20th

Fiscal Period Business Report(Statement of Financial Performance)

June 1, 2015 – November 30, 2015

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

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 20th Fiscal Period, DOI posted operating revenues of 11,837 million yen and operating income of 5,614 million yen. Our
distribution per unit for the 20th Fiscal Period is 9,688 yen, an increase by 546 yen from the 19th Fiscal Period.
See page 4 for financial and management highlights
Average contract rent at the end of the 20th Fiscal Period increased 64 yen from the end of the previous fiscal period to 18,738
yen, indicating an increase for the second consecutive fiscal period. Rent revisions contributed to 7 million yen increase in monthly
contracted rents from the end of the previous fiscal period, which was a 9.0% increase rate for the average monthly rent. Tenants
moving in/out led to 49 million yen of net increase in monthly contracted rents from the end of the previous fiscal period, andthe increase rate for the average monthly rent increased 14.0% due to replacement of tenants. Occupancy rate improved 1.0
percentage points from the end of the previous fiscal period to 98.3%. We will realize sustainable internal growth by the thoroughimplementation of the hands-on approach that continuously applies “Bonji-Tettei” as the code of conduct.
See page 8 for details of internal growth
During the 20th Fiscal Period, DOI acquired River Gate (acquisition price: 28,000 million yen) on June 2, 2015, and Daiwa Hatchobori
ekimae (acquisition price: 2,871 million yen) and Daiwa Hatchobori ekimae West (acquisition price:
1,647 million yen) on September 11, 2015 using funds obtained through the public offering
announced in April 2015. DOI will continue to selectively acquire office properties centeringon the five central wards of Tokyo in an effort to further improve the value of its portfolio.
See page 12 for details of external growthIn financial matters, DOI promoted the increase of rate of loans with fixed interest
rates, diversification of repayment dates and decrease of LTV. DOI will continue striving tofurther strengthen financial structure while working to reduce future refinancing risks.
See page 15 for details of financial condition
DOI will continue to increase the competitiveness of its properties and aim
to achieve its medium- to long-term goal of an asset size of 500 billion yen
through the utilization of investment capacity from capital increase, etc.,
while increasing long-term EPS (net income after deducting gain on sales ofproperties). We wish for the continued success of our unitholders and ask foryour continued support of DOI.

Nobuaki Omura Executive Director of Daiwa Office Investment Corporation
Contents

I. Overview of Daiwa Office Investment Corporation
To Our Investors……………………………………………… 2

II. Asset Management Report…………………………… 17
III. Balance Sheet…………………………………………… 22

Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3
Financial and Management Highlights………………………… 4

IV. Statements of Income and Retained Earnings…… 24
V. Statements of Changes in Net Assets…………… 25

Overview of Portfolio (portfolio list)…………………………… 5
Overview of Portfolio (portfolio distribution)…………………… 6
Internal Growth Measures… ………………………………… 8External Growth Measures…………………………………… 12
Financial Conditions… ……………………………………… 15
Description of Asset Manager………………………………… 16

2

VI. Statements of Cash Flows… ………………………… 26
VII. Notes to Financial Statements……………………… 27
VIII. Independent Auditor’s Report… …………………… 41
IX. Investor Information… ………………………………… 42

Characteristics and Strategies of Daiwa Office Investment Corporation

Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT Focused on the Five
Central Wards of Tokyo

Effective application of operational knowhow specialized in officebuildings

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

Office buildings 100.0%

Major Regional Cities 4.4%
Greater Tokyo

Five Central
Wards of Tokyo

87.7%

7.9%

Based on acquisition price

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 500 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%(billion yen)
500

Investment inselectively chosencompetitive properties

400

332.0

352.7 364.0

387.5

500.0
445.7
413.2

300

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Thorough implementation of hands-on
approach
Further strengthen relations with tenants

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals and lease-up activities

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

200

100

0

Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period Medium-term
ended
ended
ended
ended
ended
ended
goal
May 2013 November 2013 May 2014 November 2014 May 2015 November 2015

Fiscal period ending November 2015
(20th Fiscal Period)

Fiscal period ending May 2016
(Note) The forecasts on distribution are calculated based(21st Fiscal Period)on certain assumptions and may vary due tochanges in the status and other factors. Moreover,the forecasts set forth herein should not be
construed as a guarantee of distribution amounts.

Fiscal period ending November 2016
(22nd Fiscal Period)

9,688 yen
9,850 yen
9,900 yen(actual)(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation

3

Financial and Management Highlights
Steady increase of distributions due to progress in internal growth■ Operating Revenues■ Operating Income■ Net Income(million yen)
12,000(million yen)
6,000

(million yen)
5,000

11,837
9,000

9,763
8,432

5,614

10,387
4,000

8,587

4,438

6,000

3,641

3,000

3,760

3,677

4,688

4,000

4,770
2,959

4,031

3,016

2,000

2,000
3,000

1,000
0

0

0

16th Period 17th Period 18th Period 19th Period 20th Period

16th Period 17th Period 18th Period 19th Period 20th Period

16th Period 17th Period 18th Period 19th Period 20th Period■ Changes in Rent Revenue(million yen)
11,000External growth (acquisition/full contribution from properties sold)

10,000267

External growth (acquisition/during-the-period contribution from properties sold)

9,000

Internal growth (increase/decrease of rents of existing properties)

8,000

261

77

7,000

29

6,000

6

347
190

278

176
349
511

839

64

–55

–70

0
15th Period

16th Period

17th Period

18th Period

19th Period

20th Period■ Distribution Per Unit(yen)
10,000

Forecast from one year earlier

Forecast from six months earlier

Actual dividends
8,000
6,000

282

148
215

4,850
4,850
5,107

3,600
4,100
4,464

5,500
6,250
6,542

5,350
5,500
5,986

6,550
7,200
7,478

7,300
7,540
7,621

16th Period

17th Period(Note) External growth (acquisition/full contribution
from properties sold) indicates the fullcontribution portion of the difference in rents
and common area fees of properties acquiredor sold in the previous fiscal period, in thecurrent fiscal period.
External growth (acquisition/during-the-period
contribution from properties sold) indicatesthe during-the-period contribution portion of
the difference in rents and common area feesof properties acquired or sold in the current
fiscal period, in the current fiscal period.
Internal growth (increase/decrease of rents ofexisting properties) indicates theperiod-on-period difference in rents andcommon area fees of existing properties in
the current fiscal period.

9,000
9,350
9,688

8,328
8,700
9,142

7,570
7,820
8,256

9,750
9,850

9,900

4,000
2,000
0
12th Period

13th Period

15th Period

18th Period

19th Period

20th Period

21st Period 22nd Period

20th Period

19th Period

18th Period

17th Period

16th Period(November 2015)(May 2015)(November 2014)(May 2014)(November 2013)

Operating revenues (million yen)

11,837

10,387

9,763

8,587

8,432

Operating income (million yen)

5,614

4,770

4,438

3,760

3,677

Ordinary income (million yen)

4,689

4,032

3,642

3,005

2,955

Net income (million yen)

4,688

4,031

3,641

3,016

2,959

Total number of units issued (units)

484,000

441,000

441,000

395,798

395,798
509,560

Net assets per unit (yen)511,777

505,566

504,746

509,490

Distribution per unit (yen)

9,688

9,142

8,256

7,621

7,478

Total assets (million yen)

460,705432,232

399,555

380,723

363,653

41.7

44.3

40.2

43.0

40.6

50

47

46

44

44

4,457

4,132

3,875

3,640

3,527

325,313.01

288,833.07

286,088.89

259,381.62

244,877.17

98.3

97.3

97.2

96.4

96.3

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

4

14th Period

Overview of Portfolio (portfolio list)(as of November 30, 2015)
Property Name

Address

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

Five Central Wards of Tokyo (Note 1)
Ginza, Chuo-ku, Tokyo
8,175.26 SRC B3/12F July 1963
Ginza, Chuo-ku, Tokyo
2,032.11 SRC B3/8F Aug. 1972
Shibaura, Minato-ku, Tokyo
9,619.67 SRC B1/12F Oct. 1987
Minami Aoyama, Minato-ku, Tokyo
2,715.54 S SRC B2/5F Sept. 1990
Sarugakucho, Chiyoda-ku, Tokyo
3,657.43
SRC 8F
June 1985
Hamamatsucho, Minato-ku, Tokyo
3,663.38 SRC B2/10F July 1993
Jingumae, Shibuya-ku, Tokyo
2,198.61 RC B1/4F
Dec. 1997
Shibadaimon, Minato-ku, Tokyo
2,386.48 SRC RC B1/7F Nov. 1996
Misakicho, Chiyoda-ku, Tokyo
2,137.53
S 8F
July 1996
Shinbashi, Minato-ku, Tokyo
2,676.52 SRC B1/8F
Apr. 1974
Tsukiji, Chuo-ku, Tokyo
2,659.59
SRC 10F
Jan. 1996
Tsukiji, Chuo-ku, Tokyo
1,487.82 SRC B1/7F
Jan. 1990
Tsukishima, Chuo-ku, Tokyo
8,426.85
S 5F
July 1996
Nihombashi-Horidomecho, Chuo-ku, Tokyo
2,850.81 SRC B2/7F
Apr. 1993
Azabudai, Minato-ku, Tokyo
1,697.88 SRC B2/9F
Apr. 1984
Hatchobori, Chuo-ku, Tokyo
3,265.83 SRC B1/8F
Oct. 1974
Kojimachi, Chiyoda-ku, Tokyo
2,690.90 SRC B2/9F
Oct. 1987
Shinbashi, Minato-ku, Tokyo
11,614.92
SRC 9F
Apr. 1973
Yoyogi, Shibuya-ku, Tokyo
45,543.97 S SRC B3/34F Sept. 1995
Udagawacho, Shibuya-ku, Tokyo
2,480.65 RC B1/9F
Aug. 2006
Nihombashi-Odenmacho, Chuo-ku, Tokyo
2,379.31
SRC 8F
Mar. 1985
Kanda-Jimbocho, Chiyoda-ku, Tokyo
3,164.26
S B1/8F
Mar. 1997
Nishi-Shimbashi, Minato-ku, Tokyo
4,815.84 SRC B1/10F July 1993
Kudan Minami, Chiyoda-ku, Tokyo
2,882.61
SRC 9F
Mar. 1987
Nihombashi-Kayabacho, Chuo-ku, Tokyo
5,899.11 S SRC B1/8F Apr. 2010
Kanda-Jimbocho, Chiyoda-ku, Tokyo
2,889.34
S 9F
Feb. 2010
Maruyamacho, Shibuya-ku, Tokyo
13,960.87 S SRC B1/15F Oct. 2002
Nihombashi Hongokucho, Chuo-ku, Tokyo
2,143.08
S 8F
May 2010
Shinjuku, Shinjuku-ku, Tokyo
6,751.31 S RC B2/11F Jan. 2012
Dogenzaka Maruyamacho, Shibuya-ku, Tokyo 4,144.90 SRC B1/11F Mar. 1988
Akasaka, Minato-ku, Tokyo
8,739.17 SRC B2/7F Sept. 1990
Shibuya, Shibuya-ku, Tokyo
6,327.95 S B1/12F
Dec. 1988
Minami Azabu, Minato-ku, Tokyo
13,234.39 S RC B1/6F Sept. 2009
Ebisu, Shibuya-ku, Tokyo
2,885.64 SRC B1/9F Dec. 1997
Okubo, Shinjuku-ku, Tokyo
7,498.33
S10F
Aug. 2010
Jingumae, Shibuya-ku, Tokyo
4,421.79 S RC B1/7F Nov. 2001
Shinsen-cho, Shibuya-ku, Tokyo
2,811.35 RC B1/9F Sept. 2001
Nanpeidaicho, Shibuya-ku, Tokyo
8,566.73 S SRC B1/11F Feb. 2004
Nihonbashi Hakozakicho, Chuo-ku, Tokyo
32,062.96 S SRC RC B2/20F Feb. 1994
Hatchobori, Chuo-ku, Tokyo
2,622.42 S SRC B1/10F Feb. 2006
Hatchobori, Chuo-ku, Tokyo
1,723.24 SRC B1/9F
Feb. 1996
Subtotal
261,906.35
Greater Tokyo Area (Note 1)
Higashi-Ikebukuro, Toshima-ku, Tokyo
4,461.47 SRC S B1/9F June 1993
42 Daiwa Higashi-Ikebukuro
Kita-Shinagawa, Shinagawa-ku, Tokyo
6,548.17 SRC B1/11F July 1991
43 Daiwa Shinagawa North
Osaki, Shinagawa-ku, Tokyo
1,786.06 S RC B1/6F Sept. 2007
44 Daiwa Osaki 3-chome
Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa 2,630.30 S SRC B3/7F May 201145 Daiwa Kamiooka
Kamiogi, Suginami-ku, Tokyo
17,778.14 S SRC B2/18F June 1993
46 Integral Tower
Meguro, Meguro-ku, Tokyo
3,519.50 S SRC B2/14F July 200947 Meguro Place Tower
Subtotal
36,723.64
Major Regional Cities (Note 1)
Minami-Senba, Chuo-ku, Osaka City, Osaka
5,703.50 SRC B1/8F Sept. 1986
48 Daiwa Minami-Senba
Meieki-Minami, Nakamura-ku, Nagoya City, Aichi 7,461.90
S 12F
Dec. 200749 Daiwa Meieki
Awaji-cho, Chuo-ku, Osaka City, Osaka
13,517.62 S SRC B1/16F Feb. 2008
50 Kitahama Grand Building
Subtotal
26,683.02
Total
325,313.01

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

2003
2003

14,100 3.2
3,050 0.7
8,265 1.9
4,550 1.0
3,190 0.7
2,865 0.62,800 0.6
2,578 0.6
2,346 0.5
2006
2,080 0.5
1,560 0.3
1,240 0.3
7,840 1.8
2,520 0.6
1,600 0.4
2005
3,460 0.8
2,910 0.7
2003 13,860 3.1
133,800 30.0
5,900 1.3
2,460 0.6
4,150 0.95,000 1.1
4,000 0.95,600 1.3
3,550 0.8
24,000 5.4
1,721 0.4
9,650 2.2
4,500 1.0
9,200 2.1
7,000 1.6
14,000 3.1
4,135 0.98,450 1.99,800 2.2
4,800 1.1
16,000 3.6
28,000 6.3
2,871 0.6
1,647 0.4
391,048 87.7
2,958
7,710
1,650
2,000
15,2205,600
35,138

0.7
1.7
0.4
0.4
3.4
1.3
7.9

4,810 1.1
5,300 1.2
9,481 2.1
19,591 4.4
445,777 100.0(Note 4)

Ownership TypeLand

Building

PML (%)(Note 5)

simple and15,800 Feeleasehold
Fee simple
3,260 Fee simple Fee simple
7,350 Fee simple Fee simple
4,250 Fee simple Fee simple
3,270 Fee simple Fee simple
3,220 Fee simple Compartmentalized
ownership
2,230 Fee simple Fee simple
2,860 Fee simple Fee simple
2,680 Fee simple Fee simple
2,420 Fee simple Fee simple
1,550 Fee simple Fee simple
1,360 Fee simple Fee simple
9,080 Fee simple Fee simple
2,450 Fee simple Fee simple
1,750 Fee simple Fee simple
3,180 Fee simple Compartmentalized
ownership (100%)
2,670 Fee simple Compartmentalized
ownership (100%)
12,800 Fee simple Compartmentalized
ownership (100%)
116,000 Co-ownership Co-ownership
4,650 Fee simple Fee simple
simple and Fee simple
2,060 Feeleasehold
3,230 Fee simple Fee simple
5,330 Fee simple Fee simple
3,270 Fee simple Compartmentalized
ownership (100%)
7,460 Fee simple Fee simple
4,420 Fee simple Fee simple
32,300 Fee simple Fee simple
2,110 Fee simple Fee simple
12,000 Right of site Compartmentalized
ownership (100%)
6,380 Fee simple Fee simple
12,100 Fee simple Fee simple
8,040 Fee simple Fee simple
15,700 Fee simple Fee simple
5,120 Fee simple Fee simple
9,830 Fee simple Compartmentalized
ownership (100%)
11,200 Fee simple Fee simple
6,020 Fee simple Fee simple
17,500 Fee simple Fee simple
29,800 Fee simple Fee simple
3,060 Fee simple Fee simple
1,700 Fee simple Fee simple
401,460

4.53
3.97
3.82
9.19
7.14
3.79
13.33
3.72
4.24
5.51
4.23
4.98
4.87
4.68
6.64
4.51
6.19
3.89
2.03
1.56
4.19
5.05
3.76
5.51
4.50
5.33
3.11
3.80
4.44
3.77
7.14
5.64
2.67
2.44
4.46
4.42
6.21
1.61
1.76
5.89
7.03

3,490
5,790
2,240
2,420
17,5006,110
37,550Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple

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

3.55
7.19
6.14
6.29
1.18
1.68

2,660 Fee simple
7,150 Fee simple
11,000 Fee simple
20,810459,820

Fee simple
Fee simple
Fee simple

5.25
10.31
3.48

(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.
(Note 2) The Rentable Area is indicated as of November 30, 2015 (end of 20th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of November 30, 2015 (end of 20th Fiscal Period). The values
entered in the Appraisal Value at End of Period column of River Gate indicated as of April 1, 2015
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2015) prepared by Sompo Japan Nipponkoa Risk Management Inc.
(Note 6) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation

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

7 Daiwa Jingumae

20 SHIBUYA EDGE

30 Daiwa Shibuya Dogenzaka

32 Daiwa Shibuya Miyamasuzaka

42 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

42

Toshima-ku
19 Shinjuku Maynds Tower

27 E SPACE TOWER

46
Ogikubo Sta.

34 Daiwa Ebisu 4-chome

Suginami-ku

36 Concept Aoyama

37 Shinsen Place

38 Glass City Shibuya

Nakano Sta.

35
HigashiShinjuku Sta.

Shinjuku-ku

Shinjuku-ku
Shinjuku Sta.
29

19
46 Integral Tower

Ginza Line
Marunouchi Line
Hibiya Line
Tozai Line
Chiyoda Line
Yurakucho Line
Hanzomon Line
Namboku Line
Fukutoshin Line

Toei Subway

35 LAQUAS Higashi
Honancho
Sta. Shinjuku

Shibuya-ku

Minato-ku

36

3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

27
30
37
38

6 Daiwa A Hamamatsucho

ine
hi L
Tos
n
e
Den
yu
Tok

32
Shibuya Sta.

Naka-meguro Sta.

JR

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

634
Ebisu Sta.

15 Daiwa Azabudai

47

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

18 Daiwa Onarimon

23 Daiwa Nishi-Shimbashi

Gaienmae Sta.

4

Omotesando Sta.

20

Oedo Line
Asakusa Line
Mita Line
Shinjuku Line
Yamanote Line
Saikyo Line
Chuo Line
Sobu Line
Keiyo Line
JR Yokosuka Lineand
Sobu Rapid Line

Aoyamaitchome Sta.

7

To
ky
uT
oy
ok
oL
ine

Tokyo Metro

29 shinyon curumu

Yotsuya Sta.

31 Daiwa Akasaka

33 Azabu Green Terrace

47 Meguro Place Tower

Meguro Sta.

Osaki Sta.
44(as of November 30, 2015)

Chuo-ku

1 Daiwa Ginza

39 River Gate

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukishima

14 Daiwa Nihonbashi Horidomecho

16 Daiwa Kyobashi

21 Daiwa Kodenmacho

25 Daiwa Kayabacho Building

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.
Kudanshita Sta.

9

Akihabara Sta.

5

26 22
24
28

21

14
Ningyocho Sta.

Chiyoda-ku

Nihombashi Sta.

Tokyo Sta.
Akasakamitsuke Sta.

12

Toranomon Sta.

31

16
Ginza Sta.

Shimbashi Sta.
23
10
18

6

15
Shibakoen Sta.

25 Suitengumae39
Sta.

Chuo-ku

Hibiya Sta.

Akasaka Sta.

41 Daiwa Hatchobori ekimae West

Chiyoda-ku

Otemachi Sta.

17

28 Daiwa Nihonbashi Hongokucho 40 Daiwa Hatchobori ekimae

Kinshicho Sta.

12

41 40

Hatchobori
Sta.

5 Daiwa Sarugakucho

9 Daiwa Misakicho

17 Daiwa Kojimachi 4-chome

22 Daiwa Jimbocho

24 Daiwa Kudan

26 Daiwa Jinbocho 3-chome

45 Daiwa Kamiooka

48 Daiwa Minami-Senba

49 Daiwa Meieki

50 Kitahama Grand Building

11

Tsukishima Sta.

13

8Minato-ku
33

3

48
ShinagawaSta.

43

Shinagawaku

43 Daiwa Shinagawa North

44 Daiwa Osaki 3-chome

50 49

45

I. Overview of Daiwa Office Investment Corporation

7

Internal Growth Measures
Realizing rent increases upon contract renewal and tenant replacement while working to heighten tenant satisfaction

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

■ Office Building Rental Market of Tokyo■ Office Building Rental Market of Tokyo(yen/tsubo)
25,000(%)
10.0

23,0008.0

21,000

6.0

3.58

19,00017,497

17,000
Average rents ofexisting buildings (left axis)

15,000Vacancy rate ofexisting buildings (right axis)(tsubo)400,000

0.0

Predicted figures

300,000

6.0

100,000

4.5

0

3.0

-100,000

1.5
Floor area of new supplies
Floor area of new demands-200,000

Vacancy rate

0.0

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

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

■ Rate of New Leases and Cancellations*

(%)
100.0

(%)
20.0
97.7
95.9

95.0

96.3 96.4

96.4

95.4

97.2 97.3

98.3 98.3
96.7 96.6 96.5

95.0

13.4
10.0

9.8

7.2 7.4
3.9

94.3

3.2 3.3

8.2

5.7

4.4

6.1

6.2
2.0

4.3

0.0

92.8
92.4
90.0

85.0

7.5

200,000

4.0
2.0

(%)
9.0

-3.4 -3.9-3.9

Occupancy rate (actual)
Occupancy rate (forecast)Occupancy rate (forecast)(as of disclosure in July 2015)85.7

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

-10.0
-12.0
-14.7

-20.0

-5.9

-5.3
-7.3 -6.3

-2.8

1.2

-1.4
-2.4 -1.7-3.1-6.1 -5.7

Rate of new leases
Rate of cancellations

1.4

Expected rate of new leases
Expected rate of cancellations

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period*Transition of rate of new leases and cancellations areas to the total rentable area.

Improvement in Basic Strength• Basic strength (profitability accompanied by realization of internal growth) has steadily improved due to contract renewals andtenant replacement in the 19th FP and 20th FP• Increase in rent revenue due to improved basic strength leads almost directly to an increase in dividend resource.
■ Monthly Rent Increase Due to Contract Renewal/Tenant Replacement
Contract Renewal

Tenant Replacement

Total

19th FP

5,862 thousand yen/month

3,527 thousand yen/month

9,389 thousand yen/month

20th FP

7,938 thousand yen/month

6,438 thousand yen/month

14,376 thousand yen/month■ Increase in Dividend Resource Due to Improved Basic Strength
Total Rent Revenue(rents and common
area fees) (6 months)

Percentage of Total Rent Revenue (rents andcommon area fees) (*1)

Growth Rate of Dividend Resource (*2)

6 months

Annualized

6 months

Annualized

19th FP

8,806 million yen

0.6%

1.3%

1.5%

3.1%

20th FP

10,196 million yen

0.8%

1.7%

2.1%

4.3%

*1 Obtained by dividing the amount of rent increase (increased amount of monthly rent x 6 months) due to the improved basic strength in each fiscal period by rent revenue (rents and common area fees) in the respective fiscal period.
*2 Obtained by dividing the amount of rent increase (increased amount of monthly rent x 6 months) due to the improved basic strength in each fiscal period by net income in the prior fiscal period to the respective fiscal period.

8

Status of Contract Renewal■ 20th Fiscal Period Contract Renewal TenantsContract Renewal Area
(Excluding cancellation)■ Changes in Rent Increase/Decrease Rate of Contract
Renewal Tenants (sections)

Cancellation from
Non-Contract Renewal Area 1.7

16.0

(%)
15.0

Non-Contract Renewal Area (Excluding cancellation) 82.3

9.0

10.0

20th Period
19th Period

0.0
0.0

18th Period 4.8
17th Period

37.4

61.1

1.3

26.5

70.8

2.7

8.6

8.5

16th Period

66.7

7.9*

19.9

14.1*

57.4

10.0 4.6

15th Period

14.4

14th Period

18.9

13th Period

0.0
40.6

0.8

20.0

40.0

0.0

70.3

12.3

67.3

13.8
54.6

Unchanged

Cancellation

-25.0

9.0%

(Previous FP: 5.2%)

5% or more
but less than 10%

14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 20th PeriodLess than 0%
Unchanged 3%
Over 0% but
less than 10% 4%

6%32%

Rent increase / decrease rate

■ Monthly Rent Increase/Decrease Due to Tenant Replacement(compared to the previous tenant for the same section)

15% or more

Increase
rate of monthly rent

Decrease rate

-22.7
-22.7

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

■ Status of Upward Rent Revisions (ratio of monthly rent
revision amounts in upward revisions in the 20th FP)

22%

-7.0

Increase rate

(Note) *The ratio of areas for which contract was renewed in the 20th FP to the total rentable area
(281,321.87 m2) at the end of May 2015.
* Of the increase in the 17th FP, 14.1% is due to some tenants switching from sublease agreements tomaster lease agreements and 7.9% is due to negotiations with tenants.

2% or more
but less than 5%

30% or more

8% 7%
Increaseate of monthly rent

10% or more
but less than 15%

14.0%

47%

10% or more
but less than 20%

40%

31%

20% or more
but less than 30%(Previous FP: 10.1%)*Percentage figures are based
on total monthly rent.

Increased amount of monthly rent

0.0

-4.9

-15.0
-20.0

Increase

9.0

5.2

-10.2

-10.0

100.0
（%）

Decrease

80.0

5.2

0.0
-6.5

-7.0

4.0

60.0

5.0
1.0

2.5

-5.2

-5.0

8.2

4.5

0.0

0.00

12.1

77.1

3.1

5.0

9.8
4.3

*Percentage figures are based
on total monthly rent.

7,938 thousand yen/month

Increased amount of monthly rent

6,438 thousand yen/month

Rental Business Status■ Average Contract Rent and Market Rent

■ Attribution Analysis / Monthly Contract Rent*(yen/tsubo)
30,000100(Million Yen)
1,850

27,00090

24,00078.85 80

+151

1,800
1,750

78.06
78.52

21,00070

18,67418,00017,79915,000

Average contract rents*
Unit rent index(Period-on-period comparison, right axis)**18,738

1,700
1,650
1,600

60
50

40
12,000End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) Average contract rent of the existing 47 properties at the end of November 2015 is 18,817 yen(amount of change from the previous period: +143 yen)
* Average contract rents are average monthly contracted rents with tenants at the end of each fiscal period.
** Unit rent index is the earning rates of unit rent of individual properties indexed with the 7th Fiscal Period as 100.

1,550

+7

1,595

Decrease byRent Revisions

Increase byRent Revisions

+81

0

1,803

Decrease by
Tenants’Cancellations–32

Increase by
New Acquisition

Increase by
New Leases

1,500
1,450
1,400
End of 19th FP
Monthly Contract Rent

End of 20th FP
Monthly Contract Rent

* Monthly Contact Rent is a total of final rent from tenants contracting at the end of the Fiscal Period.
Monthly Contract Rent for Shinjuku Maynds Tower was adjusted to 6/7 of the total.

I. Overview of Daiwa Office Investment Corporation

9

Internal Growth Measures“Bonji-Tettei”
Continuous internal growth and maximization of asset value through “Bonji-Tettei”“Bonji-Tettei”
Accurate grasp of present
situations◦In depth understanding of the leasing market◦Capturing real opinions of occupying tenants◦ Specializing updated features of portfolio properties◦ Determined budget control

Activities for internal growth◦Proactive interactions with brokers◦Accompanying new tenant viewing◦Frequent visit on tenants◦ Conducting tenant satisfaction surveys◦ Thorough examination of properties◦ Solid numerical analysis in detail

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

Aims to maximize asset value
Office Management Team (9 members)

Teruaki Saito

This team aims at maximizing asset value by assigning specialist group personnel in charge to each of
the properties in the investment corporation’s portfolio.

Takafumi Ushiku Tadashi Matsumoto Keitaro Kumagai Taku Narahara

Kotaro Ishii

Chie Kamimura

Yuuki Kobatake

Takashi Aiso

Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
work history:
work history:
work history:
work history:
work history:
work history:
work history:
work history:
work history:
9 years 11 months
11 years 3 months
5 years 1 month
2 year 10 months
9 years 4 months
9 years 8 months
9 years 6 months
3 years 2 months
1 year 2 months

Investment Planning Team (2 members)

Middle office work: Budget and performance management for the portfolios

Construction Management Team

Engineering: Formulation and implementation of construction planning of the assets(1 member)(Note) The number of members is as of December 31, 2015. “Asset management work history” is the number of years engaged in the relevant work (as of end of December 2015) and does not indicate the number of years
employed at the asset management company.

Properties Acquired in the 20th - Leasing Improvement Case River Gate Acquisition Price: 28,000 million yen (Acquisition Date: June 2, 2015)
Nihonbashi Hakozakicho
Chuo-ku, Tokyo
Site Area
7,088.66 m2
Structure/Floor S SRC RC B2/20F
Total Floor Area 53,790.26 m2
Appraisal Value 29,700 million yen (Note 1)
Construction Date February 1994
Occupancy Rate 80.8% (Note 2)
Number of Tenants 87 (Note 3)
Location

Upon Acquisition NOI Yield Assumed Occupancy Rate
(Note 4)
4.5%
94.3%
Mid-term
NOI Yield Assumed Occupancy Rate
(Note 5)
4.7%
94.3%
Appraisal
NOI Yield Assumed Occupancy Rate
5.0%
95.0%
Depreciation
1.1%(Note 6)(Note 1) As of April 1, 2015.
(Note 2) As of June 2, 2015.
(Note 3) As of June 2, 2015, including 71 rental units.
(Note 4) Upon Acquisition indicates figures obtained by using expected annual balance of payments under the assumed occupancyrate, calculated based on the lease agreement upon acquisition, etc., while taking into account the accrual of tax and publicdue, etc.
(Note 5) Mid-term indicates estimated figures for normal operation period (with assumed occupancy rate) after acquisition, obtainedby deducting rent business-related expenses from rent revenue assumed under rents over a medium term, and do not
represent forecast figures for the current period or the next period onward.
(Note 6) Depreciation indicates a figure obtained by dividing the total amount of depreciation (6-month equivalent) expected to be posted upon
property acquisition and depreciation (for 6 months) expected to be posted in the following fiscal period by the acquisition price.

10

Initiatives for leasing strategy• The occupancy rate at the time of acquisition was
80.8%. Vacant floor space was approximately 1,700
tsubos, or equivalent to 2.5 floors.
• Started leasing activities upon concluding the purchaseagreement in order to take in needs for consolidating
sales bases from companies covering wide areas byutilizing the size of its standard floor space of about 600
tsubos.
• Received several applications from new tenants within
two months of the acquisition and was also able tosolicit floor expansion from existing tenants. As a result,the occupancy rate improved to 95.3% at the end of the20th Fiscal Period from 80.8% at the time of acquisition.
The vacant section was successfully leased with a rent
level surpassing the rent level initially assumed at thetime of acquisition by an average of around 10%.
• Continuing to focus on early leasing for the remaining
space of about 300 tsubos (equivalent to half a floor
space).

Measures to Increase Portfolio Value■ Strategic Renewal Works■ Measures to Improve Customer Satisfaction

Renovation of the elevator hallDistribution of calendars to office workers

Before

After

Daiwa
ShibuyaMiyamasuzaka

Shinjuku Maynds Tower[Date] December 14, 2015

■ Coexistence with Local Societies

Renewal of restrooms
Before

After

Daiwa
ShibuyaMiyamasuzakaParticipated in “Shinjuku Minamirumi”
Shinjuku Maynds Tower participated in “Shinjuku
Minamirumi” (annual event held for the third time)organized by Odakyu Electric Railway Co, Ltd.,
Takashimaya Co., Ltd., East Japan Railway Company andDaiwa Securities, and displayed illumination with a
Plantstheme of “stars.”

Christmas tree

Front side

Shinjuku Maynds Tower[Period] November 11, 2015 – February 14, 2016

Environmental Efforts■ Acquired “Green Star” Rating for 4th Consecutive Year at GRESB 2015
Following the participation in 2012, 2013 and 2014, Daiwa Real Estate Asset Management participated in the 2015 Global Real Estate
Sustainability Benchmark (GRESB) survey for the portfolio of Daiwa Office Investment Corporation and received high evaluation forsustainability in both “Management and Policy” and “Implementation and Measurement” aspects for the third consecutive year andearned the best rating of “Green Star” from GRESB Survey 2015. GRESB is a private sector-driven international organization, comprised
mainly of European pension funds and other institutional investors, committed to assessing the sustainability performance of real estate
portfolios. Daiwa Real Estate Asset Management continues to strive to improve the sustainability performance.

■ Shinjuku Maynds Tower Receives DBJ Green Building Certification Upgrade in Fiscal 2015
Under the reevaluation of DBJ Green Building Certification through regular monitoring conducted by theDevelopment Bank of Japan (DBJ), Shinjuku Maynds Tower’s certification level was upgraded from three stars(properties with excellent environmental & social awareness) to four stars (properties with exceptionally highenvironmental & social awareness).
The following two points were highly evaluated in the monitoring this time.
❶ Promotion of energy-saving measures by incorporating green leasing (Note)❷ Continuous participation in Shinjuku Minamirumi (consideration of and contribution to surrounding
communities)

Shinjuku Maynds Tower

Rank

Properties withexceptionally highenvironmental & social
awareness

Mark

Name

Four stars(Note) Green leasing is a method to realize facility renewals of a section occupied by a tenant under a scheme which brings merits to both the tenant and the owner.

Challenges for Internal Growth in the 21st FP
Occupancy rate

Floor space subject torent increase• Aim for period-end occupancy rate higher than the current forecast (98.3%) in the 21st Fiscal Period.

• Out of floor space subject to renewal in the 20th Fiscal Period, rent increases were realized for 37.4%.
• In the 21st Fiscal Period, will put forth efforts to conduct activities that accompany “improvement in tenant satisfaction” to gain further
understanding of existing tenants.

I. Overview of Daiwa Office Investment Corporation

11

External Growth Measures
Investment in selectively chosen high quality competitive properties even in harsher acquisition environment

Properties Newly Acquired in the 20th FP
Daiwa Hatchobori ekimae

Daiwa Hatchobori ekimae West

Acquisition price: 2,871 million yen(Acquisition Date: September 11, 2015)

Acquisition price: 1,647 million yen(Acquisition Date: September 11, 2015)

Hatchobori,Appraisal
Chuo-ku, Tokyo Value

Location

3,000 million
yen (Note 1)

Hatchobori,Appraisal
Chuo-ku, Tokyo Value

Location

Site Area
582.33 m2
Construction Date February 2006
Structure/Floor S SRC B1/10F Occupancy Rate 100.0% (Note 2)
Total Floor Area 4,297.67 m2 Number of Tenants 9 (Note 2)

Site Area
323.53 m2
Structure/Floor SRC B1/9F
Total Floor Area 2,198.33 m2

1,670 million
yen (Note 1)

Construction Date February 1996
Occupancy Rate 100.0% (Note 2)
Number of Tenants 9 (Note 2)Upon
Acquisition

AssumedNOI Yield Occupancy Rate

Upon
Acquisition

AssumedNOI Yield Occupancy Rate

Mid-term

3.7%
100.0%
AssumedNOI Yield Occupancy Rate

Mid-term

3.9%
100.0%
AssumedNOI Yield Occupancy Rate

(Note 3)(Note 4)(Note 3)(Note 4)

Hatchobori Sta.

4.4%

96.0%
NOI Yield Assumed
Occupancy Rate
4.4%
96.0%

(Note 5)

Appraisal

Hatchobori Sta.

ro Hibiya Line

JR Keiyo Line

0.7%

96.0%

NOI Yield Assumed
Occupancy Rate
4.6%
96.0%

Depreciationo Met

Depreciation

4.5%

Daiwa Hatchobori ekimae(Note 5)

Toky

Appraisal

Daiwa Hatchobori ekimae West

0.5%

(Note 1) As of August 15, 2015.
(Note 2) At the time of acquisition.
(Note 3) Upon Acquisition indicates figures obtained by using expected annual balance of payments under the assumed occupancy rate, calculated based on the lease agreement upon acquisition, etc. while taking into
account the accrual of tax and public due, etc.
(Note 4) Mid-term indicates estimated figures for normal operation period (with assumed occupancy rate) after acquisition, obtained by deducting rent business-related expenses from rent revenue assumed under rents
over a medium term, and do not represent forecast figures for the current period or the next period onward.
(Note 5) Depreciation indicates a figure obtained by dividing the total amount of depreciation (6-month equivalent) expected to be posted upon property acquisition and depreciation (for 6 months) expected to be posted in
the following fiscal period by the acquisition price.

Transportation accessDaiwa Hatchobori ekimae and Daiwa Hatchobori ekimae West are both located approximately one minute on foot from the closest exit of Hatchobori
Station on the JR Keiyo Line and Tokyo Metro Hibiya Line. Access to multiple train lines is available, as Kayabacho Station on the Tokyo Metro Tozai
Line and Hibiya Line, Takaracho Station on the Toei Subway Asakusa Line and Shintomicho Station on the Tokyo Metro Yurakucho Line are withinwalking distance of the properties.
Medium-term asset management strategy• Conduct sales strategy reading the trends of the leasing market in Hatchobori area
• Aim for improved profits through terms revisions in accordance with market trends by realizing enhanced relationships with existing tenants andstable occupancy over the long-term.
• Review management/operation costs for appropriate levels and work to reduce costs.
During the 20th Fiscal Period, DOI acquired River Gate on June 2, 2015 in addition to the above Daiwa Hatchobori ekimae and Daiwa Hatchobori ekimae West. (Please refer to p.10.)

Acquisition of Properties after Sponsor Change
Acquisition
timing9th Period

Total acquisition price: 207,325 million yen

10th Period

11th Period

Daiwa Jimbocho

Daiwa Nishi-Shimbashi

Daiwa Kudan

Daiwa Kayabacho
Building

Daiwa
Jinbocho 3-chome

12th Period

13th Period

E SPACE TOWER

Daiwa Nihonbashi
Hongokucho

Property nameArea

Chiyoda Ward, Tokyo

Minato Ward, Tokyo

Chiyoda Ward, Tokyo

Chuo Ward, Tokyo

Chiyoda Ward, Tokyo

Shibuya Ward, Tokyo

Chuo Ward, Tokyo

Acquisition price

4,150 million yen

5,000 million yen

4,000 million yen

5,600 million yen

3,550 million yen

24,000 million yen

1,721 million yen

Seller

ORIX JREIT Inc.

Japan Core Asset 2 YKTokyu Land Corporation

Endeavor Realty Fund YK

Tosei Corporation

Acquisition dateMar. 10, 2010

Aug. 13, 2010

Mar. 29, 2011

July 8, 2011

May 11, 2012

(Note 1)

Shining Nova No. 5 B (SPC) Daiwa Property Co., Ltd.

Sept. 2, 2010

Mar. 25, 2011

(Note 1) "YK" stands for limited liability company and TMK (tokutei mokuteki kaisha) stands for special purpose company.

12(Note 1)

Acquisition
timing14th Period

15th Period

Daiwa
Osaki 3-chome

shinyon curumu

16th Period

Daiwa Meieki

Daiwa Kamiooka

Daiwa Shibuya
Dogenzaka

Daiwa Akasaka

Daiwa Shibuya
Miyamasuzaka

Property nameArea

Shinagawa Ward, Tokyo

Shinjuku Ward, Tokyo

Nagoya City, Aichi

Yokohama City, Kanagawa

Shibuya Ward, Tokyo

Minato Ward, Tokyo

Shibuya Ward, Tokyo

Acquisition price

1,650 million yen

9,650 million yen

5,300 million yen

2,000 million yen

4,500 million yen

9,200 million yen

7,000 million yen

SellerMCR Six GK

Two domestic industrial
companies

Domestic special purpose
company

Shimizu Corporation

Domestic special purpose
company

Hakuba Capital 1 TMK(Note 1)E Buildings Limited Liability
Company

Acquisition date

Sept. 18, 2012

Dec. 3, 2012
Apr. 12, 2013

Feb. 1, 2013

Mar. 1, 2013

July 3, 2013

Aug. 9, 2013

Sept. 27, 2013

Acquisition
timing17th Period

Kitahama Grand
Building

Daiwa Ebisu 4-chome

LAQUAS Higashi
Shinjuku

Concept Aoyama

Shinsen Place

18th Period

Integral Tower

Azabu Green Terrace

19th Period

Property nameArea

Suginami Ward, Tokyo

Minato Ward, Tokyo

Osaka City, Osaka

Shibuya Ward, Tokyo

Shinjuku Ward, Tokyo

Shibuya Ward, Tokyo

Shibuya Ward, Tokyo

Acquisition price

15,220 million yen

14,000 million yen

9,481 million yen

4,135 million yen

8,450 million yen

9,800 million yen

4,800 million yen

SellerOgikubo Building YK

Azabu Green Terrace GK

GK North Beach

Domestic industrial
company

Acquisition date

May 29, 2014

July 4, 2014

Aug. 1, 2014

Dec. 1, 2014

Meguro Place Tower

River Gate

(Note 1)

Acquisition
timing19th Period
Glass City Shibuya

Higashi Shinjuku Building Domestic special purpose Domestic special purpose
TMK (Note 1)
company
company
Dec. 3, 2014

Mar. 2, 2015

Mar. 2, 2015

20th Period
Daiwa
Hatchobori ekimae

Daiwa
Hatchobori ekimae West

Total

Property nameArea

Shibuya Ward, Tokyo

Meguro Ward, Tokyo

Chuo Ward, Tokyo

Chuo Ward, Tokyo

Chuo Ward, Tokyo

Acquisition price

16,000 million yen

5,600 million yen

28,000 million yen

2,871 million yen

1,647 million yen

SellerGlass City TMK (Note 1)

Meguro Place TMK (Note 1)

Thames TMK (Note 1)

Domestic industrial
company

Domestic industrial
company

Acquisition date

May 1, 2015

May 1, 2015

Jun. 2, 2015

Sept. 11, 2015

Sept. 11, 2015

207,325 million yen(Note 2) The sum of i) the total acquisition price from the time of the above sponsor change on September 11, 2015 and ii) prices for additional acquisition of owned properties or of the site in owned properties during
the same period, is 207,745 million yen.

I. Overview of Daiwa Office Investment Corporation

13

External Growth Measures

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

LTV (based on total assets)

500.0

500

Investment for competitive
properties after thorough selection

450
400
350
300
250
200

287.3

278.1

269.1

265.0

25.5

150
100
50

Acquisition properties
Acquisition property

Acquisition properties

Acquisition property• Daiwa Nishi-Shimbashi• Daiwa Kudan• E SPACE TOWER• Daiwa Osaki
3-chome40.2• Daiwa Shibuya Dogenzaka• Daiwa Akasaka• Daiwa Shibuya Miyamasuzaka

41.7

40.0

Acquisition properties• Azabu Green Terrace• Kitahama
Grand Building• River Gate
• Daiwa Hatchobori ekimae• Daiwa Hatchobori ekimae
West

30.0

20.0
Acquisition properties

Acquisition property

Acquisition properties

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

0

44.3

Acquisition properties

28.9

28.1

60.0

50.0

43.0

40.6

37.5

34.4

34.2

34.0
25.3

314.9

313.2

311.3

413.2

387.5

364.0

352.7

332.0

70.0

445.7

Acquisition properties

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

10.0

0.0

8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

Mediumterm goal

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

is for properties acquired in the 20th FP, is for properties acquired in the 19th FP, is

Building age (years) for properties acquired after the sponsor change. Distance to station is indicated by
calculating 80m as one minute.
60• Invest heavily in the five central wards of Tokyo and equivalent area.
• Thoroughly select properties in view of actual demand toward location (distance tostation, station power, crowd attraction, surrounding environment), building specs, etc.

55

• Target properties to improve stability and profitability of our existing portfolio.

50• Invest in buildings less than 25 years of building age.

45

■ Sale Policy

40
35• Consider replacement of properties if necessary by sales in light of properties’ futurecompetitiveness, profitability, etc.

30

■ Number of Properties Reviewed for Acquisition(cases)
500

427

400

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

300
200

44 221
30

100
0

14

25

* Number of gross proposals (cases)

12th
FiscalPeriod13th
FiscalPeriod

268
25

14th
FiscalPeriod

300
28

15th
FiscalPeriod

264

356

393

296

17

15

16th
FiscalPeriod17th
FiscalPeriod20

80

15

Shinsen Place

10

Concept Aoyama
Daiwa Hatchobori ekimae

60

26

18th
FiscalPeriod23
19th
FiscalPeriod31

Daiwa Hatchobori
ekimae West

Daiwa Ebisu 4-chome

Glass City Shibuya

40
20

20th
FiscalPeriodRiver Gate

100

0

5
0

LAQUAS Higashi Shinjuku

0

1

2

3

4

5

Meguro Place Tower

6

7

11
8
9
10
Distance to station (minutes)

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

Status of Interest-Bearing Liabilities (as of November 30, 2015)
During the 20th Fiscal Period, DOI repaid existing loans of 15.6 billion yen in total and also conducted new debt financing of 16.6 billion
yen in total to refinance the aforementioned existing loans and to raise funds for the acquisition of new properties. While part of the new
debt financing (5.5 billion yen) was short-term borrowings due to strategic reasons, DOI was able to diversify repayment dates forlong-term borrowings. DOI will continue to focus on stable financial management.
■ Interest-Bearing Liabilities■ Change in Remaining Years at the Time of
Procurement of Interest-Bearing Liabilities

70.0(%) (year) 10.0

(billion yen) 280
Interest-bearing liabilities (left axis)

240

60.0

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

200

50.0

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

160

40.0

9.0
8.0

4.7 4.6

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

8.1

80

3.5

6.0

6.4

7.0

2.5

5.0

4.0

20.0

3.0

1.5

2.0

1.0

1.0

0.5

0.0

0.0

10.0

0

0.0
End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties■ Diversification of Repayment Dates

2.0

8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) Dotted line indicates average remaining years at the time of procurement
during the 20th Fiscal Period excluding short-term borrowings■ Balance of Borrowings by Financial Institution(million yen)
18,000Investment Corporation Bond

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

End of 20th
Fiscal Period

End of 20th
Fiscal Period

76.2%

3.0

30.0

40

23.8%

4.5
4.0

7.0

5.0
120

5.0 (year)

4.8
%

95.2%

Fixed interest rates

Long-term loans payable, etc.

Floating interest rates

Short-term loans payable and current
portion of long-term loans payable

Financial institution

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

Balance (mm yen)

39,90024,85020,25018,40014,50013,00011,500
6,000
5,500
5,000
5,000
4,500
2,500
2,500
2,000
2,000
2,000
2,000
1,500
1,300
1,000
1,000
500
300
200
3,000
2,100
192,300

Share

20.7%
12.9%
10.5%
9.6%
7.5%
6.8%
6.0%
3.1%
2.9%
2.6%
2.6%
2.3%
1.3%
1.3%
1.0%
1.0%
1.0%
1.0%
0.8%
0.7%
0.5%
0.5%
0.3%
0.2%
0.1%
1.6%
1.1%
100.0%■ Status of Rating
Rating agency

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

Target rating

RatingRating outlook

Issuer rating

A+

StableLong-term issuer rating

AA−

StableI. Overview of Daiwa Office Investment Corporation

15

Description of Asset Manager

Organization of Asset Manager (as of January 1, 2016)■ Description■ Directors and Auditors

Company Name

Daiwa Real Estate Asset Management Co., Ltd.

President and Representative
Akira Yamanouchi
Director

Address

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

Yuji Shinotsuka

Established

October 21, 2004

Vice President andRepresentative Director

Paid-in Capital

200 million yen

Vice President andRepresentative Director

Yoshiki Nishigaki

President

Akira Yamanouchi

Director

Naoyuki Owa

Director (non-executive)

Toshihiro Matsui

Board of Directors

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

Director (non-executive)

Mikita Komatsu

AuditorTamaki Shibayama

Auditor (non-executive)

Masaru Shirataki

Auditor (non-executive)

Shinji Kiso

No. of Employees

63 (excluding dispatched employees)

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

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

Association Membership

License No. (3)-83920, Governor of Tokyo■ Organizational Chart
Shareholders’ Meeting

License No. 34, Minister of Land, Infrastructure, Transport andTourism
Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association

Corporate Auditors
Board of Directors

Compliance Committee
Investment Committee（*）

President andRepresentative Director*Set up separately for each
investment corporation

Acquisition
Department
Office Investment
Team
Residential
Investment Team
Healthcare
Investment Team

Origination
Department

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

Private FundManagement Department

Customer Relations
Department

Finance Department

Advisory Team

Finance Team

Operational Team

Accounting Team

Administration
Department

Compliance Officer
Internal Control Office
Corporate Planning
Department

Management Team

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd④①

Investment Corporation②

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers
Executive Director: Nobuaki Omura
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

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

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

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

④ Sponsor support agreement⑤ Fiscal agency agreement(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified
Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc.
Daiwa Securities Group Inc. is the Asset Management Company’s parent company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation
Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No. 59 of 1963; including amendments thereto))16II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

20th Period 19th Period 18th Period 17th Period 16th Period

June 1, 2015 From Dec. 1, 2014 From June 1, 2014 From Dec. 1, 2013 From June 1, 2013
( From
To Nov. 30,2015 )( To May 31, 2015 )( To Nov. 30, 2014 )( To May 31, 2014 )( To Nov. 30, 2013 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
11,838
10,387
9,764
8,588
8,432
Rental revenues
11,777
10,112
9,693
8,491
8,367
Operating expenses
6,223
5,617
5,325
4,827
4,755
Property-related expenses
5,026
4,487
4,325
3,931
3,870
Operating income
5,615
4,770
4,439
3,761
3,677
Ordinary income
4,690
4,032
3,642
3,006
2,956
Net income
4,689
4,032
3,641
3,016
2,960
(2) Properties, etc. (as of end of period)
Total assets
460,706
432,233
399,555
380,723
363,654[period-on-period percentage changes][+6.6%][+8.2%][+4.9%][+4.7%][+6.2%]
Interest-bearing liabilities
192,300
191,300
160,800
163,700
147,700
Net assets
247,700
222,955
222,593
201,655
201,683[period-on-period percentage changes][+11.1%][+0.2%][+10.4%][−0.0%][+0.2%]
Unitholders’ capital
243,404
219,156
219,156
198,781
198,781(3) Distributions
Total distribution amount
4,689
4,032
3,641
3,016
2,960
Dividend payout
100.0%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)
484,000
441,000
441,000
395,798
395,798
Net assets per unit (yen)511,778505,566
504,746
509,490
509,561
Distribution per unit (yen)
9,688
9,142
8,256
7,621
7,478
Distribution amount from earnings per unit (yen)
9,688
9,142
8,256
7,621
7,478
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
1.1%
1.0%
0.9%
0.8%
0.8%
Notes 2and3[annual rate][2.1%][1.9%][1.9%][1.6%][1.7%]
ROE
2.0%
1.8%
1.7%
1.5%
1.5%
Notes 3and 4[annual rate][4.0%][3.6%][3.4%][3.0%][2.9%]
Capital ratio
53.8%
51.6%
55.7%
53.0%
55.5%
[period-on-period percentage changes][+2.2%][−4.1%][+2.7%][−2.5%][−3.3%]LTV (loan to value)
41.7%
44.3%
40.2%
43.0%
40.6%
Property leasing cash flows (NOI)
Note 5
8,455
7,180
6,866
5,916
5,826
(6) Other Referential Information
Number of investment properties
50
47
46
44
44
Number of tenants
Note 6
558
450
479
458
442
325,313.01 288,833.07 286,088.89 259,381.62 244,877.17
Total rentable area (m2)Occupancy rate
Note 7
98.3%
97.3%
97.2%
96.4%
96.3%
Depreciation
1,704
1,554
1,497
1,356
1,329
Capital expenditures
1,087
905
570
454
294
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 16th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 17th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 18th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 19th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 20th Fiscal Period are the annualized figures calculated based on 183 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as “DOI”)
was established on July 11, 2005 in accordance with the Act on Investment Trusts and Investment Corporations (ActNo. 198 of 1951; including amendments thereto) with Daiwa Real Estate Asset Management Co., Ltd. (former name
K.K. daVinci Select) (the “Asset Manager”) as the organizer. After its establishment, DOI implemented an additional
issuance of investment units through a public offering (99,600 units) on October 18, 2005 and then listed on the Tokyo
Stock Exchange, Inc. (TSE) Real Estate Investment Trust Section (stock code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition price), subsequent
activities, such as additional acquisition of properties and replacement of portfolio properties, resulted in the assets
under management amounting to 445,777 million yen as of the last day of November 2015.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear portfolio
development policy of specializing in investment in office buildings, with a particular focus on investment in a total
floor area of more than about 2,000m2 situated in downtown Tokyo, as well as through dedicated efforts to heighten
tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from June 2015 to November 2015)
The Japanese economy during the fiscal period under review saw a modest recovery against the
backdrop of the improving employment and income environments, the improvement in corporate
performance and increase in capital investment boosted by the advancing yen depreciation from the
Bank of Japan’s monetary easing measures as well as the depression of prices due to low crude oil
prices.
In the office building leasing market in central Tokyo, with new supply having settled down, the vacancy
rate took a turn after peaking in June 2013, dropping to 4.19% at the end of November 2015. Led by
improvement in the vacancy rate for large buildings, the overall vacancy rate that includes small- to
medium-sized buildings also continues to be on an improving trend. The drop in the vacancy rate has led
to an increase in office rent in some areas, and the market as a whole continues to see increase in rent,
albeit slight.
For the office building transaction market, an appetite for property acquisitions continued to be strong
among real estate companies, funds (including J-REITs) and oversea investors with the continuing
proactive lending attitude by financial institutions backed by the forecast of an increase in property prices
in accordance with expectations for economic recovery.
(B) Management Performance
In view of increasing the long-term EPS (EPS (net income per unit) after deducting gain on sales ofproperties) over the medium to long term, DOI continued to work on “external growth,” which aims toboost revenue through acquisition of properties, and “internal growth,” which aims to maximize income
generating from existing properties.
Concerning external growth, DOI acquired “River Gate” (acquisition price: 28,000 million yen) in June
2015, “Daiwa Hatchobori Ekimae” (acquisition price: 2,871 million yen) and “Daiwa Hatchobori EkimaeWest” (acquisition price: 1,647 million yen) in September 2015. As a result, DOI’s assets undermanagement as of the end of the 20th Fiscal Period (November 30, 2015) totaled 50 properties, the sum
total of acquisition prices of which amounted to 445,778 million yen.
Concerning internal growth, while the office leasing market weakened, DOI conducted proactive
leasing, such as capturing needs for floor expansion within the same property through strengthening
relationships with existing tenants and reinforcing collaboration with leasing brokers and property
managers. As a result, the occupancy rate as of the end of the 20th Fiscal Period (November 30, 2015)
was 98.3%.

18

(3) Overview of Capital Procurement(A) Procurement of Capital for New Property Acquisitions(a) In the 20th Fiscal Period, DOI issued the following investment units to fund the acquisition of new
properties.
・A public offering with the payment date on June 1, 2015 (41,045 issued units, paid-in price of 563,914
per unit, a total paid-in price of 23,145,850,130 yen) and a third-party allotment with the payment dateon June 24, 2015 (1,955 issued units, paid in price of 563,914 per unit, a total paid-in price of
1,102,451,870 yen) were implemented to fund the acquisition of a new property (River Gate) acquiredon June 2, 2015 and to procure part of the repayment funds for the borrowings made to acquire newproperties (Glass City Shibuya and Meguro Place Tower) acquired on May 1, 2015.
(b) In the 20th Fiscal Period, DOI made the following borrowings to fund the acquisition of new properties.
・A total of 5,000 million yen was borrowed from the Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo
Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Ltd. and Nippon Life Insurance Company
on September 11, 2015 to fund the acquisition of new properties (Daiwa Hatchobori Ekimae andDaiwa Hatchobori Ekimae West) acquired on the same day.
A commitment-type term loan agreement with a 20,500 million yen maximum available borrowing amount
was concluded with Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank,
Limited, Resona Bank, Ltd. and Shinsei Bank, Ltd. on April 27, 2015, but the agreement ended with theexpiration of the borrowing period on June 17, 2015.
(B) Procurement of Capital for Repayment of Borrowings
In the 20th Fiscal Period, DOI made the following borrowings to fund the repayment of borrowings that were
due for repayment.
・A total amount of 5,500 million yen was borrowed from Sumitomo Mitsui Banking Corporation,
Sumitomo Mitsui Trust Bank, Limited and Mizuho Bank, Ltd. on July 31, 2015 to fund part of therepayment of a total of 9,500 million yen borrowed from Sumitomo Mitsui Banking Corporation and
Sumitomo Mitsui Trust Bank, Limited that was due for repayment on the same day. The remaining
4,000 million yen was allocated from cash on hand.
・A total amount of 4,500 million yen was borrowed from Sumitomo Mitsui Banking Corporation, The
Nishi-Nippon City Bank, Ltd., The 77 Bank, Ltd. and The Musashino Bank, Ltd. on August 31, 2015
to fund the repayment of a total of 4,500 million yen borrowed from The Shizuoka Bank, Ltd., The
77 Bank, Ltd., The Musashino Bank, Ltd. and Sumitomo Mitsui Banking Corporation that was due forrepayment on the same day.
・A total amount of 1,600 million yen was borrowed from The Gunma Bank, Ltd., Nippon Life
Insurance Company and Taiyo Life Insurance Company on November 30, 2015 to fund therepayment of a total of 1,600 million yen borrowed from The Gunma Bank, Ltd., Nippon Life
Insurance Company and Taiyo Life Insurance Company that was due for repayment on the sameday.
(C) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 20th
Fiscal Period (November 30, 2015) stood at 192,300 million yen (short-term debt: 5,500 million yen; long-term
debt: 181,700 million yen; investment corporation bond: 5,100 million yen). The balance of the current portionof long-term debt stood at 3,700 million yen.
During the 20th Fiscal Period, DOI made borrowings centering on periods of between 7 years and 8.5 years
with the maximum being 9 years, and the average remaining period of interest-bearing liabilities as of the endof the 20th Fiscal Period stands at 4.59 years.
Furthermore, DOI concluded the interest-rate swap agreement to fixate future interest payment for the totalborrowing of 19,400 million yen in order to offset the risks of the possible increase of the interest rate.

II. Asset Management Report19

(4) Capital Expenditures during the 20th Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures implemented
during the 20th Fiscal Period. Capital expenditures for the 20th Fiscal Period amounted to 1,087 million yen
and, when combined with the 321 million yen in repair expenses charged to the 20th Fiscal Period expenses,
totals 1,408 million yen in construction work were implemented.
Name of real estate
properties (Location)
Shinjuku Maynds Tower(Shibuya-ku, Tokyo)
Daiwa Ebisu 4-chome(Shibuya-ku, Tokyo)
Daiwa Akasaka(Minato-ku, Tokyo)

PurposeRenovation work for central supervisorysystemRenovation work for air-conditioning
systemEstablishment of entrance on the public
open space side

Other
Total

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

Oct. 2013
Sep. 2015
Jun. 2015
Aug. 2015
Jan. 2015
Sep. 2015
Jun. 2015
Nov. 2015

Construction
amount paid
(millions of yen)
393
112
106
476
1,087

(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 20th Fiscal Periodof 11,838 million yen in operating revenues, 5,615 million yen in operating income, 4,690 million yen in ordinary
income and 4,689 million yen in net income.
Concerning distributions, to ensure that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation of
corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)), DOI decided to distribute the entire
amount of unappropriated retained earnings, excluding fractions of the distribution amount per unit that are lessthan 1 yen. Accordingly, DOI declared a distribution amount per unit of 9,688 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment
The Japanese economy going forward is expected to see a moderate economic recovery through recovery
in personal spending against the backdrop of favorable employment environment and the improved income
environment while various economic measures, centering on the public works projects and financial policies
promoted by the Abe administration and the monetary easing policy implemented by Bank of Japan continue.
However, factors, such as the downward swing of the Chinese economy, upset in emerging markets
accompanying the U.S. exit strategy, drop in stock prices around the world due to geopolitical risks,
downturn of the Eurozone economy and future development of the “triple fall (in bonds, yen and stocks)”
against the backdrop of concerns over losing fiscal discipline, pose potential risks of disrupting the Japanesereal economy and financial environment, and are thus thought to require attention.
In the Tokyo office building leasing market, while new supply is on a low note, factors such as improvement
in employment are stimulating demand, resulting in the vacancy rate dropping. Improvement in corporate
performance is forecast to increase demand for office floor space and rent is expected to improve as aconsequence. In the office building transaction market, backed by the favorable financing environment andexpectations of rent rising, among other factors, property acquisition appetite among investors overseas, realestate companies and funds (including J-REITs) is thought to grow even stronger.
(2) Future Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the office leasing market conditions described above, the tenant side is also expected to become
more selective with properties. Consequently, DOI will carry out operational management under thefollowing policy with an aim to enhance the competitiveness of existing properties and thereby increase
the long-term EPS over the medium to long term.
(a) Maintain and raise occupancy rates
Concerning existing tenants, strive to reduce vacancy risks by improving the quality of buildings,
equipment and management system. In addition, concerning new tenants, strive to maintain and raiseoccupancy rates through the provision of services that are of higher satisfaction levels than competing
properties through proactive participation in the market.

20

(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining office environments of hightenant satisfaction levels by implementing efficient operational management and reviewing systematicconstruction work by optimally leveraging the economies of scale achieved from proactively realizing
external growth.
(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on various
external growth strategies, while maintaining a balance with the asset acquisition environment andfinancing situation. In principle, considerations will focus on Tokyo as the investment target area, but DOI
will also consider investing in competitive properties in cities other than Tokyo from a viewpoint ofterritorially-distributed investments.
As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue tosearch for properties that meet its investment criteria by proactively gathering real estate transaction
market information through greater collaboration with the Asset Manager and Sponsor Group and utilizing
the Group’s extensive network of clients, partners, etc.
In the 20th Fiscal Period, DOI acquired “River Gate,” “Daiwa Hatchobori Ekimae,” and “Daiwa
Hatchobori Ekimae West” which is located in Tokyo. DOI believes that acquisition of these properties willcontribute to further stabilization and enhancement of the portfolio. DOI will continue to strive to acquire
properties in line with the investment strategy described above.
(C) Financial Strategy
DOI will conduct disciplined financial management of the following basic content.
(a) Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within the rangeof 40% to 50% at maximum, taking into consideration also the real LTV, etc., as a principle.
(b) Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period as a principle.
(c) Aim to have long-term loans account for at least 70% of total loans as a principle.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount equivalent to distributions paid, separately from working capital.
(D) Schedule of Capital Expenditures
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the expected construction amountincludes portions that are expensed as a separate account item of accounting costs.
Expected construction amount(millions of yen)
Name of real estate
properties(Location)

PurposeScheduled
implementation
periodTotalamountAmountpaid
duringcurrent
periodTotalamountalready
paid

Shinjuku Maynds Tower Replacement of hot-water coil
(Shibuya-ku, Tokyo)

From: Jan. 2016
To: May 2016

133

–

–

Integral Tower(Suginami-ku, Tokyo)

Repair work of exterior walls

From: Dec. 2015
To: May 2016

123

–

–

River Gate
(Chuo-ku, Tokyo)

Additional installment of special
high voltage electric substationbank and MCB board

From: Jan. 2016
To: May 2016

120

–

–

Shinjuku Maynds Tower Reinforcement of security(Shibuya-ku, Tokyo)
system

From: Jan. 2016
To: May 2016

92

–

–

Shinjuku Maynds Tower Additional installment of security(Shibuya-ku, Tokyo)
camerasFrom: Jan. 2016
To: May 2016

76

–

–

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

(Thousands of yen)

As of
May 31, 2015

As ofNovember 30, 2015

AssetsCurrent Assets:
Cash and cash equivalents (Notes 3 and 4)

22,790,814

18,700,270

275,792

238,836-515,291

403,225

386,625

185

551

Other current assets

72,379157,031

Total Current Assets

23,542,395

19,998,604

Land

12,302,227

12,302,227

Buildings and structures

3,130,285

3,139,196

Tools, furniture and fixtures

18,95818,958Construction in progress

3,449

3,573

Land in trust accounts

314,767,115

338,450,955

Buildings and structures in trust accounts

91,803,763

102,144,615

Machinery and equipment in trust accounts

707,599

777,674

Tools, furniture and fixtures in trust accounts

150,965

175,565

Construction in progress in trust accounts

408,642

27,452Other tangible fixed assets in trust accounts

4,337

4,337

(18,900,000)(20,603,805)

2,407,102

2,407,102

306,884

306,884

407,111,326

439,154,733

883

695

113,684

113,684

Long-term prepaid expenses

1,304,602

1,206,054

Deferred tax assets (Note 14)

110,868

186,816

Deferred investment corporation bond issuance costs

35,34432,390

Others13,53912,761

1,578,920

1,552,400

432,232,641

460,705,737

Tenant receivables
Consumption taxes receivable
Prepaid expenses
Deferred tax assets (Note 14)

Investment Properties, at cost (Notes 5 and 6):

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

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

22

(Thousands of yen)

As of
May 31, 2015

As ofNovember 30, 2015

Liabilities
Current Liabilities:
Accounts payable

889,756

844,893

Short-term debt (Notes 4 and 9)9,500,000

5,500,000

Long-term debt due within one year (Notes 4 and 9)8,300,000

3,700,000

632,432

541,568825

776

Accrued consumption taxes

342,585

57,157

Rent received in advance

1,298,772

1,941,024

Other current liabilities

357,535

204,480

Total Current Liabilities

21,321,905

12,789,898

5,100,000

5,100,000

Long-term debt (Notes 4 and 9)

168,400,000

178,000,000

Tenant security deposits including trust accounts (Note 4)

14,112,797

16,537,258

Derivative liabilities (Note 4)

343,138

578,198

Total Long-Term Liabilities

187,955,935

200,215,456

209,277,840

213,005,354

219,155,572

243,403,874

4,031,830

4,689,024

223,187,402

248,092,898

Deferred gains or losses on hedges(232,601)(392,515)

Total valuation and translation adjustments(232,601)(392,515)

Total Net Assets

222,954,801

247,700,383

Total Liabilities and Net Assets

432,232,641

460,705,737

Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bond (Notes 4 and 9)

Total Liabilities

Net Assets (Notes 8 and 15)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 441,000 units as of May 31,2015 and 484,000 units as of November 30, 2015
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments

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

III. Balance Sheets

23

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

(Thousands of yen)

For the fiscal period ended For the fiscal period ended
May 31, 2015
November 30, 2015
Operating Revenues:
Rental revenues (Note 7)
Other revenues related to property leasing (Note 7)
Gain on sale of investment properties (Note 12)
Total Operating Revenues
Operating Expenses:
Property-related expenses (Note 7)
Asset management fees
Asset custody fees
Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
New investment units issuance costs
Other non-operating expenses
Total Non-Operating Expenses

10,112,468
34,235240,547

11,777,301
60,695

10,387,250

11,837,996

4,486,646
838,944
20,432
67,7385,026,334
968,318
22,617
72,79021,2785,400
176,788

21,821
5,400
106,129

5,617,226
4,770,024

6,223,409
5,614,587

798
868
11,653772
805
11,99813,31913,575566,001
16,892
159,621591,940
16,708
162,633
160,735
6,521

8,366
750,880

938,537

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

4,032,463
4,032,463

4,689,625
4,689,625

887
6

806
3

Total Income Taxes (Note 14)
Net Income
Retained Earnings Brought Forward893
4,031,570
260
4,031,830

809
4,688,816
208
4,689,024

Retained Earnings at End of Period

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

24

IV. Statements of Income and Retained Earnings

V. Statements of Changes in Net Assets
For the fiscal periods ended May 31, 2015 and November 30, 2015

(Thousands of yen)

Unitholders’ Equity

Number of
Units(Units)Unitholders’CapitalRetained
Earnings

Deferred Gains
or Losses on
HedgesTotal Net
Assets441,000

219,155,572

3,641,156(203,636)

222,593,092

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

Net income––

4,031,570–

4,031,570

Net changes of items other thanunitholders’ equity

–

–

–

(28,965)(28,965)

Balance as of May 31, 2015

441,000

219,155,572

4,031,830(232,601)

222,954,801

Issuance of new investment units

43,00024,282,302––

24,248,302

Cash distributions declared––(4,031,622)–(4,031,622)

Net income––

4,688,816–

4,688,816

Net changes of items other thanunitholders’ equity

–

–

–

(159,914)(159,914)

484,000

243,403,874

4,689,024(392,515)

247,700,383

Balance as of November 30, 2014

Balance as of November 30, 2015

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

V. Statements of Changes in Net Assets

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

(Thousands of yen)

For the fiscal period
ended
May 31, 2015

For the fiscal period
endedNovember 30, 2015

Income before income taxes

4,032,463

4,689,625

Depreciation and amortization

1,555,389

1,704,770

Amortization of bond issuance costs

2,938

2,954

New investment units issuance costs–

160,735

Interest expense

582,893

608,648

Decrease in tenant receivables

28,20336,956

Increase (decrease) in accounts payable(38,144)

219,183

Increase in rent received in advance

142,070642,252

21,334,755–

Interest payments(578,393)(617,859)(Increase) decrease in consumption taxes receivable

243,389(515,291)

Other, net

272,853(401,246)

27,578,416

6,530,727(50,200,715)(34,102,121)

(780)

–

Proceeds from tenant security deposits

1,805,797

2,689,304

Refunds of tenant security deposits(1,018,898)(264,843)

Net Cash Used in Investing Activities(49,414,596)(31,677,660)

Proceeds from short-term debt

9,500,000

5,500,000

Repayment of short-term debt

(2,500,000)(9,500,000)

Proceeds from long-term debt

34,000,000

11,100,000

Repayments of long-term debt

(10,500,000)(6,100,000)–

24,087,567(3,640,870)(4,031,178)

Net Cash Provided by Financing Activities

26,859,130

21,056,389

Net Change in Cash and Cash Equivalents

5,022,950(4,090,544)

Cash and Cash Equivalents at Beginning of Period

17,767,864

22,790,814

Cash and Cash Equivalents at End of Period (Note 3)

22,790,814

18,700,270

Cash Flows from Operating Activities:

Decrease in investment properties due to sale

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

Cash Flows from Financing Activities:

Proceeds from issuance of new investment units
Distributions paid

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

26

VI. Statements of Cash Flows

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

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as“DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the“Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management(hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager,
as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating officeproperties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of November 30, 2015, DOI had ownership or trust beneficiary interests in 50 office properties withapproximately 325,313m2 of rentable office space and had leased office space to 558 tenants engaged in avariety of businesses. The occupancy rate for the office properties was approximately 98.3%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
DOI maintains its accounting records in Japanese yen.
DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

VII. Notes to Financial Statements

27

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

2-64 years
4-23 years
5-18 years

Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs andmaintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.
(c) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective
terms of the bonds.
(d) New Investment Units Issuance Costs
The issuance costs of new investment units are expensed when incurred.
(e) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements andincome tax bases of assets and liabilities using the statutory rate.
(f) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of theproperties are registered by records maintained in each jurisdiction by the local government. The taxes are imposedon the registered record owner as of January 1 of each year, based on an assessment made by the local government.
When a property is purchased within the calendar year, the taxes for corresponding calendar year are imposedon the seller. DOI pays the seller the corresponding amount of the taxes for the period from property acquisition
date to December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property,rather than expensing them. In subsequent calendar years, such taxes on investment properties are charged as
operating expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.

Capitalized real estate taxes

28

For the fiscal period ended
May 31, 2015
92,108(Thousands of yen)

For the fiscal period ended
November 30, 2015
125,634

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

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as of
May 31, 2015 and November 30, 2015 consisted of the following:(Thousands of yen)

As of May 31, 2015

As of November 30, 2015

Cash and deposits

16,703,953

16,618,093

Cash and deposits in trust

6,086,861

2,082,177

Cash and cash equivalents

22,790,814

18,700,270

VII. Notes to Financial Statements

29

Note 4 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units
for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bankborrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and welldiversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets and securities(in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties andrepay or redeem outstanding borrowings and bonds. These borrowings and bonds are exposed to liquidity risk. Suchrisk is managed in ways such as maintaining the LTV ratio at low levels, diversifying maturities, keeping the ratio of
long-term debt to total debt at high levels, and diversifying lenders. For the floating-rate borrowings exposed to therisk of future interest rate fluctuations, DOI uses derivative transactions (interest-rate swap) as hedging instruments, inorder to avoid interest rate fluctuations and to fix the amount of interest payments for floating-rate borrowings.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash
flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The
assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the
special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in the risk
management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits in theevent of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds.
Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term deposit andsetting a minimum credit rating requirement for the depository financial institutions (excluding deposits for settlement
purposes).
Supplemental Explanation regarding Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price. When there is no quoted market priceavailable, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in a different value. Also, the contractual amounts of derivativetransactions do not represent the market risk involved in these derivative transactions.

30

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

As of May 31, 2015

As of November 30, 2015

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents
Total

22,790,814

22,790,814–

18,700,270

18,700,270–

22,790,814

22,790,814–

18,700,270

18,700,270–

9,500,000

9,500,000–

5,500,000

5,500,000–

8,300,000

8,303,753

3,753

3,700,000

3,702,740

2,740

5,100,000

5,081,325(18,675)

5,100,000

5,149,380

49,380168,400,000

168,552,648

152,648

178,000,000

178,318,165

318,165

191,300,000

191,437,726

137,726

192,300,000

192,670,285

370,285(343,642)(343,642)–(579,872)(579,872)–

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

The financial instruments whose fair values are deemed extremely difficult to determine are excluded from theabove table (See Note 2 below).
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets:(1) Cash and cash equivalents
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of the fairvalue.
Liabilities:(1) Short-term debt, long-term debt due within one year and long-term debt
For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly
identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items, theirbook value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, theirfair value is calculated based on the present value of principle and interest cash flows discounted at the current
interest rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain
floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is calculated based on
the present value of principle and interest cash flows which are processed as a single unit with the interest-rate
swap.
(2) Investment corporation bond
The fair value of investment corporation bond is based on their quoted market price.

VII. Notes to Financial Statements

31

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

Type ofderivativetransaction

Hedged item

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

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

Long-term debt

66,400,000

64,400,000(343,642)

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

Long-term debt

32,850,000

27,350,000– (*2)

99,250,000

91,750,000(343,642)(Thousands of yen)Hedge
accounting method

Type ofderivativetransaction

Hedged item

As of November 30, 2015
Contracted amount
Fair value (*1)
Due after one year
Total

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

Long-term debt

82,800,000

81,300,000(579,872)

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

Long-term debt

30,350,000

28,350,000– (*2)

113,150,000

109,650,000(579,872)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps areprocessed as single unit with the hedged long-term debt.

2. Financial instruments whose fair value are deemed extremely difficult to determine
Tenant security deposits including trust accounts (with a book value of 14,112,797 thousand yen as of May 31,2015 and 16,537,258 thousand yen as of November 30, 2015) that have been deposited by tenants were
excluded from the scope of fair value disclosure because they are not marketable, and the actual deposit period
is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.

32

3. Redemption schedule for monetary claims(Thousands of yen)

As of May 31, 2015

Cash and cash equivalents
Total

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

Due after
five years––(Thousands of yen)

As of November 30, 2015

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
18,700,270––––
18,700,270––––
Due within
one year

Due after
five years––

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

As of May 31, 2015

Short-term debt
Investment corporation bondLong-term debt
Total

Due within
one year

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

Due after
five years

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

As of November 30, 2015

Short-term debt
Investment corporation bondLong-term debt
Total

Due within
one year

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

Due after
five years

5,500,000
–
–
–
–
–
–
–
– 3,000,000– 2,100,000
3,700,000 28,250,000 17,350,000 22,000,000 31,600,000 78,800,000
9,200,000 28,250,000 17,350,000 25,000,000 31,600,000 80,900,000

VII. Notes to Financial Statements

33

Note 5 – Investment Properties
Investment properties as of May 31, 2015 and November 30, 2015 consisted of the following:
As of May 31, 2015
Acquisition
cost

Accumulated
depreciation

Book value

Acquisition
cost

Accumulated
depreciation

Book valueLand

12,302,227–

12,302,227

12,302,227–

12,302,227

Buildings andstructures

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

1,497,633

3,139,196(1,720,162)

1,419,034

Tools, furnitureand fixtures

18,958(7,646)

11,312

18,958(8,508)10,450Construction inprogress

3,449

–

3,449

3,573

–

3,573

Land in trust
accounts

314,767,115–

314,767,115

338,450,955–

338,450,955

Buildings andstructuresin trust accounts

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

74,982,097

102,144,615(18,405,782)

83,738,833

Machinery andequipmentin trust accounts

707,599(367,021)

340,578

777,674(388,194)

389,480

Tools, furnitureand fixturesin trust accounts

150,965(66,678)

84,287

175,565(76,822)

98,743

Construction inprogressin trust accounts

408,642–

408,642

27,452–

27,452Other tangible
fixed assets
in trust accounts

4,337(4,337)–

4,337(4,337)–423,297,340(18,900,000)

404,397,340

457,044,552(20,603,805)

436,440,747

Total

34

(Thousands of yen)

As of November 30, 2015

Note 6 – Fair Value of Investment and Rental Properties
The book value, net changes in the book value and the fair value of the investment were as follows:(Thousands of yen)

For the fiscal period ended
May 31, 2015

For the fiscal period ended
November 30, 2015

Balance at beginning of period

378,935,081

406,699,107

Change during the period (Note 2)

27,764,026

32,424,592

Balance at end of period

406,699,107

439,123,699

Fair value (Note 3)

410,990,000

459,820,000

Book value: (Note 1)

Notes:
1. The book value represents the acquisition cost less accumulated depreciation.
2. Significant changes
For the fiscal period ended May 31, 2015, the major reasons of increase are acquisitions of six assets (48,785,200 thousand yen). The major reasonof decrease is disposition of five assets (21,325,541 thousand yen) and depreciation (1,553,853 thousand yen).
For the fiscal period ended November 30, 2015, the major reasons of increase are acquisitions of three assets (32,518,000 thousand yen). The major
reason of decrease is depreciation (1,703,686 thousand yen).
3. The fair values as of May 31, 2015 and November 30, 2015 were determined by the sum of appraisal values provided by external real estateappraisers.

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended May 31, 2015 and November 30, 2015 were as
follows:(Thousands of yen)

For the fiscal period ended
May 31, 2015

For the fiscal period ended
November 30, 2015

10,112,468

11,777,301

34,23560,695

10,146,703

11,837,996

791,273889,598

Utilities expenses

1,024,278

1,159,084

Taxes and dues

811,788883,294

Insurance expenses

14,355

16,633

Repair expenses

227,519

320,997

1,553,853

1,703,686

63,58053,042

Total rental expenses

4,486,646

5,026,334

Income from property leasing

5,660,057

6,811,662

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

Depreciation
Other

VII. Notes to Financial Statements

35

Note 8 – Net Assets
DOI issues non-par value units in accordance with the Investment Trust Act and all of the amounts issued aredesignated as stated capital. DOI maintains a minimum of 50 million yen of net assets as required by theInvestment Trust Act.

Note 9 – Short-Term Debt, Long-Term Debt and Investment Corporation Bonds
Short-term debt, Long-term debt and investment corporation bonds as of May 31, 2015 and November 30,
2015 consisted of the following:(Thousands of yen)

As of May 31, 2015
Unsecured loans due 2015 to 2024, principallyfrom banks and insurance companies with interest
rates mainly ranging from 0.3% to 1.1%

As of November 30, 2015

186,200,000

187,200,000

0.4% unsecured bond due 2019

3,000,000

3,000,000

1.0% unsecured bond due 2024

2,100,000

2,100,000

191,300,000

192,300,000

Total

Note:The interest rates presented are daily weighted average interest rates. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to calculate daily weighted average interest rates.

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of November
30, 2015 were as follows:(Thousands of yen)

Due within
one year
Short-term debt, long-term debt
and investment corporation bonds

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

Due after
five years

9,200,000 28,250,000 17,350,000 25,000,000 31,600,000 80,900,000

Note 10 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of May 31, 2015 andNovember 30, 2015 were as follows:(Thousands of yen)

As of May 31, 201536

As of November 30, 2015

Due within one year

8,320,103

9,657,806

Due after one year

16,533,506

14,628,732

Total

24,853,609

24,286,538

Note 11 – Commitment-Type Term Loans
DOI has entered into credit facilities in the form of commitment-type term loan agreements with five banks asof May 31, 2015 as follows:(Thousands of yen)

As of May 31, 2015
Total amount of commitment-type term loans

20,500,000

Borrowing execution balance–

Net unused balance

20,500,000

DOI had no credit facilities in the form of commitment-type term loan agreements as of November 30, 2015.

Note 12 – Gain on Sale of Investment Properties
Gain on sale of investment properties for the fiscal period ended May 31, 2015 was as follows:(Thousands of yen)

As of May 31, 2015
Proceeds from sale of investment properties

21,846,254

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

Other expenses related to sale(280,166)

Gain on sale of investment properties

240,547

The sales prices for individual properties are not disclosed because consents from the counterparties have notbeen obtained. The net gain on sale of investment properties is presented after offsetting gain on sale ofinvestment properties of 685,892 thousand yen with loss on sale of investment properties of 445,345 thousandyen.
No investment properties were sold during the fiscal period ended November 30, 2015.

Note 13 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings intrust as of May 31, 2015 and November 30, 2015.

VII. Notes to Financial Statements

37

Note 14 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement
to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation
Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable
income of DOI will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able
to deduct such amount from taxable income.
The following table summarizes the significant difference between the statutory tax rate and DOI’s effective tax
rate for financial statement purposes.

(%)

For the fiscal period ended
May 31, 2015

For the fiscal period ended
November 30, 2015

Statutory tax rate

34.15

32.31

Deductible cash distributions(34.14)(32.31)Others0.01

0.02

Effective tax rate

0.02

0.02

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

As of May 31, 2015

As of November 30, 2015

Deferred tax assets:
Accrued enterprise tax

1310

126,411

187,357

126,424

187,367

Deferred gains on hedges

15,371–

Total deferred tax liabilities

15,371–

Net deferred tax assets

111,053

187,367

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

38

Note 15 – Per Unit Information
Information about earnings per unit for the fiscal periods ended May 31, 2015 and November 30, 2015 and net
assets per unit as of May 31, 2015 and November 30, 2015 were as follows:(Yen)

For the fiscal period ended
May 31, 2015

For the fiscal period ended
November 30, 2015

Net income per unit

9,141.88

9,692.56

Weighted average number of units outstanding (units)

441,000

483,754

Earnings per Unit:(Yen)

As of May 31, 2015
Net Assets per Unit

As of November 30, 2015

505,566

511,778

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

Note 16 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, thetotal amount of dividends that DOI has determined to pay out is 4,031,622,000 yen for the fiscal period ended
May 31, 2015 and 4,688,992,000 yen for the fiscal period ended November 30, 2015 that are a multiple of
441,000 and 484,000 — the number of units outstanding as of May 31, 2015 and November 30, 2015,
respectively. Furthermore, DOI does not pay out dividends that exceed accounting profits as outlined in Article
32-2 of DOI’s Articles of Incorporation.
(Yen)

Unappropriated retained earnings
Cash distributions declared
Retained earnings brought forward

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

For the fiscal period ended
November 30, 2015
4,689,024,142

4,031,622,000

4,688,992,000

208,382

32,142

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

Cash distributions per unit
Board of directors meeting dates

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

For the fiscal period ended
November 30, 2015
9,688

July 15, 2015

January 20, 2016

VII. Notes to Financial Statements

39

Note 17 – Related-Party Transactions
Not applicable.

Note 18 – Segment Information
For the fiscal period ended May 31, 2015 and November 30, 2015
Segment Information
Segment information has been omitted as DOI has only one segment, which is property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements of income
and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for more than 90% of
total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for more than 90%of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of theoperating revenues recorded in the statements of income and retained earnings.

Note 19 – Significant Subsequent Events
Not applicable.

40

VIII. Independent Auditor’s Report

VIII. Independent Auditors’ Report41

IX. Investor Information
History of Investment Unit Price
16,000 (units)(yen) 800,000
Investment unit price (left axis)

Trading volume (right axis)

700,000

14,000600,000

12,000500,000

10,000400,000

8,000

300,000

6,000

200,000

4,000

100,000

2,000

0

0

2013 2014
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2015
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

Overview of Investment Units and Unitholders (as of November 30, 2015)■ No. of investment units by investor type
20th
Fiscal Period

Individuals/others
22,957 units (4.7%)

Financial institutions
215,414 units (44.5%)■ No. of unitholders
by investor type
Foreigners 46,728 units (9.7%)

Total: 484,000 units
Other domestic corporations 192,037 units (39.7%)

19th
Fiscal Period

Individuals/others
23,982 units (5.4%)

Financial institutions
187,794 units (42.6%)

Securities firms 6,864 units (1.4%)

Foreigners 36,593 units (8.3%)

Total: 441,000 units
Other domestic corporations 191,658 units (43.5%)

Name of Investor

1. Daiwa Investment Management Inc.

128,905 26.63%

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

78,790 16.28%

3. Daiwa Securities Group Inc.

59,321 12.26%

5. The Master Trust Bank of Japan, Ltd. (Trust Account)
6.

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

7. Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

52,880 10.93%

72(0.8%)

Other domestic
corporations

176(1.8%)

Foreigners

196(2.0%)

Securities firms

19(0.2%)

Total

9,570

January 20, 2016 : Announcement of financial resultsfor 20th Fiscal Period
February 15, 2016 : Sending of Japanese version Business
Report for 20th Fiscal Period(Statement of Financial Performance)
February 16, 2016 : Start paying distributions for20th Fiscal PeriodNov.
End offiscal periodAug.

50,780 10.49%
17,168

3.55%

4,356

0.90%

8.

BNP Paribas Securities Services Sydney/
Jasdec/Australian Residents

3,247

0.67%

9.

State Street Bank -West Pension Fund
Clients- Exempt 505233

3,151

0.65%

10.

BNP Paribas Securities Services Luxembourg/
Jasdec/Henderson HHF Sicav

1,965

0.41%

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

42

Financial institutions

IR Calendar
Number ofPercentage
Units Owned
Share(units)Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)

9,107(95.2%)

Securities firms 973 units (0.2%)

Top Ten Unitholders (as of November 30, 2015)4.

Individuals/others

July

Jan.
End offiscal period

Feb.

May
July 2016: Announcement of financial results for21st Fiscal Period
August 2016 : Sending of Japanese version Business
Report for 21st Fiscal Period(Statement of Financial Performance)
August 2016 : Start paying distributions for21st Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

Held at least once every two years

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

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

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

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

Newspaper in which notice is posted

Nikkei Inc.

Manager of Unitholder Registry, etc.

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

Office handling administrative affairs

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

Service counter

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

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

Daiwa Office Investment Corporation

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

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

IX. Investor Information

43

The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a brightand open investment corporation. We will continue to aim to be a highly-transparent investment corporation that isfurther cherished and trusted by our investors and tenants.