22 Fiscal Period Business Report · Fiscal Period Business Report ... on June 29, 2016, Shinjuku West Building and Ogikubo TM Building on July 21, 2016 ... 10 Daiwa Shimbashi 510

Fiscal Period Business Report (Statement of Financial Performance)

June 1, 2016 – November 30, 201622nd

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

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

2

To Our InvestorsWe would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).

In the 22nd Fiscal Period, DOI posted operating revenues of 12,853 million yen and operating income of 6,143 million yen. Our

distribution per unit for the 22nd Fiscal Period is 10,695 yen, an increase by 187 yen from the 21st Fiscal Period

See page 4 for financial and management highlights

Average contract rent at the end of the 22nd Fiscal Period increased 114 yen from the end of the previous fiscal period to 19,219

yen, indicating an increase for the fourth consecutive fiscal period. Rent revisions contributed to 8.7 million yen increase in

monthly contracted rents from the end of the previous fiscal period, which was a 6.1% rate of increase for average monthly rent.

Furthermore, the rate of increase for average monthly rent stood at 7.2% due to replacement of tenants, and the occupancy rate was

97.7%. We will realize sustainable internal growth through the thorough implementation of the hands-on approach that continuously

applies “Bonji-Tettei” as the code of conduct. See page 8 for details of internal growth

During the 22nd Fiscal Period, DOI acquired Heiwa Higashi-nihonbashi Building on June 1, 2016, Square Daikanyama Building

on June 29, 2016, Shinjuku West Building and Ogikubo TM Building on July 21, 2016 (total acquisition price: 13,392 million

yen) using funds obtained through the public offering announced in July 2016. DOI will continue

to selectively acquire office properties centering on the five central wards of Tokyo in an effort

to further improve the value of its portfolio. See page 12 for details of external growth

In financial matters, DOI promoted diversification of repayment dates by taking out long-term

borrowings. DOI will continue striving to further strengthen financial structure while working to

reduce future refinancing risks. See page 15 for details of financial conditions

DOI will continue to increase the competitiveness of its properties and aim to achieve

its medium- to long-term goal of continuous growth through the utilization of

investment capacity from capital increase, etc., while increasing long-term EPS (net

income after deducting gain on sales of properties). We wish for the continued

success of our unitholders and ask for your continued support of DOI.

I. Overview of Daiwa Office Investment Corporation

Yoshimi Murakami Executive Director of Daiwa Office Investment Corporation

Table of Contents

I. II.

III.

IV.

V.

VI.

VII.

VIII.

IX.

Overview of Daiwa Office Investment Corporation

To Our Investors……………………………………………… 2

Characteristics and Strategies of

Daiwa Office Investment Corporation ………………………… 3

Financial and Management Highlights………………………… 4

Overview of Portfolio (portfolio list)…………………………… 5

Overview of Portfolio (portfolio distribution)…………………… 6

Internal Growth Measures…………………………………… 8

External Growth Measures……………………………………12

Financial Conditions… ………………………………………15

Description of Asset Manager…………………………………16

Asset Management Report……………………………17

Balance Sheets…………………………………………22

Statements of Income and Retained Earnings……24

Statements of Changes in Net Assets………………25

Statements of Cash Flows… …………………………26

Notes to Financial Statements………………………27

Independent Auditor’s Report… ……………………41

Investor Information… …………………………………42

3I. Overview of Daiwa Office Investment Corporation

Characteristics and Strategies of Daiwa Office Investment Corporation

(Note) Please note that the percentages in the above graphs are as of December 21, 2016.

Based on acquisition price

Five CentralWards of Tokyo

88.6%

Major Regional Cities 3.1%

Greater Tokyo

8.3%

Office buildings 100.0%

Characteristics of Daiwa Office Investment Corporation

Office Specialized REIT

Effective application of operational knowhow specialized in office buildings

REIT Focused on the FiveCentral Wards of Tokyo

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

(billion yen)

0

500

100

200

300

400

Investment inselectively-chosen

competitive properties

Fiscal periodended

November 2014

Fiscal periodended

November 2015

Fiscal periodended

May 2014

Fiscal periodended

May 2015

Fiscal periodended

May 2016

Fiscal periodended

November 2016

Medium-termgoal

Activities for solid growth

Establishment of stable revenue base

・Continue acquiring properties

・Leverage borrowing capacity

Achievement of a 500 billion yen asset size

Keep the medium-to-long term, upper-limit LTV target range within 40%~50%

・Property management activities

・Maintain and improve property value

・Financial activities

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

Capture tenant needs by reinforcing ties with property managersStrategic renewals and lease-up activities

Reduce refinancing risk by extending borrowing periods and diversifying repayment dates

387.5

500.0

364.0

445.7458.3

467.7

413.2

Growth Strategies

(Note) The forecasts on distribution are calculated based

on certain assumptions and may vary due to

changes in the status and other factors. Moreover,

the forecasts set forth herein should not be

construed as a guarantee of distribution amounts.

Distribution per UnitFiscal period ended November 2016 (22nd Fiscal Period)

Fiscal period ending May 2017 (23rd Fiscal Period)

Fiscal period ending November 2017 (24th Fiscal Period)

10,695 yen (actual)

10,700 yen (forecast)

10,710 yen (forecast)

4

■ Operating Revenues ■ Operating Income

0

(million yen) (million yen)

■ Net Income

■ Distribution per Unit

■ Changes in Rental Revenues

0

2,000

6,000(million yen)

4,0009,763

4,438 3,641

10,387

4,770

5,6144,031

11,837

4,6886,108 6,143

12,363 12,853

5,250 5,324

5,3505,5005,986

5,5006,2506,542

6,5507,2007,478

7,3007,5407,621

7,5707,8208,256

8,3288,7009,142

9,0009,3509,688

9,7509,85010,508

9,90010,55010,695

10,56010,700

10,710

215148

176

64

349

511

282

267

839

115

–55

261 6

4,000

7,000

10,000

13,000

0

3,000

5,000

7,000

154

27227

117

229

0

2,000

4,000

6,000

8,000

10,000

(yen)12,000

0

6,000

7,000

8,000

9,000

10,000

11,000(million yen)

External growth (acquisition/full contribution from properties sold) (Note 1)

External growth (acquisition/during-the-period contribution from properties sold) (Note 2)

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

18th Period 19th Period 20th Period 21st Period 22nd Period 18th Period 19th Period 20th Period 21st Period 22nd Period 18th Period 19th Period 20th Period 21st Period 22nd Period

17th Period 18th Period 19th Period 20th Period 21st Period 22nd Period

14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 23rd Period 24th Period20th Period 21st Period 22nd Period

(Note 1) Amount obtained by subtracting rents and common area fees income in the previous fiscal period of properties sold in the previous fiscal period from the amount of rents and common area fees income increased compared to the previous period due to full year contribution from properties acquired in the previous fiscal period.

(Note 2) Amount obtained by subtracting rents and common area fees income decreased in the current fiscal period due to sales of properties in the current fiscal period from the amount of rents and common area fees income increased in the current fiscal period due to acquisition of properties in the current fiscal period.

Forecast from one year earlier Forecast from six months earlier Actual dividends

Financial and Management HighlightsSteady increase of distributions due to progress in internal growth

(Note) Distribution per unit for the 22nd fiscal period is calculated by dividing the amount obtained by subtracting provision for reserve for reduction entry (164 million yen) from unappropriated retained earnings by the total number of investment units issued.

22nd Period(November 2016)

21st Period(May 2016)

20th Period(November 2015)

19th Period(May 2015)

18th Period(November 2014)

Operating revenues (million yen) 12,853 12,363 11,837 10,387 9,763

Operating income (million yen) 6,143 6,108 5,614 4,770 4,438

Ordinary income (million yen) 5,325 5,326 4,689 4,032 3,642

Net income (million yen) 5,324 5,250 4,688 4,031 3,641

Total number of units issued (units) 497,869 484,000 484,000 441,000 441,000

Net assets per unit (yen) 515,230 511,818 511,777 505,566 504,746

Distribution per unit (yen) 10,695 10,508 9,688 9,142 8,256

Total assets (million yen) 483,450 476,690 460,705 432,232 399,555

Loan-to-value (LTV) (based on total asset value) (%) 42.3 43.3 41.7 44.3 40.2

Number of investment properties 53 50 50 47 46

Asset size (billion yen) 467.7 458.3 445.7 413.2 387.5

Total rentable area (m2) 336,722.04 328,027.44 325,313.01 288,833.07 286,088.89

Occupancy rate (%) 97.7 98.7 98.3 97.3 97.2


Overview of Portfolio (portfolio list)

(as of December 21, 2016)

(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.

(Note 2) The Rentable Area is indicated as of November 30, 2016 (end of 22nd Fiscal Period).(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete. (Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of December 1, 2016 for Shin Kanda Mikuracho Building and

of November 30, 2016 (end of 22nd Fiscal Period) for other properties.(Note 5) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. The figure shown for the

Rentable Area is the figure equivalent to 6/7 of the total rentable area of the entire building.

Property Name AddressRentable Area (m2)(Note 2)

Structure and No. of Floors

(Note 3)Completion

Execution of Major Repairs

Acquisition Price

Appraisal Value at End

of Period (mm yen) (Note 4)

Ownership TypePML (%)

mm yen Share(%)

Land Building

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza Ginza, Chuo-ku, Tokyo 8,179.62 SRC B3/12F July 1963 2003 14,100 3.0 16,700 Fee simple and leasehold Fee simple 4.53

2 Daiwa Ginza Annex Ginza, Chuo-ku, Tokyo 2,032.11 SRC B3/8F Aug. 1972 2003 3,050 0.6 3,500 Fee simple Fee simple 3.97

3 Daiwa Shibaura Shibaura, Minato-ku, Tokyo 9,619.67 SRC B1/12F Oct. 1987 8,265 1.8 7,670 Fee simple Fee simple 3.82

4 Daiwa Minami-Aoyama Minami Aoyama, Minato-ku, Tokyo 2,715.54 S SRC B2/5F Sept. 1990 4,550 1.0 4,410 Fee simple Fee simple 9.19

5 Daiwa Sarugakucho Sarugakucho, Chiyoda-ku, Tokyo 3,657.43 SRC 8F June 1985 3,190 0.7 3,340 Fee simple Fee simple 7.14

6 Daiwa A Hamamatsucho Hamamatsucho, Minato-ku, Tokyo 3,663.38 SRC B2/10F July 1993 2,865 0.6 3,380 Fee simple Compartmentalized ownership 3.79

7 Daiwa Jingumae Jingumae, Shibuya-ku, Tokyo 2,198.61 RC B1/4F Dec. 1997 2,800 0.6 2,320 Fee simple Fee simple 13.33

8 Daiwa Shibadaimon Shibadaimon, Minato-ku, Tokyo 2,386.48 SRC RC B1/7F Nov. 1996 2,578 0.5 2,960 Fee simple Fee simple 3.72

9 Daiwa Misakicho Misakicho, Chiyoda-ku, Tokyo 2,137.53 S 8F July 1996 2,346 0.5 2,730 Fee simple Fee simple 4.24

10 Daiwa Shimbashi 510 Shinbashi, Minato-ku, Tokyo 2,641.56 SRC B1/8F Apr. 1974 2006 2,080 0.4 2,470 Fee simple Fee simple 5.51

11 Daiwa Tsukijiekimae Tsukiji, Chuo-ku, Tokyo 2,659.59 SRC 10F Jan. 1996 1,560 0.3 1,650 Fee simple Fee simple 4.23

12 Daiwa Tsukiji Tsukiji, Chuo-ku, Tokyo 1,487.44 SRC B1/7F Jan. 1990 1,240 0.3 1,430 Fee simple Fee simple 4.98

13 Daiwa Tsukishima Tsukishima, Chuo-ku, Tokyo 8,426.28 S 5F July 1996 7,840 1.7 9,230 Fee simple Fee simple 4.87

14 Daiwa Nihonbashi Horidomecho Nihombashi-Horidomecho, Chuo-ku, Tokyo 2,850.81 SRC B2/7F Apr. 1993 2,520 0.5 2,530 Fee simple Fee simple 4.68

15 Daiwa Azabudai Azabudai, Minato-ku, Tokyo 1,697.88 SRC B2/9F Apr. 1984 1,600 0.3 1,860 Fee simple Fee simple 6.64

16 Daiwa Kyobashi Hatchobori, Chuo-ku, Tokyo 3,265.83 SRC B1/8F Oct. 1974 2005 3,460 0.7 3,290 Fee simple Compartmentalized ownership (100%) 4.51

17 Daiwa Kojimachi 4-chome Kojimachi, Chiyoda-ku, Tokyo 2,690.90 SRC B2/9F Oct. 1987 2,910 0.6 2,750 Fee simple Compartmentalized ownership (100%) 6.19

18 Daiwa Onarimon Shinbashi, Minato-ku, Tokyo 11,614.92 SRC 9F Apr. 1973 2003 13,860 3.0 13,400 Fee simple Compartmentalized ownership (100%) 3.89

19 Shinjuku Maynds Tower (Note 5) Yoyogi, Shibuya-ku, Tokyo 45,543.97 S SRC B3/34F Sept. 1995 133,800 28.5 122,000 Co-ownership Co-ownership 2.03

20 SHIBUYA EDGE Udagawacho, Shibuya-ku, Tokyo 2,480.65 RC B1/9F Aug. 2006 5,900 1.3 4,870 Fee simple Fee simple 1.56

21 Daiwa Kodenmacho Nihombashi-Odenmacho, Chuo-ku, Tokyo 2,379.31 SRC 8F Mar. 1985 2,460 0.5 2,150 Fee simple and leasehold Fee simple 4.19

22 Daiwa Jimbocho Kanda-Jimbocho, Chiyoda-ku, Tokyo 3,164.26 S B1/8F Mar. 1997 4,150 0.9 3,470 Fee simple Fee simple 5.05

23 Daiwa Nishi-Shimbashi Nishi-Shimbashi, Minato-ku, Tokyo 4,815.84 SRC B1/10F July 1993 5,000 1.1 6,000 Fee simple Fee simple 3.76

24 Daiwa Kayabacho Building Nihombashi-Kayabacho, Chuo-ku, Tokyo 5,899.11 S SRC B1/8F Apr. 2010 5,600 1.2 7,710 Fee simple Fee simple 4.50

25 Daiwa Jinbocho 3-chome Kanda-Jimbocho, Chiyoda-ku, Tokyo 2,889.34 S 9F Feb. 2010 3,550 0.8 4,620 Fee simple Fee simple 5.33

26 E SPACE TOWER Maruyamacho, Shibuya-ku, Tokyo 13,960.87 S SRC B1/15F Oct. 2002 24,000 5.1 32,800 Fee simple Fee simple 3.11

27 Daiwa Nihonbashi Hongokucho Nihombashi Hongokucho, Chuo-ku, Tokyo 2,143.08 S 8F May 2010 1,721 0.4 2,310 Fee simple Fee simple 3.80

28 shinyon curumu Shinjuku, Shinjuku-ku, Tokyo 6,751.31 S RC B2/11F Jan. 2012 9,650 2.1 13,700 Right of site Compartmentalized ownership (100%) 4.44

29 Daiwa Akasaka Akasaka, Minato-ku, Tokyo 8,739.17 SRC B2/7F Sept. 1990 9,200 2.0 12,900 Fee simple Fee simple 7.14

30 Daiwa Shibuya Miyamasuzaka Shibuya, Shibuya-ku, Tokyo 6,327.95 S B1/12F Dec. 1988 7,000 1.5 8,660 Fee simple Fee simple 5.64

31 Azabu Green Terrace Minami Azabu, Minato-ku, Tokyo 13,234.39 S RC B1/6F Sept. 2009 14,000 3.0 15,900 Fee simple Fee simple 2.67

32 Daiwa Ebisu 4-chome Ebisu, Shibuya-ku, Tokyo 2,885.64 SRC B1/9F Dec. 1997 4,135 0.9 5,380 Fee simple Fee simple 2.44

33 LAQUAS Higashi Shinjuku Okubo, Shinjuku-ku, Tokyo 7,498.33 S10F Aug. 2010 8,450 1.8 10,200 Fee simple Compartmentalized ownership (100%) 4.46

34 Concept Aoyama Jingumae, Shibuya-ku, Tokyo 4,421.15 S RC B1/7F Nov. 2001 9,800 2.1 11,800 Fee simple Fee simple 4.42

35 Shinsen Place Shinsen-cho, Shibuya-ku, Tokyo 2,811.35 RC B1/9F Sept. 2001 4,800 1.0 6,260 Fee simple Fee simple 6.21

36 Glass City Shibuya Nanpeidaicho, Shibuya-ku, Tokyo 8,566.73 S SRC B1/11F Feb. 2004 16,000 3.4 17,800 Fee simple Fee simple 1.61

37 River Gate Nihonbashi Hakozakicho, Chuo-ku, Tokyo 32,063.06 S SRC RC B2/20F Feb. 1994 28,000 6.0 30,100 Fee simple Fee simple 1.76

38 Daiwa Hatchobori ekimae Hatchobori, Chuo-ku, Tokyo 2,622.42 S SRC B1/10F Feb. 2006 2,871 0.6 3,210 Fee simple Fee simple 5.89

39 Daiwa Hatchobori ekimae West Hatchobori, Chuo-ku, Tokyo 1,723.15 SRC B1/9F Feb. 1996 1,647 0.4 1,800 Fee simple Fee simple 7.03

40 Nikko Building Nishishinjuku, Shinjuku-ku, Tokyo 6,967.61 SRC RC S B2/11F Aug. 1991 13,710 2.9 14,800 Fee simple Fee simple 4.32

41 Kirin Nihonbashi Building Nihonbashi Koami-cho, Chuo-ku, Tokyo 5,630.17 S SRC 7F Feb. 1999 8,180 1.7 8,230 Fee simple Fee simple 5.76

42 Heiwa Higashi-nihonbashi Building Higashi Nihonbashi, Chuo-ku, Tokyo 5,015.88 S 7F Mar. 2008 6,370 1.4 6,560 Fee simple Fee simple 4.37

43 Square Daikanyama Building Daikanyamacho, Shibuya-ku, Tokyo 1,588.35 S 6F Mar. 2001 2,280 0.5 2,470 Fee simple Fee simple 6.21

44 Shinjuku West Building Nishishinjuku, Shinjuku-ku, Tokyo 1,120.58 RC 4F Mar. 1989 942 0.2 1,160 Fee simple Fee simple 8.28

45 Shin Kanda Mikuracho Building Kanda Mikura-cho, Chiyoda-ku, Tokyo 1,732.42 SRC S B1/7F Jan. 1991 1,592 0.3 1,680 Fee simple Fee simple 6.01Subtotal 276,901.67 415,622 88.6 444,160Greater Tokyo Area (Note 1)

46 Daiwa Higashi-Ikebukuro Higashi-Ikebukuro, Toshima-ku, Tokyo 4,461.47 SRC S B1/9F June 1993 2,958 0.6 3,650 Fee simple Fee simple 3.55

47 Daiwa Shinagawa North Kita-Shinagawa, Shinagawa-ku, Tokyo 6,548.17 SRC B1/11F July 1991 7,710 1.6 6,010 Fee simple Fee simple 7.19

48 Daiwa Osaki 3-chome Osaki, Shinagawa-ku, Tokyo 1,786.06 S RC B1/6F Sept. 2007 1,650 0.4 2,320 Fee simple Fee simple 6.14

49 Daiwa Kamiooka Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa 2,630.30 S SRC B3/7F May 2011 2,000 0.4 2,600 Fee simple Fee simple 6.29

50 Integral Tower Kamiogi, Suginami-ku, Tokyo 17,778.14 S SRC B2/18F June 1993 15,220 3.2 18,500 Fee simple Fee simple 1.18

51 Meguro Place Tower Meguro, Meguro-ku, Tokyo 3,519.50 S SRC B2/14F July 2009 5,600 1.2 6,410 Fee simple Fee simple 1.68

52 Ogikubo TM Building Ogikubo, Suginami-ku, Tokyo 3,849.63 SRC B1/7F Nov. 1990 3,800 0.8 4,300 Fee simple Compartmentalized ownership (100%) 6.41

Subtotal 40,573.27 38,938 8.3 43,790 Major Regional Cities (Note 1)

53 Daiwa Meieki Meieki-Minami, Nakamura-ku, Nagoya City, Aichi 7,461.90 S 12F Dec. 2007 5,300 1.1 7,660 Fee simple Fee simple 10.31

54 Kitahama Grand Building Awaji-cho, Chuo-ku, Osaka City, Osaka 13,517.62 S SRC B1/16F Feb. 2008 9,481 2.0 11,500 Fee simple Fee simple 3.48Subtotal 20,979.52 14,781 3.1 19,160Total 338,454.46 469,341 100.0 507,110

Suginami-ku

Toshima-ku

4

8

6

3

23

29

46

50

52

48

47

17

25 22

5

1 2

12

13

11

16

24

2145

27 14

42

37

9

20

19

40

44

33

28

26

3536

51

18

15

31

30

43

32

7

34

10

3938

41

Ogikubo Sta.

Nakano Sta.

Honancho Sta.

Ikebukuro Sta.

Higashi Shinjuku Sta.

Shinjuku-ku

Shinjuku Sta.

Yotsuya Sta.

Shibuya-ku Aoyama-itchome Sta.

Gaienmae Sta.

Omotesando Sta.

Shibuya Sta.

Toky

u Toy

oko L

ine

Tokyu Denen-Tosh

i Line

Ebisu Sta.Naka-meguro Sta.

Meguro Sta.

Osaki Sta.Shinagawa-ku

Shinagawa Sta.

Minato-kuShibakoen Sta.

Shimbashi Sta.

Toranomon Sta.Akasaka Sta.

Hibiya Sta.Akasaka-mitsuke Sta.

Chiyoda-ku

Kudanshita Sta.

Suidobashi Sta.

Otemachi Sta.

Akihabara Sta.

Ningyocho Sta.

Kinshicho Sta.

Oshiage Sta.

Asakusa Sta.

Chuo-kuSuitengumae

Sta.

Ginza Sta.

Tokyo Sta.

Nihombashi Sta.

Tsukishima Sta.

HatchoboriSta.

Sobu LineKeiyo Line

Yamanote LineSaikyo LineChuo Line

Hibiya Line

Tokyo Metro

JR

Ginza LineMarunouchi Line

Hanzomon Line

Tozai LineChiyoda LineYurakucho Line

Fukutoshin LineNamboku Line

Asakusa Line

Toei SubwayOedo Line

Shinjuku LineMita Line

Yokosuka Line and Sobu Rapid Line

Main investment area: Five Central Wards of TokyoFocused investment area: Greater Tokyo

Major Regional Cities495354

6

Overview of Portfolio (portfolio distribution)

DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)

Daiwa Shibaura3

Daiwa Jingumae7 Daiwa Higashi-Ikebukuro46

Daiwa Shibadaimon8

E SPACE TOWER26

Integral Tower50

Ogikubo TM Building52

Meguro Place Tower51Daiwa Onarimon18

Daiwa Minami-Aoyama4

Shinjuku Maynds Tower19

Daiwa Shimbashi 51010

Daiwa Nishi-Shimbashi23

Daiwa A Hamamatsucho6

SHIBUYA EDGE20

Daiwa Azabudai15

Azabu Green Terrace31

Daiwa Shibuya Miyamasuzaka30

Glass City Shibuya36 Square Daikanyama Building43

Daiwa Akasaka29

Minato-ku

Shibuya-ku

shinyon curumu28 Nikko Building40 Shinjuku West Building44LAQUAS Higashi Shinjuku33

Shinjuku-ku

Daiwa Ebisu 4-chome32

Shinsen Place35Concept Aoyama34

Suginami-ku

Toshima-ku

4

8

6

3

23

29

46

50

52

48

47

17

25 22

5

1 2

12

13

11

16

24

2145

27 14

42

37

9

20

19

40

44

33

28

26

3536

51

18

15

31

30

43

32

7

34

10

3938

41

Ogikubo Sta.

Nakano Sta.

Honancho Sta.

Ikebukuro Sta.


Shinjuku-ku

Shinjuku Sta.

Yotsuya Sta.


Gaienmae Sta.

Omotesando Sta.

Shibuya Sta.

Toky

u Toy

oko L

ine

Tokyu Denen-Tosh

i Line


Meguro Sta.


Shinagawa Sta.


Shimbashi Sta.



Chiyoda-ku

Kudanshita Sta.

Suidobashi Sta.

Otemachi Sta.

Akihabara Sta.

Ningyocho Sta.

Kinshicho Sta.

Oshiage Sta.

Asakusa Sta.

Chuo-kuSuitengumae

Sta.

Ginza Sta.

Tokyo Sta.

Nihombashi Sta.

Tsukishima Sta.

HatchoboriSta.

Sobu LineKeiyo Line


Hibiya Line

Tokyo Metro

JR

Ginza Line

Marunouchi Line

Hanzomon Line



Asakusa Line






Suginami-ku

Toshima-ku

4

8

6

3

23

29

46

50

52

48

47

17

25 22

5

1 2

12

13

11

16

24

2145

27 14

42

37

9

20

19

40

44

33

28

26

3536

51

18

15

31

30

43

32

7

34

10

3938

41

Ogikubo Sta.

Nakano Sta.

Honancho Sta.

Ikebukuro Sta.


Shinjuku-ku

Shinjuku Sta.

Yotsuya Sta.


Gaienmae Sta.

Omotesando Sta.

Shibuya Sta.

Toky

u Toy

oko L

ine

Tokyu Denen-Tosh

i Line


Meguro Sta.


Shinagawa Sta.


Shimbashi Sta.



Chiyoda-ku

Kudanshita Sta.

Suidobashi Sta.

Otemachi Sta.

Akihabara Sta.

Ningyocho Sta.

Kinshicho Sta.

Oshiage Sta.

Asakusa Sta.

Chuo-kuSuitengumae

Sta.

Ginza Sta.

Tokyo Sta.

Nihombashi Sta.

Tsukishima Sta.

HatchoboriSta.

Sobu LineKeiyo Line


Hibiya Line

Tokyo Metro

JR

Ginza Line

Marunouchi Line

Hanzomon Line



Asakusa Line







Daiwa Sarugakucho5 Daiwa Kojimachi 4-chome17Daiwa Misakicho9 Daiwa Jimbocho22

Shin Kanda Mikuracho Building45Daiwa Jinbocho 3-chome25

Chiyoda-ku

DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)

Daiwa Ginza1

Kitahama Grand Building54Daiwa Shinagawa North47

Daiwa Ginza Annex2

Daiwa Kamiooka49 Daiwa Meieki53Daiwa Osaki 3-chome48

Daiwa Kyobashi16

Daiwa Hatchobori ekimae West39

Heiwa Higashi-nihonbashi Building42

Daiwa Tsukijiekimae11 Daiwa Tsukiji12 Daiwa Tsukishima13

Daiwa Nihonbashi Horidomecho14

Daiwa Hatchobori ekimae38

Kirin Nihonbashi Building41

Daiwa Kodenmacho21 Daiwa Kayabacho Building24

Daiwa Nihonbashi Hongokucho27

River Gate37

Chuo-ku

(as of December 21, 2016)

8

14,000

16,000

18,000

20,000

22,000

24,000(%)(yen/tsubo) (tsubo) (%)

0.0

2.0

4.0

6.0

8.0

10.0

-200,000

-100,000

0

100,000

200,000

300,000

400,000

0.0

1.5

3.0

4.5

6.0

7.5

9.0

Predicted figures

3.29

18,319

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2001200220032004200520062007200820092010201120122013201420152016201720182019 2020

Floor area of new suppliesVacancy rate (right axis)Floor area of new demands

Vacancy rate of existing buildings (right axis)Average rents of existing buildings (left axis)

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

■ Office Building Rental Market of Tokyo ■ Office Building Rental Market of 23 Wards of Tokyo

(Source) Miki Shoji (Source) CBRE “Mid-term Office Market Outlook 2016~2020”

■ Occupancy Rate ■ Rate of New Leases and Cancellations*

85.0

90.0

95.0

100.0(%)

97.7

85.7

95.9 95.4

92.4

96.495.0

96.3 96.497.2 97.3 97.3

96.8

98.3 97.7

97.5

98.797.6

94.3

92.8

Occupancy rate (actual)

Occupancy rate (forecast)

Occupancy rate (forecast) (as of disclosure in July 2016)

End of7th

Period

End of8th

Period

End of9th

Period

End of10th

Period

End of11th

Period

End of12th

Period

End of13th

Period

End of15th

Period

End of14th

Period

End of16th

Period

End of17th

Period

End of18th

Period

End of19th

Period

End of20th

Period

End of21st

Period

End of22ndPeriod

End of23rd

Period

End of24th

Period

(%)

-20.0

-10.0

0.0

10.0

20.0

3.9

-3.9

7.2

-12.0-14.7

-3.4-3.9-5.9 -7.3 -6.3 -5.3

-2.8-6.1 -5.7

-2.4 -1.7 -1.6 -2.8-3.8

7.4

3.2 3.3

9.88.2

5.74.4

6.1 6.2

2.04.3

1.83.52.9

-3.2

2.6

13.4

End of7th

Period

End of8th

Period

End of9th

Period

End of10th

Period

End of11th

Period

End of12th

Period

End of13th

Period

End of14th

Period

End of15th

Period

End of16th

Period

End of17th

Period

End of18th

Period

End of19th

Period

End of20th

Period

End of21st

Period

End of22ndPeriod

End of23rd

Period

End of24th

Period

Expected rate of cancellationsRate of cancellationsExpected rate of new leasesRate of new leases

*Transition of rate of new leases and cancellations areas to the total rentable area.

Rental Business Status

■ Average Contract Rent and Market Rent ■ Attribution Analysis/Monthly Contract Rent*

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

(yen/tsubo)

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

12,000

15,000

18,000

21,000

24,000

27,000

30,000

40

50

60

70

80

90

100

78.52

18,674

79.5378.85

18,738

80.16

19,219

19,105

End of4th

Period

End of5th

Period

End of6th

Period

End of7th

Period

End of8th

Period

End of9th

Period

End of10th

Period

End of11th

Period

End of12th

Period

End of13th

Period

End of14th

Period

End of15th

Period

End of16th

Period

End of17th

Period

End of18th

Period

End of19th

Period

End of20th

Period

End of21st

Period

End of22ndPeriod

(Million Yen)

End of 21st FP Monthly Contract Rent

End of 22nd FP Monthly Contract Rent

1,863

1,700

1,750

1,800

1,850

1,900

1,950

2,000

+8

+59 +57 –151,905

–68

0

Increase by Rent Revisions

Increase by New Leases

Decrease by Rent Revisions

Decrease by Tenants’

Cancellations

Increase by New Acquisition

Decrease by Transfer

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

(Note) Average contract rent of the existing 49 properties at the end of November 2016 is 19,331 yen (amount of change from the previous period: +209 yen)

* Average contract rents are average monthly contracted rents with tenants at the end of each fiscal period.** Unit rent index is the earning rates of unit rent of individual properties indexed with the 7th Fiscal Period

as 100.


Status of Contract Renewal■ Monthly Rent Increase Due to Contract Renewal/New Lease

■ Increase/Decrease in Monthly Rent due to New Lease and Increase/Decrease Rate (compared to the previous tenant for the same section)

■ Area of which Contract Ended/Will End In and After the Fiscal Period Ended November 2016 (the 22nd fiscal period) (based on rentable area)

* Of the increase in the 17th FP, 14.1% is due to some tenants switching from sublease agreements to master lease agreements and 7.9% is due to negotiations with tenants.

(Note) “New tenant” refers to the tenant who concluded a new lease contract in the respective fiscal period, and “Previous tenant” refers to the tenant, for the same section for which the new tenant concluded a lease contract, which had been under a lease contract immediately before the new tenant.

(Note 1) “Increase rate” and “Decrease rate” indicate the simple average of rent increase/decrease against contract rents before renewals for lease contracts whose contract renewal periods have arrived in the above periods and whose rent renewals have been agreed, rounded to the first decimal place.

(Note 2) “Rent increase / decrease rate” are obtained by dividing the total of contract rents after renewal for lease contracts whose contract renewals have been agreed by the total of contract rents before renewal, rounded to the fist decimal place.

(Note) The ratio of areas of which lease contracts are scheduled to be renewed in each fiscal period to the total rentable area (329,312.48m2) as of the end of November 2016 is indicated.

0.0 20.0 40.0 60.0 80.0 100.0(%)

19th Period

18th Period

17th Period

16th Period

15th Period

14th Period

13th Period

26.5

8.6 66.7 19.94.8

8.5

10.0

14.4 3.1

18.9

40.6 0.8 54.6 4.0

67.3 13.8

70.3 12.3

4.6 77.1 8.2

7.9* 14.1* 57.4 12.1

70.8 2.7

20th Period

21st Period

37.5 61.1 1.4

0.249.0 50.1 0.7

22nd Period 42.6 53.4 3.9

Decrease Increase Unchanged Cancellation

(Thousand yen) (%)

19th Period 20th Period 21st Period

0.0

7.5

15.0

22.5

0

10,000

20,000

30,000

40,000

50,000

60,000

32,188

9.8

14.0

2.6

35,345

46,142

52,580

29,203 29,970

22nd Period

55,05459,042

7.2

Increase/decrease rate (right axis)Previous tenant (left axis)New tenant (left axis)

(%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

22nd Period 23rd Period 24th Period 25th Period 26th Period

18.1

23.6

17.6 18.2

Scheduled24.6

5.0

10.0

15.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

(%)

0.04.5

2.5

5.0

9.8

5.2

-22.7

-7.0 -10.2

-7.0-4.9 -5.1

0.0

9.07.2

0.0

-22.7

-5.2 -6.5

1.0

4.35.2

9.07.3

0.0

6.16.1

14thPeriod

15thPeriod

16thPeriod

17thPeriod

18thPeriod

19thPeriod

20thPeriod

21stPeriod

22ndPeriod

Increase rate

Decrease rate

Rent increase / decrease rate

Contract Renewal (Note 1)

(thousand yen / month)

New Lease (Note 2)

(thousand yen / month)

Total(thousand yen /

month)

Increased Rent as Percentage of Rents and Common Area Fees Income (Note 3)

Increased Rent as Percentage of Net Income (Note 4)

6-month conversion 12-month conversion 6-month conversion 12-month conversion

19th Fiscal Period (ended May 2015) 5,862 3,157 9,020 0.7% 1.3% 1.5% 3.0%20th Fiscal Period (ended November 2015) 7,938 6,438 14,376 1.0% 2.0% 2.1% 4.3%21st Fiscal Period (ended May 2016) 13,479 766 14,246 0.8% 1.7% 1.8% 3.6%22nd Fiscal Period (ended November 2016) 8,759 3,988 12,747 0.7% 1.5% 1.5% 2.9%

(Note 1) “Contract renewal” indicates, for the portion of which lease contract was renewed during each fiscal period, the total of net increase in monthly rent calculated by subtracting the total of monthly rents before renewal from the total of monthly rents at the end of the relevant fiscal period.

(Note 2) “New lease” indicates, for the portion for which a lease contract was concluded with a new tenant in each fiscal period, the total of net increase in monthly rent calculated by subtracting the total of monthly rents under the lease contract with the immediately preceding tenant from the total of monthly rents at the end of the relevant fiscal period.

(Note 3) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by rents and common area fees income in the immediately prior fiscal period, rounded to the first decimal place.

(Note 4) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by net income in the immediately prior fiscal period, rounded to the first decimal place.

■ Changes in Ratios of Areas with Rent Increase/Decrease/Unchanged and Cancellation upon Contract Renewal

■ Changes in Rent Increase/Decrease Rate of Contract Renewal Tenants (sections)

10

Internal Growth Measures

(Note) “Asset Management work history” is the number of years engaged in the relevant work (as of end of Nov. 2016) and does not indicate the number of years employed at the asset management company.

Aims to maximize asset value through the organization of the investment corporation’s portfolio by assigning personnel in charge and specialist groups to each property.

Hiroshi UdagawaAsset management work history: 10 years 4 months

Takafumi UshikuAsset management work history: 12 years 2 months

Kotaro IshiiAsset managementwork history: 10 years 7 months

Jun AraiAsset managementwork history: 10 years 7 months

Chie KamimuraAsset managementwork history: 10 years 5 months

Yuuki KobatakeAsset managementwork history: 4 years 1 month

Jun IwasakiAsset managementwork history: 1 month

Middle office work: Budget and performance management for the portfolio

Engineering: Formulation and implementation of construction planning for assets

“Bonji-Tettei”Continuous internal growth and maximization of asset value through “Bonji-Tettei”

Office Management Team (7 members)

Investment Planning Team (3 members)

Construction Management Team (4 members)

Aims to maximize asset value

Properties Subject to Leasing Improvement in the Fiscal Period ending May 2017 (23rd FP)

Occupancy Status of Properties Subject to Leasing Improvement in the Fiscal Period Ended November 2016 (22nd FP)

• Promoted to increase inquiries by holding property viewings before and after the major renewal work and raising recognition of the property among brokers.

• Visited brokers separately considering business categories/styles that would match the property characteristics and explained the property.

• Captured floor expansion motive of the existing tenants through constant and good relationships and succeeded in concluding a floor expansion agreement without creating any downtime.

*Without the floor expansion from the existing tenant, the occupancy rate would have fallen to 88.2%.

• With the property’s high scarcity value due to its relatively new age and proximity to the station, succeeded in drawing out the needs of major companies by tapping into the needs for sub-offices/relocation of companies with rent-paying capacity.

• As a result of negotiations, contracts were concluded at an early stage with favorable terms and conditions to realize full occupancy.

■ Daiwa Tsukishima (Acquisition Price: 7,840 million yen) ■ Daiwa Shimbashi 510 (Acquisition Price: 2,080 million yen) ■ Daiwa Osaki 3-chome (Acquisition Price: 1,650 million yen)

100.0

100.0

100.0

13.2

56.7

0.0

50.0

100.0(%)

‘15/11 ‘16/2 ‘16/5 ‘16/8 ‘16/11

0

50

100

99.6 99.6

88.088.0

99.6

‘15/11 ‘16/2 ‘16/5 ‘16/8 ‘16/11

*（82.2）

100.0(%)

70.0

80.0

90.0

70

80

90

100

100.0

100.0

78.9 78.9

100.0100.0(%)

‘15/11 ‘16/2 ‘16/5 ‘16/8 ‘16/11

70.0

90.0

80.0

70

80

90

100

• Aim for securing tenants centering on companies based in the area, etc. by taking advantage of favorable access to central Tokyo and relatively low rent level for the size and grade of the property.

• Aim for early leasing of the remaining vacancies by launching campaigns targeting tenants and brokers.

• With the move-out of the main tenant, implemented renovation of facilities (air-conditioning, plumbing-related) to enhance the value of the building, which had been left undone since completion.

• Aim to take in needs of creative businesses and/or needs from Shibuya area where vacancies are decreasing, capitalizing on the brand strength of the Aoyama area.

• Aim for early securement of tenants by taking advantage of the property feature capable of securing 600 tsubos or larger area per floor at a reasonable rent in Tokyo’s major three wards.

• For leasing sections scheduled to be vacated but still occupied (cancellation dates yet to arrive), aim to conclude leasing contracts before the cancellation dates by conducting a property viewing using currently vacant sections.

■ Daiwa Tsukishima (Acquisition Price: 7,840 million yen) ■ Concept Aoyama (Acquisition Price: 9,800 million yen) ■ River Gate (Acquisition Price: 28,000 million yen)

“Bonji-Tettei”◦ In depth understanding of the leasing market◦Capturing real opinions of occupying tenants

◦Understanding of features of portfolio properties◦Determined budget control

Accurate grasp of present situations

◦Proactive interactions with brokers◦Accompanying new tenant candidate viewings◦Frequent visit on tenants

◦Conducting tenant satisfaction surveys◦Thorough examination of properties◦Solid numerical analysis in detail

Activities for internal growth

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

Realization of internal growth


Measures to Increase Portfolio Value

Environmental Efforts

■ Strategic Renewal Work

■ Progress in Introduction of Green Leasing at Shinjuku Maynds Tower

■ Acquired “Green Star” Rating for 5th Consecutive Year at GRESB 2016

■ Coexistence with Local Societies

Period: November 9, 2016 – February 14, 2017

Daiwa Tsukishima

Concept Aoyama

Ratio of Areas with LED Lighting Installed*

As part of measures to protect the environment and raise tenant satisfaction, the Investment Corporation has taken initiatives in which it concludes green leasing agreements with tenants and promotes installation of LED lighting in areas exclusively occupied by the tenants since 2014. Around 40% of areas exclusively occupied by the tenants are expected to have LED lighting in the fiscal period ending May 2017.

Daiwa Real Estate Management participated in the Global Real Estate Sustainability Benchmark (GRESB)’s GRESB Real Estate Assessment in 2016, targeting Daiwa Office Investment Corporation, and received a high evaluation on sustainability in both “management and policy” and “implementation and measurement” and acquired Green Star, the highest category, for the fifth consecutive year.

Shinjuku Maynds Tower

Shinjuku Maynds Tower participated in “Shinjuku Minamirumi” (annual event held for the fourth time) organized by Odakyu Electric Railway Co, Ltd., Takashimaya Co., Ltd., East Japan Railway Company, Asahi Mutual Life Insurance Company and Daiwa Securities, and arranged a delightful space featuring shooting stars and snow crystals displayed in a row from the snow-covered Christmas tree to the pedestrian deck and to the main entrance.

Entrance

Pedestrian Deck

Plants

Christmas Tree

Entrance

Elevator Hall

Restroom

Restroom

(%)

3.4 3.46.9

10.3

18.2

36.3

18thPeriod

19thPeriod

20thPeriod

21stPeriod

22ndPeriod

23rdPeriod

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0 Shinjuku Maynds Tower

Benefits for Tenants Benefits for the Investment Corporation•Reduction of utility charges and maintenance

costs •Improvement of working environment in offices •Contribution to corporate social responsibility (CSR)

•Enhancement of the company’s image

•Reduction of maintenance costs •Enhancement of property value by making energy-saving investments

•Receiving green lease fees

*Forecast figure is indicated for the 23rd FP.

Before

Before

Before

Before

After

After

After

After

12

Property Acquisitions after Sponsor Change Total acquisition price: 244,199 million yen

Time of Acquisition 9th Period 10th Period 11th Period 12th Period 13th Period 14th Period

Property name

Daiwa Jimbocho Daiwa Nishi-Shimbashi Daiwa Kudan Daiwa

Kayabacho BuildingDaiwa

Jinbocho 3-chome E SPACE TOWER Daiwa Nihonbashi Hongokucho

Daiwa Osaki 3-chome

Area Chiyoda Ward, Tokyo Minato Ward, Tokyo Chiyoda Ward, Tokyo Chuo Ward, Tokyo Chiyoda Ward, Tokyo Shibuya Ward, Tokyo Chuo Ward, Tokyo Shinagawa Ward, TokyoAcquisition price 4,150 million yen 5,000 million yen 4,000 million yen 5,600 million yen 3,550 million yen 24,000 million yen 1,721 million yen 1,650 million yen

Seller ORIX JREIT Inc. Japan Core Asset 2 YK (Note 1)

Shining Nova No. 5 B (SPC)

Daiwa Property Co., Ltd. Tokyu Land Corporation Endeavor Realty Fund

YK (Note 1) Tosei Corporation MCR Six GK

Acquisition date Mar. 10, 2010 Aug. 13, 2010 Sept. 2, 2010 Mar. 25, 2011 Mar. 29, 2011 July 8, 2011 May 11, 2012 Sept. 18, 2012

Time of Acquisition 15th Period 16th Period 17th Period

Property name

shinyon curumu Daiwa Meieki Daiwa Kamiooka Daiwa Shibuya Dougenzaka Daiwa Akasaka Daiwa Shibuya

Miyamasuzaka Integral Tower

Area Shinjuku Ward, Tokyo Nagoya City, Aichi Yokohama City, Kanagawa Shibuya Ward, Tokyo Minato Ward, Tokyo Shibuya Ward, Tokyo Suginami Ward, TokyoAcquisition price 9,650 million yen 5,300 million yen 2,000 million yen 4,500 million yen 9,200 million yen 7,000 million yen 15,220 million yen

Seller Two domestic industrial companies

Domestic special purpose company Shimizu Corporation Domestic special

purpose companyHakuba Capital 1 TMK

(Note 1)E Buildings Limited Liability Company

Ogikubo Building YK (Note 1)

Acquisition date

Dec. 3, 2012 Apr. 12, 2013 Feb. 1, 2013 Mar. 1, 2013 July 3, 2013 Aug. 9, 2013 Sept. 27, 2013 May 29, 2014

External Growth Measures

Current Portfolio and Acquisition Policy

DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among the vast information on properties obtained through diverse sourcing.

Building age (years)

Distance to station (minutes)

0

5

10

15

20

25

30

35

40

45

50

55

60

0 1 2 3 4 5 6 7 8 9 10 1114th FiscalPeriod

15th FiscalPeriod

16th FiscalPeriod

17th FiscalPeriod

18th FiscalPeriod

19th FiscalPeriod

20th FiscalPeriod

21st FiscalPeriod

22nd FiscalPeriod

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

• Place priority on the Five Central Wards of Tokyo and equivalent areas.

• Thoroughly select properties in view of actual demand toward location (distance to station, station power, crowd attraction, surrounding environment), building specs, etc.

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

• Invest in buildings with an age of less than 25 years.

• Consider replacement of properties if necessary through sale in light of properties’ future competitiveness, profitability, etc.

(cases)

0

100

200

300

400

500(cases)

0

20

40

60

80

100* Number of gross proposals

■ Acquisition Policy

■ Sale Policy

■ Number of Properties Reviewed for Acquisition

* Distance to station is indicated by calculating 80m as one minute

■ Distribution Chart of Portfolio Properties

Properties acquired in the 23rd FP Properties acquired in the 22nd FP Properties acquired after the sponsor change Properties acquired before the sponsor change Properties sold in the 22nd FP

25 2815

268300

264296

26

416

23

356

31

393

12

289

18

344

17

Ogikubo TM Building

Shinjuku West Building

Heiwa Higashi-nihonbashi Building

Daiwa Kudan

Square Daikanyama Building

Shin Kanda Mikuracho Building

(Note 1) "YK" stands for limited liability company and TMK (tokutei mokuteki kaisha) stands for special purpose company. (Note 2) The sum of i) the total acquisition price from the time of the above sponsor change on December 21, 2016 and ii) prices for additional acquisition of owned properties or of the site in owned properties during the same period, is 244,619 million yen.

Investment in selectively-chosen, high-quality competitive properties even in a harsher acquisition environment


Changes in Asset Size and Trading Performance

Aim to achieve medium-term goal of an asset size of 500 billion yen by utilizing acquisition capability earned through capital increase

(%)(billion yen)

8thFiscal Period

9thFiscal Period

10thFiscal Period

11thFiscal Period

12thFiscal Period

13thFiscal Period

14thFiscal Period

15thFiscal Period

16thFiscal Period

17thFiscal Period

18thFiscal Period

0

50

100

150

200

250

300

350

400

450

500

550

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

0.0

25.3 25.528.1 28.9

34.0 34.2 34.437.5

40.6265.0 269.1 278.1 287.3

311.3 313.2 314.9 332.0

352.7 364.0387.5

Investment for competitiveproperties after thorough selection

43.040.2

19thFiscal Period

20thFiscal Period

413.2

44.3

445.7

41.7

21stFiscal Period

458.3

22ndFiscal Period

467.7

43.3 42.3

Medium-term goal

500.0

As of Dec.31, 2016

469.3

LTV (based on total assets) (right axis)Total Acquisition Price

Acquisition property • Daiwa Jimbocho

Acquisition properties• Daiwa Nishi-Shimbashi • Daiwa Kudan

Acquisition property • E SPACE TOWER

Acquisition property• Daiwa Nihonbashi

Hongokucho

Acquisition properties• Nikko Building • Kirin Nihonbashi

Building

Acquisition property• Shin Kanda

Mikuracho Building

Acquisition property • Daiwa Osaki

3-chome

Acquisition properties• shinyon curumu • Daiwa Meieki • Daiwa Kamiooka

Acquisition properties• Daiwa Ebisu 4-chome • LAQUAS Higashi Shinjuku • Concept Aoyama • Shinsen Place • Glass City Shibuya • Meguro Place Tower

Acquisition property • Integral Tower

Acquisition properties• River Gate • Daiwa Hatchobori ekimae • Daiwa Hatchobori ekimae

West

Acquisition properties• Heiwa Higashi

nihonbashi Building• Square Daikanyama

Building• Shinjuku West Building• Ogikubo TM Building

Acquisition properties• Daiwa Shibuya Dougenzaka • Daiwa Akasaka • Daiwa Shibuya Miyamasuzaka

Acquisition properties• Daiwa Kayabacho • Daiwa Jinbocho 3-chome

Acquisition properties• Azabu Green Terrace • Kitahama

Grand Building

18th Period 19th Period 20th Period

Azabu Green Terrace Kitahama Grand Building

Daiwa Ebisu 4-chome

LAQUAS Higashi Shinjuku Concept Aoyama Shinsen Place Glass City Shibuya Meguro Place Tower River Gate

Minato Ward, Tokyo Osaka City, Osaka Shibuya Ward, Tokyo Shinjuku Ward, Tokyo Shibuya Ward, Tokyo Shibuya Ward, Tokyo Shibuya Ward, Tokyo Meguro Ward, Tokyo Chuo Ward, Tokyo14,000 million yen 9,481 million yen 4,135 million yen 8,450 million yen 9,800 million yen 4,800 million yen 16,000 million yen 5,600 million yen 28,000 million yen

Azabu Green Terrace GK GK North Beach Domestic industrial

companyHigashi Shinjuku

Building TMK (Note 1)Domestic special purpose company

Domestic special purpose company

Glass City TMK (Note 1)

Meguro Place TMK (Note 1) Thames TMK (Note 1)

July 4, 2014 Aug. 1, 2014 Dec. 1, 2014 Dec. 3, 2014 Mar. 2, 2015 Mar. 2, 2015 May 1, 2015 May 1, 2015 June 2, 2015

20th Period 21st Period 22nd Period 23rd PeriodDaiwa

Hatchobori ekimaeDaiwa Hatchobori

ekimae West Nikko Building Kirin Nihonbashi Building

Heiwa Higashinihonbashi Building

Square Daikanyama Building

Shinjuku West Building

Ogikubo TM Building

Shin Kanda Mikuracho Building

Chuo Ward, Tokyo Chuo Ward, Tokyo Shinjuku Ward, Tokyo Chuo Ward, Tokyo Chuo Ward, Tokyo Shibuya Ward, Tokyo Shinjuku Ward, Tokyo Suginami Ward, Tokyo Chiyoda Ward, Tokyo2,871 million yen 1,647 million yen 13,710 million yen 8,180 million yen 6,370 million yen 2,280 million yen 942 million yen 3,800 million yen 1,592 million yen

Domestic industrial company

Domestic industrial company Overseas company Kirin Beer Marketing Domestic special

purpose company Hulic GK TC1 GK TC1 OH Real Estate Management

Sept. 11, 2015 Sept. 11, 2015 Mar. 29, 2016 May 26, 2016 June 1, 2016 June 29, 2016 July 21, 2016 July 21, 2016 Dec. 21, 2016

(Note 3) Total acquisition price above includes acquisition prices of Daiwa Shibuya Dougenzaka divested in the 21st fiscal period and Daiwa Kudan divested in the 22nd fiscal period.

14

External Growth Measures

Heiwa Higashi-nihonbashi Building [Acquired on June 1, 2016]

Shin Kanda Mikuracho Building [Acquired on December 21, 2016]

Square Daikanyama Building [Acquired on June 29, 2016]

■ 22nd Fiscal Period

■ 23rd Fiscal Period

Shinjuku West Building [Acquired on July 21, 2016] Ogikubo TM Building [Acquired on July 21, 2016]

Newly Acquired Properties

• Located a 2-minute walk from Higashi-Nihonbashi Station on the Toei Asakusa Subway Line and Bakuro-Yokoyama Station on the Toei Shinjuku Subway Line and 3-minute walk from Bakurocho Station on the JR Sobu Line (Rapid).

• Since the Horidomecho and Higashi-Nihonbashi area flourished centering on textile industry for a long time, specific demands from apparel companies and such are expected.

• Exterior with a modern façade mostly covered with glass.

• Located a 2-minute walk from Nishi-Shinjuku Station on The Tokyo Metro Marunouchi Line and a 7-minute walk from Shinjuku Station which is the largest terminal station in Tokyo.

• Location amidst a concentration of various shop-visit type service related industries such as temporary staffing businesses and financial businesses for end users of insurance, etc.

• Can also accommodate the office needs for a sales base that requires loading/unloading as flat parking in the premises as well as warehouse sections on each floor are provided.

• Located a five-minute walk from Kanda Station on the JR Yamanote/Keihin Tohoku/Chuo Lines and the Tokyo Metro Ginza Line and a four-minute walk from Shin-Nihonbashi Station on the JR Sobu Line.

• Located a seven-minute walk from Mitsukoshimae Station on the Tokyo Metro Ginza/Hanzomon Lines and Kodenmacho Station on the Tokyo Metro Hibiya Line, and Iwamotocho Station on the Toei Shinjuku Line.

• Rectangular-shaped (regular-shaped) rental space with no pillars with highly flexible layout, so efficient use is possible.

• Located a 7-minute walk from Daikanyama Station on the Tokyu Toyoko Line and Shibuya Station on the JR Yamanote Line.

• Faces Hachiman Dori which is a very busy street and an exclusive residential area and apparel shops are located in the surrounding areas.

• Highly flexible layout and efficient use is possible, and features exterior with a modern façade mostly covered with glass.

• Located a 1-minute walk from Ogikubo Station on the JR Chuo/Sobu Lines and the Tokyo Metro Marunouchi Line.

• The property has high locational appeal among local residents to service-related companies such as banks and securities companies, cram schools and clinics since it is excellent in terms of proximity to Ogikubo Station. Also, back office demands of large companies in central Tokyo such as call centers are also assumed.

• Highly flexible layout and efficient use is possible, and it is well-lit.

Location Higashi-nihonbashi, Chuo-ku, Tokyo

Site Area 1,213.24m2

Structure/Floor S/7F

Total Floor Area 6,724.10m2

Acquisition Price 6,370 million yen

Appraisal Value 6,450 million yen (as of April 30, 2016)

Construction Date March 2008

Occupancy Rate 100.0% (as of June 1, 2016)

Number of Tenants 5 (as of June 1, 2016)

Location Daikanyama-cho, Shibuya-ku, TokyoSite Area 503.72m2

Structure/Floor S/6FTotal Floor Area 1,989.40m2


Appraisal Value 2,420 million yen (as of June 1, 2016)


Occupancy Rate 100.0% (as of June 29, 2016)

Number of Tenants 1 (as of June 29, 2016)

Location Nishishinjuku, Shinjuku-ku, TokyoSite Area 623.78m2

Structure/Floor RC/4FTotal Floor Area 1,438.16m2

Acquisition Price 942 million yen

Appraisal Value 1,140 million yen (as of July 1, 2016)


Occupancy Rate 100.0% (as of July 21, 2016)

Number of Tenants 7 (as of July 21, 2016)

Location Ogikubo, Suginami-ku, TokyoSite Area 970.53m2

Structure/Floor SRC/B1/7FTotal Floor Area 5,116.78m2


Appraisal Value 4,230 million yen (as of July 1, 2016)

Construction Date November 1990

Occupancy Rate 100.0% (as of July 21, 2016)

Number of Tenants 11 (as of July 21, 2016)

Location Kanda Mikuracho, Chiyoda-ku, TokyoSite Area 365.65m2

Structure/Floor SRC/S/B1/7FTotal Floor Area 2,167.76m2


Appraisal Value 1,680 million yen (as of December 1, 2016)

Construction Date January 1991

Occupancy Rate 43.4% (as of December 21, 2016)

Number of Tenants 3 (as of December 21, 2016)


(million yen)

(years) (years)

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

(billion yen)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0 (%)

End of7th

Period

End of8th

Period

End of9th

Period

End of10th

Period

End of11th

Period

End of12th

Period

End of13th

Period

End of14th

Period

End of15th

Period

End of16th

Period

End of17th

Period

8thPeriod

9thPeriod

10thPeriod

11thPeriod

12thPeriod

13thPeriod

14thPeriod

15thPeriod

16thPeriod

17thPeriod

End of18th

Period

End of19th

Period

End of20th

Period

End of21st

Period

18thPeriod

23rdFiscalPeriod

24thFiscalPeriod

25thFiscalPeriod

26thFiscalPeriod

27thFiscalPeriod

28thFiscalPeriod

29thFiscalPeriod

30thFiscalPeriod

31stFiscalPeriod

32ndFiscalPeriod

33rdFiscalPeriod

34thFiscalPeriod

35thFiscalPeriod

36thFiscalPeriod

37thFiscalPeriod

38thFiscalPeriod

39thFiscalPeriod

40thFiscalPeriod

41stFiscalPeriod

42ndFiscalPeriod

19thPeriod

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

20thPeriod

21stPeriod

22ndPeriod

4.5

10.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

End of22ndPeriod

4.1

0

5,000

10,000

15,000

20,000

25,000

End of 22nd Fiscal Period

End of 22nd Fiscal Period19.6%

80.4%

14.3%

85.7%

7.1

2.4

Investment Corporation Bond

Average year remaining at the period end (right axis)

Average remaining years at the time of procurement during the 22nd Fiscal Period (left axis)

Fixed interest rates

Floating interest rates

Long-term loans payable, etc.

Short-term loans payable, etc.

Interest-bearing liabilities (left axis)

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

0

40

80

120

160

200

240

280

Status of Interest-Bearing Liabilities (as of November 30, 2016)

During the 22nd Fiscal Period, DOI took out short-term loans of 8 billion yen in total to raise funds for the acquisition of new properties, and also conducted early repayment of existing loans (10 billion yen in total) including part of the aforementioned short-term loans. In addition, DOI refinanced matured existing loans (1.5 billion yen), successfully diversifying repayment dates.DOI will continue to focus on stable financial management.

■ Interest-Bearing Liabilities

■ Diversification of Repayment Dates

■ Status of Rating

■ Balance of Borrowings by Financial Institution

Financial institution Balance (mm yen) Share

Sumitomo Mitsui Banking Corporation 41,400 20.3%Sumitomo Mitsui Trust Bank 24,850 12.2%Development Bank of Japan 21,750 10.6%Mizuho Bank 19,400 9.5%The Bank of Tokyo-Mitsubishi UFJ 16,000 7.8%Shinsei Bank 14,000 6.9%Resona Bank 12,500 6.1%Mitsubishi UFJ Trust and Banking 8,500 4.2%Mizuho Trust and Banking 6,000 2.9%The Bank of Fukuoka 5,500 2.7%Kansai Urban Banking Corporation 5,000 2.4%Aozora Bank 3,000 1.5%Nishi-Nippon City Bank 3,000 1.5%ORIX Bank Corporation 2,500 1.2%The Gunma Bank 2,500 1.2%The 77 Bank 2,000 1.0%The Musashino Bank 2,000 1.0%Tokio Marine & Nichido Fire Insurance 2,000 1.0%The Yamaguchi Bank 2,000 1.0%The Higashi-Nippon Bank 1,500 0.7%Nippon Life Insurance Company 1,300 0.6%The Kagawa Bank 1,000 0.5%The Hiroshima Bank 1,000 0.5%Taiyo Life Insurance Company 300 0.1%Fukoku Mutual Life Insurance 200 0.1%Investment Corporation Bonds 5,100 2.5%

Total 204,300 100.0%

Rating agency Target rating Rating Rating outlook

Rating and Investment Information, Inc. (R&I) Issuer rating A+ Stable

Japan Credit Rating Agency, Ltd. (JCR) Long-term issuer rating AA− Stable

■ Change in Remaining Years at Time of Procurement of Interest-Bearing Liabilities

(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties(Note) Dotted line indicates average remaining years at the time of procurement during

the 22nd Fiscal Period excluding short-term borrowings

Financial ConditionsReduce refinancing risk by extending borrowing periods and diversifying repayment dates

■ Ratio of Fixed- to Floating-Rate Borrowings

■ Ratio of Long- toShort-Term Liabilities

16

Structure

General Administrator(Investment Corporation Bonds)

Sumitomo Mitsui Banking Corporation Resona Bank, Ltd.

Manager of Unitholder Registry, etc.

Special Account Management Institution

Sumitomo Mitsui Trust Bank, Limited

Investment Corporation

Accounting Auditor

General Meeting of Unitholders

Yoshimi MurakamiTakayuki Hiraishi Hiroshi Sakuma

Executive Director: Supervisory Director: Supervisory Director:

KPMG AZSA LLC

Supporting Company

Daiwa Securities Group Inc.

Asset ManagerGeneral Administrator

related to the operation of theadministrative instruments

①

① Asset management contract/General administration affairs contract related to operation of administrative instruments

② General administrative affairs contract/Asset custodian contract③ Unitholder register, etc. management contract/Special account management contract

④ Sponsor support agreement⑤ Fiscal agency agreement

②

③

⑤④

Daiwa Real Estate AssetManagement Co., Ltd

General Administrator Asset Custodian

Sumitomo Mitsui Trust Bank, Limited

Officers

Accounting Team

Healthcare Management Team

Office Management Team

Residential Management Team

Investment Planning Team

Construction Management Team

Office Investment Team Finance Team

Management Team

Asset Management Department

Administration Department

Customer Relations Department

Corporate Planning Department

Finance Department

Private FundManagement Department

Acquisition Department

Origination Department

Shareholders’ Meeting

Corporate AuditorsBoard of Directors

Compliance Committee

Investment Committee（*）Compliance Officer

Internal Control Office

*Set up separately for each investment corporation

President andRepresentative Director

Residential Investment Team

Healthcare Investment Team

Infrastructure Investment Team

■ Description ■ Directors and Auditors

Organization of Asset Manager (as of December 31, 2016)

■ Organizational Chart

Description of Asset Manager

(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc. Daiwa Securities Group Inc. is the Asset Management Company’s parent company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No. 59 of 1963; including amendments thereto))

Company Name Daiwa Real Estate Asset Management Co., Ltd

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

Established October 21, 2004

Paid-in Capital 200 million yen

President Akira Yamanouchi

Board of Directors9Executive directors: 4; Executive auditors: 1 Non-executive directors: 2; Non-executive auditors: 2

No. of Employees 69 (excluding dispatched employees)

Registration of Financial Instruments Business Operator

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

Building Lots and Buildings Transaction Business License

License No. (3)-83920, Governor of Tokyo

Discretionary Agent for Real Estate Transaction Approval

License No. 34, Minister of Land, Infrastructure, Transport and Tourism

Association MembershipMember of The Investment Trusts Association, Japan Member of Japan Investment Advisers Association Member of Type II Financial Instruments Firms Association

President and Representative Director Akira Yamanouchi

Vice President and Representative Director

Yuji Shinotsuka

Vice President and Representative Director

Yoshiki Nishigaki

Director Naoyuki Owa

Director (non-executive) Mikita Komatsu

Director (non-executive) Akihiko Ogino

Auditor Tamaki Shibayama

Auditor (non-executive) Morimasa Matsuda

Auditor (non-executive) Shinji Kiso

17II. Asset Management Report

1. Management Status and Other Performance Highlights Data

Fiscal Period 22nd Period 21st Period 20th Period 19th Period 18th Period

( From June 1, 2016To Nov. 30, 2016 ) ( From Dec. 1, 2015

To May 31, 2016 ) ( From June 1, 2015To Nov. 30, 2015 ) ( From Dec. 1, 2014

To May 31, 2015 ) ( From June 1, 2014To Nov. 30, 2014 )

(1) Operating Performance (Millions of yen, except per unit data or where otherwise indicated)Operating revenues 12,853 12,363 11,838 10,387 9,764 Rental revenues 12,687 11,948 11,777 10,112 9,693Operating expenses 6,710 6,255 6,223 5,617 5,325 Property-related expenses 5,433 5,014 5,026 4,487 4,325Operating income 6,143 6,108 5,615 4,770 4,439Ordinary income 5,325 5,327 4,690 4,032 3,642Net income 5,325 5,250 4,689 4,032 3,641

(2) Properties, etc. (as of end of period)Total assets 483,451 476,690 460,706 432,233 399,555 [period-on-period percentage changes] [+1.4%] [+3.5%] [+6.6%] [+8.2%] [+4.9%]Interest-bearing liabilities 204,300 206,300 192,300 191,300 160,800Net assets 256,517 247,720 247,700 222,955 222,593 [period-on-period percentage changes] [+3.6%] [+0.0%] [+11.1%] [+0.2%] [+10.4%]Unitholders’ capital 251,552 243,404 243,404 219,156 219,156

(3) DistributionsTotal distribution amount 5,325 5,086 4,689 4,032 3,641Dividend payout 100.0% 96.9% 100.0% 100.0% 100.0%

(4) Per Unit InformationTotal number of units issued (units) 497,869 484,000 484,000 441,000 441,000Net assets per unit (yen) 515,231 511,819 511,778 505,566 504,746Distribution per unit (yen) 10,695 10,508 9,688 9,142 8,256 Distribution amount from earnings per unit (yen) 10,695 10,508 9,688 9,142 8,256 Distribution amount in excess of earnings per unit (yen) – – – – –

(5) Financial IndicatorsROA Notes 2

and 31.1% 1.1% 1.1% 1.0% 0.9%

[annual rate] [2.2%] [2.3%] [2.1%] [1.9%] [1.9%]ROE Notes 3

and 42.1% 2.1% 2.0% 1.8% 1.7%

[annual rate] [4.2%] [4.2%] [4.0%] [3.6%] [3.4%]Capital ratio 53.1% 52.0% 53.8% 51.6% 55.7% [period-on-period percentage changes] [+1.1%] [−1.8%] [+2.2%] [−4.1%] [+2.7%]LTV (loan to value) 42.3% 43.3% 41.7% 44.3% 40.2%Property leasing cash flows (NOI) Note 5 9,004 8,660 8,455 7,180 6,866

(6) Other Referential InformationNumber of investment properties 53 50 50 47 46Number of tenants Note 6 558 543 558 450 479Total rentable area (m2) 336,722.04 328,027.44 325,313.01 288,833.07 286,088.89Occupancy rate Note 7 97.7% 98.7% 98.3% 97.3% 97.2%Depreciation 1,750 1,726 1,704 1,554 1,497Capital expenditures 993 517 1,087 905 570

(Note 1) Operating revenues, etc. do not include consumption taxes, etc.(Note 2) ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100(Note 3) Figures for the 18th Fiscal Period are the annualized figures calculated based on 183 days of management.

Figures for the 19th Fiscal Period are the annualized figures calculated based on 182 days of management.Figures for the 20th Fiscal Period are the annualized figures calculated based on 183 days of management.Figures for the 21st Fiscal Period are the annualized figures calculated based on 183 days of management.Figures for the 22nd Fiscal Period are the annualized figures calculated based on 183 days of management.

(Note 4) ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100(Note 5) Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation(Note 6) Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant is

counted and stated for each individual building.(Note 7) Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report

18

2. Developments in Asset Management in the Fiscal Period under Review

(1) Brief History of the Investment Corporation Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as “DOI”) was established on July 11, 2005 in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951; including amendments thereto) with Daiwa Real Estate Asset Management Co., Ltd. (former name K.K. daVinci Select) (the “Asset Manager”) as the organizer. After its establishment, DOI implemented an additional issuance of investment units through a public offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (TSE) Real Estate Investment Trust Section (stock code: 8976) on the following day. Though initial assets under management were 79,573 million yen (sum total of acquisition price), subsequent activities, such as additional acquisition of properties and replacement of portfolio properties, resulted in the assets under management amounting to 467,750 million yen as of the last day of November 2016. DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear portfolio development policy of specializing in investment in office buildings, with a particular focus on investment in a total floor area of more than about 2,000m2 situated in downtown Tokyo, as well as through dedicated efforts to heighten tenant satisfaction levels.

(2) Investment Environment and Management Performance

(A) Investment Environment (from June 2016 to November 2016) The Japanese economy during the fiscal period under review continued to show a modest recovery trend with real GDP growth rate (Second Preliminary Estimates) for July to September 2016 at an annual rate of 1.3%, recording a positive figure for three consecutive quarters under the ongoing quantitative/qualitative monetary easing policy by the Bank of Japan. In the office building leasing market in central Tokyo, with new supply having settled down, the vacancy rate took a turn after peaking in June 2013, dropping to 3.75% at the end of November 2016. Led by improvement in the vacancy rate for large buildings, the overall vacancy rate that includes small- to medium-sized buildings also continues to be on an improving trend. The drop in the vacancy rate has led to an increase in office rent in some areas, and the market as a whole continues to see increase in rent, albeit slight. For the office building transaction market, an appetite for property acquisitions continued to be strong among real estate companies, funds (including J-REITs) and overseas investors with the continuing proactive lending attitude by financial institutions backed by the forecast of an increase in property prices in accordance with expectations for economic recovery.

(B) Management Performance In view of increasing the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties) over the medium to long term, DOI continued to work on “external growth,” which aims to boost revenue through acquisition of properties, and “internal growth,” which aims to maximize income generating from owned properties. Concerning external growth, DOI acquired “Heiwa Higashi-nihonbashi Building” (acquisition price: 6,370 million yen) and “Square Daikanyama Building” (acquisition price: 2,280 million yen) in June 2016, and “Ogikubo TM Building” (acquisition price: 3,800 million yen) and “Shinjuku West Building” (acquisition price: 942 million yen) in July 2016. In addition, DOI sold 1 property (Daiwa Kudan) during the fiscal period under review. As a result, DOI’s assets under management as of the end of the 22nd Fiscal Period (November 30, 2016) totaled 53 properties, the sum total of acquisition prices of which amounted to 467,750 million yen. Concerning internal growth, while the office leasing market trended, DOI conducted proactive leasing, such as capturing needs for floor expansion within the same property through strengthening relationships with existing tenants and reinforcing collaboration with leasing brokers and property managers. As a result, the occupancy rate as of the end of the 22nd Fiscal Period (November 30, 2016) was 97.7%.

19II. Asset Management Report

(3) Overview of Capital Procurement

(A) Procurement of Capital for New Property Acquisitions

(a) In the 22nd Fiscal Period, DOI made the following borrowings and issued the following investment units to fund the acquisition of new properties.・DOI took out short-term loans of 6,000 million yen in total from Sumitomo Mitsui Banking

Corporation, Mizuho Bank, Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd. on June 1, 2016 to partially fund the acquisition of a new property (Heiwa Higashi-nihonbashi Building) acquired on the same day.

・DOI took out a short-term loan of 2,000 million yen from Sumitomo Mitsui Banking Corporation on June 29, 2016 to partially fund the acquisition of a new property (Square Daikanyama Building) acquired on the same day.

・A public offering with the payment date on August 2, 2016 (12,700 issued units, paid-in price of 587,489 per unit, a total paid-in price of 7,461,110,300 yen) and a third-party allotment with the payment date on August 31, 2016 (1,169 issued units, paid in price of 587,489 per unit, a total paid-in price of 686,774,641 yen) were implemented to repay part of the aforementioned short-term loans totaling 8,000 million yen and to allocate the funds to cash on hand which decreased after being used to acquire new properties (Ogikubo TM Building and Shinjuku West Building) acquired on July 21, 2016.

(B) Procurement of Capital for Repayment of Borrowings In the 22nd Fiscal Period, DOI made the following borrowings to fund the repayment of borrowings that were due for repayment.

・A total amount of 1,500 million yen was borrowed from Yamaguchi Bank Ltd. on August 31, 2016 to fund the repayment of the same amount borrowed from Aozora Bank, Ltd. due the same day.

DOI made an early repayment on September 30, 2016 of 10,000 million yen out of 11,000 million yen in total borrowings (long-term loans from Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank, Ltd. taken out on May 26, 2016; short-term loans from Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd. taken out on June 1, 2016; and a short-term loan from Sumitomo Mitsui Banking Corporation taken out on June 29, 2016).

(C) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 22nd Fiscal Period (November 30, 2016) stood at 204,300 million yen (short-term debt: 1,000 million yen; long-term debt: 198,200 million yen; investment corporation bonds: 5,100 million yen). The balance of the current portion of long-term debt stood at 28,250 million yen. The average remaining period of interest-bearing liabilities as of the end of the 22nd Fiscal Period stands at 4.1 years.

(4) Capital Expenditures during the 21st Fiscal Period

The following summarizes the primary construction work that constitutes capital expenditures implemented during the 22nd Fiscal Period. Capital expenditures for the 22nd Fiscal Period amounted to 992 million yen and, when combined with the 456 million yen in repair expenses charged to the 22nd Fiscal Period expenses, totals 1,449 million yen in construction work were implemented.

Name of real estate properties(Location)

Purpose PeriodConstruction amount paid

(Millions of yen)Daiwa Tsukishima(Chuo-ku, Tokyo) Renovation work of common areas From:

To:Apr. 2016Jul. 2016 70

Shinjuku Maynds Tower(Shibuya-ku, Tokyo) Repair work of mechanical parking facility From:

To:Jul. 2016

Oct. 2016 69

Daiwa Shibaura(Minato-ku, Tokyo) Upgrading of elevators From:

To:Aug. 2016Nov. 2016 64

Other From:To:

Jun. 2016Nov. 2016 790

Total 993

20

(5) Overview of Financial Performance and Distributions

As a result of the management described above, DOI posted financial performance for the 22nd Fiscal Period of 12,583 million yen in operating revenues, 6,143 million yen in operating income, 5,325 million yen in ordinary income and 5,325 million yen in net income. Concerning distributions, it is planned that the amount equivalent to distributions from earnings would be included in the amount of tax-deductible expenses based on application of special provisions for taxation of corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments thereto) (the “Special Taxation Measures Act”)). Accordingly, DOI decided to distribute the entire amount of unappropriated retained earnings (excluding fractions of the distribution amount per unit that are less than 1 yen), and declared a distribution amount per unit of 10,695 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment

The Japanese economy going forward is expected to see a moderate economic recovery through recovery in personal spending against the backdrop of favorable employment environment and the improved income environment while various economic measures, centering on the public works projects and financial policies promoted by the Abe administration and the monetary easing policy implemented by Bank of Japan continue. However, factors, such as policies to be set out by the U.S. President-elect Donald Trump, the downward swing of the Chinese economy, upset in emerging markets accompanying the U.S. “exit strategy,” drop in stock prices around the world due to geopolitical risks and downturn of the European economy, pose potential risks of disrupting the Japanese real economy and financial environment, and are thus thought to require attention.

In the Tokyo office building leasing market, while new supply is on a low note, factors such as improvement in employment are stimulating demand, resulting in the vacancy rate dropping. Improvement in corporate performance is forecasted to increase demand for office floor space and rent is expected to improve as a consequence. In the office building transaction market, backed by the favorable financing environment and expectations of rent rising, among other factors, property acquisition appetite among investors overseas, real estate companies and funds (including J-REITs) is thought to grow even stronger.

(2) Future Management Policy and Tasks

(A) Strategy for Managing Existing Properties Despite such office leasing market conditions as described above, the tenant side is also expected to become more heavily selective with properties in terms of software such as crime/disaster prevention measures and operations/management on top of location and building specifications. Consequently, DOI will carry out operational management under the following policy with an aim to enhance the competitiveness of existing properties and thereby increase the normal EPS over the medium to long term.

(a) Maintain and raise occupancy rates Concerning existing tenants, strive to reduce vacancy risks by improving the quality of buildings, equipment and management system. In addition, concerning new tenants, strive to maintain and raise occupancy rates through the provision of services that are of higher satisfaction levels than competing properties through proactive participation in the market.

(b) Maintain and raise profitability Aim to secure stable revenue over the medium to long term through further strengthening good relationships with existing tenants, as well as proactively tapping the needs of new tenants by discerning the market environment.

(c) Lower operational management costs Strive to lower operational management costs based on maintaining office environments of high tenant satisfaction levels by implementing efficient operational management and reviewing systematic construction work by optimally leveraging the economies of scale achieved from proactively realizing external growth.

21

(B) Strategy for New Property Investments DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on various external growth strategies, while maintaining a balance with the asset acquisition environment and financing situation. In principle, considerations will focus on Tokyo as the investment target area, but DOI will also consider investing in competitive properties in cities other than Tokyo from a viewpoint of territorially-distributed investments. As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue to search for properties that meet its investment criteria by proactively gathering real estate transaction market information through greater collaboration with the Asset Manager and Sponsor Group and utilizing the Group’s extensive network of clients, partners, etc. Furthermore, in the 22nd Fiscal Period, DOI acquired “Heiwa Higashi-nihonbashi Building,” “Square Daikanyama Building,” “Shinjuku West Building” and “Ogikubo TM Building” which are located in Tokyo. DOI believes that acquisition of these properties will contribute to further stabilization and enhancement of the portfolio. DOI will continue to strive to acquire properties in line with the investment strategy described above.

(C) Financial Strategy DOI will conduct disciplined financial management of the following basic content.

(a) Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within the range of 40% to 50% at maximum, taking into consideration also the real LTV, etc., as a principle.

(b) Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interest-bearing liabilities that shall become due during any single fiscal period as a principle.

(c) Aim to have long-term loans account for at least 70% of total loans as a principle.

(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.

(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing necessary funds, such as the amount equivalent to distributions paid, separately from working capital.

(D) Schedule of Capital Expenditures The following are the principal capital expenditures arising from renovation construction work, etc. currently planned for existing portfolio properties. Please note that the expected construction amount includes portions that are expensed as a separate account item of accounting costs.

Name of real estate properties(Location)

PurposeScheduled

implementation period

Expected construction amount (Millions of yen)

Total amount

Amount paid

during current period

Total amount already

paid

Daiwa Akasaka(Minato-ku, Tokyo

Upgrading of air-conditioning system

From:To:

Nov. 2016Jun. 2018 1,091 – –

Ogikubo TM Building(Suginami-ku, Tokyo)

Upgrading of air-conditioning equipment

From:To:

Feb. 2017May 2017 88 – –

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Changing lighting in exclusive areas to LED (green leasing)

From:To:

Dec. 2016May 2017 60 – –

Daiwa Akasaka(Minato-ku, Tokyo)

Upgrading of mechanical parking facility

From:To:

Oct. 2016May 2017 55 – –

Daiwa Shibadaimon(Minato-ku, Tokyo)

Upgrading of individual air-conditioning equipment

From:To:

Feb. 2017May 2017 54 – –

II. Asset Management Report

22

As of May 31, 2016 and November 30, 2016 (Thousands of yen)

As ofMay 31, 2016

As ofNovember 30, 2016

Assets

Current Assets:

Cash and cash equivalents (Notes 3 and 4) 23,038,218 20,667,865

Tenant receivables 174,843 145,235

Consumption taxes receivable － 55,305

Prepaid expenses 427,960 369,096

Deferred tax assets (Note 13) 307 12

Other current assets 188,383 16,773

Total Current Assets 23,829,711 21,254,286

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

Land 12,302,227 12,302,227

Buildings and structures 3,146,315 3,219,522

Tools, furniture and fixtures 18,958 19,126

Construction in progress 3,449 2,661

Land in trust accounts 351,272,600 359,306,652

Buildings and structures in trust accounts 102,387,897 104,787,007

Machinery and equipment in trust accounts 756,802 886,637

Tools, furniture and fixtures in trust accounts 187,063 228,556

Construction in progress in trust accounts 42,086 399,430

Other tangible fixed assets in trust accounts 4,337 4,337

Less: accumulated depreciation (21,675,860) (23,137,885)

Leasehold rights 2,407,102 2,398,276

Leasehold rights in trust accounts 306,884 306,884

Total Investment Properties, net 451,159,860 460,723,430

Other Assets:

Trademark 596 542

Lease and guarantee deposits in trust 113,685 113,684

Long-term prepaid expenses 1,189,162 1,074,159

Deferred tax assets (Note 13) 355,230 165,910

Derivative assets (Note 4) － 80,483

Deferred investment corporation bond issuance costs 29,436 26,482

Others 12,353 11,944

Total Other Assets 1,700,462 1,473,204

Total Assets 476,690,033 483,450,920

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

III. Balance Sheets

23

(Thousands of yen)

As ofMay 31, 2016

As ofNovember 30, 2016

Liabilities

Current Liabilities:

Accounts payable 988,221 1,996,737

Short-term debt (Notes 4 and 9) － 1,000,000

Long-term debt due within one year (Notes 4 and 9) 21,200,000 28,250,000

Accounts payable – other 494,490 456,273

Income taxes payable 970 831

Accrued consumption taxes 534,191 89,141

Rent received in advance 2,051,728 2,028,281

Other current liabilities 365,653 264,660

Total Current Liabilities 25,635,253 34,085,923

Long-Term Liabilities:

Investment corporation bonds (Notes 4 and 9) 5,100,000 5,100,000

Long-term debt (Notes 4 and 9) 180,000,000 169,950,000

Tenant security deposits including trust accounts (Note 4) 16,870,266 16,952,100

Derivative liabilities (Note 4) 1,364,329 845,574

Total Long-Term Liabilities 203,334,595 192,847,674

Total Liabilities 228,969,848 226,933,597

Net Assets (Notes 8 and 14)

Unitholders’ Equity:

Unitholders’ capital 243,403,874 251,551,759

Units authorized: 2,000,000 units

Units issued and outstanding: 484,000 units as of May 31, 2016 and 497,869 units as of November 30, 2016, respectively

Reserve for reduction entry － 164,163

Retained earnings 5,250,226 5,324,776

Total Unitholders’ Equity 248,654,100 257,040,698

Valuation and translation adjustments

Deferred gains or losses on hedges (933,915) (523,375)

Total valuation and translation adjustments (933,915) (523,375)

Total Net Assets 247,720,185 256,517,323

Total Liabilities and Net Assets 476,690,033 483,450,920


III. Balance Sheets

24 IV. Statements of Income and Retained Earnings

For the fiscal periods ended May 31, 2016 and November 30, 2016 (Thousands of yen)

For the fiscal periods ended May 31, 2016

For the fiscal periods ended November 30, 2016

Operating Revenues:

Rental revenues (Note 7) 11,947,802 12,687,269

Other revenues related to property leasing (Note 7) 91,981 63,616

Gain on sale of investment properties (Note 11) 323,700 102,139

Total Operating Revenues 12,363,483 12,853,024

Operating Expenses:

Property-related expenses (Note 7) 5,014,202 5,433,014

Asset management fees 994,954 1,043,441

Asset custody fees 23,183 24,159

Administrative service fees 73,682 82,492

Trust fees 19,720 18,936

Directors’ compensation 5,400 6,300

Other operating expenses 123,887 101,197

Total Operating Expenses 6,255,028 6,709,539

Operating Income 6,108,455 6,143,485

Non-Operating Revenues:

Interest income 132 45

Reversal of distribution payable 689 624

Other non-operating revenues 4,902 10,357

Total Non-Operating Revenues 5,723 11,026

Non-Operating Expenses:

Interest expense 597,307 603,225

Interest expense on investment corporation bonds 16,892 16,708

Borrowing expenses 166,855 173,072

New investment units issuance costs － 31,339

Other non-operating expenses 6,154 4,738

Total Non-Operating Expenses 787,208 829,082

Ordinary Income 5,326,970 5,325,429

Income Before Income Taxes 5,326,970 5,325,429

Income taxes – current 978 837

Income taxes – deferred 75,798 6

Total Income Taxes (Note 13) 76,776 843

Net Income 5,250,194 5,324,586

Retained Earnings Brought Forward 32 190

Retained Earnings at End of Period 5,250,226 5,324,776


IV. Statements of Income and Retained Earnings

25V. Statements of Changes in Net Assets


Number ofUnits

(Units)

Unitholders’ Equity Deferred Gains or Losses on

Hedges

Total Net AssetsUnitholders’

Capital

Reserve forReduction

Entry

RetainedEarnings

Balance as of November 30, 2015

484,000 243,403,874 － 4,689,024 (392,515) 247,700,383

Cash distributions declared －－－ (4,688,992) － (4,688,992)

Net income －－－ 5,250,194 － 5,250,194

Net changes of items other than unitholders’ equity

－－－－ (541,400) (541,400)

Balance as of May 31, 2016 484,000 243,403,874 － 5,250,226 (933,915) 247,720,185

Issuance of new investment units 13,869 8,147,885 －－－ 8,147,885

Provision of reserve for reduction entry －－ 164,163 (164,163) －－

Cash distributions declared －－－ (5,085,873) － (5,085,873)

Net income －－－ 5,324,586 － 5,324,586

Net changes of items other than unitholders’ equity

－－－－ 410,540 410,540

Balance as of November 30, 2016 497,869 251,551,759 164,163 5,324,776 (523,375) 256,517,323


V. Statements of Changes in Net Assets

26


For the fiscal periods ended

May 31, 2016

For the fiscal periods ended

November 30, 2016

Cash Flows from Operating Activities:

Income before income taxes 5,326,970 5,325,429

Depreciation and amortization 1,726,590 1,750,179

Amortization of bond issuance costs 2,954 2,954

New investment units issuance costs － 31,339

Interest expense 614,199 619,933

Decrease in tenant receivables 63,993 29,608

(Decrease) increase in accounts payable (93,048) 382,297

Increase (decrease) in rent received in advance 110,704 (23,447)

Decrease in investment properties due to sale 9,127,507 3,795,174

Interest payments (614,107) (620,025)

Decrease (increase) in consumption taxes receivable 515,291 (55,305)

Other, net 582,002 (81,115)

Net Cash Provided by Operating Activities 17,363,055 11,157,021

Cash Flows from Investing Activities:

Payments for purchases of investment properties (22,669,418) (14,558,212)

Payments for purchases of intangible assets － (82,008)

Proceeds from tenant security deposits 882,544 1,152,741

Refunds of tenant security deposits (549,537) (1,070,907)

Net Cash Used in Investing Activities (22,336,411) (14,558,386)

Cash Flows from Financing Activities:

Proceeds from short-term debt － 8,000,000

Repayments of short-term debt (5,500,000) (7,000,000)

Proceeds from long-term debt 21,700,000 1,500,000

Repayments of long-term debt (2,200,000) (4,500,000)

Proceeds from issuance of new investment units － 8,116,546

Distributions paid (4,688,696) (5,085,534)

Net Cash Provided by Financing Activities 9,311,304 1,031,012

Net Change in Cash and Cash Equivalents 4,337,948 (2,370,353)

Cash and Cash Equivalents at Beginning of Period 18,700,270 23,038,218

Cash and Cash Equivalents at End of Period (Note 3) 23,038,218 20,667,865


VI. Statements of Cash Flows

VI. Statements of Cash Flows

27VII. Notes to Financial Statements

For the fiscal periods ended May 31, 2016 and November 30, 2016

Note 1 – Organization and Basis of PresentationOrganization

Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as “DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the “Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management (hereinafter referred to as the “Asset Manager”)). DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager, as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating office properties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager. On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offering of units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange. As of November 30, 2016, DOI had ownership or trust beneficiary interests in 53 office properties with approximately 336,722m2 of rentable office space and had leased office space to 558 tenants engaged in a variety of businesses. The occupancy rate for the office properties was approximately 97.7%.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America. The accompanying financial statements have been reformatted and translated into English from the financial statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing the accompanying financial statements, relevant notes have been expanded and certain reclassifications have been made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory Japanese GAAP financial statements, but not required for fair presentation, is not presented in the accompanying financial statements. DOI maintains its accounting records in Japanese yen. DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

VII. Notes to Financial Statements

28

Note 2 – Summary of Significant Accounting Policies(a) Cash and Cash Equivalents

Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of acquisition.

(b) Investment Properties

Investment properties are recorded at cost, which includes the allocated purchase price, related costs and expenses for acquisition of the office properties and the trust beneficiary interests in trust. Investment property balances are depreciated using the straight-line method over the estimated useful lives as follows:

As of May 31, 2016 As of November 30, 2016Buildings and structures 2-64 years 2-64 yearsMachinery and equipment 4-23 years 7-23 yearsTools, furniture and fixtures 5-18 years 5-15 years

Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs and maintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.

(c) Deferred Investment Corporation Bond Issuance Costs

Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective terms of the bonds.

(d) New Investment Units Issuance Costs

The issuance costs of new investment units are expensed when incurred.

(e) Income Taxes

Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets and liabilities using the statutory rate.

(f) Real Estate Taxes

Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of the properties are registered by records maintained in each jurisdiction by the local government. The taxes are imposed on the registered record owner as of January 1 of each year, based on an assessment made by the local government. When a property is purchased within the calendar year, the taxes for corresponding calendar year are imposed on the seller. DOI pays the seller the corresponding amount of the taxes for the period from property acquisition date to December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property, rather than expensing them. In subsequent calendar years, such taxes on investment properties are charged as operating expenses in each fiscal period. The following is a summary of capitalized real estate taxes.

(Thousands of yen)

For the fiscal periods endedMay 31, 2016

For the fiscal periods endedNovember 30, 2016

Capitalized real estate taxes 53,870 39,921

(g) Consumption Taxes

Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld is included in the current assets while the excess of amounts withheld over payments is included in the current liabilities. Non-deductible consumption taxes relating to investment properties are amortized equally over five years.

(h) Hedge Accounting

DOI enters into derivative transactions for the purpose of hedging risks in the Articles of Incorporation of DOI in accordance with its general risk management policy. DOI uses interest-rate swaps as hedging instruments in order to hedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DOI applies the special accounting treatment to interest-rate swaps which qualify for hedge accounting and meet specific criteria. Under the special accounting treatment, the related differentials paid or received under such swap contracts can be recognized and included in interest expense or income of the hedged assets or liabilities, and the interest-rate swaps are not required to be measured at fair value separately. The assessment of hedge effectiveness has been made each fiscal period except for interest-rate swaps which meet the special criteria.


(i) Revenue Recognition

Operating revenues consist of rental revenues including base rents and common area charges, and other operating revenues such as utility charge reimbursements, parking space rental revenues and other income. Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can be reasonably estimated.

(j) Accounting Treatment of Trust Beneficiary Interests in Real Estate

For trust beneficiary interests in real estate, all assets and liabilities with respect to assets in trust, as well as all income generated and expenses incurred with respect to assets in trust, are recorded in the relevant balance sheet and income statement accounts of the accompanying financial statements.

Note 3 – Cash and Cash Equivalents Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as of May 31, 2016 and November 30, 2016 consisted of the following:

(Thousands of yen)

As of May 31, 2016 As of November 30, 2016Cash and deposits 20,940,425 19,070,683Cash and deposits in trust 2,097,793 1,597,182Cash and cash equivalents 23,038,218 20,667,865

Note 4 – Financial Instruments (a) Qualitative Information for Financial Instruments

Policy for Financial Instrument Transactions

DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bank borrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and well-diversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates. Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets and securities (in principle, deposits). DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.

Nature and Extent of Risks arising from Financial Instruments and Risk Management

Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties and repay or redeem outstanding borrowings and bonds. These borrowings and bonds are exposed to liquidity risk. Such risk is managed in ways such as maintaining the LTV ratio at low levels, diversifying maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders. For the floating-rate borrowings exposed to the risk of future interest rate fluctuations, DOI uses derivative transactions (interest-rate swap) as hedging instruments, in order to avoid interest rate fluctuations and to fix the amount of interest payments for floating-rate borrowings. DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the special accounting treatment. Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in the risk management policy of DOI. Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits in the event of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds. Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks such as bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term deposit and setting a minimum credit rating requirement for the depository financial institutions (excluding deposits for settlement purposes).

Supplemental Explanation regarding Fair Value of Financial Instruments

The fair value of financial instruments is based on their quoted market price. When there is no quoted market price available, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in a different value. Also, the contractual amounts of derivative transactions do not represent the market risk involved in these derivative transactions.

30

(b) Estimated Fair Value of Financial Instruments

Book value, fair value and difference between the two as of May 31, 2016 and November 30, 2016 were as follows: (Thousands of yen)

As of May 31, 2016 As of November 30, 2016

Assets Book value Fair value Difference Book value Fair value Difference

Cash and cash equivalents 23,038,218 23,038,218 – 20,667,865 20,667,865 –

Total 23,038,218 23,038,218 – 20,667,865 20,667,865 –

Liabilities

Short-term debt – – – 1,000,000 1,000,000 –

Long-term debt due within one year

21,200,000 21,292,250 92,250 28,250,000 28,320,007 70,007

Investment corporation bonds 5,100,000 5,221,170 121,170 5,100,000 5,184,930 84,930

Long-term debt 180,000,000 180,362,802 362,802 169,950,000 170,032,843 82,843

Total 206,300,000 206,876,222 576,222 204,300,000 204,537,780 237,780

Derivative transactions (*) (1,365,242) (1,365,242) – (765,091) (765,091) –

(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parenthesis indicating the net liability position.

The financial instruments whose fair value is deemed extremely difficult to determine are excluded from the above table (See Note 2 below).

Notes:

1. Methods to estimate fair value of financial instruments and derivative transactions

Assets:

(1) Cash and cash equivalents Due to the short maturities, the book value of these assets is deemed a reasonable approximation of the fair value.

Liabilities:

(1) Short-term debt, long-term debt due within one year and long-term debt For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items, their book value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, their fair value is calculated based on the present value of principle and interest cash flows discounted at the current interest rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is calculated based on the present value of principle and interest cash flows which are processed as a single unit with the interest-rate swap.

(2) Investment corporation bonds The fair value of investment corporation bonds are based on their quoted market price.


Derivative Transactions:

The Company applies the hedge accounting for all derivative transactions. Contractual amount and fair value were as follows:

(Thousands of yen)

Hedgeaccounting method

Type ofderivative

transaction Hedged item

As of May 31, 2016Contracted amount Fair value (*1)

Total Due after one year

Deferral hedge accounting method

Interest-rate swapReceive floating/Pay fixed

Long-term debt 82,800,000 81,300,000 (1,365,242)

Special treatment for interest-rate swaps


Long-term debt 28,350,000 19,850,000 – (*2)

111,150,000 101,150,000 (1,365,242)

(Thousands of yen)

Hedgeaccounting method

Type ofderivative

transaction Hedged item

As of November 30, 2016Contracted amount Fair value (*1)

Total Due after one year

Deferral hedge accounting method


Long-term debt 99,600,000 99,600,000 (765,091)

Special treatment for interest-rate swaps


Long-term debt 28,350,000 14,350,000 – (*2)

127,950,000 113,950,000 (765,091)

(*1) The fair value is provided by financial institutions.(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps are

processed as single unit with the hedged long-term debt.

2. Financial instruments whose fair value is deemed extremely difficult to determine

Tenant security deposits including trust accounts (with a book value of 16,870,266 thousand yen as of May 31, 2016 and 16,952,100 thousand yen as of November 30, 2016) that have been deposited by tenants were excluded from the scope of fair value disclosure because they are not marketable, and the actual deposit period is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.

32

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

As of May 31, 2016 Due withinone year

Due after one to two

years

Due after two to three

years

Due after three to four

years

Due after four to five

yearsDue afterfive years

Cash and cash equivalents 23,038,218 – – – – –Total 23,038,218 – – – – –

(Thousands of yen)

As of November 30, 2016 Due withinone year


years


years


years



Cash and cash equivalents 20,667,865 – – – – –Total 20,667,865 – – – – –

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

As of May 31, 2016 Due withinone year


years


years


years



Investment corporation bonds – – – 3,000,000 – 2,100,000Long-term debt 21,200,000 19,400,000 21,500,000 25,000,000 33,300,000 80,800,000Total 21,200,000 19,400,000 21,500,000 28,000,000 33,300,000 82,900,000

(Thousands of yen)

As of November 30, 2016 Due withinone year


years


years


years



Short-term debt 1,000,000 – – – – –Investment corporation bonds – – 3,000,000 – – 2,100,000Long-term debt 28,250,000 17,350,000 22,000,000 31,600,000 24,200,000 74,800,000Total 29,250,000 17,350,000 25,000,000 31,600,000 24,200,000 76,900,000


Note 5 – Tangible Fixed Assets of Investment Properties Investment properties as of May 31, 2016 and November 30, 2016 consisted of the following:

(Thousands of yen)


Acquisitioncost

Accumulateddepreciation Book value Acquisition

costAccumulateddepreciation Book value

Land 12,302,227 – 12,302,227 12,302,227 – 12,302,227

Buildings and structures 3,146,315 (1,807,702) 1,338,613 3,219,522 (1,895,482) 1,324,040

Tools, furniture and fixtures 18,958 (9,261) 9,697 19,126 (10,007) 9,119

Construction in progress 3,448 – 3,448 2,661 – 2,661

Land in trust accounts 351,272,600 – 351,272,600 359,306,652 – 359,306,652

Buildings and structuresin trust accounts

102,387,898 (19,378,467) 83,009,430 104,787,007 (20,718,843) 84,068,164

Machinery and equipmentin trust accounts

756,802 (389,890) 366,912 886,637 (411,720) 474,917

Tools, furniture and fixtures in trust accounts

187,063 (86,203) 100,860 228,556 (97,496) 131,060

Construction in progressin trust accounts

42,086 – 42,086 399,430 – 399,430

Other tangible fixed assetsin trust accounts

4,337 (4,337) – 4,337 (4,337) –

Total 470,121,734 (21,675,860) 448,445,873 481,156,155 (23,137,885) 458,018,270

34

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

(Thousands of yen)



Book value: (Note 1)

Balance at beginning of period 439,123,699 451,114,325

Change during the period (Note 2) 11,990,626 9,207,014

Balance at end of period 451,114,325 460,321,339

Fair value (Note 3) 483,390,000 505,430,000

(Notes)1. The book value represents the acquisition cost less accumulated depreciation.2. Significant changes

For the fiscal period ended May 31, 2016, the major reasons of increase are acquisitions of two assets (21,890,000 thousand yen).The major reason of decrease is sale of two assets (9,127,507 thousand yen) and depreciation (1,726,073 thousand yen).For the fiscal period ended November 30, 2016, the major reasons of increase are acquisitions of four assets (13,392,000 thousand yen). The major reason of decrease is sale of “Daiwa Kudan Building” (3,795,174 thousand yen) and depreciation (1,749,716 thousand yen).

3. The fair values as of May 31, 2016 and November 30, 2016 were determined by the sum of appraisal values provided by external real estate appraisers.

Note 7 – Rental Revenues and Expenses Rental revenues and expenses for the fiscal periods ended May 31, 2016 and November 30, 2016 were as follows:

(Thousands of yen)



Revenues from property leasing:

Rental revenues 11,947,802 12,687,269

Other revenues related to property leasing 91,981 63,616

Total revenues from property leasing 12,039,783 12,750,885

Rental expenses:

Consignment expenses 868,700 942,415

Utilities expenses 1,051,127 1,068,009

Taxes and dues 895,930 1,045,891

Insurance expenses 17,250 17,056

Repair expenses 403,759 456,738

Depreciation 1,726,073 1,749,716

Other 51,363 153,189

Total rental expenses 5,014,202 5,433,014

Income from property leasing 7,025,581 7,317,871


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

Note 9 – Short-Term Debt, Long-Term Debt Due Within One Year, Long-Term Debt and Investment Corporation Bonds

Short-term debt, long-term debt due within one year, long-term debt and investment corporation bonds as of May 31, 2016 and November 30, 2016 consisted of the following:

(Thousands of yen)


Unsecured loans due 2017 to 2026, principally from banks and insurance companies with interest rates mainly ranging from 0.2% to 1.0%

201,200,000 199,200,000

0.4% unsecured bond due 2019 3,000,000 3,000,000

1.0% unsecured bond due 2024 2,100,000 2,100,000

Total 206,300,000 204,300,000

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

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of November 30, 2016 were as follows:

(Thousands of yen)

Due withinone year


years


years


years


yearsDue after five years

Short-term debt, long-term debt and investment corporation bonds

29,250,000 17,350,000 25,000,000 31,600,000 24,200,000 76,900,000

Note 10 – Leases As Lessor The future minimum rental revenues under existing non-cancelable operating leases as of May 31, 2016 and November 30, 2016 were as follows:

(Thousands of yen)


Due within one year 10,461,097 9,765,206

Due after one year 17,018,806 16,105,193

Total 27,479,903 25,870,399

36

Note 11 – Gain on Sale of Investment Properties Gain on sale of investment properties for the fiscal period ended May 31, 2016 was as follows:

(Thousands of yen)

For the fiscal period ended May 31, 2016

Daiwa Shibuya Dogenzaka Building:

Proceeds from sale of investment property 6,400,000

Cost of selling investment property (4,474,587)

Other expenses related to sale (225,505)

Gain on sale of investment property 1,699,908

Daiwa Minami-Senba Building:




Loss on sale of investment property (1,376,208)

Gain on sale of investment properties for the fiscal period ended November 30, 2016 was as follows: (Thousands of yen)

For the fiscal period ended November 30, 2016

Daiwa Kudan Building:




Gain on sale of investment property 102,139

Note 12 – Reduction of Investment Properties Purchased with Government Subsidies Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings in trust as of May 31, 2016 and November 30, 2016.


Note 13 – Income Taxes DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct the amount distributed to its unitholders from its taxable income when certain requirements, including a requirement to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable income of DOI will be subject to regular corporate income taxes in Japan. DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able to deduct such amount from taxable income. The following table summarizes the significant difference between the statutory tax rate and DOI’s effective tax rate for financial statement purposes.

(%)



Statutory tax rate 32.31% 31.74%

Deductible cash distributions (30.85) (31.74)

Others (0.02) 0.02

Effective tax rate 1.44% 0.02%

The significant components of deferred tax assets and liabilities as of May 31, 2016 and November 30, 2016 were as follows:

(Thousands of yen)


Deferred tax assets:

Accrued enterprise tax 17 12

Deferred losses on hedges 431,326 267,141

Total deferred tax assets 431,343 267,153

Deferred tax liabilities:

Reserve for reduction entry 75,806 75,806

Deferred gains on hedges – 25,425

Total deferred tax liabilities 75,806 101,231

Net deferred tax assets 355,537 165,922

38

Note 14 – Per Unit Information Information about earnings per unit for the fiscal periods ended May 31, 2016 and November 30, 2016 and net assets per unit as of May 31, 2016 and November 30, 2016 were as follows:

(Yen)



Earnings per Unit:

Net income per unit 10,847.51 10,800.73

Weighted average number of units outstanding (units) 484,000 492,984

(Yen)


Net Assets per Unit 511,819 515,231

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

Note 15 – Distribution Information DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, the total amount of dividends that DOI has determined to pay out is 5,085,872,000 yen for the fiscal period ended May 31, 2016 and 5,324,708,955 yen for the fiscal period ended November 30, 2016 that are the largest integral multiple of 484,000 and 497,869, the number of units outstanding as of May 31, 2016 and November 30, 2016, respectively, after deducting provision of reserve for reduction entry as stipulated in Article 66-2 of the Special Taxation Measure Act of Japan. Furthermore, DOI does not pay out dividends that exceed accounting profits as outlined in Article 32-2 of DOI’s Articles of Incorporation.

(Yen)



Ⅰ Unappropriated retained earnings 5,250,225,912 5,324,776,691

Ⅱ Cash distributions declared 5,085,872,000 5,324,708,955

Ⅲ Voluntary Retained EarningsProvision of reserve for reduction entry 164,162,797 –

Ⅳ Retained earnings brought forward 191,115 67,736


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

(Yen)



Cash distributions per unit 10,508 10,695

Board of directors meeting dates July 15, 2016 January 20, 2017

Note 16 – Related-Party Transactions Not applicable.

Note 17 – Segment InformationFor the fiscal periods ended May 31, 2016 and November 30, 2016

Segment Information

Segment information has been omitted as DOI has only one segment, which is property leasing business.

Related Information

Information about Products and Services Disclosure of this information has been omitted as operating revenues to external customers for a single product/service category account for more than 90% of the operating revenues on the statements of income and retained earnings.

Information about Geographic Areas

(1) Operating revenues Disclosure of this information has been omitted as domestic operating revenues account for more than 90% of total operating revenues.

(2) Investment properties Disclosure of this information has been omitted as domestic investment properties account for more than 90% of the book value of the total investment properties.

Information about Major Tenants

Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of the operating revenues recorded in the statements of income and retained earnings.

40

Note 18 – Significant Subsequent EventsAcquisition of Asset

DOI acquired the trust beneficial interest in real estate on December 21, 2016 as described below.

Overview of the asset

Asset type Trust beneficial interest in domestic real estate

Property name Shin Kanda Mikuracho Building

Location 5-1 Kanda Mikura-cho, Chiyoda-ku, Tokyo

Acquisition price 1,592,000 thousand yen (excluding acquisition-related costs, consumption taxes, etc.)

Agreement date December 15, 2016

Acquisition date December 21, 2016

Seller OH Real Estate Management Co., Ltd.

41

VIII. Independent Auditor’s Report

VIII. Independent Auditor’s Report

42

Overview of Investment Units and Unitholders (as of November 30, 2016)

Top Ten Unitholders (as of November 30, 2016) IR Calendar

(yen) (units)

0

100,000

200,000

300,000

500,000

400,000

600,000

900,000

800,000

700,000

0

2,000

4,000

6,000

8,000

10,000

12,000

18,000

16,000

14,000

June July

Aug.

Sept.

Oct.

Nov.

Mar.

Apr.

May

June July

Aug.

Sept.

Oct.

Nov.

2014Dec.

2015 Jan.

Feb.

Mar.

Apr.

May

Dec.

2016 Jan.

Feb.

Trading volume (right axis)Investment unit price (left axis)

22ndFiscal Period

Total: 497,896 units

21stFiscal Period

Total: 484,000 units

Other domestic corporations 191,340 units (39.5%) Securities firms 6,776 units (1.4%)

Individuals/others

20,292 units (4.2%) Foreigners 53,390 units (11.0%)Financial institutions

212,202 units (43.8%)

Other domestic corporations 191,428 units (38.4%) Securities firms 3,662 units (0.7%)

Individuals/others

22,035 units (4.4%) Foreigners 61,792 units (12.4%)Financial institutions

218,952 units (44.0%)

Name of InvestorNumber of

Units Owned(units)

Percentage Share

1. Daiwa Investment Management Inc. 128,905 25.89%

2. Japan Trustee Services Bank, Ltd. (Trust Account) 70,700 14.20%

3. Daiwa Securities Group Inc. 59,321 11.91%

4.Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)

52,849 10.62%

5. The Master Trust Bank of Japan, Ltd. (Trust Account) 51,052 10.25%

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

17,676 3.55%

7. STATE STREET BANK AND TRUST COMPANY 505012 5,786 1.16%

8. CBLDN STICHTING PENSIOEN FONDS METAAL EN TECHNIEK 4,295 0.86%

9.BNP PARIBAS SECURITIES SERVICES SYDNEY/JASDEC/AUSTRALIAN RESIDENTS

4,217 0.85%

10.STATE STREET BANK - WEST PENSION FUND CLIENTS - EXEMPT 505233

3,643 0.73%

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

July Jan.

Aug.

Feb.

Nov.

May

End of fiscal period

End of fiscal period

January 20, 2017 : Announcement of financial results 22nd Fiscal Period

February 14, 2017 : Sending of Japanese version Business Report for 22nd Fiscal Period (Statement of Financial Performance)

February 15, 2017 : Start paying distributions for 22nd Fiscal Period

July 2017: Announcement of financial results for 23rd Fiscal Period

August 2017 : Sending of Japanese version Business Report for 23rd Fiscal Period (Statement of Financial Performance)

August 2017 : Start paying distributions for 23rd Fiscal Period

■ No. of Investment Units by Investor Type ■ No. of Unitholdersby Investor Type

Individuals/others 8,691(94.6%)

Financial institutions 101(1.1%)

Other domestic corporations

163(1.8%)

Foreigners 216(2.4%)

Securities firms 15(0.2%)

Total 9,186

History of Investment Unit Price

IX. Investor Information

43IX. Investor Information

Important information is

distributed via e-mail. Please

access and follow the simple

steps if you wish to receive

our IR mail Delivery Service.

Investor Memo

End of fiscal period May 31 and November 30 of each year

General Meeting of Unitholders Held at least once every two years

Date for finalizing Unitholders with voting rights for the General Meeting of Unitholders Date publicly announced beforehand

Reference date for finalizing payment of distributions

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

Listed financial instruments exchange Tokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted Nikkei Inc.

Manager of Unitholder Registry, etc. Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

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

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

Provision of Information via Website

Daiwa Office Investment Corporation

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

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

Fiscal Period Business Report (Statement of Financial Performance)

June 1, 2016 – November 30, 201622nd

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

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

Documents

22 Fiscal Period Business Report · Fiscal Period Business Report ... on June 29, 2016, Shinjuku West Building and Ogikubo TM Building on July 21, 2016 ... 10 Daiwa Shimbashi 510