Asset Management Report for 14th Period(Semi-Annual Report for 14th Period)
From January 1, 2013 to June 30, 2013

I. Greetings
To Our Unitholders
We would like to express our sincere gratitude for your continued support of Japan Excellent, Inc. (JEI) and Japan
Excellent Asset Management Co., Ltd.

We hereby report the financial results of JEI for the 14th period (from January 1, 2013 to June 30, 2013).
JEI recorded total revenues of 8,418 million yen and net income of 2,598 million yen as performance for the period. The
distribution per unit was the same level as the 13th period and the 12th period at 12,200 yen for continued stable
distribution payout.

JEI has been expanding its asset size through capital increase by public offering in the 10th period and subsequent
property acquisitions, and such efforts were continued into the 14th period with another capital increase by public
offering to further promote expansion of asset size. Four properties, including AKASAKA INTERCITY, were acquired
upon the capital increase by public offering and two properties, including Kowa Nishi-Shimbashi Building, were alsoacquired thereafter to acquire a total of six properties. Acquisition of the properties in a total amount of 28.5 billion yen,centering on downtown properties with high growth potential, led to ongoing steady growth.

In addition, focus on leasing up vacant space as early as possible, centering on properties at issue, and other efforts
resulted in substantial improvement in the occupancy rate from 94.0% at the end of the 13th period to 97.1%.

About Future Asset Management
In the office building leasing market, in central Tokyo, office demand is growing and the vacancy rate is still on an
improving trend.

With this perspective, JEI will closely coordinate with the property management companies more than ever before andendeavor to secure stable occupancy and enhance profitability of the portfolio over the medium- to long-term. At thesame time, we will pursue opportunities to invest in excellent real estate properties for continued growth of the portfolio
in view of achieving the immediate target of 300 billion yen and even greater expansion in asset size.
In terms of finance, we will continue our efforts in conducting stable financial operations by promoting conversion to
fixed interest rates in preparation for the risk of interest rate rises, as well as striving to diversify maturity dates andminimize borrowing costs.

In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and other laws andregulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the status of ouroperations and asset management to our unitholders.

We kindly ask for your continued understanding and support.
Chifumi Toda
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.
Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

2II. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
10th Period 11th Period 12th Period 13th Period
14th Period
January 1,
July 1, 2011
January 1, July 1, 2012 to January 1,
2011 to June to December 2012 to June December 31, 2013 to June30, 2011
31, 2011
30, 2012
2012
30, 2013

Fiscal period(Millions of
yen)

7,337

7,085

7,740

7,599

8,418

(Rental revenues)(Millions of
yen)

7,034

7,085

7,587

7,597

8,409

Operating expenses(Millions of
yen)

4,117

4,116

4,400

4,427

4,871

(Millions of
yen)

3,555

3,645

3,901

3,950

4,350

Operating income(Millions of
yen)

3,220

2,969

3,340

3,172

3,546

Ordinary income(Millions of
yen)

2,362

2,237

2,435

2,310

2,589

Net income(Millions of
yen)

2,313

2,236

2,434

2,309

2,598

Total assets(Millions ofyen)

209,142

227,249

228,818

228,020

257,613

(4.9)

(8.6)

(0.6)

(－0.3)(12.9)

104,366

104,338

104,537

104,545

120,683(16.9)

(0.0)

(0.1)

(0.0)

(15.4)(Millions ofyen)

102,052

102,052

102,052

102,052

117,901

Outstanding investment units(units)188,650

188,650

188,650

188,650

224,950

Net assets per unit

(yen)553,227

553,081554,134

554,175

536,488

Net income per unit (Note 2)(yen)

12,677

11,853

12,906

12,241

11,884(Millions of
yen)

2,263

2,236

2,301

2,309

2,744

Distribution per unit

(yen)

12,00011,854

12,20012,242

12,200(Profit distribution per unit)(Distribution in excess ofearnings per unit)
Return on assets (Note 3)(yen)

12,00011,854

12,20012,242

12,200

(yen)

(－)

(－)

(－)

(－)

(－)

（％）

1.2

1.0

1.1

1.0

1.1

（％）

(2.3)

(2.0)

(2.1)

(2.0)

(2.2)

Revenues(Property operating expenses)(Period-on-period change)(Note 1)
Net assets(Period-on-period change)(Note 1)
Unitholders’ capital

Total distribution(Annualized rate)
Return on equity (Note 4)（％）(Millions of
yen)
（％）

（％）

2.4

2.1

2.3

2.2

2.3

(Annualized rate)

（％）

(4.8)

(4.3)

(4.7)

(4.4)

(4.7)

Capital ratio (Note 5)

（％）

49.9

45.9

45.7

45.8

46.8

（％）

(5.1)

(－4.0)(－0.2)

(0.1)

(1.0)

（％）

97.8

100.0

94.5

100.0

105.6

Number of investment properties(properties)

19

23

24

24

28

Number of tenants(tenants)

109

124

136

134

152

Total leasable space（㎡）

234,547

262,464

266,981

266,915

302,505(Period-on-period change)
Payout ratio (Note 6)

Occupancy rate

（％）

92.4

93.8

94.7

94.0

97.1

Depreciation(Millions of
yen)

1,080

1,156

1,260

1,284

1,433

Capital expenditure(Millions of
yen)

347

357

393

283

572

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

3

Net operating income (NOI)(Note 7)
Funds from operation (FFO) per
unit (Note 8)
FFO multiples (Note 9)
Debt service coverage ratio(DSCR) (Note 10)
Interest-bearing debt
Loan-to-value (Note11)(Millions of
yen)

4,559

4,595

4,946

4,932

5,493

(yen)

16,391

17,982

18,78019,05017,924(times)

12.2

8.4

10.5

12.7

15.4

(times)

4.5

4.3

4.2

4.0

4.4

(Millions ofyen)

95,500112,800

113,800

113,300

125,400

（％）

45.7

49.6

49.7

49.7

48.7

Number of days in operation(days)
181
184
182
184
181
(Note 1) Period-on-period change of total assets and net assets are rounded down to one decimal place.
(Note 2) Net income per unit is calculated by dividing the net income by the weighted-average number of units
outstanding during the six months period.
(Note 3) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100 (Theratio is rounded to one decimal place.)(Note 4) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100 (The ratio isrounded to one decimal place.)(Note 5) Capital ratio = Period end net assets / Period end total assets × 100 (The ratio is rounded to one decimal place.)(Note 6) Payout ratio = Total distribution / Net income × 100 (The ratio is rounded down to one decimal place.)(Note 7) NOI = Rental revenues – Property operating expenses + Depreciation(Note 8) FFO per unit = (Net income + Depreciation – Gain on sale real estate + Loss on sale of real estate) / Number of
Outstanding investment units (The figure is rounded down to the whole number.)(Note 9) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one
decimal place.)(Note 10) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment
corporation bonds) (The ratio is rounded one first decimal place.)(Note 11) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100 (The ratio is rounded to one
decimal place.)(2) Asset Management Development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006 under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter referred to the “Investment Trust Law”). On March 15, 2006, it
completed the corporate registration to the Kanto Finance Bureau (registration number 52, issued by the Head of
the Kanto Local Finance Bureau) and listed on the Real Estate Investment Trust Section of the Tokyo Stock
Exchange (Securities Code: 8987) on June 27, 2006. Since the listing, we have continued investment management
primarily in office buildings with the aim of maintaining sound corporate growth and stable revenues from themedium- to long-term perspectives. On June 30, 2013, we settled our fourteenth period.

1) Business conditions and results
During the period, the Japanese economy saw monetary policies since the inauguration of a newadministration yield such results as improvement in the export environment and rise in stock prices,leading to greater expectations for improvement in corporate performance and personal consumption.
However, with uncertainty still in European and Chinese economic conditions and yet to be marked
increase in employment and capital investment of domestic companies, impact on the real economy
continues to be limited.
In the office building leasing market, with demand for relocation of offices for expansion or integration
growing active, backed by economic recovery and expectations for improvement in corporate performance,
the vacancy rate continues to be on a modest improving trend. In Osaka, although the vacancy rate rose at
one point due to large volume of supply of office floor space in the Umeda/Nakanoshima district,movements have settled down with increase in demand. Concerning the rent level, while going through amix of ups and downs in general but remaining roughly flat overall, signs of it turning around for some
excellent buildings in central Tokyo and other factors suggest downward pressures on rent are easing.
Under these circumstances, JEI made progress in leasing up vacant space, centering on properties with low
occupancy, resulting in the portfolio occupancy rate at the end of the period increasing from the previous
period’s 94.0% by 3.1 points to 97.1% in the period under review.
Asset Management Report for 14th period (Semi-Annual Report for 14th Period)4

In the real estate investment market, with J-REITs newly listing and increasing capital by public offering
one after another, transactions of investment properties increased. Among these, many of the transactionsof properties regarded as being “large” and “excellent” were made between J-REITs and their sponsors.
On the other hand, transactions of properties held by business companies were also occasionally found. At
JEI, AKASAKA INTERCITY (additional), Osaka Kogin Building (Land with Leasehold Interest), Core
City Tachikawa and SE Sankyo Building were acquired through the capital increase by public offering
implemented in January 2013, and these were followed by acquisition of Kowa Nishi-Shimbashi Building
and Kawasaki Nisshincho Building (additional).
The entire real estate portfolio of JEI at the end of the period was 28 properties in terms of the number ofproperties held, 245.5 billion yen in investment amount (on an acquisition price basis) and 302,505.42m2(91,507.88 tsubo) in total leasable space at a period-end occupancy rate of 97.1% (up 3.1 points comparedwith the previous period).
2) Fund raising highlights
During the period, JEI resolved to issue investment units by primary offering and to issue new investment
units by third-party allotment and, through these issuances, procured 14.4 billion yen on January 30, 2013
and 1.4 billion yen on February 27, 2013 in funds, respectively. The funds procured through this issuanceof new investment units and a 8.6 billion yen short-term loan based on a revolving credit facility taken out
on March 1, 2013 were used as a portion of the payment for acquisition of specified assets.
In addition, a 4.0 billion yen short-term loan based on a revolving credit facility was taken out on March
28, 2013 to use as a portion of the payment for acquisition of Kowa Nishi-Shimbashi Building.
For refinancing long-term loans of 19.6 billion yen which matured on June 28, 2013, JEI borrowed longterm loans in the same amount (breakdown: 2 billion yen in 8-year fixed interest loan, 2.6 billion yen in 6year and 7-month floating interest loan, 1 billion yen in 6-year and 7-month fixed interest loan, 11 billion
yen in 5-year floating interest loan, 2 billion yen in 4-year and 5-month floating interest loan, and 1 billion
yen in 4-year and 5-month fixed interest loan). As for floating interest loans (15.6 billion yen in total), weconverted all of them from floating-rate debts to fixed-rate debts through interest rate swaps.
As a result, as of the end of the period, JEI had the average remaining debt maturity of interest-bearing
debts at 3.01 years, long-term borrowing ratio at 100.0 percent, fixed rate ratio at 84.4 percent, andweighted average interest rate for loans purchased at 1.28 percent. Outstanding interest-bearing debts
totaled 125.4 billion yen, 101.4 billion yen in long-term loans (including 8 billion yen in long-term loans
due within one year) and 24 billion yen in investment corporation bonds. (The loan to value ratio to thetotal assets was 48.7 percent as of the end of the period.)
JEI has registered the issuance of investment corporation bonds for the purpose of dynamic arrangement oflong-term funds as follows:(Bond Issuance Registration Highlight)
Type

Investment
corporation bond

Estimated amountof issuance
100 billion yen

Scheduled period for issuance
From February 9, 2012 to February 8, 2014

The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of June 30, 2013)

Credit rating agency

Issuer rating (outlook)

Individual debt issue
rating (Note 1)

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

Long-term issuer rating
AA- (Stable) (Note 2)

AA- (Note 2)

Issuer rating
A+ (Stable) (Note 3)

A+ (Note 3)

Moody’s Japan

Issuer rating
A3 (Stable)―(Note 1) Ratings for unsecured investment corporation bonds (No.1 through No.4).

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)5

(Note 2) JEI newly received a long-term issuer rating and bonds rating from Japan Credit Rating Agency, Ltd.
(JCR) on July 3, 2013.
(Note 3) Concerning the ratings received from Rating and Investment Information, Inc. (R&I), the issuer rating waschanged from AA- (Negative) to A+ (Stable) and the bonds rating was changed from AA- to A+.

3) Financial results and distribution highlights
As a result of the above investments, JEI posted 8,418 million yen in total revenues, 3,546 million yen in
operating income, 2,589 million yen in ordinary income and 2,598 million yen in net income for the period
under review.
Concerning distributions in the period under review, by applying special provisions of the tax system on
investment corporations (Section 67-15 of theSpecial Taxation Measures Law ), as well as adding tounappropriated retained earnings the amount of reversal of a portion (146,020,766 yen) of the reserve for
reduction entry that had been set aside by applying the “Special Provisions for Taxation in the Event ofAdvance Acquisition of Land, etc. in 2009 and 2010” under Section 66-2 of the Special Taxation Measures Law
for the purpose of stabilizing the distribution level, JEI decided to distribute 2,744,390,000 yen, which is theintegral multiple of the number of investment units issued and outstanding (224,950 units), as distribution of
earnings. As a result, distribution per unit was 12,200 yen.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)63) Capital Increase
JEI carried out additional capital increase by public offering (33,000 units) on January 30, 2013, followed byissuance of investment units by third-party allotment (3,300 units) as a result of exercise of a greenshoe option by
Mizuho Securities Co., Ltd. (the lead manager of the primary offering) on February 27, 2013, raising a total
amount of 15,848 million yen in funds. The outline of the changes in the number of investment units issued andoutstanding and unitholders’ capital is as follows:
Unitholders’ capital
Paid-up Date
Capital transaction
Capital transaction (units)
Remarks(Millions of yen)
ChangeFebruary 20, 2006

Private placement
for incorporation

June 26, 2006

Balance

ChangeBalance

400

400

200

200

(Note 1)

Public offering

128,000

128,400

64,23064,430(Note 2)

July 21, 2006

Allocation of
investment units toa third party

6,400

134,800

3,211

67,641(Note 3)

July 11, 2007

Public offering

19,000

153,800

18,702

86,344(Note 4)

August 8, 2007

Allocation of
investment units toa third party

750

154,550738

87,083(Note 5)January 31, 2011

Public offering

31,000185,550

13,608100,691(Note 6)

February 28, 2011

Allocation of
investment units toa third party

3,100

188,650

1,360

102,052(Note 7)January 30, 2013

Public offering

33,000221,650

14,408116,460(Note 8)

Allocation of
investment units to(Note 9)3,300
224,950
1,440
117,901
a third party(Note 1) JEI was incorporated through private placement at a price of 500,000 yen per unit.
(Note 2) New investment units were issued at an offer price of 520,000 yen per unit (issue price of 501,800 yen perunit) through a public offering in order to fund acquisition of new properties which were acquired at the timeof the listing.
(Note 3) New investment units were issued at an issue price of 501,800 yen per unit through an allocation of
investment units to a third party in order to partially fund new property acquisitions.
(Note 4) New investment units were issued at an offer price of 1,019,200 yen per unit (issue price of 984,360 yen perunit) through a public offering in order to partially repay debts procured to acquire properties in the second
period.
(Note 5) New investment units were issued at an issue price of 984,360 yen per unit through an allocation of
investment units to a third party in order to partially repay debts procured to acquire properties in the second
period.
(Note 6) New investment units were issued at an offer price of 454,930 yen per unit (issue price of 438,984 yen perunit) through a public offering in order to repay short-term loans procured to acquire properties in the ninth
period and to fund acquisition of a new property which was acquired in the tenth period.
(Note 7) New investment units were issued at an issue price of 438,984 yen per unit through an allocation of
investment units to a third party in order to repay short-term loans procured to acquire new properties in the
ninth period and to fund acquisition of a new property which was acquired in the tenth period.
(Note 8) New investment units were issued at an offer price of 451,425 yen per unit (issue price of 436,609 yen perunit) through a public offering in order to fund acquisition of new properties which were acquired at the
fourteenth period.
(Note 9) New investment units were issued at an issue price of 436,609 yen per unit through an allocation of
investment units to a third party in order to fund acquisition of properties acquired in the fourteenth period.

February 27, 2013

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

7

[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listed on theReal Estate Investment Trust Section of the Tokyo Stock Exchange during each period is as follows:
11th period
13th period
Fiscal period 10th period
12th period
14th period(December(December(June 2013)(closing date) (June 2011)(June 2012)
2011)
2012)
Investment unit
market priceHighest (yen)543,000

408,000

430,000

511,000

739,000

Lowest (yen)363,500

295,500

297,600

371,000

463,000(Note) The highest and lowest prices of investment units refer to the closing prices on the Real Estate Investment Trust
Section of the Tokyo Stock Exchange.

(4) Distributions Paid
Concerning distributions in the period under review (14th period), based on application of special provisions of
the tax system on investment corporations (Section 67-15 of the Special Taxation Measures Law) and adding tounappropriated retained earnings the amount of reversal of the reserve for reduction entry, JEI decided to
distribute 2,744,390,000 yen, which is the integral multiple of the number of investment units issued andoutstanding (224,950 units), as distribution of earnings. As a result, distribution per unit was 12,200 yen.
Fiscal period

Accounting period
Retained earnings at end of
period (Thousands of yen)
Retained income (Thousandsof yen)Total cash distribution
amount (Thousands of yen)
(Cash distributions perunit) (yen)Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)
Total refund of investment
equity(Refund of investment perunit)

10th period

11th period

12th period

13th period

14th period

January 1, 2011
to June 30, 2011

July 1, 2011 to
December 31,
2011

January 1, 2012
to June 30, 2012

July 1, 2012 to
December 31,
2012

January 1, 2013
to June 30, 2013

2,314,032

2,236,262

2,434,824

2,309,504

2,598,369

50,232

5

133,29451－

2,263,800

2,236,257

2,301,530

2,309,453

2,744,390(12,000)(11,854)(12,200)(12,242)(12,200)

2,263,800

2,236,257

2,301,530

2,309,453

2,744,390(12,000)(11,854)(12,200)(12,242)(12,200)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
In the Japanese economy ahead, there are growing expectations for economic recovery, such as increase inpublic investment and corporate capital investment as well as improvement in personal consumption andpickup in exports, due to the effects of monetary policies and economic measures. However, withuncertainty in the global economy remaining, rise in long-term interest rates, consumption tax hike trends,
uncertainty over the sustainability of corporate earnings and personal consumption sentiment and otherfuture trends need to be closely watched.
In the office building leasing market, with expectations for continued strong growth in office demand, thevacancy rate is expected to continue to be on an ongoing trend of improving, albeit gradually. In addition,with downward pressures on the rent level also easing, rent is forecast to start slowly turning around after
hitting bottom, centering on large, excellent buildings
Asset Management Report for 14th period (Semi-Annual Report for 14th Period)8

In the real estate investment market, given the still favorable fund procurement environment and also
anticipation of high real estate transaction prices, the investment needs of J-REITs and other market players
are forecast to increasingly grow. On the other hand, given expectations for future rise in real estate prices
for sellers, the forecast is that the rush to sell will decrease and the volume of supply of, in particular, highinvestment-grade properties to the real estate investment market will considerably decrease, and real estatetransaction prices are thus expected to rise.
2) Policy and issues on future investment management
Amid delay in recovery in the office building leasing market, JEI expects earnings from the existing
portfolio to turn around in the next period onward, because there are prospects of steady early narrowing of
the rent gap and improvement of the occupancy rate through leasing up of vacant space as early as possible
at low-occupancy properties and also because of full-period contribution of the newly-acquired properties.
Going forward, we will endeavor to maintain and improve earnings of the entire portfolio by keeping andraising the rent level based on market trends and further improving the occupancy rate. Moreover, in orderto maintain asset value and improve property competitiveness over the medium to long term, we willconsistently implement additional strategic investment plans.
For external growth, we will continue to keep aiming for acquisition of competitive properties, including
asset replacements, with well-balanced investments based on size, concentration and target area in mind toincrease asset size and realize stable profitability in our portfolio over the medium- to long-term. To thisend, we will continue enhancing further interaction and collaboration with sponsor companies and have ourasset management company cultivate and refine property information sources in an effort to proactively
gain access to market information and thereby keep seizing the right business opportunities. On a further
note, of the properties acquired during the period, AKASAKA INTERCITY (additional), Osaka Kogin
Building (Land with Leasehold Interest), Kowa Nishi-Shimbashi Building and SE Sankyo Building wereacquisitions of properties from sponsors or through bridge funds from sponsors.
As for financial operations, the fund-raising environment is generally favorable for REITs. Still, we willconsistently work on stable and sound financial operations to address future changes in situations in andoutside Japan, through endeavoring to convert floating-rate debts to fixed-rate debts, diversify maturity
dates, lengthen the remaining period of debts, ensure liquidity by renewing commitment lines and maintainappropriate ratio of interest-bearing debts.
(6) Subsequent Events
None

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)9

2. Outline of the Investment Corporation(1) Investment unit
10th
As of June 30,
2011

Fiscal period

2,000,000
Number of units
authorizedunits
Number of units
issued and outstanding 188,650 units
102,052 million
Unitholders’ capital
yen

11th
As of December
31, 2011

12th
As of June 30,
2012

13th
As of December
31, 2012

14th
As of June 30,
2013

2,000,000
units

2,000,000
units

2,000,000
units

2,000,000
units

188,650 units

188,650 units

188,650 units

224,950 units

102,052 million
yen102,052 million
yen102,052 million
yen

117,901 million
yen

Number of unitholders 7,411 individuals 7,875 individuals 7,447 individuals 6,760 individuals 7,361 individuals(2) Unitholders
Major unitholders as of June 30, 2013 are as follows:
Name

Address

Number ofunits held
(Units)Ratio of number of units
held to outstanding
investment units (%)

Japan Trustee Services Bank, Ltd.
1-8-11 Harumi, Chuo-ku, Tokyo(Trust Account)

57,163

25.41

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

2-11-3 Hamamatsu-cho, Minato-ku, Tokyo

17,773

7.90

NIPPON STEEL KOWA REALESTATE CO., LTD.

1-15-5 Minami Aoyama, Minato-ku, Tokyo

14,312

6.36

Harumi Island Toriton Square Office Tower Z,
1-8-12 Harumi, Chuo-ku, Tokyo

13,196

5.87

2-2-2 Otemachi, Chiyoda-ku, Tokyo

12,689

5.64

NOMURA BANK(LUXEMBOURG) S.A.

BATIMENT A, 33, RUE DE GASPERICH,
L-5826, LUXEMBOURG

7,613

3.38

North Pacific Bank, LTD.

3-7 Odori-Nishi, Chuo-ku, Sapporo-shi,
Hokkaido

4,197

1.87

The Dai-ichi Life Insurance
Company, Limited

1-13-1 Yuraku-cho, Chiyoda-ku, Tokyo

4,132

1.84

The Chugoku Bank, LTD.

1-15-20 Marunouchi, Kita-ku, Okayama-shi,
Okayama

2,881

1.28

2,743

1.22

136,699

60.77

Trust & Custody Services Bank,
Ltd. (Securities Investment Trust
Account)
The Nomura Trust and Banking
Co., Ltd. (Investment Trust
Account)

STATE STREET BANK AND
TRUSTCOMPANY 505223

P.O. BOX 351 BOSTON MASSACHUSETTS
02101 U.S.A.
Total(Note) Ratio of number of units held to outstanding investment units is rounded to two decimal places.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

10

(3) Officers
1) Directors and accounting auditor
Name

Post
Executive
Director
Supervisory
Director
Supervisory
Director
Supervisory
Director

Chifumi Toda
Makoto Sakagami

Compensation or fee forthe six months ended
June 30, 2013
(Thousands of yen)

Major additional post
President and Director, Japan Excellent AssetManagement Co., Ltd.
Makoto Sakagami Certified Public Accounting
OfficeTsuyoshi Nagahana

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai
University

－

6,540

17,500(Note 2)
(Note 1) There is no investment unit of JEI held by the Executive Director nor the Supervisory Directors. Although
Supervisory Directors may have additional posts in companies other than those listed above, there is no conflictof interests between those companies, including those listed above, and JEI.
(Note 2) The total amount of compensation or fee shown above is an estimated amount and includes the fee for the
English financial statements audit and the fee for the preparation of a comfort letter and other services upon theissuance of new investment units in January 2013.

Accounting
AuditorErnst & Young ShinNihon
LLC－2) Policy on dismissal and discontinuation of re-election of accounting auditor
The board of directors of JEI shall deliberate dismissal of accounting auditor in accordance with the provisions
set out in the Law Concerning Investment Trusts and Investment Corporations, and deliberate discontinuation ofreelection based on circumstances in all respects.

(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
Our asset management company, asset custodian and administrative agents as of June 30, 2013 are as follows:
Classification

Name

Asset management company

Japan Excellent Asset Management Co., Ltd.

Asset custodian

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Transfer agent and other administrative work for accounting Mizuho Trust & Banking Co., Ltd.
and institution operation)
Administrative agent(Investment corporation bonds)

Mizuho Corporate Bank, Ltd. (Note)(Note) Mizuho Corporate Bank, Ltd. merged with Mizuho Bank, Ltd. on July 1, 2013 and changed its trade name toMizuho Bank, Ltd.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)11

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
13th Period(December 31, 2012)
Classification

Use

Area

14th Period(June 30, 2013)

Total
Total
Investment
Investment
acquisitionacquisition
ratio inratio inprice (Millions portfolio (%) price (Millions portfolio (%)(Note 2)
(Note 2)of yen) (Note 1)of yen) (Note 1)

Area I (Note 4)

－

－

3,866

1.5

Area II (Note 4)

4,484

2.0

4,514

1.8

Area I (Note 4)

112,568

49.4

122,563

47.6

Area II (Note 4)

7,420

3.3

9,274

3.6

Area III (Note 4)

73,61632.3

80,16031.1

Area IV (Note 4)

6,096

2.7

11,546

4.5

Area I (Note 4)

6,990

3.1

6,936

2.7

211,177

92.6

238,861

92.7

Ownership interests in an anonymous association (Note 5)

207

0.1

－

－

Deposits in bank and other assets

16,634

7.3

18,751

7.3

Total assets

228,020100.0

257,613

100.0

Real estate property(Note 3)

OfficeTrust beneficiaryinterest in realestate (Note 3)

Trust beneficiaryinterest in realestateOthers
Total(Note 1) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date(amounts of real estate property and trust beneficiary interest in real estate are based on the book value after
depreciations).
(Note 2) Investment ratio in portfolio is rounded to one decimal place.
(Note 3) Leasehold rights owned in combination with buildings and other structures are included in real estate property
and trust beneficiary interest in real estate at the combined amount.
(Note 4) Areas are classified as follows:
Area I: Six central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya)
Area II: Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.), central Nagoya (Meieki,
Fushimi, Sakae, etc.) and central Fukuoka (Tenjin, Hakata-ekimae, etc.)
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities.
(Note 5)This represents the ownership interests in an anonymous association managed by Polaire LLC.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

12

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of June 30, 2013 are as
follows:
Ratio of rental
Book value
Leasable space Leased space Occupancy revenue to total
Name(Millions ofMajor use
rate (%)(m ) (Note 1)(m ) (Note 2)
rental revenues(Note 3)yen)(%) (Note 4)
Kowa Kawasaki
Office30,01238,375.66
38,205.96
99.6
11.1
Nishiguchi Building
2

2

AKASAKA INTERCITY

27,654

11,021.04

10,132.00

91.9

6.7

OfficeAkasaka Garden City

22,712

8,769.53

7,215.53

82.3

4.3

OfficeOmori Bellport D

21,671

25,591.12

25,591.12

100.0

11.2

Office12,84525,159.49

25,159.49

100.0

9.4

Office10,71312,122.85

12,122.85

100.0

4.0

Office10,066

18,612.72

18,612.72

100.0(Note 5)

OfficeShiba 2-Chome Building

9,132

11,749.30

11,559.68

98.4

4.4

OfficeJEI Hamamatsucho
Building

8,340

6,411.26

6,411.26

100.0

3.0

OfficeNo. 35 Kowa Building

8,263

9,377.16

9,377.16

100.0(Note 5)

Office161,412167,190.13

164,387.77

98.3

62.7

Musashikosugi Tower
Place
Daiba Garden City
Building
Kowa Kawasaki
Higashiguchi Building

Total

－

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of June 30, 2013
and is rounded to two decimal places. For properties with joint ownership, the value is obtained by multiplying
the total leasable space of the shared real estate by the percentage of the interest owned by JEI.
(Note 2) Leased space refers to space with lease contracts concluded with end tenants as of June 30, 2013 and is rounded
to two decimal places. For properties with joint ownership, the value is obtained by multiplying the total leased
space of the shared real estate by the percentage of the interest owned by JEI. The leased space of end tenants
who terminated their lease arrangement but have not yet moved out as of the end of period is included in theleased space. This also applies to the calculations of occupancy rate in (Note 3) below and the total number oftenants in (Note 1) in (3) Portfolio Ownership Breakdown.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of June 30, 2013 and rounded to
one decimal place.
(Note 4) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 5) The values of Kowa Kawasaki Higashiguchi Building and No. 35 Kowa Building are not disclosed as consents
on disclosure from the end tenants have not been obtained.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

13

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of June 30, 2013 are as follows:
Property
No.

Property nameLocation (Residential address)

Form of ownershipAppraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)

Ⅰ-1

Omori Bellport D

6-26-3 Minami-Oi, Shinagawa-ku, Tokyo

Trust beneficiaryinterest in realestate23,15021,671

Ⅰ-2

Shiba 2-Chome Building

2-6-1 Shiba, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate11,0009,132

Ⅰ-3

JEI Hamatsucho Building

2-2-12 Hamamatsu-cho, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

7,470

8,340

Ⅰ-4

No. 32 Kowa Building

5-2-32 Minami-Azabu, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

6,679

7,391

Ⅰ-7

Akasaka Garden City

4-15-1 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate17,70022,712

Ⅰ-8

AKASAKA INTERCITY

1-11-44 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate24,50027,654

Ⅰ-9

Kowa Shirokanedai Building

3-19-1 Shirokanedai, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

4,970

4,883

Ｉ-10

Daiba Garden City Building

2-3-5 Daiba, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate12,08010,713

Ⅰ-11

No. 35 Kowa Building

1-14-14 Akasaka, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

9,150

8,263

Ⅰ-12

HAMARIKYU INTERCITY

1-9-1 and 15 Kaigan, Minato-ku, Tokyo

Trust beneficiaryinterest in realestate

7,830

6,936

Ⅰ-13

Shintomicho Building

3-10-9 Irifune, Chuo-ku, Tokyo

Trust beneficiaryinterest in realestate

1,820

1,799

Ⅰ-14

Kowa Nishi-Shimbashi Building

2-1-1 Nishi-Shimbashi, Minato-ku, Tokyo

Real estate

4,050

3,866

130,399

133,365

Area I
Ⅱ-1

NHK Nagoya Housou-Center
Building

1-13-3 Higashi-Sakura, Higashi-ku, Nagoya-shi,
Aichi

Real estate

4,190

4,514

Ⅱ-2

JEI Nishi-Honmachi Building

1-3-15 Awaza, Nishi-ku, Osaka-shi, Osaka

Trust beneficiaryinterest in realestate

4,200

7,408

Ⅱ-3

Osaka Kogin Building (Land with
Leasehold Interest)

4-1-1 Koraibashi, Chuo-ku, Osaka-shi, Osaka

Trust beneficiaryinterest in realestate

1,770

1,865

10,16013,789Area II
Ⅲ-1

Musashikosugi Tower Place

1-403 Kosugi-machi, Nakahara-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate16,10012,845

Ⅲ-2

Kowa Kawasaki Higashiguchi
Building

1-53 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate8,350

10,066

Ⅲ-3

JEI Hongo Building

2-38-16 Hongo, Bunkyo-ku, Tokyo

Trust beneficiaryinterest in realestate

4,560

5,192

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

14

Ⅲ-5

Kawasaki Nisshincho Building

7-1 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Kanagawa

Trust beneficiaryinterest in realestate

3,560

4,587

Ⅲ-6

No. 44 Kowa Building

1-2-7 Higashiyama, Meguro-ku, Tokyo

Trust beneficiaryinterest in realestate

1,530

977

Ⅲ-7

JEI RYOGOKU BUILDING

3-25-5 Ryogoku, Sumida-ku, Tokyo

Trust beneficiaryinterest in realestate

2,138

2,355

Ⅲ-8

Ebina Prime Tower

2-9-50 Chuo, Ebina-shi, Kanagawa

Trust beneficiaryinterest in realestate

3,690

6,006

Ⅲ-9

66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Kowa Kawasaki Nishiguchi Building Kanagawa

Trust beneficiaryinterest in realestate24,50030,012

Ⅲ-10

Pacific Square Sengoku

2-29-24 Hon-Komagome, Bunkyo-ku, Tokyo

Trust beneficiaryinterest in realestate

1,589

1,666

Ⅲ-11

Core City Tachikawa

2-37-7 Akebono-cho, Tachikawa-shi, Tokyo

Trust beneficiaryinterest in realestate

6,870

6,449

Area III

72,88780,160

3,520

3,285

Ⅳ-2

JEI Kyobashi Building

2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,
Osaka

Trust beneficiaryinterest in realestateⅣ-3

JEI Hiroshima Hacchobori Building

14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Hiroshima

Trust beneficiaryinterest in realestate

2,720

2,768

Ⅳ-4

SE Sankyo Building

1-1-2 Kitananajonishi Kita-ku, Sapporo-shi,
Hokkaido

Trust beneficiaryinterest in realestate

5,996

5,492

Area IV

12,236

11,546

Total

225,682

238,861(Note) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report preparedby real estate appraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd., and Japan
Valuers Co., Ltd. as of June 30, 2013 pursuant to the articles of incorporation of JEI and the regulations
stipulated by the Investment Trusts Association, Japan. For properties with joint ownership in the current
portfolio, the value is obtained by multiplying the total value of the shared real estate by the percentage of theinterest owned by JEI or the trustee.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

15

13th Period
July 1, 2012 to December 31, 2012
Property
No.

Property name

Total numberoftenants(At endof period)

Occupancy Rental revenue
rate (At end(Interim)of period)(Millions of
yen)
(%)）

(Note 1)14th Period
January 1, 2013 to June 30, 2013
Ratio ofrentalrevenue tototal rental
revenues(%)

Total numberoftenants(At endof period)

Occupancy Rental revenue
rate (At end(Interim)of period)(Millions of
yen)
(%)）

(Note 1)

(Note 2)

Ratio ofrentalrevenue tototal rental
revenues(%)(Note 2)

Ⅰ-1

Omori Bellport D

1

96.2

947

12.5

1

100.0

944

11.2

Ⅰ-2

Shiba 2-Chome Building

2

100.0

371

4.9

2

98.4

372

4.4

Ⅰ-3

JEI Hamamatsucho
Building

1

100.0

254

3.4

1

100.0

253

3.0

Ⅰ-4

No. 32 Kowa Building

1

92.4

271

3.6

1

100.0

249

3.0

Ⅰ-7

Akasaka Garden City

1

100.0

401

5.3

1

82.3

364

4.3

Ⅰ-8

AKASAKA
INTERCITY

12

98.6

314

4.1

12

91.9

563

6.7

Ⅰ-9

Kowa Shirokanedai
Building

1

94.7

179

2.4

1

100.0

163

1.9

Ｉ-10

Daiba Garden City
Building

1

100.0

338

4.5

1

100.0

338

4.0

Ⅰ-11

No. 35 Kowa Building

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)

Ⅰ-12

HAMARIKYUINTERCITY

6

98.2

275

3.6

6

97.9

280

3.3

Ⅰ-13

Shintomicho Building

9

100.0

72

1.0

9

100.0

71

0.9

Ⅰ-14

Kowa Nishi-Shimbashi
Building--(Note 3)(Note 3)6100.0(Note 3)(Note 3)

36

98.0

-

-

42

97.5

-

-

Area I
Ⅱ-1

NHK Nagoya Housou
Center

30

96.8

305

4.0

30

96.6

301

3.6

Ⅱ-2

JEI Nishi-Honmachi
Building

1

95.7

205

2.7

1

98.6

218

2.6

Ⅱ-3

Osaka Kogin Building(Land with Leasehold
Interest)

-

-

-

-

1

100.0

67

0.8

31

96.2

-

-

32

98.0

-

-

Ⅲ-1

Musashikosugi Tower
Place

36

100.0

806

10.6

37

100.0

787

9.4

Ⅲ-2

Kowa Kawasaki
Higashiguchi

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)Ⅲ-3

JEI Hongo Building

1

100.0

(Note 3)(Note 3)1100.0(Note 3)(Note 3)

Ⅲ-5

Kawasaki Nisshincho
Building

1

66.6

88

1.2

1

96.3

165

2.0

Ⅲ-6

No. 44 Kowa Building

1

100.0

91

1.2

1

100.0

90

1.1

Ⅲ-7

JEI Ryogoku Building

1

84.0

102

1.3

1

100.0

100

1.2

Ⅲ-8

Ebina Prime Tower

17

75.8

338

4.4

24

82.5

339

4.0

Ⅲ-9

Kowa Kawasaki
Nishiguchi Building

1

94.7

916

12.1

1

99.6

937

11.1

Ⅲ-10

Pacific Square Sengoku

6

85.1

82

1.1

7

94.9

59

0.7

Ⅲ-11

Core City Tachikawa

-

-

-

-

1

98.5

228

2.7

65

90.6

-

-

75

96.3

-

-

1

96.2

182

2.4

1

100.0

180

2.2

1

89.7

149

2.0

1

96.3

143

1.7

Area II

Area III
Ⅳ-2

JEI Kyobashi Building

Ⅳ-3

JEI Hiroshima
Hacchobori BuildingththAsset Management Report for 14 period (Semi-Annual Report for 14 Period)

16

Ⅳ-4

SE Sankyo Building

-

-

-

-

1

100.0

243

2.9

Area IV

2

93.2

-

-

3

99.1

-

-

Total

134

94.0

7,597

100.0

152

97.1

8,409

100.0

(Note 1) Total number of tenants indicates the total number of tenants in each property as of the end of each period. For properties forwhich master lease agreements have been concluded, the number of tenants is counted as one per property. When a tenant
has multiple tenancies in the same property, it is counted as one tenant, and when in multiple properties, it is counted as
multiple tenants. As for Osaka Kogin Building (Land with Leasehold Interest), total number of tenants is counted as one
based on the lease agreement for the leased land.
(Note 2) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 3) No. 35 Kowa Building, Kowa Nishi-Shimbashi Building, Kowa Kawasaki Higashiguchi and JEI Hongo Building are notdisclosed as consents on disclosure from the end tenants have not been obtained.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

17

(5) Other Assets
1) Contract amount and fair value of specified transactions and foreign exchange forwards transactions
Contract amount (Thousands of yen) (Note 1)
Classification

Type
Over one year

Fair value(Thousands of yen)
(Note 2)

Interest rate swap
contracts
Over-the-counter
Fixed interest rate
54,900,000
54,900,000－
transaction
payableFloating interest ratereceivable(Note 1) Contract amount of swap is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation as over-the-counter transactions meet requirements for special accounting
under the Accounting Standard for Financial Instruments.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)18

4. Capital Expenditures for Owned Properties(1) Scheduled Capital Expenditures
The following table shows major items of scheduled capital expenditures for repairs and maintenance planned for theproperties owned by JEI as of June 30, 2013. The values below include portions to be expensed for accounting purposes.

Property nameKowa Kawasaki
Nishiguchi
Building
Kowa Kawasaki
Nishiguchi
Building
JEI
Hamamatsucho
Building
SE Sankyo
Building

Location

PurposeEstimated construction costs(Millions of yen)
Payment
for the six
months Total ofadvance
Total
ended
payment
June 30,
2013

Schedule term

Saiwai-ku,
Kawasaki-shi

Renewal of canteens for From January 2013
office workers
To July 2013

194

－

－

Saiwai-ku,
Kawasaki-shi

Renewal of airconditioning systems(1st term)

From January 2013
To July 2013

167

－

－

Minato-ku, Tokyo

Renewal of airconditioning systems(4th term)

From April 2013
To July 2013

82

－

－

Replacement of multiKita-ku, Sapporo-shi level parking lot no. 3
pallet floorboard

From July 2013
To December 2013

42

－

－

(2) Capital Expenditures for the Six months Ended June 30, 2013
The following table shows constructions conducted by JEI during the period for properties it owned as of June 30, 2013 andexpensed as capital expenditures. Capital expenditures for the period ended June 30 were 572 million yen and, whencombined with repairs and maintenance costs of 109 million yen classified as expenses, the amount of constructions
completed totaled 681 million yen.

Location

PurposeScheduled term

Amounts
Paid(Millions ofyen)

NHK Nagoya Housou
Center Building

Higashi-ku, Nagoyashi

Renewal of air-conditioning
systems (5th term)

From June, 2012
To January 201387

JEI Hamatsucho Building

Minato-ku, Tokyo

Renewal of air-conditioning
systems (3rd term)

From October 2012
To January 2013

80

Kowa Kawasaki
Nishiguchi Building

Saiwai-ku, Kawasaki- Renewal of canteens forshi
office workers (1st term)

From December
2012
To February 2013

38

Omori Bellport D

Renewal of disaster prevention From January 2013
Shinagawa-ku, Tokyo systems (1st term)
To March 2013

36

Property name

Other constructions
Total

－

328
572

(3) Reserved Funds for Long-term Repairs and Maintenance Plans
Based on our long-term repairs and maintenance plans developed for each property, JEI has set aside the following cash
reserves, derived from depreciation and other excess cash flows, in order to fund large-scale repairs and maintenance andother construction.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

19

(Unit: Millions of yen)

Item

Reserved funds at beginning of
period11th Period
13th Period
10th Period
12th Period
12th Period
July 1, 2011 toJuly 1, 2012 toJanuary 1, 2011
January 1, 2012
January 1, 2013
December 31,
December 31,
to June 30, 2013
to June 30, 2011
to June 30, 2012
2011
2012
259

251

299

267

281

Increase

5

48

14

14

25

Decrease

13

－

47

－

7

Reserved funds at the end of
period

251

299

267

281

299

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)20

5. Expenses and Liabilities(1) Expenses Associated with Asset Management(Unit: Thousands of yen)Account

13th Period
July 1, 2012
to December 31, 2012

14th Period
January 1, 2013
to June 30, 2013(a) Asset management fees

358,309

370,459(b) Custodian fees

17,317

17,261(c) Administrative service fees

33,71233,072(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other

50,021

83,261

476,900

521,594

Total

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

21

(2)Borrowings
Borrowings by each financing source as of the end of the 14th period (ended June 30, 2013) are as follows:
Classification
LenderShort-term
Mizuho Trust & Banking Co., Ltd.
loans

Drawdowndate

May 7, 2012

Sub Total
Mizuho Corporate Bank, Ltd.
(Note 3)
Mitsubishi UFJ Trust and Banking
Long-termloans due The Norinchukin Bank
withinMizuho Corporate Bank, Ltd.
one year(Note 3)October 24,
2008

June 29,2010

Balance atBalance at end
beginning of
Averageof period
periodinterest rate
(Thousands of(Thousands of(%) (Note 1)
yen)
yen)
－

－

500,000－－－

6,000,000－－

1,000,000－

June 28,
2013

3,100,000

3,100,000

1,800,000

1,800,000

1,800,000

1,800,000

Mizuho Trust & Banking Co., Ltd.

1,300,000

1,300,000

15,000,000

8,000,000

Repayment
methodUse

Remarks

Unsecured
February Lump- Acquisition
and28, 2013 sumof real estate
unguaranteed

500,000

Mitsubishi UFJ Trust and Banking

Sub Total

Maturity
date

0.98000

December27, 2013

0.98000

－

－

－

－

Repayment
Lumpof existingsum
borrowing

Unsecured
andunguaranteed

－

－

－

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

22Classification
Lender
The Dai-ichi Life Insurance
Company Limited

Drawdown
date

Balance atBalance at end
beginning ofof period
period(Thousands of(Thousands of
yen)
yen)

Averageinterest rate(%) (Note 1)

2,000,000

2,000,000

2.25875(Note 2)Development Bank of Japan Inc.

2,000,000

2,000,000

2.28417(Note 2)

Mitsubishi UFJ Trust and Banking

4,000,000

4,000,000

3,900,000

3,900,000

Mizuho Corporate Bank, Ltd.
(Note 3)
Mizuho Trust & Banking Co., Ltd.

July 31,2007

June 29,2011

0.88000
2,400,000

2,400,000

1,200,000

1,200,000

3,000,000

3,000,000

Development Bank of Japan Inc.

2,000,000

2,000,000

Mizuho Trust & Banking Co., Ltd.

1,620,000

1,620,000

Aozora Bank, Ltd.

1,620,000

1,620,000

650,000

650,000

370,000

370,000

280,000

280,000

500,000

500,000

500,000

500,000

500,000

500,000

Aozora Bank, Ltd.

200,000

200,000

The Bank of Fukuoka

300,000

300,000

2,000,000

2,000,000

1,500,000

1,500,000

Resona Bank, Ltd.
The Dai-ichi Life Insurance
Company LimitedAozora Bank, Ltd.
Mizuho Corporate Bank, Ltd.
(Note 3)October 24,
2008

November29, 2011

Mizuho Corporate Bank, Ltd.
Long-term(Note 3)loans
Mitsubishi UFJ Trust and Banking

Mizuho Trust & Banking Co., Ltd.

January 31,
2012

July 31,
2012

Resona Bank, Ltd.

500,000

500,000

4,600,000

4,600,000

4,400,000

4,400,000

Sumitomo Mitsui Banking
Corporation

4,000,000

4,000,000

Sumitomo Mitsui Trust Bank,
Limited

1,620,000

1,620,000

1,080,000

1,080,000

Mitsubishi UFJ Trust and Banking

540,000

540,000

Mizuho Corporate Bank, Ltd.
(Note 3)520,000

520,000

2,000,000

2,000,000

1,500,000

1,500,000

1,500,000

1,500,000

1,500,000

1,500,000

Mitsubishi UFJ Trust and Banking
Mizuho Corporate Bank, Ltd.
(Note 3)

Sumitomo Mitsui Banking
Corporation

Mizuho Corporate Bank, Ltd.
(Note 3)
Mitsubishi UFJ Trust and Banking

June 29,2011

November29, 2011

January 31,
2012

Sumitomo Mitsui Banking
Corporation
Mizuho Corporate Bank, Ltd.
(Note 3)
Mitsubishi UFJ Trust and Banking

July 31,
2014

Use

Remarks

Acquisitionof realestateDecember29, 2014
Repaymentof existing
borrowing

2.27344(Note 2)June 30,2015

1.13750(Note 2)Acquisitionof realNovember
Lump30, 2015 sum(Note 4)The Norinchukin Bank

Repayment
methodestateSumitomo Mitsui Banking
Corporation

Resona Bank, Ltd.

Maturitydate

July 31,2012

Unsecured
andunguaranteed

1.14125(Note 2)

0.97125(Note 2)

1.36375(Note 2)June 29,
2016

Repaymentof existing
borrowing

1.24375(Note 2)

November29, 2016

1.24750(Note 2)January 31,
20171.03000(Note 2)1,300,000

1,300,000

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

23

Sumitomo Mitsui Banking
Corporation

1,200,000

1,200,000

Sompo Japan Insurance Inc.

2,000,000

2,000,000

Tokio Marine & Nichido Fire
Insurance Co., Ltd.

1,000,000

1,000,000

6,000,000

6,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000－

1,000,000－

500,000－

500,000

Sompo Japan Insurance Inc.

－

500,000

Tokio Marine & Nichido Fire
Insurance Co., Ltd.

－

500,000

3,000,000

3,000,000－

5,000,000－

2,000,000－

1,100,000

Development Bank of Japan Inc.

November30, 2010

Mizuho Corporate Bank, Ltd.
(Note 3)
Mitsubishi UFJ Trust and Banking

July 31,2012

Sumitomo Mitsui Banking
Corporation
Mizuho Corporate Bank, Ltd.
(Note 3)
Aozora Bank, Ltd.
Resona Bank, Ltd.

The Dai-ichi Life Insurance
Company Limited

June 28,2013

June 29,2011

Long-term Mizuho Corporate Bank, Ltd.
loans
(Note 3)(Note 4)
Mitsubishi UFJ Trust and Banking
Sumitomo Mitsui Banking
Corporation

June 28,2013－

1,000,000

Resona Bank, Ltd.

－

200,000

The Bank of Fukuoka－

700,000

Shinkin Central Bank－

1,000,000

2,000,000

2,000,000

Mizuho Corporate Bank, Ltd.
(Note 3)－500,000

Mitsubishi UFJ Trust and Banking－

500,000－

1,000,000

The Norinchukin Bank

Development Bank of Japan Inc.

Sumitomo Mitsui Banking
Corporation

January 31,
2012

June 28,2013

1.09734(Note 2)
1.73875(Note 2)

1.08375(Note 2)
November30, 2017
1.04550(Note 2)

1.19212(Note 2)1.65125(Note 2)0.81225(Note 2)

Repayment
Lump- of existing Unsecured
andsumborrowing unguaranteed

June 29,2018

1.60000(Note 2)

1.36400
January 31,(Note 2)2020－

600,000

The Dai-ichi Life Insurance
Company Limited－

1,000,000

1.31261(Note 2)Development Bank of Japan Inc.

－

2,000,000

1.60750(Note 2)June 30,
2021

Sub Total

73,800,000

93,400,000

1.28575

－

－

－

－

Total

89,300,000

101,400,000

1.26163

－

－

－

－

Mizuho Trust & Banking Co., Ltd.

(Note 1) The average interest rates are calculated using a weighted-average of the loan balance at the end of period by multiplying theinterest rate of each loan agreement as of period-end, rounding to five decimal places. Borrowings hedged by interest rate
swaps to avoid interest rate fluctuation risk are calculated using a weighted average rate adjusting the effect of the interest
rate swaps.
(Note 2) The loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).
(Note 3) Mizuho Corporate Bank, Ltd. merged with Mizuho Bank, Ltd. on July 1, 2013 and changed its trade name to Mizuho Bank,
Ltd.
(Note 4) The following table shows annual total amount of long-term loans (excluding those due within one year) for each year after
the balance sheet date.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)24

(Unit: Thousands of yen)Classification

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

Due after 5 years

Long-term loans

20,500,000

23,540,000

15,760,000

26,000,000

7,600,000

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

25

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of June 30, 2013 are as follows:
Issue

1st series unsecured
investment corporationbonds
2nd series unsecured
investment corporationbonds
3rd series unsecured
investment corporationbonds
4th series unsecured
investment corporation
bonds
Total

Balance atBalance at end
beginning ofof period
Issuance dateperiod(Thousands of(Thousands of
yen)
yen)

Interest rate
(Note 1)(%)

Maturity date

Repayment
methodUse

Remarks

March 11,2014

Lump-sum(Note 2)

(Note 4)

March 11,2010

12,000,000

12,000,000

1.52000

June 28, 2010

5,000,000

5,000,000

1.29000 June 26, 2015

Lump-sum(Note 2)

(Note 4)

November 4,
2011

5,000,000

5,000,000

1.01000

November 4,
2016

Lump-sum(Note 3)(Note 4)

November 4,
2011

2,000,000

2,000,000

1.40000

November 2,
2018

Lump-sum(Note 3)(Note 4)24,000,000

24,000,000

1.35583(Note 1) The interest rate indicated in the total column is calculated using a weighted average of the balance at the end of period bymultiplying the loan interest rate of each investment corporation bond, rounding to five decimal places.
(Note 2) The funds were used for repaying existing borrowings.
(Note 3) The funds were used for acquiring new properties.
(Note 4) The bonds are with special pari passu conditions among specified investment corporation bonds.

(4) Short-Term Investment Corporation Bonds
JEI has no outstanding short-term investment corporation bonds as of June 30, 2013.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)26

6. Condition of Investment Transactions(1) Transactions of Property and Asset-Backed Securities, Etc.
(Unit: Millions of yen)
Acquisition
Type of assets

Trust beneficiaryinterest in realestateName of property

AKASAKA
INTERCITY(Additional Acquisitionof Co- Ownership)

Transfer

Acquisition date

Acquisition
price(Note 1)

Transferdate

Transferamount(Note 1)Gain (loss)
Net book
on transfer
value(Note 2)February 5, 2013

10,289－－－－Trust beneficiary

Osaka Kogin Building

interest in realestate(Land with Leasehold
Interest)

February 5, 2013

1,770

－

－

－

－

Trust beneficiaryinterest in realCore City Tachikawa

February 5, 2013

6,500

－

－

－

－

SE Sankyo Building

March 1, 2013

5,500

－

－

－

－

March 28, 2013

3,931

－

－

－

－

April 17, 2013

520

－

－

－

－

28,510－－－－estateTrust beneficiaryinterest in realestateReal Estate

Kowa Nishi-Shimbashi
Building
Kawasaki Nisshincho
Building

Real Estate (Note 2) (Additional Acquisitionof Co-ownership
Interest)
Total－(Note 1) The acquisition price is the amount that does not factor in the expenses required in the acquisition of the real estate, etc.
(brokerage fees, property and other taxes, etc.) and the transfer amount is the transfer amount of the real estate, etc. stated in
the trust beneficiary interest transfer agreement, etc. However, concerning Osaka Kogin Building (Land with Leasehold
Interest), the purchase price of the land stated in the trust beneficiary interest purchase agreement subject to conditions
precedent (10,100,000,000 yen), less the amount equivalent to the key money pertaining to the leasehold interest in land thatwill be received from the lessee of the land (8,330,000,000 yen), is the amount (1,770,000,000 yen) calculated as theacquisition price. In addition, the amount is rounded to the nearest million yen.
(Note 2) Immediately after acquiring the co-ownership interest of Kawasaki Nisshincho Building, JEI additionally placed it in trust.

(2) Transactions of Other Assets
Other than those described above, major assets transacted are mainly bank deposits and bank deposits in trust.

(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
Acquisitionor transfer

Name of property
AKASAKA

Acquisition

INTERCITY(Additional Acquisitionof Co-Ownership)

Acquisition Osaka Kogin Building(Unit: Millions of yen)Type of assets

Acquisitiondate

Acquisition
price(Note)

Appraisalvalue
at end ofperiodAppraiser

Appraisal
date

Trust beneficiary
February 5,
interest in real
2013
estate10,28912,000Japan Real Estate
Institute

November30, 2012

February 5,
2013

1,770

1,770

Japan Real Estate
Institute

November30, 2012

Trust beneficiary

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)27

(Land with Leasehold
Interest)
Acquisition Core City Tachikawa

Acquisition

SE SANKYOBUILDING

interest in realestateTrust beneficiary
February 5,
interest in real
2013
estate

6,500

6,560

Japan Real Estate
InstituteMarch 1,
2013

5,500

5,747

Chuo Real Estate September
Appraisal Co., Ltd.,1, 2012

Real Estate

March 28,
2013

3,931

4,020

Japan Real Estate
InstituteMarch 1,
2013

Real Estate

April 17,
2013

520

511

Japan Real Estate
InstituteMarch 1,
2013

Trust beneficiaryinterest in realestateKowa Nishi-Shimbashi
Acquisition Building

November30, 2012

Kawasaki Nisshincho
Building
Acquisition (Additional Acquisitionof Co-ownership
Interest)(Note) The acquisition price is the purchase price of the property stated in the purchase agreement (excluding the amount equivalent
to consumption taxes, etc.). However, concerning Osaka Kogin Building (Land with Leasehold Interest), the purchase priceof the land stated in the trust beneficiary interest purchase agreement subject to conditions precedent (10,100,000,000 yen),less the amount equivalent to the key money pertaining to the leasehold interest in land that will be received from the lesseeof the land (8,330,000,000 yen), is the amount (1,770,000,000 yen) calculated as the acquisition price. In addition, the amountis rounded to the nearest million yen.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)282) Others
Of the transactions of JEI that are subject to research for specified assets value and other particulars under
Section 201 of the Investment Trust Law, those other than what are described in 1) Real estate, etc. isresearched and reported by Ernst & Young ShinNihon LLC.
Three interest rate swap contracts were subject to the research during the period from January 1, 2013 to June30, 2013 and we have received the related research report from Ernst & Young ShinNihon LLC. In the
research, Ernst & Young ShinNihon LLC is requested to report on the name of counterparty, currency,
contractual interest rate, transaction term and other matters pertaining to the subject interest rate swap
contracts.

(4) Transactions with Interested Parties or Major Shareholders
1) Transactions
There were no applicable items during the period.
2) Amounts of fees paid and other expenses

Classification
Property management
costs and fees

(Unit: Thousands of yen)
Breakdown of transactions with interested parties
and major shareholders
B/A
Total amount paid (A)Paid toAmount paid (B)1,148,409(Note 2)

Total

1,148,409

Nippon Steel Kowa Real
Estate Co., Ltd.

439,109

38.2％

Sekisui House, Ltd.

46,6194.1％

485,72842.3％－(Note 1) Figures indicate fees paid to interested parties and major shareholders of asset management companies with whom JEI had
transactions during the six months ended June 2013.
(Note 2) Property management costs and fees include construction management fees that were not expensed but capitalized inproperty management fees and expenses.
(Note 3) The amounts do not include consumption tax and other taxes.

(5) Transactions with Asset Management Company Concerning the Additional Businessesof the Asset Management Company
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not conduct any
additional business falling under the categories of the type I financial instruments business, type II financial
instruments business, building lots and buildings transaction business, or real estate specified joint enterprise,and had no applicable transactions.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)29

7. Accounting(1) Assets, Liabilities, Principal, and Profit and Loss
For assets, liabilities, principal, and profit and loss, please refer to the attached Balance Sheets, Statements ofIncome and Retained Earnings, Statements of Changes in Net Assets, Notes to Financial Statements andDistribution Information.

(2) Change in Depreciation Calculation Method
No changes were made during the period.

(3) Change in Asset Valuation Method
No changes were made during the period

8. Others(1) Investment Trust Beneficiary Certificates Incorporated by JEIThere were no applicable items during the period.

(2) Scheduled Meetings
1) Unitholders’ meeting
There were no applicable items during the period.

2) Board of directors meeting
Major issues related to the execution and modification of major contracts approved by the board of directorsof JEI during the six months ended June 30, 2013 is summarized below.
Approval date

January 23, 2013

February 14, 2013

Approved agenda

Description

With issuance of new investment units, anunderwriting agreement for the new investment
Conclusion of new investment units units was concluded with Mizuho Securities Co.,
underwriting agreement (agreement Ltd., Nomura Securities Co., Ltd., Mitsubishi
for entrustment of general
UFJ Morgan Stanley Securities Co., Ltd., SMBC
administrative duties concerning
Nikko Securities Inc. and Mito Securities Co.,
offering of investment units)Ltd., entrusting them with general administrative
duties concerning the offering of investment
units.
The board of directors made a comprehensive
resolution on investment corporation bonds to beissued in the period from February 15, 2013 to
February 7, 2014. The board of directors
approved the respective candidate generaladministrator for “administrative duties
Entrustment of general
concerning offering of investment corporation
administrative duties concerning
bonds” and “administrative duties concerninginvestment corporation bonds
acceptance of claims for exercise of rights andother inquiries from creditors of the investment
corporation, and other administrative duties
concerning investment corporation bonds during
the period,” and assigned decisions on all othernecessary matters to the Executive Director.

(3) Other
Unless otherwise stated, monetary amounts have been rounded down and percentage figures have beenrounded off to the nearest indicated unit in this Report.

Asset Management Report for 14th period (Semi-Annual Report for 14th Period)

30

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
June 30, 2013 and December 31, 2012
with Independent Auditor’s ReportJapan Excellent, Inc.
Balance Sheets
As of June 30, 2013 and December 31, 2012

As of
As of
June 30,
December 31,
2013
2012
(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 5)
Rental receivables
Consumption taxes refundable
Other current assets
Total current assets

As ofJune 30,
2013(U.S. dollars)(Note 2)

¥ 16,632,393
728,928
397,252
211,552
17,970,125¥ 15,325,266
650,872–
161,309
16,137,447$ 168,634,221
7,390,525
4,027,701
2,144,909
182,197,356

Property and equipment (Note 7):
Buildings and building improvements
Machinery and equipment
Furniture and fixtures
Land
Construction in progress
Buildings and building improvements for trust
accounts
Machinery and equipment for trust accounts
Furniture and fixtures for trust accounts
Land for trust accounts
Construction in progress for trust accounts
Less: accumulated depreciation
Net property and equipment

4,757,565
265
2,285
3,022,576
2,777

3,812,634
265
2,285
–
9,736

48,236,494
2,688
23,16430,645,604
28,156

92,103,927
454,947
101,813
143,746,869
76,475(13,972,662)
230,296,837

82,741,761
431,629
81,727
128,008,244
63,315(12,538,834)
202,612,762

933,832,782
4,612,662
1,032,268
1,457,435,556
775,373(141,667,464)
2,334,957,283

Investments and other assets:
Leasehold rights
Leasehold rights for trust accounts
Investment securities
Security deposits
Long-term prepaid expenses
Investment corporation bond issuance costs
Other assets
Total investments and other assets
Total assets

1,185,045
7,380,017–
15,181
417,599
52,312
296,011
9,346,165¥ 257,613,127

1,185,045
7,380,017
207,614
15,181
331,457
66,00484,5099,269,827¥ 228,020,036

12,015,055
74,825,274–
153,926
4,233,996
530,386
3,001,227
94,759,864$ 2,611,914,503

The accompanying notes are an integral part of these financial statements.
33

As of
As ofJune 30,
December 31,
2013
2012
(Thousands of yen)
Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 5 and 8)
Investment corporation bonds due within one year
(Notes 5 and 9)
Long-term debt due within one year (Notes 5 and 8)
Accounts payable – other
Unpaid consumption taxes
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 5 and 9)
Long-term debt (Notes 5 and 8)
Security deposits from tenants (Note 5)
Security deposits from tenants for trust accounts(Note 5)
Total long-term liabilities
Total liabilities
Net assets (Note 10):Unitholders’ equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding:
224,950 units as of June 30, 2013 and188,650 units as of December 31, 2012
Surplus
Voluntary reserve
Reserve for advanced depreciation of
non-current assets
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets¥

717,640–¥

510,686
500,000

As ofJune 30,
2013(U.S. dollars)(Note 2)$

7,276,081–

12,000,000
8,000,000
318,029–
388,181
21,423,850–
15,000,000
329,263
136,379
328,003
16,804,331

121,666,836
81,111,224
3,224,466–
3,935,735
217,214,342

12,000,000
93,400,000
640,175

24,000,000
73,800,000
426,974

121,666,836
946,973,537
6,490,674

9,466,074
115,506,249
136,930,099

8,443,474
106,670,448
123,474,779

95,975,602
1,171,106,649
1,388,320,991

117,901,291

102,052,384

1,195,389,750

183,3682,598,369
2,781,737
120,683,028
120,683,028¥ 257,613,127

183,368
2,309,505
2,492,873
104,545,257
104,545,257¥ 228,020,036

1,859,148
26,344,614
28,203,762
1,223,593,512
1,223,593,512$ 2,611,914,503

The accompanying notes are an integral part of these financial statements.
34

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from January 1, 2013 to June 30, 2013
and from July 1, 2012 to December 31, 2012

For the period
For the period
For the period
from January 1, from July 1, 2012 from January 1,
2013 to June 30, to December 31, 2013 to June 30,
2013
2012
2013
(Thousands of yen)
(U.S. dollars)(Note 2)
Revenues:
Rental revenues (Note 13)
Other (Note 13)
Dividend income from investment in anonymous
association
Total revenues
Operating expenses:
Property operating expenses (Note 13)
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income
Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
New unit issuance costs
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Ordinary income
Extraordinary income:Gain on donation of non-current assets
Income before income taxes
Income taxes (Note 12):Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period¥7,716,520
692,993¥6,944,963
652,843$78,237,050
7,026,191

9,173
8,418,686

1,524
7,599,330

93,00385,356,244

4,350,117
370,459
17,26133,073
6,540
94,261
4,871,711
3,546,975

3,950,122
358,310
17,31733,712
6,540
61,021
4,427,022
3,172,308

44,105,408
3,756,049
175,012335,319
66,309955,70749,393,804
35,962,440

1,569
1,506

1,551
5,677

15,913
15,270598,529
140,900
45,991
161,407595,132
96,054–
163,993

6,068,433
1,428,569
466,293
1,636,495

13,692181
2,589,350

13,692181
2,310,484

138,819
1,840
26,253,174

9,893

–

100,301

2,599,243

2,310,484

26,353,475

917
8
2,598,318
51¥2,598,369

1,088
(1)
2,309,397
108¥2,309,505

9,299
85
26,344,091
523$26,344,614

The accompanying notes are an integral part of these financial statements.
35

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from January 1, 2013 to June 30, 2013
and from July 1, 2012 to December 31, 2012

Balance as of June 30, 2012
Changes during the fiscal period:
Provision for reserve for
reduction
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31, 2012

Balance as of December 31, 2012
Changes during the fiscal period:
Issuance of new units
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of June 30, 2013

Balance as of December 31, 2012
Changes during the fiscal period:
Issuance of new units
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of June 30, 2013

For the period from July 1, 2012 to December 31, 2012
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Numberof units
in issueUnitholders’capital188,650¥102,052,384¥ 50,181––

133,187(133,187)

–

–

–

–
–

–
–

–
–

(2,301,530)
2,309,397(2,301,530)
2,309,397(2,301,530)
2,309,397(2,301,530)
2,309,397–
188,650–¥102,052,384

133,187¥183,368(125,320)¥ 2,309,505

7,867¥ 2,492,873

7,867¥104,545,257

7,867¥104,545,257¥ 2,434,825¥ 2,485,006¥104,537,390

For the period from January 1, 2013 to June 30, 2013
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Total net assets¥104,537,390

Numberof units
in issueUnitholders’capital188,650¥102,052,384¥183,368¥ 2,309,505¥ 2,492,873¥104,545,257¥104,545,257

36,30015,848,907

–

–

–

15,848,907

15,848,907

–
–

–
–

–
–

(2,309,454)
2,598,318(2,309,454)
2,598,318(2,309,454)
2,598,318(2,309,454)
2,598,318–
224,950

15,848,907¥117,901,291–¥183,368

288,864¥ 2,598,369

288,864¥ 2,781,737

16,137,771¥120,683,028

16,137,771¥120,683,028

For the period from January 1, 2013 to June 30, 2013
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(U.S. dollars) (Note 2)

Total net assets

Numberof units
in issueUnitholders’capital188,650$1,034,699,223$1,859,148$ 23,415,846$ 25,274,994$1,059,974,217$1,059,974,217

36,300160,690,527

–

–

–

160,690,527

160,690,527

–
–

–
–

–
–

(23,415,323)
26,344,091(23,415,323)
26,344,091(23,415,323)
26,344,091(23,415,323)
26,344,091–
224,950

160,690,527$1,195,389,750–$1,859,148

2,928,768$ 26,344,614

2,928,768$ 28,203,762

163,619,295$1,223,593,512

163,619,295$1,223,593,512

Total net assets

The accompanying notes are an integral part of these financial statements.
36

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from January 1, 2013 to June 30, 2013
and from July 1, 2012 to December 31, 2012
For the period
For the period
from January 1,
from July 1,
2013 to2012 toJune 30,
December 31,
2013
2012
(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bondissuance costs
New unit issuance costs
Interest income
Interest expense
Increase in rental receivables
Increase in consumption taxes refundable(Increase) decrease in prepaid expenses
Increase (decrease) in accounts payable – trade
Decrease in accounts payable – other
Decrease in unpaid consumption taxes
Increase (decrease) in advances received(Increase) decrease in long-term prepaid expenses
Gain on donation of non-current assets
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

For the period
from January 1,
2013 toJune 30,
2013(U.S. dollars)(Note 2)

¥ 2,599,243
1,433,885¥ 2,310,484
1,284,468$ 26,353,475
14,538,023

13,69245,991(1,569)759,937(78,055)(397,252)(71,643)
84,318(9,370)(136,379)
78,472(86,142)(9,893)(178,138)
4,047,097
1,569(776,179)(5,196)
3,267,291

13,692–(1,551)
759,125(111,530)–
33,510(76,177)(49,164)(18,723)(3,978)54,371–(53,588)
4,140,939
1,551(751,221)(1,397)3,389,872

138,819466,293(15,913)
7,704,927(791,393)(4,027,701)(726,375)
854,889(95,002)(1,382,733)
795,624(873,384)(100,301)(1,806,121)
41,033,127
15,913(7,869,605)(52,682)
33,126,753–
196,305(3,968,886)(211,309)
3,695(46,314)–
1,990,315(40,240,152)(25,014,760)
216,628(3,427)(241,650)
4,751(2,822)(253,622,221)
2,196,368(34,744)

1,424,105

327,984

14,438,862(401,505)(27,551,540)(487,096)(652,761)(4,070,820)(279,342,392)

Cash flows from financing activities
Proceeds from short-term loans
Repayment for short-term loans
Proceeds from long-term debt
Repayment for long-term debt
Proceeds from issuance of new units
Payments for new unit issuance costs
Distributions to unitholders
Net cash provided by (used in) financing activities

17,100,000(17,600,000)
19,600,000(7,000,000)
15,848,907(45,991)(2,311,540)
25,591,376–(500,000)
14,000,000(14,000,000)––(2,295,600)(2,795,600)

173,375,241(178,444,692)
198,722,498(70,972,321)
160,690,527(466,293)(23,436,481)
259,468,479

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

1,307,127
15,325,266¥ 16,632,393(58,489)
15,383,755¥ 15,325,266

13,252,840
155,381,381$ 168,634,221

Cash flows from investing activities
Purchases of investment securities
Proceeds from redemption of investment securities
Purchases of property and equipment
Purchases of property and equipment for trust
accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits from tenants fortrust accounts
Payments for security deposits to tenants for trust
accounts
Net cash used in investing activities

The accompanying notes are an integral part of these financial statements.
37

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from January 1, 2013 to June 30, 2013
and from July 1, 2012 to December 31, 2012

1.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM is owned 45% by NIPPON STEEL KOWA REAL ESTATE
CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by Sekisui House,
Ltd. and 20% by other corporations.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of June 30, 2013, JEI held
28 properties with 302,505 square meters of total leasable space and had leases with 152
tenants excluding residential tenants.

2.

Basis of Presentation

JEI maintains its accounting records and prepares its financial statements in accordance withaccounting principles generally accepted in Japan (“Japanese GAAP”), including provisions
set forth in the Investment Trust Law, the Corporation Law of Japan, the Financial
Instruments and Exchange Law of Japan and related regulations, which are different in certain
respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are a translation of the financial statements of JEI,
which were prepared in accordance with Japanese GAAP and presented in the securities
report of JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying
financial statements, certain reclassifications and modifications have been made for theconvenience of readers outside Japan. In addition, the notes to the financial statements include
information that might not be required under Japanese GAAP but is presented herein as
additional information. Amounts have been rounded to the nearest thousand yen in theaccompanying financial statements and in the notes thereto, whereas amounts were truncatedin the Japanese financial statements prepared in accordance with Japanese GAAP.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The
rate of ¥98.63 = U.S.$1.00, the foreign exchange rate prevailing on June 30, 2013, has beenused for translation. The inclusion of such amounts is not intended to imply that Japanese yen
have been or could be readily converted, realized or settled into U.S. dollars at that or any
other rate.

38

3.

Summary of Significant Accounting Policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks and short-term
investments which are highly liquid, readily convertible into cash with an insignificant risk ofprice fluctuation and with an original maturity of three months or less.
Property and equipment including trust accounts and trademark rights
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Buildings
Building improvements
Machinery and equipment
Furniture and fixtures

2 – 60 years
2 – 59 years
7 – 16 years
3 – 10 years

Amortization of trademark rights is computed using the straight-line method over a period of
10 years.
Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
New unit issuance costs are charged to income as incurred.
Income taxes
Income taxes are accounted for on the basis of taxable income for financial statement
purposes. The asset and liability method is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
Consumption taxes
Consumption taxes received and paid are not included in the accompanying statements ofincome and retained earnings. Consumption tax related to properties, which has not been
deducted, is included in the cost of the properties.
Property-related taxes
Principally, property-related taxes including property taxes, urban planning taxes anddepreciable property taxes are imposed on a calendar-year basis and are expensed as property
and other taxes (refer to Note 13).

39

3.

Summary of Significant Accounting Policies (continued)

JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at thetime of acquisition of such properties including trust accounts. The capitalized amount for theperiod from January 1, 2013 to June 30, 2013 was ¥210,444 thousand ($2,133,676). No
property-related taxes were capitalized for the period from July 1, 2012 to December 31,
2012.
Revenue recognition
Rental revenues are generally recognized on an accrual basis over the life of each lease.
Derivatives and hedge accounting
JEI utilizes interest-rate swap agreements as derivative financial instruments solely for the
purpose of hedging its exposure to fluctuation in interest rates. JEI has entered into certain
interest-rate swap contracts to hedge variable rates for its long-term debt obligations.
The corresponding interest-rate swap meets the criteria for the special hedge accounting
treatment under Japanese GAAP, and it is therefore not recorded at fair value.
The amounts paid or received via the swap transaction are recognized as interest adjustments.
An assessment of hedge effectiveness is omitted accordingly.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.

4.

Cash and Cash Equivalents

Cash and cash equivalents including trust accounts in the accompanying balance sheets andcash and cash equivalents in the accompanying statements of cash flows at June 30, 2013 andDecember 31, 2012 consisted of the following:
As of
As of
June 30,
December 31,
2013
2012
(Thousands of yen)
Cash and cash deposits
Cash in trust and deposits in trust
Cash and cash equivalents including
trust accounts

As ofJune 30,
2013(U.S. dollars)¥ 3,600,763
13,031,630¥ 3,596,805
11,728,461$ 36,507,785
132,126,436¥16,632,393¥15,325,266$168,634,221

40

5.

Financial Instruments

For the periods from January 1, 2013 to June 30, 2013 and from July 1, 2012 to
December 31, 2012
Overview(1) Policy for Financial Instruments
JEI borrows from banks, issues investment corporation bonds and issues investment units
to procure funds required to grow its assets under management and to repay liabilities,
based on the financial policy set forth by JEAM and the Company’s Annual Funds
Procurement Plan. When procuring funds by means of interest-bearing debt, matters suchas seeking longer durations and maturities, securing fixed interest rates and diversifying
maturity dates are taken into consideration to achieve a more stable financial situation
and avoid the risk of future interest rate hikes. Surplus funds may be invested in deposits
and safe, liquid financial assets and investment securities, but are, in principle, placed indeposits. Derivative transactions are used solely for the purpose of hedging against therisk of fluctuations in interest rates of borrowings and the like.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest Rate Fluctuation Risks)Borrowings and investment corporation bonds are primarily used to acquire
properties or to refinance existing borrowings. Some of such debt are floating rate
instruments and thus are exposed to the risk of interest rate fluctuations. Based oninterest rate forecasts developed through constant monitoring activities, JEI hedges
against the risk of interest rate fluctuations using derivative transactions(interest-rate swaps), which swap a floating interest rate for a fixed interest rate. To
reduce credit risk, derivative transactions (interest-rate swaps) are entered into
exclusively with counterparties that are financial institutions having a high credit
rating. For hedging accounting methods, hedging instruments, hedged items,
hedging policies and methods for evaluation the effectiveness of hedging activities,
see “Derivatives and hedge accounting” under Summary of Significant Accounting
Policies.
(b) Liquidity Risk (the risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced by diversifying maturity dates and funding sources, executing
commitment line agreements (as described in Note 8, “Short-Term Loans andLong-Term Debt,” there is no balance outstanding under the facility agreements asof June 30, 2013), and liquidity risk is managed through the constant management ofliquidity on hand.

41

5.

Financial Instruments (continued)(3) Supplementary Explanation of the Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.
Fair value of financial instruments
The following are carrying values and fair values as of June 30, 2013 and December 31, 2012of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note 2).
As of June 30, 2013
As of December 31, 2012
Carrying value
Fair value
Difference
Carrying value
Fair value
Difference(Thousands of yen)
(1) Cash and cash deposits(2) Cash in trust anddeposits in trust
Total assets¥(3) Short-term loans(4) Investment corporation
bonds due within one
year(5) Long-term debt due
within one year(6) Investment corporation
bonds(7) Long-term debt
Total liabilities¥(8) Derivative transactions *¥3,600,763

13,031,630¥ 16,632,393–

Carrying value

¥

–

¥

¥

–

$

13,031,630¥ 16,632,393¥––

11,728,461¥ 15,325,266

11,728,461¥ 15,325,266¥––

132,126,436$ 168,634,221

–

¥

–

¥

¥

¥

–

$

¥

¥

12,000,000

3,600,763

12,086,400

3,596,805

500,000¥

3,596,805

500,000

86,400–––36,507,785–

As of June 30, 2013
Fair value(U.S. dollars)

Difference

36,507,785$–

132,126,436$ 168,634,221

$

–
–

–

$

–

$

$

121,666,836

122,542,837

876,0018,000,000

8,000,000–

15,000,000

15,000,000–

81,111,224

81,111,224–

12,000,000
93,400,000¥ 125,400,000

12,150,200
94,393,798¥ 126,630,398

150,200
993,798¥ 1,230,398

24,000,000
73,800,000¥ 113,300,000

24,221,900
75,023,335¥ 114,745,235

221,900
1,223,335¥ 1,445,235

121,666,836
946,973,537$ 1,271,418,433

123,189,699
957,049,562$ 1,283,893,322

1,522,863
10,076,025$ 12,474,889

–

¥

–

¥

–

¥

–

¥

–

¥

–

$

–

$

–

$

–

* The value of assets and liabilities arising from derivatives is shown at net value, with the amount inparentheses representing net liability position.

(Note 1)
Methods for calculating the fair value of financial instruments and matters related toderivatives transactions
Assets(1) Cash and cash deposits and(2) Cash in trust and deposits in trust
Carrying value approximates fair value because of the short maturities of these
instruments.

42

5.

Financial Instruments (continued)

Liabilities(3) Short-term loans,(5) Long-term debt due within one year and(7) Long-term debt
Where floating rates apply, fair value is based on book value. The fair value of suchliabilities is considered to be close to book value because floating rates reflect market
interest rates within a short period of time.
If the loan is part of long-term debt, in the case of floating-rate debt hedged by aninterest-rate swap, the fair value is calculated in a similar manner using the total principal
and interest amount, treated in combination with the interest-rate swap, given that theinterest-rate swap is subject to the special treatment of interest-rate swaps under Japanese
GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by discounting the combined value of principal and interest of theapplicable long-term debt by a reasonable rate assuming the same amount were to beborrowed anew.
(4) Investment corporation bonds due within one year and(6) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(8) Derivative transactions
Please refer to Note 15, “Derivative Transactions.”(Note 2)Financial instruments for which fair value is deemed extremely difficult to determine
As of
As of
June 30,
December 31,
2013
2012
(Thousands of yen)

As ofJune 30,
2013(U.S. dollars)(1) Security deposits from tenants (*)¥ 640,175¥ 426,974$ 6,490,674(2) Security deposits from tenants fortrust accounts (*)¥9,466,074¥8,443,474$95,975,602(*) Security deposits from tenants and security deposits from tenants for trust accounts in leased properties
are not subject to fair value disclosure because such deposits have no market price. Moreover, it isdifficult to calculate the actual period of time on deposit, namely, from the time the tenant moves in
until the time the tenant vacates, and it is extremely difficult to rationally estimate cash flow.

43

5.

Financial Instruments (continued)(Note 3)The scheduled redemption amounts date of financial assets after the balance sheet dateCash and cash deposits
Cash in trust anddeposits in trust
Total

1 to 2 years¥ 3,600,763

¥

–

¥

–

¥

–

¥

–

¥

–

13,031,630¥16,632,393

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

1 year or less

1 to 2 years

Cash and cash deposits $ 36,507,785
Cash in trust and
132,126,436
deposits in trust$168,634,221
Total

Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of June 30, 2013
2 to 3 years 3 to 4 years(Thousands of yen)

1 year or less

As of June 30, 2013
2 to 3 years 3 to 4 years(U.S. dollars)

4 to 5 years

4 to 5 years

Over 5 years

Over 5 years

$

–

$

–

$

–

$

–

$

–

$

–
–

$

–
–

$

–
–

$

–
–

$

–
–

As of December 31, 2012
2 to 3 years 3 to 4 years(Thousands of yen)

1 year or less

1 to 2 years

4 to 5 years

Over 5 years¥ 3,596,805

¥

–

¥

–

¥

–

¥

–

¥

–

11,728,461¥15,325,266

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

(Note 4)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date
1 year or less
Short-term loans
Investment
corporation bonds
due within one year
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

¥

–

1 to 2 years¥–

As of June 30, 2013
2 to 3 years
3 to 4 years(Thousands of yen)
¥

–

¥

–

4 to 5 years¥–

Over 5 years¥–

12,000,000

–

–

–

–

–

8,000,000

–

–

–

–

–

–
–
¥ 20,000,000

5,000,000
20,500,000¥ 25,500,000–
23,540,000¥ 23,540,000

5,000,000
15,760,000¥20,760,000–
26,000,000¥ 26,000,000

2,000,000
7,600,000¥ 9,600,000

44

5.

Financial Instruments (continued)
1 year or less

Short-term loans
Investment
corporation bonds
due within one year
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

Short-term loans
Long-term debt due
within one year
Investment
corporation bonds
Long-term debt
Total

6.

–

$

As of June 30, 2013
2 to 3 years
3 to 4 years(U.S. dollars)

1 to 2 years
–

$

–

$

–

$

4 to 5 years–$

Over 5 years$–

121,666,836

–

–

–

–

–

81,111,224

–

–

–

–

–

–
–
$202,778,060

50,694,515
207,847,511$258,542,026–
238,669,776$238,669,776

50,694,515
159,789,111$ 210,483,626

263,611,477$263,611,477

20,277,806
77,055,662$ 97,333,468

1 year or less

1 to 2 years

As of December 31, 2012
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years¥¥

500,000

–

¥

–

¥

–

¥

–

¥

–

15,000,000

–

–

–

–

–

–
–
¥ 15,500,000

12,000,000
15,500,000¥ 27,500,000

5,000,000
15,540,000¥ 20,540,000

5,000,000
16,760,000¥21,760,000–
21,000,000¥ 21,000,000

2,000,000
5,000,000¥ 7,000,000

Investment and Rental Property

For the periods from January 1, 2013 to June 30, 2013 and from July 1, 2012 to
December 31, 2012
JEI owns rental office buildings and other properties in Tokyo and other regions for the
purpose of generating rental income. The following is the carrying value and fair value as ofJune 30, 2013 and December 31, 2012 for such real estate for lease.
As ofDecember 31, 2012
¥211,177,823

As ofDecember 31, 2012
$2,141,111,461

Carrying value
ChangeAs of(*1)
during period
June 30, 2013
(Thousands of yen)
¥27,684,075

Fair value
As ofJune 30, 2013

¥238,861,898¥225,682,000

Carrying value
ChangeAs ofduring period (*1)
June 30, 2013
(U.S. dollars)

Fair value
As ofJune 30, 2013$280,686,152$2,421,797,612$2,288,167,900

45

6.

Investment and Rental Property (continued)
Carrying value
ChangeAs of(*2)
during period
December 31, 2012
(Thousands of yen)

As ofJune 30, 2012
¥212,178,926¥(1,001,103)

Fair value
As ofDecember 31, 2012

¥211,177,823¥194,204,000(Note 1)
Carrying value represents the acquisition cost less accumulated depreciation.
(Note 2)(*1) Changes during period comprise increases of ¥10,260,613 thousand ($104,031,362)
related to the acquisition of AKASAKA INTERCITY (Additional acquisition ofcompartmentalized ownership), ¥3,877,473 thousand ($39,313,326) related to theacquisition of Kowa Nishi-Shimbashi Building, ¥1,865,265 thousand ($18,911,738)
related to the acquisition of Osaka Kogin Building (Land with leasehold interest),¥537,656 thousand ($5,451,241) related to the acquisition of Kawasaki Nisshincho
Building (Additional acquisition of co-ownership interest), ¥6,490,587 thousand($65,807,429) related to the acquisition of Core City Tachikawa, ¥5,552,239 thousand($56,293,608) related to the acquisition of SE Sankyo Building and a decrease of¥1,433,828 thousand ($14,537,445) for depreciation costs.
(*2) Changes during period comprise a decrease of ¥1,284,411 thousand for depreciation
costs.
(Note 3)
Fair value as of June 30, 2013 and December 31, 2012 is appraisal value provided bythird-party real estate appraisers.

7.

Property and Equipment

Property and equipment at June 30, 2013 and December 31, 2012 consisted of the following:
Acquisition
cost
Buildings and building
improvements¥
4,757,565
Machinery andequipment
265
Furniture and fixtures
2,285
Land
3,022,576
Construction in progress
2,777
Buildings and building
improvements for trust
accounts
92,103,927
Machinery andequipment for trust
accounts
454,947
Furniture and fixtures
for trust accounts
101,813
Land for trust accounts
143,746,869
Construction in progress
76,475for trust accounts
Total¥ 244,269,499

As of June 30, 2013
As of December 31, 2012
Accumulated
Net
Acquisition
AccumulatedNet
depreciation
book value
cost
depreciation
book value(Thousands of yen)¥

(588,678)¥

4,168,887¥

3,812,634¥(524,881)¥

3,287,753

Acquisition
cost$

48,236,494

As of June 30, 2013
Accumulated
depreciation(U.S. dollars)$(5,968,549)

Netbook value$

42,267,945

(72)
(668)
–
–

193
1,617
3,022,576
2,777

265
2,285
–
9,736

(60)
(545)
–
–

205
1,740
–
9,736

2,688
23,16430,645,604
28,156(726)(6,773)––

1,962
16,39130,645,604
28,156(13,147,516)

78,956,411

82,741,761(11,799,079)

70,942,682

933,832,782(133,301,392)

800,531,390(190,383)

264,564

431,629(175,202)

256,427

4,612,662(1,930,271)

2,682,391(45,345)–

56,468
143,746,869

81,727
128,008,244(39,067)–

42,660128,008,244

1,032,268
1,457,435,556(459,753)–

572,515
1,457,435,556–¥ (13,972,662)

76,475¥ 230,296,837

63,315¥ 215,151,596–¥ (12,538,834)

63,315¥ 202,612,762

775,373$ 2,476,624,747–$ (141,667,464)

775,373$ 2,334,957,283

46

8.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of June 30, 2013 and December 31, 2012 consisted of
the following:
As of June 30, 2013
Weighted-averageAmountinterest rate (*1)
(Thousands ofyen)
Short-term loans:
Unsecured loans from a bank due on
February 28, 2013
SubtotalLong-term debt due within
one year:
Unsecured loans from banks due on
June 28, 2013
Unsecured loans from banks due on
December 27, 2013
SubtotalLong-term debt:
Unsecured loans from an insurancecompany due on July 31, 2014
Unsecured loans from a bank due on
July 31, 2014
Unsecured loans from banks due on
December 29, 2014
Unsecured loans from an insurancecompany and a bank due on June 30,
2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
November 30, 2015
Unsecured loans from banks due on
June 29, 2016
Unsecured loans from banks due on
November 29, 2016
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from banks due on
January 31, 2017
Unsecured loans from insurancecompanies due on January 31, 2017
Unsecured loans from a bank due on
November 30, 2017
Unsecured loans from banks due on
November 30, 2017
Unsecured loans from banks due on
November 30, 2017
Unsecured loans from insurancecompanies due on November 30,
2017
Unsecured loans from an insurancecompany due on June 29, 2018
Unsecured loans from banks due on
June 30, 2018
Unsecured loans from a bank due on
January 31, 2020
Unsecured loans from banks due on
January 31, 2020
Unsecured loans from an insurancecompany due on January 31, 2020
Unsecured loans from a bank due on
June 30, 2021
Subtotal
Total

¥

–
–

–

–

As of December 31, 2012
Weighted-averageAmountinterest rate (*1)
(Thousands ofyen)

Amount(U.S. dollars)

0.68000%–

7,000,000

1.02833%–

8,000,000
8,000,000

0.98000%

8,000,000
15,000,000

1.05917%

81,111,224
81,111,224

2,000,000

2.25875% (*2)

2,000,000

2.25875% (*2)

20,277,806

2,000,000

2.28417%(*2)

2,000,000

2.28417%(*2)

20,277,806

11,500,000

0.88000%

11,500,000

0.95917%5,000,000

2.27344% (*2)

5,000,000

2.27344% (*2)

50,694,515

4,540,000

1.13750%(*2)

4,540,000

1.13750%(*2)

46,030,619

2,000,000

1.14125%(*2)

2,000,000

1.14125%(*2)

20,277,806

4,000,000

0.97125% (*2)

4,000,000

0.97125% (*2)

40,555,612

13,000,000

1.36375%(*2)

13,000,000

1.36375%(*2)

131,805,738

1.24375%(*2)

1.24375%(*2)

38,122,275

5,000,000

1.24750%(*2)

5,000,000

1.24750%(*2)

50,694,515

4,000,000

1.03000% (*2)

4,000,000

1.03000% (*2)

40,555,612

3,000,000

1.09734%(*2)

3,000,000

1.09734%(*2)

30,416,709

6,000,000

1.73875%(*2)

6,000,000

1.73875%(*2)

60,833,418

3,000,000

1.08375% (*2)

3,000,000

1.08375% (*2)

30,416,709

2,000,000

1.04550 % (*2)––

1,000,000

1.19212% (*2)––

3,000,000

1.65125%(*2)

3,000,000

1.65125%

11,000,000

0.81225% (*2)––

2,000,000

1.60000% (*2)

2,000,000

2,600,000

1.36400%

(*2)

–

–

26,361,148

1.31261%

(*2)

–

–

10,138,903

1.60750% (*2)–
73,800,000¥ 89,300,000–

20,277,806
946,973,537$ 1,028,084,761

1,000,000
2,000,000
93,400,000¥ 101,400,000

3,760,000$––

500,000
500,000

3,760,000¥

As ofJune 30, 2013

116,597,384

20,277,806
10,138,903(*2)

1.60000% (*2)

30,416,709
111,527,932
20,277,806(*1) The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period
and rounded to the nearest fifth decimal place. As for the borrowings, which were hedged by interest-rate
swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
(*2) These are fixed-rate debt. (Fixed-rate debt by the interest-rate swaps agreement is included.)

47

8.

Short-Term Loans and Long-Term Debt (continued)

The scheduled repayment amounts of long-term debt after the balance sheet date (excluding
the long-term debt due within one year) are as follows:

Long-term debt

Long-term debt

1 to 2 years

2 to 3 years

3 to 4 years
4 to 5 years(Thousands of yen)Over 5 years¥20,500,000¥23,540,000¥15,760,000¥26,000,000¥7,600,000

1 to 2 years

2 to 3 years

3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$207,847,511$238,669,776$159,789,111$263,611,477$77,055,662

JEI has commitment lines of ¥14,000 million ($141,944 thousand) with three financial
institutions to reduce refinancing risk and enhance financial stability. The full amount of suchcommitment lines was unused at June 30, 2013.

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of June 30, 2013 and December
31, 2012 are summarized as follows:

Unsecured bond due on
March 11, 2014
Unsecured bond due on
June 26, 2015
Unsecured bond due on
November 4, 2016
Unsecured bond due on
November 2, 2018
Total

As of June 30,
2013

As of June 30, 2013
WeightedaverageAmountinterest rate
(Thousandsof yen)As of December 31, 2012
WeightedaverageAmountinterest rate
(Thousandsof yen)¥12,000,000

1.52000%¥12,000,000

5,000,000

1.29000%

5,000,000

1.29000%

50,694,515

5,000,000

1.01000%

5,000,000

1.01000%

50,694,515

2,000,000¥24,000,000

1.40000%

2,000,000¥24,000,000

1.40000%

20,277,806$243,333,672

Amount(U.S. dollars)

1.52000% $121,666,836

The scheduled redemption amounts of investment corporation bonds after the balance sheet
date are as follows:

Investment
corporation bonds

Investment
corporation bonds

1 year or less

1 to 2 years¥12,000,000¥5,000,000

1 year or less

1 to 2 years$121,666,836 $50,694,515

2 to 3 years
3 to 4 years(Thousands of yen)–

¥5,000,000

2 to 3 years
3 to 4 years(U.S. dollars)–$50,694,515

4 to 5 years

Over 5 years–¥2,000,000

4 to 5 years

Over 5 years–$20,277,806

48

10. Net Assets
In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50 million.

11. Per Unit Information
Net assets per unit were ¥536,488 ($5,439) as of June 30, 2013 and ¥554,175 as of December
31, 2012. Net income per unit was ¥11,884 ($120) for the period from January 1, 2013 to June30, 2013 and ¥12,241 for the period from July 1, 2012 to December 31, 2012 and wascomputed based on the weighted-average number of units outstanding during the respective
periods.

12. Income Taxes
JEI is subject to income taxes in Japan.
JEI’s policy is to make dividend distributions in excess of 90% of distributable income foreach fiscal period in order to meet the condition set forth in the Special Taxation Measures
Law of Japan concerning the deductibility of cash dividends paid for income tax purposes.
Details of significant components of deferred tax assets and liabilities as of June 30, 2013 andDecember 31, 2012 are summarized as follows:
As of
As of
June 30,
December 31,
2013
2012
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

¥15
15
¥15

¥24
24
¥24

As of
June 30,
2013(U.S. dollars)
$154
154
$154

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from January 1, 2013 to June 30, 2013 and from July 1, 2012 to December 31,
2012 is as follows:
For the period
For the period
from January 1, from July 1, 20122013 to June 30, to December 31,
2013
2012
Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

36.59%

36.59%(38.63)2.08
0.04%(36.57)
0.03
0.05%

49

13. Breakdown of Property Rental Business Revenues and Expenses
For the period
For the period
from January 1, from July 1, 20122013 to June 30, to December 31,
2013
2012
(Thousands of yen)
Rental business revenues:
Rental revenues
Other
Total rental businessrevenues
Property operating expenses:
Property management costs
and fees
Utilities
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating
expensesProfit

For the period
from January 1,
2013 to June 30,
2013(U.S. dollars)¥7,716,520
692,993¥6,944,963
652,843$78,237,050
7,026,191

8,409,513

7,597,806

85,263,241

1,136,773
804,651629,281
23,915
109,881
1,433,828
211,788

1,006,078
762,490
613,371
22,19886,1401,284,411
175,434

11,525,628
8,158,283
6,380,213
242,470
1,114,069
14,537,445
2,147,300

4,350,117¥4,059,396

3,950,122¥3,647,684

44,105,408$41,157,833

14. Leases
JEI leases properties on which rental revenues are earned. At June 30, 2013 and December 31,
2012, future lease revenues under non-cancelable operating leases are summarized as follows:

Due within one year
Due after one year
Total

As of
As of
June 30,
December 31,
2013
2012
(Thousands of yen)

As ofJune 30,
2013(U.S. dollars)¥ 590,411
734,191¥1,324,602$ 5,986,110
7,443,896$13,430,006

¥

8,462
413,670¥422,13250

15. Derivative Transactions
Derivative Transactions as of June 30, 2013
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of June 30, 2013 for each hedge accounting method applied.
Hedge
accounting
methodType of derivativetransaction

Contract amount
Fair
More thanvalue
one year(Thousands of yen)

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps¥54,900,000¥54,900,000

Method ofcalculating
the fair value*

Contract amount
Fair
More thanvalue
one year(U.S. dollars)$556,625,773$556,625,773

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria, theswap is not recorded at fair value on the accompanying balance sheets, as described in the summary ofsignificant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 5, “Financial Instruments.”

Derivative Transactions as of December 31, 2012
(1) Hedge accounting not applied
Not applicable.
(2) Hedge accounting applied
The following are the contract values or values corresponding to the principal amount as
stipulated by contract as of December 31, 2012 for each hedge accounting method
applied.
Hedge
accounting
methodType of derivativetransaction

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
¥39,300,000¥39,300,000

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria, theswap is not recorded at fair value on the accompanying balance sheets, as described in the summary ofsignificant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value
disclosure in Note 5, “Financial Instruments.”

51

16. Related Party Transactions
For the period from January 1, 2013 to June 30, 2013
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

Amount(Thousands(U.S. dollars)of yen)¥370,459$3,756,049

Account
Accounts
payableBalance at the end of period(Thousands(U.S. dollars)of yen)¥242,991$2,463,660

For the period from July 1, 2012 to December 31, 2012
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name
Chifumi Toda

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)
¥358,310

Account
Accounts
payableBalance at the end of period(Thousands of yen)
¥226,641

52

17. Segment Information
For the periods from January 1, 2013 to June 30, 2013 and from July 1, 2012 to
December 31, 2012
Since JEI has been engaged in the real-estate leasing business as a single segment, segment
information has been omitted.
Information about products and services
Since revenues from external customers for a single segment of similar products and services
accounted for more than 90% of total operating revenues, information about products andservices has been omitted.
Information about geographic area
(1) Revenues
Since 100% of the total operating revenues were generated from external customers
within Japan, geographical breakdown of revenues has been omitted.
(2) Property and equipment
Since 100% of total property and equipment on the balance sheet are located within
Japan, geographical breakdown of such property and equipment has been omitted.
Information about major clients
Since no single external client represents 10% or more of JEI’s total operating revenues,
information about major clients has been omitted.

18. Distribution Information
In accordance with Section 33.1.2 of the bylaws set forth by JEI for distributions of cash
dividends, the amount of dividends payable, which is limited by the amount of unappropriatedretained earnings, shall be in excess of 90% of its distributable income for the fiscal period as
set forth in Section 67.15 of the Special Taxation Measures Law.
Consequently, JEI set income available for distributions of dividends at ¥2,744,390,000($27,825,104), which is the integral multiple of the 224,950 units issued as of June 30, 2013
after including a reversal of reserve for advanced depreciation of non-current assets inunappropriated retained earnings. No cash distribution exceeding the income amount set forthin Section 33.1.4 of the bylaws of JEI shall be made.
On August 13, 2013, the Board of Directors approved a resolution to make a cash distributionof ¥12,200 ($124) per unit aggregating to ¥2,744,390,000 ($27,825,104) to unitholders ofrecord as of June 30, 2013.

19. Significant Subsequent Events
Not applicable.

53