Asset Management Report for 27th Period(Semi-Annual Report for 27th Period)
From July 1, 2019 to December 31, 2019

I. Greetings
To Our Unitholders
We would like to express our sincere gratitude for your continued support of Japan Excellent, Inc. (JEI) and Japan Excellent
Asset Management Co., Ltd.
We hereby report the financial results of JEI for the 27th period (from July 1, 2019 to December 31, 2019).
During the 27th period, we transferred part of JEI Nishi-Honmachi Building and Kowa Kawasaki Nishiguchi Building as
the final phase of asset replacement which we worked on under the aim of improving portfolio quality. JEI Nishi-Honmachi
Building will be transferred entirely over the next two fiscal periods while another part of Kowa Kawasaki Nishiguchi
Building will be transferred in the next fiscal period. Meanwhile, we newly acquired BIZCORE AKASAKA-MITSUKE
of the BIZCORE series comprising medium-scale office buildings from Nippon Steel Kowa Real Estate Co., Ltd., thesponsor, in addition to Senshin Building boasting high visibility standing close to Sendai Station. Furthermore, we acquired
GRAND FRONT OSAKA, a landmark situated in front of Osaka Station/Umeda Station, in the 28th period.
Moreover, our efforts to attract new tenants with a view to increase the rent level as well as to conclude upward rent
revisions while maintaining extremely high occupancy rates in the upper 99% range have resulted in record-high rental
revenues.
Furthermore, on the financial front, JEI issued its first 20-year investment corporation bonds to extend the financing term
while also lowering the interest rate. As a result, JEI recorded operating revenue of 10,890 million yen, operating incomeof 2,912 million yen and net income of 2,242 million yen, and distribution per unit stood at 2,918 yen.

About Future Asset Management
The real estate transaction market is expected to see real estate transaction prices remain high, backed by a strong appetite
for investment by market participants and other factors. In the office building leasing market, vacancy rates and rent levels
are expected to continue to improve for the time being, supported by strong needs for floor expansion against the backdrop
of a tight employment situation.
Under such an environment, JEI intends to acquire competitive properties by means of well-balanced investments basedon size and target area while shifting its focus from asset replacement to asset size expansion for external growth. JEI willcontinue enhancing further interaction and collaboration with sponsor companies and have the asset management company
newly cultivate and refine property information sources in an effort to gain access to market information on disposition ofproperties in a prompt manner and thereby continue seizing the right business opportunities.
Furthermore, JEI will endeavor to enhance profitability of the entire portfolio by maintaining the level of occupancy rate
as well as by improving the rent level based on market trends. In terms of finance, JEI will strive to conduct stable financial
management by working to reduce financing costs while continuing to follow the basic policy of fixing interest rates ofloans, extending borrowing periods and diversifying maturity dates.
In addition, JEI remains committed to strict adherence to the Financial Instruments and Exchange Act and other laws andregulations to promote compliance, as well as to accurate and easy-to-understand disclosure of the status of our operations
to our unitholders.
We kindly ask for your continued understanding and support.

Hidehiko Ogawa
Executive Director, Japan Excellent, Inc.
President, Japan Excellent Asset Management Co., Ltd.

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

1II. Asset Management Report
1. Outline of Asset Management Operation(1) Operating Results and Financial Position of the Investment Corporation
23rd Period
24th Period
25th Period
26th Period
27th Period
July 1, 2017 January 1, 2018 July 1, 2018 January 1, 2019 July 1, 2019
to December 31,
to June 30,
to December 31,
to June 30,
to December 31,
2017
2018
2018
2019
2019

Fiscal period
Operating revenue(Rental revenues)
Operating expenses(Property operating expenses)
Operating income
Ordinary income
Net income
Total assets(Period-on-period change)
Net assets(Period-on-period change)
Unitholders’ capital
Total outstanding investment
units
Net assets per unit
Net income per unit (Note 1)
Total distribution
Distribution per unit
(Profit distribution per unit)(Distribution in excess ofearnings per unit)(Note 2)Return on assets (Note 3)(Annualized rate)
Return on equity (Note 4)(Annualized rate)
Capital ratio (Note 5)(Period-on-period change)
Payout ratio (Note 6)
Number of investment
properties
Number of tenants
Total leasable space (Note 7, 8)
Occupancy rate

(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(Millions ofyen)(%)(Millions ofyen)(%)(Millions ofyen)

11,085

10,535

10,657

10,668

10,890(10,806)(10,535)(10,657)(10,668)(10,890)

6,565

6,509

6,373

6,349

7,978

(5,931)(5,754)(5,780)(5,747)(5,906)

4,519

4,025

4,284

4,318

2,912

3,701

3,340

3,597

3,691

2,247

3,700

3,339

3,596

3,690

2,246

282,197

285,008

285,400

286,172

288,790(-5.0)

(1.0)

(0.1)

(0.3)

(0.9)

143,933

143,786

143,727

143,822

142,377(0.2)(-0.1)(-0.0)(0.1)(-1.0)

139,972

139,972

139,972

139,972

139,972(units)1,305,700

1,305,700

1,305,700

1,305,700

1,305,700(yen)

110,234

110,122

110,076

110,149

109,042(yen)(Millions of
yen)
(yen)

2,833

2,557

2,754

2,826

1,720

3,486

3,655

3,595

3,691

3,810

2,670

2,800

2,754

2,827

2,918

(yen)

(2,670)(2,800)(2,754)(2,827)(1,841)

(yen)

(－)

(－)

(－)

(－)

(1,077)

(%)

1.3

1.2

1.3

1.3

0.8

(%)

(2.5)

(2.4)

(2.5)

(2.6)

(1.6)

(%)

2.6

2.3

2.5

2.6

1.6

(%)

(5.1)

(4.7)

(5.0)

(5.2)

(3.1)

(%)

51.0

50.5

50.4

50.3

49.3

(%)

(2.7)

(-0.6)(-0.1)(-0.1)(-1.0)

(%)

94.2

109.5

100.0

100.0

107.0

(properties)

29

30

31

31

33

(tenants)
(m2)

243

202

204

204

200

356,854341,247

343,830

343,830

345,940(%)(Millions ofyen)(Millions of
yen)

99.1

99.6

99.6

99.4

99.6

1,972

1,926

1,920

1,935

1,929

1,092

867

809

1,285

1,726

Net operating income (NOI)(Note 9)Funds from operation (FFO) per
unit (Note 10)
FFO multiples (Note 11)
Debt service coverage ratio(DSCR) (Note 12)(Millions of
yen)

6,847

6,707

6,797

6,856

6,913

(yen)

4,131

4,159

4,225

4,309

4,367

(times)

16.0

17.0

17.7

18.2

20.3

(times)

10.7

11.1

11.7

12.5

9.4

Interest-bearing debt

(Millions of
yen)
(%)

122,500

126,500

126,600

126,600

129,600

43.4

44.4

44.4

44.2

44.9

184

181

184

181

184

Depreciation
Capital expenditure

Loan-to-value (Note 13)
Number of days in operation(days)

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)2

(Note 1) Net income per unit is calculated by dividing the net income by the weighted-average number of units outstanding during thesix months period.
(Note 2) Distribution in excess of earnings per unit in the 27th period is from reserve for temporary difference adjustments.
(Note 3) Return on assets = Ordinary income / [(Period beginning total assets) + (Period end total assets) / 2] × 100(Note 4) Return on equity = Net income / [(Period beginning net assets) + (Period end net assets)/ 2] × 100(Note 5) Capital ratio = Period end net assets / Period end total assets × 100(Note 6) Payout ratio = (Distribution per unit (not including distribution in excess of earnings per unit) / Net income per unit) × 100(Figures are rounded to the first decimal place.)(Note 7) For properties with joint ownership (including quasi co-ownership of trust beneficiary interest), a figure obtained bymultiplying the leasable space of the entire property by the ownership ratio is indicated as JEI’s leasable space. The same shallapply hereinafter.
(Note 8) Spaces are rounded to the nearest specified unit. The same applies hereinafter.
(Note 9) NOI = Rental revenues – Property operating expenses + Depreciation(Note 10) FFO per unit = (Net income + Depreciation – Gain on sale of real estate + Loss on sale of real estate + Impairment loss) /Total number of outstanding investment units (the figure is rounded down to the whole number).
(Note 11) FFO multiples = Period end investment unit price / Annualized FFO per unit
(Note 12)DSCR = (Net income before interest and taxes + Depreciation) / (Interest expenses + Interest expense on investment
corporation bonds)(Note 13) Loan-to-value = Period end interest-bearing debt / Period end total assets × 100

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

3

(2) Asset Management Development
Japan Excellent, Inc. (JEI) was founded on February 20, 2006 under the Law Concerning Investment Trusts andInvestment Corporations of Japan (Law No. 198 of 1951, as amended; 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, JEI has continued
investment management primarily in office buildings with the aim of maintaining sound corporate growth and stablerevenues from the medium- to long-term perspectives. On December 31, 2019, JEI settled its twenty-seventh period.
1) Business conditions and results
The world economy during the 27th period clearly indicated a declining growth rate amid concerns over theescalating U.S.-China trade friction and a hard Brexit. In light of such overseas economic slowdown, theJapanese economy saw sluggish exports and lacked robustness due to weak personal spending despite capital
investment remaining solid.
With regard to the financial environment in the U.S., amid the ongoing global trends of monetary easing, thelong-term interest rate increased modestly towards the end of the year in positive response to the progress in
the U.S.-China talks, widening the gap between the long-term and short-term interest rates. In Japan as well,there have been times in which the yield of 10-year government bonds increased to the positive range in
response to the rise in the long-term interest rate in the U.S. and Europe as the Bank of Japan maintains its
policy of monetary easing while assessing the impact of the consumption tax hike implemented in October.
In the real estate transaction market, amid the continuing favorable environment for fund procurement,
transaction yields are at a low level and real estate transaction prices remain high as market participation by
overseas investors, private funds, private REITs and general companies, etc. also continues.
In the office building leasing market, with needs for floor expansion within the same buildings, relocation for
expansion and better location, etc. continuing to be strong, vacancy rates and levels of asking rent have
improved. JEI has conducted negotiations with tenants emphasizing rent levels and has further strengthened
efforts for upward rent revisions to suit the value of properties for current contracts by ensuring to seize
opportunities for upward rent revision. As to new contracts, JEI has conducted leasing activities while setting
higher rent levels based on market trends. As a result, rent revenue for existing properties increased by 70
million yen and period-end occupancy rate (Note 1) stood at 99.6%.
The total number of properties owned and managed by JEI at the end of the current period was 33 with totalacquisition price of 279.4 billion yen and total leasable space of 345,940.29 m2 (104,646.94 tsubo).
2) Fund procurement highlights
JEI will work on stable and sound financial operations with a basic policy of procuring funds for the long term
at fixed interest rates.
In the 27th period, with regard to the 1.0 billion yen in loans that matured in October, JEI issued its first 20year bonds (1.0 billion yen, 1.07%) in September prior to the maturity, taking into consideration the market
environment. In addition, JEI took out a short-term loan (4.0 billion yen, 1 year) from a bank as funds to acquire
BIZCORE AKASAKA-MITSUKE in October. Furthermore, as for the 1.0 billion yen in loans that matured in
December, JEI extended the borrowing period from 3.0 years to 5.0 years.
As a result of the above, as of the end of the 27th period, the average remaining period of interest-bearing debt
(Note 2) was 4.2 years (shortened by 0.4 years from the end of the previous period) and the period-end averageinterest-bearing debt interest rate (Note 3) was 0.77% (the same level as at the end of the previous period) andthe loan-to-value ratio of total assets (total assets-based LTV) was 44.9% (up 0.7% from the end of the previous
period).
In addition, JEI continues to have commitment lines of 14.0 billion yen with a credit limit to reduce refinancing
risk and enhance stability for fund procurement, etc.

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

4The ratings granted to JEI by the following rating agencies are shown below:(Ratings as of December 31, 2019)
Credit rating agency
Japan Credit Rating Agency, Ltd.
(JCR)
Moody’s Japan

Issuer rating (outlook)
Long-term issuer rating
AA- (Stable)
Issuer rating
A3 (Stable)

Individual debt issue rating(Note 4)AA―3) Sustainability initiatives
JEI has worked to reduce the environmental burden and to cooperate/collaborate with stakeholders to achieve asustainable society through corporate social responsibility, while recognizing the importance of consideration
for the environment, society and governance (ESG) in the real estate investment management business.
For instance, setting a target to reduce energy consumption intensity by an average of 1% per year over the
medium to long term, JEI has worked to reduce environmental burden at properties it owns through efforts suchas adoption of LED lighting and upgrading of air-conditioning equipment for better energy-saving performance.
Furthermore, JEI has continuously promoted acquisition of DBJ Green Building certification and the number ofcertified properties stands at 11, or 60.0% of the entire portfolio (as of December 31, 2019; based on leasable
space excluding land with leasehold interest).
Such initiatives for sustainability by JEI earned high recognition including a fifth consecutive “Green Star”
rating (Note 6) in the Global Real Estate Sustainability Benchmark (GRESB) (Note 5) Real Estate Assessment
conducted in 2019, as well as “4 Star” or higher in “GRESB Rating” (Note 7), a rating of overall score according
to global ranking.
Furthermore, in light of the recent heightening of interest in ESG investment from investors, JEI improved its
website upon revamping on May 31, 2019, by adding new content concerning sustainability, etc. to showcase
its efforts on sustainability to investors.
4) Financial results and distribution highlights
As a result of the above management, JEI posted 10,890 million yen in operating revenue, 2,912 million yen in
operating income, 2,247 million yen in ordinary income and 2,246 million yen in net income for the period
under review.
Concerning distributions in the period under review, to be eligible for special provisions of the tax system on
investment corporations (Section 67-15 of the Special Taxation Measures Law), JEI determined to distribute theentirety of unappropriated retained earnings (except for the portion of less than one yen per unit) after adding tounappropriated retained earnings the 158 million yen from reversal of reserve for advanced depreciation of noncurrent assets, which allows JEI to deduct the amount of profit distribution from its taxable income. In addition,
JEI decided to distribute allowance for temporary difference adjustment (stipulated by Article 2 Paragraph 2
Item 30 of the Ordinance on Accountings of Investment Corporations) as distribution in excess of earnings
considering the impact of a major book-tax difference (stipulated by Article 2 Paragraph 2 Item 30 (a) of theOrdinance on Accountings of Investment Corporations) on distribution.
As a result, distribution per unit for the period was 2,918 yen, up 91 yen from the previous period.
(Note 1) Occupancy rate is a percentage of total leased space to total leasable space of each real estate or real estate intrust.
(Note 2) Average remaining period of interest-bearing debt is calculated by applying a weighted average of theremaining period until the repayment date or redemption date of borrowings and investment corporation bonds
at the end of the period to the balance of each interest-bearing debt, for all interest-bearing debt.
(Note 3) Period-end average interest-bearing debt interest rate is calculated by applying a weighted average of interestat the end of the current period to the balance of each interest-bearing debt, for all interest-bearing debt.
(Note 4) The rating is for 7th series unsecured investment corporation bonds, 8th series unsecured investment
corporation bonds, 9th series unsecured investment corporation bonds, 10th series unsecured investment
corporation bonds, 11th series unsecured investment corporation bonds, 12th series unsecured investment
corporation bonds, 13th series unsecured investment corporation bonds, 14th series unsecured investment
corporation bonds and 15th series unsecured investment corporation bonds.
(Note 5) GRESB is a benchmark established by European pension fund groups to measure real estate companies andmanagement institutions’ consideration to sustainability and is used in cases such as when major European andAsian institutional investors select investment targets.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)5

(Note 6) “Green Star” is given when a high evaluation with a score exceeding 50% is made in the two evaluation axes(“Management Policy” and “Implementation & Measurement).
(Note 7) “GRESB Rating” is a rating of the overall score according to the global ranking, and “5 Star” is given to the
top 20% of participants, “4 Star” to the following 20% and so forth.

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

6

(3) Capital Increase
JEI had no changes in the total number of outstanding investment units for the period under review. The outline of
the changes in the total number of outstanding investment units and unitholders’ capital until the end of the period
under review are as follows:
Unitholders’ capital
Capital transaction (units)
Remarks(Millions of yen)
Paid-up Date
Capital transaction
ChangeBalance
ChangeBalance
Private placement
February 20, 2006
400
400
200
200
(Note 1)for incorporation
June 26, 2006
Public offering
128,000
128,400
64,23064,430(Note 2)
Third-party
July 21, 2006
6,400
134,800
3,211
67,641(Note 3)
allotment
July 11, 2007
Public offering
19,000
153,800
18,702
86,344(Note 4)
Third-party
August 8, 2007
750
154,550738
87,083(Note 5)allotment
January 31, 2011
Public offering
31,000185,550
13,608100,691(Note 6)
Third-party
February 28, 2011
3,100
188,650
1,360
102,052(Note 7)
allotment
January 30, 2013
Public offering
33,000221,650
14,408116,460(Note 8)
Third-party
February 27, 2013
3,300
224,950
1,440
117,901(Note 9)allotment
Split of investment
January 1, 2014
899,800
1,124,750–
117,901(Note 10)unit
January 27, 2014
Public offering
80,0001,204,750
9,135
127,036(Note 11)
Third-party
February 26, 2014
8,000
1,212,750
913
127,950(Note 12)
allotment
July 13, 2015
Public offering(Note 13)47,0001,259,750
5,894
133,845
Third-party
August 12, 2015
(Note 14)4,700
1,264,450
589
134,434
allotment
July 11, 2016
Public offering(Note 15)
37,5001,301,950
5,034
139,469
Third-party
August 10, 2016
(Note 16)3,750
1,305,700
503
139,972
allotment(Note 1) JEI was incorporated through private placement at a price of 500,000 yen per unit.
(Note 2) New investment units were issued at an issue price of 520,000 yen per unit (purchase price of 501,800 yen per unit) througha public offering in order to fund acquisition of new properties which were acquired at the time of the listing.
(Note 3) New investment units were issued at a purchase price of 501,800 yen per unit through third-party allotment in order to partiallyfund new property acquisitions.
(Note 4) New investment units were issued at an issue price of 1,019,200 yen per unit (purchase price of 984,360 yen per unit) througha public offering in order to partially repay debts procured to acquire properties.
(Note 5) New investment units were issued at a purchase price of 984,360 yen per unit through third-party allotment in order to partially
repay debts procured to acquire properties.
(Note 6) New investment units were issued at an issue price of 454,930 yen per unit (purchase price of 438,984 yen per unit) througha public offering in order to repay short-term loans procured to acquire properties and to fund acquisition of a new property.
which was acquired.
(Note 7) New investment units were issued at a purchase price of 438,984 yen per unit through third-party allotment in order to repay
short-term loans procured to acquire new properties and to fund acquisition of a new property.
(Note 8) New investment units were issued at an issue price of 451,425 yen per unit (purchase price of 436,609 yen per unit) througha public offering in order to fund acquisition of new properties.
(Note 9) New investment units were issued at a purchase price of 436,609 yen per unit through third-party allotment in order to fundacquisition of properties.
(Note 10) With December 31, 2013 as the record date, JEI implemented a 5-for-1 split of its investment units held by Unitholders statedor recorded on that date’s final unitholder registry with January 1, 2014 as the effective date.
(Note 11) New investment units were issued at an issue price of 118,072 yen per unit (purchase price of 114,196 yen per unit) througha public offering in order to fund acquisition of new properties.
(Note 12) New investment units were issued at a purchase price of 114,196 yen per unit through third-party allotment in order to partiallyfund future acquisitions of specified assets or repayment of loans and redemption of investment corporation bonds.
(Note 13) New investment units were issued at an issue price of 129,675 yen per unit (purchase price of 125,419 yen per unit) througha public offering in order to partially repay debts procured to acquire properties.
(Note 14) New investment units were issued at a purchase price of 125,419 yen per unit through third-party allotment in order to partiallyfund future acquisitions of specified assets or partially fund repayment of loans.
(Note 15) New investment units were issued at an issue price of 138,742 yen per unit (purchase price of 134,259 yen per unit) througha public offering in order to partially repay debts procured to acquire properties.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)7

(Note 16) New investment units were issued at a purchase price of 134,259 yen per unit through third-party allotment in order to partiallyfund future acquisitions of specified assets or partially fund repayment of loans.
(Note 17) At JEI, there exist no investment units held by JEI (investment units without voting rights provided in Article 308-2 of the
Corporate Law which will be applied mutatis mutandis pursuant to Article 94 of the Investment Trust Law) or cross-heldinvestment units (investment units without voting rights provided in Article 160 of the Investment Trust Enforcement
Ordinance) as of the end of 27th period.

[Market price of the investment securities]
The period-on-period fluctuations in the highest and lowest (closing) prices of JEI’s investment units listed on theReal Estate Investment Trust Section of the Tokyo Stock Exchange during each period is as follows:
Fiscal period
23rd period
24th period
25th period
26th period
27th period(closing date) (December 2017) (June 2018) (December 2018) (June 2019) (December 2019)
Investment
unit market
Highest (yen)137,200
147,400
156,200
164,500
189,600
price
Lowest (yen)121,100
131,400
141,000
147,600
159,600(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.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)8

(4) Distributions Paid
Concerning distributions in the period under review, to be eligible for special provisions of the tax system on
investment corporations (Section 67-15 of the Special Taxation Measures Law), JEI determined to distribute theentirety of unappropriated retained earnings (except for the portion of less than one yen per unit) after adding tounappropriated retained earnings 158,039,114 yen from reversal of reserve for advanced depreciation of non-current
assets, which allows JEI to deduct the amount of profit distribution from its taxable income. Accordingly, distribution
per unit for the period was 1,841 yen.
In addition, JEI distributed the amount equivalent to impairment loss as distribution in excess of earnings in the 27th
period, and the distribution amount per unit from reserve for temporary difference adjustments was 1,077 yen.
As a result, distribution per unit for the period was 2,918 yen.
Fiscal period
Accounting period
Unappropriated retained
earnings at end of period(Thousands of yen)
Retained income(Thousands of yen)
Total cash distribution
amount (Thousands of yen)
(Cash distributions perunit) (yen)Of which, total profit
distributions (Thousands ofyen)(Profit distribution per unit)(yen)
Of which, total refund ofinvestment equity(Refund of investment
equity per unit)
Of total refund ofinvestment equity, total
distribution amount fromreserve for temporary
difference adjustments(Of refund of investment
equity per unit, distribution
amount per unit fromreserve for temporary
difference adjustments)
Of total refund ofinvestment equity, total
distribution amount from
distribution reducing
unitholders’ capital for tax
purpose(Of refund of investment
equity per unit,
distribution amount perunit from distribution
reducing unitholders’capital for tax purpose)

23rd period

24th period

25th period

26th period

27th period

July 1, 2017 to January 1, 2018 to July 1, 2018 to January 1, 2019 to July 1, 2019 to
December 31, 2017 June 30, 2018 December 31, 2018 June 30, 2019 December 31, 2019
3,700,279

3,339,461

3,596,244

3,691,310

2,246,223

214,060

－

346

97

469

3,486,219

3,655,960

3,595,897

3,691,213

3,810,032(2,670)(2,800)(2,754)(2,827)(2,918)3,486,219

3,655,960

3,595,897

3,691,213

2,403,793(2,670)(2,800)(2,754)(2,827)(1,841)

－

－

－

－

1,406,238

(－)

(－)

(－)

(－)

(1,077)

－

－

－

－

1,406,238

(－)

(－)

(－)

(－)

(1,077)

－

－

－

－

－

(－)

(－)

(－)

(－)

(－)

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

9(5) Policy and Issues on Future Investment Management
1) Outlook for investment environment
In the real estate market, although transaction yields are believed to be drawing closer to the level where room forfurther lowering is scarce, real estate transaction prices are expected to remain high backed by factors such as thefavorable fund procurement environment and vigorous appetite for investment by market participants.
In the office building leasing market, the level of asking rent is forecasted to rise moderately, centering oncompetitive buildings for the time being, as office demand is strong. Going forward, focusing on market trends
seems necessary as increase in the amount of office floor supply is expected mainly in central Tokyo.
2) Policy and issues on future investment management
A. External growth
Under such an environment, JEI intends to acquire competitive properties by means of well-balanced investments
based on size and target area while gradually shifting its focus from asset replacement to asset size expansion for
external growth. JEI will continue enhancing further interaction and collaboration with sponsor companies and havethe asset management company newly cultivate and refine property information sources in an effort to promptly
gain access to market information on disposition of properties and thereby keep seizing the right business
opportunities.
B. Internal growth
JEI will continue to make efforts to capture the needs of existing tenants in a timely manner by further strengthening
finely-tuned relationships. JEI will aim to enhance earnings of the entire portfolio and its ESG evaluation bycontinuously making additional strategic investments considering also energy saving and BCP measures in order tomaintain asset value and improve property competitiveness over the medium to long term while setting new rents
based on market trends as well as promoting upward rent revisions to realize rents that are more suitable for theproperty value, along with the aforementioned initiatives.
C. Financial strategy
JEI will consistently work on stable and sound financial operations with a basic policy of procuring funds for thelong term at fixed interest rates. In addition, JEI will consider issuance of green bonds from the perspective of
maintaining and strengthening its financial base through diversification of fund procurement means while carefully
monitoring the environment of the financial market.
JEI will set the upper limit of total assets-based LTV at 60% and manage it at around 35% to 50%. Furthermore, JEI
will conduct financial operations that emphasize stability by reducing refinancing risks through diversification of
maturity dates of interest-bearing debt.
D. Sustainability initiatives
JEI will work to reduce the environmental burden and to cooperate/collaborate with stakeholders to achieve asustainable society through corporate social responsibility.

(6) Subsequent Events
1)

Issuance of new investment units through public offering (primary offering)
The board of directors of JEI resolved the following issuance of new investment units through public offering
at its meetings held on January 6, 2020, and January 15, 2020. The payment for the offering was completed
on January 21, 2020.
<Issuance of new units through public offering>Number of units issued

43,000 units

Issue price

173,355 yen per unit

Total issue price

7,454,265,000 yen

Paid-in amount (purchase price)

167,754 yen per unit

Total paid-in amount (total purchaseprice)

7,213,422,000 yen

Payment date

January 21, 2020

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

10

2)

Issuance of new investment units through third-party allotment (greenshoe option)
The board of directors of JEI resolved the following issuance of new investment units through third-party
allotment at its meetings held on January 6, 2020, and January 15, 2020. The payment for the offering wascompleted on February 13, 2020.
As a result, unitholders’ capital is 147,907,649,350 yen, including the amount increased through the above
primary offering, and the number of investment units issued and outstanding is 1,353,000 as of February 13,
2020.
<Issuance of new units through third-party allotment>
Number of units issued

4,300 units

Paid-in amount (purchase price)

167,754 yen per unit

Total paid-in amount (total purchaseprice)

721,342,200 yen

AllotteeMizuho Securities Co., Ltd.

Payment dateFebruary 13, 2020

(Reference Material)
1. Acquisition of Asset (GRAND FRONT OSAKA (Umekita Plaza/South Building))
JEI concluded a transaction agreement for trust beneficiary interest in real estate on January 6, 2020, as
follows and acquired it on February 3, 2020.
< Overview of the Acquired Asset>
Trust beneficiary interest in real estate (quasi co-ownership
Acquired asset
interest)
Name of asset

GRAND FRONT OSAKA (Umekita Plaza/South Building)

Location

4-1 Ofuka-cho, Kita-ku, Osaka-shi, Osaka (Umekita Plaza)
4-20 Ofuka-cho, Kita-ku, Osaka-shi, Osaka (South Building)Acquisition price (Note)

4,868,050,000 yen

Date of conclusion of agreement

January 6, 2020

Acquisition dateFebruary 3, 2020

Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note) Acquisition price is the acquisition value of trust beneficiary interest, excluding acquisitionrelated expenses, JEI’s share of real estate tax and city planning tax or consumption tax.
2.

Acquisition of Asset (GRAND FRONT OSAKA (North Building))
JEI concluded a transaction agreement for trust beneficiary interest in real estate on January 6, 2020, as
follows and acquired it on February 3, 2020.
< Overview of the Acquired Asset>
Trust beneficiary interest in real estate (quasi coAcquired asset
ownership interest)
Name of asset

GRAND FRONT OSAKA (North Building)

Location

3-1 Ofuka-cho, Kita-ku, Osaka-shi, Osaka

Acquisition price (Note)

3,982,950,000 yen

Date of conclusion of agreement

January 6, 2020

Acquisition dateFebruary 3, 2020

Seller

Nippon Steel Kowa Real Estate Co., Ltd.

(Note) Acquisition price is the acquisition value of trust beneficiary interest, excluding acquisitionAsset Management Report for 27th period (Semi-Annual Report for 27th Period)

11

related expenses, JEI’s share of real estate tax and city planning tax or consumption tax.
3.

Borrowing of Funds
JEI concluded a loan agreement on January 28, 2020, as described below to allot funds to the repayment ofan existing borrowing.
<Overview of Borrowing>

LenderMizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Trust & Banking Co., Ltd.
The Norinchukin Bank

Loan amount

5,600,000,000 yen

Interest rate (Note)

Base interest rate (Japanese Bankers Association (JBA)
one-month Yen-TIBOR) + 0.49000%

Drawdown date

January 31, 2020

Principal repayment date

January 31, 2029

Principal repayment method

To be repaid in full on the principal repayment date

Collateral

Unsecured / Non-guaranteed(Note) JEI concluded an interest rate swap agreement on January 29, 2020, and fixed the interest rate at
0.71200%.
4.

5.

Borrowing of Funds
JEI concluded a loan agreement on January 28, 2020, as described below to allot funds to the repayment ofan existing borrowing.
<Overview of Borrowing>
Lender

The Dai-ichi Life Insurance Company Limited

Loan amount

1,000,000,000 yen

Interest rate

0.77000%

Drawdown date

January 31, 2020

Principal repayment date

January 31, 2029

Principal repayment method

To be repaid in full on the principal repayment date

Collateral

Unsecured / Non-guaranteed

Borrowing of Funds
JEI concluded a loan agreement on January 28, 2020, as described below to allot funds to the repayment ofan existing borrowing.
<Overview of Borrowing>
Lender

The Dai-ichi Life Insurance Company Limited

Loan amount

2,000,000,000 yen

Interest rate

0.68778%

Drawdown date

January 31, 2020

Principal repayment dateJuly 31, 2028

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

12Principal repayment method

To be repaid in full on the principal repayment date

Collateral

Unsecured / Non-guaranteed

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)13

2. Outline of the Investment Corporation(1) Investment Units
23rd
24th
25th
26th
27th
As of December 31, As of June 30, As of December 31, As of June 30, As of December 31,
2017
2018
2018
2019
2019

Fiscal period
Total number of units
authorized
Total number of units
issued and outstanding
Unitholders’ capital
Number of unitholders

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

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

10,000,000 units

1,305,700 units 1,305,700 units

1,305,700 units 1,305,700 units

1,305,700 units

139,972
million yen
7,680
individuals

139,972
million yen
6,741
individuals

139,972
million yen
6,046
individuals

139,972
million yen
7,189
individuals

139,972
million yen
6,393
individuals(2) Unitholders
Major unitholders as of December 31, 2019 are as follows:
Number ofunits held
(Units)Ratio of number ofunits held tooutstanding
investment units(%)

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

322,541

24.70

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

205,153

15.71

1-8-1 Akasaka, Minato-ku, Tokyo

71,560

5.48

Harumi Triton Square Tower Z,
1-8-12 Harumi, Chuo-ku, Tokyo

63,9774.90

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

55,747

4.27

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

20,660

1.58

STATE STREET BANK WEST
CLIENT - TREATY 505234

1776 HERITAGE DRIVE, NORTHQUINCY, MA 02171, U.S.A.

18,166

1.39

DFA INTERNATIONAL REALESTATE SECURITIESPORTFOLIO

6300 BEE CAVE ROAD, BUILDING ONE
AUSTIN TX 78746 US

15,027

1.15

JPMorgan Securities Japan Co.,Ltd.

2-7-3 Marunouchi, Chiyoda-ku, Tokyo

14,978

1.15

The Chukyo Bank, Ltd.

3-33-13 Sakae, Naka-ku, Nagoya-shi, Aichi

13,799

1.06

Total

801,608

61.39

Name

Japan Trustee Services Bank, Ltd.
(Trust Account)
The Master Trust Bank of Japan,
Ltd. (Trust Account)
Nippon Steel Kowa Real EstateCo., Ltd.
Trust & Custody Services Bank,
Ltd. (Securities Investment Trust
Account)
The Nomura Trust and Banking
Co., Ltd. (Investment Trust
Account)
The Dai-ichi Life Insurance
Company, Limited

Address

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

14

(3) Officers
1) Directors and accounting auditor
Compensation or fee forthe six months ended
December 31, 2019
(Thousands of yen)

Post

Name

Executive
Director

Hidehiko Ogawa

President, Japan Excellent Asset Management
Co., Ltd.

Supervisory
Director

Tsuyoshi Nagahama(Note 2)Advisor, Anderson, Mori & Tomotsune

Supervisory
Director

Osamu Hirakawa(Note 3)Advisor, Anderson, Mori & Tomotsune

Shunichi Maekawa

Professor, Sugiyama Jogakuen University, Schoolof Modern Management

Eiji Takagi

Eiji Takagi Certified Public Accounting Office

Supervisory
Director
Supervisory
Director
Accounting
AuditorErnst & Young
ShinNihon LLC

Major additional post

–

6,220

14,900(Note 4)–(Note 1) There are no investment units of JEI held by either the Executive Director or the Supervisory Directors. Although Supervisory
Directors may have additional posts in companies other than those listed above, there are no conflicts of interest between thosecompanies, including those listed above, and JEI.
(Note 2) Tsuyoshi Nagahama retired as Supervisory Director on October 31, 2019, upon the expiration of the term of office.
(Note 3) Osamu Hirakawa was elected as Supervisory Director at the eighth general unitholders’ meeting held on September 26, 2019,
and assumed the office on November 1, 2019.
(Note 4) The total amount of compensation or fee shown above is an estimated amount and includes the amount paid as compensation
for auditing during the 27th period (11,000 thousand yen), the fee for the English financial statements audit and the preparationof a comfort letter upon the issuance of the 15th Series Unsecured Investment Corporation Bonds in September 2019.

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

(4) Name of Asset Management Company, Asset Custodian and Administrative Agents
JEI’s asset management company, asset custodian and administrative agents as of December 31, 2019 are as follows:
Classification

Name

Asset management company

Japan Excellent Asset Management Co., Ltd.

Asset custodian

Mizuho Trust & Banking Co., Ltd.

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

Mizuho Bank, Ltd.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)15

3. Investment Portfolio of the Investment Corporation(1) Investment Portfolio by Area
26th Period(As of June 30, 2019)27th Period(As of December 31, 2019)

Total
acquisition
price (Millionsof yen)(Note 2)

Investment
ratio inportfolio (%)

Total
acquisition
price (Millionsof yen)(Note 2)

Investment
ratio inportfolio (%)

Area I

11,016

3.8

10,997

3.8

Area II

5,683

2.0

5,603

1.9

Area IV

-

-

1,628

0.6

Area I

99,06734.6

104,923

36.3

Area II

8,896

3.1

8,495

2.9

Area III

94,55533.0

92,056

31.9

Area IV

21,256

7.4

21,300

7.4

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

17,551

6.1

17,4376.0

Total

258,02890.2

262,443

90.9

Deposits in bank and other assets

28,1449.8

26,347

9.1

Total assets

286,172

100.0

288,790100.0Classification

Use

Real estate
property
Officebuilding
Trust beneficiaryinterest in realestateArea(Note 1)

(Note 1) Areas are classified as follows:
Area I: Six central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya)
Area II: Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.), Central Nagoya (Meieki, Fushimi,
Sakae, etc.) and Central Fukuoka (Tenjin, Hakata-ekimae, etc.).
*Central Osaka refers to the areas within about a 10-minute walk from JR Osaka Station, Umeda Station (Hankyu
Railway, Hanshin Electric Railway, and Osaka Metro), Yodoyabashi Station (Osaka Metro) or Honmachi Station(Osaka Metro), respectively. Central Nagoya refers to the areas within about a 10-minute walk from Nagoya
Station (JR, Nagoya City Subway, and Nagoya Railroad), Fushimi Station (Nagoya City Subway), or Sakae Station(Nagoya City Subway and Nagoya Railroad), respectively. Central Fukuoka refers to the areas within about a 10minute walk from Hakata Station (JR and Fukuoka City Subway), Tenjin Station (Fukuoka City Subway) andNishitetsu Fukuoka Station (Nishi-Nippon Railroad), respectively. They are, however, not always in line withadministrative districts.
Area III: Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba)
Area IV: Areas in Osaka, Nagoya and Fukuoka other than Area II, and other government designated cities.
The same applies hereinafter.
(Note 2) Total acquisition price is based on the amounts accounted for in the balance sheets as of the settlement date (amounts of realestate property and trust beneficiary interest in real estate are based on the book value after depreciations).

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

16

(2) Major Property
The principal properties (top ten properties in net book value) owned by JEI as of December 31, 2019 are as
follows.
Ratio of rental
Book value
Leasable space Leased space Occupancy revenue to total
Name(Millions ofMajor use
rate (%)(m ) (Note 1)(m ) (Note 2)
rental revenues(Note 3)yen)(%)
OfficeAKASAKA INTERCITY
26,824
11,021.03
11,021.03
100.0
5.6
building
Kowa Kawasaki
Office26,76936,456.87
36,456.87
100.0
9.0
Nishiguchi Buildingbuilding
Nisseki Yokohama
Office23,10640,440.72
40,440.72
100.0
10.8
Buildingbuilding
OfficeOmori Bellport D
20,76325,801.66
25,801.66
100.0
8.7
building
Other(commercial
HAMARIKYU
17,437
19,718.11
19,474.50
98.8
6.7 facilities,
INTERCITY
residence,etc.)
Musashikosugi Tower
Office12,49425,043.93
25,043.93
100.0
7.6
Place
building
OfficeMansard Daikanyama
11,2755,420.80
5,278.26
97.4
2.8
building
Kowa Nishi-Shimbashi
Office10,997
8,949.04
8,949.04
100.0(Note 4)
Buildingbuilding
Kowa Kawasaki
Office9,872
18,612.72
18,612.72
100.0(Note 4)
Higashiguchi Buildingbuilding
Daiba Garden City
Office9,654
12,122.85
12,122.85
100.0
3.1
Buildingbuilding
2

Total

169,193

203,587.73

2

203,201.58

99.8

－

－

(Note 1) Leasable space refers to space available for lease of which ownership is attributable to JEI as of December 31, 2019. For
properties with joint ownership, the value is obtained by multiplying the total leasable space of the shared property by thepercentage of the interest owned by JEI, regarding the figure as JEI’s leasable space.
(Note 2) Leased space refers to space with lease contracts or master lease agreements that guarantee a certain amount of fixed rent
payment concluded with end tenants as of December 31, 2019. For properties with joint ownership, the value is obtained bymultiplying the total leased space of the property by the percentage of the co-ownership interest owned by JEI, regarding thefigure as JEI’s leased space. For properties which are used for profit by the master lease company, leased space refers to the
portion used and the figures indicate space which can be reasonably calculated based on the lease agreement on the masterleasing. The leased space of end tenants who terminated their lease arrangement but have not yet moved out as of the end of
period is included in the leased space. This also applies to any figure which is calculated based on “leased space” in thisdocument.
(Note 3) Occupancy rate is a percentage of total leased space to total leasable space as of December 31, 2019.
(Note 4) The values of Kowa Nishi-Shimbashi Building and Kowa Kawasaki Higashiguchi Building are not disclosed as consent on
disclosure from the end tenants have not been obtained.

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

17

(3) Portfolio Ownership Breakdown
Real estate properties and their forms of ownership as of December 31, 2019 are as follows:
Property
No.

Property nameLocation (Residential address)

Ⅰ-1

Omori Bellport D

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

Ⅰ-2

Shiba 2-Chome Building

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

Ⅰ-3

JEI Hamamatsucho Building

2-2-12 Hamamatsu-cho, 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-12

HAMARIKYU INTERCITY

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

Ⅰ-13

Shintomicho Building

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

Ⅰ-14

Kowa Nishi-Shimbashi Building

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

Ⅰ-15

Mansard Daikanyama

10-1 Sarugakucho, Shibuya-ku, Tokyo

I-16

AKASAKA INTERCITY AIR

1-8-1Akasaka, Minato-ku, Tokyo

I-17

Bizcore Akasaka-mitsuke

3-1-2 Akasaka, Minato-ku, Tokyo

NHK Nagoya Housou-Center
Building

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

Ⅱ-1
Ⅱ-2

JEI Nishi-Honmachi Building

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

Ⅱ-3

Osaka Kogin Building (Land with
Leasehold Interest)

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

Ⅲ-1

Musashikosugi Tower Place

Ⅲ-2

Kowa Kawasaki Higashiguchi
Building

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

Ⅲ-3

JEI Hongo Building

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

Ⅲ-5

Kawasaki Nisshincho Building

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

Ⅲ-7

JEI RYOGOKU BUILDING

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

Ⅲ-9

Kowa Kawasaki Nishiguchi Building

66-2 Horikawa-cho, Saiwai-ku, Kawasaki-shi,
Kanagawa

Ⅲ-10

Pacific Square Sengoku

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

Ⅲ-11

Core City Tachikawa

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

Ⅲ-12

Nisseki Yokohama Building

Ⅲ-13

Yokohama Bentendori Dai-ichi
Seimei Building

Ⅳ-2

JEI Kyobashi Building

Ⅳ-3

JEI Hiroshima Hacchobori Building

Ⅳ-4

SE Sapporo Building

Ⅳ-5

Aoba-dori Plaza

3-2-1 Chuo, Aoba-ku, Sendai-shi, Miyagi

Ⅳ-6

Daiwa Minami-morimachi Building

2-6, Kita Tenjinbashi, Kita-ku 2-chome,
Osaka-shi, Osaka

Ⅳ-7

JEI Naha Building

2-8-1 Kumoji, Naha-shi, Okinawa

Hiroshima Dai-ichi Seimei OS
Building
Senshin Building

1-2-21 Matoba-cho Minami-ku,
Hiroshima-shi, Hiroshima
1-6-27 Chuo, Aoba-ku, Sendai-shi, Miyagi
Area IV
Total

IV-8
IV-9

1-1-8 Sakuragi-cho, Naka-ku, Yokohama-shi,
Kanagawa
4-59 Bentendori, Naka-ku, Yokohama-shi,
Kanagawa
Area III
2-2-48 Kata-machi, Tsushima-ku, Osaka-shi,Osaka
14-4 Hacchobori, Naka-ku, Hiroshima-shi,
Hiroshima
1-1-2 Kitananajonishi, Kita-ku, Sapporo-shi,
Hokkaido

Form of ownership
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Real estateAppraisal value
at end of period Net book value(Millions of yen) (Millions of yen)
(Note)
25,90020,763

13,500

9,061

9,000

8,145

30,00026,824

5,390

4,684

10,3009,654

25,90017,437

2,170

1,738

13,20010,997

13,50011,275

7,770

6,559

6,610

6,216

163,240

133,358

6,160

5,603

5,470

6,630

2,470

1,865

14,10014,09921,30012,494

9,950

9,872

4,700

4,991

4,710

4,203

2,620

2,209

23,90026,769

1,580

1,617

9,400

6,129

29,90023,106672

663

108,732

92,056

4,380

2,839

3,780

2,562

8,890

5,132

4,460

2,205

5,200

4,213

1,940

1,481

3,270

2,866

1,670
33,590319,6621,628
22,929262,443

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)18

(Note) Appraisal value at end of period indicates the appraisal value described in the real estate appraisal report prepared by real estateappraisers belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal Co., Ltd., Japan Valuers Co., Ltd., Daiwa Real
Estate Appraisal Co., Ltd. and The Tanizawa Sogo Appraisal Co., Ltd. as of December 31, 2019, pursuant to the articles ofincorporation of JEI and the regulations stipulated by the Investment Trusts Association, Japan. For properties with joint
ownership in the current portfolio, the value is obtained by multiplying the total value of the shared real estate by the percentageof the interest owned by JEI or the trustee.

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

19

26th Period
January 1, 2019 to June 30, 2019

Property
No.

Property name

Total numberoftenants(At endof period)

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

(Note 1)

I-1
Ⅰ-2
Ⅰ-3
Ⅰ-8
Ⅰ-9
I-10
Ⅰ-12
Ⅰ-13
Ⅰ-14
Ⅰ-15
I-16
I-17
Ⅱ-1
Ⅱ-2
Ⅱ-3

Ⅲ-1
Ⅲ-2
Ⅲ-3
Ⅲ-5
Ⅲ-7
Ⅲ-9
Ⅲ-10
Ⅲ-11
Ⅲ-12
Ⅲ-13

Omori Bellport D
Shiba 2-Chome Building
JEI Hamamatsucho
Building
AKASAKA
INTERCITY
Kowa Shirokanedai
Building
Daiba Garden City
Building
HAMARIKYUINTERCITY
Shintomicho Building
Kowa Nishi-Shimbashi
Building
Mansard Daikanyama
AKASAKA
INTERCITY AIR
Bizcore Akasaka-mitsuke
Area I
NHK Nagoya HousouCenter Building
JEI Nishi-Honmachi
Building
Osaka Kogin Building(Land with Leasehold
Interest)
Area II
Musashikosugi Tower
Place
Kowa Kawasaki
Higashiguchi Building
JEI Hongo Building
Kawasaki Nisshincho
Building
JEI Ryogoku Building
Kowa Kawasaki
Nishiguchi Building
Pacific Square Sengoku
Core City Tachikawa
Nisseki Yokohama
Building
Yokohama BentendoriDai-ichi Seimei Building
Area III

27th Period
July 1, 2019 to December 31, 2019
Ratio ofrentalrevenue tototal rental
revenues(%)

Total numberoftenants(At endof period)

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

(Note 1)

Ratio ofrentalrevenue tototal rental
revenues
(%)

1
2

100.0
100.0

923
373

8.7
3.5

1
2

100.0
99.2

948
373

8.7
3.4

1

100.0

230

2.2

1

100.0

232

2.1

14

100.0

594

5.6

14

100.0

614

5.6

1

100.0

184

1.7

1

100.0

191

1.8

1

100.0

335

3.1

1

100.0

334

3.1

1

92.6

722

6.8

1

98.8

727

6.7

11

100.0

70

0.7

11

100.0

73

0.7

5

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

10

100.0

315

3.0

10

97.4

299

2.8

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

48

98.7

-

-

1
45

88.9
99.3

48
-

0.4
-

38

99.9

385

3.6

37

100.0

387

3.6

1

98.4

217

2.0

1

100.0

243

2.2

1

100.0

89

0.8

1

100.0

89

0.8

40

99.3

-

-

39

100.0

-

-

40

100.0

810

7.6

40

100.0

822

7.6

1

100.0

(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)1100.0(Note 2)

(Note 2)

1

100.0

217

2.0

1

100.0

222

2.0

1

100.0

112

1.1

1

100.0

114

1.1

1

100.0

949

8.9

1

100.0

984

9.0

1
1

100.0
100.0

53
322

0.5
3.0

1
1

100.0
100.0

54
316

0.5
2.9

1

99.2

1,173

11.0

1

100.0

1,175

10.8

1

100.0

42

0.4

1

100.0

41

0.4

49

99.8

-

-

49

100.0

-

-

Ⅳ-2

JEI Kyobashi Building

1

100.0

177

1.7

1

96.8

182

1.7

Ⅳ-3

JEI Hiroshima
Hacchobori Building

1

98.6

153

1.4

1

96.0

156

1.4

Ⅳ-4

SE Sapporo Building

1

100.0

403

3.8

1

100.0

417

3.8

Ⅳ-5

Aoba-dori Plaza

52

99.4

196

1.8

51

99.4

195

1.8

Ⅳ-6

Daiwa Minamimorimachi Building

10

100.0

198

1.9

10

100.0

199

1.8

Ⅳ-7

JEI Naha Building

1

100.0

82

0.8

1

100.0

84

0.8

IV-8

Hiroshima Dai-ichi
Seimei OS Building

1

100.0

142

1.3

1

100.0

143

1.3

IV-9

Senshin Building

-

-

1

98.4

17

0.2

-

-

Area IV

67

99.7

-

-

67

98.9

-

-

Total

204

99.4

10,668

100.0

200

99.6

10,890100.0(Note 1) Total number of tenants indicates the total number of tenants in each property as of the end of each period. For properties forwhich master lease agreements have been concluded, the number of tenants is counted as one per property. When a tenant has
multiple tenancies in the same property, it is counted as one tenant, and when in multiple properties, it is counted as multiple
tenants. As for Osaka Kogin Building (Land with Leasehold Interest), total number of tenants is counted as one based on thelease agreement for the leased land.

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

20

(Note 2) Rental revenue (interim) and ratio of rental revenue to total rental revenues for Kowa Nishi-Shimbashi Building, Kowa
Kawasaki Higashiguchi Building and JEI Hongo Building are not disclosed as consent on disclosure of rents from the end
tenants has not been obtained; and those for AKASAKA INTERCITY AIR are not disclosed as consent on disclosure of rents
from the co-owners has not been obtained.

(4) Securities Portfolio
None(5) Renewable Power Generation Facility
None(6) Right to Operate Public FacilityNone(7) Other Assets
1) Contract amount and fair value of specified transactions and foreign exchange forwards transactions
Fair value
Contract amount (Thousands of yen) (Note 1)(Thousands of yen)Classification
Type(Note 2)
Over one year

Over-the-countertransaction

Interest rate swap
transactions
Floating interest ratereceivable
Fixed interest rate
payable46,140,000

40,540,000–(Note 1) Contract amount of swap transactions is calculated based on notional principal.
(Note 2) Fair value is omitted for presentation as over-the-counter transactions meet requirements for special accounting under the
Accounting Standard for Financial Instruments.

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

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)21

4. Capital Expenditures for Owned Properties(1) Scheduled Capital Expenditures
The following table shows major items of scheduled capital expenditures for repairs and maintenance planned for theproperties owned by JEI as of the end of the 27th period (ended December 31, 2019). The values below include
portions to be expensed for accounting purposes.

Property nameLocation

Kowa Kawasaki
Nishiguchi Building

Estimated construction costs(Millions of yen)
Payment
for the six
Total ofmonthsTotal
advanceended
payment
December 31,
2019

PurposeSchedule term

Kawasaki-shi,
Kanagawa

Renovation of airconditioning systems(Phase 3-2)

From December 2019
To June 2020

192

－

－

Kowa Kawasaki
Higashiguchi Building

Kawasaki-shi,
Kanagawa

Renovation of
restrooms (Phase 1)

From February 2020
To June 2020

115

－

－

SE Sapporo Building

Sapporo-shi,
Hokkaido

Update of automatic fire
alarm system

From April 2019
To March 2020

123

－

－

Omori Bellport D

Shinagawa-ku,
Tokyo

68

－

－

Omori Bellport D

Shinagawa-ku,
Tokyo

46

－

－

Nisseki Yokohama
Building

Yokohama-shi,
Kanagawa

33

－

－

9

－

－

Yokohama BentendoriDai-ichi Seimei
Building

Yokohama-shi,
Kanagawa

Update of heat source
From August 2019equipment of heat
To March 2020
supply facility (Phase 1)
Update of extra-highvoltage substation of
From August 2019heat source facility
To March 2020
(Phase 1)
Update of lighting incommon spaces on
From January 2020
standard floors
To June 2020
(conversion to LED)
Application ofwaterproof coating
From March 2020
material on exterior
To May 2020
walls

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

22

(2) Capital Expenditures for the Six Months Ended December 31, 2019
The following table shows constructions conducted by JEI during the period ended December 31, 2019, and expensed
as capital expenditures. Capital expenditures for the period ended December 31, 2019, were 1,726 million yen and,
when combined with repairs and maintenance costs of 311 million yen classified as expenses in the period underreview, the amount of constructions completed totaled 2,038 million yen.
Property nameLocation

PurposeScheduled term

Kowa Kawasaki
Higashiguchi Building
Kowa Kawasaki
Nishiguchi Building

Kawasaki-shi,
Kanagawa
Kawasaki-shi,
Kanagawa

Renovation of air-conditioning
systems (Phase 2)
Renovation of air-conditioning
systems (Phase 3-1)

From January 2019
To December 2019
From July 2019
To December 2019

Kowa Kawasaki
Nishiguchi Building

Kawasaki-shi,
Kanagawa

Renovation of elevators(Phase 4)

From April 2019
To October 2019

Hiroshima Dai-ichi
Seimei OS Building

Hiroshima-shi,
Hiroshima

Renovation of common use area

SE Sapporo Building
Omori Bellport D
Kowa Kawasaki
Nishiguchi Building
SE Sapporo Building
Nisseki Yokohama
Building

Amounts
Paid (Millions of yen)

615
225
136

From June 2019
To December 2019
From April 2019
To August 2019

99

Update of automatic fire alarm
Sapporo-shi, Hokkaido system
Update of automatic
From August 2019
Shinagawa-ku, Tokyo air conditioning
To October 2019
control equipment (Phase 2)
Kawasaki-shi,
Renovation of elevators
From October 2019
Kanagawa(Phase 5)
To October 2019
Renovation of multi-levelparking lot (Replacement of
From November 2019
Sapporo-shi, Hokkaido circulation drive system for No. To December 2019
1 to No. 4)
Yokohama-shi,
Kanagawa

Yokohama Bentendori
Yokohama-shi,
Dai-ichi Seimei
Kanagawa
Building

70
47
40
34

Change of vibration control
device system

From December 2019
To December 201931

Update of air-conditioner heatsourceFrom October 2019
To November 2019

16

–

408

Other constructions

1,726

Total

(3) Reserved Funds for Long-Term Repairs and Maintenance Plans
Based on the long-term repairs and maintenance plans developed for each property, JEI has set aside the following
cash reserves, derived from depreciation and other excess cash flows, in order to fund large-scale repairs, maintenanceand other construction.
(Unit: Millions of yen)Item23rd Period
24th Period
25th Period
26th Period
27th Period
July 1, 2017 to January 1, 2018 to July 1, 2018 toJanuary 1, 2019 to July 1, 2019 to
December 31, 2017 June 30, 2018 December 31, 2018 June 30, 2019 December 31, 2019

Reserved funds at
beginning of period

546

289

258

290

284

Increase

484

636

469

411

899

Decrease

742

667

437

417

884

Reserved funds at theend of period

289

258

290

284

300

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)23

5. Expenses and Liabilities(1) Expenses Associated with Asset Management(Unit: Thousands of yen)
26th Period
January 1, 2019
to June 30, 2019

Account

27th Period
July 1, 2019
to December 31, 2019(a) Asset management fees

447,411390,335(b) Custodian fees

21,27821,332(c) Administrative service fees

39,21538,715(d) Compensation for directors

6,540

6,220

(e) Accounting auditor fees

11,00011,000(f) Other

76,09676,044

601,541

543,647

Total(2) Borrowings
Borrowings by each financing source as of the end of the 27th period (ended December 31, 2019) are as follows:
Classification
LenderShort-term
Mizuho Bank, Ltd.
loans

Sub Total
Nippon Life Insurance Company
Development Bank of Japan Inc.

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
Use
Remarks(Thousands(%)(Thousands ofmethodof yen)(Note 1)yen)
November 2,
October 8,
Redemption of
2,000,000－ 0.27237
20182019
investment
Unsecured
March 8,March 8,Lump- corporation
5,000,000
5,000,000 0.27193
and nonbonds
2019
2020
sum
guaranteed
October 1,
October 1,
Acquisition of
4,000,000 0.27377
－
2019
2020
real estate
7,000,000
9,000,000
December 12,0.25000 December 12,－ (Note 2)
1,000,000
2016
2019
January 31,
1.60000
2,000,000
2,000,000 (Note 2)2012
Drawdown
date

Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Mizuho Trust & Banking Co., Ltd.
Long-termloans due MUFG Bank, Ltd.
within one The Dai-ichi Life Insurance Company
year
LimitedJune 28,
2013

Mizuho Bank, Ltd.
The Norinchukin BankMUFG Bank, Ltd.

December 27,
2013

Mizuho Trust & Banking Co., Ltd.
Mizuho Bank, Ltd.
Sub Total

September 28,
2018

500,000

500,000

1,000,000

1,000,000

600,000

600,000

500,000

500,000

1,000,000

1,000,000

675,000

675,000

1,162,500

1,162,500

675,000

675,000

487,500

487,500－

2,000,000

9,600,000

10,600,000

1.36400(Note 2)

1.31261(Note 2)January 31,
2020

Lumpsum

Repayment of Unsecured
existing
and nonborrowing guaranteed

1.00000(Note 2)0.27193

September 30,
2020

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

24Classification

LenderDrawdown
date

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
(Thousands(%)(Thousands ofmethodof yen)(Note 1)yen)

Mizuho Bank, Ltd.

September 28,
2018

2,000,000－

Development Bank of Japan Inc.

June 28, 2013

2,000,000

2,000,000

The Dai-ichi Life Insurance
Company Limited

July 31, 2014

2,000,000

2,000,000

520,000

520,000

540,000

540,000

1,080,000

1,080,000

Sumitomo Mitsui Trust Bank Limited

1,620,000

1,620,000

Mizuho Bank, Ltd.

1,950,000

1,950,000

2,000,000

2,000,000

1,200,000

1,200,000

600,000

600,000

2,000,000

2,000,000

1,000,000

1,000,000

2,000,000

2,000,000

500,000

500,000

500,000

500,000

1,950,000

1,950,000

2,000,000

2,000,000

1,200,000

1,200,000

600,000

600,000

June 30, 2015

2,000,000

2,000,000

June 29, 2018

3,000,000

3,000,000

Mizuho Bank, Ltd.

420,000

420,000

MUFG Bank, Ltd.

250,000

250,000

Sumitomo Mitsui Banking
Corporation

140,000

140,000

1,560,000

1,560,000

Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation

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

November 29,
2016

December 29,
2014

Resona Bank, Ltd.
Sompo Japan Nipponkoa Insurance
Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.

January 31,
2017

Development Bank of Japan Inc.

July 31, 2014

Sompo Japan Nipponkoa Insurance
Inc.
Tokio Marine & Nichido Fire
Insurance Co., Ltd.

November 30,
2017

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

December 29,
2014

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

Mizuho Trust & Banking Co., Ltd.
The Norinchukin Bank

November 30,
2015

1,500,000

1,500,000

Resona Bank, Ltd.

500,000

500,000

Aozora Bank, Ltd.

750,000

750,000

The Bank of Fukuoka, Ltd.

150,000

150,000

1,000,000

1,000,000

3,500,000

3,500,000

500,000

500,000

500,000

500,000

3,500,000

3,500,000

Mizuho Bank, Ltd.

870,000

870,000

MUFG Bank, Ltd.

590,000

590,000

350,000

350,000

1,560,000

1,560,000

Resona Bank, Ltd.

1,000,000

1,000,000

Aozora Bank, Ltd.

750,000

750,000

The Bank of Fukuoka, Ltd.

150,000

150,000

MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Resona Bank, Ltd.

November 30,
2017

Aozora Bank, Ltd.
Development Bank of Japan Inc.

Sumitomo Mitsui Banking
Corporation
Mizuho Trust & Banking Co., Ltd.

November 30,
2015

0.27193

September 30,
2020

1.60750(Note 2)0.98834(Note 2)June 30,2021

0.41787

November 29,
2021

0.81875(Note 2)

December 30
2021

0.35000(Note 2)January 31,
2022

1.15417(Note 2)June 30,
2022

Use

Remarks

0.35000 November 30,(Note 2)2022

0.93625(Note 2)

December 30,
2022

1.20250(Note 2)0.46000(Note 2)June 30,
2023

Lumpsum

Repayment Unsecuredof existingand nonborrowing guaranteed

0.84375 November 30,(Note 2)2023

0.64801 November 30,(Note 2)2023

0.68431(Note 2)

May 31,2024

0.96275 November 30,(Note 2)2024

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

25

Classification

LenderDrawdown
date

December 12,
2019

Balance atBalance at
Average
beginning of
Repayend of period interest rate
periodMaturity date ment
(Thousands of(%)(Thousands ofmethodyen)(Note 1)yen)－

1,000,000

Mizuho Bank, Ltd.

3,700,000

3,700,000

MUFG Bank, Ltd.

1,000,000

1,000,000

400,000

400,000

1,000,000

1,000,000

Nippon Life Insurance Company

Sumitomo Mitsui Banking
Corporation
The Norinchukin Bank

June 29, 2018

Shinkin Central Bank

1,000,000

1,000,000

The Bank of Fukuoka, Ltd.

700,000

700,000

Resona Bank, Ltd.

200,000

200,000

Mizuho Bank, Ltd.

850,000

850,000

850,000

850,000

600,000

600,000

1,450,000

1,450,000

2,200,000

2,200,000

1,750,000

1,750,000

1,100,000

1,100,000

The Norinchukin Bank

850,000

850,000

Aozora Bank, Ltd.

500,000

500,000

Mizuho Bank, Ltd.

850,000

850,000

850,000

850,000

600,000

600,000

1,450,000

1,450,000

1,300,000

1,300,000

1,300,000

1,300,000

1,000,000

1,000,000

Sumitomo Mitsui Banking
Corporation

700,000

700,000

Sub Total

78,000,000

77,000,000

Total

94,600,000

96,600,000

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

November 1,
2018

The Norinchukin Bank
Long-term
Mizuho Bank, Ltd.
loans
MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation

September 29,
2017

MUFG Bank, Ltd.
March 8, 2019
Mizuho Bank, Ltd.
The Norinchukin Bank
Development Bank of Japan Inc.

September 29,
2017

Mizuho Bank, Ltd.
MUFG Bank, Ltd.

June 29, 2018

0.42000(Note 2)

December 12,
2024

0.67400(Note 2)June 30, 2025

0.70600(Note 2)

November 1,
2025

Lumpsum

Use

Remarks

Repaymentof existing
borrowing

Unsecuredand nonguaranteed

0.83441(Note 2)
March 31,2026

0.57100(Note 2)0.83071 September 30,(Note 2)2026
0.79100(Note 2)

December 30,
2026(Note 1) Average interest rate is calculated by applying a weighted average to the loan balance during the period. Borrowings hedged
by interest rate swaps to avoid interest rate fluctuation risk are calculated by applying a weighted average rate in considerationof the effect of the interest rate swaps.
(Note 2) Loans are fixed-rate loans (including loans with fixed-rate interest using interest rate swaps).

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

26

(3) Investment Corporation Bonds
The outstanding investment corporation bonds issued by JEI as of December 31, 2019, are as follows:
Classification
Issuancedate

Unsecured investment corporation bonds

Issue

Balance at endof period(Thousands ofyen)Interest rate(%)

Maturity date

Repayment
methodUse

Remarks

7th series unsecured
investment corporation bonds

March 10, 2014

8,000,000

8,000,000

1.13000

March 11,2024

(Note 1)

8th series unsecured
investment corporation bonds

September 9,2015

5,000,000

5,000,000

1.03000

September 9,2025(Note 2)

9th series unsecured
October 27, 2016
investment corporation bonds

2,000,000

2,000,000

0.45000

October 27,
2026(Note 3)10th series unsecured
investment corporation bonds

December 20,
2016

2,000,000

2,000,000

0.39000

December 20,
2023

11th series unsecured
investment corporation bonds

April 25, 2017

7,000,000

7,000,000

0.65000 April 23, 2027

2,000,000

2,000,000

0.24000 April 20, 2023

2,000,000

2,000,000

0.95000 April 20, 2033－

1,000,000

1.07000

September 9,2039(Note 2)28,000,000

29,000,000

4,000,000

4,000,000

0.63000

August 10,2028

Lump-sum (Note 2) (Note 4)

Sub Total

4,000,000

4,000,000

Total

32,000,000

33,000,000

Lump-sum (Note 2) (Note 4)

12th series unsecured
investment corporation bonds

April 20, 2018

13th series unsecured
investment corporation bonds
15th series unsecured
investment corporation bonds

September 10,
2019

Sub Total

Green
bonds

Balance at
beginning of
period(Thousands ofyen)

14th series unsecured
investment corporation bonds(Note 1)
(Note 2)
(Note 3)(Note 4)

August 10, 2018

(Note 3)

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

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

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

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

Property nameAcquisition
date

Trust beneficiary
Bizcore Akasakainterest in real estate mitsuke
Real estate

Senshin Building

Transfer

Acquisition
priceTransfer date

Transfer
price

Net book
value

Gain (loss)
on transfer(Note 1)

(Note 1)

(Note 2)

(Note 3)October 1,
2019

6,200

－

－

－

－

November 13,
2019

1,580

－

－

－

－

－

－

December 20,
2019

450

348

101

－

－

December 20,
2019

1,260

1,481

(222)

－

7,780

－

1,710

1,830

(120)

JEI Nishi-honmachi
Trust beneficiary
Building (quasi cointerest in real estate ownership interest
5.0%)
Kowa Kawasaki
Trust beneficiary
Nishiguchi Building
interest in real estate (quasi co-ownershipinterest 5.0%)
Total(Note 1) The acquisition/transfer price indicates the amount excluding related expenses (brokerage fee, taxes, etc.) required for the acquisition/transfer, andis the purchase amount of real estate stated in the trust beneficiary interest purchase agreement.
(Note 2) Net book value at the time of transfer is indicated.
(Note 3) Gain (loss) on transfer indicates the amount obtained by deducting net book value and other transfer expenses from transfer price.

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

Name of property

Acquisition/transfer priceAppraisalvalue(millions of yen)
(Note 1)(millions of
yen)

6,200

6,570

November 13,
2019

1,580

1,670

December 20,
2019

450

December 20,
2019

1,260

Type of

Acquisition/asset

transfer date

Appraiser

Appraisal
date

Trust
Acquisition

Bizcore Akasakamitsuke

beneficiary
October 1, 2019
interest inJapan Real
July 31, 2019
Estate Institutereal estate
Acquisition Senshin Building

Transfer

Real estate

JEI Nishi-honmachi

Trust

Building (quasi coownership interest

beneficiaryinterest in

5.0%)

real estate

Kowa Kawasaki

October 1,
2019

Daiwa Real293
Estate Appraisal(Note 2)
Co., Ltd.

October 1,
2019

1,260
(Note 3)October 1,
2019

Trust

Nishiguchi Building beneficiaryTransfer(quasi co-ownership interest ininterest 5.0%)

The Tanizawa
Sogo Appraisal
Co., Ltd.

Japan Valuers
Co., Ltd.

real estate(Note 1) The acquisition/transfer price is the purchase price of the property stated in the purchase agreement (excluding the amount equivalent to
consumption taxes, etc.).
(Note 2) Appraisal value for JEI Nishi-honmachi Building indicates the amount obtained by multiplying the appraisal value for the entire property by 5.0%,
which is the quasi co-ownership trust beneficiary interest subject to transfer.
(Note 3) Appraisal value for Kowa Kawasaki Nishiguchi Building indicates the amount equivalent to the 5.0% quasi co-ownership trust beneficiary interest
subject to transfer and is based on the appraisal value for the 35.0% quasi co-ownership interest of the property.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)282) Others
None(4) Transactions with Interested Parties
1) Transactions
Acquisition price or disposal amountClassification
Acquisition priceTotal amount

Disposal amount

7,780 million yen

1,710 million yen

Nippon Steel Kowa Real Estate Co., Ltd.

6,200 million yen (79.7%)- million yen (-%)

Total

6,200 million yen (79.7%)- million yen (-%)

Breakdown for transactions with interested parties(Note)

Interested parties refers to the interested parties of the asset management company, which has concluded an asset management agreement with JEI as
prescribed in Article 123 of the Investment Trust Enforcement Order and Section 26, Paragraph 1, Item 27 of the Regulations for Management Reports
Concerning Investment Trusts and Investment Corporations of the Investment Trusts Association, Japan.

2) Amounts of fees paid and other expenses(Unit: Thousands of yen)
Breakdown of transactions with interested parties
Classification

Total amount paid (A)B/APaid to

Property management
costs and fees

Total

1,458,956

1,458,956

Amount paid (B)Nippon Steel Kowa Real EstateCo., Ltd.

572,901

39.3%

The Dai-ichi Building Co., Ltd.

188,551

12.9%

Akasaka Intercity Management
Co., Ltd.

23,975

1.6%–

785,42953.8%(Note 1) Figures indicate fees paid to interested parties of the asset management company with whom JEI had direct transactions during
the six months ended December 31, 2019.
(Note 2) The Dai-ichi Building Co., Ltd. became a subsidiary of Dai-ichi Life Holdings, Inc. on October 1, 2019, and therefore falls
under the category of interested parties of the asset management company thereafter.
(Note 3) Other than the Total amount paid indicated above, the following payments were made for maintenance and repair work, etc.
which were ordered to interested parties during the period.
Nippon Steel Kowa Real Estate Co., Ltd.
35,227 thousand yen
Kowa Real Estate Facilities Co., Ltd.
307,081 thousand yen
Nihon Sekkei Co., Ltd.
11,300 thousand yen
Nippon Steel Community Service Co., Ltd. 2,848 thousand yen
The Dai-ichi Building Co., Ltd.
13,134 thousand yen(5) Transactions with Asset Management Company Concerning the Additional Businessesof the Asset Management Company
The Asset Management Company (Japan Excellent Asset Management Co., Ltd.) does not conduct any additional
business falling under the categories of the type I financial instruments business, type II financial instruments
business, building lots and buildings transaction business, or real estate specified joint enterprise, and had no
applicable transactions.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)29

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

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

(3) Change in Asset and Infrastructure Assets, etc. Valuation Method
No changes were made during the period

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)30

8. Others(1) Notice1) General unitholders’ meeting
The eighth general unitholders’ meeting of JEI was held on September 26, 2019. The following table summarizes
the major matters approved at the unitholders’ meeting.
AgendaSummary

Election of one executive

Hidehiko Ogawa was elected as an executive director. The term of his office is two

director

years from November 1, 2019.

Election of one substituteexecutive director
Election of three supervisory
directors

Toshihiko Sasaki was elected as a substitute executive director.
Osamu Hirakawa, Shunichi Maekawa and Eiji Takagi were elected as supervisory
directors. Their term of office is two years from November 1, 2019.

2) Board of directors’ meeting
There were no applicable items during the period.

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

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

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

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)31

Financial Statements
Japan Excellent, Inc.
For the six-month periods ended
December 31, 2019 and June 30, 2019with Independent Auditor’s Report

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

32

33

Japan Excellent, Inc.
Balance Sheets
As of December 31, 2019 and June 30, 2019
As ofDecember 31, 2019

As ofJune 30, 2019

(Thousands of yen)
AssetsCurrent assets:
Cash and cash equivalents including trust accounts(Notes 4 and 5)
Rental receivables
Prepaid expenses and other current assets
Total current assets

23,884,427
380,012236,429
24,500,869

25,647,834
362,961
219,297
26,230,092

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

7,641,213
6,253
49,835
10,607,317
118,078,827
1,024,281
301,435
149,590,759
115,459(34,079,697)
253,335,685

7,312,013
6,253
49,835
9,292,709
116,973,957
942,708
265,897
146,475,849
116,057(32,515,031)
248,920,250

Intangible assets:
Leasehold rights
Brand and trademark
Leasehold rights for trust accounts
Software
Other intangible assets for trust accounts
Total intangible assets

1,721,607－
7,382,016
9,533
3,969
9,117,127

1,721,607
12
7,382,016
10,633
4,297
9,118,567

Investments and other assets:
Deferred tax assets
Security deposits
Long-term prepaid expenses
Other assets
Total investments and other assets

50
15,181820,887
845,077
1,681,196

7
15,181
902,009836,314
1,753,513

155,922
155,922288,790,801

149,873
149,873
286,172,297

Deferred assets:
Investment corporation bond issuance costs
Total deferred assets
Total assets

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)34

As of
As ofDecember 31, 2019
June 30, 2019
(Thousands of yen)
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 – otherAccrued expenses
Accrued corporation taxes
Accrued consumption taxes
Advances received
Other current liabilities
Total current liabilities
Long-term liabilities:
Investment corporation bonds (Notes 5 and 9)
Long-term debt (Notes 5 and 8)
Security deposits from tenants (Note 5)
Security deposits from tenants for trust accounts (Note 5)
Total long-term liabilities
Total liabilities
Net assets (Note 10)
Unitholders’ equity:
Unitholders’ capital
Surplus
Voluntary reserve
Reserve for advanced depreciation of non-current assets
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets

2,321,419
9,000,000

1,657,518
7,000,000

10,600,000
405,506
153,400
1,514
77,233200,3315
22,759,411

9,600,000
439,565
149,470742
221,152
85,6891,332
19,155,471

33,000,000
77,000,000
1,174,194

32,000,000
78,000,000
1,129,346

12,480,048
123,654,242
146,413,653

12,065,244
123,194,591
142,350,062

139,972,885

139,972,885

158,0392,246,223
2,404,262
142,377,147
142,377,147
288,790,801

158,039
3,691,310
3,849,350
143,822,235
143,822,235
286,172,297

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

35

Japan Excellent, Inc.
Statements of Income and Retained Earnings
For the periods from July 1, 2019 to December 31, 2019and from January 1, 2019 to June 30, 2019

For the period
from July 1, 2019
to December 31, 2019

For the period
from January 1, 2019
to June 30, 2019

(Thousands of yen)
Revenues (Note 13) :Rental business revenues
Other
Total revenues
Operating expenses (Note 13) :Property operating expenses
Loss on sales of real estate properties (Note 14)
Impairment loss (Note 15)
Asset management fees
Custodian fees
Administrative service fees
Compensation for directors
Other
Total operating expenses
Operating income
Other income:Interest income
Other
Other expenses:
Interest expense
Loan arrangement fees
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Other
Ordinary income
Income before income taxes
Income taxes (Note 12) :Current
Deferred
Net income
Retained earnings at beginning of period
Retained earnings at end of period

9,984,107
906,756
10,890,864

9,850,159
818,102
10,668,262

5,906,910
120,673
1,407,147
390,335
21,332
38,7156,220
87,044
7,978,378
2,912,485

5,747,936－－
447,411
21,27839,215
6,540
87,096
6,349,477
4,318,784

122
594

127
1,051

367,351
134,676
130,647
11,55021,3602,247,617
2,247,617

358,380
126,920
129,970
12,630315
3,691,747
3,691,747

1,533
(42)
2,246,12697
2,246,223

762
20
3,690,964
346
3,691,310

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

36

Japan Excellent, Inc.
Statements of Changes in Net Assets
For the periods from July 1, 2019 to December 31, 2019and from January 1, 2019 to June 30, 2019
For the period from July 1, 2019 to December 31, 2019
Net assets
Unitholders’ equity
SurplusNumber ofunits in issue

Unitholders’capitalVoluntary
reserve
Reserve foradvanceddepreciation of
non-current
assetsRetainedearnings

Total surplus

Totalunitholders’equityTotal net
assets(Thousands of yen)
Balance as ofJune 30, 2019
Changes during
the fiscal period:
Distributions fromretained earnings
Net income
Total changes
during the fiscal
periodBalance as ofDecember 31, 20191,305,700

139,972,885

158,039

3,691,310

3,849,350

143,822,235

143,822,235

－

－

－

(3,691,213)(3,691,213)(3,691,213)(3,691,213)

－

－

－

2,246,126

2,246,126

2,246,126

2,246,126－－－(1,445,087)(1,445,087)(1,445,087)(1,445,087)

1,305,700

139,972,885

158,0392,246,223

2,404,262

142,377,147

142,377,147

For the period from January 1, 2019 to June 30, 2019
Net assets
Unitholders’ equity
SurplusNumber ofunits in issue

Unitholders’capitalVoluntary
reserve
Reserve foradvanceddepreciation of
non-current
assetsRetainedearnings

Total surplus

Totalunitholders’equityTotal net
assets(Thousands of yen)
Balance as ofDecember 31, 2018
Changes during
the fiscal period:
Provision ofreserve for
reduction entry
Distributions fromretained earnings
Net income
Total changes
during the fiscal
periodBalance as ofJune 30, 20191,305,700

139,972,885

158,0393,596,244

3,754,283

143,727,168

143,727,168

－

－

－

(3,595,897)(3,595,897)(3,595,897)(3,595,897)

－

－

－

3,690,964

3,690,964

3,690,964

3,690,964－－－

95,066

95,066

95,066

95,0661,305,700

139,972,885

158,039

3,691,310

3,849,350

143,822,235

143,822,235

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

37

Japan Excellent, Inc.
Statements of Cash Flows
For the periods from July 1, 2019 to December 31, 2019and from January 1, 2019 to June 30, 2019
For the period
from July 1, 2019
to December 31, 2019

For the period
from January 1, 2019
to June 30, 2019

(Thousands of yen)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Impairment loss
Interest income
Interest expense
Decrease (increase) in rental receivables
Decrease (increase) in consumption taxes refundable
Decrease (increase) in prepaid expense
Increase (decrease) in accounts payable – trade
Increase (decrease) in accounts payable – other
Increase (decrease) in unpaid consumption taxes
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Decrease in property and equipment for trust accounts due to sale
Decrease in property and intangible assets for trust accounts due
to saleOther, net
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchases of property and equipment
Purchases of property and equipment for trust accounts
Purchases of intangible assets
Proceeds from security deposits from tenants
Payments for security deposits to tenants
Proceeds from security deposits in trust accounts from tenants
Payments for security deposits in trust accounts to tenants
Net cash provided by (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
Proceeds from issuance of investment corporation bonds
Payments for redemption of investment corporation bonds
Distributions to unitholders
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 4)

2,247,617
1,930,311
11,5501,407,147(122)
497,999(17,050)－
2,716
113,902(35,959)(143,919)
114,642
81,121
1,830,607

3,691,747
1,936,097
12,630－(127)
488,350
29,02928,951(17,900)(7,940)6,138
221,152
2,961(56,306)－

189－(30,931)8,009,820
122(494,068)(761)
7,515,112(8,828)6,325,955
127(492,827)(1,178)
5,832,077(1,641,801)(7,387,277)－
48,212(3,364)756,307(341,503)(8,569,427)(240,408)(755,652)(11,000)
2,440－
368,962(192,334)(827,993)

4,000,000(2,000,000)
1,000,000(1,000,000)
982,400－(3,691,491)(709,091)(1,763,406)
25,647,834
23,884,427

5,000,000－
3,750,000(3,750,000)－(5,000,000)(3,595,570)(3,595,570)
1,408,513
24,239,320
25,647,834

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

38

Japan Excellent, Inc.
Notes to Financial Statements
For the periods from July 1, 2019 to December 31, 2019and from January 1, 2019 to June 30, 20191.

Organization

Japan Excellent, Inc. (hereinafter, “JEI”), established on February 20, 2006 under the Law
Concerning Investment Trusts and Investment Corporations of Japan (the “Investment TrustLaw”), is a real estate investment corporation which primarily invests in office buildings.
JEI is externally managed by a licensed asset management company, Japan Excellent AssetManagement (“JEAM”). JEAM was originally owned 45% by NIPPON STEEL KOWA REALESTATE CO., LTD., 20% by The Dai-ichi Life Insurance Company, Limited, 15% by Sekisui
House, Co., LTD., and 20% by other corporations. Due to the transfer of ownership by Sekisui
House, Co., LTD., on May 12, 2014, ownership interests of 9% and 6% were each acquired by
NIPPON STEEL KOWA REAL ESTATE CO., LTD., and The Dai-ichi Life Insurance
Company, Limited, respectively.
JEI was listed on the Tokyo Stock Exchange on June 27, 2006. As of December 31, 2019, JEI
held 33 properties with 345,940.29 square meters of total leasable space and had leases with200 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 andExchange Law of Japan and related regulations, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards.
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 reportof JEI filed with the Kanto Local Finance Bureau. In preparing the accompanying financial
statements, certain reclassifications and modifications have been made for the convenience ofreaders outside Japan. In addition, the notes to the financial statements include information thatmight not be required under Japanese GAAP but is presented here in as additional information.
The amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements in accordance with the financial statements originally prepared in Japaneseand filed with the regulatory authorities in Japan.

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

39

3.

Summary of Significant Accounting Policies

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

2 – 60 years
6 – 16 years
3 – 15 years

Intangible assets
Depreciation is computed by the straight-line method over the estimated useful lives of therespective assets as follows:
Brand and trademark
Software10 years
5 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 andthe 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).

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

40

3.

Summary of Significant Accounting Policies (continued)

JEI capitalizes the property-related taxes allocated to the sellers of properties to JEI at the timeof acquisition of such properties including trust accounts. The capitalized amount for the period
from January 1, 2019 to June 30, 2019 was ¥687 thousand. The capitalized amount for theperiod from July 1, 2019 to December 31, 2019 was ¥6,668 thousand.
Revenue recognition
Rental revenues are generally recognized on an accrual basis over the life of each lease.
Derivatives and hedge accounting
JEI utilizes interest-rate swap agreements as derivative financial instruments solely for the
purpose of hedging its exposure against fluctuation risk in interest rates. JEI has therefore
entered into certain interest-rate swap contracts in order to hedge the risk of variable rates for
its long-term debt obligations.
Each corresponding interest-rate swap is not required to be re-measured to fair value, because
it meets the criteria for the special hedge accounting treatment under Japanese GAAP, which
JEI applies to each interest-rate swap agreement.
Under this special hedge accounting treatment, the differentials paid or received under the swap
agreements are recognized and included in interest expense of the hedged loans, and theinterest-rate swaps are not required to be measured at fair value separately. For interest-rate
swaps that meet the specific criteria for the special accounting treatment, assessments of hedge
effectiveness are not performed.
Properties in trust accounts
All assets and liabilities held in trust, for which real estate in possession of JEI was entrusted,
and all earnings and expenses resulting from such trust, are properly reflected in theaccompanying balance sheets and statements of income and retained earnings, respectively.

4.

Cash and Cash Equivalents

Cash and cash equivalents including trust accounts in the accompanying balance sheets andcash and cash equivalents in the accompanying statements of cash flows at December 31, 2019
and June 30, 2019 consisted of the following:

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

As of
As of
December 31, 2019
June 30, 2019
(Thousands of yen)
7,165,726
9,553,228
16,718,701
16,094,605
23,884,427
25,647,834

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

41

5.

Financial Instruments

For the periods from July 1, 2019 to December 31, 2019 and from January 1, 2019 toJune 30, 2019
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 JEI’s Annual Funding Procurement
Plan. When procuring funds by means of interest-bearing debt, matters such as seeking
longer durations and maturities, securing fixed interest rates over the entire term of the
instrument in order to benefit from the recent favorable financial environment with low
interest rates, and diversifying maturity dates are taken into consideration to achieve a morestable financial situation and avoid the risk of future interest rate hikes. Surplus funds may
be invested in deposits and safe, liquid financial assets and investment securities, but are,in principle, placed in fixed-rate term deposits. Derivative transactions are used solely forthe purpose of hedging against the risk of fluctuations in interest rates of borrowings andinvestment corporation bonds.
(2) Types of Financial Instruments, Related Risks and Risk Management System(a) Market Risks (Interest rate fluctuation risk)
Borrowings and investment corporation bonds are primarily used to acquire properties
or to refinance existing borrowings or bonds. Some of such debt were floating rate
instruments and thus were exposed to the risk of interest rate fluctuations. Based oninterest rate forecasts developed through constant financial market monitoring
activities, JEI has concentrated on hedging against the risk of interest rate fluctuations
principally using interest-rate swaps, through which a floating interest rate is swapped
for a fixed interest rate, which finally led to 88.6% of existing borrowings being
covered by a fixed interest rate swap for the entire maturity as of December 31, 2019.
To reduce credit risk, derivative transactions (interest-rate swaps) are entered into
exclusively with counterparties that are financial institutions with high credit ratings.
For hedging accounting methods, hedging instruments, hedged items, hedging
policies and methods for evaluation of the effectiveness of hedging activities, see“Derivatives and hedge accounting” under Summary of Significant Accounting
Policies.
(b) Liquidity Risk (Risk of being unable to procure funds required for repayments)
Borrowings and investment corporation bonds are exposed to liquidity risk. This risk
is reduced through diversification of maturity dates and funding sources, andarrangement of commitment line agreements (as described in Note 8, “Short-Term
Loans and Long-Term Debt,” there is no balance outstanding under the facility
agreements as of December 31, 2019). Liquidity risk is also mitigated through theconstant management of liquidity on hand.

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

42

5.

Financial Instruments (continued)(3) Supplementary Explanation of the Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.
Fair value of financial instruments
The following are carrying values and fair values as of December 31, 2019 and June 30, 2019of financial instruments and the differences between them. When fair value is extremely
difficult to ascertain, it is excluded from the following table (Note B).

(1) Cash and cash deposits(2) Cash and deposits in trust
Total assets(3) Short-term loans (Note C)(4) Investment corporation bonds
due within one year (Note C)(5) Long-term debt
due within one year (Note C)(6) Investment corporation bonds(Note C)
(7) Long-term debt (Note C)
Total liabilities(8) Derivative transactions *As of December 31, 2019
As of June 30, 2019
Carrying
Fair value
Carrying
Fair value
Difference
Difference
value(Note A)
value
(Note A)
(Thousands of yen)
7,165,726
7,165,726
9,553,228
9,553,228－－
16,718,701
16,718,701
16,094,605
16,094,605－－
23,884,427
23,884,427－
25,647,834
25,647,834－
9,000,000
9,000,000－
7,000,000
7,000,000
－
－

－

－

－

－

－

10,600,000

10,637,781

37,7819,600,000

9,685,985

85,98533,000,000
77,000,000
129,600,000

33,281,107
78,227,367
131,146,256

281,107
1,227,367
1,546,256

32,000,000
78,000,000
126,600,000

32,733,763
79,777,491
129,197,240

733,763
1,777,491
2,597,240

－

－

－

－

－

－

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

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

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

43

5.

Financial Instruments (continued)

Liabilities(3) Short-term loans
Carrying value approximates fair value because of the short maturities of these instruments.
(5) Long-term debt due within one year and(7) Long-term debt
Where floating rates apply, book value is generally considered appropriate as fair value.
The fair value of such liabilities is considered to approximate book value, since floating
rates reflect market interest rates within a short period of time.
If the loan is part of long-term debt, in the case of floating-rate debt hedged by an interestrate swap, the fair value is calculated in a similar manner using the total principal andinterest amount, treated in combination with the interest-rate swap, given that the interestrate swap is subject to the special treatment of interest-rate swaps under Japanese GAAP.
The fair value of long-term fixed-rate debt and long-term fixed-rate debt due within one
year are calculated by applying a reasonably assumed interest rate as a discount rate, which
was determined to be applicable for the borrowings under similar conditions.
(4) Investment corporation bonds due within one year and(6) Investment corporation bonds
The fair value of investment corporation bonds issued by JEI is based on quoted market
prices.
(8) Derivative transactions
Please refer to Note 17, “Derivative Transactions.”(Note B)・Financial instruments for which fair value is deemed extremely difficult to determine
The fair values of security deposits from tenants and security deposits from tenants for trust
accounts are as follows:① Security deposits from tenants*② Security deposits from tenants for trust accounts*

As of
As of
December 31, 2019
June 30, 2019
(Thousands of yen)
1,174,194
1,129,346
12,480,048
12,065,244* Security deposits from tenants and security deposits for trust accounts from tenants in leased properties are
not subject to fair value disclosure, since such deposits have no market price. Furthermore, due to theircharacteristics, it is extremely difficult to estimate the fair value of security deposits in advance because of
the uncertainty of the timing when the tenant vacates. As a result, it is therefore impossible to rationallyestimate the exact cash flow from such security deposits.

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

44

5.

Financial Instruments (continued)

・The scheduled redemption amounts of financial assets after the balance sheet dateCash and cash deposits
Cash and deposits in trust
Total

Cash and cash deposits
Cash and deposits in trust
Total

1 year or less

1 to 2 years

7,165,726
16,718,701
23,884,427－－－

1 year or less

1 to 2 years

9,553,228
16,094,605
25,647,834－－－

As of December 31, 2019
2 to 3 years
3 to 4 years(Thousands of yen)
－
－
－
－
－
－
As of June 30, 2019
2 to 3 years
3 to 4 years(Thousands of yen)
－
－
－
－
－
－

4 to 5 years

Over 5 years

－
－
－

－
－
－

4 to 5 years

Over 5 years

－
－
－

－
－
－

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

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

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

As of December 31, 2019
2 to 3 years
3 to 4 years(Thousands of yen)－－

1 year or less

1 to 2 years

9,000,000

－

－

－

－

10,600,000－－
19,600,000－－
13,510,000
13,510,000－－
11,750,000
11,750,000

1 year or less

1 to 2 years

7,000,000

－

－

－

－

9,600,000－－
16,600,000－－
6,000,000
6,000,000－－
14,510,000
14,510,000

4 to 5 years

Over 5 years

－

－

－

－

－

－
4,000,000
15,770,000
19,770,000－
8,000,000
9,770,000
17,770,000－
21,000,000
26,200,000
47,200,000

4 to 5 years

Over 5 years

－

－

－

－

－

－
2,000,000
11,750,000
13,750,000－
10,000,000
14,270,000
24,270,000－
20,000,000
31,470,000
51,470,000

As of June 30, 2019
2 to 3 years
3 to 4 years(Thousands of yen)－－

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

45

6.

Investment and Rental Property

For the periods from July 1, 2019 to December 31, 2019 and from January 1, 2019 toJune 30, 2019
JEI owns rental office buildings and other properties in Tokyo and other regions for the purposeof generating rental income. The following is the carrying value and fair value as of December
31, 2019 and June 30, 2019 for such real estate for lease.
Carrying value
As of
Change during period
As ofJuly 1, 2019(*1)
December 31, 2019
(Thousands of yen)
258,028,172
4,415,107
262,443,280
Carrying value
As of
Change during period
As ofJanuary 1, 2019(*2)
June 30, 2019
(Thousands of yen)
258,689,768(661,596)
258,028,172

Fair value
As ofDecember 31, 2019
322,764,988

Fair value
As ofJune 30, 2019
310,488,000

A) Carrying value represents the acquisition cost less accumulated depreciation.
B) Details of change during period:(*1)The increase of ¥4,415,107 thousand during the period is mainly due to an increase of¥6,233,065 thousand related to the acquisition of BIZCORE Akasakamitsuke, anincrease of ¥1,631,012 thousand related to the acquisition of Senshin Building, and adecrease of ¥1,481,825 thousand related to the part disposal of Kowa Kawasaki
Nishiguchi Building, a decrease of ¥348,972 thousand related to the part disposal of JEI
Nishi-Honmachi Building, a decrease of ¥1,407,147 thousand related to the impairmentof Kowa Kawasaki Nishiguchi, and a decrease of ¥1,929,198 thousand for depreciation
costs.
(*2) A decrease of ¥661,596 thousand during period is mainly due to depreciation costs of¥1,935,705 thousand.
C) Fair value
Fair value as of December 31, 2019 and June 30, 2019 is appraisal value provided by thirdparty real estate appraisers.

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

46

7.

Property and Equipment

Property and equipment at December 31, 2019 and June 30, 2019 consisted of the following:
As of December 31, 2019

Buildings and building
improvements
Machinery and equipment
Furniture and fixtures
Land
Buildings and building
improvements for trust
accounts
Machinery and equipment
for trust accounts
Furniture and fixtures
for trust accounts
Land for trust accounts
Construction in progress
for trust accounts
Total

As of June 30, 2019

Acquisition
cost

Accumulated
depreciation

7,641,213
6,253
49,835
10,607,317(1,774,682)(3,662)(18,274)－

5,866,531
2,591
31,56010,607,317

118,078,827(31,611,230)

1,024,281

Net
Acquisition
book value
cost(Thousands of yen)

Accumulated
depreciation

Netbook value

7,312,013
6,253
49,835
9,292,709(1,663,787)(3,380)(14,862)－5,648,225
2,872
34,973
9,292,709

86,467,596

116,973,957(30,201,675)

86,772,281(511,390)

512,890942,708(480,429)

462,278

301,435
149,590,759(160,456)－

140,978
149,590,759

265,897
146,475,849(150,895)－

115,002
146,475,849

115,459
287,415,383－(34,079,697)

115,459
253,335,685

116,057
281,435,282－(32,515,031)

116,057
248,920,250

8. Short-Term Loans and Long-Term Debt
Short-term loans and long-term debt as of December 31, 2019 and June 30, 2019 consisted of
the following:
As of December 31, 2019
Weighted-averageAmountinterest rate (*1)
Short-term loans:(Thousands of yen)

As of June 30, 2019
Weighted-averageAmountinterest rate (*1)
(Thousands of yen)Unsecured loans from a bank due on October 8, 2019－0.27237%2,000,000

0.26224%

Unsecured loans from a bank due on March 8, 2020

5,000,000

0.27193%5,000,000

0.26123%

Unsecured loans from a bank due on October 1, 2020

4,000,000

0.27377%－

Subtotal

9,000,000

7,000,000

Long-term debt due within one year:
Unsecured loans from an insurance company due on
December 12, 2019－0.25000% (*2)

1,000,000

0.25000% (*2)

Unsecured loans from a bank due on January 31, 2020

2,000,000

1.60000% (*2)

2,000,000

1.60000% (*2)

Unsecured loans from banks due on January 31, 2020
Unsecured loans from an insurance company due on
January 31, 2020

2,600,000

1.36400% (*2)

2,600,000

1.36400% (*2)

1,000,000

1.31261% (*2)

1,000,000

1.31261% (*2)

Unsecured loans from banks due on January 31, 2020

3,000,000

1.00000% (*2)

3,000,000

1.00000% (*2)

Unsecured loans from a bank due on September 30, 2020

2,000,000

0.27193%

Subtotal

10,600,000－
9,600,000

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

47

8.

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

Long-term debt:－

Unsecured loans from a bank due on September 30, 2020

0.27193%2,000,000

0.26121%

Unsecured loans from a bank due on June 30, 2021
Unsecured loans from an insurance company due on
June 30, 2021

2,000,000

1.60750% (*2)

2,000,000

1.60750% (*2)

2,000,000

0.98834% (*2)

2,000,000

0.98834% (*2)

Unsecured loans from banks due on November 29, 2021

3,760,000

0.41787%

3,760,000

0.41909%

Unsecured loans from banks due on December 30, 2021
Unsecured loans from insurance companies due on
January 31, 2022

5,750,000

0.81875% (*2)

5,750,000

0.81875% (*2)

3,000,000

0.35000% (*2)

3,000,000

0.35000% (*2)

Unsecured loans from a bank due on June 30, 2022
Unsecured loans from insurance companies due on
November 30, 2022

2,000,000

1.15417% (*2)

2,000,000

1.15417% (*2)

1,000,000

0.35000% (*2)

1,000,000

0.35000% (*2)

Unsecured loans from banks due on December 30, 2022

5,750,000

0.93625% (*2)

5,750,000

0.93625% (*2)

Unsecured loans from a bank due on June 30, 2023
Unsecured loans from an insurance company due on
June 30, 2023

2,000,000

1.20250% (*2)

2,000,000

1.20250% (*2)

3,000,000

0.46000% (*2)

3,000,000

0.46000% (*2)

Unsecured loans from banks due on November 30, 2023

5,270,000

0.84375% (*2)

5,270,000

0.84375% (*2)

Unsecured loans from banks due on November 30, 2023

5,500,000

0.64801% (*2)

5,500,000

0.64801% (*2)

Unsecured loans from a bank due on May 31, 2024

3,500,000

0.68431% (*2)

3,500,000

0.68431% (*2)

Unsecured loans from banks due on November 30, 2024

5,270,000

0.96275% (*2)

5,270,000

0.96275% (*2)

Unsecured loans from banks due on December 12, 2024

1,000,000

0.42000% (*2)－

Unsecured loans from banks due on June 30, 2025

8,000,000

0.67400% (*2)

8,000,000

0.67400% (*2)

Unsecured loans from banks due on November 1, 2025

3,750,000

0.70600% (*2)

3,750,000

0.70600% (*2)

Unsecured loans from banks due on March 31, 2026

6,400,000

0.83441% (*2)

6,400,000

0.83441% (*2)

Unsecured loans from banks due on March 31, 2026

3,750,000

0.57100% (*2)

3,750,000

0.57100% (*2)

Unsecured loans from a bank due on September 30, 2026

1,300,000

0.83071% (*2)

1,300,000

0.83071% (*2)

Unsecured loans from banks due on December 30, 2026

3,000,000

0.79100% (*2)

3,000,000

0.79100% (*2)

Subtotal
Total

77,000,000

78,000,000

96,600,000

94,600,000(*1)The weighted-average interest rate is weighted-average figures during the period. As for the borrowings hedged by interestrate swaps for the purpose of mitigating interest rate fluctuation risk, the fixed interest rates after entering into the interest rate
swap transactions are used to calculate the weighted-average interest rate.
(*2) These are fixed-rate debt (incl. fixed-rate debt through each interest-rate swap agreement).

The scheduled repayment amounts of long-term debt as of December 31, 2019 are as follows:
Long-term debt

1 year or less

1 to 2 years

10,600,000

13,510,000

2 to 3 years
3 to 4 years(Thousands of yen)
11,750,000
15,770,000

4 to 5 years

Over 5 years

9,770,000

26,200,000

JEI has commitment lines of ¥14,000,000 thousand with three financial institutions to mitigate
refinancing risk and enhance financial stability. As of December 31, 2019, these commitment
lines have never been utilized.
Asset Management Report for 27th period (Semi-Annual Report for 27th Period)

48

9.

Investment Corporation Bonds

Details of total investment corporation bonds outstanding as of December 31, 2019 and June30, 2019 are summarized as follows:
As of December 31, 2019
Weighted-averageinterest rate
Amount(Thousands of yen)Unsecured bond #7
due on March 11, 2024
Unsecured bond #8
due on September 9, 2025
Unsecured bond #9
due on October 27, 2026
Unsecured bond #10
due on December 20, 2023
Unsecured bond #11
due on April 23, 2027
Unsecured bond #12
due on April 20, 2023
Unsecured bond #13
due on April 20, 2033
Unsecured bond #14
due on August 10, 2028
Unsecured bond #15
due on September 9, 2039
Total

As of June 30, 2019
Weighted-averageinterest rate
Amount(Thousands of yen)

8,000,000

1.13000%

8,000,000

1.13000%

5,000,000

1.03000%

5,000,000

1.03000%

2,000,000

0.45000%

2,000,000

0.45000%

2,000,000

0.39000%

2,000,000

0.39000%

7,000,000

0.65000%

7,000,000

0.65000%

2,000,000

0.24000%

2,000,000

0.24000%

2,000,000

0.95000%

2,000,000

0.95000%

4,000,000

0.63000%

4,000,000

0.63000%

1,000,000

1.07000%－

33,000,000

32,000,000

The scheduled redemption amounts of investment corporation bonds as of December 31, 2019are as follows:
1 year or less

1 to 2 years－－

Investment corporation bonds

10.

2 to 3 years
3 to 4 years(Thousands of yen)－
4,000,000

4 to 5 years

Over 5 years

8,000,000

21,000,000

Net Assets

In accordance with the Investment Trust Law, JEI issues only non-par value investment units
and maintains net assets of at least ¥50,000 thousand.

11.

Per Unit Information

Net assets per unit as of December 31, 2019 and June 30, 2019 were calculated based on thenumber of units outstanding as of each date, (1,305,700 units) and (1,305,700 units),
respectively.
Net income per unit for the periods from July 1, 2019 to December 31, 2019 and January 1,
2019 to June 30, 2019 was calculated based on the weighted-average number of units
outstanding during the corresponding periods, (1,305,700 units) and (1,305,700 units),
respectively.
Accordingly, net assets per unit were ¥109,042 as of December 31, 2019 and ¥110,149 as ofJune 30, 2019. Net income per unit was ¥1,720 for the period from July 1, 2019 to December
31, 2019 and ¥2,826 for the period from January 1, 2019 to June 30, 2019.

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

49

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 for eachfiscal period in order to meet the condition set forth in the Special Taxation Measures Law ofJapan 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, 2019
and June 30, 2019 are summarized as follows:
As of December 31,
As of June 30,
2019
2019
(Thousands of yen)
Deferred tax assets:
Accrued enterprise taxes
Impairment loss
Subtotal deferred tax assets
Valuation reserve
Total deferred tax assets
Net deferred tax assets

50
442,688442,738(442,688)
50
50

7
－
7
－
7
7

A reconciliation of the differences between the statutory tax rate and the effective tax rate forthe periods from July 1, 2019 to December 31, 2019 and January 1, 2019 to June 30, 2019 is asfollows:

Statutory tax rate
Reconciliation:
Deductible distributions paid
Increase(decrease) in valuation reserve
Reversal of reserve for reduction entry
Other
Effective tax rate

For the period
from July 1, 2019
to December 31, 201931.51%For the period fromJanuary 1, 2019
to June 30, 201931.51%(53.41%)19.73%
2.22%
0.02%
0.07%

(31.51%)
－
－
0.02%
0.02%

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

50

13.

Breakdown of Revenues and Expenses
For the period
For the period
from July 1, 2019from January 1, 2019
to December 31, 2019
to June 30, 2019
(Thousands of yen)

Revenues:
Rental business revenues
Rental revenues
Common area revenues
Other rental revenues
Subtotal
Other
Utilities revenues
Other revenues
Subtotal
Total rental revenues
Property operating expenses:
Property management costs and fees
Utilities expenses
Property and other taxes
Insurance
Repairs and maintenance
Depreciation
Other
Total property operating expenses
Profit8,442,609
1,267,889
273,608
9,984,107

8,302,097
1,272,591
275,471
9,850,159

793,195
113,561
906,756
10,890,864

713,089
105,013818,102
10,668,262

1,458,956
1,013,977
944,725
20,796
311,820
1,929,198
227,435
5,906,910
4,983,953

1,399,365
959,157
917,694
22,333285,363
1,935,705
228,316
5,747,936
4,920,325

14. Breakdown of Gain or Loss on Sales of Real Estate Properties
For the period
For the period
from July 1, 2019from January 1, 2019
to December 31, 2019
to June 30, 2019
(Thousands of yen)
JEI Nishi-Honmachi Building
Proceeds from sale of real estate
Cost of sales of real estate
Other related sale expenses
Gain on sale of real estate

450,500
348,972140
101,386－－－－

For the period
For the period
from July 1, 2019from January 1, 2019
to December 31, 2019
to June 30, 2019
(Thousands of yen)
Kowa KawasakiNishiguchi Building
Proceeds from sale of real estate
Cost of sales of real estate
Other related sale expenses
Loss on sale of real estate

1,260,143
1,481,825
378
222,060－－－－

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)51

15．Impairment Loss
In the period ended December 31, 2019, JEI recorded impairment loss on the following asset
group.
(Thousands of yen)
Impairment
Property nameLocationType
loss
Kowa Kawasaki
Nishiguchi

Kawasaki-shi,
Kanagawa

Land for trust accounts

885,863

Buildings and building
521,284
improvement for trust accounts
In calculating impairment loss, each property is considered as one asset group.
As a result, for one fixed asset group scheduled to be sold, the book value was reduced to therecoverable value in the fiscal period ended December 31, 2019, and the difference amounting
to ¥1,407,147,000 was recognized as an impairment loss under operating expenses.
The nature of the impairment loss arising from the sale is considered to be an operating
expense, and the corresponding account category is classified as operating expenses inaccordance with Article 48, Paragraph 2 of “Regulation on Accountings of Investment
Corporations.”
The recoverable value of this asset group is measured by the net selling price.
The net selling price is calculated by deducting the estimated sales related expenses from theactual sale price.

16．Leases
JEI leases properties on which rental revenues are earned. At December 31, 2019 and June 30,
2019, future lease revenues under non-cancelable operating leases are summarized as follows:

Due within one year
Due after one year
Total

As of December 31,
As of June 30,
2019
2019
(Thousands of yen)
1,680,109
750,472
3,294,640
2,469,014
4,974,750
3,219,487

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)52

17. Derivative Transactions
Derivative Transactions as of December 31, 2019(1) Transactions to which hedge accounting is not applied:
Not applicable.
(2) Transactions to which hedge accounting is applied:
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of December 31, 2019 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Interest-rate swap
Receive floating,pay fixed

Hedgeditem

Long-term
debt

Contract amount
Fair value
More than
one year(Thousands of yen)

46,140,000

40,540,000

Method ofcalculating
the fair value** Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value disclosurein Note 5, “Financial Instruments.”

Derivative Transactions as of June 30, 2019(1) Transactions to which hedge accounting is not applied:
Not applicable.
(2) Transactions to which hedge accounting is applied:
The following are the contract values or values corresponding to the principal amount as
stipulated by contracts as of June 30, 2019 for each hedge accounting method applied.
Hedge
accounting
methodSpecialtreatment ofinterest-rate
swaps

Type of derivativetransaction

Interest-rate swap
Receive floating,pay fixed

Hedgeditem

Long-term
debt

Contract amount
Fair value
More than
one year(Thousands of yen)

46,140,000

40,540,000

Method ofcalculating
the fair value** Since the above interest-rate swap meets the criteria for the special hedge accounting treatment underJapanese GAAP and therefore qualifies for hedge accounting, the swap is not revalued at fair value on theaccompanying balance sheets, as described in the summary of significant accounting policies.
In addition, since the swap and the long-term debt hedged by the swap are accounted for as a unit, the fairvalue of the swap is disclosed as part of the fair value of the hedged long-term debt in the fair value disclosurein Note 5, “Financial Instruments.”

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

53

18.

Related Party Transactions

For the period from July 1, 2019 to December 31, 2019(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders
Name

Description of transaction

Hidehiko
Ogawa

Payment of asset management
fees to JEAM

Amount(Thousands of yen)390,335

Account
Accounts
payableBalance at the end of period(Thousands of yen)
310,434

For the period from January 1, 2019 to June 30, 2019(1) Parent Company and Major Corporate Unitholders
Not applicable.
(2) Subsidiaries and Affiliated Companies
Not applicable.
(3) Sister Companies
Not applicable.
(4) Directors and Major Individual Unitholders

Name

Description of transaction

Hidehiko
Ogawa

Payment of asset management
fees to JEAM

Amount(Thousands of yen)
447,411

Account
Accounts
payableBalance at the end of period(Thousands of yen)
368,885

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

54

19.

Segment Information

For the periods from July 1, 2019 to December 31, 2019 and from January 1, 2019 toJune 30, 2019
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.

20.

Distribution Information

In accordance with Section 33.1.2 of the bylaws set forth by JEI for distributions of cash
dividends, the amount of dividends payable, which is limited by the amount of retained earnings
at end of period, shall be in excess of 90% of its distributable income for the fiscal period as set
forth in Section 67.15 of the Special Taxation Measures Law. Consequently, JEI set income
available for distributions of dividends at ¥2,403,793,700, which is the maximum integral
multiple of the 1,305,700 units issued, but not exceeding ¥2,404,262,788, which is the amountof retained earnings at December 31, 2019.
Moreover, JEI proposed to provide dividend in excess of earnings as stipulated in Section 33.1.4of the bylaws set forth by JEI, using reserve for temporary difference adjustments totaling¥1,406238,900, which is the maximum value arrived at when the total number of investment
units outstanding (1,305,700 units) is multiplied by an integer, to the extent not surpassing theamount equivalent to the impairment loss recorded for the fiscal period.
On February 17, 2020, the Board of Directors approved a resolution to make a cash distributionof ¥2,918 per unit aggregating to ¥3,810,032,600 to unitholders of record as of December 31,
2019.

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

55

21.

Accounting Standards Issued But Not Yet Applied

As of December 31, 2019, JEI has not yet applied the following accounting standards and theirimplementation guidance.
(1) Accounting Standard for Revenue Recognition and its Implementation Guidance“Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan(“ASBJ”) Statement No.29, March 30, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30, March 30, 2018)(a) Overview
Conducting a joint project to clarify the comprehensive principles for recognizing
revenues, the International Accounting Standards Board (“IASB”) and the Financial
Accounting Standards Board (“FASB”) in the U.S. issued “Revenue from Contracts with
Customers” (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. IFRS 15 became
effective from fiscal periods beginning on or after January 1, 2018 and Topic 606 became
effective from fiscal periods beginning after December 15, 2017. Under thesecircumstances, ASBJ also developed a comprehensive accounting standard for revenue
recognition and issued a new standard together with its implementation guidance.
As a basic policy for the development of the new standard, ASBJ determined to adopt
the core principles of IFRS 15 in order to enhance comparability of financial statements,
which is one of the benefits of consistency with IFRS 15. In addition, for any item to beconsidered arising from business practices in Japan, alternative treatments shall be added
to the extent that comparability is not impaired.
(b) Scheduled date of application
JEI will apply the aforementioned standard and guidance from the beginning of the
fiscal period ending December 31, 2021.
(c) Effect of application of the new accounting standard
The effect of application of the aforementioned standard on JEI’s financial statements
is currently under evaluation.

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)56

(2) Accounting Standard for Fair Value Measurement and its Implementation Guidance“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ
Guidance No. 31, July 4, 2019)(a) Overview
Developing accounting standards for fair value measurement, IASB and FASB issued
new common fair value measurement in May 2011 (IFRS 13 by IASB and update to
Topic 820 by FASB). IFRS 13 became effective from fiscal periods beginning on or afterJanuary 1, 2013 and Topic 820 became effective from fiscal periods beginning after
December 15, 2011. Under these circumstances, ASBJ also developed an accounting
standard for fair value measurement and issued a new standard together with its
implementation guidance.
As a basic policy for the development of the new standard, ASBJ determined togenerally adopt all the principles of IFRS 13 in order to enhance comparability offinancial statements among domestic and overseas companies, by applying the consistentmeasurement methods. However, for any item to be considered arising from businesspractices in Japan, other treatment for the item shall be determined to the extent thatcomparability is not impaired.
(b) Scheduled date of application
JEI will apply the aforementioned standard and guidance from the beginning of the
fiscal period ending December 31, 2021.
(c) Effect of application of the new accounting standard
The effect of application of the aforementioned standard on JEI’s financial statements
is currently under evaluation.
22.

Significant Subsequent Event

Issuance of new units
On January 6, 2020 and January 15, 2020, the Board of Directors approved resolutions tocomplete a public offering and third-party allocation, respectively, of new units as outlined
below. JEI received payments on January 21, 2020 and February 13, 2020 for the said
units, which were issued in accordance with the conditions outlined below. As a resultof the issuance of new units, JEI had unitholders’ capital of ¥147,907 million with
1,353,000 units in issue at February 13, 2020.
A. Issuance of new units through a public offering(i) Method of issuance(ii) Number of units issued(iii) Issue price (offer price)(iv) Total offer price(v) Proceeds per unit(vi) Aggregate proceeds(vii) Payment datePublic offering
43,000 units¥173,355 per unit
¥7,454 million¥167,754 per unit
¥7,213 million
January 21, 2020

Asset Management Report for 27th period (Semi-Annual Report for 27th Period)57

B. Issuance of new units through allocation to a third party(i) Method of issuance(ii) Number of units issued(iii) Proceeds per unit(iv) Aggregate proceeds(v) Payment date(vi) Allottee
23.

Allocation to a third party
4,300 units¥167,754 per unit
¥721 million
February 13, 2020
Mizuho Securities Co., Ltd.

Additional Information

For the period from July 1, 2019 to December 31, 2019
This property’s transfer will be conducted in three parts as described in (3) and (6) below
and completed on July 3, 2020.
(1) Property NameJEI Nishi-Honmachi Building(2) Assets to Be Transferred

Trust beneficiary right in real estate¥9,010 million(3) Transfer Price¥450.5 million(quasi co-ownership
5.0%)(4) Book Value(As of December 31, 2019)(5) Planned Date of Execution ofPurchase Agreement(6) Transfer Dates (planned)

24.

¥7,208 million(quasi co-ownership
80.0%)―¥1,351.5 million(quasi co-ownership
15.0%)¥6,630 million
December 6, 2019

December 20, 2019

March 27, 2020

July 3, 2020

Information on Allowance for Temporary Difference Adjustments

For the period from July 1, 2019 to December 31, 2019(1) Reason for reversal, related assets and amounts

Related assets

Buildings and building improvements for trust accounts
Land for trust accounts(Thousands of yen)
Provision ofallowance
Reason offorprovision
temporarydifference
adjustments
Impairment
loss

1,406,238(2) Method of reversal
Impairment loss
Upon sale, the corresponding amount is scheduled to be reversed.
Asset Management Report for 27th period (Semi-Annual Report for 27th Period)

58