Asset Management Report for 11th Period(Semi-Annual Report for 11th Period)
From July 1, 2011 to December 31, 2011

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

We have announced our financial results for the eleventh period started July 1, 2011 and ended December
31, 2011.
JEI recorded total revenues of 7,085 million yen and net income of 2,236 million yen. Distribution perunit exceeded our forecast at the beginning of the period and marked 11,854 yen.
JEI resumed property acquisitions in the second half of 2010 and has implemented various property
acquisitions and replacements for improved profitability and competitiveness. During the period, we
acquired HAMARIKYU INTERCITY and other three properties in the amount of approximately 20.3
billion yen in total.

About Future Asset Management
In the office leasing market, demand is rising for office buildings that are highly resistant to earthquakes
and other damages due to the effect of the Great East Japan Earthquake, although the overall market
conditions continue to be weak facing uncertainty in the economic outlook.
Japan Excellent, Inc. (JEI) will not only strive to improve the portfolio return through asset replacements
and other means, but also make further investments toward the medium- to long-term expansion of theasset base in a manner that will ensure optimal balance in terms of investment size, return, and geographic
area.
In financing, we will continue to strive for stable and sound financial operation through, among others,
lengthening borrowing spans, converting floating-rate debts to fixed-rate debts, and diversifying maturity
dates.
JEI will continue, as before, to promote our compliance system through strict conformance with the
Financial Instruments and Exchange Act and other applicable laws and regulations. In addition, we willbe always paying attention to provide information about our financial conditions and asset management
performance to our unitholders in an accurate and straightforward manner.
We kindly ask for your continued cooperation and support.

Chifumi Toda
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
2II. Asset Management Report
1. Outline of Asset Management Operation(1) Operating results and financial position of the Investment Corporation
Fiscal period
Accounting term

7th period
From July 1, 2009
to December 31,
2009

8th period
From January 1,
2010
to June 30, 2010

9th period
From July 1, 2010
to December 31,
2010

10th period
From January 1,
2011
to June 30, 2011

11th period
From July 1, 2011
to December 31,
2011

Revenues(Millions of yen)

7,494

7,302

7,094

7,337

7,085

(Rental revenues)(Millions of yen)

7,494

7,302

7,094

7,034

7,085

Operating expenses(Millions of yen)

4,145

4,050

4,040

4,117

4,116

(Property operating expenses)(Millions of yen)

3,577

3,516

3,494

3,555

3,645

Operating income(Millions of yen)

3,349

3,252

3,053

3,220

2,969

Ordinary income(Millions of yen)

2,486

2,367

2,219

2,362

2,237

Net income(Millions of yen)

2,485

2,366

2,218

2,313

2,236

Total assets(Millions of yen)

195,040

194,710

199,186

209,142

227,249(Period-on-period change)(%)(–0.1)(–0.1)

(2.2)

(4.9)

(8.6)

Net assets(Millions of yen)

89,45089,38989,272

104,366

104,338(Period-on-period change)

(%)

(0.1)

(0.0)

(–0.1)(16.9)(0.0)

Unitholders’ capital(Millions of yen)

87,08387,08387,083102,052

102,052

Outstanding investment units(Units)154,550

154,550

154,550

188,650

188,650

Net assets per unit

(Yen)

578,780

578,387

577,629553,227

553,081Net income per unit (Note 1)(Yen)

16,084

15,314

14,353

12,677

11,853

Total distribution(Millions of yen)

2,485

2,366

2,218

2,263

2,236

Distribution per unit

(Yen)

16,085

15,315

14,353

12,00011,854(Profit distribution per unit)(Yen)

16,085

15,315

14,353

12,00011,854(Distribution in excess of earnings
per unit)

(Yen)

(–)

(–)

(–)

(–)

(–)

Return on assets (Note 2)(%)(Annualized rate)
Return on equity (Note 3)(%)(Annualized rate)

1.3

1.2

1.1

1.2

1.0

(2.5)

(2.5)

(2.2)

(2.3)

(2.0)

2.8

2.6

2.5

2.4

2.1

(5.5)

(5.3)

(4.9)

(4.8)

(4.3)

Capital ratio (Note 4)

(%)

45.9

45.9

44.8

49.9

45.9

(Period-on-period change)

(%)

(0.1)

(0.0)

(–1.1)(5.1)(–4.0)

Payout ratio (Note 5)

(%)

100.0

100.0

99.9

97.8

100.0

Number of investment properties(Properties)

18

18

19

19

23

Number of tenants(Tenants)

126

124

108

109

124

Total leasable space

2

(m )

220,521220,474

228,177

234,547

262,464

Occupancy rate

(%)

97.0

97.4

91.7

92.4

93.8

Depreciation(Millions of yen)

990

992

993

1,080

1,156

Capital expenditure(Millions of yen)

134

248

328

347

357

Net operating income (NOI)(Note 6)

(Millions of yen)

4,907

4,778

4,593

4,559

4,595

Funds from operation (FFO) per
unit (Note 7)(Yen)

22,494

21,737

20,78016,391

17,982

FFO multiples (Note 8)(Times)

9.2

9.6

13.0

12.2

8.4

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)3

Debt service coverage ratio(DSCR) (Note 9)(Times)Interest-bearing debt

(Millions of yen)

Loan-to-value (Note 10)
Number of days in operation

4.5

4.4

4.3

4.5

4.3

95,50095,500100,400

95,500112,800

(%)

49.0

49.0

50.4

45.7

49.6

(Days)

184

181

184

181

184

(Note 1) Net income per unit is calculated by dividing net income by the weighted-average number of units
outstanding during the six months period.
(Note 2) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2]  100(The ratio is rounded to one decimal place.)(Note 3) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets) / 2]  100 (Theratio is rounded to one decimal place.)(Note 4) Capital ratio = Period end net assets / Period end total assets  100 (The ratio is rounded to one decimal
place.)(Note 5) Payout ratio = Total distribution / Net income  100 (The ratio is rounded down to one decimal place.)(Note 6) NOI = Rental revenues – Property operating expenses + Depreciation(Note 7) FFO per unit = (Net income + Depreciation – Gain on sale of real estate + Loss on sale of real estate) /Number of outstanding investment units (The figure is rounded down to the whole number.)(Note 8) FFO multiples = Period end investment unit price / Annualized FFO per unit (The rate is rounded down to
one decimal place.)(Note 9) DSCR = Net income before interest and taxes / (Interest expenses + Interest expense on investment
corporation bonds) (The ratio is rounded to one decimal place.)(Note 10) Loan-to-value = Period end interest-bearing debt / Period end total assets  100 (The ratio is rounded to one
decimal place.)

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
4

(2) Asset management development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006 in accordance with the Law
Concerning Investment Trusts and Investment Corporations of Japan (hereinafter referred to as
the “Investment Trust Law”). On March 15, 2006, it completed the corporate registration to the
Kanto Finance Bureau (registration number 52, issued by the Head of the Kanto Local Finance
Bureau) and listed on the Real Estate Investment Trust Section of the Tokyo Stock Exchange(Securities Code: 8987) on June 27, 2006.
Since the listing, we have continued investment management primarily in office buildings withthe aim to maintain sound corporate growth and stable revenues based on the medium- and longterm perspectives. On December 31, 2011, we settled our eleventh period.

1) Business Conditions and Results
The domestic economy during the period showed a slight recovery from the effect of the Great
East Japan Earthquake, yet it has been facing uncertainties primarily due to the impact ofEuropean financial crisis, progressive yen appreciation and prolonged deflation.
In the office leasing market, an increase in demand for office buildings highly equipped withquake-resistant and fire-prevention features are observed. However, the demand and supply ingeneral has shown a back and forth state on the fear of remaining economic uncertainties. In theTokyo metropolitan area, demand for office building is generally weak with only a few
exceptional areas and the vacancy rate, which had once shown a sign of slight recovery, remains
at the same unfavorable level. Besides, the rent level in the market has not recovered yet. In
Osaka and Nagoya areas, a buoyant pickup in demand has recently been seen, however, the trendof declining rent prices continues in conjunction with the projections suggesting a shrinking
demand in the future office leasing market.
Despite these harsh business conditions, JEI recorded improved average occupancy rate of 93.8
percent from 92.5 percent of the previous period for the entire holding properties, as a result ofproactive leasing activities focusing on improvement-required properties in Akasaka andKawasaki areas through closely working with our property management companies and officeleasing intermediaries. In building management and operation, we strived for more efficientbuilding operation, by reducing commissioned service fees including facility maintenance feesand reviewing PM fees, primarily for the key properties which need well-balanced profit andexpenditure.
In the real estate investment market, the Great East Japan Earthquake caused a stagnant trading
for a certain period of time. However, the effect on the overall market remained limited.
Consequently trading for real estate investment trusts (REITs) resumed and turned to a pick up
trend. JEI acquired four properties – MID Kyobashi Building (scheduled to operate under a newname, JEI Kyobashi Building from March 2012), No. 35 Kowa Building, HAMARIKYUINTERCITY, Pacific Square Sengoku – during the period from September to December of 2011.
The entire asset portfolio held by JEI as of the end of the period recorded 23 properties in theinvestment amount of 215.4 billion yen (on the acquisition price basis) with total leasable spaceof 262,464.32m2 (79,395.46 tsubo) at a 93.8 percent of occupancy rate (an increase of 1.4
percentage points from the last period) as of the end of the period.

2) Fund Raising Highlight
We have made efforts consistently since the previous term to raise funds, focusing on
lengthening of interest bearing debts, diversification of maturity dates and conversion ofAsset Management Report for 11th Period (Semi-Annual Report for 11th Period)
5

floating-rate debts to fixed-rate debts.
JEI issued the third investment corporation bond (5-year) in the amount of 5 billion yen and thefourth investment corporation bond (7-year) in the amount of 2 billion yen on November 4, 2011and entered into a short-term loan of 1.3 billion yen on a revolving credit line basis on November
25, 2011 to apply to part of funds for the acquisition of No. 35 Kowa Building. This short-termloan was refinanced to a long-term loan in the same amount (4-year with floating interest rate) on
November 29, 2011.
On December 20, 2011, JEI entered into a short-term loan of 9 billion yen on a revolving credit
line basis to apply to part of funds for the acquisitions of HAMARIKYU INTERCITY and
Pacific Square Sengoku.
For refinancing of a long-term loan of 7 billion yen (floating interest rate) which matured on
November 29, 2011, JEI managed to enter into long-term loan in the same amount (of which
3.24 billion yen was for 4-year floating interest loan and 3.76 billion yen was for 5-year floatinginterest loan).
As for the above floating interest loans (totaled 8.3 billion yen), we promoted the conversion of
floating-rate debts to fixed-rate debts through interest rate swaps.
As a result, as of the end of the period, the average remaining debt maturity of interest bearing
debts became 2.92 years, long-term borrowing ratio was 92.0 percent, fixed rate ratio was 62.3
percent and weighted average interest rate for loans purchased recorded 1.31 percent.
Outstanding interest bearing debts totaled 112.8 billion yen, of which 9 billion yen was for shortterm loans, 79.8 billion yen was for long-term loans (including those of 14 billion yen with thematurity of less than one year) and 24 billion yen was for investment corporation bonds (loan tovalue for the total assets was 49.6 percent as of the end of the period).
JEI has registered the issuance of investment corporation bonds for the purpose of dynamic
arrangement of long-term funds as follows:(Bond Issuance Registration Highlight)
Estimated amount of
Type
Scheduled period for issuanceissuance
Investment corporation
100 billion yen
From February 9, 2012 to February 8, 2014bond
The ratings for JEI provided by the following rating agencies are shown below:(Ratings as of December 31, 2011)
Rating and Investment
Moody’s Japan
Information, Inc. (R&I)
Issuer rating (outlook)
A3 (Stable)(Note 1)
AA- (Stable)(Note 2)
Individual debt issue rating
AA(Note 1) On July 7, 2011, the rating was upgraded from Negative to Stable.
(Note 2) Ratings for unsecured investment corporation bonds (No.1 through No.4).

3) Financial Results and Distribution Highlight
As a result of the above investments, JEI recorded 7,085 million yen in total revenues, 2,969
million yen in operating income, 2,237 million yen in ordinary income and 2,236 million yen in
net income for the period under review.
As for distributions, JEI determined to distribute all retained earnings at the end of period,
rounding down the portion less than 1 yen of distribution per investment unit, with the intent toinclude the amount of profit distributions in deductible expenses by applying Special Measure
Concerning Taxation for Corporation Tax (Section 67-15 of the Act on Special Measures
Concerning Taxation). As a result, JEI determined the amount of distribution per unit to be
11,854 yen.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
6

(3) Capital Increase
JEI had no changes in the number of outstanding investment units for the period under review. The outlineof the changes is as follows:
Paid-up date

Capital transaction

ChangeFebruary 20, 2006

Private placement
for corporation

June 26, 2006

Public offering

July 21, 2006

Unitholders’ capital(Millions of yen)

Outstanding investment units(Units)Balance

ChangeRemarks

Balance

400

400

200

200

(Note 1)

128,000

128,400

64,23064,430(Note 2)

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)(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 a price of 520,000 yen per unit (subscription price of 501,800 yen perunit) through a public offering in order to raise funds for purchasing new properties which were acquired at
the time of the listing.
(Note 3) New investment units were issued at a price of 501,800 yen per unit through an allocation of investment
units to a third party in order to apply to certain part of funds for new property acquisitions.
(Note 4) New investment units were issued at a price of 1,019,200 yen per unit (subscription price of 984,360 yen
per unit) through a public offering in order to refund certain part of debts procured to acquire properties inthe second period.
(Note 5) New investment units were issued at a price of 984,360 yen per unit through an allocation of investment
units to a third party in order to refund certain part of debts procured to acquire properties in the second
period.
(Note 6) New investment units were issued at a price of 454,930 yen per unit (subscription price of 438,984 yen perunit) through a public offering in order to refund certain short-term loans procured to acquire properties in
the ninth period and to raise funds to acquire a new property which was acquired in the tenth period.
(Note 7) New investment units were issued at a price of 438,984 yen per unit through an allocation of investment
units to a third party in order to refund the short-term loans procured to acquire new properties in the ninth
period and to raise funds to acquire a new property which was acquired in the tenth period.
[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listedon the Real Estate Investment Trust Section of the Tokyo Stock Exchange during each period are as follows:
Fiscal period
7th period(Closing date) (December 2009)
Investment unit
market price8th period(June 2010)

9th period(December 2010)

10th period(June 2011)

11th period(December 2011)

Highest (Yen)

490,000

496,500

570,000

543,000

408,000

Lowest (Yen)

388,000

386,500

397,000

363,500

295,500

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)7

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

(4) Distribution Paid
The distributions for the eleventh fiscal period were determined to be 11,854 yen per unit. The Investment
Corporation has determined to distribute all retained earnings at the end of period, rounding down the
portion less than 1 yen of distribution per investment unit, with the intent to apply the special treatment ofincome taxes under the Special Taxation Measures Law (Section 67.15 of the Special Taxation Measures
Law) in which the amount equivalent to distributions from profits is deducted from taxable corporate income
as a deductible expense.
Fiscal period

7th period

8th period

9th period

10th period

11th period

Accounting term

From July 1, 2009
to December 31,
2009

From January 1,
2010
to June 30, 2010

From July 1, 2010
to December 31,
2010

From January 1,
2011
to June 30, 2011

From July 1, 2011
to December 31,
2011

2,486,006

2,366,962

2,218,333

2,314,032

2,236,262

69

29

76

50,2325

2,485,936

2,366,933

2,218,256

2,263,800

2,236,257(16,085)(15,315)(14,353)(12,000)(11,854)

2,485,936

2,366,933

2,218,256

2,263,800

2,236,257(16,085)(15,315)(14,353)(12,000)(11,854)

–

–

–

–

–

(–)

(–)

(–)

(–)

(–)

Retained earnings at the endof period (Thousands of yen)
Retained earnings(Thousands of yen)
Total profit distributions(Thousands of yen)(Distributions per unit) (Yen)
Total profit distributions(Thousands of yen)
(Profit distribution per unit)(Yen)
Total refund of investment
equity(Refund of investment per
unit)(5) Policy and issues on future investment management
1) Outlook for Investment Environment
An economic recovery is now considered to come later than the initial projection as the Chinese
economy, once a driving factor for the global growth, is decelerating and the European debt
crisis deepens. While the US growth is expected for a turnaround, a facilitated pace of domestic
recovery in the coming months is also expected on the back of restored supply chains andboosted demand regarding the earthquake restoration. However, a fundamental upturn
generated by buoyant exports is not expected to come anytime soon due to the impact of thedownturn in the overseas economies.
In the office leasing market in the Tokyo metropolitan area, the forecasts indicate a weakened
demand for a little while given the delayed economic upbeat. The vacancy rate is expected tokeep back and forth and the rent level may further take time towards a turnaround. In Osaka andNagoya areas, amid extended trend in moderate supply and demand due to scheduled supply ofmajor office buildings, a drastic revitalization of the market is expected to come even later.
In the real estate investment market, easing trend of fund-raising conditions and investor needs
can be expected to continue, giving rise to active trading. To realize this, further revitalizationof the office leasing market and elimination of the gap in target prices and interest yield
between sellers and buyers are considered to serve significantly.

2) Policy and Issues on Future Investment Management
Amid a delay in recovery in the office leasing market, JEI works to earn more profits from ourAsset Management Report for 11th Period (Semi-Annual Report for 11th Period)8

overall asset portfolio through replacement of assets and other appropriate measures. We will
strive for realizing more efficient property management operation to improve the profitability,
focusing on retaining new tenants as early as possible, particularly for properties which needwell-balanced profit and expenditure such as Ebina Prime Tower and Kawasaki Nissincho
Building. In addition, we will consistently implement additional strategic investment plans tomaintain the asset value and improve competitive position of our properties on the medium- tolong-term basis.
For external growth, we will plan and implement well-balanced investments based on the size,
profitability and target area to increase asset size and realize stable profitability in our portfolio
on the medium- to long-term basis. To this end, we will continue enhancing further interaction
and collaboration with sponsor companies, have our asset management companies to cultivate
and refine property information sources, and seek business opportunities with efforts toproactively gain access to market information.
As for the financial environment, we recognize that the fund-raising conditions in the real estate
investment industry are generally favorable despite concerns over the market environment in
the near term due to deepening European financial crisis and other factors. Based on thisperspective, we will consistently work on stable financial operation through diversifying
financing sources including issuance of investment corporation bonds, diversifying maturity
dates, lengthening borrowing spans, converting floating-rate debts to fixed-rate debts, andmaintaining liquidity through establishment of commitment lines.

(6) Subsequent eventsNone.

2. Outline of the Investment Corporation(1) Investment unit
Fiscal period

7th period
9th period
11th period
8th period
10th period
As of December 31,
As of December 31,
As of December 31,
As of June 30, 2010
As of June 30, 2011
2009
2010
2011

Number of units

2,000,000 units

2,000,000 units

2,000,000 units

2,000,000 units

2,000,000 units

154,550 units

154,550 units

154,550 units

188,650 units

188,650 units

Unitholders’ capital

87,083 million yen

87,083 million yen

87,083 million yen 102,052 million yen 102,052 million yen

Number of unitholders

4,734 individuals

5,469 individuals

5,495 individuals

authorized
Number of units issued
and outstanding

7,411 individuals

7,875 individuals

Number of units
owned(Units)Ratio of number ofunits owned to
outstanding
investment units(%)(2) Unitholders
Major unitholders as of December 31, 2011 are as follows:

Name

Address

Japan Trustee Services Bank, Ltd.
(Trust Account)

1-8-11 Harumi, Chuo-ku, Tokyo

37,572

19.92

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

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

14,337

7.60

Kowa Real Estate Co., Ltd.

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

14,312

7.59

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
9Trust & Custody Services Bank, Ltd.
(Securities Investment Trust
Account)

Harumi Island Toriton Square Office Tower Z, 18-12 Harumi, Chuo-ku, Tokyo

12,565

6.66

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

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

7,905

4.19

North Pacific Bank, LTD.

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

4,590

2.43

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

4,132

2.19

3,776

2.00

3,511

1.86

2,277

1.21

104,977

55.65

The Dai-ichi Life Insurance
Company, Limited
NOMURA BANK(LUXEMBOURG) S.A.
The Chugoku Bank, LTD.
Trust & Custody Services Bank, Ltd.
(Money Trust Account, Taxable)

Batiment A, 33, Rue de Gasperich, L-5826,
Luxembourg
1-15-20 Marunouchi, Kita-ku, Okayama-shi,
OkayamaHarumi Island Toriton Square Office Tower Z, 18-12 Harumi, Chuo-ku, Tokyo
Total(Note) Ratio of number of units owned to outstanding investment units is rounded to two decimal places.

(3) Officers
1) Directors and accounting auditor
Post

Executive
Director
Supervisory
Director
Supervisory
Director
Supervisory
Director
Accounting
AuditorName

Major additional post

Chifumi Toda

President and Director, Japan Excellent AssetManagement Co., Ltd.

Makoto Sakagami

Makoto Sakagami Certified Public Accounting Office

Tsuyoshi Nagahama

Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Faculty of Real Estate, Meikai University

Ernst & Young ShinNihon
LLC

Compensation or fee forthe six months ended
December 31, 2011
(Thousands of yen)
–

6,540

17,700(Note 2)–

(Note 1) There is no investment unit of JEI held by the Executive Director nor the Supervisory Directors. Although
Supervisory Directors may have additional post in other company than listed above, there is no conflict ofinterests between those companies including listed above and JEI.
(Note 2) The total compensation shown above is an estimated amount and includes fees for English financial
statement audit and for the preparation of a comfort letter and other services in relation to the issuance ofinvestment corporation bonds in November 2011.

2) Policy on dismissal and discontinuation of re-election of accounting auditor
The board of directors deliberate dismissal of accounting auditor in accordance with the provisions set out
in the Investment Trust Law and deliberate discontinuation of re-election based on circumstances in all
respects.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
10(4) Name of asset management company, asset custodian and administrative
agentsOur asset management company, asset custodian and administrative agents as of December 31, 2011 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 andinstitution operation)

Mizuho Trust & Banking Co., Ltd.

Administrative agent(Investment corporation bonds)

Mizuho Corporate Bank, Ltd.

3. Investment Portfolio of the Investment Corporation(1) Investment portfolio by area
10th period(As of June 30, 2011)
Classification

Use

Real estate property(Note3)Area

11th period(As of December 31, 2011)

Acquisition price Investment ratio Acquisition price Investment ratio(Millions of yen) in portfolio (%) (Millions of yen) in portfolio (%)(Note 1)
(Note 2)
(Note 1)
(Note 2)

Area II (Note 4)

4,309

2.0

4,377

1.9

Area I (Note 4)

106,11650.7

114,242

50.3

Area II (Note 4)

7,508

3.6

7,461

3.3

Area III (Note 4)

73,521

35.2

74,62932.8

Area IV (Note 4)

–

–

3,395

1.5

Area I (Note 4)

–

–

7,096

3.1

Total

191,455

91.5

211,203

92.9

Deposits in bank and other assets

17,687

8.5

16,046

7.1

Total assets

209,142100.0

227,249

100.0

Trust beneficiaryinterest in real estate(Note 3)

Trust beneficiaryinterest in real estate

Offices

Others(Note 1) Acquisition price is based on the amounts accounted for in the balance sheets as of the closing date(amounts of real estate and trust beneficiary interest in real estate are based on the book value after
adjusting depreciations).
(Note 2) Investment ratio in portfolio is rounded to one decimal place.
(Note 3) Leasehold rights held combined with buildings and other structures are indicated in real estate property andtrust beneficiary interest in real estate at the combined amount.
(Note 4) Areas are classified as follows:
Area I:

Six central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya)

Area II: Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.),
central Nagoya (Meieki, Fushimi, Sakae, etc.), and central Fukuoka (Tenjin, Hakata-ekimae, etc.)
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities

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

(2) Major Property
The principal properties (top ten properties in net book value) held by JEI as of December 31, 2011 are as
follows:
Ratio of rental
Occupancy
revenue to total
rate (%)
rental revenues (%)(Note 3)(Note 4)

Net book value(Millions of yen)

Leasable space(m2)(Note 1)

Leased floor
space (m2)(Note 2)

30,63738,332.15

35,491.28

92.6

12.5

OfficesAkasaka Garden City

22,876

8,769.53

7,215.53

82.3

5.0

Offices

Omori Bellport D

21,94925,828.29

25,828.29

100.0

14.5

Offices

AKASAKA INTERCITY

17,5355,622.98

5,622.98

100.0

4.4

Offices

13,09925,217.28

25,217.28

100.0

11.2

Offices

10,961

12,122.85

12,122.85

100.0

4.8

Offices

10,30918,612.72

18,612.72

100.0(Note 5)

Offices

Shiba 2-Chome Building

9,210

11,749.30

11,464.86

97.6

5.3

OfficesNo. 35 Kowa Building

8,317

9,377.16

9,377.16

100.0(Note 5)

Offices

8,259

6,411.26

6,411.26

100.0

4.2

Offices

153,156

162,043.52

157,364.21

97.1

69.1

–

Name of real property
Kowa Kawasaki Nishiguchi
Building

Musashikosugi Tower
Place
Daiba Garden City
Building
Kowa Kawasaki
Higashiguchi Building

JEI Hamamatsucho
Building
Total(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of December
31, 2011 and is rounded to two decimal places. If the property is a joint ownership property, the value isobtained after multiplying the total leasable space of the shared real estate by the percentage of the interest
owned by JEI.
(Note 2) Leased floor space refers to space with lease agreements with end tenants as of December 31, 2011 and isrounded to two decimal places. If the property is a joint ownership property, the value is obtained after
multiplying the total leased floor space of the shared real estate by the percentage of the interest owned by
JEI. The leased floor space of end tenants who terminated their lease agreement but not yet removed as ofthe end of period is included in the leased floor space. This also applies to the calculations of occupancy
rate in (Note 3) below and the total number of tenants in (Note 1) in (3) Portfolio ownership breakdown.
(Note 3) Occupancy rate is a percentage of total leased floor space to total leasable space as of December 31, 2011
and rounded to one decimal place.
(Note 4) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 5) The values of Kowa Kawasaki Higashiguchi Building and No. 35 Kowa Building are undisclosed because
the consent from the tenants has not been obtained.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
12

Major use(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of December 31, 2011 are as follows:
PropertyNo.

Name of real property

Location (Displayed 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 Hamamatsucho Building

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

I-4

No. 32 Kowa Building

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

I-6

No. 28 Kowa Building (Note 2)

2-20-1 Nishi-Gotanda, Shinagawa-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

II-1

NHK Nagoya Housou Center
Building

1-13-3 Higashi-Sakura, Higashi-ku, Nagoyashi, Aichi
1-3-15 Awaza, Nishi-ku, Osaka-shi, Osaka

Form of ownership
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate

24,04021,94910,800

9,210

7,930

8,259

7,031

7,404

2,820

2,802

18,20022,876

12,60017,535

5,200

4,924

11,66010,961

9,100

8,317

7,320

7,096

116,701

121,338

Real estate

4,320

4,377

Trust beneficiary interestin real estate

4,220

7,461

8,540

11,83916,40013,0998,380

10,309

5,010

5,239

4,380

4,083

1,570

999

2,191

2,395

3,590

6,187

24,80030,637

1,702

1,677

68,02374,629

3,530

3,395

Area IV

3,530

3,395

Total

196,794

211,203

Area I

II-2

JEI Nishi-Honmachi Building

Area II
III-1

Musashikosugi Tower Place

III-2

Kowa Kawasaki Higashiguchi
Building

1-403 Kosugi-machi, Nakahara-ku,
Kawasaki-shi, Kanagawa
1-53 Nisshin-cho, Kawasaki-ku, Kawasakishi, Kanagawa

III-3

JEI Hongo Building

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

III-5

Kawasaki Nisshincho Building

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

III-6

No. 44 Kowa Building

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

III-7

JEI Ryogoku Building

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

III-8

Ebina Prime Tower

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

III-9

Kowa Kawasaki Nishiguchi
Building

III-10

Pacific Square Sengoku

66-2 Horikawa-cho, Saiwai-ku, Kawasakishi, Kanagawa
2-29-24 Hon-Komagome, Bunkyo-ku,
Tokyo

Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate
Trust beneficiary interestin real estate

Area III
IV-2

MID Kyobashi Building

Appraisal value atthe end of period Net book value(Millions of yen) (Millions of yen)
(Note 1)

2-2-48 Kata-machi, Miyakojima-ku, Osakashi, Osaka

Trust beneficiary interestin real estate(Note 1) Appraisal value at the end of period indicates the appraisal value described in the real estate appraisal report
prepared by a real estate appraiser belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co.,
Ltd., and Japan Valuers Co., Ltd. as of December 31, 2011 based on the articles of incorporation of JEI and

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
13

the regulations stipulated by the Investment Trusts Association, Japan. When there is a joint ownershipproperty in the current portfolio, its value is obtained after multiplying the total value of the shared realestate by the percentage of the interest owned by JEI or the trustee.
(Note 2) This property will be transferred to KW Emerald Specific Purpose Company as of February 29, 2012 basedon the agreement dated January 24, 2012 (based on the information available as of January 31, 2012).
Hereinafter, the same note shall apply to this property.

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

Property
Name of real propertyNo.

10th period
From January 1, 2011 to June 30, 2011
RentalTotal number of Occupancy
revenues (Fortenants (At the rate (At thethe period)end of period) end of period)(Millions of(Note 1)
(%)
yen)

I-1
I-2
I-3
I-4
I-6
I-7
I-8
I-9
I-10
I-11
I-12

Omori Bellport D
Shiba 2-Chome
Building
JEI Hamamatsucho
Building
No. 32 Kowa
Building
No. 28 Kowa
Building
Akasaka Garden
City
AKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building
No. 35 Kowa
Building
HAMARIKYUINTERCITY
Area I

II-1
II-2

NHK Nagoya
Housou Center
Building
JEI NishiHonmachi Building
Area II

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

Musashikosugi
Tower Place
Kowa Kawasaki
Higashiguchi
Building
JEI Hongo Building
KawasakiNisshincho
Building
No. 44 Kowa
Building
JEI Ryogoku
Building
Ebina Prime Tower
Kowa Kawasaki
Nishiguchi Building
Pacific Square
Sengoku

11th period
From July 1, 2011 to December 31, 2011

Ratio of
RentalRatio ofrentalTotal number of Occupancy
revenues (For rental revenue
revenue totenants (At the rate (At thethe period)
to total rental
total rental
end of period) end of period)(Millions of revenues (%)
revenues (%)(Note 1)(%)yen)
(Note 2)
(Note 2)

1

99.7

1,020

14.5

1

100.0

1,028

14.5

2

100.0

373

5.3

2

97.6

372

5.3

1

100.0

295

4.2

1

100.0

295

4.2

1

96.4

277

3.9

1

97.4

276

3.9

1

95.3

138

2.0

1

100.0

120

1.7

1

82.3

516

7.3

1

82.3

357

5.0

12

83.9

306

4.4

13

100.0

312

4.4

1

100.0

197

2.8

1

100.0

205

2.9

1

100.0

276

3.9

1

100.0

338

4.8

–

–

–

–

1

100.0

(Note 3)(Note 3)

–

–

–

–

4

87.2

15

0.2

21

96.6

27

97.1

31

89.4

297

4.2

32

90.6

291

4.1

1

97.1

227

3.2

1

90.0

229

3.2

32

93.6

33

90.3

36

100.0

799

11.4

36

100.0

796

11.2

1

100.0

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

1

100.0

172

2.5

1

100.0

174

2.5

1

100.0

225

3.2

1

96.7

223

3.2

1

99.1

90

1.3

1

99.1

91

1.3

1

98.1

106

1.5

1

100.0

109

1.5

14

69.0

295

4.2

15

69.3

323

4.6

1

85.6

912

13.0

1

92.6

886

12.5

–

–

–

–

6

100.0

5

0.1

63

91.6

1

96.3

124

1.8

1

96.3

124

93.8

7,085

100.0

Area III56

89.4

MID Kyobashi
Building––

Area IV

–

–

Total

109

92.4

–

7,034

–

100.0

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
15

(Note 1) Total number of tenants indicates total number of tenants in each property as of the end of each period. A
property entered into a master lease agreement is counted as one tenant. A tenant who has multiple tenancies
in one property is counted as one tenant. A tenant who has tenancies in multiple properties is counted as one
tenant for each property.
(Note 2) Ratio of rental revenue to total rental revenues is rounded to one decimal place.
(Note 3) The values of Kowa Kawasaki Higashiguchi Building and No. 35 Kowa Building are undisclosed because
the consent from the end tenants has not been obtained.

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

Fair value(Thousands of yen)
(Note 2)Type
More than one year

Over-the-countertransaction

Interest rate swap
contracts with floatingrate to fixed-rate interest

21,300,000–

21,300,000(Note 1) Contract amount of swap is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation because over-the-counter transactions meet requirements for special
accounting under the Accounting Standard for Financial Instruments.

4. Capital Expenditures for Holding Properties(1) Scheduled capital expenditures
The following table shows major planned capital expenditures associated with planned maintenance andrepair for the properties held by JEI as of December 31, 2011. The values below include those to be
expensed for accounting purposes.

Name of real
property

NHK Nagoya
Housou Center
Building
JEI Hamamatsucho
Building
JEI Hongo Building

Location

PurposeAir-conditioning system
Higashi-ku, Nagoya-shi renewal construction(4th term)
Air-conditioning system
Minato-ku, Tokyo
renewal construction(2nd term)
Air-conditioning system
Bunkyo-ku, Tokyo
renewal construction(3rd term)

Scheduled term

Estimated construction costs(Millions of yen)
Payment
for the six
Total ofmonthsTotal
advanceended
payment
December31, 2011

From August 2011
to May 2012

115

–

–

From April 2012
to June 2012

82

–

–

From January 2012
to June 2012

37

–

–

(2) Capital expenditures for the six months ended December 31, 2011
The following table shows constructions completed during the period and to be expensed as capital
expenditure pertaining to our portfolio held as of December 31, 2011. During the period, the amount ofconstructions completed totaled 454 million yen, composed of 357 million yen of capital expenditure and 96
million yen of maintenance and repair classified as an expense for the six months ended December 31, 2011.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
16Name of real property

Location

PurposeScheduled term

Amounts paid
(Millions ofyen)

Kowa Shirokanedai Building

Minato-ku, Tokyo

Bathroom renewal construction

From December 2010
to August 201193

NHK Nagoya Housou Center
Building

Higashi-ku, Nagoya-shi

Air-conditioning system renewal From September 2010
construction (3rd term)to December 201192

JEI Hamamatsucho Building

Minato-ku, Tokyo

Air-conditioning system renewal From September 2011
construction (1st term)to December 201177–

Other constructions

94

Total

357

(3) Reserved funds for long-term maintenance and repair plan
JEI has reserved funds for maintenance and repair as below to appropriate for future expenditures on largescale maintenance and repair, taking out from depreciation and other excess cash flow based on our longterm maintenance and repair plan developed for each property. (Millions of yen)
7th period
9th period
8th period
From July 1,
From July 1,
From January 1,
Item
2009
2010
2010
to December 31,
to December 31,
to June 30, 2010
2009
2010
Reserved funds at the beginning of
254
254
254
period10th period
From January 1,
2011
to June 30, 2011

11th period
From July 1,
2011
to December 31,
2011

259

251

Increase

–

–

5

5

48

Decrease

–

–

–

13

–

254

254

259

251

299

Reserved funds at the end of period

5. Expenses and Liabilities(1) Expenses associated with asset management(Thousands of yen)Account

10th Period
From January 1, 2011
to June 30, 2011

11th Period
From July 1, 2011
to December 31, 2011(a) Asset management fees

428,085

337,980(b) Custodian fees

15,243

15,939(c) Administrative service fees

29,05833,092(d) Compensation for directors

6,540

6,540

(e) Accounting auditor fees

11,50011,500(f) Other

70,89465,436561,321

470,489

Total

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
17

(2) Borrowings
Borrowings by each financing source as of the end of the 11th period (ended December 31, 2011) are as
follows:
Classification
LenderBorrowingdate

Mizuho Corporate Bank, Ltd.
Shorttermloans

Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation

December20, 2011

Subtotal
Aozora Bank, Ltd.
The Chuo Mitsui Trust andBanking Company, Limited
Mizuho Trust & Banking Co., Ltd.
Sumitomo Mitsui Banking
Corporation

June 29,
2009

Mizuho Corporate Bank, Ltd.

Longterm debt
due
withinone year

Mitsubishi UFJ Trust and Banking
Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation–

4,000,000–

3,000,000–

2,000,000–

9,000,000

1,615,384–

1,615,384–

1,615,384–

1,076,923–

538,461–

538,461––2,300,000–

2,200,000–

2,000,000

Resona Bank, Ltd.

–

500,000

Mizuho Corporate Bank, Ltd.

–2,500,000–

1,500,000–

2,000,000–

1,000,000

7,000,000

14,000,000

2,300,000–

2,200,000–

2,000,000–

500,000–

2,500,000–

1,500,000–

2,000,000–

1,000,000–

6,000,000

6,000,000

The Norinchukin Bank

Mizuho Trust & Banking Co., Ltd.
Sompo Japan Insurance Inc.

July 31,
2007

July 31,2007

Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Subtotal
Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation
The Norinchukin Bank

July 31,
2007

Resona Bank, Ltd.
Mizuho Corporate Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Longterm debt
(Note3)

Balance at theBalance at the Average
beginning of
end of period interest rate
period(Thousands of(%)(Thousands ofyen)(Note 1)yen)

Sompo Japan Insurance Inc.

July 31,2007

Tokio Marine & Nichido Fire
Insurance Co., Ltd.
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation

October
24, 2008

The Norinchukin Bank
Mizuho Corporate Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
Mizuho Trust & Banking Co., Ltd.

June 29,2010

0.68000

Maturity Repayment
date
methodUse

Remarks

For
Unsecured
January 31,
acquisition
Lump-sumand2012
of realunguaranteed
estate0.68000––

November29, 2011–

Lump-sum
0.68643––

For
Unsecured
repayment
andof otherunguaranteedborrowing

July 31,2012

1.96907(Note 2)

1.32775

–

–

–

–

–

July 31,2012–

1,000,000

1,000,000

3,100,000

3,100,000

1,800,000

1,800,000

1,800,000

1,800,000

1,300,000

1,300,000

For
Unsecured
repayment
Lump-sumandof otherunguaranteedborrowing

1.03643

June 28,2013

1.08643

December27, 2013

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

Lender
The Dai-ichi Life Insurance
Company, Limited

July 31,2007

Development Bank of Japan Inc.
Mitsubishi UFJ Trust and Banking
Corporation

4,000,000

4,000,000

3,900,000

3,900,000

2,400,000

2,400,000

1,200,000

1,200,000

3,000,000

3,000,000

2,000,000

2,000,000

Mizuho Trust & Banking Co., Ltd.

–

1,620,000

Aozora Bank, Ltd.

–

1,620,000–

650,000

Mizuho Corporate Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.

June 29,2011

Resona Bank, Ltd.
The Dai-ichi Life Insurance
Company, Limited
Development Bank of Japan Inc.

Longterm debt
(Note 4)

Balance at theBalance at the Average
beginning of
end of period interest rate
period(Thousands of(%)(Thousands ofyen)(Note 1)yen)
2.25875
2,000,000
2,000,000(Note 2)2.284172,000,000
2,000,000(Note 2)October 24,
2008

0.98643

November29, 2011

Aozora Bank, Ltd.
Mizuho Corporate Bank, Ltd.

–370,000

Sumitomo Mitsui Banking
Corporation
Mitsubishi UFJ Trust and Banking
Corporation–

280,000

4,600,000

4,600,000

4,400,000

4,400,000

4,000,000

4,000,000–

1,620,000–

1,080,000

Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
The Chuo Mitsui Trust andBanking Company, Limited
Sumitomo Mitsui Banking
Corporation
Mitsubishi UFJ Trust and Banking
Corporation

June 29,2011

November29, 2011

Maturity Repayment
date
methodDecember29, 2014

June 30,2015

1.13750

November30, 2015

1.24375

For
repaymentof otherborrowing

Lump-sum

UnsecuredForandacquisition
unguaranteedof realestateJune 29,
2016

For
repaymentof otherborrowing

November29, 2016–

540,000–

520,000

6,000,000

6,000,000

3,000,000

3,000,000

Subtotal

71,500,000

65,800,000

1.37841

–

–

–

–

Total

78,500,000

88,800,000

1.29964

–

–

–

–

Mizuho Corporate Bank, Ltd.
Development Bank of Japan Inc.
The Dai-ichi Life Insurance
Company, Limited

November30, 2010
June 29,2011

1.73875 November(Note 2) 30, 2017
1.65125 June 29,(Note 2)
2018

(Note 1) The average interest rates are calculated using a weighted-average of the loan balance at the end of period
by multiplying the interest rate of each loan agreement as of period-end, rounding to five decimal places.
Borrowings hedged by interest rate swaps to avoid interest rate fluctuation risk are calculated using aweighted-average rate adjusting the effect of the interest rate swaps.
(Note 2) The loans are fixed-rate loans.
(Note 3) The following table shows the total long-term debt maturing each year after the balance sheet date(excluding the portion due within one year).
(Thousands of yen)Classification
Long-term debt

RemarksForacquisitionof realestateJuly 31,2014

2.27344(Note 2)

1.36375(Note 2)Use

1 to 2 years
15,000,000

2 to 3 years
15,500,000

3 to 4 years
9,540,000

4 to 5 years
16,760,000

Over 5 years
9,000,000

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
19

(3) Investment Corporation Bonds
Investment corporation bonds issued as of December 31, 2011 are as follows:
Issue
1st series unsecured
investment corporationbonds
2nd series unsecured
investment corporationbonds
3rd series unsecured
investment corporationbonds
4th series unsecured
investment corporation
bonds

Issuance date

Balance at the
beginning of
period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)Interest rate
(Note 1)(%)

Maturity date

Repayment
methodUse

Remarks

March 11,2010

12,000,000

12,000,000

1.52000

March 11,2014

Lump-sum(Note 2)

(Note 3)June 28,2010

5,000,000

5,000,000

1.29000 June 26, 2015

Lump-sum(Note 2)

(Note 3)

November 4,
2011–

5,000,000

1.01000

November 4,
2016

Lump-sum(Note 2)

(Note 3)

November 4,
2011–

2,000,000

1.40000

November 2,
2018

Lump-sum(Note 2)

(Note 3)17,000,000

24,000,000

1.35583

Total(Note 1) The interest rate indicated in the total column is calculated using a weighted-average of the balance at theend of period by multiplying the loan interest rate of each investment corporation bond, rounding to fivedecimal places.
(Note 2) The funds were appropriated to repayments of borrowings.
(Note 3) The bonds are with special pari passu conditions among specified investment corporation bonds.

(4) Short-term investment corporation bonds
JEI has no outstanding short-term investment corporation bonds as of December 31, 2011.

6. Condition of Investment Transactions(1) Transactions of property and asset-backed securities, etc.
(Millions of yen)
Acquisition
Type of assets

Trust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateTrust beneficiaryinterest in realestateName of real
property

Transfer

Acquisition date

Acquisition
price(Note)MID Kyobashi
Building

September 1, 2011

3,308

No. 35 Kowa
Building

November 25, 2011

HAMARIKYUINTERCITY
Pacific Square
SengokuTransferamountNet book
value

Gain (loss)
on transfer

–

–

–

–

8,280

–

–

–

–

December 20, 2011

7,080

–

–

–

–

December 20, 2011

1,620

–

–

–

–

–

20,288––––Transfer date

(Note) The acquisition price indicates each 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
Other assets than property or asset-backed securities, etc. above are mainly bank deposits and bank deposits
in trust.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
20

(3) Appraisal and research for specified asset value, etc.
1) Real estate, etc.
Acquisitionor transfer

Property name

Type of assets(Millions of yen)
Research value ofAcquisition pricespecified asset(Note 2)
(Note 1)

Acquisition date

MID Kyobashi
Trust beneficiary
September 1, 2011
3,308
Building
interest in real estate(Note 1) The research for specified asset value, etc. shown above was conducted by Ernst & Young ShinNihon LLC
at the time of acquisition in accordance with the Japanese Institute of Certified Public Accountants (JICPA)
Industry Audit Committee Report No. 23, “Price Research of Specified Assets Held by Investment Trusts
and Investment Corporations.” In addition, JEI received a research report containing matters necessary forthe identification of the property, such as the location and the lot number of the property.
(Note 2) The acquisition price indicates each contracted amount of the property in each purchase agreement or trust
beneficiary interest transfer agreement excluding related expenses (brokerage fee, taxes, etc.), rounding to
the million yen.
Acquisition

3,530(Millions of yen)
Acquisitionor transfer

Property name

Type of assets

Acquisitiondate

Acquisition
price(Note 1)

Property
appraisal
value(Note 2)

Property appraiser

Trust beneficiary
November 25,
Japan Real Estateinterest in real
8,280
8,960
2011
InstituteestateTrust beneficiary
HAMARIKYU
December 20,
Japan Real Estate
Acquisitioninterest in real
7,080
7,320
INTERCITY
2011
InstituteestateTrust beneficiary
Pacific Square
December 20,
Chuo Real Estate
Acquisitioninterest in real
1,620
1,702
Sengoku2011
Appraisal Co., Ltd.
estate(Note 1) The acquisition price indicates each contracted amount of the property in each purchase agreement or trust
beneficiary interest transfer agreement excluding related expenses (brokerage fee, taxes, etc.), rounding to
the million yen.
(Note 2) Under the amendment of Section 201 of the Investment Trust Law enacted on November 24, 2011, realestate appraisal is required instead of research for specified asset value, etc. when a specified asset (limited
to land or buildings or rights or assets related thereto that are specified by a Cabinet Order) is acquired ortransferred.
Acquisition

No. 35 Kowa
Building

2) OtherTransactions of JEI that are subject to research for specified asset value, etc. under Section 201 of theInvestment Trust Law other than those listed in 1) Real estate, etc. above are researched and reported by
Ernst & Young ShinNihon LLC.
Three interest rate swap contracts were subject to the research during the period from July 1, 2011 to
December 31, 2011 and we have received the related research report from Ernst & Young ShinNihon LLC.
In the research, Ernst & Young ShinNihon LLC is supposed to report on the name of counterparty,
currency, contractual interest rate, transaction term and other matters pertaining to the subject interest rate
swap contracts.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
21

Valuationdate

July 1, 2011
December 1,
2011
November30, 2011

(4) Transactions with interested parties and major shareholders
1) Transactions
Acquisition price or disposal amountClassification
Acquisition priceTotal amount

Disposal amount

20,288 million yen– million yen

Acquisition price from interested parties
and major shareholders
15,360 million yen (75.7%)

Disposal amount to interested parties
and major shareholders– million yen (–%)

Breakdown for transactions with interested parties and major shareholders
Kowa Real Estate Co., Ltd.

15,360 million yen (75.7%)– million yen (–%)

Total

15,360 million yen (75.7%)– million yen (–%)

(Note 1) Above transactions indicate transactions made between interested parties and major shareholders for the six
months ended December 31, 2011. “Interested parties” means the interested parties related to the asset
management company of JEI as prescribed in Section 26, Paragraph 1, Item 27 of the Regulations forManagement Reports Concerning Investment Trusts and Investment Corporations of the Investment Trusts
Association, Japan. “Major shareholders” means the major shareholders as defined in Section 29-4,
Paragraph 2 of the Financial Instruments and Exchange Act.
(Note 2) In addition to the transactions listed above, JEI received an adjustment of 61 million yen from Kowa Real
Estate Co., Ltd. in relation to No. 35 Kowa Building.

2) Amounts of fees paid and other expenses

Classification

Total amount paid (A)(Thousands of yen)
Breakdown of transactions with interested parties andmajor shareholders
Paid to

Property management costs
and fees

Kowa Real Estate Co., Ltd.

361,419

35.4%

Sekisui House, Ltd.

47,376

4.6%

408,795

40.0%

1,020,747(Note 2)
Total

B/A

Amount paid (B)1,020,747–(Note 1) Figures indicate fees paid to interested parties and major shareholders of asset management companies withwhom JEI had transactions during the six months ended December 2011.
(Note 2) Property management costs and fees include construction management fees that were not expensed but
capitalized in property management fees and expenses.
(Note 3) The amounts do not include consumption tax and other taxes.

(5) Transactions with asset management companies concerning the additional
businesses of the asset management companies
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not run any
additional businesses classified in the type I financial instruments business, type II financial instruments
business, building lots and buildings transaction business, or real estate specified joint enterprise and did
not have applicable transactions.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)22

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

(2) Change in depreciation calculation method
No changes were made during the period.

(3) Change in asset valuation method
No changes were made during the period.

8. Others(1) Investment trust beneficiary certificates incorporated by JEI
Not applicable during the period.

(2) Scheduled meetings
1) Unitholders’ meeting
The 4th unitholders’ meeting of JEI was held on October 20, 2011. The following table summarizes the
major matters approved by the unitholders’ meeting.
Proposal

Summary
The articles of incorporation was amended as follows: Necessary changes to reflect the amendment of the enforcement order for theSpecial Taxation Measures Law, which provides the requirements for theapplication of the special provisions for taxation on investment corporationsprescribed in the Special Taxation Measures Law, pertaining to the requirementthat the offering of investment units shall be carried out mainly in Japan.
 Changes to provide special rules concerning the period in which a resolution on
the election of substitute officers is effective.
 Necessary changes to reflect the amendment of the Special Taxation Measures
Law that changed the requirements for the reduction of registration and license

Partial amendments to the articles ofincorporation

tax imposed on the registration of the ownership change of real estate.
 Necessary changes to enable JEI to invest in quotas calculated pursuant to the
Act on Promotion of Global Warming Countermeasures and other similar items
or emission allowances, caps, etc.
 Necessary changes to reflect the change of the definition of the amount of asset
under management that is used as a basis for the calculation of the asset
management fee I, which is one of the fees paid by JEI to the asset managementcompany.
 Necessary changes to enable the asset management company to bear part ofexpenses for processing the administrative works outsourced from JEI to theasset management company.
 Other changes in the texts for the alteration and clarification of expression andchanges in the wording necessary for the rearrangement of the texts.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)
23

Chifumi Toda was elected as an executive director. The term of his office is two

Election of one executive director

years from November 1, 2011.

Election of one substitute executive
director
Election of three supervisory directors

Miki Naito was elected as a substitute executive director.
Makoto Sakagami, Tsuyoshi Nagahama, and Shunichi Maekawa were elected assupervisory directors. The term of their office is two years from November 1, 2011.

2) Board of directors meeting
Outline of major contracts to be entered into or revised which were approved by the board of directors of
JEI during the six months ended December 31, 2011 is as follows:
Approval date

Approved agenda

Description

August 12, 2011

Entering into revised agreement for
ongoing asset management agreement

Provisions on fees for the outsourcing of business from theInvestment Corporation to the Asset Management Company
were partially revised.

(3) Other
Figures less than unit indicated in each statement have been rounded down for amounts and rounded for ratio
unless otherwise indicated in this Report.

Asset Management Report for 11th Period (Semi-Annual Report for 11th Period)24

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
December 31, 2011 and June 30, 2011
with Report of Independent Auditors

Japan Excellent, Inc.
Balance Sheets
As of December 31, 2011 and June 30, 2011

AssetsCurrent assets:
Cash and cash equivalents including trust
accounts (Notes 4 and 5)
Rental receivables
Consumption taxes refundable
Other current assets
Total current assets

As of
As of
December 31,
June 30,
2011
2011(Thousands of yen)

As ofDecember 31,
2011(U.S. dollars)(Note 2)

¥ 14,708,786
453,875
227,660
118,216
15,508,537¥ 16,496,792
375,348
193,373
114,170
17,179,683$ 189,229,202
5,839,123
2,928,850
1,520,856
199,518,031

Property and equipment (Note 7):
Buildings and building improvements
Machinery and equipment
Furniture and fixtures
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
Less: accumulated depreciation
Net property and equipment

3,605,649
265
1,850
12,2333,492,109
265
833
14,50846,386,840
3,411
23,796
157,375

81,146,718
416,916
76,706
127,497,971(10,120,288)
202,638,020

72,203,216
416,916
74,837
115,651,435(8,964,177)
182,889,942

1,043,956,226
5,363,644
986,829
1,640,267,222(130,197,962)
2,606,947,381

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

1,185,045
7,380,017
15,182355,240
93,38773,787
9,102,658¥ 227,249,215

1,185,045
7,380,017
15,181
362,835
61,01568,427
9,072,520¥ 209,142,145

15,245,656
94,944,253
195,313
4,570,180
1,201,431
949,281
117,106,114$ 2,923,571,526

The accompanying notes are an integral part of these financial statements.
27

Liabilities
Current liabilities:
Accounts payable – trade
Short-term loans (Notes 5 and 8)
Long-term debt due within one year (Notes 5
and 8)
Accounts payable – other
Provision for loss on disaster
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 5 and 9)
Long-term debt (Notes 5 and 8)
Security deposits from tenants (Note 5)
Security deposits from tenants for trust accounts(Note 5)
Total long-term liabilities
Total liabilities
Net assets (Note 10):Unitholders’ equity:
Unitholders’ capital:
Units authorized: 2,000,000 units
Units issued and outstanding: 188,650 units asof December 31, 2011 and June 30, 2011
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

As of
As of
December 31,
June 30,
2011
2011(Thousands of yen)

As ofDecember 31,
2011(U.S. dollars)(Note 2)¥$583,762
9,000,000¥

583,196–

7,510,131
115,785,411

14,000,000
303,70656
271,276
24,158,800

7,000,000
342,674
16,430257,942
8,200,242

180,110,639
3,907,186
720
3,489,977
310,804,064

24,000,000
65,800,000
415,626

17,000,000
71,500,000
421,646

308,761,096
846,520,005
5,347,046

8,535,962
98,751,588
122,910,388

7,653,840
96,575,486
104,775,728

109,815,535
1,270,443,682
1,581,247,746

102,052,384

102,052,384

1,312,908,586

50,1812,236,262
2,286,443
104,338,827
104,338,827¥ 227,249,215–
2,314,033
2,314,033
104,366,417
104,366,417¥ 209,142,145

645,580
28,769,614
29,415,194
1,342,323,780
1,342,323,780$ 2,923,571,526

The accompanying notes are an integral part of these financial statements.
28

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from July 1, 2011 to December 31, 2011
and from January 1, 2011 to June 30, 2011

For the period
For the period
from July 1,
from January 1,
2011 to2011 toDecember 31,
June 30,
2011
2011(Thousands of yen)

For the period
from July 1,
2011 toDecember 31,
2011(U.S. dollars)(Note 2)

Revenues:
Rental revenues (Note 13)
Other (Note 13)
Gain on sale of real estate (Note 14)
Total revenues¥6,569,425
515,944–
7,085,369¥6,565,051
469,836
302,618
7,337,505$84,515,957
6,637,638–
91,153,595

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

3,645,610
337,980
15,94033,093
6,540
76,936
4,116,099
2,969,270

3,555,973
428,085
15,24329,0596,540
82,394
4,117,294
3,220,211

46,900,935
4,348,130
205,068
425,740
84,137989,794
52,953,804
38,199,791

1,841

1,798

23,69061,354
12,829–5,201

789,322
165,045

Other income:Interest income
Gain on adjustment for property rental businessprofitOther
Other expenses:
Interest expense
Loan arrangement fees
New unit issuance costs
Interest expense on investment corporation bonds
Amortization of investment corporation bondissuance costs
Other
Ordinary income

551,628
101,837–
136,523541,561
146,481
43,953
122,359

7,096,720
1,310,134–
1,756,380

11,1286,846
2,237,332

9,846
129
2,362,881

143,164
88,06928,783,381

Extraordinary losses:
Loss on disaster
Income before income taxes

64
2,237,268

47,9332,314,948

823
28,782,558

Income taxes (Note 12):Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

1,062
(4)
2,236,210
52¥2,236,262

987
52,313,956
77¥2,314,033

13,658(47)
28,768,947
667$28,769,614

The accompanying notes are an integral part of these financial statements.
29

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from July 1, 2011 to December 31, 2011
and from January 1, 2011 to June 30, 2011

Numberof units in
issue

Balance as of December 31, 2010
Changes during the fiscal period:
Issuance of new units
Distributions from retained
earnings
Net income
Changes in unrealized loss ondeferred hedge transactions
Total changes during the fiscal
periodBalance as of June 30, 2011

Balance as of June 30, 2011
Changes during the fiscal period:
Provision for reserve for
reduction
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31, 2011

Balance as of June 30, 2011
Changes during the fiscal period:
Provision for reserve for
reduction
Distributions from retained
earnings
Net income
Total changes during the fiscal
periodBalance as of December 31, 2011

For the period from January 1, 2011 to June 30, 2011
Net assets
Valuation and translation
Unitholders’ equity
adjustments
Unrealized loss
Total
on deferred
Total valuation
Unitholders’
Retained
unitholders’hedge
and translation
capitalearnings
equitytransactions
adjustments(Thousands of yen)

Total net assets

154,550¥ 87,083,030¥ 2,218,333¥ 89,301,363¥ (28,771)¥ (28,771)¥ 89,272,592

34,10014,969,354–

14,969,354––

14,969,354

–
–

–
–

(2,218,256)
2,313,956(2,218,256)
2,313,956

–
–

–
–

(2,218,256)
2,313,956

–

–

–

–

28,771

28,771

28,771

34,100188,650

14,969,354¥ 102,052,384

95,700¥ 2,314,033

15,065,054¥ 104,366,417

28,771–

15,093,825¥ 104,366,417¥

28,771–¥For the period from July 1, 2011 to December 31, 2011
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(Thousands of yen)

Numberof units in
issue

Unitholders’capital188,650¥ 102,052,384–

Total net assets–¥ 2,314,033¥ 2,314,033¥ 104,366,417¥ 104,366,417–

50,181(50,181)

–

–

–

–
–

–
–

–
–

(2,263,800)
2,236,210(2,263,800)
2,236,210(2,263,800)
2,236,210(2,263,800)
2,236,210–
188,650–¥ 102,052,384

50,181¥ 50,181(77,771)¥ 2,236,262(27,590)¥ 2,286,443(27,590)¥ 104,338,827(27,590)¥ 104,338,827¥

For the period from July 1, 2011 to December 31, 2011
Net assets
Unitholders’ equity
Surplus
Voluntary
reserve
Reserve foradvanceddepreciation of
Total
non-current
Retained
unitholders’assetsearnings
Total surplus
equity(U.S. dollars) (Note 2)

Numberof units in
issue

Unitholders’capital188,650$ 1,312,908,586–

Total net assets–$ 29,770,137$ 29,770,137$ 1,342,678,723$ 1,342,678,723–

645,580(645,580)

–

–

–

–
–

–
–

–
–

(29,123,890)
28,768,947(29,123,890)
28,768,947(29,123,890)
28,768,947(29,123,890)
28,768,947–
188,650–$ 1,312,908,586

645,580$ 645,580(1,000,523)$ 28,769,614(354,943)$ 29,415,194(354,943)$ 1,342,323,780(354,943)$ 1,342,323,780$

The accompanying notes are an integral part of these financial statements.
30

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from July 1, 2011 to December 31, 2011
and from January 1, 2011 to June 30, 2011

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuancecosts(Decrease) increase in provision for loss on disasterNew unit issuance costs
Interest income
Interest expense(Increase) decrease in rental receivables
Increase in consumption taxes refundable(Increase) decrease in prepaid expenses(Decrease) increase in accounts payable – trade(Decrease) increase in accounts payable – other
Decrease in unpaid consumption taxes(Decrease) increase in advances received
Decrease (increase) in long-term prepaid expenses
Decrease in property and equipment for trust accounts
due to sale
Other, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits from tenants for trust
accounts
Payments for security deposits to tenants for trust
accounts
Net cash used in investing activities
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
Issuance of new units
Proceeds from issuance of investment corporation bonds
Payments for investment corporation bond issuance
costs
Payments for new unit issuance costs
Distributions to unitholders
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

For the period
For the period
from July 1,
from January 1,
2011 to2011 toDecember 31,
June 30,
2011
2011(Thousands of yen)

For the period
from July 1,
2011 toDecember 31,
2011(U.S. dollars)(Note 2)¥$

2,237,268
1,156,168¥

2,314,948
1,080,842

28,782,558
14,874,153

11,128(16,374)–(1,841)
688,151(78,527)(34,286)(12,180)(29,064)(44,199)–(8,978)
7,595

9,846
16,43043,953(1,798)663,920
57,638(193,373)
17,72544,862
9,192(4,816)33,366(100,440)

143,164(210,652)–(23,690)8,853,100(1,010,251)(441,098)(156,692)(373,905)(568,623)–(115,505)
97,704–
4,203
3,879,064
1,841(672,394)(995)
3,207,516

3,995,580(24,333)
7,963,542
1,798(691,629)(950)
7,272,761–
54,07349,904,336
23,690(8,650,379)(12,811)41,264,836(34,787)(20,830,784)
681(6,701)(130,421)(11,394,014)
8,804(15,404)(447,534)(267,988,988)
8,766(86,216)

1,154,787

701,662

14,856,391(272,665)(19,989,469)(907,360)(11,736,733)(3,507,851)(257,165,432)

10,300,000(1,300,000)
8,300,000(7,000,000)–
7,000,000–(4,900,000)
27,500,000(27,500,000)
14,969,355–

132,509,970(16,724,559)
106,779,879(90,055,320)–
90,055,320(43,500)–(2,262,553)
14,993,947–(43,953)(2,216,574)
7,808,828(559,629)–(29,107,845)
192,897,816(1,788,006)
16,496,792¥ 14,708,786

3,344,856
13,151,936¥ 16,496,792(23,002,780)
212,231,982$ 189,229,202

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

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from July 1, 2011 to December 31, 2011
and from January 1, 2011 to June 30, 20111.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM is owned 45% by Kowa Real Estate Co., Ltd., 20% by The
Dai-ichi Life Insurance Company, Limited, 15% by Sekisui House, Ltd. and 20% by othercorporations.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of December 31, 2011, JEI
held 23 properties with 262,464 square meters of total leasable space and had leases with 124
tenants excluding residential tenants.

2.

Basis of Presentation

JEI maintains its accounting records and prepares its financial statements in accordance withaccounting principles generally accepted in Japan (“Japanese GAAP”), including provisions
set forth in the Investment Trust Law, the Corporation Law of Japan, the Financial
Instruments and Exchange Law of Japan and related regulations, which are different in certain
respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are a translation of the financial statements of JEI,
which were prepared in accordance with Japanese GAAP and presented in the securities
report of JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying
financial statements, certain reclassifications and modifications have been made for theconvenience of readers outside Japan. In addition, the notes to the financial statements include
information that might not be required under Japanese GAAP but is presented herein as
additional information. Amounts have been rounded to the nearest thousand yen in theaccompanying financial statements and in the notes thereto, whereas amounts were truncatedin the Japanese financial statements prepared in accordance with Japanese GAAP.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The
rate of ¥77.73 = U.S.$1.00, the foreign exchange rate prevailing on December 31, 2011, hasbeen used for translation. The inclusion of such amounts is not intended to imply thatJapanese yen have been or could be readily converted, realized or settled into U.S. dollars atthat or any other rate.

32

3.

Summary of Significant Accounting Policies

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

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

Amortization of trademark rights is computed using the straight-line method over a period of
10 years.
Deferred assets
Investment corporation bond issuance costs are amortized using the straight-line method over
the amortization periods.
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).
JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at thetime of acquisition of such properties including trust accounts. The capitalized amounts forthe periods from July 1, 2011 to December 31, 2011 and from January 1, 2011 to June 30,
2011 were ¥15,667 thousand ($201,560) and ¥66,033 thousand, respectively.

33

3.

Summary of Significant Accounting Policies (continued)

Provision for loss on disaster
Provision for loss on disaster is recorded at the amount estimated as of December 31, 2011
and June 30, 2011 to provide for possible repair and recovery costs arising from the Great
East Japan Earthquake.
Revenue recognition
Rental revenues are generally recognized on an accrual basis over the life of each lease.
Derivatives and hedge accounting
JEI utilizes interest-rate swap agreements as derivative financial instruments solely for the
purpose of hedging its exposure to fluctuation in interest rates. JEI has entered into certain
interest-rate swap contracts to hedge variable rates for its long-term debt obligations.
The corresponding interest-rate swap meets the criteria for the special hedge accounting
treatment under Japanese GAAP, and it is therefore not recorded at fair value.
The amounts paid or received via the swap transaction are recognized as interest adjustments.
An assessment of hedge effectiveness is omitted accordingly.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.
(Additional information)
Effective July 1, 2011, JEI adopted the Accounting Standard for Accounting Changes andError Corrections (Accounting Standards Board of Japan (hereinafter referred to as the ASBJ)
Statement No. 24, December 4, 2009) and the Guidance on Accounting Standard for
Accounting Changes and Error Corrections (ASBJ Guidance No. 24, December 4, 2009).

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 December 31,
2011 and June 30, 2011 consisted of the following:

Cash and cash deposits
Cash in trust and deposits in trust
Cash and cash equivalents including
trust accounts

As of
As of
December 31,
June 30,
2011
2011(Thousands of yen)

As ofDecember 31,
2011(U.S. dollars)¥ 2,940,334
11,768,452¥ 5,560,049
10,936,743$ 37,827,527
151,401,675¥14,708,786¥16,496,792$189,229,202
34

5.

Financial Instruments

For the periods from July 1, 2011 to December 31, 2011 and from January 1, 2011 toJune 30, 2011
Overview(1) Policy for Financial Instruments
JEI borrows from banks, issues investment corporation bonds and issues investment units
to procure funds required to grow its assets under management and to repay liabilities,
based on the financial policy set forth by JEAM and the Company’s Annual Funds
Procurement Plan. When procuring funds by means of interest-bearing debt, matters suchas seeking longer durations and maturities, securing fixed interest rates and diversifying
maturity dates are taken into consideration to achieve a more stable financial situation
and avoid the risk of future interest rate hikes. Surplus funds may be invested in deposits
and safe, liquid financial assets and investment securities, but are, in principle, placed indeposits. Derivative transactions are used solely for the purpose of hedging against therisk of fluctuations in interest rates of borrowings and the like.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest Rate Fluctuation Risks)Borrowings and investment corporation bonds are primarily used to acquire
properties or to refinance existing borrowings. Some of such debt are floating rate
instruments and thus are exposed to the risk of interest rate fluctuations. Based oninterest rate forecasts developed through constant monitoring activities, JEI hedges
against the risk of interest rate fluctuations using derivative transactions(interest-rate swaps), which swap a floating interest rate for a fixed interest rate. To
reduce credit risk, derivative transactions (interest-rate swaps) are entered into
exclusively with counterparties that are financial institutions having a high credit
rating. For hedging accounting methods, hedging instruments, hedged items,
hedging policies and methods for evaluation the effectiveness of hedging activities,
see “Derivatives and hedge accounting” under Summary of Significant Accounting
Policies.
(b) Liquidity Risk (the risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced by diversifying maturity dates and funding sources, and liquidity risk ismanaged through the constant management of liquidity on hand.
(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.

35

5.

Financial Instruments (continued)

Fair value of financial instruments
The following are carrying values and fair values as of December 31, 2011 and June 30, 2011of financial instruments and the differences between them. When fair value is difficult toascertain, it is excluded from the following table (Note 2).
As of December 31, 2011
As of June 30, 2011
Carrying value
Fair value
Difference
Carrying value
Fair value(Thousands of yen)
(1) Cash and cash
deposits(2) Cash in trust anddeposits in trust
Total assets(3) Short-term loans(4) Long-term debt due
within one year(5) Investment
corporation bonds(6) Long-term debt
Total liabilities(7) Derivativetransactions *Difference

As of December 31, 2011
Carrying value
Fair value
Difference(U.S. dollars)¥–¥ 5,560,049¥ 5,560,049

¥

–

$

37,827,527$–

11,768,452¥ 14,708,786

11,768,452¥ 14,708,786¥––

10,936,743¥ 16,496,792

10,936,743¥ 16,496,792¥––

151,401,675$ 189,229,202

151,401,675$ 189,229,202

$

–
–

¥

¥

¥

–

¥

–

¥

–

$ 115,785,411$ 115,785,411

$

–

¥

2,940,334

9,000,000¥

2,940,334

9,000,000–¥

37,827,527$

14,000,000

14,039,015

39,0157,000,000

7,000,000–

180,110,639

180,612,561

501,92224,000,000
65,800,000¥ 112,800,000

24,188,000
66,178,742¥ 113,405,757

188,000
378,742¥ 605,757

17,000,000
71,500,000¥ 95,500,000

17,187,400
71,710,990¥ 95,898,390

187,400
210,990¥ 398,390

308,761,096
846,520,005$ 1,451,177,151

311,179,725
851,392,541$ 1,458,970,238

2,418,629
4,872,536$ 7,793,087

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

$

–

$

–

$

–

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

(Note 1)
Methods for calculating the fair value of financial instruments and matters related toderivatives transactions
Assets(1) Cash and cash deposits and(2) Cash in trust and deposits in trust
Carrying value approximates fair value because of the short maturities of these
instruments.
Liabilities(3) Short-term loans,(4) Long-term debt due within one year and(6) Long-term debt
Where floating rates apply, fair value is based on book value. The fair value of suchliabilities is considered to be close to book value because floating rates reflect market
interest rates within a short period of time.
If the loan is part of long-term debt, in the case of floating-rate debt hedged by aninterest-rate swap, the fair value is calculated in a similar manner using the total principal
and interest amount, treated in combination with the interest-rate swap, given that theinterest-rate swap is subject to the special treatment of interest-rate swaps under Japanese
GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by discounting the combined value of principal and interest of theapplicable long-term debt by a reasonable rate assuming the same amount were to beborrowed anew.
36

5.

Financial Instruments (continued)(5) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(7) Derivative transactions
Please refer to Note 16, “Derivative Transactions.”(Note 2)Financial instruments for which fair value is deemed extremely difficult to determine
As of
As of
December 31, 2011
June 30, 2011
(Thousands of yen)
(1) Security deposits fromtenants *(2) Security deposits fromtenants for trust accounts *As ofDecember 31, 2011
(U.S. dollars)¥ 415,626¥ 421,646$

5,347,046¥8,535,962¥7,653,840$109,815,535* Security deposits from tenants and security deposits from tenants for trust accounts in leased properties
are not subject to fair value disclosure because such deposits have no market price. Moreover, it isdifficult to calculate the actual period of time on deposit, namely, from the time the tenant moves in until
the time the tenant vacates, and it is extremely difficult to rationally estimate cash flow.

(Note 3)
Planned redemption amounts after settlement date of financial assets

Cash and cash deposits
Cash in trust anddeposits in trust
Total

1 year or less

1 to 2 years¥ 2,940,334

¥

–

¥

–

¥

–

¥

–

¥

–

11,768,452¥14,708,786

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

1 year or less

1 to 2 years

Cash and cash deposits $ 37,827,527
Cash in trust and
151,401,675
deposits in trust$189,229,202
Total

Cash and cash deposits
Cash in trust anddeposits in trust
Total

As of December 31, 2011
2 to 3 years 3 to 4 years(Thousands of yen)

$

–

$

–
–

As of December 31, 2011
2 to 3 years 3 to 4 years(U.S. dollars)
$

–

$

–
–

$

–

$

–
–

As of June 30, 2011
2 to 3 years 3 to 4 years(Thousands of yen)

4 to 5 years

4 to 5 years
$

–

$

–
–

4 to 5 years

Over 5 years

Over 5 years
$

–

$

–
–

1 year or less

1 to 2 years

Over 5 years¥ 5,560,049

¥

–

¥

–

¥

–

¥

–

¥

–

10,936,743¥16,496,792

¥

–
–

¥

–
–

¥

–
–

¥

–
–

¥

–
–

37

5.

Financial Instruments (continued)(Note 4)
Planned redemption amounts after settlement date of borrowings, investment corporation
bonds and other interest-bearing debt

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

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

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

6.

1 year or less

1 to 2 years¥ 9,000,000¥–

As of December 31, 2011
2 to 3 years
3 to 4 years(Thousands of yen)
¥

–

¥

–

4 to 5 years¥–

Over 5 years¥–

14,000,000

–

–

–

–

–

–
–
¥ 23,000,000–
15,000,000¥ 15,000,000

12,000,000
15,500,000¥ 27,500,000

5,000,000
9,540,000¥ 14,540,000

5,000,000
16,760,000¥ 21,760,000

2,000,000
9,000,000¥ 11,000,000

1 year or less

1 to 2 years

As of December 31, 2011
2 to 3 years
3 to 4 years(U.S. dollars)

4 to 5 years

Over 5 years$ 115,785,411

–

$

–

$

$

–

–

$

–

$

180,110,639

–

–

–

–

–

–
–
$ 295,896,050–
192,975,685$ 192,975,685

154,380,548
199,408,208$ 353,788,756

64,325,228
122,732,536$ 187,057,764

64,325,228
215,618,166$ 279,943,394

25,730,091
115,785,411$ 141,515,502

1 year or less

1 to 2 years

As of June 30, 2011
2 to 3 years
3 to 4 years(Thousands of yen)

4 to 5 years

Over 5 years

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

7,000,000

–

–

–

–

–

–
–
¥ 7,000,000–
21,000,000¥ 21,000,000

12,000,000
8,000,000¥ 20,000,000

5,000,000
20,500,000¥ 25,500,000–
13,000,000¥ 13,000,000–
9,000,000¥ 9,000,000

Investment and Rental Property

For the periods from July 1, 2011 to December 31, 2011 and from January 1, 2011 toJune 30, 2011
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 ofDecember 31, 2011 and June 30, 2011, for such real estate for lease.

As ofJune 30, 2011
¥191,455,003

Carrying value
ChangeAs ofduring period (*1)
December 31, 2011
(Thousands of yen)
¥19,748,079¥211,203,082

Fair value
As ofDecember 31, 2011
¥196,794,000

38

6.

Investment and Rental Property (continued)
Carrying value
ChangeAs of(*1)
during period
December 31, 2011
(U.S. dollars)

As ofJune 30, 2011
$2,463,077,360$254,059,930

As of
December 31, 2010
¥185,054,616

Fair value
As ofDecember 31, 2011

$2,717,137,290$2,531,763,798

Carrying value
ChangeAs ofduring period (*2)
June 30, 2011
(Thousands of yen)

Fair value
As ofJune 30, 2011

¥6,400,387¥191,455,003¥176,964,000(Note 1)
Carrying value represents the acquisition cost less accumulated depreciation.
(Note 2)(*1) Changes during period comprise increases of ¥8,324,100 thousand ($107,089,939)
related to the acquisition of No.35 Kowa Building, ¥7,105,754 thousand ($91,415,861)
related to the acquisition of HAMARIKYU INTERCITY, ¥3,431,797 thousand($44,150,231) related to the acquisition of MID Kyobashi Building, ¥1,680,304
thousand ($21,617,188) related to the acquisition of Pacific Square Sengoku, and adecrease of ¥1,156,110 thousand ($14,873,420) for depreciation costs.
(*2) Changes during period comprise an increase of ¥11,115,110 thousand related to theacquisition of Daiba Garden City Building and decreases of ¥3,995,580 thousand
related to the disposition of No. 36 Kowa Building and ¥1,080,785 thousand for
depreciation costs.
(Note 3)
Fair value as of December 31, 2011 and June 30, 2011 is appraisal value provided bythird-party real estate appraisers.

7.

Property and Equipment

Property and equipment at December 31, 2011 and June 30, 2011 consisted of the following:
As of December 31, 2011
Acquisition
cost

Accumulated
depreciation

As of June 30, 2011

Net
book value

Acquisition
cost

As of December 31, 2011

Accumulated
depreciation

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

¥

3,605,649
265
1,850
12,233¥(426,972)
(36)
(312)
–

¥

3,178,677
229
1,538
12,233¥3,492,109
265
832
14,508

Accumulated
depreciation

Acquisition costNetbook value(U.S. dollars)¥(383,323)
(24)
(251)
–

¥

3,108,786
241
582
14,508$46,386,840
3,411
23,796
157,375$(5,493,012)(460)(4,017)–$40,893,828
2,951
19,779157,375

81,146,718(9,518,760)

71,627,958

72,203,216(8,425,877)

63,777,339

1,043,956,226(122,459,280)

921,496,946

416,916(146,202)

270,714416,916(132,091)

284,825

5,363,644(1,880,897)

3,482,747

76,706
127,497,971(28,006)–

48,700127,497,971

74,838
115,651,434(22,611)–52,227
115,651,434

986,829
1,640,267,222(360,296)–

626,533
1,640,267,222¥ 212,758,308¥ (10,120,288)¥ 202,638,020¥ 191,854,118¥ (8,964,177)¥ 182,889,942$2,737,145,343$ (130,197,962)$2,606,947,381

39

8.

Short-Term Loans and Long-Term Debt

Short-term loans and long-term debt as of December 31, 2011 and June 30, 2011 consisted of
the following:
As of
December 31, 2011
WeightedaverageAmountinterest rate
(Thousands ofyen)
Short-term loans:
Unsecured loans from banks¥ 9,000,000
due on January 31, 2012
Subtotal
9,000,000
Long-term debt due within
one year:
Unsecured loans from banks
due on November 29, 2011
Unsecured loans from banks
due on July 31, 2012
Unsecured loans from banks
and insurance companies
due on July 31, 2012
Subtotal–

0.68000%–

As ofJune 30, 2011
WeightedaverageAmountinterest rate
(Thousands of
yen)
¥

–
–

7,000,000–

As of
December 31,
2011

Amount(U.S. dollars)$ 115,785,411
115,785,411–

1.34000%

7,000,000

0.68643%––

90,055,320

7,000,000
14,000,000

1.96907%–7,000,000–

90,055,319
180,110,639

Long-term debt:
Unsecured loans from banks
due on July 31, 2012–
Unsecured loans from banks
and insurance companies
due on July 31, 2012–
Unsecured loans from banks
due on June 28, 2013
7,000,000
Unsecured loans from banks
due on December 27, 2013
8,000,000
Unsecured loans from aninsurance company due on
July 31, 2014
2,000,000
Unsecured loans from abank due on July 31, 2014
2,000,000
Unsecured loans from banks
due on December 29, 2014
11,500,000
Unsecured loans from aninsurance company and abank due on June 30, 2015
5,000,000
Unsecured loans from banks
due on November 30, 2015
4,540,000
Unsecured loans from banks
due on June 29, 2016
13,000,000
Unsecured loans from banks
due on November 29, 2016
3,760,000
Unsecured loans from abank due on November 30,
2017
6,000,000
Unsecured loans from aninsurance company due on
3,000,000
June 29, 2018
Subtotal
65,800,000
Total¥ 88,800,000–

7,000,000

0.69000%––

7,000,000

1.96907%–

1.03643%

7,000,000

1.04000%

90,055,320

1.08643%

8,000,000

1.09000%

102,920,366

2.25875%

2,000,000

2.25875%

25,730,091

2.28417%2,000,000

2.28417%

25,730,091

0.98643%

11,500,000

0.99103%147,948,025

2.27344%5,000,000

2.27344%

64,325,228

1.13750%–

1.36375%

13,000,000

1.24375%–

1.73875%

6,000,000

1.73875%

77,190,274

1.65125%

3,000,000
71,500,000¥ 78,500,000

1.65125%

38,595,137
846,520,005$ 1,142,416,055–
1.36375%–

58,407,307
167,245,594
48,372,572

40

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of December 31, 2011 and June30, 2011 are summarized as follows:
As of
December 31,
2011

As of
December 31, 2011
WeightedaverageAmountinterest rate
(Thousands of
yen)

As of
June 30, 2011
WeightedaverageAmountinterest rate
(Thousands ofyen)¥12,000,000

1.52000%¥12,000,000

1.52000%$154,380,548

5,000,000

1.29000%

5,000,000

1.29000%

64,325,228

5,000,000

1.01000%––

64,325,228

2,000,000¥24,000,000

1.40000%–¥17,000,000–

25,730,092$308,761,096

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

Amount(U.S. dollars)

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

11. Per Unit Information
Net assets per unit were ¥553,081 ($7,115) as of December 31, 2011 and ¥553,227 as of June30, 2011. Net income per unit was ¥11,853 ($152) for the period from July 1, 2011 to
December 31, 2011 and ¥12,677 for the period from January 1, 2011 to June 30, 2011 andwas computed based on the weighted-average number of units outstanding during therespective periods.

41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 December 31,
2011 and June 30, 2011 are summarized as follows:
As of
As of
December 31, 2011
June 30, 2011
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Total deferred tax assets
Net deferred tax assets

¥22
22
¥22

¥19
19
¥19

As of
December 31, 2011
(U.S. dollars)
$286
286
$286

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from July 1, 2011 to December 31, 2011 and from January 1, 2011 to June 30,
2011 is as follows:

Statutory tax rate
Reconciliation:
Deductible distributions paid
Other
Effective tax rate

For the period from
July 1, 2011 to
December 31, 2011

For the period fromJanuary 1, 2011 toJune 30, 201139.33%

39.33%(39.31)0.03
0.05%(38.46)(0.82)
0.05%

42

13. Breakdown of Property Rental Business Revenues and Expenses
For the period from For the period from
July 1, 2011 toJanuary 1, 2011 to
December 31, 2011
June 30, 2011
(Thousands of yen)
Rental business revenues:
Rental revenues
Other
Total rental businessrevenues
Property operating expenses:
Property management costs
and fees
Utilities
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating
expensesProfit

For the period from
July 1, 2011 to
December 31, 2011
(U.S. dollars)¥6,569,425
515,944¥6,565,051
469,836$84,515,957
6,637,638

7,085,369

7,034,887

91,153,595

1,014,099
627,237
556,563
21,81796,4591,156,111
173,324

1,033,212
552,926
561,760
21,687
92,6301,080,785
212,973

13,046,428
8,069,434
7,160,213
280,677
1,240,945
14,873,420
2,229,818

3,645,610¥3,439,759

3,555,973¥3,478,914

46,900,935$44,252,660

14. Breakdown of Gain on Sale of Real Estate
Gain on sale of real estate for the period from January 1, 2011 to June 30, 2011 is as follows:
For the period fromJanuary 1, 2011 toJune 30, 2011
(Thousands of yen)
No. 36 Kowa Building
Proceeds from sale of real estate
Cost of sale of real estate
Other related sale expenses
Gain on sale of real estate¥4,300,000
3,995,580
1,803¥ 302,617

15. Leases
JEI leases properties on which rental revenues are earned. At December 31, 2011 and June 30,
2011, future lease revenues under non-cancelable operating leases are summarized as follows:
As of
As of
December 31, 2011
June 30, 2011
(Thousands of yen)
Due within one year
Due after one year
Total

¥ 703,710
362,902¥1,066,612¥ 619,095
661,873¥1,280,968

As of
December 31, 2011
(U.S. dollars)$ 9,053,258
4,668,748$13,722,006

43

16. Derivative Transactions
Derivative Transactions as of December 31, 2011
(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 the settlement date for each hedge accounting method
applied.
Hedge
accounting
methodType ofderivativetransaction

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

Hedgeditem

SpecialInterest-rate swap
treatment ofLong-term
Receive floating,interest-rate
debt
pay fixed
swaps¥21,300,000¥21,300,000

Method ofcalculating
the fair value*

Contract amount
Fair
More thanvalue
one year(U.S. dollars)$274,025,473$274,025,473

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria,
the swap is not recorded at fair value on the accompanying balance sheets, as described in the summaryof significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, thefair value 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 June 30, 2011
(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 the settlement date for each hedge accounting method
applied.
Hedge
accounting
methodType ofderivativetransaction

Hedgeditem

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

Contract amount
Fair
More thanvalue
one year(Thousands of yen)
¥13,000,000¥13,000,000

Method ofcalculating
the fair value** Since the above interest-rate swap qualifies for hedge accounting and meets certain matching criteria,
the swap is not recorded at fair value on the accompanying balance sheets, as described in the summaryof significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, thefair value 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.”44

17. Related Party Transactions
For the period from July 1, 2011 to December 31, 2011
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

Amount(Thousands(U.S. dollars)of yen)¥337,980$4,348,130

Account

Balance at the end of period(Thousands(U.S. dollars)of yen)Accounts
payable¥214,971$2,765,608

For the period from January 1, 2011 to June 30, 2011
(1) Parent company and major corporate unitholders
Not applicable.
(2) Affiliates
Not applicable.
(3) Sister companies
Not applicable.
(4) Directors and major individual unitholders
Name

Description oftransaction

Chifumi Toda

Payment of asset
management fees to
JEAM

AmountAccount(Thousands of yen)
¥428,085

Accounts payable

Balance atthe end of period(Thousands of yen)
¥264,98445

18. Segment Information
For the period from July 1, 2011 to December 31, 2011 and from January 1, 2011 toJune 30, 2011
Since JEI has been engaged in the real-estate leasing business as a single segment, segment
information has been omitted.
Information about products and services
Since revenues from external customers for a single segment of similar products and services
accounted for more than 90% of total operating revenues, information about products andservices has been omitted.
Information about geographic area
(1) Revenues
Since 100% of the total operating revenues were generated from external customers
within Japan, geographical breakdown of revenues has been omitted.
(2) Property and equipment
Since 100% of total property and equipment on the balance sheet are located within
Japan, geographical breakdown of such property and equipment has been omitted.
Information about major clients
Since no single external client represents 10% or more of JEI’s total operating revenues,
information about major clients has been omitted.

19. Distribution Information
In accordance with Section 33.1.2 of the bylaws set forth by JEI for distributions of cash
dividends, the amount of dividends payable, which is limited by the amount of unappropriatedretained earnings, shall be in excess of 90% of its distributable income for the fiscal period as
set forth in Section 67.15 of the Special Taxation Measures Law. Consequently, JEI set
income available for distributions of dividends at ¥2,236,257,100 ($28,769,550), which is the
maximum integral multiple of the 188,650 units issued not exceeding unappropriated retained
earnings at December 31, 2011. No cash distribution exceeding the income amount set forthin Section 33.1.4 of the bylaws of JEI shall be made.
On February 14, 2012, the Board of Directors approved a resolution to make a cash
distribution of ¥11,854 ($153) per unit aggregating to ¥2,236,257,100 ($28,769,550) to
unitholders of record as of December 31, 2011.

46

20. Significant Subsequent Events
Disposition of property
The following property was sold.
1.

Type of asset sold

Trust Property

2.

Asset nameNo. 28 Kowa Building

3.

Location

2-20-1, Nishigotanda, Shinagawa-ku, Tokyo

4.

Selling price¥2,960 million ($38,081 thousand) (Note)

5.

Delivery dateFebruary 29, 2012

6.

Purchaser

KW Emerald Specific Purpose Company(Note) The selling price does not include fees related to the sale, proportional JEI share of the applicablereal estate tax and city planning tax, and consumption tax.

47