Information, Inc.
Unsecured investment corporation bond rating(R&I)(No. 1 Unsecured Investment Corporation Bonds): A+(Note) R&I changed the rating outlook of Top REIT’s issuer rating on August 8, 2014 as described above.

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

Amount to be Issued

Scheduled Period of Issue¥100,000 million

From May 20, 2014 to May 19, 2016

D. Earnings Results and Dividends
As a result of the asset management and operations described above, Top REIT recorded asset
management performance during the seventeenth fiscal period of ¥5,792 million in operating revenue,¥2,563 million in operating income and ¥1,955 million in ordinary income after deducting expenses
concerning borrowings, etc., and net income was ¥1,954 million.
As for dividends, with the aim of having an amount equivalent to profit dividends deducted as expenses
based on the application of the special provision on taxation of investment corporations (Article 67-15 of
the Act on Special Measures Concerning Taxation [Act No. 26 of 1957, as amended; hereinafter, the“Special Taxation Measures Act”]), Top REIT decided that the maximum value arrived at when thenumber of units issued and outstanding (176,000 units) is multiplied by an integer, within the limit of thebalance of unappropriated retained earnings of the seventeenth fiscal period and after deducting theamount of deferred tax liabilities being corrected due to the change in tax rate which would be transferredto the reserve for reduction entry, would be paid out. Consequently, Top REIT declared a dividend perinvestment unit of ¥11,107.

9

3. Balance of Paid-in CapitalThe outline of changes in paid-in capital of Top REIT during the past five years is as follows:
Total number of units
Total paid-in capitalissued and outstanding(million yen)
Issue date
Remarks
Note(units)Increase
Balance
Increase
BalanceNovember 25, 2013
Public offering
20,000175,000
8,460
90,720Note 1
December 13, 2013
Third party allotment
1,000
176,000
423
91,143Note 2
Note 1: New investment units were issued at a price of ¥438,750 per unit (issue value of ¥423,000 per unit)
through a public offering in order to raise funds for the acquisition of specified assets.
Note 2: New investment units were issued at a value of ¥423,000 per unit through a third party allocation to raise
funds for the acquisition of specified assets, etc.

[Market Price of Investment Unit]
The market price of the investment unit on Tokyo Stock Exchange REIT Market during respective fiscal
periods is as follows:
Fiscal period
As of the end of
fiscal period
Highest price

13th

14th

15th

16th

17th

October, 2012

April, 2013

October, 2013

April, 2014

October, 2014

459,000yen

576,000yen

519,000yen

494,000yen

483,000yen

Lowest price358,500yen

351,000yen

411,000yen

437,500yen

444,000yen

4. Cash Distribution
The dividend per unit for the 17th fiscal period is 11,107 yen. Top REIT expects to distribute almost all thebalance of unappropriated retained earnings of the 17th fiscal period after deducting the amount ofdeferred tax liabilities being corrected due to the change in tax rate along with the tax system revision in
fiscal 2014 which would be transferred to the reserve for reduction entry to be eligible for special tax
treatments (Article 67-15 of the Act on Special Measures Concerning Taxation) that allows Top REIT to
deduct an amount equivalent to distributions of retained earnings as expenses from taxable income.
Fiscal period
As the end of fiscal period
Unappropriated retained
earnings
Internal reserves
Total dividends<Dividend per unit>
Of which, dividend ofaccumulated earnings<Per unit>
Of which, repayment ofpaid-in capital<Per unit>

Units

13th
October,2012

14th
April,2013

15th
October,2013

16th
April, 2014

17th
October,2014

thousand yen

2,001,377

1,822,649

1,579,617

1,913,997

1,954,943

thousand yen
thousand yen

172,001,360

4
1,822,645

12
1,579,605

1,933
1,912,064

111
1,954,832<yen><12,912><11,759><10,191><10,864><11,107>

thousand yen

2,001,360

1,822,645

1,579,605

1,912,064

1,954,832<yen><12,912><11,759><10,191><10,864><11,107>

thousand yen

－

－

－

－

－

<yen>

<－>

<－>

<－>

<－>

<－>

10

5. Management Policy and Issues to be addressed(a) Management Strategy for Existing Properties
Top REIT will continue to follow its basic asset management strategy that centers on sustaining andincreasing revenue over the medium to long term by maintaining and improving tenant satisfaction (the“Tenants First” policy) and keeping operational management costs at an appropriate level. Under thisstrategy, Top REIT will focus on sustaining relationships of trust with tenants, leasing vacant spaces andsuch, as well as striving to maintain stable occupancy rates over the medium to long term.
Furthermore, Top REIT will also work to ensure an appropriate perception of the operational
management conditions for each property while steadily implementing such measures as to sustain andimprove revenues and keep operational management costs at an appropriate level. In addition, Top REIT
will carry out systematic repair work and such to enhance the competitiveness of properties and tomaintain and improve the functionality of properties, in an aim to secure stable revenues over the
medium to long term.
(b) Investment Strategy for New Properties
Top REIT aims to increase its dividends over the medium to long term by realizing external growththrough acquisition of new properties. Top REIT will continue to not only further utilize pipeline
support functions from sponsor companies, but also utilize various established information channels tocollect information on new properties based on detailed analysis of market environment of each asset
classes, while placing emphasis on primarily highly competitive office buildings. By doing so, Top
REIT aims to expand the portfolio size while improving its quality.
Furthermore, Top REIT makes it a management policy to keep the ratio of the investment amount perproperty at less than 20% of the entire portfolio as a target over the medium to long term. Goingforward, Top REIT will work to reduce the risk of concentration on specific properties by steadily
advancing further external growth.
(c) Financial Strategy
Top REIT will continue to implement diversified and flexible fund procurement operations in
preparation for acquisition of new properties and refinancing of existing loans, etc. While securing
mobility and flexibility in fund procurement, Top REIT will work to reduce the risk involved in fundprocurement by extending borrowing periods and spreading out the repayment dates. At the same time,
Top REIT will manage the risk of interest rate fluctuations by taking into account the balance ofborrowings at floating and fixed interest rates, as it discerns the interest rate trends. Moreover, financial
soundness will be maintained by keeping the leverage at an appropriate level.
(d) Compliance and Risk Management, etc.
In addition to the supervision of the Executive Officer by Supervisory Directors at the Board of
Directors meetings and other occasions, Top REIT will continue its direction and supervision on the
Asset Manager that it can conduct management operations with full care given to market risks,
including rent decreases, and credit risks as well as with a focus on the protection of unitholders’interests in conducting transactions with interested parties and on other compliance issues.

116. Significant Subsequent Events<Disposition of Properties>
Top REIT disposed of two properties on November 13, 2014 as described below.
Trust beneficiary interest in real estate in Japan(1) Property Type
Kanda Park Plaza(2) Name of Property
2-2-2 Kajicho, Chiyoda-ku, Tokyo(3) Address (Residential building address)¥5,350 million(4) Disposition Price¥5,052 million (as of October 31, 2014)(5) Book Value
Approx. ¥109 million(6) Gains on disposal
November 12, 2014(7) Sales Agreement dateNovember 13, 2014
(8) Disposition Date
Undisclosed(9) Purchaser(1) Property Type
(2) Name of Property(3) Address (Residential building address)(4) Disposition Price(5) Book Value(6) Gains on disposal(7) Sales Agreement date(8) Disposition Date
(9) Purchaser

Trust beneficiary interest in real estate in JapanOAK PLAZA
2-10-6 Kanda Awajicho, Chiyoda-ku, Tokyo¥2,900 million¥2,686 million (as of October 31, 2014)
Approx. ¥191 million
November 12, 2014
November 13, 2014NIPPON STEEL KOWA REAL ESTATE CO., LTD.

(Note) Disposition Price is the price for sale to be specified in the sales agreement for trust beneficiaryinterest in real estate (excluding consumption tax and equivalents) which does not include disposition
expenses, money adjustment such as taxes, etc.

[Reference Information]<Partial Early Repayment of Borrowings>
Top REIT made the partial early repayment of borrowings on November 28, 2014 with the proceedsfrom the disposition of Kanda Park Plaza and OAK PLAZA, etc. Outline of the partial early
repayment of borrowings is described below.
Long-term loan (Term Loan No. 15)(1) Lender(2) Balance of loans before repayment (A)(3) Amount of repayment (B)(4) Balance of loans after repayment (A-B)(5) Date of early repayment(6) Execution date
(7) Principal repayment date

Sumitomo Mitsui Trust Bank, Limited.
The Bank of Fukuoka, Ltd.
The Hiroshima Bank, Ltd.
The Yamaguchi Bank, Ltd.
¥6,700 million¥3,873 million¥2,827 million
November 28, 2014
March 31, 2011
February 29, 2016

Long-term loan (Term Loan No. 19-(1))(1) Lender(2) Balance of loans before repayment (A)(3) Amount of repayment (B)(4) Balance of loans after repayment (A-B)(5) Date of early repayment

Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo Mitsubishi UFJ, Ltd.
Resona Bank, Limited¥7,000 million¥4,046 million¥2,954 million
November 28, 201412

(6) Execution date
(7) Principal repayment dateNovember 30, 2012
September 30, 2015

Long-term loan (Term Loan No. 20-(3))(1) Lender(2) Balance of loans before repayment (A)(3) Amount of repayment (B)(4) Balance of loans after repayment (A-B)(5) Date of early repayment(6) Execution date
(7) Principal repayment dateMizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation¥3,075 million¥1,778 million¥1,297 million
November 28, 2014
March 27, 2013
September 30, 201513

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

13th
October,2012
2,000,000
155,000
82,260
7,823

14thApril,2013
2,000,000
155,000
82,2607,872

15th
October,2013
2,000,000
155,000
82,2607,590

16thApril,2014
2,000,000
176,000
91,1439,163

17th
October,2014
2,000,000
176,000
91,1439,846

2. Matters Concerning the Investment Units
Major unitholders as of October 31, 2014 are as follows:
NameJapan Trustee Service Bank (trust account)
The Master Trust Bank of Japan (trust account)
Trust and Custody Services Bank (securities investment trust account)
Nomura Trust and Banking (investment trust account)
Nomura Securities Co., Ltd.
THE FUJI FIRE AND MARINE INSURANCE COMPANY,LIMITED
Sumitomo Mitsui Trust Bank, Limited.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
Oji Real Estate Co., Ltd.
MetLife Insurance K.K.
The Asahi Fire & Marine Insurance Co., Ltd.
STATE STREET BANK-WEST PENSION FUND CLIENTS-EXEMPTThe Iyo Bank, Ltd.
STATE STREET BANK AND TRUST COMPANY 505223
CHASE NOMINEES RE JASDEC TREATY Y CLIENT A/C (GENERAL)
Total

Number of units held
(units)
41,092
11,989
8,518
6,147
3,507
3,465
3,176
3,162
3,162
2,025
2,010
1,686
1,500
1,477
1,451
94,367

Share of total(%) (Note)
23.35
6.81
4.84
3.49
1.99
1.97
1.80
1.80
1.80
1.15
1.14
0.96
0.85
0.84
0.82
53.62

Note: The share of total is calculated by rounding to the second decimal place.

3. Officer and Auditor
A: Name of directors and auditor as of October 31, 2014 are as follows:
Post
Executive Officer
Supervisory Director

Name
Junichi Sahara(Note1)
Yasuyuki Kuribayashi(Note1)Supervisory Director

Kunio Tsuneyama(Note1)

Accounting Auditor

KPMG AZSA LLC

Major additional post

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

Adviser, Sumitomo Mitsui Trust
Guarantee Co., Ltd.
Partner Attorney,
City-Yuwa Partners (Note2)
Managing Partner, Tsuneyama
Certified Public Accountants Office
Managing Partner, Tsuneyama Sogo
Accountants Office
Non Executive Director in Kuroda
Electric Co., Ltd.
(Note2)
－

2,700
1,800

1,800

10,000Note1: There are no investment units of Top REIT held by the Executive Officer or Supervisory Directors in theirown name or others' names.
Note2: Although Exective Officer and Supervisory Directors may have additional posts in entities other thanthose listed above, there is no conflict of interest between those companies including those listed above
and Top REIT.
Note3: There was no resignation or dismissal of the Officer, Director and Auditor during the current period.

B: Policy on determination of dismissal and denial of reappointment of accounting auditor
The Board of Directors shall decide after taking various factors into consideration.

14

4. Asset Manager, Asset Custodian and Administrative Agents
Asset manager, etc. as of October 31, 2014 are as follows:Business

Company name

Asset manager

Top REIT Asset Management Co., Ltd.

Assets custodian

Sumitomo Mitsui Trust Bank, Limited.

Administrative agent(running of the organization, accounting matters, etc.)
Administrative agent(unitholders’ register, special accounts)
Administrative agent(investment corporation bonds)

Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited.

15【3】 Status of Investment Assets
1. Composition of Assets

Type of assets

Asset class

Real estate

Office building

Office building

Retail property

Area

17th
As of October 31, 2014
Total amount
As a percentage
owned
of total assets(million yen)(%)
(Note 1)
(Note 2)Central Tokyo

5,830

2.9

5,818

2.9

Subtotal

5,830

2.9

5,818

2.9

Central Tokyo

133,42966.4

132,744

66.2

Tokyo
Metropolitan Area

1,635

0.8

1,618

0.8

Subtotal

135,06467.3

134,36267.0

27,445

13.7

27,275

13.6

1,219

0.6

1,211

0.6

Subtotal

28,66414.3

28,487

14.2

Central Tokyo

2,376

1.2

2,348

1.2

Tokyo
Metropolitan Area

17,386

8.7

17,2508.6

Subtotal

19,763

9.8

19,5999.8

Central Tokyo

2,692

1.3

2,686

1.3

Subtotal

2,692

1.3

2,686

1.3

192,01495.6

190,955

95.2

8,787

4.4

9,596

4.8

200,802100.0

200,551

100.0<192,014><95.6><190,955><95.2>

Tokyo
Metropolitan Area
Other
Major Cities

Real estatein trust

Residential

16th
As of April 30, 2014
Total amount
As a percentage
owned
of total assets(million yen)(%)
(Note 1)
(Note 2)

Other

Subtotal of real estate and real estate in trust
Cash, deposits and other assets

Total assets (Note 3)

Note 1: Total amount owned is based on the amounts appropriated on the Balance Sheet at the end of each period.
(Real estate and real estate in trust represent the book values after deducting depreciation). Total Amountfigures were rounded down to the nearest million yen.
Note 2: As a percentage of total assets show the ratio of respective assets to total assets and is rounded to firstdecimal place.
Note 3: Figures in brackets <> of total assets represent the portions of actually owned properties in the object
assets.

< Geographical Classification >Area

RegionSupplementary note

Central Tokyo

Chiyoda-ku, Chuo-ku, Minato-ku, Shibuya-ku,
Shinjuku-ku and Shinagawa-ku

―

Tokyo
Metropolitan Area

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

KansaiRegional economic zone centering
on Osaka

Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama Prefectures

ChukyoRegional economic zone centeringon Nagoya

Aichi, Gifu and Mie Prefectures

Major cities
Across thecountry

Cities designated by government ordinance andother major cities (excluding cities belonging to
the above classifications)16―

2. Major Properties Owned
The major properties (top ten properties by book value) that Top REIT owns as of October 31, 2014 are
as follows:Book value
Property name(million yen)

Rentable floor
space(Note 1)

Leased floor
space(Note 2)

Occupancy
rate(Note 3)

Portion ofrentalrevenue(Note 4)

(m2)

(m2)

(%)

(%)

Primary use

NEC Head Office
Building

Trust
beneficiaryinterest

42,586

72,238.03

72,238.03

100.0

24.8

OfficeHarumi Island
Triton Square
Office Tower Y

Trust
beneficiaryinterest

29,92623,170.40

21,696.08

93.6

13.8

OfficeHarumi Island
Triton Square
Office Tower Z

Trust
beneficiaryinterest

19,22910,914.20

10,914.20

100.0

OfficeKanda Nishiki-cho
3-chome Building

Trustbeneficiaryinterest

12,621

8,025.65

8,025.65

100.0

OfficeSagamihara Shopping
CenterTrust
beneficiaryinterest

11,17861,763.28

61,763.28

100.0

5.7

Fukasawa House
Towers H&I

Trust
beneficiaryinterest

9,996

11,357.44

10,821.58

95.3

4.2 Residential

Akasaka Oji
Building

Trust
beneficiaryinterest

9,736

7,301.15

7,301.15

100.0

4.7

OfficeIto-Yokado
Higashi-Narashino Store

Trust
beneficiaryinterest

7,697

51,098.42

51,098.42

100.0

4.1

Retailproperty

Shiba-Koen Building

Real estate

5,818

3,060.43

2,596.69

84.8

1.3

OfficeTrust
Shinjuku EAST Building beneficiaryinterest

5,779

7,523.04

7,479.09

99.4

4.2

OfficeTotal

154,570

256,452.04

253,934.17

99.0

76.0

Retailproperty

Note 1: Rentable floor space is total rentable space for each asset as of the end of the 17th fiscal period. Furthermore, in the caseof co-ownership (including quasi-co-ownership), the stated figure is given by multiplying the rentable floor space of thewhole building by the ratio of co-ownership, and rounded to the second decimal place.
Note 2: Leased floor space is floor space based on lease agreements effective as of the end of the 17th fiscal period. Furthermore,in the case of co-ownership (including quasi-co-ownership), the stated figure is given by multiplying the leased floor
space of the whole building by the ratio of co-ownership, and rounded to the second decimal place. In the case ofcontracting the master-lease agreements as pass-through type, the floor space subleased to end-tenants is calculated as theleased area.
Note 3: Occupancy rate is the figure given by dividing leased floor space as of the end of the 17th fiscal period by rentable floor
space, and rounded to the first decimal place.
Note 4: Portion of rental revenue is rounded to first decimal place. Portion of rental revenue for Harumi Island Triton Square
Office Tower Z and Kanda Nishiki-cho 3-chome Building is not disclosed due to being unable to obtain the consent of
the tenants.

17

Asset class

3. Details of Portfolio Properties① Details of Properties
A. The details of properties owned by Top REIT as of October 31, 2014 are as follows

Area

Property name

NEC Head Office
Building
Harumi Island
Triton Square
Office Tower Y
Akasaka Oji
Building
Kanda Park Plaza(Note 2)
Office building

Shiba-Koen Building
Central Tokyo

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

Retail property

Tokyo
Metropolitan
Area

Type of title

5-7-1 Shiba, Minato-ku, Tokyo

Trust beneficiaryinterest

53,15042,5861-8-11 Harumi, Chuo-ku,
Tokyo

Trust beneficiaryinterest

27,10029,926

8-1-22 Akasaka,
Minato-ku, Tokyo
2-2-2 Kajicho,
Chiyoda-ku, Tokyo
3-5-5 Shiba, Minato-ku,
Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest

9,420

9,736

5,080

5,052

Real estate

3,460

5,818

1-8-12 Harumi, Chuo-ku,
Tokyo

Trust beneficiaryinterest

12,30019,2293-11-1 Kanda Nishiki-cho,
Chiyoda-ku, Tokyo
1-17-24, Shinkawa,Chuo-ku, Tokyo
10-5, Tomihisa-cho,Shinjuku-ku, Tokyo

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

9,610

12,621

6,010

5,737

6,450

5,779

2,100

2,074

2,570

1,618

137,250

140,1818,820

11,178

3,990

7,697

4,010

3,774

Trust beneficiaryInterest

4,890

4,625

Trust beneficiaryinterest

1,300

1,211

23,01028,487

2,750

2,348

7,410

9,996

5,340

4,853

1,320

1,219

1,250

1,180

18,07019,599

2,660

2,686

2,660

2,686

180,990

190,955

Ginza Oji Building

4-9-8, Ginza, Chuo-ku, Tokyo

Faret East Building

2-34-7 Akebonocho,
Tachikawa-shi, Tokyo

Trust beneficiaryinterest

3-13-33 Kobuchi, Minami-ku,
Sagamihara-shi, Kanagawa
7-3-1 Higashi Narashino,
Narashino-shi, Chiba
7-3-1 Bessho, Minami-ku,
Saitama-shi, Saitama
Building A:1-10, Oyamadai,
Kashiwa-shi, Chiba
Building B: 1-29, Oyamadai,
Kashiwa-shi, Chiba
2-7-28 Chuo, Aoba-ku,
Sendai-shi, Miyagi

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Subtotal (11 Properties)
Sagamihara Shopping
Center
Ito-Yokado
Higashi-Narashino StoreTokyo
Musashiurawa Shopping
Metropolitan
SquareArea
Kojima × Bic Camera
Kashiwa Store
Other
Major Cities

Address

Appraisal value
at end of 17th
period(million yen)
(Note 1)MEL Building

Subtotal (5 Properties)

Residential

Central Tokyo

Tokyo
Metropolitan
Area

Top Residence
Nihonbashi Kayabacho
Fukasawa House
Towers H&I
Ecology Toyosu
Procentury
Impress
Musashi-Koganei
Top Residence Yoga

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

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Other

Subtotal (5 Properties)
Central Tokyo

Total(22 Properties)OAK PLAZA (Note 2)

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

Subtotal (1 Property)

Trust beneficiaryinterest

Book value at
end of 17th
period(million yen)

Note 1: For “Appraisal value at end of period,” Top REIT indicates the assessed value based on the appraisal by real estate appraisers
following the asset evaluation method and standards stipulated in Top REIT’s Articles of Incorporation and rules of The
Investment Trusts Association, Japan (based on real estate appraisal reports prepared by Tanizawa Sogo Appraisal Co, Ltd;
Japan Real Estate Institute and Daiwa Real Estate Appraisal Co, Ltd) as of October 31, 2014 as the points of evaluation.
Note 2: Kanda Park Plaza and OAK PLAZA were disposed on November 13, 2014.

18

Area

Property name

100.0

1,416

25.1

1

100.0

1,439

24.8

7

87.5

769

13.6

8

93.6

801

13.8

100.0

266

4.7

6

100.0

271

4.7

9
2

90.2
62.4

151
70

2.7
1.3

9
2

90.2
84.8

154
74

2.7
1.3

Harumi Island Triton
Square Office Tower Z

1

100.0

1

100.0

Kanda Nishiki-cho
3-chome Building

1

100.0

1

100.0

Shinkawa Chuo Building

1

100.0

212

3.8

1

97.6

213

3.7

Shinjuku EAST Building

4

99.4

197

3.5

4

99.4

242

4.2

Ginza Oji Building

2

83.8

82

1.5

2

100.0

89

1.5

Faret East
Building

1

100.0

150

2.7

1

96.2

152

2.6

35

96.8

4,080

72.4

36

98.1

4,203

72.6

2

100.0

332

5.9

2

100.0

332

5.7

1

100.0

236

4.2

1

100.0

236

4.1

3

100.0

129

2.3

3

100.0

126

2.2

1

100.0

1

100.0

1

100.0

58

1.0

1

100.0

58

1.0

8

100.0

891

15.8

8

100.0

912

15.8

Top Residence
Nihonbashi Kayabacho

1

96.2

89

1.6

1

99.4

92

1.6

Fukasawa House Towers
H&I

1

92.9

231

4.1

1

95.3

241

4.2

Ecology Toyosu
Procentury

1

96.2

168

3.0

1

96.6

166

2.9

Impress Musashi-Koganei

1

94.9

44

0.8

1

94.9

44

0.8

Top Residence Yoga

1

95.5

37

0.7

1

94.2

38

0.7

5

94.6

571

10.1

5

96.1

582

10.1

OAK PLAZA(Note 4)

1

100.0

94

1.7

1

100.0

94

1.6

Subtotal (1 property)
Total (22 properties)

1
49

100.0
98.1

94
5,637

1.7
100.0

1
50

100.0
98.9

94
5,792

1.6
100.0

Central Tokyo

6

Subtotal (11 properties)
Sagamihara Shopping
Center
Ito-Yokado
Higashi-Narashino Store
Musashiurawa Shopping
SquareKojima × Bic Camera
Kashiwa StoreTokyo Metropolitan
Area

Retail property

1Harumi Island Triton
Square Office Tower Y
Akasaka Oji Building

Other
Major
CitiesCentralTokyo
Tokyo Metropolitan
Area

Residential

17th Fiscal Period
From May 1, 2014
to October 31, 2014
Occupancy Rent revenue Ratio ofrate- real estate
rental(end of(for period) revenue toperiod) (million yen) total rental(Note 2)revenues(%)(%)(Note 3)

NEC Head Office Building

MEL
Building

Subtotal (5 properties)

CentralTokyo

Subtotal (5 properties)
Other

Number oftenants(end ofperiod)(case)(Note1)

16th Fiscal Period
From November 1, 2013
to April 30, 2014
Occupancy Rent revenue Ratio of
Number ofrate- real estate
rentaltenants(end of(for period) revenue to(end ofperiod) (million yen) total rental
period)(Note 2)revenues(case)(%)(%)(Note 3) (Note1)

Kanda Park Plaza (Note 4)
Shiba-Koen Building

Tokyo
Metropolitan
Area

Office building

Asset class

B. Operating results for each fiscal period of each property owned are as follows:

Note1: Number of tenants indicates total number of tenants of each property as of the end of period. In the case a master leaseagreement is concluded, it is counted as 1 tenant. In the case 1 tenant rents multiple units, it is counted as 1 tenant if the units
are in the same property and as multiple tenants if the units are in multiple properties.
Note 2: Rent revenue is rounded down to the nearest million yen. Rent revenue for Harumi Island Triton Square Office Tower Z,

19

Kanda Nishiki-cho 3-chome Building and Kojima × Bic Camera Kashiwa Store is not disclosed due to being unable toobtain the consent of the tenants.
Note 3: Ratio of rental revenue to total rental revenues is rounded to first decimal place. Ratio of rental revenue to total rental
revenues for Harumi Island Triton Square Office Tower Z, Kanda Nishiki-cho 3-chome Building and Kojima × Bic Camera
Kashiwa Store is not disclosed due to being unable to obtain the consent of the tenants.
Note 4: Kanda Park Plaza and OAK PLAZA were disposed on November 13, 2014.

② Details of Investment Securities
There are none applicable.

4. Contracted Amount and Market Price of Specified Transactions
The contracted amount and market price of the specified transactions of Top REIT as of October 31,
2014 are as follows:
Contract amount (Note 1) (Note 2)
Segment

Type of transaction

Longer than a year

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

29,70029,700(Million yen)
Market price(Note 1)
(Note 3)
(174)

Total
29,70029,700(174)
Note1: The above figures are rounded down to the nearest million yen.
Note2: Contract amounts of interest-rate swap transactions represent figures based on the estimated principal.
Note3: Market price is evaluated at the price calculated by the counterparty of the concerned transaction contract based on theprevailing market rate.

5. Status of Other Assets
All real estate and trust beneficiary interests in real estate are listed in the table under the “3-① Detailsof Portfolio Properties. ”There were no significant specified assets that are main investment targets of
Top REIT other than those listed above as of October 31, 2014.

6. Status of Assets by Country and Region
There are none applicable.

20

【4】Capital Expenditures for Properties Owned
1. Schedule of Capital Expenditures
The table below lists the estimated amounts of significant capital expenditures for repair andmaintenance work of properties held by Top REIT, planned as of October 31, 2014. The estimatedconstruction costs shown in the table below include those classified to expenses in accounting.

Property nameLocation

Scheduled term forconstruction
or maintenancePurposeRenewal of
air conditioning facility
Waterproofing work forheat storage tank
Renewal of gondola
Renewal of parts forelectrical substationequipment
Minato-ku,
Renewal of emergency
Tokyobroadcasting equipment
Renewal of monitoring
device and wiring
Renewal ofventilating duct
Renewal ofcooling machine
Renewal of drainpipe for
air conditioning facility
Sagamihara-shi, Renewal of fire-prevention
Kanagawa
monitoring equipment, etc.

NEC Head
Office Building

Sagamihara
Shopping CenterMay 2014 toNovember 2014
May 2014 toJanuary 2015
May 2014 toJanuary 2015
May 2014 toJanuary 2015
May 2014 toMarch 2015
May 2014 toMarch 2015
May 2014 toMarch 2015
May 2014 toMarch 2015
May 2014 toMarch 2015
January 2015 toMarch 2015

Estimated construction cost
(million yen)
Total of
Payment for
Total
advancethe period
payment
26

－

－

14

－

－

26

－

－

20

－

－

34

－

－

48

－

－

20

－

－

44

－

－

14

－

－

40

－

－

2. Capital Expenditures Made During the 17th Fiscal Period
The following table is an overview of construction work conducted during the seventeenth fiscal periodthat fall under the category of capital expenditures for properties held. Capital expenditures during theseventeenth fiscal period amounted to ¥143 million and combined with ¥94 million in repairs andmaintenance costs that fall under expenses for the seventeenth fiscal period, a total of ¥237 million of
construction work was implemented.
Name of property

Location

PurposeScheduled term forconstruction or maintenanceCapital expenditures(million yen)

NEC Head
Office Building

Minato-ku,
Tokyo

Renewal of partsfor fire shutter

May 2014 toSeptember 2014

41

Renewal of function

May 2014 to
October 2014

102

Others

Total

143

21

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

13th

14th

15th

16th

17th

From May 1, 2012
to October 31, 2012

From November 1, 2012
to April 30, 2013

From May 1, 2013
to October 31, 2013

From November 1, 2013
to April 30, 2014

From May 1, 2014
to October 31, 2014

Balance of reserved funds at
beginning of the period

347

410

375

414

385

Amount reserved during theperiod

197

197

197

197

282

Amount used from reserved
funds during the period

133

232

158

225

181

Balance carried forward to thenext period

410

375

414

385

486

【5】Expenses and Liabilities
1. Details of Expenses Related to Asset Management
Fiscal Period
Item(Million yen)
17th
From May 1, 2014
to October 31, 2014

16th
From November 1, 2013
to April 30, 2014(a) Asset management fees (Note)

354

369

Asset custodian fees andadministrative service fees7578(c) Directors’ compensation

66(d) Audit fees1010(e) Other expenses

38

44

485

508

(b)

Total

Note: In addition to the amounts described above, asset management fees consisted of ¥45 million in 16th fiscal
period in association with the acquisition of new properties recorded as book value of the respective
properties.

222. Status of Borrowings
Status of borrowings from respective financial institutions as of October 31, 2014 is as follows.

LenderDateborrowed

Sumitomo Mitsui Trust Bank
Term Loan
No. 5

Development Bank of Japan

June 29,2007

Current Portion of Long-Term Loans Payable

The Dai-ichi Life Insurance

Term Loan
No. 11Development Bank of Japan

January 13,
2010

Sumitomo Mitsui Trust Bank

Term Loan
No.19-①

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ

Mizuho Bank
Mitsubishi UFJ Trust andBanking Corporation

Term Loan
No.11

Term Loan
No. 14

Long Term Loans Payable

Term Loan
No. 15

November30, 2016(Note 4)(Note 5)

Unsecured
andunguaranteed

-

3,000

-

1,500
0.63

September
30. 2015

Bulletrepayment on
repayment
date(Note 6)

Unsecured
andunguaranteed

0.63

September
30, 2015

Bulletrepayment on
repayment
date(Note 7)

Unsecured
andunguaranteed

2.42

November30, 2016(Note 4)(Note 5)

Unsecured
andunguaranteed

1.39

BulletFebruary 29, repayment on
2016
repayment
date(Note 6)

Unsecured
andunguaranteed

0.71

BulletFebruary 29, repayment on
2016
repayment
date(Note 3)

Unsecured
andunguaranteed

0.53

November30, 2016

Bulletrepayment on
repayment
date(Note 6)

Unsecured
andunguaranteed

0.63

BulletOctober 31, repayment on
2016
repayment
date(Note 5)

Unsecured
andunguaranteed

Bulletrepayment on
repayment(Note 6)

Unsecured
andunguaranteed

-

1,500

-

1,000

-

1,800

6,012

3,841

3,841

3,006

3,006

The Hiroshima Bank

(Note 2)

(Note 2)

3,006

3,006

835

835

1,700

1,700

3,000

3,000

1,000

1,000

The Yamaguchi Bank

1,000

1,000

Sumitomo Mitsui Trust Bank.

6,687

6,687

4,440

4,440

3,474

3,474

3,474

3,474

965

965

1,008

1,008

644

644

504

504

504

504

340

340

5,660

5,660

0.71

4,255

4,255

(Note 8)

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ
Mitsubishi UFJ Trust andBanking Corporation

November30, 2011

Mizuho Bank

Term Loan
No. 18

2.42

6,012

Sumitomo Mitsui Trust Bank

Term Loan
No. 17135

Mizuho Bank

Mizuho Bank.
Term Loan
No. 16135

Sumitomo Mitsui Trust Bank

March 31,2011

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ.
Mitsubishi UFJ Trust andBanking CorporationMarch
30, 2012

Sumitomo Mitsui Trust Bank.

June 29,2012

Mizuho Bank.

Unsecured
andunguaranteed

2.40

1,957

The Bank of Fukuoka(Note 3)-

2,025

Sumitomo Mitsui Trust Bank

Bulletrepayment on
repayment
date

1,000

10,210March 3,2011

June 30,
2014

2.27

2.40

4,135

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ.
Mitsubishi UFJ Trust andBanking Corporation

Remarks-

1,275

January 13,
2010

Use ofproceeds

1,000-

Development Bank of Japan

Repayment
method-March 27,2013

Subtotal

Average interest
rate
Repayment date(%)
(Note 1)

2,000

November30, 2012

Resona Bank

Term Loan
No. 20

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

23

June 30,2017

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ
Mitsubishi UFJ Trust andBanking Corporation

Long Term Loans Payable

Sumitomo Mitsui Trust Bank
Term Loan
No.19-①

Term Loan
No. 20Term Loan
No. 21

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ

November30, 2012

3,330

3,330

925

925

3,000

-

1,500

-

Resona Bank

1,000

-

Sumitomo Mitsui Trust Bank

1,428

1,428

Mizuho Bank

1,264

1,264

989

989

989

989

Development Bank of Japan

2,355

2,355

Mizuho Bank

1,800

-

Mitsubishi UFJ Trust andBanking Corporation

1,275

-

730

730

Sumitomo Mitsui Banking
Corporation
The Bank ofTokyo-Mitsubishi UFJ

Sumitomo Mitsui Trust Bank
Resona Bank

March 27,2013

April 30,
2013

500

500

1,400

1,400

1,400

1,400

1,000

1,000

Aozora Bank

500

500

The Bank of Fukuoka

200

200

Sumitomo Mitsui Trust Bank

-

1,000

Aozora Bank

-

1,000

-

1,000

March 31,2014

Mizuho BankThe Dai-ichi Life Insurance
Sumitomo Mitsui Banking
Corporation

June 30,
2014

400

The Bank of Fukuoka-

300

Mizuho Bank-

300

Subtotal

87,79581,652

Total

91,93091,862

Note2:
Note3:
Note4:
Note5:
Note6:
Note7:
Note8:

0.75

September
30. 2015

March
27, 2018

1.08

Bulletrepayment on
repayment
date(Note 6)

Unsecured
andunguaranteed

Bulletrepayment on
repayment
date(Note 7)

Unsecured
andunguaranteed

0.63

September
30, 2015

0.75

April
30, 2018

Bulletrepayment on
repayment
date(Note 5)

Unsecured
andunguaranteed

0.82

March 29,2019

Bulletrepayment on
repayment
date(Note 3)

Unsecured
andunguaranteed

March 29,2019

Bulletrepayment on
repayment
date(Note 6)

Unsecured
andunguaranteed(Note 2)0.90-

Note1:

date

0.63
-

Sumitomo Mitsui Banking
Corporation

Term Loan
No.23-②

3,330

1,500

Sumitomo Mitsui Trust Bank

Term Loan
No.23-①

3,330

The average interest rate is the interest rate of borrowings for the respective loan contracts (weighted by the balance during theperiod) and rounded to the second decimal place.
The borrowings are hedged by interest rate swap transactions and the average interest rates show the weighted-average interest rates
adjusting the effect of interest rate swap transactions.
The use of borrowings is for repayment of short-term loans payable.
Repayment of ¥67.5 million will be made at the end of June and December each year starting on June 30, 2010, with the remaining
payment of ¥1,822.5 million to be repaid on November 30, 2016, the final repayment date.
The use of borrowings is for acquisition of trust beneficiary interest in real estate.
The use of borrowings is for repayment of long-term loans payable.
The use of borrowings is for repayment of short-term and long-term loans payable.
A portion of borrowing amounting to ¥8,500 million is hedged by interest rate swap transaction and the average interest rate shows
the weighted-average interest rate adjusting the effect of interest rate swap transaction.

3. Status of Investment Corporation Bonds
Investment corporation bond issued and outstanding as of October 31, 2014 is as follows.

Name of Bonds

Issue
Date

Balance as of
the beginningof the 17th
fiscal period(million yen)

Balance as ofthe end of the
17th fiscal
period(million yen)Interest
Rate(%)

Maturity
Date

Redemption
methodUse ofproceeds

No.1
Unsecured
Repayment
June 4,
June 4,
BulletInvestment
8,500
8,500
1.00
of
2010
2015
payment
Corporation
borrowing
Bond (Note)
Total
8,500
8,500
Note: This bond is equipped with special pari passu conditions among the specified investment corporation bonds.

24

RemarkUnsecured
andunguaranteed4. Status of Short-Term Investment Corporation Bonds
There are none applicable.

25

【6】Status of Acquisitions and Dispositions During the Period
1. Acquisitions and Dispositions of Real Estate, etc. and Asset Backed Securities
There are none applicable.
2. Acquisitions and Dispositions of Others Assets
Other major assets besides real estate and asset backed securities stated above consist mostly of bankdeposits or bank deposits within assets held in trust.
3. Research on Prices of Specified Assets(1) Real estate, etc.
There are none applicable.
(2) Others
There are none applicable.

26

4. Transaction with Interested Parties, etc.
(1) Status of Transaction
There are none applicable during the17th fiscal period.
(2) Amounts of Fees Paid, etc.
Fees paid to interested parties, etc. during the 17th Fiscal Period are as follows.
Item

Transactions with interested parties, etc.
and major unitholders

Total amount offees paid (A)(thousand yen)

Property management fees

Paid toRatio
against total
amount
B/A(%)

Amount ofpayment (B)(thousand yen)

Oji Real Estate

32,971

7.6

Sumitomo Mitsui Trust Bank

1,250

0.3

436,231

Trust compensation

19,875

Sumitomo Mitsui Trust Bank

17,375

87.4

Asset custodian fees

9,009

Sumitomo Mitsui Trust Bank

9,009

100.0

Administrative service fees

69,085

Sumitomo Mitsui Trust Bank

69,085100.0

Sumitomo Mitsui Trust Bank

962

7.6

Other fees paid

12,743
9

0.1

Oji Real Estate
Borrowing related expenses

154,614

Sumitomo Mitsui Trust Bank

65,180

42.2

6,678

Sumitomo Mitsui Trust Bank

100

1.5

5,576

Sumitomo Mitsui Trust Bank

625

11.2

2,073

Sumitomo Mitsui Trust Bank

342

16.5

Investment unit issuance related
expenses
Investment corporation bondrelated expenses
Other non-operating expenses

Other expenses related to5,700 Oji Real Estate488
8.6
rent business
Note 1: Interested parties, etc. means interested parties, etc. of the asset manager which concluded asset management
entrustment contract with Top REIT as prescribed in Article 123 of the Enforcement Order of the Investment Trust andInvestment Corporations Law. However, the table above also includes transactions with interested parties as provided
in the internal rules of the asset manager (including special purpose companies, etc. to which interested parties, etc.
have been entrusted with asset management). Please note that the parties to which payments were made during thecurrent period were Oji Real Estate and Sumitomo Mitsui Trust Bank.
Note 2: In addition to the fees paid described above, the amounts paid for repair and maintenance work placed with interested
parties, etc. during the 17th fiscal period are Oji Real Estate of ¥28,357 thousand. Furthermore, the concerned
payments include construction management fees.

5. Status of Transactions with the Asset Manager Regarding Additional Work Conducted
Top REIT Asset Management Co., Ltd., the asset management company of Top REIT, does notconcurrently conduct any type 1 financial instruments business, type 2 financial instruments business,building lots and buildings transaction business, or real estate specified joint enterprise business, and has
no such transactions with Top REIT.

【7】Overview of Accounting
1. Assets, Liabilities, Principal and Profit / Loss
Please refer to accompanying “Ⅱ.Balance Sheets”, “Ⅲ.Statements of Income”, “Ⅳ.Statements of
Changes in Net assets (Unitholders’ Equity)”, “Ⅴ.Notes to Financial Statements” and “Ⅵ.Statementsof Cash Dividend Distributions”.
2. Change in Depreciation Method
There are none applicable.
3. Change in Valuation Methods of Real Estate, etc.
There are none applicable.
4. Status of Investment Trust Beneficiary Certificates of Top REIT, etc.
There are none applicable.
27

【8】Others
1. Notice
Board of Directors
There is no execution or modification of major contracts approved by the board of directors of Top
REIT during the 17th Fiscal Period.
2. Others
Unless otherwise stated, fractions less than the specified unit are rounded down to the nearest
specified unit for monetary amounts and rounded to the nearest specified unit for percentage figures.

28

II. Balance Sheets(Unit: thousand yen)
Seventeenth Fiscal Period

Sixteenth Fiscal Period(Reference)(as of April 30, 2014)
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Consumption taxes receivable
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment
Intangible assets
Leasehold right in trust
Other intangible assets in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Other
Total investments and other assets
Total noncurrent assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance expenses
Total deferred assets
Total assets

29(as of October 31, 2014)

3,049,986
4,273,472
193,414353,139
16
137,402
1,830
8,009,261

4,427,277
3,926,308
219,407
360,75417－
08,933,766

1,153,573(225,614)
927,958
5,559(3,388)2,170
20,309(11,988)
8,320
5,717
(2,137)
3,579
4,888,525
66,712,538(16,038,443)
50,674,094
801,903(317,387)
484,516
307,426(156,723)
150,702
273,432(156,700)
116,731
134,748,836
192,005,437

1,158,083(241,752)
916,330
5,559(3,469)2,089
20,309(12,582)
7,726
6,609
(2,562)
4,047
4,888,525
66,838,553(17,163,781)
49,674,771
802,038(335,874)
466,164
312,926(182,083)
130,843
279,398(172,805)
106,593
134,748,836
190,945,929

7,348
2,198
63
9,610

7,348
1,924
42
9,315

10,000492,375
229,164
731,540
192,746,588

10,000372,029
246,400
628,429
191,583,674

12,86133,393
46,254200,802,104

7,349
26,71434,063
200,551,504

Sixteenth Fiscal Period(Reference)(as of April 30, 2014)(Unit: thousand yen)
Seventeenth Fiscal Period(as of October 31, 2014)

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

296,523－
4,135,000
252,726
131,332853－
795,670
9,937
5,622,044

186,273
8,500,000
10,210,000
256,812110,509670
223,962
801,889
5,899
20,296,018

Noncurrent liabilities
Investment corporation bondLong-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Deferred tax liabilities
Long-term advances received
Derivatives liabilities
Total noncurrent liabilities

8,500,000
87,795,000
101,016
5,649,955
13,79979
38,429－81,652,500
127,4295,298,658
11,76435
44,377102,098,279
107,720,324

87,134,766
107,430,784

91,143,100

91,143,100

49,95849,95851,87351,873

1,913,997
1,963,956

1,954,943
2,006,816

93,107,056

93,149,916(25,275)(29,195)

Total valuation and translation adjustments
Total net assets(25,275)
93,081,780(29,195)
93,120,720

Total liabilities and net assets

200,802,104

200,551,504

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total Voluntary retained earnings
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges

30III. Statements of Income
Sixteenth Fiscal Period(Reference)(From November 1, 2013
to April 30, 2014)
Operating revenue
Rent revenue – real estate
Other lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee
Administrative service fees
Directors’ compensations
Audit fee
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Reversal of dividends payable
Insurance income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Borrowing related expenses
Amortization of investment unit issuance expenses
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

31(Unit: thousand yen)
Seventeenth Fiscal Period(From May 1, 2014
to October 31, 2014)

5,590,221
47,135
5,637,356

5,762,641
29,981
5,792,623

2,622,805
354,776
8,898
66,861
6,300
10,00038,9293,108,571
2,528,785

2,721,218
369,341
9,009
69,0856,300
10,00044,4603,229,416
2,563,206

675
1,023
191
－
1,891

1,579
563
3,979
820
6,942

408,933
42,0345,511
150,072
6,678
4,415
617,646
1,913,029
1,913,029
957(1,913)(955)
1,913,985
12
1,913,997

402,362
42,965
5,511
154,6146,678
2,137
614,271
1,955,878
1,955,878
963
(9)
954
1,954,924
19
1,954,943

IV. Statements of Changes in Net Assets (Unitholders’ Equity)
For the period from November 1, 2013 to April 30, 2014 (16th fiscal period)(Unit: thousand yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges of items
during the period
Issuance of new
investment units
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

82,260,100

Voluntary retained earnings
Total
Reserve for
Voluntary
reduction entry
retainedearnings
49,95849,958

Total surplus

Totalunitholders’equity1,579,617

1,629,576

83,889,676

8,883,000

8,883,000(1,579,605)(1,579,605)(1,579,605)

1,913,985

1,913,985

1,913,985

8,883,000－－

334,380

334,380

9,217,380

91,143,100

49,95849,958

1,913,997

1,963,956

93,107,056

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges of items
during the period
Issuance of new
investment units
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

Unappropriatedretainedearnings(undisposed
loss)

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets(18,376)(18,376)

83,871,299

8,883,000(1,579,605)
1,913,985(6,899)(6,899)(6,899)(6,899)(6,899)9,210,480(25,275)(25,275)

93,081,780

32

For the period from May 1, 2014 to October 31, 2014 (17th fiscal period)(Unit: thousand yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance at the
beginning of theperiodChanges of items
during the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

91,143,100

Voluntary retained earnings
Total
Reserve for
Voluntary
reduction entry
retainedearnings

Total surplus

Totalunitholders’equity49,95849,958

1,913,997

1,963,956

93,107,056

1,914

1,914

(1,914)－－(1,912,064)(1,912,064)(1,912,064)

1,954,924

1,954,924

1,954,924

－

1,914

1,914

40,94542,86042,86091,143,100

51,87351,873

1,954,943

2,006,816

93,149,916

Valuation and translation
adjustments

Balance at the
beginning of theperiodChanges of items
during the period
Reserve for
reduction entry
Dividends fromsurplus
Net income
Net changes of
items other thanunitholders’equity (net)Total changes of
items during theperiodBalance at the endof current period

Unappropriatedretainedearnings(undisposed
loss)

Deferred gains
or losses onhedgesTotal valuationand translation
adjustments

Total net assets(25,275)(25,275)

93,081,780－(1,912,064)
1,954,924(3,920)(3,920)(3,920)(3,920)(3,920)38,940(29,195)(29,195)

93,120,720

33

V. Notes to Financial Statements
Note 1. Premise of the Going Concern
Sixteenth Fiscal Period (Reference)
For the period from November 1, 2013
to April 30, 2014

Seventeenth Fiscal Period
For the period from May 1, 2014
to October 31, 2014

There are none applicable.

There are none applicable.

Note 2. Significant Accounting Policies

Classification

1.

Method ofDepreciation andAmortization of
Property, etc.

Sixteenth Fiscal Period (Reference)

Seventeenth Fiscal Period

For the period
from November 1, 2013
to April 30, 2014

For the period
from May 1, 2014
to October 31, 2014

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

Treatment
Method ofDiffered Assets

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

Building
Structures
Machinery and equipment
Tools, furniture and fixtures(2) Intangible Assets
Adopts the straight-line method.

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

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

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

2~59 years
2~54 years
2~15 years
2~12 years(1) Investment Corporation Bonds Issuance Costs(1) Investment Corporation Bonds Issuance Costs
Amortized on the straight-line method over the
Amortized on the straight-line method over thematurity period of the bonds.
maturity period of the bonds.
(2) Investment Unit Issuance Expenses(2) Investment Unit Issuance Expenses
Amortized on the straight-line method over three
Amortized on the straight-line method over three
years.
years.

3.

Standard for
Posting ofIncome andExpenses

Method of treatment concerning Taxes on Property Method of treatment concerning Taxes on Property
and Equipment
and Equipment
Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 16th fiscal period, theamount equivalent to the property taxes includedin the acquisition costs of real estate totaled 9,946
thousand yen for Shinjuku EAST Building, Ginza
Oji Building and Kojima × Bic Camera Kashiwa
Store.

34

Top REIT adopts the method of treating property
taxes, city planning taxes and depreciable asset
taxes, etc. on owned real estate, etc, as expenses
related to the rent business in the amountcorresponding to the management period out of
the assessed and determined taxation amount.
In addition, as for the acquisition of real estate or
beneficiary interests in trust in real estate, theadjustments equivalent to property tax for theacquired fiscal year paid to the transferor will be
included in acquisition costs, and thus will not berecorded as expenses in the corresponding period.
Furthermore, during the 17th fiscal period, there
was no amount equivalent to the property taxes
included in the acquisition costs of real estate.

4.

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

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

5.

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

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

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

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

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

1.Cash and Deposits in trust
2.Building in trust, Structures in trust, machineryand equipment in trust, Tools, furniture andfixtures in trust, other properties in trust, landin trust, other intangible assets in trust
3.Land leasehold right in trust
4.Lease and guarantee deposits in trust
5.Tenant leasehold and security deposits in trust

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

35(2) Accounting Treatment Method of Consumption
Taxes
National and local consumption taxes areaccounted with the consumption taxes excluded.
Furthermore, consumption taxes related toacquisition of properties, which has not been
deducted, is included in the acquisition costs of
the respective properties.

Note 3. Balance Sheet
Sixteenth Fiscal Period (Reference)

Seventeenth Fiscal Period

As of April 30, 2014

As of October 31, 2014

1. Asset Pledged as Collateral and Secured Liabilities

1. Asset Pledged as Collateral and Secured Liabilities

Assets pledged as collateral are as follows.

Assets pledged as collateral are as follows.

(Thousand yen)
2,266,146
73,0908,892,092
11,231,329

Building in trust
Structures in trust
Land in trust
Total(Thousand yen)
2,215,760
70,431
8,892,092
11,178,283

Building in trust
Structures in trust
Land in trust
Total

Secured liabilities are as follows.

Secured liabilities are as follows.
(Thousand yen)

Tenant leasehold and security
deposits in trust
Total(Thousand yen)
Tenant leasehold and security
deposits in trust
Total

326,648
326,648

326,648
326,648

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

50,000 thousand yen

Note 4. Statement of Income and Retained Earnings(Thousand yen)

Sixteenth Fiscal Period(Reference)

Seventeenth Fiscal Period

For the period
From November 1, 2013
to April 30, 2014

For the period
From May 1, 2014
to October 31, 2014

A. Revenue related to rent business
Rental and parking revenue

5,255,447

5,407,387

Other lease revenue

334,773355,253

Other lease business revenue

43,291

23,242

Cancellation penalty received

3,843

6,739

5,637,356

5,792,623

Property management costs and fees

452,977

436,231

Utilities expenses

248,305

297,115

Property-related taxes and dues

580,275

638,223

Non-life insurance expenses

10,751

11,115

Repair expenses

99,54594,085

1,193,406

1,202,801

37,542

41,6452,622,805

2,721,218

3,014,550

3,071,404

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

Depreciation and amortization
Other
Total expenses related to rent business
C. Revenue and expenses of real estate rent business(A − B)36

Note 5. Unitholders’ Equity

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

Sixteenth Fiscal Period(Reference)

Seventeenth Fiscal Period

For the period
From November 1, 2013
to April 30, 2014

For the period
From May 1, 2014
to October 31, 2014

2,000,000 units

2,000,000 units

176,000 units

176,000 units

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

Sixteenth Fiscal Period(Reference)

Seventeenth Fiscal Period

For the period
From November 1, 2013
to April 30, 2014

For the period
From May 1, 2014
to October 31, 2014

Current assets
Income taxes – current payable16

17

13,114

15,14013,13015,158

Noncurrent assets
Deferred gains or losses on hedges
Total deferred tax assets(Deferred Tax Liabilities)(Thousand yen)

Sixteenth Fiscal Period(Reference)

Seventeenth Fiscal Period

For the period
From November 1, 2013
to April 30, 2014

For the period
From May 1, 2014
to October 31, 2014

Noncurrent liabilities
Reserve for reduction entry

26,913

26,905

Total deferred tax liabilities

26,913

26,905

13,783

11,747(Net deferred tax liabilities)

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

Effective statutory tax rate

Sixteenth Fiscal Period(Reference)

Seventeenth Fiscal Period

For the period
From November 1, 2013
to April 30, 2014

For the period
From May 1, 2014
to October 31, 201436.59%

34.16%

Deductible cash distributions(36.57%)(34.14%)

Other(0.07%)

0.03%(0.05%)

0.05%(Adjustment)

Effective tax rate after applying tax effect accounting

37

3. Correction of amount of deferred tax assets and deferred tax liabilities due to the change in tax rate of corporatetax, etc.
With the Local Corporation Tax Act (Act No. 11 of 2014) and the Act on Partial Amendment of the Local Tax Law,etc. (Act No. 4 of 2014) being promulgated on March 31, 2014, the local corporation tax has been established and therate of corporate inhabitant tax, corporate enterprise tax and special local corporation tax have been changed fromoperating periods that start on October 1, 2014 or after. As a result, the effective statutory tax rate used to calculate
the deferred tax assets and deferred tax liabilities for the 17th fiscal period have been changed from 34.16% for the
16th fiscal period to 34.15% concerning temporary differences expected to be reversed during the operating periods
which start on November 1, 2014. Furthermore, the impact from the changed tax rate is minimal.

Note 7. Leases
There are none applicable.

Note 8. Financial Instruments
Information on financial instruments for the periods ended April 30, 2014 and October 31, 2014 required
pursuant to the revised accounting standards are as follows:
1. Matters Concerning Status of Financial Instruments(1) Policy for financial instruments
Top REIT procures necessary funds through bank loans, issuance of investment corporation bonds andissuance of investment units, with the aim of contributing to steady growth of assets managed and stableearnings from a mid-and long-term view in accordance with the financial policy stated by the asset manager.
Although management of surplus funds by using financial instruments targeting securities, monetary claims,
etc. in accordance with the investment limitations stipulated in the Articles of Incorporation, as a general rule,the surplus funds are managed by placing them in deposit.
Furthermore, derivative transactions shall be limited to those for the purpose of hedging interest rate
fluctuation risk and other risks in accordance with the investment limitations.
(2) Financial Instruments, Their Risks and Risk Management System
Top REIT and Top REIT Asset Management, Co., Ltd. (TRAM), the asset management company of Top REIT,
strive for advancing risk management through regular inspection of the adequacy and effectiveness of risk
management systems. Top REIT and TRAM adopt the structure that inspects various risks regularly andreflects the results of inspection on the risk management plan and the management plans. In addition, Top
REIT and TRAM inspect risks and reflect the results of inspection in the decision-making in a timely manner
through various transactions.
Top REIT and TRAM strive for risk management based on the incorporation rules of the asset manager
concerning individual financial instruments and their risks, and risk management system.
①

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

②

Market risk concerning loans
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties
and refinance existing loans and bonds.
Loans, especially floating-rate borrowings, are exposed to market risks, Top REIT manages to hedge
against interest-raising risk by fixed-rate interests entered into interest swap transactions and setting thetarget of fixed- rate interest ratios. In addition, when procuring new loans and refinancing, Top REIT
inspects interest-raising risks and studies borrowing methods that minimize risks. For the hedging
instruments and hedged items, hedging policy, method for assessing the effectiveness of hedging, etc. inhedge accounting, please refer to “4. Methods of Hedge Accounting” under “Note 2. Significant
Accounting Policies” above.

38

③

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

(3) Supplemental Explanation About the Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is noquoted market price available, fair value is reasonably estimated. Certain assumptions are used for theestimation of fair value. Accordingly, the result of such estimation may change if different assumptions areused. Furthermore, the contractual amounts of derivative transactions stated in “2. Matters Concerning
Estimated Fair Value, etc. of Financial Instruments” below do not represent the market risk involved in thesederivative transactions.
2. Matters Concerning Estimated Fair Value, etc. of Financial Instruments
For the period from November 1, 2013 to April 30, 2014 (16th Fiscal Period) (Reference)
The following table includes the book value, fair value and valuation difference of financial instruments as ofApril 30, 2014. The financial instruments that are recognized to be extremely difficult to estimate the fair value
are not included in the table. (Please refer to Note 2).
(Thousand yen)

As of April 30,2014
Book value

Fair value

Difference(1)

Cash and deposits

3,049,986

3,049,986－(2)

Cash and deposits in trust

4,273,472

4,273,472－

Total assets
Current portion of
long-term loans payable
Investment corporationbondLong-term loans payable
Tenant leasehold andsecurity deposits in trust

7,323,458

7,323,458－

4,135,000

4,171,218

36,2188,500,000

8,555,165

55,16587,795,000

88,004,624

209,624

1,118,943

1,118,943－

101,548,943

101,849,951

301,007

Applied hedge accounting(38,429)(38,429)－

Total derivative transactions(38,429)(38,429)

－

(3)
(4)
(5)
(6)

Total liabilities
Derivative transactions (*1)(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.

39For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting
he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.
Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is referential figure disclosedby the financial data provider.

(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Contract amount
Hedge
Type of
Fair
Method of calculating
accounting
derivative
Hedge item
More thanvalue
the fair value
methodtransactions
one yearCalculated on value
Principal Interest rate swap Long-term
treatment
loans
8,500,000 8,500,000 (38,429) provided by
Pay fixed /counterparty financial
methodpayablereceive floating
institution
SpecialInterest rate swap Long-term
treatment ofloans
23,200,000 21,200,000(*2)―
Pay fixed /interest-ratepayablereceivefloating
swaps(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*3)
4,531,011
Total
4,531,011(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period

Cash and deposits
Cash and deposits in trust
Total(Thousand yen)
Due within one year
3,049,986
4,273,472
7,323,458

40

(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two tothree tofour to five
one yearfive years
years
three years
four yeas
years
Investment
corporation
bonds

－

8,500,000

－

－

－

－

Long-term
loans
payable4,135,000

33,610,000

23,930,000

25,755,000

4,500,000

－

Total

4,135,000

42,110,000

23,930,000

25,755,000

4,500,000－

For the period from May 1, 2014 to October 31, 2014 (17th Fiscal Period)
The following table includes the book value, fair value and valuation difference of financial instruments as of
October 31, 2014. The financial instruments that are recognized to be extremely difficult to estimate the fairvalue are not included in the table. (Please refer to Note 2).
(Thousand yen)
As of October 31, 2014
Book value

Fair value

Difference(1)

Cash and deposits

4,427,277

4,427,277－(2)

Cash and deposits in trust

3,926,308

3,926,308－

Total assets
Current portion of investment
corporation bondCurrent portion of long-term loans
payableLong-term loans payable
Tenant leasehold and security
deposits in trust

8,353,586

8,353,586－

8,500,000

8,531,025

31,025

10,210,000

10,211,606

1,606

81,652,500

81,874,568

222,068

1,198,333

1,198,333－

101,560,833

101,815,533

254,700(44,377)(44,377)－(44,377)(44,377)

－

(3)
(4)
(5)
(6)

Total liabilities
Derivative transactions (*1)
Applied hedge accounting
Total derivative transactions(*1): The value of assets and liabilities arising from derivative transactions is shown in net value, with amount inparentheses representing the net liability position.

(Note1) Methods for calculating the fair value of financial instruments and matters related to derivativetransactions
Assets(1) Cash and deposits, and(2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Liabilities(3) Current portion of long-term loans payable, and(5) Long-term loans payable
For long-term loans payable with floating interest rates, the fair value would be almost equal to thebook value because such loans reflect the market interest rate in a short-term period and thus are
based on the concerned book value.
For fixed-rate long-term loans payable, the fair value is the present value calculated by discounting
he sum total amount of its principal and interest payment on a rate reasonably estimated to be
applicable to similar long-term loans.

41Furthermore, the fair value of long-term loans payable that qualifies for the special treatment ofinterest-rate swap (refer to Derivative Transactions below) is the present value calculated by thediscounted sum total of its principal and interest payments net calculated from the interest-rate
swap on a rate reasonably estimated to be applicable to similar fixed-rate long-term loans.
(4) Investment corporation bonds
The fair value of investment corporation bonds issued by Top REIT is referential figure disclosedby the financial data provider.
(6) Tenant leasehold and security deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as thebook value and is thus stated at that book value.
Derivative Transactions
Hedge accounting applied
The following are the contract values or values corresponding to the principal amounts as stipulated
by contracts for derivative transactions as of date of settlement for each hedge accounting method
applied.
(Thousand yen)Contract amount
Hedge
Type of
Fair
Method of calculating
accounting
derivative
Hedge item
More thanvalue
the fair value
methodtransactions
one yearCalculated on value
Principal Interest rate swap Long-term
Pay fixed /treatment
loans
8,500,000 8,500,000 (44,377) provided bycounterparty financial
methodpayablereceive floating
institution
SpecialInterest rate swap Long-term
treatment of
Pay fixed /loansinterest-rate receive floating
payableswaps

21,200,000 21,200,000

(*2)

―

(*2) Since the derivative transactions accounted by special treatment of interest-rate swaps are treated as one transaction
together with long-term loans payable which is the hedged item, the fair value is included in the fair value of the said
long-term loans payable (refer to Note 1(5)).

(Note 2) Financial instruments which are recognized to be extremely difficult to estimate the fair value of are as
follows(Thousand yen)
Item
Carrying value
Tenant leasehold and security deposits in trust (*3)
4,100,325
Total
4,100,325(*3) Tenant leasehold and security deposits in trust which excluded the above (6) are not subject to fair value disclosure
because arriving at the fair value is extremely difficult due to the fact that the contract termination period, which is therepayment date, is difficult to reasonably estimate as leases may be cancelled, renewed or re-signed even if a lease term
is set in the lease contract, making a reasonable estimate of future cash flows difficult.

(Note 3) Redemption Schedule amount for Monetary Claims after the end of the period

Cash and deposits
Cash and deposits in trust
Total(Thousand yen)
Due within one year
4,427,277
3,926,308
8,353,586

42

(Note 4) Repayment Schedule amount for Investment Corporation Bonds and Long-Term Loans Payable after
the end of the period(Thousand yen)
Due after
Due after
Due after
Due after
Due within
Due after
one to two
two tothree tofour to five
one yearfive years
years
three years
four yeas
years
Investment
corporation
bonds

8,500,000

－

－

－

－

－

Long-term
loans
payable10,210,000

26,535,000

38,362,500

8,255,000

8,500,000

－

Total

18,710,000

26,535,000

38,362,500

8,255,000

8,500,000－

Note 9. Investment and Rental Properties
Top REIT owns in the portfolio certain office buildings (including land), etc. located in Tokyo and other areas
which are for lease.
The following table is the amount posted on the balance sheet, amounts of increase (decrease) during the period andfair value of these investment and rental properties as of the balance sheet date.

For the period from November 1, 2013 to April 30, 2014 (16th Fiscal Period) (Reference)(Thousand yen)Book value
Balance at the beginningof the period
180,064,553

Change during the period
11,950,431

Balance at the end of
the period
192,014,984

Fair value at end of theperiod179,800,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable acquisition of Shinjuku EAST Building(5,889,285 thousand yen), Ginza Oji
Building (2,085,743 thousand yen), and Kojima × Bic Camera Kashiwa Store(4,657,682 thousand yen), anddecrease is mainly due to the depreciation and amortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser.

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended April 30, 2014 ispresented in “Note 4. Statement of Income and Retained Earnings.”

For the period from May 1, 2014 to October 31, 2014 (17th Fiscal Period)(Thousand yen)Book value
Balance at the
beginning of the period
192,014,984

Change during the period(1,059,782)

Balance at the end of
the period
190,955,201

Fair value at end of theperiod181,500,000(Note 1) Summary of corresponding investment and rental properties are presented in “3-Status of Investment Assets.”(Note 2) Book value represents the acquisition cost less accumulated depreciation and amortization.
(Note 3) Of the amounts of increase (decrease) during the current period for investment and rental properties, the amount of
increase is primarily attributable to capital expenditures, and decrease is mainly due to the depreciation andamortization.
(Note 4) Fair value at the end of the period is the appraisal value as appraised by an outside real estate appraiser. Meanwhile,
fair value of Kanda Park Plaza and OAK PLAZA are calculated based on the disposition prices dated November 13,
2014. (Kanda Park Plaza: 5,350,000 thousand yen, OAK PLAZA: 2,900,000 thousand yen)

Furthermore, loss and profit concerning investment and rental properties for fiscal period ended October 31, 2014 ispresented in “Note 4. Statement of Income and Retained Earnings.”

43

Note 10. Transactions with Interested Parties
For the period from November 1, 2013 to April 30, 2014 (16th Fiscal Period) (Reference)

Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank Ltd.

Business
description
oroccupation

Banking

Ratio ofinvestment
units heldamong total
number ofinvestment
units(Note 1)27.33%(Note3)

Type oftransaction

Rent revenue, etc(Note4)
Administrative
service fee
Brokerage fee

Interested
Party and
Assetscustodian

Sumitomo
Mitsui
Trust
Bank,
Limited.

Banking

1.80%

Trust fee
Other fees paid
Property
management
expensesOther
non-operating
expenses
Borrowing
related expenses
Investment unit
issuance related
expenses
Investment
corporation bondrelated expenses

Amount oftransaction(thousand yen)
(Note 2)Item in balance
sheetsOperatingaccounts
532,353 receivable
Advances
received
Accounts
66,861 payable-other
185,000
17,267
Operating
1,024 accounts payable

Balance atperiod end(thousand yen)
(Note 2)

6,239
70,20561,068－1,250
Long-term
342 prepaid expenses
Prepaid expenses
Long-term
64,928 prepaid expenses
Prepaid expenses
Investment unit
100 issuance
expenses
Accounts
payable-other
Investment
623 corporation bondissuance
expenses

420
720
178,475
106,908
500
55
1,308

(Note 1) Ratio of investment units held is rounded down to the second decimal place.
(Note 2) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs. Furthermore, transaction
terms are determined based on prevailing market conditions.
(Note 3) The described above ratio was held to trust accounts. The ratio is rounded down to the second decimal place.
(Note 4) The described above rent revenues, etc. include rents and common service revenue as well as related utilities revenue,
additional facilities use revenue and parking revenue.

44

For the period from May 1, 2014 to October 31, 2014 (17th Fiscal Period)

Attribution

Company
nameInterested
Party

Japan
Trustee
Services
Bank Ltd.

Business
description
oroccupation

Banking

Ratio ofinvestment
units heldamong total
number ofinvestment
units(Note 1)23.35%(Note 3)

Type oftransaction

Rent revenue, etc(Note 4)
Administrative
service fee
Trust fee
Other fees paid
Property
management
expensesOther
non-operating
expenses

Amount oftransaction(thousand yen)
(Note 2)Item in balance
sheetsOperatingaccounts
503,416 receivable
Advances
received
Accounts
69,085 payable-other
17,375962 Operating
accounts payable
1,250

Balance atperiod end(thousand yen)
(Note 2)

6,454
70,20563,223－Long-term
60
prepaid expenses
342
Interested Sumitomo
Prepaid
expenses
720
Party and MitsuiLong-term
Trust
Banking
1.80%
Assets133,377
Borrowing
65,180 prepaid expenses
custodian Bank,
related expenses
Limited.
Prepaid expenses
108,516
Investment unit
Investment unit
issuance related
100 issuance
400
expenses
expenses
Accounts
56
payable-other
Investment
Investment
corporation bond
625 corporation bondrelated expenses
747
issuance
expenses(Note 1) Ratio of investment units held is rounded down to the second decimal place.
(Note 2) Consumption tax, etc. are excluded from the amounts of transactions. Consumption tax, etc. are included in thebalances at end period, but excluded only for investment corporation bond issuance costs. Furthermore, transaction
terms are determined based on prevailing market conditions.
(Note 3) The described above ratio was held to trust accounts. The ratio is rounded down to the second decimal place.
(Note 4) The described above rent revenues, etc. include rents and common service revenue as well as related utilities
revenue, additional facilities use revenue and parking revenue.

45

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

Seventeenth Fiscal Period

For the period
from November 1, 2013
to April 30, 2014

For the period
from May 1, 2014
to October 31, 2014

Net Assets per Unit

528,873yen

Net Assets per Unit

529,095yen

Net Income per Unit

11,056yen

Net Income per Unit

11,107yen

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

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

(Note 1) The per unit amounts are rounded down to the nearest yen.
(Note 2) Net income per unit is calculated by dividing the net income by the weighted average number of investment units overthe number of days in the period.
(Note 3) The basis for the calculation of net income per unit is as follows:
sixteenth Fiscal Period (Reference)

Seventeenth Fiscal Period

For the period
from November 1, 2013
to April 30, 2014

For the period
from May 1, 2014
to October 31, 2014

Net Income (thousand yen)

1,913,985

1,954,924

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

Net income attributable to ordinary investment
unit (thousand yen)

1,913,985

1,954,924

Weighted-average number of units during theperiod (unit)

173,116

176,00046

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

Seventeenth Fiscal Period

For the period
from November 1, 2013
to April 30, 2014

For the period
from May 1, 2014
to October 31, 2014

There are none applicable.

<Disposition of Properties>
Top REIT disposed of two properties on November 13,
2014 as described below.
Kanda Park Plaza(1) Property Type: Trust beneficiary interest in real estate in Japan(2) Name of Property: Kanda Park Plaza(3) Address (Residential building address):
2-2-2 Kajicho, Chiyoda-ku, Tokyo(4) Disposition Price: 5,350 million yen(5) Book Value: 5,052 million yen (as of October 31, 2014)(6) Gains on disposal: Approx. 109 million yen(7) Sales Agreement date: November 12, 2014
(8) Disposition Date: November 13, 2014(9) Purchaser: Undisclosed

OAK PLAZA(1) Property Type: Trust beneficiary interest in real estate in Japan(2) Name of Property: OAK PLAZA(3) Address (Residential building address):
2-10-6 Kanda Awajicho, Chiyoda-ku, Tokyo(4) Disposition Price: 2,900 million yen(5) Book Value: 2,686 million yen (as of October 31, 2014)(6) Gains on disposal: Approx. 191 million yen(7) Sales Agreement date: November 12, 2014
(8) Disposition Date: November 13, 2014(9) Purchaser: NIPPON STEEL KOWA REAL ESTATE CO., LTD.

47

VI. Statements of Cash Dividend Distributions

Classification

I. Unappropriated retained earnings
II. Total Amount of Dividends(Dividend per unit)
III. Voluntary retained earnings

Sixteenth Fiscal Period (Reference)
For the period
from November 1, 2013
to April 30, 2014

Seventeenth Fiscal Period
For the period
from May 1, 2014
to October 31, 2014

Amount(yen) (Note 1)

Amount(yen) (Note 2)

1,913,997,778
1,912,064,000[10,864]

1,954,943,312
1,954,832,000[11,107]

1,914,510
19,268

7,879
103,433

Reserve for reduction entry

IV. Retained earnings brought forward

Note1: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation.” Based on these policies, Top REIT decided on a total distribution of 1,912,064,000 yen as
distribution of income for the period. This is the maximum value arrived at when the number of units issued and outstanding(176,000 units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings of thesixteenth fiscal period and after deducting the amount of deferred tax liabilities being corrected due to the change in tax rate
which would be transferred to the reserve for reduction entry.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the Articles
of Incorporation.
Note2: In accordance with the “cash distribution policy” stipulated in Article 34 of the Articles of Incorporation, the amounts ofdividends are limited to the amounts of income. The article also stipulates the policy that “Top REIT shall distribute amountin excess of the amount equivalent to 90% of its distributable profits as stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation.” Based on these policies, Top REIT decided on a total distribution of 1,954,832,000 yen as
distribution of income for the period. This is the maximum value arrived at when the number of units issued and outstanding(176,000 units) is multiplied by an integer, within the limit of the balance of unappropriated retained earnings of thesixteenth fiscal period and after deducting the amount of deferred tax liabilities being corrected due to the change in tax rate
which would be transferred to the reserve for reduction entry.
Furthermore, Top REIT does not make cash distributions in excess of the profit as stipulated in Article 34-2 of the Articles
of Incorporation.

Disclaimer:
The accompanying English financial information, comprising of balance sheets, statements of retained
earnings, statements of changes in unitholders’ capital, notes to financial information and statements of cash
dividends, have been translated from the Japanese financial statements of Top REIT prepared in accordancewith the Act on Investment Trusts and Investment Corporations.
Under Article 130 of the Act on Investment Trusts and Investment Corporations, the Japanesefinancial statements for the fiscal period ended October 31, 2014 have been audited by KPMG AZSA LLC, in
accordance with auditing standards generally accepted in Japan. However, this English translation of theJapanese language report of independent auditors is not attached herein because the accompanying English
translation of balance sheets, statements of retained earnings, statements of changes in unitholders’ capital,
notes to financial information and statements of cash dividends are unaudited.

48

VII. Statements of Cash Flows (Reference Information)(Unit: thousand yen)
Sixteenth Fiscal Period(From November 1, 2013 –to April 30, 2014)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of trademark
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance expenses
Interest income and interest on securities
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) of consumption taxes receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
Subtotal

Seventeenth Fiscal Period(From May 1, 2014 –to October 31, 2014)

1,913,029
1,193,406
21
5,511
6,678
(675)
450,967(90,159)(137,402)(24,002)
15,641
13,142(61,670)
89,82870,327(17,394)
3,427,250

1,955,878
1,202,801
21
5,511
6,678
(1,579)445,328(25,992)
137,402(7,615)
15,974
4,086
223,962
6,218
120,345(29,376)
4,059,646

675(450,954)
(963)

1,579
(466,150)(1,145)2,976,008

3,593,929(2,951)(12,961,001)(8,450)－1,098,156(321,616)(3,587)(255,766)－
26,413
160,435(511,732)(12,195,863)(584,237)

4,500,000(4,500,000)
4,500,000(67,500)
8,883,000(35,317)(1,579,605)
11,700,577－－
4,000,000(4,067,500)－－(1,912,064)(1,979,564)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period

2,480,722
4,842,736

1,030,128
7,323,458

Cash and cash equivalents at end of period

7,323,458

8,353,586

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Purchase of property, intangible assets in trust
Proceeds from tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of investment units
Payments for investment unit issuance expenses
Dividends paid
Net cash provided by (used in) financing activities

49

Note Concerning Significant Accounting Policy [Reference Information]

Classification

Scope offunds instatementsof cash flows

Sixteenth Fiscal Period
For the period
from November 1, 2013
to April 30, 2014
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

Seventeenth Fiscal Period
For the period
from May 1, 2014
to October 31, 2014
Funds (cash and cash equivalents) in statements ofcash flows consist of cash on hand and cash in trust,deposits placed with banks and deposits in trust thatcan be withdrawn at any time, and short-term
investments that are highly liquid and easily
convertible to cash, have a low risk of pricefluctuation and mature within three months from thedate of purchase.

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

Sixteenth Fiscal Period
For the period
from November 1, 2013
to April 30, 2014
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets*1.

(as of April 30, 2014)(Unit: thousand yen)
3,049,986
4,273,472
7,323,458

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

Seventeenth Fiscal Period
For the period
from May 1, 2014
to October 31, 2014
Reconciliation of cash and cash equivalents at end of
period and amount of items presented in balance
sheets(as of October 31, 2014)(Unit: thousand yen)
4,427,277
3,926,308
8,353,586

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

Stock and Unitholders Information
TOP REIT Trading Volume（yen）

TSE REIT Index

TOPIX

TOP REIT（unit）

1,000,000

10,00017th FP

18th FP

900,000
8,000
800,000
700,000

6,000

600,000
4,000

500,000
400,000

2,000

300,000
200,000

0
Mar.1
2006

Oct.31
2006

Apr.272007

Oct.31
2007

Apr.302008

Oct.31
2008

Apr.302009

Oct.302009

Apr.302010

50

Oct.292010

Apr.282011

Oct.31
2011

Apr.272012

Oct.31
2012

Apr.302013

Oct.31
2013

Apr.302014

Oct.312014No. of Unitholders
15th FP
Total numberof unitholders:7,59016th FP
Total numberof unitholders:9,16317th FP
Total numberof unitholders:9,846

Individuals / other 7,217[95.1%]

Financial institutions
93 [1.2%](incl. securities firms)
Other domestic corporations
150 [2.0%]
Overseas corporations / individuals 130 [1.7%]

Individuals / other 8,747[95.5%]

Financial institutions
108 [1.2%](incl. securities firms)
Other domestic corporations
175 [1.9%]
Overseas corporations / individuals 133 [1.5%]

Financial institutions
110 [1.1%](incl. securities firms)
Other domestic corporations
175 [1.8%]
Overseas corporations / individuals 153 [1.6%]

Individuals / other 9,408[95.6%]

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No. of Units Held

15th FP
Total numberof units issued
andoutstanding:155,000

16th FP
Total numberof units issued
andoutstanding:176,000
17th FP
Total numberof units issued
andoutstanding:176,000

0%

Other domestic corporations:
12,143[7.8%]

Individuals / other:
23,164 [14.9%]

Financial institutions (incl. securities firms):
104,319 [67.3%]
Other domestic corporations
12,544[7.1%]

Individuals / other:
28,351[16.1%]

Financial institutions (incl. securities firms):
116,647[66.3%]
Other domestic corporations
12,490[7.1%]
Overseas
corporations /Financial institutions (incl. securities firms):
individuals:
110,126[62.6%]
20,733[11.8%]

Individuals / other:
32,651[18.6%]

10%

20%

30%

40%

51

50%

60%

70%

80%

90%

100%