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Earnings Announcement
for the 32nd Fiscal Period


I am Fukushima, President and Representative Director of Daiwa Real Estate Asset Management.
Thank you very much for watching the video of Daiwa Securities Living Investment Corporation's financial results. We would also like to express our sincere gratitude for your understanding and support for the management of the Investment Corporation.
I would now like to explain our financial results for the fiscal period ending November 30, 2021, the 32nd period, our recent situation, and our future initiatives.
Thank you very much in advance of your cooperation.

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Topics of the Fiscal Period Ended
November 2021 (32nd FP)


First, please see page 4.
This is the topic of today’s presentation.
The first is about internal growth. The occupancy rate at the end of the 32nd fiscal period was 97.8%, up 0.3% from the previous fiscal period, and up 1% from the initial forecast. This is a result of the steady progress in leasing, which began to take place in large blocks since last summer.
However, I have the impression that it is too early to say that the market has started to recover. The rent at the time of contract renewal was increased by 7.1%, but the percentage was only 6.5% of the target tenants. The rent at the time of replacement was plus 2.4%, barely securing an increase. Distributions amounted to JPY14,000, including the reversal of retained earnings.

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Topics of the Fiscal Period Ended
November 2021 (32nd FP)


Secondly, I would like to talk about external growth. Kandabashi PR-EX was acquired in the 32nd fiscal period. Entering the 33rd fiscal period, we transferred the Minami Aoyama Building and Kojimachi Building in December and made a property replacement to acquire land for development in Kanda-Sudacho.

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Topics of the Fiscal Period Ended
November 2021 (32nd FP)


The third is about finance and ESG. The LTV as of the end of the 32nd fiscal period is 41.9%, and a commitment line of JPY3 billion will be established by Daiwa Next Bank as of the end of January.
GRESB 2021 has improved to four stars from two stars in the previous year and expressed its support for TCFD in December. We also renewed our website, expanded ESG-related disclosures, and published a sustainability report. The details are explained in the appropriate section.
The deferment of rent, which had been granted to some tenants since the year before last when COVID-19 pandemic struck, has all been recovered as of now. Tenant vacancy trends and leasing have settled down, so we have removed the page about the impact of COVID from this report.

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Highlights of the Fiscal Period Ended
November 2021 (32nd FP)


Please see page 7.
I will now explain the status of financial results for the 32nd period and the forecast for the 33rd period and beyond.
This is the result of the 32nd period. Operating revenue decreased by JPY1.172 billion from the previous fiscal period to JPY13.882 billion. Net income decreased by JPY750 million from the previous fiscal period to JPY6.799 billion due to the loss of JPY1.026 billion in gains on sales, and a JPY121 million decrease in rent income from existing properties. Distributions have been maintained at JPY14,000, the same amount as the previous fiscal period, with a reversal of the equivalent of JPY102 from retained earnings.
The comparison between forecast and actual results shows no significant difference. Due to the contribution of properties acquired during the period, and the accumulation of detailed improvements, the amount of reversal, which was originally planned to be JPY200, was reduced to JPY102.

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Highlights of Forecasts for the Fiscal Periods Ending May 2022 and November 2022 (33rd and 34th FP)

Please see page 8.
Here are the earnings forecasts for the 33rd and 34th periods.
First, the 33rd period. The top line is JPY14.44 billion, a JPY558 million increase from the previous period, due to a JPY906 million gain on the sale of two properties, a JPY185 million decrease in revenue for the period due to the sale, and a JPY53 million decrease in rent income from existing properties.
We forecast net income of JPY7,410 million, an increase of JPY611 million over the previous fiscal period.

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Highlights of Forecasts for the Fiscal Periods Ending May 2022 and November 2022 (33rd and 34th FP)

Normally, the current fiscal period corresponds to the development period of the Nihonbashi Bakurocho Project and Kanda Sudacho Project, and we would cover the missing revenue by reversing retained earnings. But we expect to secure JPY14,000 without reversing retained earnings in the current fiscal period by adjusting the amount of gain on sales to be reserved in retained earnings. The occupancy rate at the end of the period is expected to be 97.7%.

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Highlights of Forecasts for the Fiscal Periods Ending May 2022 and November 2022 (33rd and 34th FP)

Next is the 34th period. The top line is expected to be JPY13.818 billion, a decrease of JPY622 million from the previous fiscal period, due to the absence of JPY906 million in gains on sales, while the existing rent income is expected to increase by JPY167 million due to the contribution of rent generation from newly contracted parcels.
Net income is expected to be JPY6.638 billion, down JPY772 million from the previous fiscal period. As will be explained on the next page, until the two development projects contribute to earnings, we plan to maintain the same amount of distribution of JPY14,000, as in the 32nd and 33rd fiscal periods, by reversing the equivalent of JPY400 from retained earnings from sales.
The forecasted occupancy rate at the end of the fiscal period is 97.1%, but this is due to the impact of the Nihonbashi Bakurocho Project scheduled for completion at the end of November this year. And if this is excluded, the occupancy rate of existing properties is forecasted to be 98.1%.

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Change in Dividends per Unit andPolicy for utilizing Internal Reserves

Please see page 9.
This page has been added due to the complexity of what constitutes a distribution in the past few fiscal periods, including the generation of gains on sales, efforts for development projects, and the accumulation and reversal of retained earnings.
The chart shows the transition from the 29th fiscal period, the fiscal period ending May 31, 2020 to the 34th fiscal period. In the 30th fiscal period, Shimbashi was sold, and of the profit from the sale, the equivalent of JPY667 per unit was retained internally. JPY16 per unit was used as a distribution, resulting in an actual distribution of JPY13,817.

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Change in Dividends per Unit andPolicy for utilizing Internal Reserves

In the 31st fiscal period, Kyobashi was sold, the equivalent of JPY1,468 was retained, and the equivalent of JPY635 was used for distributions, and the actual distribution was JPY14,000. In the 32nd fiscal period, the equivalent of JPY102 was withdrawn from retained earnings to cover the lack of earnings until the Bakurocho Project was completed, and the actual distribution was JPY14,000.
In the 33rd fiscal period, we sold Minami Aoyama and Kojimachi, and set aside JPY1,182 as retained earnings and JPY674 as distributions, resulting in a distribution forecast of JPY14,000. In the 34th fiscal period, in addition to the Bakurocho project, we will reverse JPY400 of retained earnings to cover the lack of earnings until the Kanda-Sudacho project is completed. The distribution forecast is JPY14,000.

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Change in Dividends per Unit andPolicy for utilizing Internal Reserves

The bottom line is the amount of retained earnings at the end of each fiscal period. The dark red indicates the amount of retained earnings newly accumulated from the gain on sale. We have set aside a total of approximately JPY1.6 billion in reserves from the sale of the four properties, and JPY2.3 billion when combined with internal reserves from the previous fiscal period.
We plan to use this internal reserve to cover the lack of earnings for about three years until the Bakurocho and Kanda-Sudacho projects are completed, and stable cash flow can be expected.

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Change in Dividends over the Past Decade

Please see page 10.
Distributions have continued to increase for 21 consecutive fiscal periods up to the 31st fiscal period, but the actual amount for the 32nd fiscal period and the forecasts for the 33rd and 34th fiscal periods are set at JPY14,000.
Next, let's talk about internal growth.

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Leasing Market of Tokyo Office Buildings

Please see page 12.
Here are the market trends for office buildings in Tokyo.
The vacancy rate bottomed out in February 2020 and rose sharply until October 2021, picking up slightly in November and December, but still remaining at a high level.On the right, the rental clock. For large office buildings, rents have been falling along with the vacancy rate since June 2020 and have shown a slight downward trend in the last six months as well.
Overall, rents in office buildings have not fallen as much as in large buildings, but vacancy rates are on the rise.
All of these indicators do not show a clear bottoming out of the occupancy rate. We believe that we should continue to operate under cautious market judgment.

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Analysis of Leasing Business (1)
― Change in Occupancy Rate and Ratio of Area Attributable to New Leases/Cancellations as a Percentage of Total Leasable Area ―


Please see page 13.
This section explains the operation status of the DOI.
The occupancy rate is expected to be 97.8% at the end of the 32nd period, up 1% from the forecast, 97.7% at the end of the 33rd period, 97.1% at the end of the 34th period, and 98.1% excluding the impact of the Bakurocho Project.
After operating under the pandemic, we believe it is possible to maintain the operation rate in the mid 97% range in the future.
Bottom left is the rate of move-in and move-out. The number of cancellations increased in the 31st and 32nd periods but returned to a calm situation in the 33rd period.

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Analysis of Leasing Business (1)
― Change in Occupancy Rate and Ratio of Area Attributable to New Leases/Cancellations as a Percentage of Total Leasable Area ―


Going forward, we will be watching the impact of the massive supply of new buildings in 2023.
Although 80% of the DOI floors are not directly affected, there is a possibility that some of them will be. We believe that we can control the situation sufficiently within the overall portfolio, but we will try to detect any signs as soon as possible and take proactive measures.
The number of move-ins and move-outs was about the same as the previous year. While there were many restructuring-type move-outs, such as cost-cutting and downsizing, there were also many move-ins for expansion and relocation, which seems to reflect the ups and downs of different industries within the pandemic.

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Analysis of Leasing Business (2)
― Improvement in Basic Strength ―


Please see page 14.
Internal growth figures.
The red box on the right is the actual amount of increase/decrease for the 32nd period. The pink area represents the replacement of tenants, adding JPY2.04 million, and the light blue area represents the renewal of contracts, adding JPY1.56 million, for a total monthly increase of JPY3.61 million.
At this point, we believe that our top priority is to maintain the occupancy rate, while maintaining a positive figure in this category. As a result, maintain the level of distributions. For the time being, we are not expecting a recovery to the pre-COVID level, but we will aim to improve the figures to the extent possible.

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Analysis of Leasing Business (3)
― Changes in Rent Increase/Decrease Rate of Contract Renewal Tenants ―


Details are provided on the following page 15 onwards.
Details of rent increase upon renewal.
In the 32nd period, 17.1% of the total contracts were renewed, and 6.5% of the tenants agreed to increase the amount. This is less than half the rate of the previous fiscal period. But we are grateful for the understanding of the tenants who agreed to the increase within the pandemic.
In addition, the fact that there were no downward revisions under these circumstances can be said to be a result of the tenant relations that have been established.

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Analysis of Leasing Business (3)
― Changes in Rent Increase/Decrease Rate of Contract Renewal Tenants ―


Top right, the rate of rent increase. For the 32nd period, the increase was 7.1% or JPY1.56 million. The breakdown is shown in the donut chart at the bottom right.
We are aware that the rent gap for the portfolio as a whole has narrowed considerably, but the strength or weakness varies by property and parcel.
We would like to make efforts to understand the situation of each tenant and respond appropriately.

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Analysis of Leasing Business (4)
― Status of Contract Rent ―


Please see page 16.
The rent due to the replacement increased by JPY2.04 million, or 2.4%. The figure turned positive from negative in the previous fiscal period.
There is no bias toward properties that rose or fell, and the assessment is that rents rose in parcels with relatively low levels of previous tenant rents and fell in parcels with high levels of previous tenant rents.
Before COVID, almost all the parcels were on an upward trend, so this shows that the rent gap is shrinking.

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Portfolio Map: Increase and
Decrease in Unit Contract Rent Compared With Previous Fiscal Period


Please see page 17.
The increase/decrease in unit price per contract by property.
While there were 14 cases of increase, there were 5 cases of decrease. Four of the five properties that fell are located in the main Shibuya area.
We believe that this is merely a correction of the excessive rise in rents before COVID and does not mean that the area as a whole has become less competitive.DOI's occupancy rate for the main Shibuya area is 97.1%.
While the most recent newly contracted rent has declined, it has not pushed down the average rent for each property, which remains at the same level as in 2019.

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Internal Growth Strategy

Please see page 18.
This is an introduction of the DOI Investment Management Department and Construction Management Department, which support the work of operations.
The DOI Investment Management Department has increased the number of staff during the pandemic and has been operating with a staff of nine.
Going forward, we will continue to monitor the office market and make optimal allocations throughout the Company.

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Occupancy Status of Properties Subject to Leasing Improvement
in the Fiscal Period ended November 2021 (32nd FP)


Please see page 19.
This is the result of the properties for which leasing was strengthened in the previous fiscal period.
First, the River Gate. Due to the tenants' cautious consideration, we were forced to play a long game. Since the summer of last year, the tide has turned, and large parcels have been signed one after another, resulting in 92.6% of the 81.2% forecast for the end of the 32nd period, and 98.6% for the end of the 33rd period.

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Occupancy Status of Properties Subject to Leasing Improvement
in the Fiscal Period ended November 2021 (32nd FP)


Next, Shinjuku Maynds Tower.
The forecast for the end of the 33rd fiscal period was 87.4%, factoring in the cancellation of a large-lot tenant. But the forecast for the end of the 33rd fiscal period has improved to 93.4% due to the successful leasing of approximately half of the subject parcels of 1,000 tsubo.
Aiming to achieve full occupancy by the end of the 34th fiscal period, we will continue to strengthen leasing of the property.

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Occupancy Status of Properties Subject to Leasing Improvement
in the Fiscal Period ended November 2021 (32nd FP)


Finally, there's Akasaka. We had assumed 70.9% at the end of the 32nd period due to the departure of several tenants. In some sections, DOI's first attempt at leasing set-up offices, i.e., offices with furnished interiors, attracted more viewings than expected, and we were able to re-tenant with a significant increase in rent.
Thanks, in part to the contribution of this parcel, the rate returned to 82% at the end of the 32nd fiscal period. But due to further cancellations, the rate is scheduled to drop to under 80% again at the end of the 33rd fiscal period.
We will continue to strengthen leasing activities in the current fiscal period.

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Properties Subject to Leasing Improvement in the Fiscal Period
Ending May 2022 (33rd FP)


See page 20.
The number of properties to be leased in the current fiscal period is four, including the two properties shown on the previous page and the following two properties.
On the left, SHIBUYA EDGE. Due to multiple tenant move-outs, the occupancy rate at the end of the 32nd fiscal period was 73.9%. As of now, we have already received applications for all the parcels and are in the process of negotiating for contracts.

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Properties Subject to Leasing Improvement in the Fiscal Period
Ending May 2022 (33rd FP)


On the right, the Kandabashi PR-EX. At the time of acquisition last September, we had received cancellation notices for two floors, which resulted in 79.2% at the end of the 32nd fiscal period.
Immediately after the acquisition of the property, we have been proceeding with leasing, and currently have received an application for one floor at the rent level that is in line with our forecast.
We are aiming to close the remaining floor by the end of the 33rd fiscal period.Next, let's talk about external growth.

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Newly Acquired Properties in the Fiscal Period Ended November 2021

Please see page 22.
This is a newly acquired project.
In the 32nd fiscal period, we acquired Kandabashi PR-EX.
In addition to Otemachi Station, which is a five-minute walk from the property, Ogawa-cho, Takebashi, and Kanda Stations are also within walking distance. The property has convenient access to JR lines and multiple subway lines, as well as proximity to central business districts.

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Newly Acquired Properties in the Fiscal Period Ended November 2021

On the other hand, the area is expected to have solid office demand with relatively low rent levels.
Despite its small size, the building has a ceiling height of 2.7 meters, OA floors, individual air conditioning, and other facilities to meet the needs of various tenants.
The NOI yield at the time of acquisition is 3.5%, but we have already succeeded in re-tenanting one floor at the target rent and are moving toward the mid-term target of 3.9%.

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Asset Replacement in the Fiscal Period Ending May 2022 (33rd FP)

Please see page 23.
In the 33rd fiscal period, we implemented property replacement by transferring two properties that are over 30 years old, Daiwa Minami Aoyama Building and Daiwa Kojimachi 4-chome Building, and acquiring land for development in Kanda-Sudacho 2-chome.
This transaction was a relative transaction with World Holdings Group, a company listed on the first section of the Tokyo Stock Exchange, which is engaged in real estate development business, including redevelopment projects.
We acquired a new property in the vicinity of Akihabara Station, one of the major terminal stations in Tokyo, and realized a gain of JPY900 million on the sale.

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Development Project Efforts and Progress

Please see page 24.
This is the approach and progress of the development project.
The Kanda-Sudacho 2-chome Development Project is the second development project for DOI. We are working on it by utilizing the knowledge gained from the preceding Nihonbashi-Bakurocho 1-chome Development Project.
The estimated acquisition price, including land and construction costs, is JPY15.2 billion for a 12-story building with 240 tsubo per floor. We have already concluded a design supervision contract and a construction contract with Taisei Corporation and are now moving forward with the implementation design in preparation for the start of construction in July this year.
The expected NOI yield for the cruising period is just over 4%. Construction is scheduled to be completed in March 2024.
We will report on the progress as appropriate.

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Development Project Efforts and Progress

The bottom row shows the progress of the first phase, the Nihonbashi Bakurocho 1-chome development project. Construction started last June as planned and is progressing smoothly.
In December of last year, we selected a property management company, created a dedicated brochure and website, and started leasing activities.
In addition, the asset management company revised its organization as of February 1 and established a new Development Planning Office, increasing the number of staff by one to four to be in charge of development projects.

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Efforts to Improve Portfolio Quality

Please see page 25.
Replacement of properties for nine fiscal periods after the 25th fiscal period is shown.Over the past four years, we have acquired 13 properties worth JPY102 billion and transferred 9 properties worth JPY106.1 billion. This means that we have replaced more than 20% of our portfolio.
As a result, we have succeeded in reducing the average building age by approximately two years as of the end of the 32nd fiscal period compared to the case where we continue to own the portfolio as of the beginning of the 25th fiscal period, while maintaining the ratio in the 80% range of the five major wards of Tokyo.

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Efforts to Improve Portfolio Quality

In addition, by the end of the 37th fiscal period, when the two properties currently under development will be completed, we expect to see a reduction of more than three years, which means that the effects of the qualitative improvement of the portfolio through the development properties will be realized in a tangible way.

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Acquisition/Sale Policy and Status of Deliberation for Property Acquisitions

Please see page 26.
There is no change in the basic policy for acquisition and sale of properties.
As in the past, we will continue to acquire properties that contribute to improving the quality of our portfolio through careful selection of properties and unique innovations.

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Change in Asset Size
and Acquisition Performance


Please see page 27.
The following is a list of our past acquisitions.
Although we have a mid-term target of JPY500 billion, we dare not set a deadline, and will continue with this policy.

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Status of Interest-Bearing Liabilities (1)

Please see page 29.
Next, I would like to talk about the financial situation.
First, let's look at interest-bearing debt. In the 32nd fiscal period, we refinanced JPY6.5 billion and carried out interest rate swaps on the existing JPY15.4 billion loan.
The LTV ratio as of the end of the 32nd fiscal period was 41.9%.
The fixed interest rate ratio was approximately 83.7%.
The long-term borrowing ratio was 83.2%, all of which are stable. The rating is as shown.

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Status of Interest-Bearing Liabilities (2)

Please see page 30.
Repayment schedule of interest-bearing debt. The average remaining maturity is 3.9 years. The average new borrowing maturity is 8.4 years.
We will continue to strive for appropriate financial management with the cooperation of our lenders.

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Status of Interest-Bearing Liabilities (3)

Please see page 31.
The following is a list of lenders. We have the support of many financial institutions.
Thank you very much. Thank you for your continued support.

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Unitholders as of the End of November 2021

Please see page 32.
The status of unitholders as of the end of the 32nd fiscal period is shown.
IR within the pandemic was mainly conducted via conference calls, but we conducted 57 domestic and 31 overseas IRs for the 31st fiscal period, providing more opportunities than the previous fiscal period.
For individual investors, we conducted online seminars, as well as a face-to-face seminar in October last year for the first time in two years.
We will continue to engage in dialogue with investors in Japan and overseas.

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Efforts on ESG | Environment

Please see page 35. This section describes our ESG initiatives.
On page 35, I first want to talk about the Environment.
In GRESB 2021, the overall rating has improved from two stars to four stars, and the disclosure rating from B to A.
As an investment management company, we also expressed our support for the TCFD recommendations and joined the TCFD Consortium.
We are currently in the process of completing the development of our internal policies related to climate change and beginning discussions on the business risks and opportunities posed by climate change.
We are considering disclosing the results of our qualitative analysis at the time of our next earnings announcement.

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Efforts on ESG | Social

Page 36, Social.
We are working to ensure the safety of our employees, business partners, and others involved in the pandemic.
In addition to the thorough implementation of infection control at each property, we are also implementing new measures, such as providing vaccination venues and introducing sterilizing cleaning robots using AI technology.
As described in the section on initiatives for employees, the Company formulated a general business owner action plan in October last year in accordance with the Act on Advancement of Measures to Support Raising Next-Generation Children.
We are working to improve the employment environment so that all employees, including those with children, can demonstrate their abilities and aim to balance work and family life.

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Efforts on ESG | Governance

Page 37, Governance.
The Sustainability Promotion Office, which was established in June last year, plays a central role in the planning, formulation, and implementation of ESG and SDGs-related activities for all investment corporations and the Company.
Most recently, in December last year, we completely renewed the website of the Company to expand the disclosure of ESG-related information and published a new sustainability report.
In the management fee system revised for the fiscal period ending November 30, 2019, the 28th fiscal period, the calculation method focuses on investment results.
By aligning the vectors of investors and the Company, we are strengthening incentives to improve performance.
The management fee ratio for the 32nd fiscal period was 0.50%.

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Daiwa Securities Group’s Efforts to Achieve SDGs

Page 38 describes the Daiwa Securities Group's efforts to address the SDGs.
The Daiwa Securities Group has formulated a management vision "2030 Vision" as its medium-term goal and a medium-term management plan to achieve it. We will continue to work together as a group to realize the SDGs.

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Lastly, in addition to doing what we have always done as a matter of course, we will continue to maintain a sensitive antenna so that we do not miss any opportunities. We will fulfill our reporting and accountability in good faith so that our lenders and equity investors will support us.
We will also maintain strict governance in carrying out these activities. We will continue to adhere to these basic policies.
In the 32nd period, we believe that we were able to maintain our basic strength and continue our management structure in preparation for a reversal offensive when the market recovery is confirmed.

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We will not change our basic policy for the 33rd period, as we cannot say that the market recovery has been confirmed at this point.
At the same time, this is an important time for us to put the finishing touches on the Nihonbashi Bakurocho 1-chome development project that we are newly undertaking.
We are determined to do our best so that we can give you a good report in six months' time.We will continue to strive to become an investment corporation and asset management company that can be trusted and supported by everyone.
This concludes the explanation.
Thank you for watching.