Asset Management Report for 18th Period(Semi-Annual Report for 18th Period)
From January 1, 2015 to June 30, 2015

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 18th period (from January 1, 2015 to June 30, 2015).
JEI recorded total revenues of 10,212 million yen, net income of 3,097 million yen and the distribution per unit forthe period was 2,554 yen. JEI realized increases in revenue, income and distribution for the fourth consecutive
period.
During the 18th period, JEI acquired a prime large property, Nisseki Yokohama Building, for 24.5 billion yen withthe cooperation of Mizuho Bank, Ltd., the sponsor. Nisseki Yokohama Building is a symbolic large-scale tower
office building located in Minato Mirai 21 serving as a key business base for the JX Group, which is the largest
energy-related company in Japan. In addition to being able to acquire such a prime property, JEI was able to realize
increases in income and distribution due to progress in upward rent revision with existing tenants and successfully
continuing to retain high occupancy rates that are above the market average, etc.
In terms of finance, JEI continues to retain rating of AA- from the rating agency as JEI’s ongoing stable financemanagement was recognized.

About Future Asset Management
The Japanese economy is on a recovery trend due to additional monetary easing by the Bank of Japan,
improvement in the corporate performance brought by the weak yen and continuation of high stock prices and low
and stable long-term interest rates.
In the office building leasing market, the vacancy rate is forecast to continue to be on a downward trend as demandfor offices is expected to steadily grow going forward. In addition, the rent level is starting to gradually rise since
new rents have begun to show a turnaround centering on large-scale, prime buildings in central Tokyo, indicating
an increase in the number of upward rent revisions.
In the real estate investment market, real estate transaction prices are expected to continue rising as the supply of
prime properties is still limited in central Tokyo and metropolitan areas, while favorable fund procurement
environment and expansion in market players are observed.
With this perspective, in addition to maintaining a high occupancy rate, JEI will endeavor to further improve theoccupancy rate and profitability of the entire portfolio by setting appropriate new rents based on market trends andpromoting upward rent revision to suit the value of properties. Furthermore, JEI will pursue opportunities to invest
in prime real estate properties, including asset replacements, for increasing asset size over the medium to long term.
Concurrently, JEI will strictly adhere to appropriate portfolio management and maintain the quality of the portfolio
while cautiously assessing the sense of overheating in the real estate investment market.
In terms of financing, JEI will continue its efforts in conducting stable financial operations by striving to diversify
maturity dates and minimize financing costs while promoting conversion to fixed interest rates and extension of
average remaining period of interest-bearing debt in preparation for the risk of interest rate rises in the future.
In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and otherlaws and regulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the statusof our operations and asset management to our unitholders.
We kindly ask for your continued understanding and support.

Hidehiko Ogawa
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.
thAsset Management Report for 18 period (Semi-Annual Report for 18th Period)

2II. Asset Management Report
1. Outline of asset management operation(1) Operating results and financial position of the Investment Corporation
14th Period
15th Period 16th Period 17th Period 18th Period
January 1, July 1, 2013 to January 1, July 1, 2014 to January 1,
2013 to June December 31, 2014 to June December 31, 2015 to June30, 2013
2013
30, 2014
2014
30, 2015

Fiscal period

Revenues(Millions of
yen)

8,418

8,850

9,558

9,695

10,121(8,409)(8,848)(9,558)(9,695)(10,121)

4,871

5,140

5,592

5,731

6,102

(4,350)(4,605)(5,022)(5,180)(5,533)

3,546

3,709

3,966

3,963

4,018

2,589

2,775

3,011

3,041

3,098

2,598

2,774

3,010

3,040

3,097

257,613257,901

277,842

278,037

300,976(12.9)

(0.1)

(7.7)

(0.1)

(8.3)

120,683

120,713130,998

131,028

131,085(15.4)

(0.0)

(8.5)

(0.0)

(0.0)

117,901

117,901

127,950

127,950

127,950(units)224,950

224,950

1,212,750

1,212,750

1,212,750(yen)

107,297

107,324

108,017

108,042

108,089

(yen)

2,376

2,466

2,511

2,506

2,554

2,744

2,774

3,010

3,040

3,097

12,200(2,440)12,334(2,466)

2,482

2,507

2,554

12,20012,334

2,482

2,507

2,554

(–)

(–)

(－)

(Rental revenues)(Millions ofOperating expenses(Millions ofyen)(Property operating expenses)

yen)(Millions ofyen)Operating income(Millions of

Ordinary income(Millions of

Net income(Millions of

Total assets(Millions of(Period-on-period change)
Net assets(Period-on-period change)
Unitholders’ capital
Total outstanding investment
units
Net assets per unit (Note 1)
Net income per unit (Note 2)
Total distribution

yen)
yen)
yen)
yen)
(%)
(Millions ofyen)(%)(Millions ofyen)(Millions ofyen)Distribution per unit
(Distribution per unit after split)(Note 3)(yen)

(Profit distribution per unit)(Of this, profit distribution per unit after
split)(yen)(2,440)(2,466)

(–)

(–)

(–)

(–)

(Note 3)

(Distribution in excess ofearnings per unit)(yen)(Of this, distribution in excess of earnings
per unit after split) (Note 3)

Return on assets (Note 4)(Annualized rate)

(%)

1.1

1.1

1.1

1.1

1.1

(%)

(2.2)

(2.1)

(2.3)

(2.2)

(2.2)

Return on equity (Note 5)

(%)

2.3

2.3

2.4

2.3

2.4

(%)

(4.7)

(4.6)

(4.8)

(4.6)

(4.8)

(%)

46.8

46.8

47.1

47.1

43.6

(%)

(1.0)

(−0.0)(0.3)(−0.0)(−3.6)(Annualized rate)
Capital ratio (Note 6)(Period-on-period change)
Payout ratio (Note 7)

(%)

105.6

99.9

99.9

100.0

99.9

Number of investment properties(properties)

28

28

30

30

31

Number of tenants(tenants)

152

157

206

214

219

302,505

302,505

330,285

330,179

370,671

Total leasable space (Note 8, 9)(㎡)

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)3

Occupancy rate

(%)

97.1

98.7

98.3

99.1

97.9

Depreciation(Millions of
yen)

1,433

1,504

1,624

1,657

1,786

Capital expenditure(Millions of

572

775

558

415

790

Net operating income (NOI)(Note 10)Funds from operation (FFO) per
unit (Note 11)
FFO multiples (Note 12, 13)
Debt service coverage ratio(DSCR) (Note 14)(Millions of

5,493

5,747

6,160

6,172

6,374

(yen)

3,584

3,804

3,822

3,873

4,027

(times)

15.4

16.3

17.4

20.8

17.4

(times)

4.4

4.4

4.8

5.0

5.0

125,400

125,400

133,900

133,900

155,400

Interest-bearing debt

yen)
yen)

(Millions ofyen)

Loan-to-value (Note15)

(%)

48.7

48.6

48.2

48.2

51.6

Number of days in operation(days)

181

184

181

184

181

(Note 1) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. Net assets per unit iscalculated assuming the split of investment units was implemented at the beginning of the fourteenth period.
(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. Moreover, a five-for-one split of investment units was implemented with January 1, 2014 as theeffective date. Net income per unit is calculated assuming the split of investment units was implemented at the beginning of
the fourteenth period.
(Note 3) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. Distribution per unit
after spit, of this, profit distribution per unit after split and of this, distribution in excess of earnings per unit after split arecalculated assuming the split of investment units was implemented at the beginning of the fourteenth period (figures arerounded down to the nearest whole number).
(Note 4) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 5) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 6) Capital ratio = Period end net assets / Period end total assets × 100(Note 7) Payout ratio = Total distribution / Net income × 100(Note 8) For properties with joint ownership, a figure obtained by multiplying the leasable space of the entire property by theownership ratio is indicated as JEI’s leasable space. The same shall apply hereinafter.
(Note 9) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 10) NOI = Rental revenues – Property operating expenses + Depreciation(Note 11) FFO per unit = (Net income + Depreciation – Gain on sale real estate + Loss on sale of real estate) / Total Number of
Outstanding investment units (the figure is rounded down to the whole number). Moreover, a five-for-one split ofinvestment units was implemented with January 1, 2014 as the effective date. Total outstanding investment units arecalculated assuming the split of investment units was implemented at the beginning of the fourteenth period.
(Note 12) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to one decimal
place.)(Note 13) A five-for-one split of investment units was implemented with January 1, 2014 as the effective date. FFO multiples arecalculated based on the period end investment unit price calculated assuming the split of investment units was implemented
at the beginning of the fourteenth period.
(Note 14) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment corporation bonds)(Note 15) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

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

4

(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 Director (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 the medium- to long-term perspectives. On June 30, 2015, we settled our eighteenth period.
1) Business conditions and results
The Japanese GDP posted positive growth for the two consecutive quarters of October – December 2014 andJanuary – March 2015 due to a continuous recovery trend in personal consumption and exports as well as tobuoyed capital investment. Although the recovery trend currently seems to be taking a break in exports,
personal consumption, etc., the Japanese economy continues to show underlying strength as capital
investment and the employment situation continue to improve.
In the office building leasing market, tenant needs for floor area increase in the same building and relocationfor expansion have become apparent backed by improvement in corporate performance and the employment
situation, and the vacancy rate generally continues to be on an improving trend. However, the leasing market
in Osaka and Nagoya areas appears to be in a bit of a stalemate due to the effect of new supply and such.
Under such circumstances, the occupancy rate of JEI’s portfolio achieved an extremely high level of 99.1%
at the end of the previous period. However, as a result of leasing activities focused on rent levels whenfilling vacancies after some departures, the occupancy rate at the end of the period under review stood at
97.9% (98.2% based on the assets owned at the end of the previous period).
In the real estate investment market, a rise in real estate transaction prices due mainly to a decrease in
expected yields is observed amid the continuing favorable fund procurement environment, and there is senseof overheating compared to the previous period. In addition to the new listings of J-REITs, market
participation of not only overseas investors, private funds and private REITs but also of general companies,
etc. has become more noticeable.
JEI acquired Nisseki Yokohama building on a negotiation basis in April 2015 using information provided by
the Mizuho Financial Group, and the entire real estate portfolio of JEI at the end of the period was 31
properties in terms of the number of properties held, 289.9 billion yen in investment amount (on an
acquisition price basis) and 370,671.48 m2 in total leasable space.

2) Fund raising highlights
During the period, JEI also aimed to reduce borrowing costs and convert floating-rate debts to fixed ratedebts by taking advantage of financing environment with low interest rate while continuing to make efforts
as during the previous period to extend borrowing period and diversify maturity dates.
Out of long-term fixed interest loans of 5.0 billion yen which matured in June 2015, 2.0 billion yen was
refinanced with long-term fixed interest loans (period of 8 years) (the remaining 3.0 billion yen was repaid
with liquidity on hand). Furthermore, in addition to refinancing investment corporation bonds of 5.0 billion
yen which matured in June 2015 with short-term loans (period of 3 months), JEI newly procured 24.5 billion
yen for the acquisition of Nisseki Yokohama Building in April 2015 with short-term loans and conducted
weekly renewal of interest rate during the interest bearing period. These resulted in realizing a further
reduction in borrowing costs and the average remaining period of interest bearing debt was shortened.
As a result, as of the end of the period, JEI had the average remaining debt maturity of interest-bearing debts(Note 1) at 2.9 years, long-term borrowing ratio (Note 2) and fixed rate ratio (Note 3) both at 81.0%, andweighted average interest rate for loans purchased (Note 4) at 0.95%. Outstanding interest-bearing debts
totaled 155.4 billion yen, 29.5 billion yen in short-term loans, 100.9 billion yen in long-term loans (including
23.54 billion yen in long-term loans due within one year) and 25.0 billion yen in investment corporation
bonds (The loan to value ratio to the total assets was 51.6% as of the end of the period).
Asset Management Report for 18th period (Semi-Annual Report for 18th Period)

5

JEI has commitment lines of 14.0 billion to reduce refinancing risk, enhance stability for fund procurement,
etc.
The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of June 30, 2015)
Credit rating agency

Issuer rating (outlook)

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

Long-term issuer rating
AA- (Stable)
Issuer rating
A+ (Stable)
Issuer rating
A3 (Stable)

Moody’s Japan

Individual debt issue rating(Note 5)AA−
A+―

(Note 1) Calculated using a weighted-average of the remaining maturity of all interest-bearing debts from the end of the period underreview by respective interest-bearing debt.
(Note 2) Long-term borrowing ratio = (long-term loans (including long-term loans due within one year) + investment corporation bonds(including investment corporation bonds due within one year) / total interest-bearing debts(Note 3) Fixed rate ratio = Total interest-bearing debts at fixed interest rate (including long-term loans which interest rates were fixed
through interest rate swap transactions) / total interest-bearing debts(Note 4) Calculated using a weighted-average of interest rates at the end of the period under review by outstanding amount of respective
interest-bearing debt for all interest-bearing debts.
(Note 5) The rating of JRC is for the 3rd series unsecured investment corporation bonds, 4th series unsecured investment corporation
bonds, 5th series unsecured investment corporation bonds, 6th series unsecured investment corporation bonds and 7th series
unsecured investment corporation bonds. The rating of R&I is for the 3rd series unsecured investment corporation bonds and 4thseries unsecured investment corporation bonds.

3) Financial results and distribution highlights
As a result of the above management, JEI posted 10,121 million yen in total revenues, 4,018 million yen in
operating income, 3,098 million yen in ordinary income and 3,097 million yen in net income for the period
under review.
Considering distributions in the period under review, JEI determined to distribute the whole unappropriatedretained earnings (except for the portion of less than one yen per unit) to be eligible for special provisions of
the tax system on investment corporations (Section 67-15 of the Special Taxation Measures Law), that allows
JEI to deduct the amount of profit distribution from its taxable income. Accordingly, distribution per unit forthe period was 2,554 yen.

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)63) Capital Increase
JEI had no changes in the total number of outstanding investment units for the period under review. The outline of
the changes in the total number of outstanding investment units and unitholders’ capital until the end of the period
under review are as follows:
Unitholders’ capital
Capital transaction (units)
Paid-up Date
Capital transaction
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)3,300

224,950

1,440

117,901(Note 9)899,800

1,124,750–

117,901(Note 10)February 27, 2013
January 1, 2014

Allocation of
investment units toa third party
Split of investment
unit

January 27, 2014

Public offering

80,0001,204,750

9,135

127,036(Note 11)February 26, 2014

Allocation of
investment units toa third party

8,000

1,212,750

913

127,950(Note 12)(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 per unit) through apublic offering in order to fund acquisition of new properties which were acquired at the time of 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 athird 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 per unit) through apublic 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 athird 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 per unit) through apublic offering in order to repay short-term loans procured to acquire properties in the ninth period and to fund acquisitionof 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 athird party in order to repay short-term loans procured to acquire new properties in the ninth period and to fund acquisitionof 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 per unit) through apublic 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 athird party in order to fund acquisition of properties acquired in the fourteenth period.
(Note 10) With December 31, 2013 as the record date, JEI implemented a 5-for-1 split of its investment units held by Unitholders
stated or recorded on that date’s final unitholder registry with January 1, 2014 as the effective date.
(Note 11) New investment units were issued at an offer price of 118,072 yen per unit (issue price of 114,196 yen per unit) through apublic offering in order to fund acquisition of new properties which were acquired at the sixteenth period.
(Note 12) New investment units were issued at an issue price of 114,196 yen per unit through an allocation of investment units to athird party in order to partially fund future acquisitions of specified assets, repayment of loans and redemption of investment
corporation bonds.
(Note 13) At JEI, there exist no investment units held by JEI (investment units without voting rights provided in Article 308-2 of the
Corporate Law which will be applied mutatis mutandis pursuant to Article 94 of the Investment Trust Law) or cross-heldinvestment units (investment units without voting rights provided in Article 160 of the Investment Trust Enforcement
Ordinance) as of the end of the eighteenth period.

Asset Management Report for 18th period (Semi-Annual Report for 18th 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:
15th period (December 2013)

Investment unit
market priceFiscal period 14th period(closing date) (June 2013)

Before exrights date

After exrights date

16th period(June 2014)

17th period(December
2014)

18th period(June 2015)

Highest (yen)739,000

639,000

123,300

141,600

164,700

168,400

Lowest (yen)463,000

515,000

117,600

114,200

133,400

141,400(Note 1) 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.
(Note 2) JEI implemented a 5-for-1 split of its investment units with January 1, 2014 as the effective date.

(4) Distributions Paid
The distribution per unit for the period (the eighteenth period) was 2,554 yen per unit, based on JEI’s decision to
distribute the whole unappropriated retained earnings (except for the portion of less than one yen per unit) to beeligible for the special tax treatment on investment corporations (Article 67-15 of the Special Taxation Measures
Law) that allows JEI to deduct the amount of profit distribution from its taxable income.
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)(Distribution per unit after
split) (yen) (Note)
Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)(Profit distribution per unit
after split) (yen) (Note)
Total refund of investment
equity(Refund of investment per
unit)(Refund of investment perunit after split) (yen) (Note)

14th period

15th period

16th period

17th period

18th period

January 1, 2013
to June 30, 2013

July 1, 2013 to
December 31,
2013

January 1, 2014
to June 30, 2014

July 1, 2014 toDecember 31,
2014

January 1, 2015
to June 30, 2015

2,598,369

2,774,683

3,010,447

3,040,640

3,098,080

–

149

402

275

717

2,744,390

2,774,533

3,010,045

3,040,364

3,097,363(12,200)(12,334)(2,482)(2,507)(2,554)(2,440)(2,466)

2,744,390

2,774,533

3,010,045

3,040,364

3,097,363(12,200)(12,334)(2,482)(2,507)(2,554)(2,440)(2,466)

–

–

–

–

－

(–)

(–)

(–)

(–)

(－)

(–)

(–)

(Note) JEI implemented a five-for-one split of investment units with January 1, 2014 as the effective date. Distribution per unit after
split, profit distribution per unit after split and refund of investment per unit after split are calculated assuming the split ofinvestment units was implemented at the beginning of the fourteenth period.

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

8

(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
The world economy in 2016 is expected to slightly improve due to mild growth brought by recovery inadvanced nations centering on the U.S. and weakening of downward pressure against growth of resource-richnations brought on by low crude oil prices.
While the plunge in crude oil prices which started in the latter half of last year has boosted economies
centering on oil importing countries, it has caused instability, heightened credit risks, etc. in resource-richnations generating anxiety factors for the world economy. Still, the global low interest environment is likely
to continue for the foreseeable future and positively affecting the growth of the world economy, due to theeffects of continuous quantitative monetary easing including the purchase of government bonds in Japan andEurope as well as the expected solid growth mainly led by strong personal consumption in the U.S.
However, although moderate growth can be expected due to quantitative monetary easing, the weak euro andlow crude oil prices in the euro zone, factors of concern continue to linger as the Greek financial crisis is
expected to continue, and concerns remain over the UK’s possible breakaway from the EU, etc. Although
Asian economies will continue to be strong in general, the speed of economic growth is expected to slow.
Particularly in China, repayment of debts related to local governments and real estate are a concern because of
the slowdown in growth rate in addition to the uncertainties of the Shanghai stock market. Also for emerging
nations, cautious attention should be given to various smoldering global risks that could push down
economies, including projected negative growth in Russia and Brazil in 2015, possible capital outflow risk
upon the expected raising of interest rates by the U.S. and the continuation of geopolitical risks centering on
the Ukraine and the Middle East.
The Japanese economy has been gradually getting back on a recovery trend supported by the continuation of
the weak yen, high stock prices and stable low long-term interest rate brought on by monetary easing by the
Bank of Japan and implementation of emergency financial measures. Although negative growth of -0.9% wasposted in fiscal 2014, personal consumption is expected to be strong in fiscal 2015 as a wage-increase trend
was observed in the spring wage negotiations amid ongoing improvement in the employment environment.
Close to 2% growth rate is forecast for fiscal 2015 since economic expansion is expected due to a recovery inexports and increase in capital investment supported by the weak yen, high stock prices and substantial drop
in crude oil price.
It is believed that domestic long-term interest rates will continue to be pressed downward for the time being
due to quantitative purchase of government bonds by the Bank of Japan. However, with the high stock prices
and progressing rise in interest rates in the U.S., domestic interest rates may also feel gradual upward pressure.
Furthermore, close attention should be paid to speculation about additional monetary easing amid heightened
dependency on the purchase of government bonds by the Bank of Japan and concerns over possible further
volatility in line with the long-term interest moves in the U.S. and Germany.
In the office building leasing market, the vacancy rate is expected to continue to be on an improving trend
though moderate since office demand is anticipated to steadily expand going forward. Furthermore, new rents
have started to make a turnaround at properties whose vacancies are being eliminated centering on large-scale
prime buildings in central Tokyo. The rent level has begun to gradually rise as actual cases of upward rent
revisions have been observed.
In the real estate investment market, real estate transaction prices are continued to be expected to rise as the
supply of prime properties is still limited, especially in central Tokyo and metropolitan areas, while afavorable fund procurement environment and expansion in market players are expected. Cautiously assessing
whether the sense of overheating is further growing in the real estate investment market is needed.

2) Policy and issues on future investment management
JEI will continue to make efforts to capture the needs of existing tenants in a timely manner by further
strengthening finely-tuned relationships. With these efforts and promotion of upward revisions to realize rents
Asset Management Report for 18th period (Semi-Annual Report for 18th Period)

9

that are more suitable for the property value as well as setting of new rents based on market trends, JEI will
pursue to enhance both the occupancy rate and earnings of the entire portfolio and existing properties at thesame time. Moreover, in order to maintain asset value and improve property competitiveness over the
medium to long term, JEI will consistently make additional strategic investments.
For external growth, JEI will continue striving to acquire, including replacing assets, competitive properties
with well-balanced investments based on size, concentration and target area to increase asset size and realize
stable profitability in our portfolio over the medium to long term. To this end, we will continue enhancing
further interaction and collaboration with sponsor companies and have the asset management company
cultivate and refine property information sources in an effort to proactively gain access to market informationand thereby keep seizing the right business opportunities. The acquisition of Nisseki Yokohama Building
during the period under review was realized with the information provided by the Mizuho Financial Groupand the bridge finance from Mizuho Bank, Ltd., the sponsor.
Regarding financial operations, in the 17th period ended December 2014, JEI achieved a fixed interest rate
ratio of 100% and realized lengthening of the remaining period of debts to 3.6 years for the average remaining
period of interest-bearing debt as of the end of the period
In the 18th period, out of long-term fixed interest loans of 5.0 billion yen which matured in June 2015, 2.0
billion yen was refinanced with long-term fixed interest loans (period of 8 years) (the remaining 3.0 billion
yen was repaid with liquidity on hand). Furthermore, in addition to refinancing investment corporation
bonds of 5.0 billion yen which matured in June 2015 with short-term loans (period of 3 months), JEI newly
procured 24.5 billion yen for the acquisition of Nisseki Yokohama Building in April 2015 with short-termloans and conducted weekly renewal of interest rate during the interest bearing period. These resulted inrealizing a further reduction in borrowing costs and the average remaining period of interest bearing debt
was shortened to 2.9 years.
Although the fund-raising environment is generally favorable for JEI, volatile movements in the financemarket attributable especially to overseas factors such as Greek financial crisis, Shanghai stock market plunge
are recently noticeable. We will consistently work, with an continuous aim to reduce borrowing costs taking
advantage of current low interest financing environment, on stable and sound financial operations while
carefully watching future changes in situations within and outside Japan and endeavoring to lengthen theremaining period of debts, diversify maturity dates, ensure liquidity by renewing commitment lines andmaintain an appropriate ratio of interest-bearing debts.

(6) Subsequent Events① Issuance of new investment units through public offering (primary offering)
The board of directors of JEI resolved the following issuance of new investment units through public
offering at its meetings held on June 24, 2015 and July 6, 2015. The payment for the offering was completed
on July 13, 2015.
<Overview of the issuance of new investment units through public offering>Number of new investment units to be issued

47,000 units

Offer price¥129,675 per unit

Total offer price¥6,094,725,000

Issue price¥125,419 per unit

Amount to be paid in (Issue value)¥5,894,693,000

Payment dateJuly 13, 2015

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)10

②Issuance of new investment units through third-party allotment (greenshoe option)
The board of directors of JEI resolved the following issuance of new investment units through third-party
allotment at its meetings held on June 24, 2015 and July 6, 2015. The payment for the offering wascompleted on August 12, 2015.
As a result, unitholders’ capital is 134,434,701,400 yen, including the amount increased through the above
primary offering, and the number of investment units issued and outstanding is 1,264,450 as of August 12,
2015.

<Overview of issuance of new investment units through third-party allotment>
Number of new investment units to be issued

4,700 units

Issue price¥125,419 per unit

Amount to be paid in (Issue value)¥589,469,300

AlotteeMizuho Securities Co., Ltd.

Payment dateAugust 12, 2015

〈Reference Information〉
Issuance of investment corporation bonds
On September 9, 2015, JEI issued investment corporation bonds as described below based on thecomprehensive resolution on the issuance of investment corporation bonds adopted at its meeting held
on February 16, 2015 to partially fund repayment of existing short-term borrowings.
〈Overview of Investment Corporation Bond〉
Name

8th Series Unsecured Investment
Corporation Bonds

Issue date

September 9, 2015

Total issue amount

5 billion yen

Interest rate

1.030%

Redemption date

September 9, 2025

Collateral

Unsecured/Non-guaranteed (Note)(Note) The bonds are with special pari passu conditions among specified investment corporation bonds.

The following is the balance of borrowings as of today.
Investment corporation bonds(Including bonds maturing within
one year)

30,000 million yen

Short-term borrowings

17,000 million yen

Long-term borrowings(Including borrowings due within
one year)

100,900 million yen

Total interest-bearing debt

147,900 million yen

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)11

2. Outline of the Investment Corporation(1) Investment units
14th
As of June 30,
2013

Fiscal period
Total number of units
authorized
Total number of units
issued and outstanding

15th
16th
17th
As of December As of June 30, 2014 As of December
31, 2013(Note)
31, 2014

18th
As of June 30,
2015

2,000,000 units

2,000,000 units

224,950 units

224,950 units

1,212,750 units

1,212,750 units

1,212,750 units

Unitholders’ capital

117,901 million
yen

117,901 million
yen127,950 million
yen127,950 million
yen127,950 million
yen

Number of unitholders

7,361 individuals 6,846 individuals

10,000,000 units 10,000,000 units 10,000,000 units

8,451 individuals 7,917 individuals 7,848 individuals(Note) JEI implemented a five-for-one split of its investment units with January 1, 2014 as the effective date.

(2) Unitholders
Major unitholders as of June 30, 2015 are as follows:
Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%)

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

354,755

29.25

Trust & Custody Services Bank,
Harumi Island Triton Square Office Tower Z,
Ltd. (Securities Investment Trust
1-8-12 Harumi, Chuo-ku, Tokyo
Account)

87,948

7.25

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

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

79,848

6.58

NIPPON STEEL KOWA REALESTATE CO., LTD.

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

71,5605.90

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

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

40,535

3.34

The Dai-ichi Life Insurance
Company, Limited

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

20,6601.70

STATE STREET BANK AND
TRUST COMPANY 505223
NOMURA BANK(LUXEMBURG) S. A.
RBC ISB A／C DUB NONRESIDENT - TREATY RATEThe Fuji Fire and Marine
Insurance

P.O. BOX 351 BOSTONMASSACHUSETTS 02101 U.S.A
BATIMENT A, 33, RUE DE GASPERICH,
L-5826, LUXEMBOURG
14 PORTE DE FRANCE, ESCH-SURALZETTE, LUXEMBOURG, L-4360
1-18-11 Minami-Senba, Chuo-ku, Osakashi, Osaka

17,564

1.45

12,5381.03

12,5001.03

12,4001.02

710,308

58.57

Name

Address

Total

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

12

(3) Officers
1) Directors and accounting auditor
Post

Name

Compensation or fee forthe six months ended June30, 2015 (Thousands ofyen)

Major additional post

Executive
Director

Hidehiko Ogawa

President, Japan Excellent Asset Management
Co., Ltd.

Supervisory
Director

Tsuyoshi Nagahama

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai
University

Eiji Takagi

Eiji Takagi Certified Public Accounting Office

Supervisory
Director
Supervisory
Director
Accounting
AuditorErnst & Young ShinNihon
LLC

–

6,540

12,500(Note 2)–

(Note 1) There are no investment units of JEI held by neither the Executive Director nor the Supervisory Directors. Although
Supervisory Directors may have additional posts in companies other than those listed above, there is no conflict of 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.

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, 2015 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 Bank, Ltd.

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)13

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
Classification

Area(Note 1)

Use

17th Period(December 31, 2014)

18th Period(June 30, 2015)

Total
Total
Investment
acquisitionacquisition
Investment
ratio inprice (Millions
price (Millions
ratio inportfolio (%)
of yen)of yen)portfolio (%)(Note 2)
(Note 2)
Area I

3,847

1.4

3,830

1.3

Area II

5,786

2.1

5,838

1.9

Office Area I
building Area II

121,50243.7

121,109

40.2

9,203

3.3

9,178

3.0

Area III

78,92028.4

103,223

34.3

Area IV

17,922

6.4

17,847

5.9

OthersTrust beneficiary (commercial
interest in realfacilities, Area I
estateresidence,
etc.)

18,7106.7

18,574

6.2

Total

255,892

92.0

279,602

92.9

Deposits in bank and other assets

22,1448.0

21,374

7.1

Total assets

278,037

100.0

300,976

100.0

Real estate property

Trust beneficiaryinterest in realestate(Note 1) 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.).
*Central Osaka refers to the areas within about a 10-minute walk from JR Osaka Station, Umeda Station (Hankyu
Railway, Hanshin Electric Railway, and Osaka City Subway), Yodoyabashi Station (Osaka City Subway) or
Hommachi Station (Osaka City Subway), respectively. Central Nagoya refers to the areas within about a 10minute walk from Nagoya Station (JR, Nagoya City Subway, and Nagoya Railroad), Fushimi Station (Nagoya
City Subway), or Sakae Station (Nagoya City Subway and Nagoya Railroad), respectively. Central Fukuoka
refers to the areas within about a 10-minute walk from Hakata Station (JR and Fukuoka City Subway), Tenjin
Station (Fukuoka City Subway) and Nishitetsu Fukuoka Station (Nishi-Nippon Railroad), respectively. They are,however, not always in line with administrative districts.
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.
The same applies hereinafter.
(Note 2) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date (amounts of realestate property and trust beneficiary interest in real estate are based on the book value after depreciations).

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

14

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of June 30, 2015 are as
follows:
Ratio of rental
Book value
Leasable space Leased space Occupancy revenue to total
Name(Millions ofMajor use
rate (%)(m2) (Note 1)(m2) (Note 2)
rental revenues(Note 3)yen)(%)
Kowa Kawasaki
Office29,54138,375.66
36,683.47
95.6
9.3
Nishiguchi Buildingbuilding
OfficeAKASAKA INTERCITY
27,422
11,021.03
11,021.03
100.0
5.5
building
Nisseki Yokohama
Office24,56540,440.73
38,775.79
95.9
5.3
Buildingbuilding
OfficeAkasaka Garden City
22,4888,769.53
8,769.53
100.0
3.7
building
OfficeOmori Bellport D
21,27225,801.66
25,801.66
100.0
9.2
building
Other(commercial
HAMARIKYU
18,574
19,718.11
18,769.52
95.2
7.2 facilities,
INTERCITY
residence,etc.)
Musashikosugi Tower
Office12,68225,159.49
25,159.49
100.0
7.8
Place
building
Daiba Garden City
Office10,385
12,122.85
12,122.85
100.0
3.3
Buildingbuilding
Kowa Kawasaki
Office9,757
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
OfficeShiba 2-Chome Building
8,996
11,749.30
11,749.30
100.0
3.7
building
Total

185,687

211,771.08

207,465.36

98.0

－

–

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of June 30, 2015. For
properties with joint ownership, the value is obtained by multiplying the total leasable space of the shared property by thepercentage of the interest owned by JEI, regarding the figure as JEI’s leasable space.
(Note 2) Leased space refers to space with lease contracts or master lease agreements that guarantee a certain amount of fixed rent
payment concluded with end tenants as of June 30, 2015. For properties with joint ownership, the value is obtained bymultiplying the total leased space of the property by the percentage of the interest owned by JEI, regarding the figure as
JEI’s leased space. For properties which are used for profit by the master lease company, leased space refers to the portion
used and the figures indicate space which can be reasonably calculated based on the lease agreement on the master leasing.
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 the leased space. This also applies to any figure which is calculated based on “leased space” in this document.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of June 30, 2015.
(Note 4) The values of Kowa Kawasaki Higashiguchi Building are not disclosed as consent on disclosure from the end tenants havenot been obtained.

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

15

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of June 30, 2015 are as follows:
Property
No.

Property nameLocation (Residential address)

Ⅰ-1

Omori Bellport D

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

Ⅰ-2

Shiba 2-Chome Building

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

Ⅰ-3

JEI Hamatsucho Building

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

Ⅰ-4

No. 32 Kowa Building

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

Ⅰ-7

Akasaka Garden City

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

Ⅰ-8

AKASAKA INTERCITY

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

Ⅰ-9

Kowa Shirokanedai Building

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

Ｉ-10

Daiba Garden City Building

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

Ⅰ-11

No. 35 Kowa Building

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

Ⅰ-12

HAMARIKYU INTERCITY

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

Ⅰ-13

Shintomicho Building

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

Ⅰ-14

Kowa Nishi-Shimbashi Building

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

Ⅱ-1
Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-6
Ⅲ-7
Ⅲ-8
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12

Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6

Form of ownership
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Real estate

Area I
NHK Nagoya Housou-Center
1-13-3 Higashi-Sakura, Higashi-ku, Nagoya-shi,
Real estate
Building
Aichi
Trust beneficiary
JEI Nishi-Honmachi Building
1-3-15 Awaza, Nishi-ku, Osaka-shi, Osakainterest in real estate
Osaka Kogin Building (Land with
Trust beneficiary
4-1-1 Koraibashi, Chuo-ku, Osaka-shi, Osaka
Leasehold Interest)
interest in real estate
Area II
1-403 Kosugi-machi, Nakahara-ku, KawasakiTrust beneficiary
Musashikosugi Tower Placeshi, Kanagawa
interest in real estate
Kowa Kawasaki Higashiguchi
1-53 Nisshin-cho, Kawasaki-ku, Kawasaki-shi, Trust beneficiary
Building
Kanagawa
interest in real estate
Trust beneficiary
JEI Hongo Building
2-38-16 Hongo, Bunkyo-ku, Tokyo
interest in real estate
7-1 Nisshin-cho, Kawasaki-ku, Kawasaki-shi,
Trust beneficiary
Kawasaki Nisshincho Building
Kanagawa
interest in real estate
Trust beneficiaryNo. 44 Kowa Building
1-2-7 Higashiyama, Meguro-ku, Tokyo
interest in real estate
Trust beneficiary
JEI RYOGOKU BUILDING
3-25-5 Ryogoku, Sumida-ku, Tokyo
interest in real estate
Trust beneficiary
Ebina Prime Tower
2-9-50 Chuo, Ebina-shi, Kanagawa
interest in real estate66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Trust beneficiary
Kowa Kawasaki Nishiguchi Building
Kanagawa
interest in real estate
Trust beneficiary
Pacific Square Sengoku
2-29-24 Hon-Komagome, Bunkyo-ku, Tokyo
interest in real estate
Trust beneficiaryCore City Tachikawa
2-37-7 Akebono-cho, Tachikawa-shi, Tokyo
interest in real estate
Trust beneficiary
Nisseki Yokohama Building
1-1-8 Sakuragi-cho, Yokohama-shi, Kanagawa
interest in real estate
Area III
2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,
Trust beneficiary
JEI Kyobashi Building
Osakainterest in real estate14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Trust beneficiary
JEI Hiroshima Hacchobori Building
Hiroshimainterest in real estate
1-1-2 Kitananajonishi Kita-ku, Sapporo-shi,
Trust beneficiary
SE Sapporo Building
Hokkaido
interest in real estate
Trust beneficiary
Aoba-dori Plaza
3-2-1 Chuo, Aoba-ku, Sendai-shi, Miyagi
interest in real estate
2-6, 2-chome Kita Tenjinbashi, Kita-ku,
Trust beneficiary
Daiwa Minami-morimachi Building
Osaka-shi, Osakainterest in real estate
Area IV
Total

Appraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)
24,50021,272

12,000

8,996

6,520

8,380

6,390

7,363

17,20022,48824,40027,422

5,010

4,833

12,10010,385

9,320

8,196

22,10018,574

1,870

1,770

4,190

3,830

145,600

143,514

5,590

5,838

4,380

7,312

1,990

1,865

11,96015,016

17,90012,682

8,780

9,757

4,500

5,108

3,930

4,454

1,450

1,003

2,200

2,310

3,770

5,834

25,00029,541

1,400

1,653

7,490

6,311

25,20024,565

101,620

103,223

4,030

3,146

2,830

2,685

6,200

5,432

3,030

2,198

4,840

4,385

20,930280,110

17,847
279,602(Note) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report prepared by realestate appraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd., Japan Valuers Co., Ltd. andDaiwa Real Estate Appraisal Co., Ltd. as of June 30, 2015 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 isobtained by multiplying the total value of the shared real estate by the percentage of the interest owned by JEI or the trustee.

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

16

Property
No.

Ⅰ-1
Ⅰ-2
Ⅰ-3
Ⅰ-4
Ⅰ-7
Ⅰ-8
Ⅰ-9
Ｉ-10
Ⅰ-11
Ⅰ-12
Ⅰ-13
Ⅰ-14

Ⅱ-1
Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-6
Ⅲ-7
Ⅲ-8
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12
Ⅳ-2
Ⅳ-3
Ⅳ-4
Ⅳ-5
Ⅳ-6

Property name

Omori Bellport D
Shiba 2-Chome Building
JEI Hamamatsucho
Building
No. 32 Kowa Building
Akasaka Garden CityAKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building
No. 35 Kowa Building
HAMARIKYUINTERCITY
Shintomicho Building
Kowa Nishi-Shimbashi
Building
Area I
NHK Nagoya Housou
CenterJEI Nishi-Honmachi
Building
Osaka Kogin Building(Land with Leasehold
Interest)
Area II
Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi
JEI Hongo Building
Kawasaki Nisshincho
Building
No. 44 Kowa Building
JEI Ryogoku Building
Ebina Prime Tower
Kowa Kawasaki
Nishiguchi Building
Pacific Square Sengoku
Core City Tachikawa
Nisseki Yokohama
Building
Area IIIJEI Kyobashi Building
JEI Hiroshima
Hacchobori Building
SE Sapporo Building
Aoba-dori Plaza
Daiwa Minamimorimachi Building
Area IV
Total

17th Period
July 1, 2014 to December 31, 2014
Ratio of
Total number
Occupancy Rental revenue
rentalofrate (At end(Interim)
revenue totenantsof period)(Millions of
total rental(At end(%)yen)
revenuesof period)(Note 1)
(%)
1
100.0
950
9.8
2
99.2
371
3.8

18th Period
January 1, 2015 to June 30, 2015
Ratio of
Total number
Occupancy Rental revenue
rentalofrate (At end(Interim)
revenue totenantsof period)(Millions of
total rental(At end(%)yen)
revenuesof period)(Note 1)
(%)
1
100.0
932
9.2
2
100.0
372
3.7

1

100.0

190

2.0

1

100.0

203

2.0

1
1

100.0
100.0

252
379

2.6
3.9

1
1

100.0
100.0

252
370

2.5
3.7

12

97.3

578

6.0

13

100.0

554

5.5

1

100.0

176

1.8

1

94.7

168

1.7

1

100.0

335

3.5

1

100.0

335

3.3

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

1

99.5

723

7.5

1

95.2

727

7.2

11

100.0

73

0.8

11

100.0

72

0.7

6

100.0

(Note 2)

(Note 2)6100.0(Note 2)

(Note 2)

39

99.6

-

-

40

99.0

-

-

30

98.9

395

4.1

29

90.4

366

3.6

1

100.0

211

2.2

1

100.0

208

2.1

1

100.0

83

0.9

1

100.0

83

0.8

32

99.5

-

-

31

95.6

-

-

37

100.0

796

8.2

36

100.0

786

7.8

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

1

100.0

194

2.0

1

100.0

190

1.9

1
1
33

100.0
93.9
97.2

97
101
406

1.0
1.0
4.2

1
1
35

100.0
95.9
98.2

87
99
426

0.9
1.0
4.2

1

99.8

950

9.8

1

95.6

943

9.3

7
1

94.7
97.9

55
285

0.6
2.9

8
1

86.9
100.0

63
298

0.6
3.0

-

-

-

-

1

95.9

537

5.3

84
1

99.0
100.0

186

1.9

87
1

97.6
100.0

184

1.8

1

98.7

144

1.5

1

98.9

142

1.4

1
47

100.0
88.1

369
174

3.8
1.8

1
48

98.5
90.0

359
172

3.5
1.7

9

95.7

194

2.0

10

100.0

196

1.9

59
214

97.2
99.1

9,695

100.0

61
219

97.8
97.9

10,121100.0(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) 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 18th period (Semi-Annual Report for 18th Period)

17

(4) Securities Portfolio
None(5) Renewable power generation facility
None(6) Right to operate public facilityNone(7) Other Assets
Contract amount and fair value of specified transactions and foreign exchange forwards transactions
Fair value
Contract amount (Thousands of yen) (Note 1)(Thousands of yen)Classification
Type(Note 2)
Over one year

Over-the-countertransaction

Interest rate swap
transactions
Fixed interest rate
payableFloating interest ratereceivable

76,900,000

53,360,000–(Note 1) Contract amount of swap transactions 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.

(8) Status of JEI’s properties by country and region
None for JEI’s properties in countries or regions other than Japan.

Asset Management Report for 18th period (Semi-Annual Report for 18th 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 the properties owned by JEI as of June 30, 2015. The values below include portions to be expensed foraccounting purposes.
Estimated construction costs(Millions of yen)
Payment
for the six
Property nameLocation
PurposeSchedule term
Total ofmonthsadvance
Total
ended
payment
June 30,
2015
Renewal of wallMusashikosugi
Kawasaki-shi,
From July 2015
through type air－－
117
Tower Place
Kanagawa
To December 2015
conditioner (2/5th
term)
Omori Bellport D Shinagawa-ku, Tokyo

Renewal of disasterprevention systems

No. 35 Kowa
Building

Minato-ku, Tokyo

Renovation of
exterior walls

No. 32 Kowa
Building

Minato-ku, TokyoJEI NishiHonmachi
Building

Osaka-shi, Osaka

From March 2015
To October 2015

99

－

－

From November 2015
To December 2015

82

－

－

73

－

－

30

－

－

From November 2015
Renovation of
To December 2015
exterior walls
Renewal of airconditioning systems From October 2015
on standard floor
To December 2015(8/10th term)(2) Capital Expenditures for the Six months Ended June 30, 2015
The following table shows constructions conducted by JEI during the period for properties it owned as of June30, 2015 and expensed as capital expenditures. Capital expenditures for the period ended June 2015 were 790
million yen and, when combined with repairs and maintenance costs of 171 million yen classified as expenses,
the amount of constructions completed totaled 962 million yen.
Amounts
Paid
Property nameLocation
PurposeScheduled term(Millions ofyen)
Renewal of wall-throughMusashikosugi Tower
Kawasaki-shi,
From October 2014
type air conditioner (1/5th
191
Place
Kanagawa
To March 2015
term)
NHK Nagoya HousouCenter Building

Nagoya-shi, Aichi

SE Sapporo Building

Replacement of multi-level
Sapporo-shi, Hokkaido parking lot No. 1 pallet
floorboard

Renewal of heat source

Other constructions
Total

From July 2014
To February 201596

From June 2015
To June 2015

51

–

451
790

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

19

(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 thefollowing cash reserves, derived from depreciation and other excess cash flows, in order to fund large-scale
repairs and maintenance and other construction.
(Unit: Millions of yen)Item

17th Period
15th Period
16th Period
18th Period
14th Period
July 1, 2014 to
July 1, 2013 toJanuary 1, 2013 December 31, January 1, 2014 December 31, January 1, 2015
to June 30, 2013
to June 30, 2014
to June 30, 2015
2013
2014

Reserved funds at beginning of
period

281

299

309

368

316

Increase

25

364

143

80

119

Decrease

7

354

83

132

118

299

309

368

316

317

Reserved funds at the end of
periodAsset Management Report for 18th period (Semi-Annual Report for 18th Period)20

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

17th Period
July 1, 2014
to December 31, 2014

18th Period
January 1, 2015
to June 30, 2015(a) Asset management fees

409,168

415,782(b) Custodian fees

20,74820,762(c) Administrative service fees

40,64339,719(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,00011,000(f) Other

63,01675,640551,117569,444

Total

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

21

(2) Borrowings
Borrowings by each financing source as of the end of the 18th period (ended June 30, 2015) are as follows:
Classification
LenderDrawdown
date

Balance at
beginning of
period(Thousands ofyen)

Balance at end of
Averageperiodinterest rate
(Thousands of (%) (Note 1)yen)(Note 2)

Maturity
date

Repayment
methodUse

Remarks

Repayment
June 30,Mizuho Bank, Ltd.

－7,500,000

0.35818 July 21, 2015of existing

2015
borrowing
RedemptionofShort-termloans

June 25,
Mizuho Bank, Ltd.

－

5,000,000

September

Lump-

25, 2015

sum

0.420912015

investment
corporation

Unsecured
andunguaranteedbonds
Repayment
June 30,Mizuho Bank, Ltd.

－March 31,
17,000,000

0.380002015

of existing
2016
borrowing

Sub Total－

29,500,000

3,000,000－

The Dai-ichi Life Insurance Company
October 24,

LimitedJune 30,
2.273442008
Development Bank of Japan Inc.

2,000,000－

Mizuho Trust & Banking Co., Ltd.

1,620,000

1,620,000

1,620,000

1,620,000

650,000

650,000

Mizuho Bank, Ltd.

370,000

370,000

Sumitomo Mitsui Banking Corporation

280,000

280,000

Long-termloans due Mizuho Bank, Ltd.

500,000

500,000

within one Mitsubishi UFJ Trust and Banking

500,000

500,000

500,000

500,000

200,000

200,000

Aozora Bank, Ltd.
NovemberAozora Bank, Ltd.

Repayment

2015

of existing
borrowing
1.13750

29, 2011

Acquisitionof real estateyear

Resona Bank, Ltd.

January 31,
2012

Aozora Bank, Ltd.

1.14125

The Bank of Fukuoka

300,000

300,000

The Norinchukin Bank

2,000,000

2,000,000

July 31,
Mizuho Trust & Banking Co., Ltd.

November

Lump-

Unsecuredand30, 2015

sum

unguaranteed

Repaymentof existing
0.97125

1,500,000

borrowing

1,500,000

2012
Resona Bank, Ltd.

500,000

Mitsubishi UFJ Trust and Banking
June 29,
Mizuho Bank, Ltd.
2011
Sumitomo Mitsui Banking Corporation
Sub Total
Mitsubishi UFJ Trust and Banking－－－

1.36375
2016

4,000,000
23,540,000

4,600,000－

4,400,000－

4,000,000－

2011
Sumitomo Mitsui Banking Corporation

June 29,
4,400,000

15,540,000
June 29,

Mizuho Bank, Ltd.

500,000
4,600,000

June 29,
1.36375
2016
Repayment

Long-term Mitsui Sumitomo Trust & Banking Co.,loans

Lump1,620,000

1,620,000

of existing

Ltd.
Sumitomo Mitsui Banking Corporation

sum
November

1,080,000

1,080,000

Mitsubishi UFJ Trust and Banking

540,000

540,000

Mizuho Bank, Ltd.

520,000

520,000

29, 2011

1.24375 November

borrowing

Unsecured
andunguaranteed

29, 2016

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

22Classification
LenderDrawdown
date

Mizuho Bank, Ltd.

Balance at
beginning of
period(Thousands ofyen)

Balance at end of Average
periodinterest rate
(Thousands of (%) (Note 1)yen)(Note 2)2,000,000

2,000,000

1,500,000

1,500,000

Sumitomo Mitsui Banking Corporation

1,500,000

1,500,000

Mizuho Bank, Ltd.

1,500,000

1,500,000

Mitsubishi UFJ Trust and Banking

1,300,000

1,300,000

January 31,
Mitsubishi UFJ Trust and Banking

Maturity
date

Repayment
methodUse

Remarks

Repayment

Unsecuredand1.247502012

1.03000 January 31,
Sumitomo Mitsui Banking Corporation

July 31,1,200,000

1,200,000

Sompo Japan Nipponkoa Insurance Inc.

2012

2,000,000

2,000,000

1,000,000

1,000,000

6,000,000

6,000,000

1,000,000

1,000,000

1,000,000

1,000,000

Sumitomo Mitsui Banking Corporation

1,000,000

1,000,000

Mizuho Bank, Ltd.

1,000,000

1,000,000

2017

1.09734
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
NovemberDevelopment Bank of Japan Inc.

1.73875

30, 2010
Mizuho Bank, Ltd.
July 31,
Mitsubishi UFJ Trust and Banking

1.08375

2012
November
1.04550
Aozora Bank, Ltd.

Long-term
loans

500,000

500,000

Resona Bank, Ltd.

June 28,500,000

500,000

Sompo Japan Nipponkoa Insurance Inc.

2013

500,000

500,000

30, 2017

Lump-

1.19212Tokio Marine & Nichido Fire Insurance
500,000

500,000

3,000,000

3,000,000

of existingsum
borrowingCo., Ltd.
The Dai-ichi Life Insurance Company

June 29,

Limited2011

June 29,

5,000,000

5,000,000

Mitsubishi UFJ Trust and Banking

2,000,000

2,000,000

1,100,000

1,100,000

1,000,000

1,000,000

200,000

200,000

June 28,
The Norinchukin Bank

1.65125
2018

Mizuho Bank, Ltd.

Sumitomo Mitsui Banking Corporation

0.81225

2013
Resona Bank, Ltd.

June 30,
2018

The Bank of Fukuoka

700,000

700,000

Shinkin Central Bank

1,000,000

1,000,000

The Norinchukin Bank

1,450,000

1,450,000

Mizuho Bank, Ltd.

850,000

850,000

Mitsubishi UFJ Trust and Banking

850,000

850,000

Mizuho Trust & Banking Co., Ltd.

March 11,600,000

600,0002014

1,450,000

1,450,000

Mizuho Bank, Ltd.

850,000

850,000

Mitsubishi UFJ Trust and Banking

850,000

850,000

Mizuho Trust & Banking Co., Ltd.

600,000

600,000

The Norinchukin Bank

unguaranteed

0.74500 November 1,
2018

0.77500

March 8,2019

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

23

Classification
LenderDrawdown
date

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

Averageinterest rate(%) (Note 1)(Note 2)January 31,
Development Bank of Japan Inc.

Maturity
date

Repayment
methodUse

Remarks

1.60000
2,000,000

2,000,000

500,000

500,0002012
Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking

500,000

500,000

Sumitomo Mitsui Banking Corporation

June 28,

1,000,000

1,000,000

Mizuho Trust & Banking Co., Ltd.

2013

600,000

600,000

1,000,000

1,000,000

The Dai-ichi Life Insurance Company

1.36400

January 31,
1.312612020

LimitedThe Norinchukin Bank

1,162,500

1,162,500

Mizuho Bank, Ltd.

December

675,000

675,000

Mitsubishi UFJ Trust and Banking

27, 2013

675,000

675,000

487,500

487,500

2,000,000

2,000,000

Mizuho Trust & Banking Co., Ltd.

1.00000

June 28,
Long-term
loans

Development Bank of Japan Inc.

1.60750

2013

June 30,

Repayment Unsecured
andLump-sum of existing
The Dai-ichi Life Insurance Company

July 31,

Limited2014

Mitsubishi UFJ Trust and Banking
Mizuho Bank, Ltd.

December

2021
2,000,000

2,000,000

2,000,000

2,000,000

1,950,000

1,950,000

borrowing

0.98834

unguaranteed

December
0.81875

Mizuho Trust & Banking Co., Ltd.

29, 2014

Resona Bank, Ltd.

1,200,000

1,200,000

600,000

600,000

2,000,000

2,000,000

30, 2021

July 31,Development Bank of Japan Inc.

June 30,
1.15417

2014

2022

Mitsubishi UFJ Trust and Banking

2,000,000

2,000,000

Mizuho Bank, Ltd.

December

1,950,000

1,950,000

0.93625 December

Mizuho Trust & Banking Co., Ltd.

29, 2014

1,200,000

1,200,000

30, 2022

600,000

600,000－

2,000,000

Resona Bank, Ltd.
June 30,Development Bank of Japan Inc.

June 30,2015

1.20250
2023

Sub Total

88,360,000

77,360,000

Total

103,900,000

130,400,000(Note 1) The average interest rates are calculated using a weighted-average of the loan balance during the period. Borrowings hedged
by interest rate swaps to avoid interest rate fluctuation risk are calculated using a weighted average rate adjusting the effectof the interest rate swaps.
(Note 2) All short-term loans are floating-rate loans. All long-term loans due within one year and other long-term loans are fixed-rateloans (including loans with fixed-rate interest using interest rate swaps).

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

24

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of June 30, 2015 are as follows:
Issue

2nd series unsecured
investment corporationbonds
3rd series unsecured
investment corporationbonds
4th series unsecured
investment corporation
bonds
5th series unsecured
investment corporationbonds
6th series unsecured
investment corporation
bonds
7th series unsecured
investment corporation
bonds
Total

(Note 1)
(Note 2)
(Note 3)(Note 4)

Balance at
beginning ofIssuance dateperiod(Thousands ofyen)June 28, 2010

Balance at endof period(Thousands ofyen)

5,000,000-

5,000,000

5,000,000

Interest rate(%)

Maturity date

1.29000 June 26, 2015

1.01000

November 4,
2011

Use

Remarks(Note 1)

November 4,
2016(Note 2)2,000,000

2,000,000

1.40000

November 2,
2018
November25, 2013

Repayment
methodLump-sum(Note 4)(Note 1)5,000,000

5,000,000

0.46000

5,000,000

5,000,000

0.46000

March 11,2019

1.13000

March 11,2024

March 10,2014

(Note 3)8,000,000

8,000,000

30,000,000

25,000,000

The funds were used for repaying existing borrowings.
The funds were used for acquiring new properties.
The funds are used for redeeming existing investment corporation bonds and repaying existing borrowings.
The bonds are with special pari passu conditions among specified investment corporation bonds.

(4) Short-Term Investment Corporation Bonds
None(5) Subscription rights for New Investment Units
None

Asset Management Report for 18th period (Semi-Annual Report for 18th Period)25

6. Condition of Investment Transactions(1) Transactions of Property, Asset-Backed Securities, Etc. and Infrastructure Assets, etc.
and Infrastructure Related Assets(millions of yen)
Acquisition
Type of assets

Name of property

Transfer

Acquisition Acquisition
Transfer
Transfer date
date
price (Note)amountTrust beneficiary Nisseki Yokohama
April 1, 2015
interest in real estate
Building－

Total

Net book Gain (loss)
value on transfer

24,500－－－－24,500－－－－(Note) The acquisition price indicates the contracted amount of the property in each purchase agreement or trust beneficiary interest transfer
agreement excluding related expenses (brokerage fee, taxes, etc.).

(2) Transactions of Other Assets
None(3) Appraisal and Research for Specified Asset Value, Etc.
1) Real estate, etc.
(millions of yen)
Acquisitionor transfer

Name ofproperty

Type ofassetsAcquisitiondate

Acquisition
price (Note)

Appraisal
Value

Appraiser

Appraisal
Date

Acquisition

NissekiYokohama
Building

Trust
beneficiaryinterest inreal estate

April 1,
2015

24,50024,600Japan Real Estate
InstituteMarch 3,
2015

(Note) The acquisition price is the purchase price of the property stated in the purchase agreement (excluding the amount equivalent to
consumption taxes, etc.).

2) OthersNone(4) Transactions with Interested Parties
1) Transactions
None2) Amounts of fees paid and other expenses

Classification

Property management
costs and fees

Total

(Unit: Thousands of yen)
Breakdown of transactions with interested parties
and major shareholders
Total amount paid (A)B/APaid toAmount paid (B)
NIPPON STEEL KOWA
REAL ESTATE CO., LTD.
1,406,073 Kowa Real Estate Facilities,
Co., Ltd.
1,406,073–

195,59613.9%

290,24920.6%

485,846

34.6%(Note 1) Figures indicate fees paid to interested parties of asset management companies with whom JEI had transactions during thesix months ended June 30, 2015.
(Note 2) Other than the Total amount paid indicated above, the following payments were made for maintenance and repair work, etc.
which were ordered to interested parties and major shareholders during the period.
NIPPON STEEL KOWA REAL ESTATE CO., LTD.

6,203 thousand yen

KOWA REAL ESTATE FACILITIES CO., LTD.

179,374 thousand yen

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

26

(5)

Transactions with Asset Management Company Concerning the Additional Businesses of
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 18th period (Semi-Annual Report for 18th Period)27

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 and Infrastructure Assets, etc. Valuation Method
No changes were made during the period

8. Others(1) Notice1) General 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
directors of JEI during the six months ended June 30, 2015 is summarized below.
Approval dateFebruary 16, 2015

Approved agenda

Description

Entrustment of generaladministrative duties
concerning investment
corporation bonds

The board of directors made acomprehensive resolution on investment
corporation bonds to be issued in the period
from February 17, 2015 to February 8,
2016. The board of directors approved therespective candidate general administrator
for “administrative duties concerning
offering of investment corporation bonds”
and “administrative duties concerning
acceptance of claims for exercise of rights
and other inquiries from creditors of theinvestment
corporation,
and
other
administrative
dutiesconcerninginvestment corporation bonds during theperiod,” and assigned decisions on all othernecessary matters to the Executive
Director.

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

(3) Juridical Persons Owning Overseas Real Estate and Status of the Owned Real Estate
There were no applicable items during the period.

(4) 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 18th period (Semi-Annual Report for 18th Period)28

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
June 30, 2015 and December 31, 2014
with Independent Auditor’s ReportJapan Excellent, Inc.
Balance Sheets
As of June 30, 2015 and December 31, 2014

As of
As of
June 30,
December 31,
2015
2014
(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 5)
Rental receivables
Consumption taxes refundable
Prepaid expenses and other current assets
Total current assets
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
Intangible assets:
Leasehold rights
Brand and trademark
Leasehold rights for trust accounts
Other intangible assets for trust accounts
Total intangible assets
Investments and other assets:
Security deposits
Long-term prepaid expenses
Other assets
Total investments and other assets
Deferred assets:
Investment corporation bond issuance costs
Total deferred assets
Total assets

18,447,139
867,254
801,341
200,300
20,316,035

20,133,941
891,341–
187,374
21,212,657

5,806,732
6,253
10,716
3,032,788–

5,681,733
6,253
10,716
3,032,788
3,690

116,180,982
709,585
173,626
165,111,023
9,254(20,545,518)
270,495,444

103,706,287
646,734
159,600
152,291,494
6,177(18,759,431)
246,786,043

1,721,607
251
7,380,016
4,943
9,106,819

1,721,607
308
7,380,016
5,071
9,107,004

15,181
612,425
334,087
961,694

15,181
483,751
321,631
820,564

96,37496,374300,976,368

110,837
110,837
278,037,107

The accompanying notes are an integral part of these financial statements.
31

As of
As ofJune 30,
December 31,
2015
2014
(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 – otherAccrued expenses
Accrued corporation taxes
Accrued consumption taxes
Advances received
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
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

1,216,219
29,500,000

791,736––5,000,000

23,540,000
435,855
181,834
766–
91,717317
54,966,711

15,540,000
344,429
205,401
541
432,931
86,881–
22,401,922

25,000,000

25,000,000

77,360,000

88,360,000

723,465764,784

11,840,224
114,923,690
169,890,401

10,481,873
124,606,658
147,008,581

127,950,539

127,950,539

37,347
3,098,080
3,135,427
131,085,966
131,085,966
300,976,368

37,3473,040,640
3,077,987
131,028,526
131,028,526
278,037,107

The accompanying notes are an integral part of these financial statements.
32

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from January 1, 2015 to June 30, 2015
and from July 1, 2014 to December 31, 2014

For the period
For the period
from January 1, from July 1, 20142015 to June 30, to December 31,
2015
2014
(Thousands of yen)
Revenues (Note 13):
Rental revenues
Other
Total revenues

9,215,979
905,368
10,121,347

8,754,613
941,198
9,695,812

Operating expenses (Note 13):
Property operating expenses
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income

5,533,045
415,782
20,762
39,7196,540
86,6406,102,489
4,018,858

5,180,793
409,168
20,74840,643
6,540
74,016
5,731,910
3,963,901

1,938
875

1,799
2,419

634,385
105,178
30,447
137,980

627,936
143,137–
140,904

14,463263
3,098,954

14,463525
3,041,153

3,098,954

3,041,153

1,159
(10)
3,097,804
275
3,098,080

907
7
3,040,238
402
3,040,640

Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
New investment unit issuance costs
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Ordinary income
Income before income taxes
Income taxes (Note 12):Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

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

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from January 1, 2015 to June 30, 2015
and from July 1, 2014 to December 31, 2014

For the period from July 1, 2014 to December 31, 2014
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserveforadvanceddepreciati
Numberon ofof units Unitholders’ non-curre
in issuecapitalnt assets

Retainedearnings

Total
surplusTotal
unitholders’equityTotal net
assets(Thousands of yen)
Balance as of June 30,
2014
Changes during the
fiscal period:
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as ofDecember 31, 2014

1,212,750

127,950,539

37,3473,010,447

3,047,794

130,998,333

130,998,333

–

–

–

(3,010,045)(3,010,045)(3,010,045)(3,010,045)

–

–

–

3,040,238

3,040,238

3,040,238

3,040,238–––

30,19230,19230,19230,192

1,212,750

127,950,539

37,3473,040,640

3,077,987

131,028,526

131,028,526

For the period from January 1, 2015 to June 30, 2015
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserveforadvanceddepreciati
Numberon ofof units Unitholders’ non-curre
in issuecapitalnt assets
Balance as ofDecember 31, 2014
Changes during the
fiscal period:
Distributions fromretained earnings
Net income
Total changes during
the fiscal period
Balance as of June 30,
2015

Retained
Total
earnings
surplus(Thousands of yen)Totalunitholders’equityTotal net
assets

1,212,750

127,950,539

37,3473,040,640

3,077,987

131,028,526

131,028,526

–

–

–

(3,040,364)(3,040,364)(3,040,364)(3,040,364)

–

–

–

3,097,804

3,097,804

3,097,804

3,097,804–––

57,44057,44057,44057,4401,212,750

127,950,539

37,347

3,098,080

3,135,427,

131,085,966

131,085,966

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

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from January 1, 2015 to June 30, 2015
and from July 1, 2014 to December 31, 2014
For the period
For the period
from
from
January 1,
July 1,2015 to2014 toJune 30,
December 31,
2015
2014
(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuancecosts
New unit issuance costs
Interest income
Interest expense
Decrease (increase) in rental receivables
Decrease (increase) in consumption taxes refundable
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable – trade
Increase (decrease) in accounts payable – other
Increase (decrease) in unpaid consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

3,098,954
1,786,271

3,041,153
1,657,642

14,46330,447(1,938)772,365
24,086(801,341)(7,708)151,080
68,402(432,931)
4,835(128,674)(31,715)
4,546,598
1,938(795,931)(996)
3,751,608

14,463–(1,799)768,840(34,109)374,253
64,349(28,378)
11,645432,931(11,919)(113,055)(5,141)
6,170,875
1,799(800,125)(1,029)5,371,520(125,225)(25,091,268)–(5,092)
12,872(54,192)(51,915)(478,670)
(204)
–
6,536
(17,073)

1,571,632(199,725)(23,890,997)

209,992(328,395)(659,730)

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
Payments for investment corporation bond redemption
Payments for new unit issuance costs
Distributions to unitholders
Net cash provided by (used in) financing activities

54,000,000(24,500,000)
2,000,000(5,000,000)(5,000,000)(6,138)(3,041,275)
18,452,586––
15,500,000(15,500,000)––(3,008,861)(3,008,861)

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(1,686,802)
20,133,941
18,447,139

1,702,927
18,431,014
20,133,941

Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets
Purchases of intangible assets for trust accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits in trust accounts fromtenants
Payments for security deposits in trust accounts to tenants
Net cash used in investing activities

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

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from January 1, 2015 to June 30, 2015
and from July 1, 2014 to December 31, 2014

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 was originally owned 45% by NIPPON STEEL KOWA
REAL ESTATE CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by
Sekisui House, Co., LTD., and 20% by other corporations. Due to the transfer of ownershipby Sekisui House, Co., LTD., on May 12, 2014, ownership interests of 9% and 6% were eachacquired by NIPPON STEEL KOWA REAL ESTATE CO., LTD., and The Dai-ichi Life
Insurance Company, Limited, respectively.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of June 30, 2015, JEI held
31 properties with 370,671 square meters of total leasable space and had leases with 219
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.
The amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements in accordance with the financial statements originally prepared inJapanese and filed with the regulatory authorities in Japan.

36

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
6 – 16 years
3 – 15 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 investment 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).

37

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. No property-related taxes were
capitalized for the period from July 1, 2014 to December 31, 2014, whereas the capitalized
amount for the period from January 1, 2015 to June 30, 2015 was ¥186,039 thousand.
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 against fluctuation risk in interest rates. JEI has therefore
entered into certain interest-rate swap contracts in order to hedge the risk of variable rates for
its long-term debt obligations.
Each corresponding interest-rate swap is not required to be re-measured to fair value, because
it meets the criteria for the special hedge accounting treatment under Japanese GAAP, which
JEI applies to each interest-rate swap agreement.
Under this special hedge accounting treatment, the differentials paid or received under theswap agreements are recognized and included in interest expense of the hedged loans, and theinterest-rate swaps are not required to be measured at fair value separately. For interest-rate
swaps that meet the specific criteria for the special accounting treatment, assessments ofhedge effectiveness are not performed.
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, 2015 andDecember 31, 2014 consisted of the following:
As of
As of
June 30,
December 31
2015
2014
(Thousands of yen)
Cash and cash deposits
Cash and deposits in trust
Cash and cash equivalents including
trust accounts

2,472,809
15,974,329

5,591,016
14,542,925

18,447,139

20,133,941

38

5.

Financial Instruments

For the periods from January 1, 2015 to June 30, 2015 and from July 1, 2014 toDecember 31, 2014
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 over the entire
term of the instrument in order to benefit from the recent favorable financial environment
with low interest rates, and diversifying maturity dates are taken into consideration toachieve 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 in fixed-rate term deposits. Derivative transactions
are used solely for the purpose of hedging against the risk of fluctuations in interest rates
of borrowings and investment corporation bonds.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest rate fluctuation risk)
Borrowings and investment corporation bonds are primarily used to acquire
properties or to refinance existing borrowings or bonds. Some of such debt were
floating rate instruments and thus were exposed to the risk of interest rate
fluctuations. Based on interest rate forecasts developed through constant financial
market monitoring activities, JEI has concentrated on hedging against the risk ofinterest rate fluctuations using interest-rate swaps, through which a floating interest
rate is swapped for a fixed interest rate, which finally led to all existing borrowings
being covered by a fixed interest rate swap for the entire maturity as of June 30,
2015. To reduce credit risk, derivative transactions (interest-rate swaps) are enteredinto exclusively with counterparties that are financial institutions having a highcredit rating. For hedging accounting methods, hedging instruments, hedged items,
hedging policies and methods for evaluation of the effectiveness of hedging
activities, see “Derivatives and hedge accounting” under Summary of Significant
Accounting Policies.
(b) Liquidity Risk (Risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced through diversification of maturity dates and funding sources, andarrangement of commitment line agreements (as described in Note 8, “Short-Term
Loans and Long-Term Debt,” there is no balance outstanding under the facility
agreements as of June 30, 2015). Liquidity risk is also mitigated through theconstant management of liquidity on hand.

39

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, 2015 and December 31, 2014of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note B).
Carryingvalue

As of June 30, 2015
As of December 31, 2014
Fair value
Carrying
Fair value(Note A)
Difference
value(Note A)
Difference(Thousands of yen)

(1) Cash and cash
deposits(2) Cash in trust anddeposits in trust

2,472,809

2,472,809–

5,591,016

5,591,016–

15,974,329

15,974,329–

14,542,925

14,542,925–

Total assets

18,447,139

18,447,139–

20,133,941

20,133,941–

29,500,000

29,500,000

–

–

–

–

5,000,000

5,025,300

25,300(3) Short-term loans(Note C)(4) Investment
corporation bonds
due within one year
(Note C)–––

(5) Long-term debt
due within one
year (Note C)

23,540,000

23,709,560

169,560

15,540,000

15,665,909

125,910(6) Investment
corporation bonds(Note C)

25,000,000

25,373,580

373,580

25,000,000

25,443,840

443,840(7) Long-term debt
(Note C)

77,360,000

78,448,019

1,088,019

88,360,000

89,716,287

1,356,287

Total liabilities

155,400,000

157,031,159

1,631,159

133,900,000

135,851,337

1,951,337(8) Derivativetransactions *

–

–

–

–

–

–

* The value of assets and liabilities arising from derivative transactions is shown at net value.

(Note A)
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.
Liabilities(3) Short-term loans,(5) Long-term debt due within one year and40

5.

Financial Instruments (continued)(7) Long-term debt
Where floating rates apply, book value is generally considered appropriate as fair value.
The fair value of such liabilities is considered to approximate book value, since 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 applying a reasonably assumed interest rate as a discount rate,
which was determined to be applicable for the borrowings under similar conditions.
(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 B)・Financial instruments for which fair value is deemed extremely difficult to determine
The fair values of security deposits from tenants and security deposits from tenants for trust
accounts are as follows:
As of
As of
June 30,
December 31,
2015
2014
(Thousands of yen)
① Security deposits from tenants*

723,465764,784② Security deposits from tenants fortrust accounts*

11,840,224

10,481,873* Security deposits from tenants and security deposits in trust accounts from tenants in leased properties are
not subject to fair value disclosure, since such deposits have no market price. Furthermore, due to theircharacteristics, it is extremely difficult to estimate the fair value of security deposits in advance because of
the uncertainty of the timing when the tenant vacates. As a result, it is therefore impossible to rationallyestimate the exact cash flow from such security deposits.

41

5.

Financial Instruments (continued)

・The scheduled redemption amounts of financial assets after the balance sheet date
1 year or less
Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of June 30, 2015
2 to 3 years 3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

2,472,809

–

–

–

–

–

15,974,329
18,447,139

–
–

–
–

–
–

–
–

–
–

1 year or less
Cash and cash deposits
Cash in trust anddeposits in trust
Total

1 to 2 years

1 to 2 years

As of December 31, 2014
2 to 3 years 3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

5,591,016

–

–

–

–

–

14,542,925
20,133,941

–

–

–

–

–

–

–

–

–

–

(Note C)The scheduled redemption amounts of borrowings, investment corporation bonds and otherinterest-bearing debt after the balance sheet date

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

As of June 30, 2015
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

29,500,000

–

–

–

–

–

–

–

–

–

–

–

23,540,000

–

–

–

–

–

–
–
53,040,000

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

12,000,000
7,500,000
19,500,000–
8,600,000
8,600,000

8,000,000
19,500,000
27,500,000

1 year or less

1 to 2 years

As of December 31, 2014
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

–

–

–

–

–

–

5,000,000

–

–

–

–

–

15,540,000

–

–

–

–

–

–
–
20,540,000

5,000,000
16,760,000
21,760,000–
24,000,000
24,000,000

7,000,000
17,750,000
24,750,000

5,000,000
3,750,000
8,750,000

8,000,000
26,100,000
34,100,000

42

6.

Investment and Rental Property

For the periods from January 1, 2015 to June 30, 2015 and from July 1, 2014 toDecember 31, 2014
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, 2015 and December 31, 2014 for such real estate for lease.

As ofDecember 31, 2014
255,892,739

As ofJune 30, 2014
257,099,544

Carrying value
ChangeAs ofduring period (*1)
June 30, 2015
(Thousands of yen)
23,709,273

279,602,013

Carrying value
ChangeAs ofduring period (*2)
December 31, 2014
(Thousands of yen)
(1,206,805)

255,892,739

Fair value
As ofJune 30, 2015
280,110,000

Fair value
As ofDecember 31, 2014
251,560,000

A) Carrying value represents the acquisition cost less accumulated depreciation.
B) Details of change during period(*1) The increase of ¥23,709,273 during the period is mainly due to an increase of¥24,705,264 thousand related to the acquisition of NISSEKI YOKOHAMA Building,and a decrease of ¥1,786,214 thousand for depreciation costs.
(*2) The decrease of ¥1,206,805 thousand during the period is mainly due to depreciation
costs of ¥1,657,585 thousand.
C) Fair value
Fair value as of June 30, 2015 and December 31, 2014 is appraisal value provided bythird-party real estate appraisers.

43

7.

Property and Equipment

Property and equipment at June 30, 2015 and December 31, 2014 consisted of the following:
As of June 30, 2015
Acquisition
cost

Accumulated
depreciation

As of December 31, 2014
Net
book value

Acquisition
cost

Accumulated
depreciation

Netbook value(Thousands of yen)
Buildings and building
improvements
Machinery andequipment
Furniture and fixtures
Land
Construction in progress
Buildings and building
improvements for trust
accounts
Machinery andequipment for trust
accounts

5,806,732(905,612)

4,901,120

5,681,733(819,945)

4,861,787

6,253(1,129)

5,123

6,253

(848)

5,405

10,716(2,590)8,126

10,716(2,010)8,706

3,032,788–

3,032,788

3,032,788–

3,032,788

–

–

–

3,690

–

3,690

116,180,982(19,286,673)

96,894,309

103,706,287(17,619,382)

86,086,904

441,987

646,734(244,505)

402,229709,585(267,598)

Furniture and fixtures
for trust accounts

173,626(81,915)

91,710159,600(72,739)

86,861

Land for trust accounts

165,111,023–

165,111,023

152,291,494–

152,291,494

Construction in progress
for trust accounts

9,254

–

9,254

6,177

–

6,177

291,040,963(20,545,518)

270,495,444

265,545,475(18,759,431)

246,786,043

Total

44

8.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of June 30, 2015 and December 31, 2014 consisted of
the following:

Short-term loans:
Unsecured loans from a bank due on
July 21, 2015
Unsecured loans from a bank due on
September 25, 2015
Unsecured loans from a bank due on
March 31, 2016
SubtotalLong-term debt due within one year:
Unsecured loans from a bank due on
June 30, 2015
Unsecured loans from an insurancecompany 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
SubtotalLong-term debt:
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 banks due on
November 1, 2018
Unsecured loans from banks due on
March 8, 2019
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 banks due on
January 31, 2020
Unsecured loans from a bank due on
June 30, 2021
Unsecured loans from an insurancecompany due on June 30, 2021
Unsecured loans from banks due on
December 30, 2021
Unsecured loans from a bank due on
June 30, 2022
Unsecured loans from banks due on
December 30, 2022
Unsecured loans from a bank due on
June 30, 2023
Subtotal
Total

As of June 30, 2015
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)

As of December 31, 2014
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)

7,500,000

0.35818%––

5,000,000

0.42091%––

17,000,000
29,500,000

0.38000%

–

–

–

–

2,000,000

2.27344% (*2)––

3,000,000

2.27344% (*2)

4,540,000

1.13750% (*2)

4,540,000

1.13750% (*2)

2,000,000

1.14125% (*2)

2,000,000

1.14125% (*2)

4,000,000

0.97125% (*2)

4,000,000

0.97125% (*2)

13,000,000
23,540,000

1.36375% (*2)–
15,540,000––

13,000,000

1.36375% (*2)

3,760,000

1.24375% (*2)

3,760,000

1.24375% (*2)

5,000,000

1.24750% (*2)

5,000,000

1.24750% (*2)

4,000,000

1.03000% (*2)

4,000,000

1.03000% (*2)

3,000,000

1.09734% (*2)

3,000,000

1.09734% (*2)

6,000,000

1.73875% (*2)

6,000,000

1.73875% (*2)

3,000,000

1.08375% (*2)

3,000,000

1.08375% (*2)

2,000,000

1.04550% (*2)

2,000,000

1.04550% (*2)

1,000,000

1.19212% (*2)

1,000,000

1.19212% (*2)

3,000,000

1.65125% (*2)

3,000,000

1.65125% (*2)

11,000,000

0.81225% (*2)

11,000,000

0.81225% (*2)

3,750,000

0.74500% (*2)

3,750,000

0.74500% (*2)

3,750,000

0.77500% (*2)

3,750,000

0.77500% (*2)

2,000,000

1.60000% (*2)

2,000,000

1.60000% (*2)

2,600,000

1.36400% (*2)

2,600,000

1.36400% (*2)

1,000,000

1.31261% (*2)

1,000,000

1.31261% (*2)

3,000,000

1.00000% (*2)

3,000,000

1.00000% (*2)

2,000,000

1.60750% (*2)

2,000,000

1.60750% (*2)

2,000,000

0.98834% (*2)

2,000,000

0.98834% (*2)

5,750,000

0.81875% (*2)

5,750,000

0.81875% (*2)

2,000,000

1.15417% (*2)

2,000,000

1.15417% (*2)

5,750,000

0.93625% (*2)

5,750,000

0.93625% (*2)

2,000,000
77,360,000
130,400,000

1.20250% (*2)–
88,360,000
103,900,000–(*1) The weighted-average interest rate is weighted-average figures during the period. As for the borrowings hedged byinterest-rate swaps for the purpose of mitigating interest rate fluctuation risk, the fixed interest rates after entering into
the interest rate swap transactions are used to calculate the weighted-average interest rate.
(*2) These are fixed-rate debt (incl. Fixed-rate debt through each interest-rate swap agreement).

45

8.

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

The scheduled repayment amounts of long-term debt as of June 30, 2015 (excluding thelong-term debt due within one year) are as follows:

Long-term debt

1 to 2 years

2 to 3 years

15,760,000

26,000,000

3 to 4 years
4 to 5 years(Thousands of yen)
7,500,000

8,600,000

Over 5 years
19,500,000

JEI has commitment lines of ¥14,000 million with three financial institutions to mitigate
refinancing risk and enhance financial stability. As of June 30, 2015, these commitment lines
have never been utilized.

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of June 30, 2015 and December
31, 2014 are summarized as follows:
As of June 30, 2015
As of December 31, 2014

Amount(Thousands ofyen)
Unsecured bond #2 dueon June 26, 2015
Unsecured bond #3 dueon November 4, 2016
Unsecured bond #4 dueon November 2, 2018
Unsecured bond #5 dueon November 2, 2018
Unsecured bond #6 dueon March 11, 2019
Unsecured bond #7 dueon March 11, 2024
Total

Weightedaverage interest
rate

Amount(Thousands ofyen)

Weightedaverage interest
rate

－

－

5,000,000

1.29000%

5,000,000

1.01000%

5,000,000

1.01000%

2,000,000

1.40000%

2,000,000

1.40000%

5,000,000

0.46000%

5,000,000

0.46000%

5,000,000

0.46000%

5,000,000

0.46000%

8,000,000
25,000,000

1.13000%

8,000,000
30,000,000

1.13000%46

9.

Investment Corporation Bonds (continued)

The scheduled redemption amounts of investment corporation bonds as of June 30, 2015 are
as follows:

Investment
corporation bonds

1 year or less

1 to 2 years－

5,000,000

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

12,000,000

4 to 5 years

Over 5 years－

8,000,000

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 as of June 30, 2015 and December 31, 2014 were calculated based on thenumber of units outstanding as of each date (1,212,750 units).
Net income per unit for the periods from January 1, 2015 to June 30, 2015 and July 1, 2014 toDecember 31, 2014 was calculated based on the number of units outstanding during therespective periods (1,212,750 units).
Accordingly, net assets per unit were ¥108,089 as of June 30, 2015 and ¥108,042 as ofDecember 31, 2014. Net income per unit was ¥2,554 for the period from January 1, 2015 toJune 30, 2015, and ¥2,506 for the period from July 1, 2014 to December 31, 2014.

47

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, 2015 andDecember 31, 2014 are summarized as follows:
As of
As of
June 30,
December 31,
2015
2014
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

25
25
25

14
14
14

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from January 1, 2015 to June 30, 2015 and from July 1, 2014 to December 31,
2014 is as follows:
For the period
For the period
from January 1, from July 1, 20142015 to June 30, to December 31,
2015
2014
Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

34.15%

34.16%(34.13)0.02
0.04%(34.15)0.02
0.03%

Adjustment in deferred tax assets and deferred tax liabilities due to tax rate change
For the period from July 1, 2014 to December 31, 2014
The “Act for Local Corporation Tax Act” (Act No.11 of 2014) and the “Act for Partial
Revision of Local Tax Act” (Act No.4 of 2014) promulgated on March 31, 2014 had led tothe establishment of the “Local Corporation Tax Act”, as well as partial involvement of“Special Local Corporation Tax” in “Corporation Tax”, which resulted in a change of thestatutory tax rate applicable to the deferred tax assets and deferred tax liabilities arising fromthe temporary differences that are expected to be resolved in the fiscal period starting on
October 1, 2014 and after to 34.15%. The impact of this change is minimal.
For the period from January 1, 2015 to June 30, 2015
Due to the “Act for Partial Revision of Income Tax Act” (Act No.9 of 2015) on March 31,
2015, the corporation tax rate will be changed effective the fiscal period starting on April 1,2015 and after, which resulted in a change of the statutory tax rate applicable to the deferred
tax assets and deferred tax liabilities arising from the temporary differences that are expected
to be resolved in the fiscal period starting on April 1, 2015 and after to 32.31%. The impact of
this change is minimal.
48

13. Breakdown of Property Rental Business Revenues and Expenses
For the period from
For the period fromJanuary 1, 2015 toJuly 1, 2014 toJune 30, 2015
December 31, 2014
(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
expensesProfit9,215,979
905,368

8,754,613
941,198

10,121,347

9,695,812

1,406,073
1,153,175
791,943
29,068
171,479
1,786,214
195,090

1,246,265
1,118,201
753,158
27,048
176,671
1,657,585
201,8625,533,045
4,588,302

5,180,793
4,515,019

14. Leases
JEI leases properties on which rental revenues are earned. At June 30, 2015 and December 31,
2014, future lease revenues under non-cancelable operating leases are summarized as follows:
As of
As of
June 30,
December 31,
2015
2014
(Thousands of yen)
Due within one year
Due after one year
Total

250,023
622,613872,636466,260
694,741
1,161,001

49

15. Derivative Transactions
Derivative Transactions as of June 30, 2015
(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, 2015 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Hedged item

Interest-rate swap
Long-term
Receive floating, pay
debt
fixed

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

76,900,000

53,360,000

Method ofcalculating
the fair value** Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant 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, 2014
(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, 2014 for each hedge accounting method
applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Hedged item

Interest-rate swap
Long-term
Receive floating, pay
debt
fixed

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
76,900,000

66,360,000

Method ofcalculating
the fair value** Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant 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.”50

16. Related Party Transactions
For the period from January 1, 2015 to June 30, 2015
(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders
Name
HidehikoOgawa

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)
415,782

Account
Accounts
payableBalance at the end of period(Thousands of yen)
335,083

For the period from July 1, 2014 to December 31, 2014
(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders
Name
HidehikoOgawa

Description oftransaction
Payment of asset
management fees to
JEAM

Amount(Thousands of yen)
409,168

Account
Accounts
payableBalance at the end of period(Thousands of yen)
272,759

17. Segment Information
For the periods from January 1, 2015 to June 30, 2015 and from July 1, 2014 toDecember 31, 2014
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.

51

17. Segment Information (continued)
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 retained
earnings at end of period, 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 ¥3,097,363,500, which is the maximum
integral multiple of the 1,212,750 units issued, but not exceeding ¥3,098,080,863 which is theamount of retained earnings at June 30, 2015. No cash distribution exceeding the income
amount set forth in Section 33.1.4 of the bylaws of JEI shall be made.
On August 17, 2015, the Board of Directors approved a resolution to make a cash distributionof ¥2,554 per unit aggregating to ¥3,097,363,500 to unitholders of record as of June 30, 2015.

52

19. Significant Subsequent Events(1) Issuance of new units
On June 24, 2015 and July 6, 2015, the Board of Directors approved resolutions tocomplete a public offering and third-party allocation, respectively, of new units asoutlined below. JEI received payments on July 13, 2015 and August 12, 2015 for thesaid units, which were issued in accordance with the conditions outlined below. As aresult of the issuance of new units, JEI had unitholders’ capital of ¥134,434 million
with 1,264,450 units in issue at August 12, 2015.
A. Issuance of new units through a public offering(i) Method of issuance(ii) Number of units issued(iii) Issue price (offer price)(iv) Total offer price(v) Proceeds per unit(vi) Aggregate proceeds(vii) Payment datePublic offering
47,000 units¥129,675 per unit
¥6,094 million¥125,419 per unit
¥5,894 million
July 13, 2015

B. Issuance of new units through allocation to a third party(i) Method of issuance(ii) Number of units issued(iii) Proceeds per unit(iv) Aggregate proceeds(v) Payment date(vi) Allottee

Allocation to a third party
4,700 units¥125,419 per unit
¥589 million
August 12, 2015
Mizuho Securities Co., Ltd.

53