SEMI-ANNUAL REPORT FOR THE PERIODMARCH 1ST 2007 TO AUGUST 31ST 2007

http://www.ncrinv.co.jp/eng/

Financial
FinanFi
ancia Highlights
New City Residence Investment Corporation (New City Residence) was listed on the Real Estate Investment

Summary of 1st to 5th Period Results

Trust section of the Tokyo Stock Exchange on December 15, 2004 (securities code: 8965).
Through the acquisition of leasing properties featuring high-quality residences, and the introduction of anarray of value-added services, New City Residence has positioned itself as a high-end multifamily apartment
brand.
New City Residence aims to build a portfolio that appeals to a broad range of tenants, responds to diverseand changing lifestyle preferences, as well as environmental, demographic and generational trends.
New City Residence delivers strong growth through a pipeline strategy and extensive outside information
network, and continues to meet the needs of its tenants through centralized property management
functions and standardized services.
Given the importance inherent in the nature of residential properties, New City Residence is confident that it
is well positioned for stable medium- to long-term earnings.

1st Period
2nd Period
3rd Period
4th Period
5th Period(ended Aug 31, 2005)* (ended Feb 28, 2006) (ended Aug 31, 2006) (ended Feb 28, 2007) (ended Aug 31, 2007)
260 days
181 days
184 days
181 days
184 days
3,224 million yen
3,346 million yen
4,201 million yen
5,678 million yen
5,730 million yen
1,151 million yen
1,435 million yen
1,635 million yen
2,442 million yen
2,199 million yen
1,146 million yen
1,433 million yen
1,630 million yen
2,437 million yen
2,197 million yen

Operating period
Operating revenues
Income before income taxes
Net income

2,591 million yen
1,657 million yen
1,146 million yen

2,637 million yen
1,934 million yen
1,433 million yen

3,293 million yen
2,282 million yen
1,630 million yen

3,615 million yen
3,175 million yen
2,437 million yen

4,122 million yen
3,044 million yen
2,197 million yen

104,678 million yen
62,200 million yen
40,503 million yen
59.4%

135,663 million yen
66,900 million yen
66,539 million yen
49.3%

164,094 million yen
94,600 million yen
66,756 million yen
57.6%

181,509 million yen
90,300 million yen
88,242 million yen
49.7%

195,685 million yen
104,350 million yen
88,006 million yen
53.3 %

74,556 units
15,381 yen
543,268 yen
22,231 yen

122,612 units
11,692 yen
542,687 yen
15,774 yen

122,612 units
13,302 yen
544,451 yen
18,616 yen

164,068 units
14,858 yen
537,843 yen
19,351 yen

164,068 units
13,393 yen
536,404 yen
18,555 yen

NOI (Note 1)
FFO (Note 2)
Total cash distribution
Total assets
Total interest-bearing liabilities
Net assets
LTV (Note 3)
Outstanding investment units issued
Distribution per unit
Net asset per unit
FFO per unit

Note 1: NOI = Rental income for the period (rental revenues – rental expenses) + depreciation for the period
Note 2: FFO = Net income for the period + depreciation for the period
Note 3: LTV (Loan to value ratio) = Total interest bearing liabilities/total assets at end of period*The 1st period was from December 15, 2004 to August 31, 2005

Table of Contents
Financial Highlights
Interview with the Management
Diversification Highlights
Rent Trends of New and Renewed Contracts
Brand Strategy
Financial Strategy
Collaboration Network
Acquisitions in the 5th Period
Portfolio Map
Portfolio List
Overview of New City Residence
Organizational Chart of Asset Management Company
Governance for Conflicts of Interest
Selective Financial Data
Financial Statements
Auditors Report
Balance Sheets
Statements of Income
Statements of Changes in Unitholders’ Equity
Statements of Cash Flows
Notes to Financial Statements

Principal Investment Information

1
2
6
7
8
9
10
11
14
16
18
19
19
20
21
22
23
24
25
26
27
inside Back CoverOperating Revenues
and Net Income

Total Assets
and Net Assets

JPY Million

JPY Million

6,000

200,000
5,678

181,509

150,000

4,000

135,663

100,000

3,346

2,000

2,437
1,146

1,433

2,197

104,678

50,0001,630

66,53966,756

2nd
period3rd
period88,24288,0064th
period5th
period40,5030
1stperiod2nd
periodOperating revenues

3rd
period4th
period5th
period

1st
periodNet income

Total assets

Distribution per Unit
and Net Asset per Unit
JPY
17,500JPY
537,843

542,687

Net assets

Issuer Ratings

544,451543,268

15,000

164,094

4,201
3,224

0

195,685

5,730

545,000
536,404(as of August 31, 2007)
Rating Agency

Issuer Rating

Rating Outlook

Moody's Investors Service, Inc.

A3

Positive

Rating and Investment Information, Inc.

A+

Stable530,000

15,381

14,85813,393

13,302

12,500515,000

11,692

10,000500,000

1st
period2nd
periodDistribution per unit

3rd
period4th
period5th
periodNet asset per unit1Interview
Innterv
rview with the Management
Further Reinforcing Market Trust by Becoming More Transparent and Understandable
New City Residence Investment Corporation (New City Residence) is a Japanese real estate
investment trust (J-REIT) listed in December 2004. In the more than three years since, New
City Residence has consistently and successfully secured “stable revenues and steady
growth,” and has continued to grow as a representative residential property J-REIT.
We are resolved in our commitment to continuously achieve steady growth in the future,with a portfolio centering on "close," "new" and "large" properties primarily located in
the Tokyo Metropolitan Area, and to maintain our efforts to further reinforce our trust
relationship with investors.
Q: Please explain the new management structure andstance following your appointment as Executive
Director of New City Residence and President of CBRE
Residential Management on July 31, 2007.

In recent years, increasingly rigorous earthquake resistancestandards are required. In addition, ceiling heights andsash heights are indispensable factors from the perspectiveof the living environment. Likewise, ensuring security isalso essential. Keeping such in mind, New City Residence
endeavors to acquire properties that have a building ageof five years or less as much as possible.
Jun Arai
Executive Director, New City Residence
Investment Corporation
President, CBRE Residential Management K.K.

fully examining changes in the external environment such asreal estate market conditions and interest rate trends.

Portfolio Growth

Arai: I assumed the post of Executive Director of New City
Residence and President of CBRE Residential Management
K.K. (hereafter, CBRERM), the asset manager of New City
Residence at the end of July.
There has been no change in the asset management policy of
New City Residence with my appointment. I will conduct
asset management in line with the policies and strategies
New City Residence has diligently implemented since the IPO.
I believe this is what is required of the representative directorof the asset manager, and this is my first message to ourunitholders.
Q: What are your property acquisition strategy andexternal growth targets?
Arai: New City Residence started with a portfolio of 61 billion
yen when listed. By the end of August 2007 when the 5th
period ended, the total acquisition price topped 180 billion
yen. Our initial target of a 200 billion yen portfolio by the endof 2007 is near at hand.

“New” means buildings constructed based onrecent regulations.

We have constructed a portfolio that has “close,” “new” and“large” properties as core assets that are complemented byother excellent assets that are smaller in size but featuresimilar characteristics. "Close," "new" and "large" properties
are highly competitive, and thus have much room for rent
increases in the future. We believe this type of investment
strategy is indispensable in building a portfolio that iscompetitive in the medium to long term.
Q. We understand you are focused on central Tokyo, butwhat is your investment policy for other cities?

“Large” means properties having wellequipped common spaces that only large
properties can afford.

Arai: We are investing in ordinance designated cities
including Osaka and Nagoya.

In Japan, traditionally owners of rental housing tended to
be individuals, and their insufficient capital served as abarrier against the building of large rental housing.
Moreover, there was also a market “belief” that rental
housing was easy to lease up when it had a maximum ofaround 50 units.

We strictly select locations from the perspective that people
want to live in rental housing that is close to their workplace,as well as take into consideration the specific area
characteristics. Our selective investment focuses onproperties that generate high revenues and for which stabledemand over the long term can be projected.

However, the emergence of J-REITs has made large rental
housing properties common, and they are being leased up
at a good pace. This means that residents appreciate thecommon spaces in these apartments, which enjoy thefacilities of large for-sale condominiums (i.e., hotel-likeentrance halls, lounges with excellent views, etc.).

For example, our investments in Osaka are second only to theTokyo Metropolitan Area. This is because we assume there
will be increased demand for offices in Osaka asredevelopment increases, and New City Residence owns
many properties within walking distance from office areas in
Osaka City. We are confident that we can expect future rent
hikes for our portfolio properties.

External Growth Strategies
Q: Within your external growth strategy, you havepositioned the "close," "new" and "large" properties
as core portfolio assets. Can you tell us about thebackground of this policy?
Arai: Let me first summarize the characteristics of "close,""new" and "large" assets.

Pipeline Strategy

Growing Profit through a Select Portfolio

Collaboration with sponsor New City Corporation K.K.
Alliance with major brokerage firms(As per memorandum on Provision of Real Estate Brokerage Information, etc.)• Chuo Mitsui Trust Bank
• Sumitomo Real Estate Sales• Tokyu Livable• Mitsui Real Estate Sales

Construct portfolio with high potential to raise rents• Investment focuses on Tokyo 5 Central Wards• Acquisition of “Close,” ”New” and “Large” core assets
Selective investment in high-yield properties in the heart of key regional cities
Stabilization of cash flows from new properties with low occupancies by concluding
master lease agreements with the sellers

PORTFOLIO ENHANCEMENTNew City Residence has concluded an agreement with New
City Corporation K.K., a sponsor of CBRERM, for theprovision of certain information and properties. This pipeline,
through which we acquire properties, will continue tocontribute to our external growth in the future. New City
Residence has also constructed a diverse acquisition network
outside of its sponsors that includes large developers andother real estate companies.
As we continue our external growth efforts in the future,
New City Residence will pursue expansion through theacquisition of excellent assets at the appropriate timing, after2“Close” means locations close to businesszones.

Acquisition Method Diversification
Develop robust sourcing channels

Residents of New City Residence properties desire the highquality lifestyle that can be attained through the closenessof their workplace and residence. Not to mention being
within walking distance from railway stations, closeness tocentral business districts (CBDs) is key to leasing residencesthat gain stable revenues over the long term. By living incentrally located rental residences, tenants save valuabletime.

Promote acquisition of properties still under development• Avoid excessive property competition• Promote acquisition of properties that match the New City Residence brand inbuilding design and specifications

Due Diligence
Construct system for double checking engineering reports and appraisal reports
internally
Periodically inspect properties during construction
Obtain Reps & Warranties from sellers for legal compliance and liability latent
defects3

Q. New City Residence was the pioneer of implementing
a branding strategy within its internal growthstrategy among J-REITs. Why is this?
Arai: Our revenues come from services in which we provide“space for living.” Thus, we exercise utmost care regarding
the expectations and concerns of residents, and reflect ourfindings in our services. This leads to higher satisfaction of
the residents, and eventually realizes improvement in
portfolio values, or internal growth, as a result of increases inrent and occupancy rate.
Since the listing, we have affixed the name of “New City
Residence” to most of the properties we own. We have also
provided a variety of services to the tenants, such as theissuance of the “New City Residence Card,” the first suchservice among J-REITs. It is a credit card with a rent deduction
function, and bonus points are awarded according to the rent
payments. This service is very popular, as it eliminates steps togo and pay the rent and the saved points can be changed to
products, JAL mileage, etc. It also reduces the risk of laterent payments and such.
The most recent addition to our variety of services is the“New City Reform.” Usually, renovations and such toindividual rooms of rental housing are not allowed but wehave permitted this in a number of our properties by tying up
with a renovation firm. Thus, tenants can make interiorchanges and renovations in accordance with their needs anddesires.
These services for tenants are provided through New City
Property Services K.K., the property manager of New City
Residence. Assigning the property management work to asingle firm allows us to provide high-quality and standardized

services. Since we own properties of various types and invarious locations, we believe service programs must be an
important factor for existing tenants to consider moving toour other properties when they marry, have a change inworkplace or go through other life stage or such changes.
The penetration of the New City Residence brand has
improved the renewal rate of tenants (rate of tenants who
renew the rental contracts), and has contributed to a rise inoccupancy rate for the entire portfolio. We intend to continue
taking various measures in the future to enhance the brandvalue.
Q: Can you explain your financial strategy, as it is also an
important factor?
Arai: New City Residence has been focused on developing astable financial foundation by keeping an LTV level of a
maximum 60% in principle.
New City Residence has promoted a shift to fixed-rateborrowings and presently almost 70% of borrowings are at a
fixed interest rate. We will maintain this level in the future to
reduce the risk of increased interest rates.
Moreover, we are working to lengthen the average durationof debts and to diversify fund procurement methods by
issuance of investment corporation bonds, as well as reducing
refinancing risks by spreading out repayment dates ofborrowings.
We will aim to maintain the optimal fund procurement
structure while working to ensure flexible and stablefinancing activities as well as improving the balance ofinterest payments.

Internal Growth Strategies
Spreading of the “New City Residence” Brand

Achievement of High Occupancy and Higher Rents

High-quality rental condominiums

Accumulated leasing know-how insures maintenance of high occupancy

New additions to tenant services*

Higher rents for renewals and new leases

New City Residence credit card*

Strengthen collaborative relationship with leading rental agents

Implement monitoring survey for tenants** Provided through New City Property Services K.K.

MAXIMIZE CASH FLOW
Cost Reductions and Improvementof Management Specifications

4

Strategic Asset Management

Effective property management in each and every area

Greater efficiency in property performance analysis and tenant data management

Cost reductions through building management bids and stricter management
specifications

Reinforce depth of performance records and build a track record database utilizing
the MRI system*

Standardization of management specifications nationally*MRI stands for "Management Reports International," an asset management system

Q. Concerning the increasing rents for rental housing, acommon perception is that rents peak whenproperties are new. Do you agree?
Arai: This common perception is because in the past, most of
the owners of rental housing were individuals, who found it
difficult to provide services and to bear the repair andmaintenance costs. Therefore, the buildings and interiors
tended to deteriorate as years passed, and owners often had
to decrease rent as they couldn’t compete with newly built
properties. Additionally, the public sector (such as
government-owned corporations) was among the few
owners who tried to operate rental housing from a long-term
perspective. However, since they were public organizations,
there was not much incentive to increase rents.

Needless to say, a fundamental position is that fluctuations inthe supply and demand of residences are much more stablethen office retail and other asset classes. This is a basic
condition.

Supply-Demand Analysis
in the Tokyo 5 Central Wards

In this regard, the emergence of J-REITs has first produced
owners in the private sector who can operate rental housing
over the long term. I believe we can change the past image ofrental housing by acquiring high quality, well-locatedproperties that should be able to maintain competitivenessover the medium to long term by providing a variety ofservices to the tenants and by renovating them at theappropriate time. Actually, the unit rent of properties owned
by New City Residence has been increasing, and we will work
to maintain this trend.
Furthermore, CERERM, the asset manager of New City
Residence, has been proactively accumulating know-how onrental housing from CB Richard Ellis (CBRE), one of its
sponsors and a real estate company listed on the New York
Stock Exchange.
Q. What type of changes do you foresee in the supply
and demand balance of rental housing?
Arai: I believe the trend of people returning to city centers inrental housing demand will continue. This is because weanticipate retired people will move to the city centers inpursuit of a cultured living environment or because of
excellent healthcare facilities available there, to say nothing ofbusinesspersons in their thirties who constitute the main
tenants of our properties and who demand residences close
to their workplaces.
Japan is experiencing a population decrease and a slowdown
in the increase of households is anticipated. Nevertheless,there should be strong demand for rental condominiums in
the city center. One of the challenges for New City Residence
is to establish a portfolio or realize an asset quality that cansteadfastly meet this need.

(Source: Attractors Laboratories)

Q: In closing, do you have a message to unitholders?
Arai: Since the listing, New City Residence has been engaged
in “securing a steady growth of assets under management
and stable revenues from a medium- to long-term
perspective” by implementing the advantages of a residential
J-REIT. We are resolved to implement a variety of measures tofurther reinforce the trust relationship we have enjoyed withunitholders.
In addition, New City Residence is committed to clarifying thefeatures of the portfolio and the risk characteristics to present
ourselves as an “understandable REIT” to unitholders.
My sincere desire and hope is that you, our unitholders, willcontinue and renew your support of New City Residence.

5

Diversification
Highlights
Diver
ersific

Rent
Re t Trends
Tren of New and Renewed Contracts

4th Period (as of February 28, 2007)

5th Period (as of August 31, 2007)

94

104

No. of Properties (properties)

9.0%
(86)

181.9

167.0

Portfolio Size (JPY Billion)

Rent Trends

No. of Leasable Units (units)

5,779

6,479

PML (%)

3.1

2.5

5.6%
(75)

27.1%
(260)

Total of
960
units
64.0%

Total of
1,335
units
57.9%

(614)

(773)

36.5%
(487)

Increase
Unchanged
Decrease

Note: PML, or probable maximum loss, refers to the probability of the maximum loss from an earthquake and in this case the level of damage that may result from the assumed
maximum earthquake size (large earthquake that occurs once every 475 years = large earthquake with 10% or greater probability of occurring within 50 years) assumed for theassumed scheduled use period expressed as a percentage (%) of the replacement cost of the expenses expected to be required to restore the damages.
Note: The pie charts show the number of units that increased, decreased or had unchanged rents when comparing new rents to old rents at the time of new leases and renewals, andGeographic
Spreadthe percentage that they represent within the total number of units.

Unit Price of Rent Per Tsubo (occupied area basis)

19.8%

13.7%

108

Tokyo 5 Central Wards
Tokyo 23 Wards(excluding 5 central wards)

Overall Portfolio

9.8%
10.7%
48.0%

53.9%

Greater Tokyo(excluding Tokyo 23 wards)

106

104

Regional

22.4%
21.7%
102

100

Building Age
8.7%

8.0%

5.1%

98

5.2%

Less than 2 years
2 to 4 years

Aug 2005(End of 1st Period)

Feb 2006(End of 2nd Period)

Aug(End of 3rd Period)

Feb 2007(End of 4th Period)

Aug(End of 5th Period)

2Note 1: Entered figures are indexes calculated by setting the unit price of rent per tsubo (rent per 3.3m ) at the end of August 2005 (end of 1st period) as 100. Assets already sold have
18.6%

10.9%

4 to 6 years

37.3%

been excluded.
Note 2: Figures have been rounded to the first decimal place.

41.2%

Note 3: Offices, shops and other areas not used for residence have been excluded in the calculation of unit price of rent.

6 to 8 years

Occupancy Rate by Area

More than 8 years

100%

30.9%

Average building
age: 3.3 years

34.1%

Average building
age: 3.5 years

95%

Unit Type
5.5% 0.5%

5.1% 0.6%

Single26.6%

Urban Family
FamilyPremium

28.6%

90%

34.9%

33.7%
32.2%

85%

Other
33.6%

30.9%

Tokyo 5 Central Wards

Tokyo 23 Wards excl. 5 Central Wards

Regional Cities

Total

Greater Tokyo excl. Tokyo 23 Wards

80%
End of
End of Sep
Aug 2006(End of 3rd Period)

Note 1: Ratio of geographic spread and building age are based upon acquisition price. Unit type is based upon net leasable area.
Note 2: "Other" unit type includes non-residential use areas such as retail, offices, etc.

92.3

93.7

End of Nov

End of Dec

End of Jan End of Feb End of Mar
2007 (End of 4th Period)

End of Apr

End of May

End of Jun

End of Jul End of Aug(End of 5th Period)

94.0

94.6

90.0

92.5

91.9

92.4

93.8

95.1

94.2

91.1

92.0

Note 3: The Tokyo 5 Central Wards are the Minato, Shibuya, Shinjuku, Chiyoda and Chuo Wards.

Note 1: Occupancy rate represents the percentage of the end-of-month leased area of residences with concluded lease contracts against the total leasable area of the entire portfolio.

Tokyo 23 Wards represents the other 18 wards after excluding the 5 Central Wards.

Note 2: The Tokyo 5 Central Wards are the Minato, Shibuya, Shinjuku, Chiyoda and Chuo Wards. Tokyo 23 Wards excl. 5 Central Wards represents the other 18 wards after excluding

Greater Tokyo represents Tokyo (excluding Tokyo 23 Wards), Kanagawa, Chiba and Saitama Prefectures.
Note 4: Figures are rounded to the first decimal place. Thus, the sum totals of the above may not necessarily be 100%.

6Total(%)

End of Oct

the Tokyo 5 Central Wards. Greater Tokyo excl. Tokyo 23 Wards represents Tokyo (excluding Tokyo 23 wards), Kanagawa, Chiba and Saitama Prefectures. Regional cities
represents other regions.

7

Br
Brand
d Strategy
SSt
Bran
nd

Fin
Financial
Finan
Fi
ina
ancia Strategy

Tenant Service Programs that Support Living in Rental Housing

Financial Policy• Shift to fixed interest rates

Responses to risks of higher interest rates: Purchase of floating-for-fixed interest rate swap, issuance of investment corporation bonds

New City Residence Card
All tenants living in properties with the name
“New City Residence” attached are eligible toreceive this personalized credit card with its variety
of benefits.

• Longer average duration and more diversified repayment maturity dates[Benefits]- Automatic rent deductions from bankaccounts- Points are added in accordance with rent
payments made using the Card
- No guarantor is necessary whencontracting the lease, etc.

Reduction of refinancing risks: Obtain long-term (five-year) loans when acquiring properties• Diversify fund procurement measures and lenders

Secure stability and flexibility in fund procurement: Registration for issuance of investment corporation bonds, extension of commitment line ceilings

Interest-bearing liabilities

New City 24

New City Patrol(JPY Billion)

New City 24 is New City Residence's around-the-clock call center staffed by

New City Patrol comprises a team of building anddedicated maintenance personnel ready to assist tenants with everything

security professionals that make monthly inspections

from water leaks and airof New City Residence properties

conditioning problems tofrom the perspective of the60

tenant, confirming the proper

40questions from new tenants

Coordination

Reportingupkeep of the exterior, cleaning,

before moving in.

building management, andsecurity features.

104.3

100
80

62.2
25.5

66.9
14,0

94.6
14.0

90.3
14.0

31.0

36.9

38.8

43.6

Long-term loans

36.9
43.7

36.7

29.7
16.0

0

End of 1st Period

End of 2nd Period

End of 3rd Period

End of 4th Period

End of 5th Period(End of Aug 2005)(End of Feb 2006)(End of Aug 2006)(End of Feb 2007)(End of Aug 2007)

Note: Short-term loans include long-term loans payable due within one year.

New City Reform
Unit renovations are provided under a central
structure handling everything from orders toReformation and renovation cases
Tatami unit

Installation of system furniture

Ratios of Long-term Fixed Interest Rate Borrowings and Long-term Liabilities

construction via New City Residence's property(%)

manager, New City Property Services K.K., and a

80

76.1%

71.5%

70

partner company (within Tokyo Metropolitan Area

50

58.5%

53.8%

60

and Osaka Area).

67.7%

41.0%

30

Ratio of long-term fixed interest rateborrowings (%) (Note 2)

36.2%

20

Living Option

Welcome Kit

Exclusive Website for Tenants

A variety of services are provided in relation

Upon signing of new rental contracts, tenantsUseful information can be obtained throughto clothing, meals and living.

are given booklets describing available services

the exclusive tenant homepage, which also[Services]- Home delivery of food
- Cleaning of clothes- Housecleaning- Furniture and home appliance rentals- Shopping services, etc.
(Through direct contracts between the tenants andservice companies)

and providing useful information.

serves as a communication conduit between
tenants and property management.

[Content]- Maps of surrounding area
- Schedule chart for moving in- Contacts for inquiries- Available services- Questionnaire postcard, etc.

Note 1: The tenant service programs are provided through New City Property Services K.K., a main property management company for New City Residence.
Note 2: The tenant service programs are not provided at all of the properties and real estate in trusts that New City Residence owns. At some properties, a limited number of service programs are provided.

100

Ratio of long-term liabilities (Note 1)

52.3%

40

8

Short-term loans (Note)

37.5

20

Call center

Investment corporation bonds

25.6%
16.4%

End of 1st Period

End of 2nd Period

End of 3rd Period

End of 4th Period

End of 5th Period(End of Aug 2005)(End of Feb 2006)(End of Aug 2006)(End of Feb 2007)(End of Aug 2007)(1) The ratio is the percentage of interest-bearing liabilities with maturity of over one year against the balance of interest-bearing liabilities.
(2) The ratio is the percentage of borrowings with fixed interest rates (including those with forward-dated interest rate swap agreements) against the balance of interest-bearing liabilities.
(3) The figures have been rounded to the first decimal place.

Status of Investment Corporation Bonds
Investment corporation bonds

Issue dateIssue amountInterest rate

Maturity date

Ratings

First series of unsecured investment corporation bonds

February 24, 2006

14,000 million yen

1.61% per annum

February 24, 2011

Moody’s: A3

Second series of unsecured investment corporation bonds

April 12, 2007

12,000 million yen

1.79% per annum

April 12, 2012

Third series of unsecured investment corporation bonds

April 12, 2007

5,000 million yen

2.15% per annum

April 11, 2014

Moody’s: A3
R&I: A+
Moody’s: A3
R&I: A+

9

Collaboration
NetworkCollaabor

Acquisitionsin the 5th PeriodAcququisitiOur clearly defined collaboration network provides the backbone to our growth and includes: strategic pipelines assources to excellent properties; integrated property management services provided by New City Property Services K.K.

R-20

New City Residence Shinsaibashi East Tower

for standardized, high-quality and economical management services; and business alliances with major real estateagents to maintain high occupancy rates.

Acquisition price

JPY 4,693 million

Features

Acquisition date

March 2007

Location

1-15-25, Shimanouchi,

Surveillance system
Various amenities:•Floor heating in living
and dining rooms•Hands-free interphonewith color TV monitor•Heated toilet seat withshower (bidet) functions
Parking facilities for 81
vehiclesChuo-ku, Osaka

Collaboration withSponsor

Acquisition of
Development Projects

Investment Corporation♦Real estatecompanies♦Developers

New City Corporation K.K.
• Supplying real estate
information from third parties• Developing properties for New
City Residence

Memorandum on
provision of realestateinformation andoperational
support

Provision ofdevelopment
projects
New City Residence
Investment Corporation

Floors28

Net rentable area

8,747.40m

Number of units

133 (entire building)Completion date

January 2007

Appraisal value*

JPY 4,700 million (CR 5.3%)

2• Developing portfolio thatsatisfies "New City Residence"standards• Early commitment to avoid
increased competition over

New City Residence Shinsaibashi East Tower, a 28-story tower condominium with a total of 133

acquisitions

units, is a core asset of our portfolio in Osaka. The units are fully equipped for-sale

Property Information
Providerscondominiums, including floor heating. Located on a site that is walking distance from theAsset Management
Company

central town area of Osaka, it offers great convenience in terms of closeness between
workplace and residence.

The Chuo Mitsui Trust andBanking Company

Sumitomo Real Estate Sales
Tokyu Livable

Memorandum on
provision of realestatebrokerage
information, etc.

CBRE Residential
Management K.K.

R-25

New City Residence Uemachidai

Mitsui Real Estate Sales
Basic agreement concerning consigned
property management work

Acquisition price

JPY 3,214 million

Features

Acquisition dateAugust 2007

Location

4-1-12, Uehonmachi Nishi,

Surveillance system
Various amenities:•Floor heating in living room
•Bath with mist sauna and clothes
and bath drying ventilation system•Heated toilet seat with shower(bidet) functions•Disposer•Hands-free interphone with color
TV monitor
Parking facilities for 35 vehicles

Chuo-ku, Osaka

Intensification of property management businessand standardization of high-quality services• Property management from a medium- to long-term perspective• Integration of tenant-oriented service program

New City Property Services K.K.

• Reduction of management costs

Floors

15/B1

Net rentable area

5,415.39m

Number of units

69 (entire building)Completion date

January 2007

Appraisal value*

JPY 3,240 million

2(CR 5.1%)
Outsourcing contracts for leasing operations

Enhance leasing networks throughbusiness alliances with major leasing
agentsAble

Taisei Housy

Town Housing

Tokyu Livable

which face south and receive ample sunlight. Located within walking distance of three different
train stations, it has great accessibility. There are parks and public facilities near the property,• Distribute "New City Residence" information to allbranches through head offices of major leasing agents

New City Residence Uemachidai is a 15-story family-type condominium with 69 units, all of

Minimini

Relo Estate

Resident First

Chintai Jyutaku Service

and the environment is full of greenery despite its closeness to the central part of Osaka.

• Utilize the website, branch and marketing network ofeach agent

10*Appraisal value is based on the appraisal report as of the date of acquisition. Cap rate is based on net cash flow.

11Acquisitionsin the 5th Period (continued)
Acququisiti
M-27 New City Residence Minowa

M-29 New City Residence Nakano

Acquisition price

JPY 1,720 million

Acquisition price

JPY 1,250 million

Acquisition dateAugust 2007

Acquisition dateAugust 2007

Location

5-24-4, Negishi, Taito-ku, Tokyo

Location

2-12-13, Arai, Nakano-ku, Tokyo

Floors15

Floors12

Net rentable area

2,406.41m

Net rentable area

Number of units

78 (entire building)Completion date
Appraisal value*

R-15

M-28 New City Residence Jiyugaoka West

Acquisition price

JPY 720 million

Acquisition dateAugust 2007

Location

7-14-11, Todoroki, Setagaya-ku, Tokyo

Floors

3/B1

Net rentable area

857.32m

Number of units

28 (entire building)Completion dateAugust 2007

Appraisal value*

JPY 720 million (CR 4.7%)

2

M-25

R-22

1,613.86m

New City Residence

New City Residence

Number of units

42 (entire building)June 2007

Completion date

March 2007

Morishita West

Kotodaikoen

JPY 1,730 million (CR 5.1%)

Appraisal value*

JPY 1,250 million (CR 4.8%)
Acquisition price

JPY 810 million

Acquisition priceJPY 655 million

Acquisition dateJune 2007

Acquisition date

April 2007

Location

2-12-11,

Location

3-10-24, Kokubuncho,

2

New City Residence Sakae

R-21

2

New City Residence Sannomiya

Aoba-ku, Sendai-shi,Shin-Ohashi,

Miyagi Prefecture

Koto-ku, Tokyo

12

Floors11

Net rentable area

Floors11/B1

1,275.60m

Net rentable area

1,684.10m

Number of units

40 (entire building)Number of units

50 (entire building)Completion date

May 2007

Completion dateFebruary 2007

Appraisal value*

JPY 837 million (CR 5.1%)

Appraisal value*

JPY 655 million (CR 5.5%)

2

R-23

R-24

New City Residence

New City Residence

Ichibancho

OmachiAcquisition price

JPY 965 million

Acquisition price

JPY 841 million

Acquisition dateJuly 2007

Acquisition dateAugust 2007

Location

1-6-27,1-6-30, Ichibancho,

Location

2-5-8, Omachi,

Acquisition price

JPY 1,360 million

Acquisition price

JPY 1,485 million

Acquisition date

March 2007

Acquisition date

March 2007

Aoba-ku, Sendai-shi,

Location

4-16-10 Sakae, Naka-ku, Nagoya-shi, Aichi Prefecture

Location

3-2-31, Isobedori, Chuo-ku, Kobe-shi, Hyogo Prefecture

Miyagi Prefecture

Floors13

Floors15

Net rentable area

2,836.00m

Net rentable area

Number of units

73 (entire building)Completion dateFebruary 2007

Appraisal value*

JPY 1,410 million (CR 5.6%)

2

Floors10 (A building) 9 (B building)

3,071.60m

Net rentable area

Number of units

112 (entire building)Completion date

January 2007

Appraisal value*

JPY 1,490 million (CR 5.5%)

2*Appraisal values are based on the appraisal reports as of the date of acquisition. Cap rates are based on net cash flow.

2

Aoba-ku, Sendai-shi,
Miyagi Prefecture
Floors13

2,800.32m

Net rentable area

2,149.08m

Number of units

68 (entire building)Number of units

72 (entire building)Completion dateJune 2007

Completion dateJune 2007

Appraisal value*

JPY 970 million (CR 5.6%)

Appraisal value*

JPY 849 million (CR 5.6%)

2*Appraisal values are based on the appraisal reports as of the date of acquisition. Cap rates are based on net cash flow.

2

13

Por
Po
Portfolio
f oliol o Map
M
Portf
Portfoortfoltfol
TOKYO 23 WARDS
Sapporo
R-1

M-22
M-15

M-8

M-16
M-24

M-5

GREATER TOKYOTOKYO 5 CENTRAL WARDS

Sendai
R-23
R-22
R-24

R-6
Fukuoka
R-3
R-4

R-5

R-9

R-7

Nagoya

TOKYO

R-21
R-2

OSAKA

R-15

OSAKA CITY

R-12

Note: "Tokyo 5 Central Wards" comprises Minato Ward, Shibuya Ward, Shinjuku Ward, Chiyoda Ward and Chuo Ward. The "Tokyo 23 Wards excluding Central 5 Wards" comprises all
23 wards of Tokyo excluding the aforementioned five wards. The "Greater Tokyo excluding Tokyo 23 Wards" comprises Tokyo Prefecture excluding the 23 Wards of Tokyo, andKanagawa, Chiba, and Saitama Prefectures. "Regional Cities" comprises all other areas excluding the aforementioned.

14

15

Portfolio
PortfoPofolio List
As of end of 5th period (August 31, 2007)
Acquisition Price No. of Leasable
Property Name(million yen)
Units (units)
No.
(Note 2)
(Note 3)(Note 4)
Tokyo Central 5 Wards (Note 1)
62
C-1
NCR Minami Aoyama
3,783
60
NCR Nishi Azabu Twin Tower
3,315
C-2
37
NCR Nishi Azabu
3,143
C-3
NCR Ochanomizu
44
C-4
2,300
26
C-5
NCR Sangubashi
1,734
NCR Shinjyuku Ichibankan
1,978
105
C-6
NCR Shinjyuku Nibankan
889
41
C-7
NCR Nihonbashi East
62
C-8
1,622
55
NCR Nihonbashi West
1,480
C-9
40
NCR Ginza Twin I
1,133
C-10
NCR Ginza Twin II
33
C-11
968
21
C-12
NCR Harajyuku
1,220
30
C-13
NCR Mita
986
NCR Yoyogi Uehara
765
25
C-14
NCR Sendagaya
695
21
C-15
NCR Shinjyuku 7 Chome
23
C-16
626
21
NCR Ichigaya Sanaicho
577
C-17
NCR Nihonbashi Ningyocho I
32
C-18
1,230
38
C-19
NCR Nihonbashi Ningyocho II
1,290
32
NCR Shin-Ochanomizu
1,160
C-20
NCR Jinbocho (Note 7)
C-21
1,662
63
NCR Nihonbashi Ningyocho III
C-22
1,470
60
NCR Jinbocho II
C-23
841
41
NCR Ginza East III
C-24
3,140
108
NCR Shinjuku Gyoen I
C-25
3,050
90
NCR Sasazuka
C-26
1,180
32
NCR Takanawadai
C-27
842
48
NCR Nihonbashi Ningyocho IV
C-28
580
27
NCR Shinjuku Gyoen II
C-29
510
20
NCR Ginza East IV
C-30
1,530
40
NCR Takanawadai II
C-31
840
24
NCR Minami Azabu
C-32
1,260
40
NCR Minami Azabu East
C-33
4,000
96
C-34
NCR Ginza
3,332
88
NCR Nihonbashi Suitengu
C-35
10,995169
NCR Takanawa
C-36
4,930
103
NCR Higashi Nihonbashi
C-37
16,200264
Catherina Mita Towersuite
C-38(New City Residence)
Tokyo 23 Wards excluding Central 5 Wards (Note 1)
M-2
NCR Todoroki
1,850
22
M-3
NCR Honjo Azumabashi
1,122
35
M-4
NCR Kitazawa
1,070
15
M-5
NCR Meguro
1,050
26
M-6
NCR Senzokukoen
921
19
M-8
NCR Monzennakacho
524
31
M-9
NCR Denenchofu
511
17
M-10
NCR Negishi
356
12
M-11
NCR Kamiikedai
238
12
M-12
NCR Otsuka
1,290
54
M-13
NCR Morishita
985
38
M-14
NCR Wakabayashi Koen
970
23
M-15
NCR Asakusabashi
870
32
M-16
NCR Gakugeidaigaku
1,210
38
M-17
NCR Jiyugaoka
1,470
40
M-18
NCR Mejiro East
1,080
29
M-19
NCR Iriya
675
22
M-20
NCR Ikebukuro
3,227
87
M-21
NCR Kaname-cho
1,360
73
M-22
NCR Ueno Tower
2,990
102
M-23
NCR Shinagawa Seaside Tower
9,350
208
M-24
NCR Yakumo
1,160
18
M-25
NCR Morishita West
810
40
M-26
NCR Togoshiginza
1,960
80
M-27
NCR Minowa
1,720
78
M-28
NCR Jiyugaoka West
720
28
M-29
NCR Nakano
1,250
42

16

Structure,
Completed Floor

Occupancy Rate Rental
at end of period Revenue(%) (Note 5) (thousand yen)

Percentage of Total
Rental Revenue(%) (Note 6)

Aug. 2002
Mar. 2003
Mar. 2002
Aug. 2002
Oct. 1998
May 2002
Apr. 2002
Apr. 2003
Apr. 2003
Sep. 2003
Sep. 2003
Sep. 2000
Feb. 2003
Oct. 2000
Mar. 2000
Jan. 1995
Sep. 2000
Aug. 2004
Aug. 2004
Jul. 2004
Dec. 2004
May 2004
Jun. 2004
Sep. 2003
Sep. 2004
Feb. 2004
Apr. 2003
Mar. 2004
Dec. 2003
Sep. 2004
Jul. 2004
Sep. 2005
Oct. 2005
Jul. 2005
Aug. 2005
Feb. 2006
Aug. 2006

RC, 14F
SRC, 15F/B1F
RC, 5F/B1F
RC, 8FRC, 4F/B1F
RC, 7FRC, 6FRC, 10F
SRC, 12F
RC, 12F
SRC, 12FRC, 5F
SRC, 11F
RC, 4F/B1F
RC, 4FRC, 5F/B1F
RC, 4F/B1F
SRC, 13F
SRC, 12F
SRC, 10F/B1F
RC, 10F
RC, 11F
SRC, 12F
SRC, 15F
RC, 10F
RC, 9F
SRC, 13FRC, 10F
SRC, 11F
RC, 6F/B1F
RC, 6FRC, 9FRC, 14F
SRC, RC, 12F
SRC, 12F
RC, 16F/B1F
RC, 28F/B2F
36F/B2F

93.4
92.4
88.8
87.3
96.9
98.9
97.8
97.3
84.7
97.6
93.7
95.2
93.3
100.0
100.0
100.0
95.4
97.3
90.3
100.0
98.8
98.2
97.7
100.0
93.3
94.2
100.0
100.0
100.0
92.3
92.8
97.5
96.2
96.3
95.6
97.1
91.7

114,826
92,91490,394
59,12250,66663,08329,466
50,66442,75534,17529,87833,67533,03623,167
20,983
20,184
16,23938,21938,96034,95257,09250,99542,00325,43390,00093,33932,29527,84517,02016,94941,83323,82839,389108,940
99,960272,877
139,280
425,669

2.2
1.8
1.7
1.1
1.0
1.2
0.6
1.0
0.8
0.6
0.6
0.6
0.6
0.4
0.4
0.4
0.3
0.7
0.7
0.7
1.1
1.0
0.8
0.5
1.7
1.8
0.6
0.5
0.3
0.3
0.8
0.4
0.7
2.0
1.9
5.1
2.6
8.0

Mar. 1993
Sep. 2003
Jan. 2002
Apr. 2000
Apr. 1995
Sep. 2000
Jul. 1995
Jul. 2000
Mar. 2002
Sep. 2004
Sep. 2004
Feb. 2004
Jan. 2005
Apr. 2005
Apr. 2004
Apr. 2005
Jun. 2005
Jan. 2005
Aug. 2005
Feb. 2005
Nov. 2005
Nov. 2005
May 2007
May 2006
Jun. 2007
Aug. 2007
Mar. 2007

RC, 3F/B2F
SRC, RC, 14F
RC, 4FRC, 7FRC, 3FRC, 9FRC, 3FRC, 8F
S, 4F
SRC, 13FRC, 11FRC, 4FRC, 9FRC, 4FRC, 5FRC, 8F
SRC, 12F
SRC, 14F
RC, 13F
SRC, 14F/B1F
RC, 25F/B2F
RC, 3F/B1F
RC, 11F
RC, 10F
RC, 15FRC, 3F/B1F
RC, 12F

94.9
100.0
73.0
100.0
94.2
100.0
100.0
92.1
100.0
91.9
97.8
95.8
96.7
98.0
97.7
97.1
96.0
94.3
97.3
91.3
95.7
95.4
100.0
98.5
0.0
0.0
0.0

56,91037,207
26,84032,77131,092
18,075
19,234
11,4888,165
39,526
31,34329,40634,25444,38742,461
34,70522,757
89,95639,48895,838279,319
29,991
5,614
67,200
-

1.1
0.7
0.5
0.6
0.6
0.3
0.4
0.2
0.2
0.7
0.6
0.6
0.6
0.8
0.8
0.7
0.4
1.7
0.7
1.8
5.2
0.6
0.1
1.3
-

Acquisition Price No. of Leasable
Property Name(million yen)
Units (units)
No.
(Note 2)
(Note 3)(Note 4)
Greater Tokyo excluding Tokyo 23 Wards (Note 1)
G-1
NCR Yokohama East
6,753
228
G-2
NCR Funabashi Honcho
1,083
86
G-3
SH Motosumiyoshi
1,058
57
G-4
NCR Toyoda
1,053
67
G-5
NCR Nishi Funabashi
997
81
G-6
NCR Maihama
844
61
G-7
NCR Ichikawamyoden
769
58
G-8
NCR Kumegawa
715
31
G-9
NCR Urayasu
653
51
G-10
NCR Minamigyotoku I
648
49
G-11
NCR Minamigyotoku II
447
35
G-12
NCR Nogeyama
469
30
G-13
NCR Minamirinkan
456
29
G-14
NCR Shonan
445
19
G-15
LM Fuchinobe Honcho
222
15
G-16
LM Higashi Oume Daisan
175
33
G-17
PT Ichikawa
620
40
G-18
PT Shioyaki
310
36
G-19
PT Horie
193
22
Regional Cities (Note 1)
726
R-1
NCR Ohdori-koen
40
720
R-2
Goshikiyama Heights
33
379
R-3
NCR Nishikoen
30
258
R-4
NCR Nishi Ohori
17
274
R-5
NCR Kakogawa
34
202
R-6
LM Maebashi Nishikatakai
23
1,710
R-7
Aprile Tarumi
99
3,830
R-9
Crest Kusatsu
540
1,740
R-10
NCR Honmachi East
117
1,640
R-11
NCR Shin-Umeda
108
770
R-12
NCR Shizuoka Takajo
45
5,400
R-13
NCR Abeno
153
382
R-14
NCR Otedori
31
1,361
R-15
NCR Sakae
73
4,780
R-16
NCR Nipponbashi Kouzu
262
4,693
R-20
NCR Shinsaibashi East Tower
133
1,485
R-21
NCR Sannomiya
112
655
R-22
NCR Kotodaikoen
50
965
R-23
NCR Ichibancho
68
842
R-24
NCR Omachi
72
3,214
R-25
NCR Uemachidai
69
TOTAL

181,930

Structure,
Completed Floor

Occupancy Rate Rental
at end of period Revenue(%) (Note 5) (thousand yen)

Percentage of Total
Rental Revenue(%) (Note 6)

Mar. 2003
Mar. 1997
Apr. 1991
Jun. 1992
Mar. 2001
Mar. 2003
Mar. 2003
Dec. 1999
Feb. 2003
Mar. 2003
Mar. 2003
Sep. 2000
Apr. 2002
Feb. 2000
Aug. 1991
May 1992
Apr. 2004
Apr. 1993
Mar. 1991

RC, 21F
SRC, 10F/B1F
RC, 7F/B1F
SRC, 8F
SRC, 10FRC, 6FRC, 5F
SRC, 7FRC, 5FRC, 5FRC, 6FRC, 6FRC, 8FRC, 3F
SRC, RC, 9F
RC, 7FRC, 9FRC, 3FRC, 3F

98.1
100.0
96.8
92.4
93.8
96.7
100.0
100.0
100.0
95.9
85.7
96.7
100.0
100.0
93.3
91.0
100.0
100.0
85.2

242,241
39,74046,39643,89635,30628,18331,08722,32822,96021,977
15,20815,776
17,682
15,7708,844
10,49320,016
12,975
8,391

4.5
0.7
0.9
0.8
0.7
0.5
0.6
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.2
0.2
0.4
0.2
0.2

Oct. 2000
Aug. 1993
Oct. 2000
May 2000
Sep. 2000
Feb. 1992
Jan. 2003
Feb. 1999
Feb. 2005
Feb. 2005
Feb. 2006
Jan. 2006
Jan. 2006
Feb. 2007
Jan. 2006
Jan. 2007
Jan. 2007
Feb. 2007
Jun. 2007
Jun. 2007
Jan. 2007

RC, 9F/B1F
RC, 7FRC, 11FRC, 5FRC, 3FRC, 6FRC, 12F
RC, 11F/B2F
RC, 15FRC, 11F
RC, 12F
SRC, 15F
RC, 11F
RC, 13F
RC, 14F/B1F
RC, 28F
RC, 15FRC, 11F/B1F
RC, 10F/9F
RC, 13F
RC, 15F/B1F

94.8
100.0
96.7
94.4
97.1
94.6
100.0
100.0
92.2
93.7
100.0
93.9
90.0
98.9
94.8
88.2
98.3
100.0
100.0
100.0
0.0

24,27728,14916,592
11,116
16,162
10,12362,148
157,457
60,22057,25534,454
177,511
12,06628,063
155,388
100,212
43,155
17,183
6,554
680
-

0.5
0.5
0.3
0.2
0.3
0.2
1.2
3.0
1.1
1.1
0.6
3.3
0.2
0.5
2.9
1.9
0.8
0.3
0.1
0.0
-

6,479

92.0

5,328,215

100.0Note 1: "Tokyo Central 5 Wards" comprises Minato Ward, Shibuya Ward, Shinjuku Ward, Chiyoda Ward and Chuo Ward. The "Tokyo 23 Wards excluding Central 5 Wards"
comprises all 23 wards of Tokyo excluding the aforementioned five wards. The "Greater Tokyo excluding Tokyo 23 Wards" comprises Tokyo Prefecture excluding the 23
Wards of Tokyo, and Kanagawa, Chiba, and Saitama Prefectures. "Regional Cities" comprises all other areas excluding the aforementioned.
Note 2: Under Property Name, "NCR" is the acronym for New City Residence, "LM" for Lions Mansion, "SH" for Sonnen Heim and "PT" for Park Terrace.
Note 3: The Acquisition Price column has the acquisition price of already acquired assets entered.
Note 4: The No. of Leasable Units column indicates the leasable units of individual real estate and trust real estate as of August 31, 2007.
Note 5: The Occupancy Rate column indicates the ratio that the leased floor space of individual real estate and trust real estate comprises of their total leasable floor spaces and thedata as of August, 2007.
Note 6: The Percentage of Total Rental Revenue figures are rounded to the first decimal place.
Note 7: C-21 (NCR Jinbocho) was sold on June 29, 2007. Figures entered in the above Rental Revenue and Percentage of Total Rental Revenue columns are for the four months fromMarch 1 to June 28, 2007.
Note 8: Figures indicated in the above table are rounded off to the last indicated figure. As such, the sum of the individual items may not add up to the subtotal or total.

17

OverviewOvererview of New City Residence

Organizational
Chart of Asset Management Company
Orga
ganiz
General Meeting ofUnitholders

Investment Corporation Structure
Property Information Providers
The Chuo Mitsui Trust and Banking Co., Ltd.

New City Residence
Investment Corporation

Statutory Auditor
Accounting Auditor(Temporary Accounting Auditor)

Sumitomo Real Estate Sales Co., Ltd.

PricewaterhouseCoopers Aarata
Tokyu Livable, Inc.
Mitsui Real Estate Sales Co., Ltd.

Information and Property Provider

New City Corporation K.K.

General Meeting ofUnitholders

Transfer Agent

Board of Directors

Mitsubishi UFJ Trustand Banking Corporation

Executive Director

Board of Directors
Outside Directors

Compliance & Risk
Management Committee

Investment Committee

Compliance & Risk
Management OfficeInternal Audit OfficeOutside Specialist

President

Investment & AssetManagement Division

Finance Division

Administration Division

Jun Arai
Supervisory Director
Koichi Shimada

Property Management Company

Supervisory Director
Rika Nakamura

Administrative Agent/Asset Custodian
Mizuho Trust & Banking Co., Ltd.

New City Property Services K.K.
and others

Asset Management
Company

Finance
Department

Planning
Department

Acquisition
Department

Accounting
Department

Administration
Department

Asset Management
Department
Operation Planning
Department

Investment Corporation BondManagement Company, Paying Agent

Information Provider

The Chuo Mitsui Trustand Banking Co., Ltd.
CB Richard Ellis Investors, LLC
CB Richard Ellis Investors Holdings K.K

Research & IR
Department

CBRE Residential
Management K.K.

The Sumitomo Trustand Banking Co., Ltd.

Governancefor Conflicts of Interest
Govverninterest
A three-layer check system, including outside personnel, has been established to monitor transactions
between interested parties. Interested parties are defined in the Investment Trust Law of Japan as shareholders
with a 10% or more share of the asset management company, or those who have established special-purpose
vehicles on behalf of asset management affiliates.
Drafting Department

Notes to the Investment Corporation Structure
ASSET MANAGEMENT COMPANY: CBRE Residential
Management K.K. provides services including mattersrelating to the management of investment assets andthe procurement of funds by New City Residence,submitting reports on investment assets to New City
Residence and establishing asset management plans.
ADMINISTRATIVE AGENT/ASSET CUSTODIAN: Mizuho
Trust & Banking Co., Ltd. undertakes administration
related to the issue of investment units, administrationof accounting matters and tax payments, preparation of
accounting records and financial statements and otherservices.
TRANSFER AGENT: Mitsubishi UFJ Trust and Banking
administrates the register of unitholders and payment of
distributions to unitholders under the storage transfer
system of the Japan Securities Depository Center, Inc.,and provides certain other services concerning
unitholders.

18

INVESTMENT CORPORATION BOND MANAGEMENTCOMPANY AND PAYING AGENT: The Chuo Mitsui Trustand Banking Co., Ltd. and The Sumitomo Trust andBanking Co., Ltd. receives payments, preserves debt,
conducts management functions related to investment
corporation bonds, and to repayment of principal to theinvestment corporation creditor of the investment
corporation bonds and the payment of interest on thesebonds.
INFORMATION AND PROPERTY PROVIDER: New City
Corporation K.K. provides New City Residence with realestate information concerning properties for acquisition,in addition to other business support.
INFORMATION PROVIDER: CB Richard Ellis Investors LLC
and CB Richard Ellis Investors Holdings K.K. provide
certain information and advice in support of CBRE
Residential Management K. K.

PROPERTY MANAGEMENT COMPANY: New City
Property Services K.K. and other companies provide
services including the administration of repairs,
maintenance, renovation, improvements and inspection
on a limited basis; the purchase and supervision of
installation and related work regarding equipment,
fixtures, materials and consumables; leasing
management service administration; lease execution andmaintenance, and collection of lease payments andoverdue rent.
PROPERTY INFORMATION PROVIDER: The Chuo Mitsui
Trust and Banking Co., Ltd., Sumitomo Real Estate Sales
Co., Ltd., Tokyu Livable, Inc. and Mitsui Real Estate Sales
Co., Ltd. provide information relating to real estate heldby, or to be developed and held by third parties.

Compliance Officer
Chief Investment Officer
Chief Financial Officer
Compliance &Risk Management Committee[ Members ]Directors,
general managers
and the Compliance Officer

Investment Committee

Investment Committee[ Members ]President,
Chief Investment Officer,
Chief Financial Officer,
all directors including outside
directors and outside specialists

Compliance & Risk
Management Committee
Board of Directors

Board of Directors[ Members ]All directors and auditors
including outside directors

In addition to the efforts to conform to legal requirements, the asset management company has established provisions in its
internal rules that relate to behavior and transactions with extended interested parties, including the Management Guidelines andthe Committee Rules. These provisions have been established to better allow the asset management company to fulfill its
responsibilities in the management of investment assets.

19

Selective
Selec
Se
ective Financial Data
Operating Results and Asset Status
Operating revenues(Real estate rental revenues)

Unit

5th Fiscal
Period

4th Fiscal
Period

3rd Fiscal
Period

2nd Fiscal
Period

1st Fiscal
PeriodAug. 2005

Aug. 2007

Feb. 2007

Aug. 2006

Feb. 2006

Millions of yen

5,730

5,678

4,201

3,346

3,224

Millions of yen(5,328)(4,734)(4,201)(3,346)(3,224)

Millions of yen

2,752

2,527

2,125

1,607

1,485

Millions of yen(2,053)(1,856)(1,559)(1,209)(1,143)Operating income

Millions of yen

2,978

3,151

2,075

1,739

1,738

Ordinary income

Millions of yen

2,199

2,442

1,635

1,435

1,151

Net income (a)Millions of yen

2,197

2,437

1,630

1,433

1,146

Total assets (b)Millions of yen

195,685

181,509

164,094

135,663

104,678

Total unitholders’ equity (c)Millions of yen

88,00688,242

66,756

66,53940,503Unitholders’ capitalMillions of yen

85,79185,791

65,106

65,10639,357

Investment units outstanding (d)Unit

164,068

164,068

122,612

122,61274,556

Total unitholders’ equity per unit

JPY

536,404

537,843

544,451542,687

543,268

Operating expenses(Property operating expenses)

Millions of yen

2,197

2,437

1,630

1,433

1,146

Distribution per unit (e)/(d)JPY

13,393

14,85813,302

11,692

15,381(Portion of distribution of earnings per unit)

JPY(13,393)(14,858)(13,302)(11,692)(15,381)(Portion of distribution in excess of earnings per unit)

JPY

(-)

(-)

(-)

(-)

(-)

Ordinary income to total assets (Note 2)%

1.2 (2.3)

1.4 (2.9)

1.1 (2.2)

1.2 (2.4)

1.6 (2.2)

Return on total unitholders' equity (Note 2)%

2.5 (4.9)

3.1 (6.3)

2.4 (4.9)

2.7 (5.4)

2.9 (4.1)

Equity ratio (c)/(b)

%

45.0

48.6

40.7

49.0

38.7

Payout ratio (e)/(a)

%

99.9

99.9

100.0

99.9

99.9

Property

104

94

93

86

77

Total distributions (e)[Other reference information]
No. of properties
Gross leasable floor spacem2

276,209.31

246,553.52

227,310.83

183,722.52

153,429.01

End-of-period occupancy rate

%

92.0

94.2

92.3

94.6

91.7

Depreciation and amortization

Millions of yen

846

737

651

500

510

Capital expenditure

Millions of yen

53

29

65

46

40

NOI from leasing (Note 2)

Millions of yen

4,122

3,615

3,293

2,637

2,591

Times

5.6

7.6

7.4

12.7

9.3

Funds from operation (FFO) per unit (Note 2)

JPY

18,555

19,351

18,616

15,774

22,231

Funds from operation (FFO) (multiple) (Note 2)

Times

15.5

15.5

13.6

16.9

18.3

Debt service coverage ratio (DSCR) (Note 2)

104,350

90,30094,60066,90062,200End-of-period ratio of interest-bearing liabilities to total assets (Note 2)

%

53.3

49.7

57.6

49.3

59.4

Management period

Days

184

181

184

181

260

Total interest-bearing liabilities

Millions of yen

Financial Statements
Auditors Report

22

Balance Sheets

23

Statements of Income

24Statements of Changes in Unitholders’ Equity

25

Statements of Cash Flows

26

Notes to Financial Statements

27

Note 1: Monetary figures are rounded down to the digit indicated. Figures for each comparison, etc. are rounded to the first decimal place. The payout ratio is also rounded down to thefirst decimal place.
Note 2: Denoted indicators are calculated utilizing the methods described below. In addition, annualized figures from the management period are indicated in parentheses.
The actual management of the first fiscal period started on December 15, 2004 and ordinary income to total assets and return on total unitholders’ equity
are calculated with December 15, 2004 as the start of the period.

20

Ordinary income to total assets

Operating income / Average assets
Average assets = (Total assets at start of period + Total assets at end of period) / 2

Return on total unitholders’ equity

Net income/Average unitholders’ equity
Average unitholders’ equity = (Unitholders’ equity at start of period + Unitholders’ equity at end of period) / 2

NOI from leasing

Rental business income (Rental revenues - Property operating expenses) + Depreciation and amortization

DSCR

Net income before interest, depreciation and amortization / Interest payments

FFO per unit

(Net income + Depreciation and amortization) / Investment units outstanding

FFO multiple

Investment unit price at end of period / Annualized FFO per unit

End-of-period ratio of interest-bearing
liabilities to total assets

Interest-bearing liabilities at end of period / Total assets at end of period

21

Auditors Report

Balance Sheets
Item
AssetsCurrent assets:
Cash and bank deposits
Cash and bank deposits in trust (Note 5)
Rental receivables
Prepaid expenses
Advanced money
Consumption tax refundable
Other current assets
Allowance for doubtful receivables
Total current assets¥

Fixed assets:
Property and equipment, at cost:
Land including trust accounts (Notes 4, 5)
Buildings including trust accounts (Notes 4, 5)
Other tangible assets including trust accounts (Notes 4, 5)
Accumulated depreciation (Note 4)
Total property and equipment

As of February 28, 2007

Thousands of yen

Thousands of yen

4,245,687
4,076,730
119,610
33,124--41,731
51,866(4,917)8,563,834¥

4,713,872
3,885,406
136,718
47,387700,000--24,134(3,616)
9,503,902

115,105,970
71,007,807
2,726,564(3,081,700)
185,758,642

107,527,140
63,284,072
2,182,453(2,280,442)
170,713,224

913,996
4,875
918,871913,996
5,252
919,248

Investments and other assets
Deposits
Long-term prepaid expenses
Reserve for repairs and maintenanceDerivative assets
Total investments and other assets
Total fixed assets

11,454
108,445
197,441
12,110329,453
187,006,967

10,274
116,156
181,632
28,871
336,934
171,969,407

Deferred assets
Bond issuance costs
Total deferred assets
Total assets

114,657
114,657
195,685,458

36,60436,604
181,509,914

Intangible assets:
Leasehold interests in trust
Other intangible assets
Total intangible assets

Liabilities and Unitholders' Equity
Liabilities
Current liabilities:
Trade payables
Short-term loan payable (Notes 5, 7)
Long-term loan payable due within one year (Notes 5, 7)
Other payables
Accrued expenses
Consumption taxes payable
Accrued income taxes
Rents received in advance
Deferred tax liabilities
Other current liabilities
Total current liabilities
Long-term liabilities
Investment corporation bonds (Note 8)Long-term loan payable (Note 7)
Deferred tax liabilities
Leasehold and security deposits
Leasehold and security deposits in trust
Derivative liabilities
Total long-term liabilities
Total liabilities
Unitholders' Equity (Note 6)
Unitholders' capital
Units authorized: 2,000,000 units
Units issued and outstanding: 164,068 units as ofAugust 31, 2007 and February 28, 2007
Unappropriated income
Unrealized gain
Unrealized gain from deferred hedge transactions
Total unitholders' equity
Total liabilities and unitholders' equity
The accompanying notes are an integral part of these financial statements.

22

As of August 31, 2007

¥

¥

¥

222,623
17,500,000
12,200,000
571,083
283,164--1,484
508,475
7,274
42,084
31,336,189¥¥

255,079
25,300,000
12,200,000
382,161
155,21332,675
4,983
436,150
11,03813,38138,790,684

31,000,000
43,650,000
4,770
262,001
1,425,269
477
76,342,519
107,678,709

14,000,000
38,800,000--217,062
1,455,701
3,592
54,476,356
93,267,040

85,791,179

85,791,179

2,197,443

2,437,788

18,12688,006,749
195,685,458

13,90688,242,874
181,509,914

¥

23

24

25

26

27

Notes to Financial Statements♦Intangible assets
Other intangible assets are depreciated using the straight-line method.

♦Long-term prepaid expenses
Long-term prepaid expenses are depreciated using the straight-line method and are comprised of deferred financing costs and other items.

♦Unit issuance costs
Costs related to the issuance of new investment units are treated as period expenses. Furthermore, the issuance of new investment units
through a public offering on November 22, 2006 was conducted under an underwriting agreement in which a security company
underwrote the shares at an issue price and then sold the shares to general investors at an offer price different from the issue price (known
as the “spread method”).
In the spread method, the proceeds from the difference between the issue and offer price belong to the underwriter. Therefore, NCRI does
not pay the underwriter an underwriting commission. At the time of the public offering on November 22, 2006, the difference between
the issue price and offer price was 739,200 thousand yen. If the underwriting agreement had been such that the securities underwriter
had conducted the underwriting at the issue price, and if the new investment units had been offered to general investors at an identicaloffer price (conventional method), this amount would have been treated as issuance costs. Consequently, under the spread method, there
are no issuance costs recorded on the Statements of Income and retained earnings of the financial statements, and as a result, issuancecosts are 739,200 thousand yen lower, compared to the conventional method. Ordinary income and income before income taxes
increased by this amount, compared with the conventional method.

♦Bond issuance costs
Effective March 1, 2007, NCRI adopted a new accounting standard, “Tentative Solution on Accounting for Deferred Assets” (Practical
Solution No.19 issued by the Accounting Standards Board of Japan on August 11, 2006), which allows bond issuance costs to beamortized over the term of the bond using the straight line method. As a result of this change for the six months ended August 31, 2007,bond issuance costs and income before income taxes increased by 9,342 thousand yen, and amortization of bond issuance costs decreasedby the same amount.
Bond issuance costs recorded as of and before February 28, 2007 were amortized over three years based on the previous accounting rulein accordance with the transition measurement of Practical Solution No. 19.

♦Allowances
To cover possible credit losses, an allowance for doubtful receivables is provided for any amount deemed uncollectible. The allowance iscalculated on the basis of historical default rates for normal claims or on the basis of individual assessments on specific claims on debtors
threatened with bankruptcy.

ITL. Under the simplified method, interest rate swaps are not measured at fair value. Instead, the net amount to be paid or received under
the swap agreements is recognized and included in interest expense or income as incurred.
Consequently, liabilities decreased by 43,881 thousand yen compared to those based on the former accounting method, and unitholders’equity increased by the same amount for the six months ended February 28, 2007. There was no impact to net income.
NCRI evaluates the effectiveness of hedging instruments by comparing the cumulative fluctuations in cash flows of the hedged items withthat of hedging instruments. However, hedge effectiveness is not evaluated for interest rate swap transactions that meet the criteria forthe simplified method.

♦Accounting method for beneficiary interests in trust assets including real estate
Regarding trust beneficiary rights in trust assets, including real estate, all asset and liability accounts within the trust assets and all income
and expense accounts generated by or incurred from the trust assets are recorded in the relevant account items of the balance sheets andthe statement of income and retained earnings.

♦Accounting for consumption taxes
Consumption taxes are excluded from transaction amounts. However, non-deductible consumption taxes on fixed assets are included in
the acquisition costs of the respective assets.

3. Cash and Cash Equivalents
Cash and cash equivalents as of August 31, 2007 and February 28, 2007 consisted of the following:(Thousands of yen)

Cash and bank deposits
Cash and bank deposits in trust
Bank deposits retained for repayment of leasehold and security deposits
Bank deposits in trust retained for repayment of leasehold and security deposits in trust
Cash and cash equivalents

Tangible assets as of August 31, 2007 and February 28, 2007 consisted of the following:(Thousands of yen)

Rental revenue is recognized on an accrual basis based on the lease agreement.

Property-related taxes including city planning taxes, depreciable property taxes, and other taxes are imposed on property on a calendar
year basis. The amount of such taxes assessed in the period is charged to income as property operating expenses. Under the Japanese tax
rule, the seller of the property at the time of disposal is liable for property-related taxes on the property from the date of disposal to theend of the calendar year in which the property is disposed. In accordance with Japanese business practice, the seller, however, isreimbursed by the purchase of the property for the accrued property-related tax liabilities, and the amount of the settlement reflects thisadjustment. NCRI is allocated the portion of the property-related taxes for the period from the purchase date of each property through theend of the calendar year. Capitalized property-related taxes are 9,517 thousand yen for the period ended August 31, 2007 and 1,191
thousand yen for the period ended February 28, 2007, respectively.

♦Derivatives and hedge accounting
The derivative transactions utilized by NCRI are interest rate swaps. Pursuant to NCRI’s policy on interest rate swap transactions, NCRI
enters into derivative transactions solely for the purpose of hedging the risks of interest rate fluctuations, which is defined in the Article of
Incorporation of NCRI, and does not enter into such transactions for speculative or trading purposes.

As of February 28, 2007
¥4,713,872
3,885,406(264,317)(1,496,798)¥6,838,162

4. Schedule of Tangible Assets of Property and Equipment♦Revenue recognition♦Property-related taxes

As of August 31, 2007
¥4,245,687
4,076,730(311,784)(1,474,871)¥6,535,761

LandLand in trust
Land including trust accounts
Buildings
Buildings in trust
Buildings including trust accounts
Structures
Machinery and equipment
Tools, furniture and fixtures
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Other tangible assets including
trust accounts total
Total

As of August 31, 2007
Book
Acquisition Accumulated
Depreciation
Value
Costs
¥26,135,278¥–¥26,135,278–
88,970,691
88,970,691
115,105,970–
115,105,970
19,155,759
19,514,342(358,582)
48,940,534
51,493,465(2,552,931)
71,007,807(2,911,513)
68,096,294
172,430
174,700(2,270)(10,450)
399,366
409,816
622,434(33,461)
588,973(16,913)483,837
500,751
605,360(40,464)
564,896346,873413,500(66,626)

As of February 28, 2007
Book
Acquisition Accumulated
Costs
Depreciation
Value¥16,600,462¥16,600,462¥–
90,926,678–
90,926,678
107,527,140
107,527,140–
10,721,854
10,896,689(174,835)
52,387,383(1,988,547)
50,398,835(2,163,382)
61,120,689
63,284,072(1,021)
86,13687,157
209,476(4,545)204,931(16,617)340,813357,431503,391(12,828)
490,563583,701
615,229(31,528)
359,247
409,766(50,518)

2,726,564(170,186)

2,556,377

2,182,453(117,060)

2,065,393¥188,840,342¥(3,081,700)¥185,758,642¥172,993,667¥(2,280,442)¥170,713,224

Derivative transactions are measured at fair value. Gains and losses on derivatives are deferred until maturity of the hedged transactions
and are recognized as either an asset or liability (known as “deferred hedge treatment”).
Although deferred hedge treatment was adopted, NCRI has applied the “simplified method” since September 1, 2006 in accordance withthe amended ITL (effective beginning on May 1, 2006) for interest rate swaps that were executed after the effective date of the amended

28

29

5. Pledged Assets and Secured Loans

7. Short-Term Loans and Long-Term Loans

As of August 31, 2007 and February 28, 2007, the following assets were pledged as collateral for the following loans:

Short-term loans and long-term loans as of August 31, 2007 and February 28, 2007 consisted of the following:
As of February 28, 2007
As of August 31, 2007
AmountInterest rate
Interest rate
Amount(Thousands of yen)(%)(%)(Thousands of yen)
Short-term loan payable
Unsecured loans due on November 30, 2007
¥ 6,400,000
0.96%
1.11%
¥ 2,099,610
with floating rate
Unsecured loans due on December 13, 2007
2,100,000
0.98%
1.11%
688,940
with floating rate
Unsecured loans due on December 21, 2007
16,800,000
1.01%
1.11%
5,511,450
with floating rate
Unsecured loans due on March 31, 2007
1.17%
–
–
4,400,000
with floating rate
Unsecured loans due on March 31, 2007
1.17%
1,800,000––
with floating rate
Unsecured loans due on March 31, 2007
1.17%
2,250,000––
with floating rate
Unsecured loans due on March 31, 2007
1.17%
750,000––
with floating rate
¥ 17,500,000¥ 25,300,000
Sub total
Long-term loan payable due within one year
0.90%
¥ 12,200,000¥ 12,200,000
0.86%
Secured loans due on December 17, 2007
¥ 12,200,000¥ 12,200,000
Sub total
Long-term loan payable
1.22%
19,550,000
21,100,000
1.14%
Secured loans due on September 21, 2008
1.03%
4,000,000
4,000,000
0.87%
Unsecured loans due on December 18, 2008
1.12%
5,700,000
5,700,000
0.96%
Unsecured loans due on December 18, 2009
1.80%
8,000,000
8,000,000
1.80%
Unsecured loans due on December 17, 2010
1.50%
6,400,000––
Unsecured loans due on March 26, 2012
¥ 43,650,000¥ 38,800,000
Sub total¥73,350,000¥76,300,000
Total

Pledged assets:
Cash and bank deposits in trust
Buildings in trust
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Land in trust
Total(Thousands of yen)

As of August 31, 2007
¥ 2,147,202
26,659,739
277,819
71,892
135,141
46,556,988¥ 75,848,783

As of February 28, 2007
¥ 2,154,062
27,853,419
282,767
82,581
137,190
48,513,072¥79,023,094

As of August 31, 2007
¥ 12,200,000
19,550,000¥31,750,000

As of February 28, 2007
¥ 12,200,000
21,100,000¥33,300,000

Loans secured by the pledged assets:Long-term loan payable due within one year
Long-term loan payable
Total(Thousands of yen)

6. Unitholders’ Equity (stipulated in Paragraph 4, Article 67 of the ITL)NCRI issues only non-par value of investment units in accordance with the Investment Trust Law of Japan. The entire amount of the issue
price of the new units is designated as state capital. The Company is required to maintain net assets of at least 50,000 thousand yen as
required by the Investment Trust Law of Japan.

NCRI entered into 7,000 million yen and 2,000 million yen credit facilities in the form of commitment lines with certain financial
institutions for the periods ended August 31, 2007 and February 28, 2007. The unused amount of such credit facilities was 7,000 million
yen as of August 31, 2007 and 2,000 million yen as of February 28, 2007.
The anticipated maturities of long-term loans for the following four years ended August 31 starting in 2009 were as follows:(Thousands of yen)

2009
2010
2011
2012

30

¥ 23,550,000¥ 5,700,000¥ 8,000,000¥ 6,400,000

31

8. Investment Corporation Bonds

10. Breakdown of Gain on Sale of Properties

Details of total investment corporation bonds outstanding are summarized as follows:(Thousands of yen)

As of August 31, 2007
AmountInterest rate
First series of unsecured investment corporation
bonds due on February 24, 2011
Second series of unsecured investment corporation
bonds due on April 12, 2012
Third series of unsecured investment corporation
bonds due on April 11, 2014

As of February 28, 2007
AmountInterest rate

¥ 14,000,000

1.61%¥ 14,000,000

1.61%¥ 12,000,000

1.79%

–

–

¥ 5,000,000

2.15%

–

–

The anticipated maturities of these bonds for the following four years ended August 31 starting in 2009 were as follows:(Thousands of yen)

2009
2010
2011
2012

–
–
¥ 14,000,000¥ 12,000,000

Gains on sales of properties for the six months ended August 31, 2007 and February 28, 2007 were as follows:
C-21 New City Residence Jinbocho
Proceeds from sale of properties
Cost of properties sold
Other sales expenses
Gains on sales of properties
M-1 New City Residence Meguro Mita
Proceeds from sale of properties
Cost of properties sold
Other sales expenses
Gains on sales of properties
M-7 New City Residence Kyodo
Proceeds from sale of properties
Cost of properties sold
Other sales expenses
Gains on sales of properties
R-8 New City Residence Uehonmachi
Proceeds from sale of properties
Cost of properties sold
Other sales expenses
Gains on sales of properties(Thousands of yen)August 31, 2007

February 28, 2007

¥ 3,275,000(2,845,467)(27,639)¥ 401,893

–
–
–
–

–
–
–
–

¥ 7,070,000(6,086,246)(25,913)¥ 957,840––––¥ 757,000(748,249)(4,975)¥ 3,775––––¥ 859,000(871,805)(4,662)¥ (17,468)

9. Rental Revenues and Expenses
Rental revenues and expenses for the six months ended August 31, 2007 and February 28, 2007 were as follows:

A. Rental revenues
Rent
Parking lot income
Incidental income
Other rental revenues
Subtotal
B. Property operating expenses
Repairs and maintenanceUtilities
Property management fee
Property related taxes
Insurance
Broker fee, advertising fee and others
Trust fee
Depreciation and amortization
Allowance for doubtful accounts
Other rental expenses
Subtotal
C. Real estate rental business profit (A-B)

32(Thousands of yen)

As of August 31, 2007

As of February 28, 2007

¥ 4,907,248
160,198
13,437247,330¥ 5,328,215¥ 4,305,680
137,530
15,516
276,017¥ 4,734,746

315,332
67,954
144,697
164,699
11,559365,558
47,563846,941
2,772
86,001¥ 2,053,080¥3,275,134

283,269
74,617
135,677
123,485
10,488358,515
46,459737,301
3,053
83,533¥ 1,856,401¥2,878,345

11. Per Unit Information
The following table summarizes the net income per unit for the six months ended August 31, 2007 and February 28, 2007 and theunitholders’ equity per unit as of August 31, 2007 and February 28, 2007.

Net income per unit
Weighted-average number of units

Unitholders’ equity per unit

For the six months ended
August 31, 2007
¥ 13,393
164,068 units

For the six months ended
February 28, 2007
¥ 16,804
145,062 units

As of August 31, 2007
¥ 536,404

As of February 28, 2007
¥ 537,843

Net income per unit is calculated by dividing net income by the weighted daily average number of units.
Diluted net income per unit is not presented since no warrants and convertible bonds were outstanding during the six months ended
August 31, 2007 and February 28, 2007.

33

12. Income Taxes

14. Derivatives

Income taxes in Japan applicable to NCRI consist of corporate income tax, enterprise tax and inhabitant tax. The following is areconciliation between the statutory income tax rate in Japan and the effective tax rate reflected in the accompanying financial statements
for the six months ended August 31, 2007 and February 28, 2007:

NCRI had the following derivatives contracts outstanding as of August 31, 2007 and as of February 28, 2007:(%)

Statutory income tax rate
Deductible dividend payments
Other
Effective tax rate

As of August 31, 2007
39.39%(39.36)0.05
0.08%

As of February 28, 2007
39.39%(39.31)
0.11
0.19%(Thousands of yen)Interest rate swap:
Fixed rate payable and floating rate receivable

August 31, 2007
Notional amount

Fair value¥ 39,600,000¥ (51,430)

February 28, 2007
Notional amount

Fair value¥ 33,200,000¥ (18,602)

Interest rate swap transactions are exposed to interest rate fluctuation risks. Credit risk is recognized as immaterial because transactions
are only entered into with financial institutions that have high credit ratings. Risk management for the periods is conducted based on theasset management procedures of the asset management company.

Under NCRI’s distribution policy, cash distributions are made in excess of 90% of distributable income as defined in the Special Taxation
Measures Law of Japan for the fiscal period to qualify for conditions as set forth in the Special Taxation Measures Law to achieve a
deduction of cash distributions for income tax purposes. Based on such policy, NCRI treated the cash distributions as taxable distributions
as defined in the Special Taxation Measures Law.

15. Related Party Transactions

The tax effects of significant temporary differences that resulted in net deferred tax assets or liabilities as of August 31, 2007 and February
28, 2007 were as follows:

Jun Arai, who holds no voting rights of New City Residence Investment Corporation, is the Executive Director of NCRI and President of
CBRE Residential Management K.K.

(Thousands of yen)August 31, 2007
Current liabilities
Deferred tax assets
Enterprise taxes
Bad-debt loss
Allowance for doubtful accounts
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Unrealized gain from deferred hedge transactions
Total deferred tax liabilities(Net deferred tax liabilities)
Long-term liabilities
Deferred tax liabilities
Unrealized gain from deferred hedge transactions
Total deferred tax liabilities(Net deferred tax liabilities)

Tetsuya Fujita resigned as the Executive Director of NCRI and President of CBRE Residential Management K.K. on July 31, 2007.

February 28, 2007

45
1,897
1,936
3,880
(3,834)
45

333
1,945
1,432
3,710
(3,377)
333

7,320
7,320
7,274

11,372
11,372
11,038

4,770
4,770
4,770

–
–
–

13. Leases
NCRI operates its properties that are rented to tenants on lease terms of two years generally, with monthly payments due in advance.
As of August 31, 2007 and February 28, 2007, the future lease revenue under non-cancelable operating leases was as follows:

CBRE Residential Management K.K. has entered into an asset management agreement subject to the conditions set forth in Article of
Incorporation of New City Residence Investment Corporation. Management fees payable and incurred as of August 31, 2007 and February
28, 2007 and for the periods then ended were as follows:(Thousands of yen)Management fees payable
Asset management fees for the period

August 31, 2007
¥ 395,713
686,096

February 28, 2007
¥ 291,127704,692

177,143 thousand yen and 242,500 thousand yen relating to the acquisition of properties for the six months ended August 31, 2007 andFebruary 28, 2007, respectively, were included in asset management fees in the table above and were capitalized as acquisition costs of
the respective property.

16. Distribution Information
Pursuant to the distribution policy set forth in Article 35, Paragraph 1 of NCRI’s Articles of Incorporation, the maximum distribution
amount cannot exceed unappropriated income, and this amount must exceed 90% of the “distributable income” which is defined in
Article 67-15 of the Special Taxation Measures Law of Japan. No cash distributions exceeding unappropriated income as set forth in Article
35, Paragraph 1 (2) of NCRI’s Articles of Incorporation were made.
Based on this policy, the board of directors of NCRI resolved to make cash distributions on October 24, 2007 and April 24, 2007 of
2,197,362,724 yen and 2,437,722,344 yen for 164,068 units to unitholders of record on August 31, 2007 and February 28, 2007,
respectively.
Income carried forward after distributions for the six months ended August 31, 2007 and February 28, 2007 were as follows:(Thousands of yen)

Due within 1 year
Due after 1 year
Total

For the six months ended
August 31, 2007
¥ 253,571
448,698¥ 702,269

For the six months ended
February 28, 2007
¥ 411,036
554,433¥ 965,469

August 31, 2007

February 28, 2007
(Thousands of yen)

Unappropriated income
Cash distribution declared
Income carried forward¥ 2,197,443
2,197,362
81¥ 2,437,788
2,437,722
65¥ 13,393¥ 14,858(yen)Cash distribution declared per unit

34

35

Pr
Principal
Princcipal Investment Information
17. Subsequent Events

Composition of Unitholders

Investment Unit Performance

Note: Unit prices are closing basis.

(as of August 31, 2007)

Transfer of assets(i) NCRI has entered into a sales and purchase agreement for trust beneficiary rights in real estate on September 14, 2007. Under thetransfer agreement effective September 14, 2007, NCRI sold the trust beneficiary rights in New City Residence Shinjyuku Ichibankan to
KAG 8 Investment TMK for 2,181 million yen on October 30, 2007. The resulting gain on the sale of the property is approximately 177
million yen, which will be recorded in operating revenues. The sales price excludes real estate tax, city-planning tax, and consumption
tax.

Number of units owned - 164,068

Trading volume (units)

Financial institutions(including securities firms)

3,000

74,169 units

45.2%

Other domestic corporations

6,456 units

3.9%

Overseas investors
Individuals & others

69,757 units
13,686 units

42.5%
8.3%

Unit price (yen)750,000

Unit price
Trading volume690,000
2,000
630,000

570,000(ii) NCRI has concluded a transfer agreement for trust beneficiary rights in real estate on September 14, 2007. Under the transfer
agreement effective September 14, 2007, NCRI sold the trust beneficiary rights in New City Residence Shinjyuku Nibankan to KAG 8
Investment TMK for 979 million yen on October 30, 2007. The resulting gain on the sale of the property is approximately 76 million
yen, which will be recorded in operating revenues. The sales price excludes real estate tax, city-planning tax, and consumption tax.

Number of unitholders - 6,075(iii) NCRI has concluded a transfer agreement for trust beneficiary rights in real estate on September 14, 2007. Under the transfer
agreement effective September 14, 2007, NCRI sold the trust beneficiary rights in New City Residence Sasazuka to KAG 8 Investment
TMK for 3,507 million yen on October 30, 2007. The resulting gain on the sale of the property is approximately 352 million yen, which
will be recorded in operating revenues. The sales price excludes real estate tax, city-planning tax, and consumption tax.

Individuals & others

1,000
510,000

Financial institutions(including securities firms)

130

2.1%

Other domestic corporations
Overseas investors

107
132

1.8%
2.2%

5,706

93.9%

0
Mar.
2007
(End of 4th
fiscal period)

Apr.

May

Jun.

Jul.

450,000
Aug.
2007(End of 5th
fiscal period)

Principal Unitholders(as of August 31, 2007)
Investment Units Held

Percentage Share (Note)

Japan Trustee Services Bank, Ltd. (Trust Account)

14,969 units

9.12%

NikkoCiti Trust and Banking Corporation (Investment Trust Account)

11,290 units

6.88%

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

7,996 units

4.87%

CGML-IPB Customer Collateral Account7,052 units

4.29%

The Bank of New York, Treaty JASDEQ Account5,846 units

3.56%

State Street Bank and Trust Company

5,374 units

3.27%

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

4,534 units

2.76%

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

3,546 units

2.16%

Goldman Sachs International

3,543 units

2.15%

North Pacific Bank, Ltd.

3,513 units

2.14%

67,663 units

41.24%

Name

Total

Note: Percentage Share indicates the number of investment units held as a percentage of the total number of investment units issued and outstanding

Corporate Data (as of August 31, 2007)
Corporate Office:1-10-6, Roppongi, Minato-ku, Tokyo 106-0032, Japan

Date of Incorporation: September 27, 2004
Capital:¥85,791,179,400 (164,068 units)

Stock Listing:Tokyo Stock Exchange

Security Code:8965

Contact: For further information, please contact our asset
management company or visit our website.
(http://www.ncrinv.co.jp/eng/)
CBRE Residential Management K.K.
1-10-6, Roppongi, Minato-ku, Tokyo 106-0032, Japan
Phone: +81-3-6229-3860
Fax:+81-3-6229-3867

Disclaimer
The contents of this document, including summary notes, quotes, data and other information, are provided by New City Residence Investment Corporation ("NCRI") / CBRE Residential Management K.K.
("CBRERM") solely for information purposes and are not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell, any securities of NCRI. Please note that this document
and the information included in it have not been prepared or distributed as a disclosure document or management report that are based on the requests of the Financial Instruments and Exchange Law, theInvestment Trust and Investment Corporation Law and the Cabinet Office regulations and rules attached to the Law, the listing regulations of the Tokyo Stock Exchange and other related rules.
This document includes forward-looking statements such as financial forecasts. To the extent that statements in this document do not relate to historical or current facts, they constitute forward-looking
statements. These forward-looking statements are based on current assumptions and beliefs of NCRI and CBRERM in light of the information currently available to it, and involve known and unknown risks,
uncertainties and other factors. Such risks, uncertainties and other factors may cause NCRI's actual results, performance, achievements or financial position to be materially different from any future results,
performance, achievements or financial position expressed or implied by those forward-looking statements. NCRI and CBRERM undertakes no obligation to publicly update them after the date of this document.
Although we have made every effort to assure the accuracy of the content, etc. provided in this document, we do not guarantee the accuracy/reliability of the content. Furthermore, please note that the content issubject to change without notice. The reproduction or alteration of the content described in this document without proper prior approval is strictly prohibited.

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