Semi-annual Report for the 5th Period(From April 1, 2017 to September 30, 2017)

Highlights

For the 5th fiscal period ended September 30, 2017
Distribution per unit

JPY 6,115
Forecast DPU for the 6th fiscal period

JPY 6,200
Total assets (by acquisition price) /Number of properties

contents
I. Overview of KRR
From the Executive Director
Key Characteristics
Pipeline Expansion
External GrowthInternal Growth
Financial Highlights
ESG Initiatives

JPY 204.9 bn
51 properties

Portfolio List

Portfolio Map
Overview of Portfolio
Close-up KRR Vol.5
Ashico Town Ashikaga
Summary of Investment Unit
II. Asset Management Report

Number of tenants

5 4 2 tenants

Overview of Asset Management
Profile of KRR
Status on Investment Properties
Capital Expenditures

Occupancy rate at the end of period

99.6 %

Expenses and Liabilities
Acquisition and Disposition
Accounting
OthersRoseo Mito

From the Executive Director

Thanks to your support, Kenedix Retail REIT Corporation (“KRR”) has reported its results ofoperations for the fifth fiscal period (from April 1, 2017 to September 30, 2017).
We became the first J-REIT to focus primarily on neighborhood, community and other shopping
centers that cater to the day-to-day needs of local area customers upon our listing in February 2015.
Japan is undergoing unprecedented demographic changes that, we believe, are influencing thenature of local retail markets. In particular, the aging of the Japanese population and the increased
concentration of populations in urban areas have resulted in shrinkage of retail trade areas for
shopping centers. We have also observed an increase in market share of specialty stores asconsumer tastes change. Accordingly, we expect continued high demand for such local shopping
centers for daily needs because of their convenience. We believe our selective investments in theseshopping centers contribute further increase in unitholder’s value.
We acquired 18 shopping centers with acquisition price of 80,843 million yen upon our listing. At
the end of the fifth fiscal period, our portfolio, consisted of 51 properties for 204,913 million yen inacquisition price, reaching the AUM target of 200 billion yen within three years after the IPO, aheadof the schedule. We believe that AUM growth contribute to diversification of our portfolio andstability of our earnings base.
In the fifth fiscal period, we acquired eight properties in connection with public offering and Resora
Obu Shopping Terrace, an NSC in Greater Nagoya area, in August. We also conducted renewal
projects at MONA Shin-Urayasu and Blumer HAT Kobe. For the fifth fiscal period, operating
revenue totaled 7,803 million yen, operating income was 3,666 million yen, ordinary income was3,108 million yen and net income was 3,104 million yen. The distribution to unitholders was 6,115
yen per unit.
We dedicate ourselves to the maximization of unitholder value by continuing implementation of
our growth strategy extensively supported from our Sponsor and the Alliance Companies.
We respectfully look forward to your continued support.

Akihiro Asano

Executive Director, Kenedix Retail REIT Corporation
Director & COO, Head of Retail REIT Department,
Kenedix Real Estate Fund Management, Inc.

1

Key Characteristics

Focus on shopping centers for daily needs
1

The only J-REIT to focus on shopping centers for daily needs

Retail properties located within residential districts or adjacent to major roads, which
provide daily goods and services
Well located for daily living

Retail trade area of an approximately 1 to 10 km radius (generally 3 to 5 km radius)
Customers predominantly from local areas surrounding the retail property

High volume of customer traffic

Accommodate certain daily local retail needs
Strong customer traffic on both weekdays and weekends

Specialty store tenant diversity

Various specialty stores to meet a range of day-to-day needs
Groceries, clothing and other daily goods and services

NSC

SM

Supermarkets

Neighborhood
Shopping Centers

Retail trade area
3 km radius

Retail trade area
3 – 5 km radiusStand-alone storesthat primarily
provide groceries

Shopping centerswith a supermarket
as an anchor or coretenantLife Kameido

Urban
Station-Front
Shopping Centers

CSC

Shopping centers in
the immediate vicinityof an urban public
transportation station

Retail trade area
3 – 10 km radius

Community
Shopping Centers

Retail trade area
5 – 10 km radius

Daikanyama Address Dixsept2

Larger shopping
centers than NSC, witha supermarket as ananchor or core tenant

Fululu Garden Yachiyo

Blumer Maitamon

SS

Specialty Stores

Retail trade area
1 – 10 km radiusSpecialty stores suchas drug stores,
convenience stores,
health clubs orelectronic appliancestoresHomecenter Kohnan Sunadabashi

Investment in major metropolitan areas with population concentrations

Primary geographic target areas
The four major metropolitan areas of Japan, which have relatively stable populations:•Tokyo metropolitan area•
Greater Osaka area•

Greater Nagoya area•

Fukuoka area

* KRR may also from time to time consider investing in ordinance-designated cities, core cities and other areas,
which would allow KRR to build a more diversified portfolio that provides flexibility and positive returns,
consistent with KRR’s investment goals, when attractive opportunities arise.

Location (by acquisition price)
Ordinance-designed cities,
core cities andother areas
22.1%
Fukuoka area
3.9%
Greater Nagoya
area
10.6%

Tokyo metropolitan area
Greater Osaka area

4 major
Metropolitan
Areas
％

77.9

Greater Osaka area
21.6%

Tokyo
metropolitan
area
41.8%

As of September 30, 2017

Greater
Nagoya area
Fukuoka area2

Pipeline Expansion

1

Pipeline expansion through collaboration with KRR’s Sponsor and Alliance Companies

KRR aims steady external growth through pipelines from its Sponsor and Alliance Companies andpipeline expansion utilizing sourcing capability of the Asset Manager.

Strong support from the Kenedix Group and KRR’s Alliance Companies
KRR has strong support from its Sponsor, Kenedix, Inc., as well as Alliance Companies forboth internal and external growth. In addition, ITOCHU Corporation became a new Alliance
Company in August 2016, which KRR expects will further promote its growth strategies.

Asset management
Property management

Sponsor2

Alliance Companies

Preferential access to potential acquisition opportunities

KRR seeks to achieve external growth by selectively acquiring properties managed or developed by
the Kenedix Group and taking advantage of preferential negotiation rights for properties owned byAlliance Companies.
Examples of pipelines
Apita Terrace Yokohama Tsunashima(Note 1)

Location: Yokohama, Kanagawa

Unicus Urawamisono (Land)
Location: Saitama, Saitama

Planned toopen in spring
2018

Across Plaza Urayasu Higashino (Land)(Note 1)

Location: Urayasu, Chiba

Opened inMar. 2017

Ozeki Tokiwadai
Location: Itabashi, Tokyo

Planned toopen in Dec.
2017

Development Project in Nagoya (Land)(Note 1)Opened in
Sep. 2017

Location: Nagoya, Aichi

Planned toopen in autumn
2018

Note 1: The illustrations above are completion images based on design drawings and may differ from the actual buildings after completion.
Note 2: KRR has no plans to acquire these properties and there is no guarantee that KRR can acquire these properties in the future.

3

External Growth

1

Steady AUM growth

KRR made steady AUM growth through three follow-on offerings since its IPO. Its AUM
expanded from 80.8 billion yen at the time of listing to 204.9 billion yen. KRR achieved its target
AUM of 200 billion yen, set at the time of the IPO, ahead of the schedule.
( AUM )( JPY bn )
250

204.9
200

158.7
150

100

Aiming forsteady growthof asset value
going forward

164.3

131.6

80.8

91.8

50

0

2

IPO
(Feb. 10, 2015)

1st Period(Sep. 30, 2015)

2nd Period(Mar. 31, 2016)

3rd Period(Sep. 30, 2016)

4th Period(Mar. 31, 2017)

5th Period(Sep. 30, 2017)

Assets acquired in the 5th fiscal period

N - 6 Resora Obu Shopping Terrace

An NSC located in an area high population growth
The property houses Yamanaka, a grocery supermarket, which promotes “dominant strategy” in Aichi Prefecture, as
its main tenant
NSC
Acquisition Price

JPY 7,911 mn

Location

1-98
Hiiragiyama-cho,
Obu, Aichi

Land area

29,359.74m2

Gross floor area

24,093.43m2

Core tenant

Premium Support
K.K.

Appraisal NOI

JPY 410 mn

Appraisal NOI yield

5.2%

4

T-18 Totsuka-Fukaya Shopping Center (Land)

NSC

T-19 Yumemachi Narashinodai Mall
Located in an area with high population growth,housing a competitive supermarket as the anchor
tenantNSC

T-20 Kawamachi Yahagi Mall

T-21 Prime Square Jiyugaoka

A new NSC developed by Kenedix housing tenantswith a high level of customer attraction

Located in the neighborhood of Jiyugaoka along Tokyu
Toyoko Line

NSC

SS

T-22 Round1 Ichikawa-Onitaka

F-2 Round1 Stadium Hakata-Hanmichibashi

A-road-side amusement facility located in an areawith easy access and high population growth

A large-scale flagship store for Round One that offers avariety of amusement and sporting facilities

SSSS

F-3 Kurume-Nishi Shopping Center
An NSC located in a residential district near downtown
Kurume City and tenants include a grocery supermarket
and a drug store, etc.

R-10 Sun Street Hamakita
Located in an area with high population growth andexpected to generate synergies among the tenants thatoffer services and experiences, with Seiyu as the core tenant

NSC

NSC

Underlying land of an NSC opened in Mar. 2015 locatedin an area with population growth5Internal Growth
Active retail property management

Value added “one-stop” asset management and property management services
KRR seeks to enhance tenant relationships and profitability through value-added “one-stop" asset
management and property management services and implementation of a retail property management
cycle.

Seek internal growth through property management
KRR seeks to improve the profitability and value of its portfolio through strategic acquisitions andimprovements in asset management and property management.

Enhance profitability andasset value throughbuilding expansions

Enhance tenantsatisfaction and reduce
cost through effective
utilization of capital
expenditure

Adopt optimal leasing
structures for competitive
tenant mix and rental
upsideBuilding expansion leveraging unused portions of floor area
KRR increased profitability and value of its assets through building expansions
Constructed secondhand shop building at Roseo Mito

Constructed restaurant building at Unicus Ina

Examples of effective utilization of CAPEXKRR seeks to use proper and well-timed capital expenditures to reduce costs, increase satisfactionof tenants and increase stability of revenue by making its properties more competitive.
Example 1: MONA Shin-Urayasu (1st phase)
Repair and renovation of outdoor facilities and signboards toimprove commercial environment

Example 2: Blumer HAT Kobe
Change in layout and leasing of new tenants to increase rent
revenues

BeforeBefore

After

After

6

Financial Highlights
KRR implements flexible financial strategies, aiming to produce stable profits in the medium- tolong-term and to steadily grow its portfolio.

1

Financial highlights (as of September 30, 2017)
LTV

42.6%

Long-term debt ratio /Fixed interest debt ratio

Average interest rate

Number of lenders

Japan Credit Rating Agency(JCR)

Average remaining years
to maturity

11

4.8 years

2

0.96%

87.1%

A (positive)

Diversifying KRR’s lending sources■ Issued investment corporation bonds■ Established commitment lines

KRR issued investment corporation bonds on
August 31, 2017, leveraging low interest rateenvironment.

KRR established commitment lines with
Sumitomo Mitsui Banking Corporation andMizuho Bank, Ltd. in April, 2017. This was thefirst time that a J-REIT listed after 2012 with“A” long-term credit rating established suchcommitment lines.

Issue

Maturity

3rd unsecured
investment corporation 5 years
bonds
4th unsecured
investment corporation 10 years
bonds
Total

3

AmountAnnualinterest rate

JPY 1.0 bn

0.320%

JPY 2.0 bn

0.700%

JPY 3.0 bn−

コミットメントライン設定

枠
Commitment
credit lines

JPY 2.0 bn

Debt maturity schedule (as of October 3, 2017)

KRR believes that diversified debt maturity schedule will contribute to a stable financing standing.

Debt outstanding JPY 97,900 mn (excluding interest-bearing tenant leasehold and security deposits)(JPY mn)
12,00010,000Borrowings

Investment corporation bonds

Borrowed a 11 year loan for
the first time

8,000

6,000

4,000

2,000

0
6th
7th
8th
9th
10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
21st 22nd 23rd 24th 25th 26th 27th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

7

E S G I n i t iat i ves

1

Environmental Initiatives

Installation of LED lighting
KRR promotes installation of LED lighting to reduce O - 4 Blumer HAT Kobe
replacement costs and to conserve energy. This effort
also contributes to mitigate environmental burden by
reducing CO2 and waste emissions.

T-1

Fululu Garden Yachiyo

T-2

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

T-5

Un i cus I n a

O - 5 Carino Esaka
R-4

Ashico Town Ashikaga

Greening of facilities
Greening of facilities creates energy-saving effects
such as mitigation of outdoor temperature, as well
as relaxing effects for visitors by providing refreshingspaces.
Blumer Maitamon (Entrance)

MONA Shin-Urayasu (Rooftop )Fululu Garden Yachiyo

Kawamachi Yahagi Mall

Summer Festival (Unicus Ina)

Kamisato Farmer’s Market(Unicus Kamisato)

Signing of agreement(Unicus Yoshikawa)

Signing of agreement(Fululu Garden Yachiyo)

Installation of delivery boxes
KRR has installed delivery boxes in some of its
properties, expecting it will decrease redeliveries, thus
leading to low-carbon society. In addition, delivery
boxes improve the convenience of the consumers
visiting the shopping centers.

2

Initiatives to enliven local communities

Encouraging greater community interactions
KRR is maki n g effo rt s t o enliv en lo c al
co m m u nities
byho l din g
co m m unity part icipating event s at it s pro pert ies .

Collaboration with local communities
KRR agreed with Yoshikawa City to provide part ofUnicus Yoshikawa as a temporary shelter in case of adisaster as floods. KRR also agreed with Yachiyo
Police Station to provide coupons to the elderly who
voluntarily returned their driver’s license.

8

3

Recognitions and certifications on environment

D B J G r e e n Building Certification
Approx. 40% of properties (14 out of 38) have acquired the “DBJ Green Building Certification”
for their environmental and social initiatives.
Note : 38 properties, excluding 13 land-only properties from the 51 properties that KRR holds as of September 30, 2017.

Properties with outstanding environmental & social awareness (★★★★)
T - 2 MONA Shin-Urayasu

T - 1 Fululu Garden Yachiyo

Properties with excellent environmental & social awareness (★★★)
T - 4 Daikanyama Address Dixsept

O-4

Bl u m e r HA T Ko b e

R-1

Roseo Mito

R-4

Ashico Town Ashikaga

Properties with high environmental & social awareness (★★)
T-5

Unicus Ina

T-19

Yumemachi Narashinodai Mall

T-20

Kawamachi Yahagi Mall

O - 5 Carino Esaka
R-10

T-3

Pa s s a g g io N i s hia r ai

T-7

Un i cus Y o s h ika wa

O-1

Bl u m e r M a i t a m on

Sun Street Hamakita

GRESB Real Estate Assessment 2017
KRR has been awarded a “Green Star” in the 2017 GRESB Real
Estate Assessment for the second consecutive year, as it
received high evaluation on both “implementation andmeasurement” and “management and policy”. KRR also
earned “Three Star GRESB Rating” which is relative indicationof the global performance. KFM, the asset manager of KRR,
has also joined the GRESB Company & Fund Members.

9Por tfolio List as of September 30, 2017
Total
acquisition price

Weighted averageoccupancy rate

Number of
Tenants

JPY204,913 mn

99.6 %

542
N SC

No.

Name of property

Location(city / ward, prefecture)

SM

CSC

Urban Station-Front SC

Acquisition price(JPY mn)SS

Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

T-1

Fululu Garden Yachiyo

Yachiyo, Chiba

14,848

99.4

48

T-2

MONA Shin-Urayasu

Urayasu, Chiba

8,063

95.9

70

T-3

Passaggio Nishiarai

Adachi ward, Tokyo

5,850

99.8

42

T-4

Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

97.9

27

T-5

Unicus Ina

Kitaadachi-gun, Saitama

4,470

100.0

1

T-6

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

4,000

100.0

1

T-7

Unicus Yoshikawa

Yoshikawa, Saitama

3,600

100.0

11

T-8

Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

T-9

Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

100.0

1

T-10 K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

100.0

1

T-11 Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

100.0

1

T-12 Unicus Konosu (Land)

Konosu, Saitama

1,700

100.0

1

T-13 Inageya Yokohama Minamihonjuku (Land)

Yokohama, Kanagawa

1,442

100.0

1

T-14 Gourmet City Chiba-Chuo

Chiba, Chiba

T-15 Nakamachidai Tokyu Store
T-16 Central Wellness Club Nagatsuta Minamidai

760

100.0

1

Yokohama, Kanagawa

3,360

100.0

1

Yokohama, Kanagawa

1,724

100.0

2

T-17 Life Kameido

Koto ward, Tokyo

1,450

100.0

1

T-18 Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

100.0

2

T-19 Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

100.0

14

T-20 Kawamachi Yahagi Mall

Chiba, Chiba

3,097

100.0

12

T-21 Prime Square Jiyugaoka

Meguro ward, Tokyo

2,820

100.0

2

T-22 Round1 Ichikawa-Onitaka

Ichikawa, Chiba

1,880

100.0

1

O-1

Blumer Maitamon

Kobe, Hyogo

8,389

98.2

50

O-2

Central Square Takadono (Land)

Osaka, Osaka

2,685

100.0

1

O-3

Piago Kahma Home Center Omihachiman

Omihachiman, Shiga

2,140

100.0

2

O-4

Blumer HAT Kobe

Kobe, Hyogo

11,000

98.7

42

O-5

Carino Esaka

Suita, Osaka

6,555

97.8

30

O-6

COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

O-7

Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

100.0

1

O-8

Welcia Kishiwadakamori (Land)

Kishiwada, Osaka

487

100.0

1

O-9

Life Nishi-Tengachaya

Osaka, Osaka

1,505

100.0

1

Amagasaki, Hyogo

3,723

100.0

1

Nagoya, Aichi

2,311

100.0

1

O-10 Million Town Tsukaguchi (Land)

Kahma Home Center Nakagawa Tomita
N-1(Land)
N-2 Valor Ichinomiya-Nishi

Ichinomiya, Aichi

2,174

100.0

1

N-3

K's Denki Nakagawa Tomita (Land)

Nagoya, Aichi

889

100.0

1

N-4

Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

N-5

K’s Denki Shin-Moriyama (Land)

Nagoya, Aichi

1,370

100.0

1

N-6

Resora Obu Shopping Terrace

Obu, Aichi

7,911

99.4

43

F-1

Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

F-2

Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

100.0

1

F-3

Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

100.0

4

R-1

Roseo Mito

Mito, Ibaraki

10,046

99.7

22

10

Por tfolio Map as of September 30, 2017
NSC

R-4
T-11

R-1

SM
CSC

T-12

R-6

Urban Station-Front SC

T-5

SS

T-9

T-7

R-9

Round1 Ichikawa-Onitaka

T-3
T-8
T-4
T-21

Prime Square Jiyugaoka

T-22
T-17
T-2

R-2

T-19 Yumemachi Narashinodai Mall
T-1

R-3

T-20 Kawamachi Yahagi Mall
T-14

T-15

T-16

R-7

T-13
T-6

R-5

T-18

T-10

Totsuka-Fukaya Shopping Center (Land)

O-3

F-2
F-1

Round1 Stadium
Hakata-Hanmichibashi

O-4

O-10

O-1

F-3

O-9

Kurume-Nishi Shopping Center

N-2
N-5
N-4

N-3
N-1

O-7

Resora Obu

O-5
O-2

N-6 Shopping Terrace
Sun Street Hamakita R-10

O-6

R-8

O-8

No.

Location(city / ward, prefecture)

Name of property

Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

R-2

K's Denki Aomori Honten

Aomori, Aomori

1,469

100.0

1

R-3

Super Sports Xebio Aomori-Chuo

Aomori, Aomori

898

100.0

1

R-4

Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

100.0

29

R-5

Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

2

R-6

Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

R-7

Solala Plaza

Sendai, Miyagi

5,720

100.0

1

R-8

P-1 Plaza Tenno

Hamamatsu, Shizuoka

4,010

100.0

7

R-9

Seiyu Rakuichi Moriya (Land)

Moriya, Ibaraki

4,111

100.0

1

Hamamatsu, Shizuoka

10,74698.0

51

204,913

99.6

542

R-10 Sun Street Hamakita

Total
Note 1: “Occupancy rate” is as of September 30, 2017.
Note 2: “Number of tenants” indicates the number of end-tenants as of September 30, 2017.

11

Over view of por tfolio (as of September 30, 2017)
T-1

Fululu Garden Yachiyo

T-2

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-5

Unicus Ina

T-6

Yorktown Kita-Kaname

T-7

Unicus Yoshikawa

T-8

S p or t s C l u b
R e n a iss a n ce F u j imi dai

T-9

Super Viva Home
Iwatsuki (Land)

T-10

K’s Denki
Shonan-Fujisawa (Land)

T-11

Unicus Kamisato (Land)

T-12

Unicus Konosu (Land)

T-13

Inageya Yokohama
Minamihonjuku (Land)

T-14

Gourmet City Chiba-Chuo

T-15

Nakamachidai
Tokyu Store

T-16

Central Wellness Club Nagatsuta
Minamidai

T-17

Life Kameido

O-2

Life Takadono (Land)

O-3

Piago Kahma Home
Center Omihachiman

O-7

Hankyu Oasis
Hirakatadeguchi

O-4

Blumer HAT Kobe

O-6

COMBOX Komyoike(Note) Please refer p.4 and p.5 for the properties acquired in the fifth fiscal period.

12

O-1

O-5

Blumer Maitamon

O-10

Milion Town
Tsukaguchi (Land)

N-4

Homecenter Kohnan Sunadabashi

R-2

K’s Denki Aomori Honten

R-3

R-6

Kasumi Technopark Sakura

R-8

P-1 Plaza Tenno

O-8

WelciaKishiwadakamori (Land)

O-9

Life Nishi-Tengachaya

N-2

Valor Ichinomiya-Nishi

N-3

K’s Denki Nakagawa
Tomita (Land)

N-5

K’s Denki
Shin-Moriyama (Land)

F-1

Sunny Noma

Super Sports Xebio AomoriChuo

R-4

Ashico Town Ashikaga

R-5

Yorktown Shinden-Higashi

R-7

Solala Plaza

R-1

Roseo Mito

R-9

Seiyu Rakuichi Moriya (Land)

N-1

Kahma Home Center
Nakagawa Tomita (Land)

Carino Esaka

13

Close-up KRR Vol. 5

R-4

NSC

Neighborhood Shopping Center

Ashico Town Ashikaga
NSC in Ashikaga City with a Reopened Cinema Complex
Ashico Town Ashikaga is a neighborhood shopping
center that started operating in September 2007 at theformer site of a Sanyo Electric factory in Ashikaga,
Tochigi Prefecture. The shopping center is about two
kilometers east of Ashikaga Station on the JR RyomoLine. It faces Prefecture Road 40, a major transportation
corridor in the Ashikaga region, and is about threekilometers south of the Ashikaga Interchange on the
Kita-Kanto Expressway. In addition, the shopping centerhas approximately 2,000 parking spaces to provide easy
access by car.

To maintain close ties with the community, Ashico
Town Ashikaga has many activities involving the
public sector and local organizations. For example,
the rooftop parking area is open to the public for theannual fireworks viewing and the shopping center
hosts exercise (walking) seminars held by the healthpromotion division of the Ashikaga municipal
government. The shopping center has started Kids
Festivals and other events with the participation of
local residents, such as performances by marchingbands and yosakoi dance groups from 2017. In
recognition of these activities, Ashico Town Ashikaga
was awarded DBJ (Development Bank of Japan) Green
Building Certification (three-star rank) in June 2016 as
a property with excellent environment and social
awareness.

At Ashico Town Ashikaga, several retail buildings as well
as a cinema building surround a spacious flat parking
area. There is a well-balanced composition of tenants
including stores for groceries, home and garden
products, electronic appliances, sporting goods andcasual apparel as well as a fitness center. Many tenants A variety of activities will continue to be implemented
are stores that are well known nationwide in Japan.
in order to make Ashico Town Ashikaga more
attractive as the area’s leading neighborhood
Ashico Town Ashikaga underwent a major renovation in shopping center and the site of the city’s only cinema
2014. In addition, United Cinemas Ashico Town complex.
Ashikaga began operating in March 2016, after KRR’s Note: The city of Ashikaga aims to become “a city of movie and video
activities,” but had no movie theater for a seven-year periodacquisition in October 2015. The return of a cinema to production
starting in 2009. Due to the strong request from residents for a theater,
Ashikaga (Note) makes this neighborhood shopping United Cinemas Ashico Town Ashikaga began operating with eight screens
center a place not only to purchase items but also to and 1,285 seats in March 2016. In September 2016, a comprehensive
partnership agreement was concluded by the city of Ashikaga, United
enjoy a variety of experiences. The greater appeal of Cinemas Co., Ltd., and P&D Consulting Co., Ltd., the property manager ofthis shopping center due to the cinema complex has Ashico Town Ashikaga. The agreement has three main components: (1)achieve the city’s movie and video production vision; (2) increase interest in
resulted in an expanded trade area, increasing visitors movies in the Ashikaga region; and (3) use Ashico Town Ashikaga and its
from the nearby cities of Sano and Ota. Since the cinema complex to enliven local communities in the Ashikaga region.
Acquisition
cinema opened, the shopping center has been posting
JPY 4,180 mn
pricemonthly sales that are about 4% higher than in the
Location
Ashikaga, Tochigi
previous year. Furthermore, the increase in visitors since
Land area 101,808.44m2
the cinema opened has had a favorable influence on
Gross floor
leasing operations. Ashico Town Ashikaga has added a26,430.26m2
areafamily restaurant, a mobile phone store and a dental
Core tenant Cainz Corporation
clinic and currently has no vacancies.

14

Summar y of Investment Unit
Unit Price and trading volume(Unit)
100,000(Yen)
平成27年2月10日終値
266,100円

320,000

40,000
Unit price

TSE REIT index

Volume300,000

35,000280,000

30,000260,000

25,000240,000

20,000220,000

15,000200,000

10,000180,000

5,000

160,000

0
Feb.
10,

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

End

of

of

of

of

of

of

of

of

of

of

of

Of

of

of

of

of

of

of

of

of

of

of

of

Of

of

of

of

of

of

of

of

of

of

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

2015

2016

2017

Note: TSE REIT Index is adjusted to KRR's closing unit price of JPY 266,100 as of February 10, 2015.

General breakdown of unitholders
As of September 30, 2017

Ownership ratio
by investor type
Brokerage firms
4,013 units(0.8%)

Foreign investors
180,373 units(35.5%)

Other domestic
corporations268(2.2%)
Financial
institutions
113(0.9%)

Individuals
and others
53,191 units(10.5%)

Foreign investors219(2.0%)
Brokerage firms
21(0.2%)

12,301

507,700
units

Other domestic
corporations
16,185 units(3.2%)

Number of unitholders
by investor type

Financial
institutions
253,938 units(50.0%)

Individuals
and others
11,680(95.0%)

15

II. ASSET MANAGEMENT REPORT
Overview of Asset Management(1) Trends in Key Indicators
First fiscal period

Second fiscal period

Third fiscal period

Fourth fiscal period

Fifth fiscal period(From October 3, 2014
to September 30, 2015)(From October 1, 2015
to March 31, 2016)(From April 1, 2016
to September 30, 2016)(From October 1,2016
to March 31, 2017)(From April 1,2017
to September 30, 2017)

Millions of yen

5,103

5,541

6,374

6,430

7,803

Millions of yen

5,103

5,541

6,374

6,427

7,797

Millions of yen

2,639

2,715

3,400

3,409

4,137

Millions of yen

2,246

2,235

2,860

2,817

3,468

Operating income

Millions of yen

2,463

2,826

2,973

3,021

3,666

Ordinary income

Millions of yen

1,939

2,428

2,519

2,556

3,108

Net income

Millions of yen

1,933

2,427

2,518

2,552

3,104

Total assets

Millions of yen

108,382

150,009179,360

185,037

229,628(-)(+38.4)(+19.6)(+3.2)(+24.1)

59,79080,03496,73996,823

116,516(-)(+33.9)(+20.9)(+0.1)(+20.3)Fiscal period
Operating revenues
Of which, property-related revenues
Property-related expenses
Of which, property-related expenses[Period-on-period changes]
Total net assets%
Millions of yen[Period-on-period changes]
Unitholders’ capital
Number of investment units issued andoutstanding
Net assets per unit
(Note 2)%Millions of yen

57,85777,606

94,256

94,256113,399

Units

260,750

355,250

422,450

422,450

507,700

Yen

229,301

225,291

228,996229,195

229,498

Millions of yen

1,933

2,432

2,523

2,553

3,104

Distributions per unit

Yen

7,414

6,846

5,974

6,044

6,115

Of which, distributions of earnings
Of which, distributions in excess ofretained earnings
Ordinary income to total assets (Note 3)

Yen

7,414

6,834

5,888

6,044

6,115

Yen

-

12

86

-

-

Distributions[Annualized] (Note 4)%

Return on net assets (Note 5)

2.0

1.9

1.5

1.4

1.5

(3.1)

(3.7)

(3.1)

(2.8)

(3.0)

3.3

3.5

2.8

2.6

2.9

(5.2)

(6.9)

(5.7)

(5.3)

(5.8)

55.2

53.4

53.9

52.3

50.7

(-)

(-1.8)(+0.6)(-1.6)(-1.6)

Days

363

183

183

182

183

%

100.0

100.0

98.8

100.0

100.0

19

33

40

42

51

m2

306,225.83

609,026.59

674,491.03

719,906.77

865,226.20

321

389

405

409

542

%

99.6

99.6

99.7

99.6

99.6

Depreciation expense

Millions of yen

560

565

714

721

885

Capital expenditures

Millions of yen

133

530

264

276

367

Rental NOI (Net operating income) (Note 9)

Millions of yen

3,417

3,871

4,228

4,331

5,214

FFO (Funds from operation) (Note 10)

Millions of yen

2,548

3,058

3,315

3,358

4,093

[Annualized] (Note 4)%

Net assets to total assets (Note 6)[Period-on-period changes]
Operating days
Payout ratio(Note 7)%

Number of properties
Leasable area
Number of tenants (Note 8)
Occupancy ratio(Note 11)

FFO per unit
Yen
9,772
8,609
7,847
7,949
8,062
Note 1: Figures above are rounded down for monetary amounts and rounded to the nearest tenth for ratios.
Note 2: Distributions in excess of earnings for the allowance for temporary difference adjustments are not considered.
Note 3: Ordinary income to total assets = Ordinary income /{(Total assets at beginning of period + Total assets at end of period) / 2} × 100
Total assets at the beginning of the first fiscal period is the total assets on February 10, 2015, when the actual operation began.
Note 4: For the first fiscal period, annualized as if the operation began from February 10, 2015, when the actual operation began.
Note 5: Return on net assets = Net income /{( Net assets at beginning of period + Net assets at end of period) / 2} × 100
Net assets at the beginning of the first fiscal period is the net assets on February 10, 2015, when the actual operation began.
Note 6: Net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Note 7: Payout ratio = Total distibutions (excluding excess of earnings) / Net income × 100
When calculated as follows, the payout ratio is 100.2% for the fiscal period ended March 31, 2016 and 100.2% for the fiscal period ended
September 30, 2016.
Payout ratio = Total distributions (including excess of earnings) / Net income × 100
Note 8: As for building tenants, if a tenant leases multiple spaces in a building, each space is counted as one tenant. In a pass-through type master lease,
the number of end-tenants is shown in parentheses. In a sublease type master lease, the number of master lessee is shown.
Note 9: Rental NOI = Property-related revenues - Property-related expenses + Depreciation expenses
Note 10: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property
Note 11: FFO per unit = FFO / Number of investment units issued and outstanding

16

(2) Status of Asset Management(Overview of the Fiscal Period ended September 30, 2017)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local
Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on
the Real Estate Investment Trust Securities (“J-REIT”) Market of Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public offerings,
including an international offering. As a result, the number of investment units issued at the end of the fiscal period
ended September 30, 2017 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day
needs of local area customers and have stable demand from retailers and customers, in order to provide stable
investment returns over the long term. Sponsored by Kenedix, Inc., a leading, independent real estate asset
management company, KRR entrusts its asset management and investment operations to Kenedix Real Estate FundManagement, Inc. (“KFM”), with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail properties that generally have the following characteristics:
a. Retail trade area of approximately a one to ten kilometer radius (and generally, a three to five kilometer radius), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and servicesii) Investment Environment
There were signs of a moderate economic rebound in Japan with recoveries in employment and income environment.
Real GDP growth (second preliminary estimate) in the second quarter of 2017 was positive 2.5% on an annualizedbasis, indicating positive figures for five consecutive quarters. However, uncertainty in economy remains due to thepolicies of the new U.S. administration, a rise in protectionism, geopolitical risk, etc.
As for Japan’s retail market, disparities among the retail market are seen as general merchandize stores (“GMS”) are
reported to be struggling, but supermarkets and drugstores are performing relatively well.
Looking at the financial environment, the Nikkei Stock Average is bullish with recoveries in corporate earnings, while
Dow Jones Industrial Average hits all-time highs in the U.S. On the other hand, the market remained unstable due toglobal market events such as the policies of the new U.S. administration and geopolitical risks. In terms of interest rates,
there are concerns that interest rates in Japan may rise due to the Federal Reserve rate hike in the U.S., while“Quantitative and Qualitative Monetary Easing with Yield Curve Control” including the negative interest rate policyby the Bank of Japan is keeping the interest rates in Japan low. Under these conditions, the J-REIT market and rise inreal estate market, equity finance by J-REITs in the half year from April to September of 2017 decreased from previous
year. The amount of real estate purchased by J-REITs in the above mentioned period decreased from the previous year
as well.

17iii) Management Performance(A) Acquisition of Assets
KRR acquired and started the operations of the following trust beneficiary interests in real estate (six properties
acquired on April 19, 2017 with acquisition price of 18,821 million yen, one property acquired on April 27, 2017 withacquisition price of 10,746 million yen, one property acquired on May 18, 2017 wiith acquisition price of 3,097 million
yen and one property acquired on August 1, 2017 with acquisition price of 7,911 million yen). As a result, the portfolio
at the end of the fiscal period under review (September 30, 2017) consists 51 properties with the total acquisition priceof 204,913 million yen.
Property
number

Propertytype

Property name(Note 1)

Location(City/ward,
prefecture)

Acquisition
price(million yen)

Acquisition date

(Note 2)

T-18

NSC

Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

April 19, 2017

T-19

NSC

Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

April 19, 2017

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

3,097

May 18, 2017

T-21

SS

Prime Square Jiyugaoka

Meguro ward, Tokyo

2,820

April 19, 2017

T-22

SS

Round1 Ichikawa-Onitaka

Ichikawa, Chiba

1,880

April 19, 2017

N-6

NSC

Resora Obu Shopping Terrace

Obu, Aichi

7,911

August 1, 2017

F-2

SS

Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

April 19, 2017

F-3

NSC

Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

April 19, 2017

R-10

NSC

Sun Street Hamakita

Hamamatsu, Shizuoka

10,746

April 27, 2017

Total

40,575Note 1: Properties are categorized into the following five types of shopping centers for daily needs: NSC (Neighborhood Shopping Centers), SM(Supermarkets), CSC (Community Shopping Centers), Urban Station-Front SC (Urban Station-Front Shopping Centers) and SS (Specialty
Stores). Features of the categories are described below.
Types of shopping centers for daily needs

Features

Trade area

NSC (Neighborhood Shopping Centers)

Shopping centers with a supermarket as an anchor or core tenant andseveral specialty store tenants

Three to fivekilometer

SM (Supermarkets)

Stand-alone stores that primarily provide groceries, with a retail trade area

Three kilometer

CSC (Community Shopping Centers)

Larger shopping centers than NSC, which have a supermarket as an anchor
or core tenant in addition to specialty store tenants

Five to ten
kilometer

Urban Station-Front Shopping Centers

Shopping centers that are located in the immediate vicinity of an urban
public transportation station, which take advantage of stable foot traffic

Three to ten
kilometer

SS (Specialty Stores)

Single- or multiple-tenant shopping centers that specialize in a single typeof merchandise or service, such as drug stores, convenience stores, healthclubs or electronic appliance stores

One to ten
kilometer

Note 2: “Acquisition price” represents the purchase price of each trust beneficiary interest specified in purchase agreement in relation to theacquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; androunded down to the nearest one million yen).

(B) Management and Operation of Assets
KFM provides property management services for all of the properties owned by KRR at the end of the period underreview (September 30, 2017). By using the same company for both asset management and property management
services, KRR aims to build stronger relationships with tenants and increase returns from its portfolio. Furthermore, byimplementing retail property management that better reflects the needs of KRR’s tenants, KRR strives to accumulate
know-how and improve tenant satisfaction. KRR invests primarily in neighborhood and community shopping centersthat cater to the day-to-day needs of customers. The portfolio is diversified in terms of properties, tenants and othercharacteristics with a goal to generate consistent long-term cash flows. At the same time, a portion of the rent includes
sales-linked rent to explore the upside potential (Note 1) for rental income. By using these measures, KRR aims to pursue a
portfolio that achieves both stability and growth.
As of the end of the fiscal period under review, the portfolio as a whole performed well with an overall occupancy ratioof 99.6%. Furthermore, the portfolio is diversified in terms of tenants as there are 542 end-tenants (Note 2) in KRR’s retailproperies.
Note 1:
Note 2:“Upside potential” represents feasibility of rental income or cash flow growth.
The number of end-tenants is the sum of the number of end-tenants in a pass-through type master lease and the number of masterleassees in a sublease type master lease.

18

(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and the costof the funds to achieve stable medium to long-term returns and consistent growth of assets under management.
(Equity Finance)
In the fiscal period under review, KRR sold a total 81,250 newly issued units offered in Japan and overseas on April 18,
2017, and raised 18,244 million yen to acquire a portion of properties. In addition, 4,000 units were issued throughthird-party allotment on May 17, 2017, raising 898 million yen that was used to prepay borrowing for acquisition ofproperties. Due to these activities, unitholders’ capital increased to 113,399 milion yen as of September 30, 2017.
(Debt Finance)
During the fiscal period under review, KRR borrowed 24,200 million yen for the acquisition of properties and 11,070
million yen for refinancing. On the other hand, KRR prepaid 4,000 million yen using the proceeds from the issuance ofinvestment corporation bonds and cash on hand. Consequently, borrowings totaled 92,900 million yen andinterest-bearing debt including investment corporation bonds (excluding interest-bearing tenant leasehold and security
deposits) totaled 97,900 million yen at the end of the fiscal period under review (September 30, 2017).
As for borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. On the other hand, KRR
partially borrowed short-term loans from the point of flexibility under the financing strategy, also controlling financing
cost. KRR may use swaps to fix the interest payments to hedge against the risk of a rise in interest rates.
(Investment Corporation Bonds)
To diverse financing methods, KRR issued investment corporaion bonds as follows. Investment corporation bonds atthe end of the fiscal period under review (September 30, 2017) totaled 5,000 million yen. The total amount raised wasused for partial prepayment of borrowings with drawdown date of August 1, 2017.
Bonds
3rd Series Unsecured Investment
Corporation Bonds
4th Series Unsecured Investment
Corporation Bonds
Note:

Balance as ofInterest rateIssuance date September 30, 2017(%)
(million yen)August 31,
1,000
0.320
2017
August 31,
2,000
0.700
2017

Maturity date

Redemption
methodRemarks

August 31,
2022
August 31,
2027

Full onmaturity(Note)

Ranking pari passu among the specified investment corporation bonds

As a result, the average remaining years to maturity is 4.8 years, the weighted average interest rate is 0.96%, thelong-term debt ratio (Note 1) is 87.1% and the LTV ratio (Note 2) is 42.6%.
Note 1:
Note 2:Long-term debt ratio = (Long-term borrowings + Investment corporation bonds) / (Borrowings + Investment corporation bonds)
LTV ratio = (Loans payable + Investment corporation bonds) / Total assets(Credit Ratings)
The status of the credit ratings as of September 30, 2017 is as follows.
Credit rating agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the ratings
Long-term issuer rating

A (Outlook: Positive)

Rating on bonds

A(Shelf Registration)
KRR filed a shelf registration statement for investment corporation bonds (excluding short-term investment
corporation bonds) on September 29, 2016. Details are as follows.
Planned issue amount
Planned issuance period

100,000,000,000 yen
October 7, 2016 to October 6, 2018

Use of funds

Acquisition funds for specified assets (as defined in Article 2, Paragraph 1 of the Investment Trust Law),
repayment funds for borrowings, repayment funds for investment corporation bonds (including short-term
investment corporation bonds), refund funds for lease and guarantee deposits, funds to pay for repairs andmaintenance, working capital, etc.

KRR issued the 1st Series Unsecured Investment Corporation Bonds (1,000 million yen) and the 2nd Series
Unsecured Investment Corporation Bonds (1,000 million yen) on October 31, 2016, and the 3rd Series Unsecured
Investment Corporation Bonds (1,000 million yen) and the 4th Series Unsedcured Investment Corporation Bonds(2,000 million yen) on August 31, 2017, based on this shelf registration statement.
iv) Results of Operations
For this period, revenue was 7,803 million yen, operating income was 3,666 million yen, ordinary income was 3,108
million yen and net income was 3,104 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distributionof 3,104,585,500 yen which is almost equivalent to the earnings for the fiscal period. Cash distributions are paid inaccordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments). Consequently, the distribution per unit was 6,115 yen.

19

(3) Changes in Investment Units Issued and Outstanding
Changes in the number of investment units issued and outstanding and unitholders’ capital since its corporation aresummarized in the following table.
Date

Type of issue

Notes
Increase

October 3, 2014

Private placement forincorporation

February 9, 2015

Unitholders’ capital(in million yen)

Total number of units issued andoutstanding (units)
Balance

Increase

Balance

750

750

150

150

(Note 1)

Public offering

254,250

255,000

56,43056,580(Note 2)

March 11, 2015

Capital increase throughthird-party allocation

5,750

260,750

1,276

57,857(Note 3)October 1, 2015

Public offering

88,750349,500

18,54776,404(Note 4)

October 21, 2015

Capital increase throughthird-party allocation

5,750

355,250

1,201

77,606(Note 5)

April 20, 2016

Public offering

64,000419,250

15,856

93,463(Note 6)

May 18, 2016

Capital increase throughthird-party allocation

3,200

422,450

792

94,256(Note 7)

April 18, 2017

Public offering

81,250503,700

18,244

112,500(Note 8)

Capital increase through
4,000
507,700
898
113,399
third-party allocation
Issued at issue price of 200,000 yen per unit for incorporation.
Issued at issue price of 230,000 yen per unit (issue amount of 221,950 yen per unit) for acquisition of new properties.
Issued at issue amount of 221,950 yen per unit for repayment of borrowings.
Issued at issue price of 216,543 yen per unit (issue amount of 208,991 yen per unit) for acquisition of new properties.
Issued at issue amount of 208,991 yen per unit for repayment of borrowings.
Issued at issue price of 256,717 yen per unit (issue amount of 247,764 yen per unit) for acquisition of new properties.
Issued at issue amount of 247,764 yen per unit for repayment of borrowings.
Issued at issue price of 232,537 yen per unit (issue amount of 224,547 yen per unit) for acquisition of new properties.
Issued at issue amount of 224,547 yen per unit for repayment of borrowings.

May 18, 2017
Note 1:
Note 2:
Note 3:Note 4:Note 5:Note 6:Note 7:Note 8:Note 9:(Note 9)(Changes in Unit Price at Tokyo Stock Exchange)
The highest and lowest closing prices of the investment units listed on J-REIT section of the Tokyo Stock Exchange
for each fiscal period are as follows.
Fiscal period
For the fiscal period
endedFirst fiscal period

Second fiscal period

Third fiscal period

Fourth fiscal period

Fifth fiscal period

September 30, 2015

March 31, 2016

September 30, 2016

March 31, 2017

September 30, 2017

Highest

JPY 309,500

JPY 282,700

JPY 296,100

JPY 275,000

JPY 251,100

LowestJPY 224,500

JPY 226,800

JPY 240,000

JPY 235,200

JPY 228,900

,

,

,

20

(4) Distributions
In accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution of
3,104,585,500 yen, which is almost equivalent to the earnings for the fiscal period. Cash distributions are paid inaccordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments).
Consequently, the distribution per unit for the fiscal period was 6,115 yen.
(in thousands of yen)First fiscal period
September 30, 2015

Second fiscal period
March 31, 2016

Third fiscal period
September 30, 2016

Fourth fiscal period
March 31, 2017

Fifth fiscal period
September 30, 2017

1,933,270

2,427,985

2,518,802

2,584,343

3,104,740

70

206

31,417216

155

1,933,200

2,432,041

2,523,716

2,553,287

3,104,585[7,414 yen]

[6,846 yen]

[5,974 yen]

[6,044 yen]

[6,115 yen]

1,933,200

2,427,778

2,487,385

2,553,287

3,104,585[7,414 yen]

[6,834 yen]

[5,888 yen]

[6,044 yen]

[6,115 yen]

－

4,263

36,330－－[－][12 yen][86 yen]

[－]

[－]

－

4,263

36,330－－[Distributions per unit][－][12 yen][86 yen][－][－]Total distributions in excessof earnings from theunitholders’ capital for tax
purposes

－

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

[－]

Fiscal period
For the fiscal period ended
Unappropriated retained
earnings
Retained earnings carriedforward
Total distributions[Distributions per unit]
Of which, distributions ofearnings[Distributions of earnings perunit]
Of which, distributions inexcess of retained earnings[Distributions in excess ofretained earnings per unit]
Total distributions in excessof earnings for the allowancefor temporary adjustment

21

(5) Management Policy and Issues to be Addressed
Outlook for Asset Management
The Japanese economy is expected to continue to recover at a moderate pace. However, we should pay attention to
uncertainties about the overseas economy and politics regarding the direction of U.S. financial policies, the policies of
the new U.S. administration, etc. We also need to pay attention to changes in domestic economic environment, such as
fluctuation of yen due to a rise in protectionism, effects of “Quantitative and Qualitative Monetary Easing with Yield
Curve Control” including the negative interest rate policy and concerns over geopolitical risks.
As for Japan’s retail sector environment, disparities among the retail market are seen as general merchandize stores(GMS) are reported to be struggling, but supermarkets and drugstores are performing well, and KRR anticipates that
this trend to continue.
In the real estate trading market, we anticipate the high level of transaction volume to continue because of the lowinterest rate environment under the Bank of Japan’s monetary easing measures. However, investors should keep inmind the risk of changes in banks’ lending attitude towards real estate sector, as amount of banks’ outstanding loans
towards real estate sector reached new highs. In addition, investors should also keep in mind that equity finance and theamount of property acquisition by J-REIT in the half year from April to September of 2017 have decreased from theprevious year as J-REIT market remained sluggish.
From a medium to long-term perspective, to generate a steady stream of rental revenue, consistently increase KRR’s
assets and establish a suitable financial position, KRR will continue to manage assets based on the following policies.
(A) Investment Strategy for New Properties and Disposition Policy
KRR receives a variety of support from many sources in order to achieve steady growth of KRR’s assets and increase
the value of KRR’s assets. One source is the Kenedix Group, including Kenedix, Inc., the parent company of KFM (Note).
KRR also receives support from KRR’s Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., Nippon
Commercial Development Co., Ltd., P&D Consulting Co., Ltd., and ITOCHU Corporation. KRR is implementing a
growth strategy that takes full advantage of the external growth opportunities created by the large and diverse
acquisition pipeline made possible by the support of these companies.
When acquiring properties, KRR makes decisions based on all applicable factors with emphasis on four parameters: theretail property’s attractiveness, location, profitability and the tenant mix. By using this selection process, KRR invests
in retail properties that have competitive advantages, and prospects for stable cash flow and asset value growth. KRR
also invests in land ownership interests underlying retail properties. Regarding land-only properties, KRR makes theseinvestments after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset value ofthe land, and the proportion of land-only properties in KRR’s portfolio. KRR may also consider making an equity
investment in a tokumei kumiai (silent partnership) for the acquisition of preferential negotiation rights andopportunities for additional revenues, provided that KRR is given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, KRR makes decisions based primarily on the significance of theseproperties in the context of the portfolio. This is assessed by comprehensive evaluation of the outlook for future
profitability and asset value determined based on its current profitability and market trends.
Note:

The Kenedix Group consists of Kenedix, Inc. and its subsidiaries and affiliates.

(B) Management Strategy for Existing Properties
KRR is committed to building a portfolio that can pursue both stability and growth. KRR believes that implementing
integrated asset and property management services makes it possible to properly manage retail properties and pursue
internal growth. Furthermore, this integrated management framework facilitates activities to enliven local communities
where KRR’s properties are located, enabling KRR to aim for medium to long-term growth in asset value.
To accomplish these goals, KFM oversees properties owned by KRR while placing priority on the following themes.
・“One-stop” asset management and property management services
・Continuously implementing a retail property management cycle through KRR’s in-house property management
services
・Pursuit of internal growth through management of retail properties
・Directing investments and management policies to enliven local communities in the medium to long-term“One-stop” asset management and property management services
KRR plans to use the integrated asset management and property management services of KFM for strengthening
relationships with tenants and making the portfolio more profitable.
Continuously implementing a retail property management cycle through KRR’s in-house property management
services
KFM provides property management services for all of KRR’s properties for the purposes of performing retail property
management that better reflects the needs of the tenants as well as accumulating know-how and improving tenantsatisfaction. Specifically, KRR uses direct contact with tenant companies at KRR’s properties in order to strengthen
tenant relationships and make properties more profitable. To this end, KRR maintains periodic communication withtenants and perform questionnaire surveys to customers for monitoring of market conditions, so that KRR can identify
the needs of tenants and the customers visiting their sites. This process makes it possible to find issues that stand in theway of achieving greater satisfaction for tenants and their customers. Once KRR has discovered points that require22attention, KRR takes actions that take full advantage of the resources and knowledge regarding retail properties within
the Kenedix Group. Solutions include measures such as the effectively utilizing capital expenditures, optimizing tenantmix, realizing growth in asset value by pursuing property expansions, and cutting costs, to improve tenant satisfaction
and acquire more know-how.
Pursuit of internal growth through management of retail properties
KRR seeks to improve the profitability and value of its portfolio through proper management of retail properties.
i. Effectively utilize capital expenditure
KRR will use proper and well-timed capital expenditures to increase the satisfaction of tenants and make its
properties more competitive.
ii. Optimize tenant mix
KRR will constantly work on attracting new tenants that are highly appealing to shoppers and replace tenants withothers, optimizing tenant composition, in order to seek stable revenue and higher profitability by attracting morecustomers.
iii. Realize growth in asset value by pursuing property expansions
KRR will use the extensive knowledge involving retail properties of the Kenedix Group and KRR’s Alliance
Companies to utilize the underutilized space (Note) at properties and expand properties. These measures will take into
account the competitive position of each property, the effect on KRR’s financial position and other factors. By
increasing space that can be leased, KRR aims to increase revenue and asset value.
Note:

The underutilized space is defined as the area that is calculated by multiplying the floor space ratio, or the ratio of total area of thebuilding to the site area, which is prescribed in Article 52 of the Building Standards Act (Act No.201 of 1950, including subsequent
amendments.) and applied to each retail property in accordance with the Building Standards Act, City Planning Act (Act No.100 of 1968,
including subsequent amendments.) and other laws and regulations, by the land area that is allowed to be used as a retail property site, andsubtracting from this figure the actual gross floor area of the building.

Directing investments and management policies to enliven local communities in the medium to long-term
At KRR’s retail properties, KRR seeks tenants that provide services, holds community involved events and uses othermeasures to help enliven the local communities where KRR’s properties are located. KRR believes these activities willcontribute to the medium to long-term growth in the asset value of these properties.
(C) Financing
KRR will establish a suitable financial foundation by examining numerous financing methods and selecting the
optimum ones. These decisions will reflect interest rates and other elements of the financial environment. KRR’s goal
is to select financing methods that result in the optimum balance between financial stability and the financing cost.
(D) Disclosure of Information
KRR’s policy concerning disclosure activities is to use extensive investor relations activities to distribute a wide range
of information to investors and other related parties and to announce information as soon and as accurately as possible.
KRR uses TDnet (Timely Disclosure network) and press releases to meet the timely-disclosure requirements of theTokyo Stock Exchange. In addition, KRR proactively posts information on its website (http://www.krr-reit.com/en/).
(E) Conflicts of Interest
In addition to managing the assets of KRR, KFM provides asset management services to other investment corporations
and real estate funds. KFM uses a “preferential right for acquisition opportunities” system for the property acquisition
process. KFM has a pipeline committee, which includes a compliance officer, and operates in accordance with rules.
This system is structured to prevent improper allocation of acquisition opportunities as well as conflicts of interest
among the REITs and funds managed by KFM. Through these measures, KFM is taking suitable actions regarding
conflicts of interest.

23

(6) Important Subsequent Events
Not applicable.
(Reference Material)
Disposition of Assets
KRR has contracted a purchase and sale agreement (Note 1) on November 14, 2017 to dispose the following asset.
Property Property
numbertype

Property nameLocation

Buyer

Anticipated sale price(million yen) (Note 2)

Scheduled date ofsale

Nippon Commercial
Development Co.,
1,128
April 27, 2018
Ltd.
Note 1: The purchase and sale agreement with the buyer on the sale of the asset falls under the category of forward commitment made byinvestment corporations as stipulated in the “Comprehensive Guidelines for Supervision of Financial Instruments Business Operators,etc.” ruled by the Financial Service Agency of Japan. In case the agreement is terminated, either of the parties responsible for thetermination shall compensate for the damage resulted from the termination by paying a penalty corresponding to 20% of the sale price(excluding consumption taxes and local consumption taxes) to the other party. However, since KRR is the seller in this transaction andthere is no concern such as financing in executing the sale, KRR believes that the risk of KRR paying the penalty and making animportant impact on its financial condition is small.
Note 2: “Anticipated sale price” represents the amount specified in the sale and purchase agreement for the trust beneficiary interests, exclusiveof the various expenses (sale expenses, property tax, city planning tax, consumption tax, etc.) required in the sale of the asset.
N-3

SS

K’s Denki Nakagawa
Tomita(Land)

Nagoya, Aichi

24

Profile of KRR(1) Status of Unitholders’ CapitalFirst fiscal period
Second fiscal period
Third fiscal period
Fourth fiscal period
Fifth fiscal period(From October 3, 2014 to (From October 1, 2015 to (From April 1, 2016 to (From October 1, 2016 to (From April 1, 2017 to
September 30, 2016)
March 31, 2017)
September 30, 2017)
September 30, 2015)
March 31, 2016)

Fiscal period
Total number of authorized
investment units
Total number of investment
units issued and outstanding

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

260,750 units

355,250 units

422,450 units

422,450 units

507,700 units

Unitholders’ capital

57,857 million yen

77,606 million yen

94,256 million yen

94,256 million yen

113,399 million yen

Number of unitholders

8,954

10,876

10,618

10,072

12,301(2) Matters Concerning Investment Units
The following is a list of major unitholders as of September 30, 2017.
Name

Location

Number of units
held(Units)Ratio (%)
(Note)

JAPAN TRUSTEE SERVICES BANK, LTD.
(Trust Acct.)

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

73,162

14.41

THE MASTER TRUST BANK OF JAPAN, LTD.
(Trust Acct.)

2-11-3, Hamamatsucho, Minato-ku, Tokyo

72,492

14.27

TRUST & CUSTODY SERVICE BANK, LTD.
(Securities Investment Trust Acct.)

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

24,305

4.78

THE NOMURA TRUST AND BANKING CO.,LTD. (Investment Trust Acct.)

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

21,021

4.14

17,015

3.35

16,318

3.21

10,453

2.05

8,621

1.69

8,251

1.62

7,589

1.49

259,227

51.05

THE BANK OF NEW YORK MELLON SA/NV 10

JP MORGAN CHASE BANK 385628
THE BANK OF NEW YORK,NON-TREATY JASDEC ACCOUNTMITSUBISHI UFJ TRUST AND BANKINGCORPORATION

2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.
Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.

STATE STREET BANK AND TRUSTCOMPANY 505223
SIX SIS LTD.
Total

Note: “Ratio” is the ratio to total number of units issued and outstanding, rounded down to the second decimal place.

25

(3) Matters Concerning Directors and Auditori) Executive Director, Supervisory Director, and Independent Auditor as of September 30, 2017
Position

Name

Executive Director Akihiro Asano

Director & COO, Head of Retail REIT Department, KFM

1,500

Yoshitoshi Yasu

Yoshitoshi Yasu Certified Public Accountant / Tax Accountant Office
Auditor of YOKU MOKU Holdings Co., Ltd.
Auditor of YOKU MOKU Co., Ltd.
Auditor of YOKU MOKU Crea Co., Ltd.
Auditor of Fujiricoh Trading Co., Ltd.
Auditor of CLOVER Inc.
Auditor of Kabou-isshin Co., Ltd.
Director & member of Audit comittee of Looop Inc.

1,500

Mai Ishiwatari

Partner, Shiroyama-Tower Law OfficeDirector, Cocone Corporation
Representative Director, Cocone Education Corporation

1,500

Supervisory
Director(Note 1)

Independent
Auditor

Total amount of fees
paid during the period(thousand yen)

Other concurrent title

Ernst & Young ShinNihon LLC－

30,900(Note 2)

Note 1: Although supervisory directors are concurrently officers in corporations other than the ones stated above, there are no conflicts of interest
between KRR and any other corporations, including those stated above.
Note 2: Compensation for the Accounting Auditor includes payments for writing a comfort letter for the issuance of new investment units andinvestment corporation bonds.

ii) Policy on Decisions to Terminate or not Reappoint the Accounting Auditor
The KRR Board of Directors will consider the termination of the Accounting Auditor pursuant to the provisions of theInvestment Trust Act of Japan. The directors will also consider not reappointing the Accounting Auditor after
examining the quality of audits, compensation for auditing and other applicable items.
(4) Asset Manager, the Custodian and Administrators
Asset manager, the custodian and administrators as of September 30, 2017 are as follows.
Operational role

Name

Asset Manager

Kenedix Real Estate Fund Management, Inc.

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

Financial Agent for Investment Corporation Bonds

Sumitomo Mitsui Trust Bank, Ltd.

26

Status on Investment Properties(1) Component of Assets
Fourthfiscal period
as of March 31, 2017
Type ofspecified asset

Fifth fiscal period
as of September 30, 2017

Areas

Property type

(Note 1)

Total amount held
(Millions of yen)

Total amount held
(Millions of yen)

Ratio (%)
(Note 3)(Note 2)Trust
beneficiaryinterest in realestateRatio (%)
(Note 3)(Note 2)

Tokyo metropolitan
area

71,122

38.4

86,655

37.7

Greater Osaka area

45,00024.3

44,945

19.6

Greater Nagoya area

13,971

7.6

22,162

9.7

Fukuoka area

1,485

0.8

8,133

3.5

Ordinance-designatedcities, core cities andother areas

35,20019.0

45,874

20.0

－

－

－

－

166,782

90.1

207,771

90.5

101

0.1

2

0.0

Bank deposits and other assets

18,1539.8

21,854

9.5

Total assets

185,037100.0

229,628

100.0

Neighborhood,community andother shopping
centers for daily
needs

Other retailproperties－

Total of trust beneficiary interests in real estate
Investment securities(Note 4)Note 1: “Areas” are categorized to the Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area and Ordinance-designatedcities, core cities and other areas. References to “Tokyo metropolitan area” are to the area that consists of Tokyo, Kanagawa, Saitama and Chiba
prefectures. References to the “Greater Osaka area” are to the area that consists of Osaka, Kyoto, Hyogo, Nara and Shiga prefectures. References tothe “Greater Nagoya area” are to the area that consists of Aichi, Gifu and Mie prefectures. References to the “Fukuoka area” are to the area thatconsists of Fukuoka prefecture. “Ordinance-designated cities, core cities and other areas” refers to cities designated by government ordinance, whichhave populations of 500,000 persons or more, core cities, which have populations of 200,000 persons or more, and to other areas with a population
fewer than 200,000 persons, which KRR believes will have suitable customer traffic from surrounding areas.
Note 2: “Total amount held” is the amount allocated in the balance sheets as of September 30, 2017 (figures are on a net book value basis after deducting
depreciation), and is rounded down to the nearest million.
Note 3: “Ratio” is the ratio of the amount allocated in the balance sheets to the total assets rounded to the nearest tenth.
Note 4: “Investment securities” is the silent partnership equity interest of JRP8 GK.

27

(2) Major Assets Owned
The following are major assets owned (the ten largest properties by book value) by KRR as of March 31, 2017.
Property
number

Property nameBook value(in millions)Leasable area(m2)

Leased area(m2)

(Note 1)

(Note 2)

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

T-1

Fululu Garden Yachiyo

14,90977,057.56

75,629.94

99.4

9.4

RetailO-4Blumer HAT Kobe

11,50923,775.88

23,475.76

98.7

6.3

RetailR-10

Sun Street Hamakita

10,83549,023.34

48,023.37(Note 5)

98.0

5.9

RetailR-1

Roseo Mito

9,984

48,296.15

48,161.79

99.7

4.9

Retail

T-2

MONA Shin-Urayasu

8,523

9,592.65

9,201.92

95.9

6.2

RetailO-1

Blumer Maitamon

8,367

30,290.55

29,752.83

98.2

6.5

Retail

N-6

Resora Obu Shopping Terrace

8,242

19,990.40

19,878.29

99.4

1.4

RetailN-4

Homecenter Kohnan Sunadabashi

7,126

20,329.07

20,329.07

100.0(Note 6)

RetailO-5Carino Esaka

6,649

7,540.58

7,371.52

97.8

3.9

RetailO-6

COMBOX Komyoike

6,403

25,530.44

25,530.44

100.0

2.9

RetailTotal

92,553

311,426.62

308,354.93

99.0(Note 6)Note 1:
Note 2:

Note 3:Note 4:Note 5:Note 6:(Note 5)－－

“Leasable area” is equivalent to gross floor area of space that KRR considers to be available for lease in each property, rounded to the nearest
tenth. For land-only properties, leasable area is equivalent to land area as described in the property registry.
“Leased area” indicates the total leased area based on the lease agreements for each property as of September 30, 2017. As for leaseagreements of buildings, the leased area of warehouses and land are excluded. As for pass-through type master leases (the master lease inwhich rent received by the lessor is in principle the same amount as the rent received by the master lessee from end-tenants), the leased area
based on the lease agreements between the master lessee and the end-tenants as of September 30, 2017 is shown. As for sublease type master
leases (the master lease in which a fixed amount of rent is received from the master lessee.), the leased area to the master lessee is shown.
“Occupancy rate” is calculated by dividing leased area by leasable area as of September 30, 2017, rounded to the nearest tenth.
“Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
The area that KRR owns exclusively as proportion to the co-ownership interest (co-ownership ratio: 90%).
KRR has not obtained consent from the tenant(s) to release this information.

28

(3) Overview of the Portfolio[Overview of Assets Owned]
The following summarizes the real estate or the real estate properties in trust owned by KRR as of March 31, 2017.
Area(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
formBook value(in millions)(Note 2)

T-1
T-2
T-3
T-4

CSC
Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Fululu Garden Yachiyo

Yachiyo, Chiba

MONA Shin-Urayasu

Urayasu, Chiba

Passaggio Nishiarai

Adachi ward, Tokyo

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

T-5

NSC

Unicus Ina

Kitaadachi-gun, Saitama

T-6

NSC

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

T-7

NSC

Unicus Yoshikawa

Yoshikawa, Saitama

T-8

SS

T-9

NSC

T-10

SS

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

T-21

SS

Prime Square Jiyugaoka

Meguro-ku, Tokyo

T-22

SS

Round1
Ichikawa-Onitaka

Ichikawa, Chiba

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

O-3
O-4

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa (Land)

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

T

O-5
O
O-6
O-7
O-8

Inageya Yokohama
Minamihonjuku (Land)
Gourmet City
Chiba-Chuo
Nakamachidai
Tokyu Store
Central Wellness Club
Nagatsuta MinamidaiLife Kameido
Totsuka-Fukaya
Shopping Center (Land)
Yumemachi
Narashinodai Mall

Life Takadono (Land)

Yokohama, Kanagawa
Chiba, Chiba
Yokohama, Kanagawa
Yokohama, Kanagawa
Koto ward, Tokyo
Yokohama, Kanagawa
Funabashi, Chiba(Note 4)

Osaka, Osaka

NSC

Piago Kahma Home
Center Omihachiman

Omihachiman, Shiga

NSC

Blumer HAT Kobe

Kobe, Hyogo

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
Welcia Kishiwadakamori
SS(Land)

Suita, Osaka
Izumi, Osaka
Hirakata, Osaka
Kishiwada, Osaka

O-9

SM

Life Nishi-Tengachaya

Osaka, Osaka

O-10

NSC

Million Town
Tsukaguchi (Land)

Amagasaki, Hyogo

Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate

Evaluation value(in millions)(Note 3)

14,90915,200

8,523

8,820

5,852

6,370

5,420

5,940

4,401

4,850

3,961

4,310

3,607

3,840

2,546

2,750

4,890

5,400

3,210

3,530

3,043

3,050

1,726

1,770

1,462

1,430

761

807

3,452

3,820

1,787

1,910

1,467

1,520

4,228

4,300

3,456

3,520

3,130

3,260

2,905

2,840

1,908

1,970

8,367

9,340

2,727

3,040

2,137

2,430

11,50911,600

6,649

6,910

6,403

6,840

1,317

1,330

497

488

1,563

1,650

3,772

3,870

29

Area
(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
form(Note 2)

N-1

SS

Kahma Home Center
Nagoya, Aichi
Nakagawa Tomita (Land)

N-2

NSC

Valor Ichinomiya-Nishi

N-3

SS

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

N

F

R

R-7
R-8

K’s Denki
Nakagawa Tomita (Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama (Land)
Resora Obu Shopping
Terrace
Sunny Noma

Note 2:
Note 3:Note 4:

Nagoya, Aichi
Nagoya, Aichi
Nagoya, Aichi
Obu Aichi
Fukuoka, Fukuoka

Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi Shopping
CenterRoseo Mito

Fukuoka, Fukuoka
Kurume, Fukuoka
Mito, Ibaraki

K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
SakuraUrban
Solala Plaza
Station-Front SC

Aomori, Aomori
Aomori, Aomori
Ashikaga, Tochigi
Sendai, Miyagi
Tsukuba, Ibaraki
Sendai, Miyagi

NSC

P-1 Plaza Tenno

Hamamatsu, Shizuoka

R-9

NSC

Seiyu Rakuichi Moriya(Land)Moriya, Ibaraki

R-10

NSC

Sun Street Hamakita

Hamamatsu, Shizuoka

Total
Note 1:

Ichinomiya, Aichi

Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estateBook value(in millions)

Evaluation value(in millions)(Note 3)

2,351

2,630

2,143

2,320

907

995

7,126

7,310

1,390

1,430

8,242

7,990

1,471

1,560

5,079

5,290

1,582

1,630

9,984

11,300

1,474

1,580

893

947

4,351

5,060

3,315

3,330

851

876

5,675

5,960

4,171

4,340

4,320

4,220

10,835

11,160207,771

218,633“T”, “O”, “N”, “F” and “R” hereinafter refers to Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated cities, core cities and other areas, respectively.
“Location” indicates the residential address. For those without a residential address, the building or land address on the registry is shown.
“Evaluation value” shows the appraisal value stated on the real estate appraisal report created by the real estate appraisers of Daiwa Real EstateAppraisal Co., Ltd., Japan Real Estate Institute and The Tanizawa Sōgō Appraisal Co., Ltd. in accordance with the methods and standards for asset
valuation as stipulated in the KRR Articles of Incorporation as well as the regulations as stipulated by The Investment Trusts Association, Japan.
KRR changed the property name as follows.
Property number
New name
Previous name
Effective date
O-2
Life Takadono (Land)
Central Square Takadono (Land)
September 27, 201730

[Earnings Performance for the Individual Properties]
Fourth fiscal period
as of March 31, 2017
Area

Property
number

Propertytype

Property name

Numberof tenants(Note 1)

T-1
T-2
T-3
T-4

T

Occupancyrate (%)

Rentalrevenue(millions)(Note 2)

Ratio tototal
rentalrevenue
(%)

48

98.2

744

11.6

48

99.4

733

9.4

MONA Shin-Urayasu

1(70)

95.7

506

7.9

1(70)

95.9

483

6.2

Passaggio Nishiarai

1(41)

98.1

309

4.8

1(42)

99.8

305

3.9

Daikanyama Address
Dixsept

1(26)

9

28

4.0

1(2)

97.9

268

3.4

2.2

1

100.0

139

1.8

NSC

Unicus Ina

1

100.0

138

T-6

NSC

Yorktown KitaKaname

1

100.0

－

－

100.0

－

(Note 3)

1－(Note 3)(Note 3)(Note 3)

T-7

NSC

Unicus Yoshikawa

1(11)

100.0

133

2.1

1(11)

100.0

132

1.7

T-8

SS

1

100.0

1

100.0

T-9

NSC

1

100.0

1

100.0

T-10

SS

T-11

NSC

T-12

NSC

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

T-21

SS

T-22

SS

O-1

NSC

O-3
O-4
O-5
O-6
O-7
O-8
O-9
O-10
N

Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Fululu Garden
YachiyoRentalRatio toNumberrevenue total rentalof tenants(millions) revenue(Note 1)
(Note 2)
(%)

T-5

O-2

O

CSC

Occupancyrate (%)

Fifth fiscal period
as of September 30, 2017

N-1

SM
NSC
NSC

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa(Land)
Unicus Kamisato(Land)
Unicus Konosu(Land)
Inageya Yokohama
Minamihonjuku(Land)
Gourmet City
Chiba-Chuo
Nakamachidai Tokyu
Store
Central Wellness Club
Nagatsuta MinamidaiLife Kameido
Totsuka-Fukaya
Shopping Center(Land)
Yumemachi
Narashinodai Mall
Kawamachi Yahagi
Mall
Prime Square
Jiyugaoka
Round1
Ichikawa-Onitaka
Blumer Maitamon
Central Square
Takadono (Land)
Piago Kahma Home
Center Omihachiman
Blumer HAT Kobe

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
WelciaSS
Kishiwadakamori(Land)
Life
SM
Nishi-Tengachaya
Million Town
NSC
Tsukaguchi (Land)
Kahma Home Center
SS
Nakagawa Tomita(Land)－－(Note 3)(Note 3)

1

100.0

1

100.0

72

1

100.0

41

1

100.0

1

100.0

1

100.0

2

100.0

59

1

100.0

－

－

(Note 3)(Note 3)－(Note 3)－－(Note 3)(Note 3)

1

100.0

1.1

1

100.0

72

0.9

0.6

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

2

100.0

1

100.0

－
(Note 3)

0.9

－

－

(Note 3)(Note 3)

59

0.8

－

－

(Note 3)(Note 3)

－

－

－

－

2

100.0

－

－

－

－

1(14)

100.0

128

1.6

－

－

－

－

1(12)

100.0

88

1.1

－

－

－

－

2

100.0

－

－

－

－

1

100.0

50

99.2

480

7.5

50

98.2

1

100.0

－

－

1

100.0

(Note 3)(Note 3)

2

100.0

－

98.7

489

6.3

1(30)

97.8

305

3.9

1

100.0

226

2.9

1

100.0

1

100.0

0.7

1

100.0

－

－

1

100.0

(Note 3)(Note 3)

99.1

482

7.5

1(42)

1(30)

97.8

289

4.5

1

100.0

226

3.5

1

100.0
－

－

(Note 3)(Note 3)

100.0

1

100.0

1

100.0

6.5

(Note 3)

1(41)

1

509
－

100.0

100.0

－
(Note 3)(Note 3)2

1－(Note 3)

44

1

－

－

(Note 3)(Note 3)

44

0.6

－

－

(Note 3)(Note 3)

100.0

31

Fourth fiscal period
as of March 31, 2017
Area

Property
number

Propertytype

Property name

Numberof tenants(Note 1)

N

N-2

NSC

N-3

SS

N-4

SS

N-5

SS

N-6

NSC

F-1
F

SM

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R
R-7

Valor IchinomiyaNishi
K’s Denki
Nakagawa Tomita(Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama(Land)
Resora Obu
Shopping Terrace

NSC

1

100.0

1

100.0

－

Round1 Stadium
Hakata-Hanmichibas
hiKurume-Nishi
Shopping Center
Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
Sakura

P-1 Plaza Tenno

－

1

100.0

1

100.0

(Note 3)

1

100.0

1

100.0

1

100.0

1

100.0

－

－

1(43)

99.4

1

100.0

1

Urban
Solala Plaza
Station-Front SC

R-8

RentalRatio toRentalOccupanc
Number Occupancrevenue total rental
revenueyof tenantsy(millions) revenue(millions)(Note 1)rate (%)
rate (%)(Note 2)
(Note 2)(%)

(Note 3)Sunny Noma

Fifth fiscal period
as of September 30, 2017

100.0

－

－

－

－

(Note 3)(Note 3)

Ratio tototal
rentalrevenue(%)－－(Note 3)(Note 3)

113

1.4

－

－

(Note 3)(Note 3)

－

－

－

－

1

100.0

－

－

－

－

4

100.0

46

0.6

1(22)

99.7

375

5.8

1(22)

99.7

379

4.9

1

100.0

－

－

1

100.0

(Note 3)(Note 3)

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

7

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

7

100.0

270

4.2

－

－

(Note 3)(Note 3)

136

2.1

－

－

－

－

(Note 3)(Note 3)

288

3.7

－

－

(Note 3)(Note 3)

100.0

136

1.7

－

－

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

1

100.0

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

R-10

NSC

Sun Street Hamakita

－

－

－

－

1(51)

98.0

458

5.9

409

99.6

6,427

100.0

542

99.6

7,797

100.0

Total
Note 1:

Note 2:
Note 3:

Number of tenants is based upon the number of lease agreements with respect to the building(s) (or land in the case of land-only properties withleasehold interest) on each such property used mainly as stores and offices, as of March 31, 2017. Where one lessee leases more than one section of
the property, the lessee is counted as a tenant for each section leased within the property. Where pass-through type master lease agreements areentered into, the number of master lessees is with the number of end-tenants indicated in parentheses. Where sublease type master lease agreements
are entered into, the indicated, number of master lessee is shown. As for the “Total” of “Number of tenants”, the number of end-tenants is used forpass-through type master leases and the number of master lessee is used for sublease type master leases.
Rental revenue is based on total rental and other operating revenues of each property.
KRR has not obtained consent from the tenant(s) to release this information.

[Overview of Investment Securities]
The following summarizes the investment securities owned by KRR as of September 30, 2017.

Asset name

Type of asset

Silent partnership equity
interest of JRP8 GK (Note 2)
Total
Note 1:
Note 2:

Silentpartnership
equity interest

Amount(units)Book value(in millions)
Unit
price

Evaluation value(in millions) (Note 1)
Unit
Price

Price

Evaluation
profits/losses(in millions)

Price

Remarks

－

－

2

－

2

－

－

－

－

2

－

2

－

－

“Evaluation value” indicates the book value.
Asset under management is the trust beneficiary interest in real estate of “Yumemachi Narashinodai Mall”. KRR acquired the trust beneficiaryinterest on April 19, 2017.

32

(4) Specified Transaction
As of March 31, 2017, the contract amount and fair value of the outstanding transaction under the specified
transaction account of KRR are as follows.
Contract amount (million yen)
(Note 1)Type

Due after one year

Fair value(million yen)
(Note 2) (Note 3)(Note 1)OTC

Interest rate swaps:
Receive floating / pay fixed

61,84057,990

22

Total

－

61,84057,99022Note 1: The contract amount of interest rate swaps is based on its notional principal.
Note 2: For the financial reporting purpose, the transaction is not measured at fair value but accounted for under special treatment for interest
rate swaps based on “Accounting Standards for Financial Instruments” under Japanese GAAP.
Note 3: Based on the amount provided by counterparty financial institutions.

(5) Other Assets
Real estate or beneficiary rights of real estate in trust owned by KRR are disclosed in “(3) Overview of the Portfolio”.
KRR has no other specified assets.
(6) Asset in Geographic Area
KRR owns no asset in specified area other than Japan.

33

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures (Note) for renovations, repairs and other projects that are planned forthe sixth fiscal period ending March 31, 2018. These expenditures are for real estate owned by KRR and real estate intrusts in which KRR owns trust beneficiary rights. These planned projects may include some expenditure that will berecorded as expenses rather than capital expenditures for accounting purposes.
Property
number

Property nameLocation

PurposeSchedule

Prime Sqyare
Jiyugaoka
Yorktown
Kita-Kaname

Meguro-ku,
Tokyo
Hiratsuka,
Kanagawa

T-1

Fululu Garden
YachiyoYachiyo, Chiba

Power generator renewal

O-1

Blumer Maitamon

Kobe, Hyogo

N-2

Valor
Ichinomiya-Nishi

Ichinomiya,
Aichi

T-21
T-6

Planned amount of capital expenditure(Millions of yen)
Payment for Total amountTotal
the period
already paid

From October 2017
to March 2018
From July 2017
to December 2017

70

－

－

54

－

－

From October 2017
to March 2018

51

－

－

LED installation to common
area

From October 2017
to March 2018

46

－

－

Exterior wall repair

From September 2017
to November 2017

33

－

－

Interior repair
Rooftop parking waterproof(2) Capital Expenditures during the Fiscal Period under Review
The table below shows major capital expenditures for renovations, repairs and other projects in the fiscal period underreview.
The amount of capital expenditures in the fiscal period under review was 367 million yen. There were also
expenditures of 189 million yen that were recorded as repair expenses. In total KRR spent 556 million yen on the
projects.
Property
number

Property nameLocation

PurposeT-2

MONA
Shin-Urayasu

Urayasu, Chiba

First phase of renewal

O-4

Blumer HAT Kobe

Kobe, Hyogo

103rd block renewal

O-5

Carino Esaka

Suita, Osaka

Central monitoring panel renewal

O-5

Carino Esaka

Suita, Osaka

Escalator renewal

O-4

Blumer HAT Kobe

Kobe, Hyogo

Installation of shutters for 103rd block

Schedule
From March 2017
to July 2017
From March 2017
to June 2017
From DecemberJanuary
2016
to June 2017
From May 2017
to June 2017
From March 2017
to April 2017

Capital expenditure(Millions of yen)
134
61
27
21
12

Others

109

Total

367

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable34

Expenses and Liabilities(1) Expenses related to Asset Management
Fourth fiscal period(From October 1, 2016
to March 31, 2017)
Asset management fees (Note)(in thousands of yen)Fifth fiscal period(From April 1, 2017
to September 30, 2017)

488,477

549,721

Asset custody fees

7,549

7,776

Administrative service fees

23,972

25,791

Directors' compensation

4,500

4,500

Other operating expenses

67,03981,132591,538

668,921

Total

Note: The amount of asset management fees capitalized in addition to the amount above are 55,810 thousand yen for the fourth fiscal period and 405,750
thousand yen for the fifth fiscal period.

35

(2) Status of Borrowings
Borrowings on a financial institution basis as of September 30, 2017 are as follows.
Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

4,140,000-

4,140,000-

360,000-

360,000-

The Bank of Tokyo-M itsubishi UFJ, Ltd.

1,070,000-

1,070,000

-

0.480

April 21, 2017

Sumitomo M itsui Banking Corporation

3,900,000--

3,900,000

0.480

October 3, 2017

Sumitomo M itsui Banking Corporation

450,000--

450,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

450,000--

450,000

M izuho Bank, Ltd.

400,000--

400,000
0.430

February 10, 2018

Resona Bank, Ltd.

250,000--

250,000

Aozora Bank, Ltd.

250,000--

250,000

Sumitomo M itsui Trust Bank, Ltd.

200,000--

200,000-

900,000-

900,000
0.430

April 19, 2018

0.430

April 21, 2018

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderSumitomo M itsui Banking Corporation

Averageinterest rate
(Note 1)
(Note 2)(％)

Balance at theend of period(Thousands of
yen)

0.480
M izuho Bank, Ltd.

Short-Term Loans Payable

Sumitomo M itsui Banking Corporation

Payment due date
（Note 3）Current Portion ofLong-Term
Loans Payable
Long-Term Loans Payable

Remarks(Note 4)

Unsecured/Non-guaranteed(Note 4)

Unsecured/Non-guaranteed(Note 4)

Unsecured/Non-guaranteed

April 21, 2017

M izuho Bank, Ltd.

-

300,000-

300,000

Sumitomo M itsui Banking Corporation-

2,600,000-

2,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

-1,070,000-

1,070,000

Aozora Bank, Ltd.

-

640,000-

640,000

Resona Bank, Ltd.

-

400,000-

400,000

M izuho Bank, Ltd.

-

360,000-

360,000

M izuho Trust & Banking Co., Ltd.

-

300,000-

300,000

M itsubishi UFJ Trust and Banking Corporation-

200,000-

200,000

Sumitomo M itsui Banking Corporation （Note 6）-

1,000,000

1,000,000

-

0.430

April 27, 2018

Sumitomo M itsui Trust Bank, Ltd. （Note 7）-

8,500,000

8,500,000

-

0.430

July 31, 2018

11,470,000

16,270,000

15,070,000

12,670,000

Sumitomo M itsui Banking Corporation

2,300,000--

2,300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000
0.545

February 10, 2018

M izuho Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

350,000--

350,000

Sub Total

3,850,000--

3,850,000

Sumitomo M itsui Banking Corporation

2,400,000--

2,400,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000

M itsubishi UFJ Trust and Banking Corporation

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000
0.751

February 10, 2020

Resona Bank, Ltd.

500,000--

500,000

The Gunma Bank, Ltd.

400,000--

400,000

The M usashino Bank, Ltd.

400,000--

400,000

M izuho Bank, Ltd.

350,000--

350,000

M izuho Trust & Banking Co., Ltd.

300,000--

300,000

Sumitomo M itsui Banking Corporation

3,000,000--

3,000,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

700,000--

700,000

Sumitomo M itsui Trust Bank, Ltd.

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Ltd.

450,000--

450,000

M izuho Bank, Ltd.

400,000--

400,000

Sumitomo M itsui Banking Corporation

2,600,000--

2,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

600,000--

600,000

Aozora Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M izuho Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

Sub Total

Use

0.865

February 10, 2021

0.978

February 10, 2022

36

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

Development Bank of Japan Inc.（Note 5）

1,500,000--

1,500,000

0.925

February 10, 2021

Development Bank of Japan Inc.（Note 5）

1,600,000--

1,600,000

1.033

February 10, 2022

Sumitomo M itsui Banking Corporation

4,600,000--

4,600,000

1.366

April 16, 2025

The Bank of Tokyo-M itsubishi UFJ, Ltd.

750,000--

750,000

Aozora Bank, Ltd.

500,000--

500,000

M izuho Bank, Ltd.

400,000--

400,000
0.534

M arch 31, 2019

Sumitomo M itsui Trust Bank, Ltd.

200,000--

200,000

Resona Bank, Ltd.

200,000--

200,000

The M usashino Bank, Ltd.

150,000--

150,000

1,000,000--

1,000,000

Sumitomo M itsui Trust Bank, Ltd.

600,000--

600,000

M izuho Bank, Ltd.

400,000--

400,000
0.975

M arch 31, 2023

Resona Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M itsubishi UFJ Trust and Banking Corporation

400,000--

400,000

Development Bank of Japan Inc.（Note 5）

1,500,000--

1,500,000

0.994

M arch 31, 2023

Sumitomo M itsui Banking Corporation

1,850,000--

1,850,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

550,000--

550,000

Sumitomo M itsui Trust Bank, Ltd.

500,000--

500,000

0.545

M arch 31, 2019

Resona Bank, Ltd.

300,000--

300,000

The M usashino Bank, Ltd.

250,000--

250,000

M itsubishi UFJ Trust and Banking Corporation

450,000--

450,000

Resona Bank, Ltd.

200,000--

200,000

0.987

M arch 31, 2023

The M usashino Bank, Ltd.

150,000--

150,000

Development Bank of Japan Inc.（Note 5）

1,500,000--

1,500,000

1.013

M arch 31, 2023

Sumitomo M itsui Banking Corporation

3,000,000--

3,000,000

M izuho Bank, Ltd.

1,150,000--

1,150,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderThe Bank of Tokyo-M itsubishi UFJ, Ltd.

Averageinterest rate
(Note 1)
(Note 2)(％)

Payment due date
（Note 3）Long-Term Loans Payable

1,000,000--

1,000,000

M izuho Trust & Banking Co., Ltd.

700,000--

700,000

Sumitomo M itsui Trust Bank, Ltd.

650,000--

650,000

Resona Bank, Ltd.

500,000--

500,000

Sumitomo M itsui Banking Corporation

1,500,000--

1,500,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

400,000--

400,000

M izuho Bank, Ltd.

710,000--

710,000

Sumitomo M itsui Trust Bank, Ltd.

620,000--

620,000

Sumitomo M itsui Trust Bank, Ltd.

450,000--

450,000

0.803 September 30, 2024

Development Bank of Japan Inc.（Note 5）

890,000--

890,000

0.760 September 30, 2024

Sumitomo M itsui Banking Corporation

2,670,000--

2,670,000

0.932

April 21, 2026

The Bank of Tokyo-M itsubishi UFJ, Ltd.

890,000--

890,000

0.888

October 31, 2025

0.550 September 30, 2021

1.110

M arch 31, 2024

1.243

April 16, 2025

Use

Remarks(Note 4)

Unsecured/Non-guaranteed

0.368 September 30, 2019

The Gunma Bank, Ltd.（Note 5）

500,000--

500,000

Development Bank of Japan Inc.（Note 5）

2,000,000--

2,000,000

1.049

M izuho Trust & Banking Co., Ltd.（Note 5）

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

Sumitomo M itsui Banking Corporation-

2,600,000-

2,600,000

Aozora Bank, Ltd.

-

500,000-

500,000

M itsubishi UFJ Trust and Banking Corporation-

400,000-

400,000

Sumitomo M itsui Trust Bank, Ltd.

-

300,000-

300,000

Resona Bank, Ltd.

-

300,000-

300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 5)-

600,000-

600,000

0.400

Development Bank of Japan Inc.（Note 5）-

500,000-

500,000

0.553

M izuho Bank, Ltd. (Note 5)-

400,000-

400,000

0.553

M izuho Trust & Banking Co., Ltd.（Note 5）-

200,000-

200,000

0.553

Resona Bank, Ltd.

0.485

January 31, 2027

January 31, 2027

April 27, 2021

37

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderIncrease during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

Averageinterest rate
(Note 1)
(Note 2)(％)

Payment due date
（Note 3）

Sumitomo M itsui Banking Corporation-

1,500,000-

1,500,000

Sumitomo M itsui Trust Bank, Ltd.

-

400,000-

400,000

Aozora Bank, Ltd.

-

400,000-

400,000

Resona Bank, Ltd.

-

300,000-

300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 5)-

600,000-

600,000

0.696

M izuho Bank, Ltd. (Note 5)-

600,000-

600,000

0.815

Development Bank of Japan Inc.（Note 5）-

500,000-

500,000

0.814

M izuho Trust & Banking Co., Ltd.（Note 5）-

200,000-

200,000

0.814

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 5)-

500,000-

500,000

0.903

October 31, 2026

Sumitomo M itsui Banking Corporation-

500,000-

500,000

Sumitomo M itsui Trust Bank, Ltd.

-

500,000-

500,000

1.033

M ay 18, 2027

Resona Bank, Ltd.

-

400,000-

400,000

Development Bank of Japan Inc.（Note 5）-

500,000-

500,000

1.050

M izuho Bank, Ltd. (Note 5)-

500,000-

500,000

1.049

M izuho Trust & Banking Co., Ltd.（Note 5）-

300,000-

300,000

1.050

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 5)-

500,000-

500,000

0.670 September 29, 2023

Sumitomo M itsui Trust Bank, Ltd.

-1,500,000-

1,500,000

0.918 September 30, 2026

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 5)-

500,000-

500,000

0.930

M izuho Bank, Ltd. (Note 5)-

1,500,000-

1,500,000

1.029
1.100 September 29, 2028

0.772

Use

Remarks(Note 4)

Unsecured/Non-guaranteed

October 31, 2024

October 31, 2024

Long-Term Loans Payable

M ay 18, 2027

September 29, 2027
Sumitomo M itsui Trust Bank, Ltd.

-1,500,000-

1,500,000

Sub Total

57,380,000

19,000,000-

76,380,000

72,700,000

35,270,000

15,070,000

92,900,000

Total

Note 1: All debts except for the following Note 6 are borrowings at a floating rate.
Note 2: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to borrowings forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into
consideration the effects of the interest rate swaps are indicated.
Note 3: All the repayment methods of debt financing except for the following Note 7 and Note 8 are lump-sum repayments on the due date.
Note 4: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 5: Borrowings at a fixed rate.
Note 6: Partial prepayment was made on May 31, 2017.
Note 7: Prepayment of 3,000,000 thousand yen and 5,500,000 thousand yen was made on August 31, 2017 and September 29, 2017, respectively.

(3) Status of Investment Corporation Bonds
Balance as ofApril 1, 2017
(million yen)

Balance as of
September 30,
2017(million yen)

October 31,
2016

1,000

1,000

0.200

October 29,
2021

2nd Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.600

October 30,
2026

3rd Series Unsecured Investment
Corporation Bonds

August 31,
2017

－

1,000

0.320

August 31,
2022

4th Series Unsecured Investment
Corporation Bonds

August 31,
2017

－

2,000

0.700

August 31,
2027

2,000

5,000

Bonds

Issuance date

1st Series Unsecured Investment
Corporation Bonds

Total

Interest rate
Redemption
Maturity date(%)
methodUse

Remarks(Note 1)
Full onmaturity(Note 3)(Note 2)

Note 1: “Use” is acquisition funds for specified assets, repayment funds for borrowings, etc.
Note 2: “Use” is repayment funds for borrowings.
Note 3: Ranking pari passu among the specified investment corporation bonds(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable38

Acquisition and Disposition(1) Acquisition and Disposition of Real Estate Properties & Asset-Backed Securities and Infrastructure &Infrastructure Related Assets
Acquisition
Ownership
form

Property
number

Property nameAcquisition date

Disposition

Acquisition price(in millions)(Note)

Disposition
Disposition
priceBook value Gain / loss
Date
(in millions) (in millions) (in millions)(Note)

Trust beneficiaryinterest in real estate

T-18

Totsuka-Fukaya
Shopping Center (Land)

April 19, 2017

4,170

－

－

－

－

Trust beneficiaryinterest in real estate

T-19

Yumemachi
Narashinodai Mall

April 19, 2017

3,416

－

－

－

－

Trust beneficiaryinterest in real estate

T-20

Kawamachi Yahagi Mall

May 18, 2017

3,097

－

－

－

－

Trust beneficiaryinterest in real estate

T-21

Prime Square Jiyugaoka

April 19, 2017

2,820

－

－

－

－

Trust beneficiaryinterest in real estate

T-22

Round1
Ichikawa-Onitaka

April 19, 2017

1,880

－

－

－

－

Trust beneficiaryinterest in real estate

N-6

Resora Obu Shopping
TerraceAugust 1, 2017

7,911

－

－

－

－

Trust beneficiaryinterest in real estate

F-2

Round1 Stadium
Hakata-Hanmichibashi

April 19, 2017

5,020

－

－

－

－

Trust beneficiaryinterest in real estate

F-3

Kurume-Nishi Shopping
CenterApril 19, 2017

1,515

－

－

－

－

Trust beneficiaryinterest in real estate

R-10

Sun Street Hamakita

April 27, 2017

10,746－－－－

40,575

－

－

－

－

Total
Note:

“Acquisition price” and “Disposition price” represent the purchase price of each trust beneficiary interest specified in purchase agreement in relation
to the acquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; and rounded
down to the nearest one million yen).

(2) Acquisition and Disposition of Other Assets
Other assets except real estate properties and asset-backed securities mentioned above mostly consist of cash anddeposits and cash and deposits in trust.

39

(3) Appraisal Values of Specific Assetsi) Real Estate
Acquisition Ownership Property/disposition
form
numberTrust
beneficiary
Acquisitioninterest inreal estate

Property nameAcquisition date

Acquisition
price(in millions)Appraisalvalue(in millions)(Note 1)

(Note 2)

Appraiser

Evaluation dateT-18

Totsuka-Fukaya
Shopping Center (Land)

April 19, 2017

4,170

4,290

Daiwa Real EstateAppraisal Co., Ltd.

Feb.1, 2017

T-19

Yumemachi
Narashinodai Mall

April 19, 2017

3,416

3,520

Daiwa Real EstateAppraisal Co., Ltd.

Feb.1, 2017

T-20

Kawamachi Yahagi
Mall

May 18, 2017

3,097

3,220

Daiwa Real EstateAppraisal Co., Ltd.

Feb. 1, 2017

T-21

Prime Square Jiyugaoka

April 19, 2017

2,820

2,850

Daiwa Real EstateAppraisal Co., Ltd.

Mar. 1, 2017

T-22

Round1
Ichikawa-Onitaka

April 19, 2017

1,880

1,970

Daiwa Real EstateAppraisal Co., Ltd.

Feb. 1, 2017

N-6

Resora Obu Shopping
TerraceAugust 1, 2017

7,911

7,990

The Tanizawa Sōgō
Appraisal Co., Ltd.

Jun. 1, 2017

F-2

Round1 Stadium
Hakata-Hanmichibashi

April 19, 2017

5,020

5,190

Japan Real Estate
Institute

Feb. 1, 2017

F-3

Kurume-Nishi Shopping
CenterApril 19, 2017

1,515

1,600

Japan Real Estate
Institute

Feb. 1, 2017

Japan Real EstateFeb. 1, 2017
Institute
Note 1: “Acquisition price” represents the purchase amount (excluding acquisition costs and consumption taxes) of each property or beneficiary right ofreal estate in trust as stated in the Sales and Purchase Agreement.
Note 2: “Appraisal value” of specific assets above was calculated in accordance with the guideline of “Real Estate Appraisal Standards, Chapter 3,
Appraisal of Securitized Real Estate.”
R-10

Sun Street Hamakita

April 27, 2017

10,746

10,890ii) Others(A) Investigator regarding values of certain assets

BDO Toyo & Co.
(B) Result and method of investigation
With regard to transactions and contracts entered by KRR whose values shall be investigated based on the Article
201 of the Act on Investment Trusts and Investment Corporations, BDO Toyo & Co. performs an investigation oftransactions. For the fiscal period from April 1, 2017 to September 30, 2017, the transaction subject to suchinvestigation was 15 interest rate swap transactions, for which KRR received reports from BDO Toyo & Co.. For
this purpose, investigation was performed with respect to details of the interest swap contracts, such as the nameof counter parties, contract amounts, or the period of transactions. This survey is not a part of the audit for
finalcial statements, and there is no guarantee of fairness of the price and internal management system.

40

(4) Related-Party Transactionsi) Transactions
Transaction price (in millions)Purchase
Total amountSale

40,575-

Transaction with related-party
JRP8 GK

3,416(8.4%)-(-%)

GK KRF63

3,097(7.6%)-(-%)

JRP9 GK

100,746(26.5%)

-

(-%)

Total

17,259(42.5%)-(-%)ii) Amounts of Fees Paid
Not applicableNote:

A related party, etc. is defined as a related party, etc. of the asset manager having an asset management agreement with KRR as prescribed in
Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japan and in Article 26-27 of theRegulations for Asset Investment Reports by Investment Trusts and Investment Corporations of the Investment Trusts Association, Japan.

(5) Transactions with Asset Manager in Connection with Concurrent Business Conducted by the Asset Manager
There is no transaction with the Asset Manager, KFM, regarding to the Type II Financial Instruments Business, andBuilding Lots and Buildings Transaction Business. Furthermore, KFM does not concurrently engage in any of Type I
Financial Instruments Business, Real Estate Specified Joint Business.

41

Accounting(1) Status on Assets, Liabilities, Principals, and Income and Losses
Please refer to the “Balance Sheets”, “Statements of Income and Retained Earnings”, “Statements of Changes in Net
Assets” and “Notes to Financial Statements” presented later in this report.
(2) Change in Calculation of Depreciation
Not applicable(3) Change in Valuation of Real Estate Properties and Infrastructure Assets
Not applicable(4) Disclosure of Beneficiary Certificates of Investment Trust Established by Selfi) Acquisition of Beneficiary Certificates of Investment Trust Established by Self
Not applicableii) Ownership of Beneficiary Certificates of Investment Trust Established by Self
Not applicable(5) Disclosure of Companies Owning Real Estate Overseas
Not applicable(6) Disclosure of Real Estate Owned by Companies Owning Real Estate Overseas
Not applicable

Others(1) Noticei) General Meeting of Unitholders
Not applicableii) Board of Directors
Date

April 11, 2017

Approved items
Conclusion of an underwriting
agreement for new investment units

Summary
For the issuance of new investment units, which was approved by the
Board of Directors on March 31, 2017, KFM, SMBC Nikko Securities
Inc., Nomura Securities Co., Ltd., Daiwa Securities Co., Ltd., Mizuho
Securities Co., Ltd. and UBS Securities Japan Co., Ltd. signed anunderwriting agreement.

(2) Others
In this report, any fraction is rounded down for monetary amounts and rounded off for ratios unless otherwise stated.

42Financial Statements(4th Fiscal Period: from October 1, 2016 to March 31, 2017)(5th Fiscal Period: from April 1, 2017 to September 30, 2017)
Independent Auditor’s Report
Balance Sheets
Statements of Income and Retained Earnings
Statements of Changes in Net Assets
Statements of Cash Flows
Notes to Financial Statements

44

Kenedix Retail REIT Corporation

Balance Sheets
As of September 30, 2017 and March 31, 2017
As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 9 and 11)¥5,265,120¥5,258,633

Cash and deposits in trust (Notes 9 and 11)

13,908,498

11,575,715

Operating accounts receivable249,833

182,993

Prepaid expenses

136,375

41,020Consumption taxes receivable

947,707

-

3,571

2,987

20,511,105

17,061,349

Other
Total current assets
Non-current assets
Property, plant and equipment (Notes 17 and 20)
Buildings in trust

54,528,155

42,757,457

Accumulated depreciation(3,197,167)(2,377,464)

Buildings in trust, net (Note 3)

51,330,987

40,379,992

2,797,067

1,822,887

Accumulated depreciation(196,396)(145,181)
1,677,705

Structures in trust
Structures in trust, net (Note 3)

2,600,670

Machinery and equipment in trust

214,510203,295

Accumulated depreciation(16,977)(11,445)

Machinery and equipment in trust, net

197,533

191,850

71,172

60,635

Accumulated depreciation(15,164)(10,639)

Tools, furniture and fixtures in trust, net (Note 3)

56,00749,995

149,241,987

123,937,095

Tools, furniture and fixtures in trust

Land in trust (Note 3)
Construction in progress in trust

14,291

24,784203,441,477

166,261,423

4,328,697

520,598

2,776

2,064

4,331,474

522,662

Investment securities

2,790

101,690

Lease and guarantee deposits

10,00010,000Total property, plant and equipment, net
Intangible assets (Note 20)
Leasehold right in trust (Note 17)
Other
Total intangible assets
Investments and other assets

Lease and guarantee deposits in trust

60,25636,035Long-term prepaid expenses

808,924

648,066

Long-term deposits

157,110

124,960

Other

22,55323,395

1,061,634

944,147

208,834,586

167,728,234

Organization costs

20,26425,331

Investment corporation bond issuance costs

38,307

17,671

Investment unit issuance costs

224,185

204,840

Total investments and other assets
Total non-current assets
Deferred assets

Total deferred assets
Total assets

282,757

247,843¥229,628,449¥185,037,427

See accompanying notes to financial statements.

45

As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥574,194¥516,631

Short-term loans payable (Notes 11 and 21)

12,670,000

11,470,000

Current portion of long-term loans payable (Notes 11 and 21)

3,850,000

3,850,000

Accounts payable-other339,816

280,035

Accrued expenses

18,164

12,501

Income taxes payable

2,703

3,275

41,046245,842

1,104,639

878,241

Accrued consumption taxes
Advances received
Deposits received

142,780

124,240

18,743,344

17,380,767

Investment corporation bonds (Notes 11 and 22)

5,000,000

2,000,000

Long-term loans payable (Notes 11 and 21)

76,380,000

57,380,000

Tenant leasehold and security deposits in trust (Notes 3 and 11)

12,933,293

11,397,149

Asset retirement obligations (Note 15)

23,482

23,335

Other

31,76732,639Total current liabilities
Non-current liabilities

Total non-current liabilities
Total liabilities

94,368,543

70,833,124

113,111,887

88,213,892

113,399,022

94,256,390(9,754)(40,593)

Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments (Note 5)
Total deduction from unitholders' capital
Unitholders' capital, net(9,754)(40,593)

113,389,267

94,215,796

3,104,740

2,584,343

Surplus
Unappropriated retained earnings
Total surplus

3,104,740

2,584,343

116,494,008

96,800,139

Deferred gains or losses on hedges (Notes 11 and 12)

22,55323,395

Total valuation and translation adjustments

22,55323,395

Total unitholders' equity
Valuation and translation adjustments

Total net assets (Note 6)

116,516,561

96,823,535

Total liabilities and net assets¥229,628,449¥185,037,427

See accompanying notes to financial statements.

46

Kenedix Retail REIT Corporation

Statements of Income and Retained Earnings
For the period from April 1, 2017 to September 30, 2017 and the period from October 1, 2016 to March 31, 2017
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

(in thousands of yen)
Operating revenues
Rent revenue-real estate (Note 7)¥6,637,179¥5,524,740

Other lease business revenue (Note 7)

1,160,494

902,740

5,844

3,131

7,803,517

6,430,612

3,468,519

2,817,984

549,721488,477

Dividend income
Total operating revenues
Operating expenses
Expenses related to rent business (Note 7)
Asset management fees
Asset custody fees

7,776

7,549

Administrative service fees

25,791

23,972

Directors' compensation

4,500

4,500

Other operating expenses

81,132

67,039Total operating expenses

4,137,441

3,409,522

3,666,076

3,021,090

Interest income

5952Interest on refund-

164

Total non-operating income

59

217

Operating income
Non-operating income

Non-operating expenses
Interest expenses

369,045

310,372

Interest expenses on investment corporation bonds

5,414

3,337

Financing-related expenses

80,322

67,385

Amortization of organization costs

5,066

5,038

Amortization of investment corporation bond issuance costs

1,906

1,404

Amortization of investment unit issuance costs

96,17576,922557,930

464,459

Ordinary income

Total non-operating expenses

3,108,205

2,556,848

Income before income taxes

3,108,205

2,556,848

3,681

3,922

Income taxes
Current
Total income taxes
Net income

3,681

3,922

3,104,524

2,552,926

Retained earnings brought forward

216

31,417

Unappropriated retained earnings¥3,104,740¥2,584,343

See accompanying notes to financial statements.

47

Kenedix Retail REIT Corporation

Statements of Changes in Net Assets
For the period from April 1, 2017 to September 30, 2017 and the period from October 1, 2016 to March 31, 2017
Unitholders' equity
Unitholders' capital

Surplus

Deduction from unitholders'
capitalUnitholders'

Allowance for

Total

Unitholders'

capitaltemporary

deduction from

capital, netdifference

unitholders'adjustments

capitalUnappropriated

Total
Total

unitholders'surplusequity¥2,518,802¥2,518,802¥96,770,929(2,487,385)(2,487,385)(2,487,385)

retainedearnings(in thousands of yen)
Balance as of September
30, 2016¥94,256,390¥(4,263)¥(4,263)¥94,252,127

Changes of items during
the period
Dividends fromsurplusDistributions inexcess of earnings
from allowance fortemporary difference
adjustments(36,330)(36,330)(36,330)

Net income(36,330)
2,552,926

2,552,926

2,552,926

Net changes of items
other thanunitholder’s equity
Total changes of items
during the period-(36,330)(36,330)(36,330)

65,54065,54029,209¥94,256,390¥(40,593)¥(40,593)¥94,215,796¥2,584,343¥2,584,343¥96,800,139

Balance as of March 31,2017 (Note 8)
Changes of items during
the period
Issuance of new
investment units

19,142,631

19,142,631

19,142,631

Dividends fromsurplus(2,553,287)(2,553,287)(2,553,287)(30,838)(30,838)-

3,104,524

3,104,524

3,104,524

Reversal of
allowance fortemporary difference
adjustments

30,83830,83830,838Net income
Net changes of items
other thanunitholder’s equity
Total changes of items
during the period

19,142,631

30,83830,83819,173,470

520,397

520,397

19,693,868¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,104,740¥3,104,740¥116,494,008

Balance as of September
30, 2017 (Note 8)48

Valuation and translation
adjustments
Deferred gains

Total valuation

or losses on

and translation

hedgesadjustments

Total net assets(in thousands of yen)
Balance as of September
30, 2016¥(31,166)¥(31,166)¥96,739,763

Changes of items during
the period
Dividends fromsurplus(2,487,385)

Distributions inexcess of earnings
from allowance fortemporary difference
adjustments(36,330)

Net income

2,552,926

Net changes of items
other thanunitholder’s equity

54,56254,56254,56254,56254,562

83,772¥23,395¥23,395¥96,823,535

Total changes of items
during the period
Balance as of March 31,2017 (Note 8)
Changes of items during
the period
Issuance of new
investment units

19,142,631

Dividends fromsurplus(2,553,287)

Reversal of
allowance fortemporary difference
adjustments-

Net income

3,104,524

Net changes of items
other thanunitholder’s equity

(842)

(842)

(842)

(842)

(842)

19,693,026¥22,553¥22,553¥116,516,561

Total changes of items
during the period
Balance as of September
30, 2017 (Note 8)

See accompanying notes to financial statements.

49

Kenedix Retail REIT Corporation

Statements of Cash Flows
For the period from April 1, 2017 to September 30, 2017 and the period from October 1, 2016 to March 31, 2017
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥3,108,205¥2,556,848

Depreciation and amortization

885,529

721,929

5,066

5,038

Amortization of organization costs
Amortization of investment corporation bond issuance costs

1,906

1,404

Amortization of investment unit issuance costs

96,17576,922

Interest income

(59)

(52)

Interest expenses

374,459

313,709

Decrease (increase) in operating accounts receivable(66,839)

23,405Decrease (increase) in consumption taxes receivable(947,707)

477,707

Decrease (increase) in prepaid expenses(95,354)

71,692

Increase (decrease) in operating accounts payable

119,319(2,220)

Increase (decrease) in accounts payable-other59,447

11,825

Increase (decrease) in accrued consumption taxes(204,795)

245,842

Increase (decrease) in advances received

226,397

18,941

Increase (decrease) in deposits received

18,539

1,571

Decrease (increase) in long-term prepaid expenses(160,857)

3,889

Decrease (increase) in long-term deposits(32,150)-

Other(7,011)(6,558)Subtotal

3,380,270

4,521,894

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

59

52(370,062)(308,315)(4,253)(1,728)3,006,014

4,211,903(38,122,784)(5,994,725)(1,141)(504)

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment in trust
Purchase of intangible assets
Purchase of intangible assets in trust
Purchase of investment securities
Proceeds from investment securities(3,812,078)--(101,690)

104,744

3,131

Payments for lease and guarantee deposits in trust(24,220)-

Repayments of tenant leasehold and security deposits in trust(603,958)(317,595)

Proceeds from tenant leasehold and security deposits in trust

2,141,079

193,659

215,676

215,676(40,102,682)(6,002,048)

Proceeds from short-term loans payable

16,270,000

6,500,000

Payments of short-term loans payable(15,070,000)(7,100,000)

Proceeds from long-term loans payable

19,000,000

4,000,000

Proceeds from issuance of investment corporation bonds

2,977,457

1,980,924

Proceeds from issuance of investment units

19,027,111-

Payments of dividends(2,552,953)(2,523,176)

Net cash provided by (used in) financing activities

39,651,615

2,857,747

Net increase (decrease) in cash and cash equivalents

2,554,947

1,067,602

Proceeds from restricted bank deposits in trust
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities

Cash and cash equivalents at the beginning of the period

14,296,903

13,229,301

Cash and cash equivalents at the end of the period (Note 9)¥16,851,851¥14,296,903

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from April 1, 2017 to September 30, 2017 and the period from October 1, 2016 to March 31, 2017

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporationsof Japan (the “Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local Finance Bureau(registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on the Real Estate Investment Trust Securities(J-REIT) Market of Tokyo Stock Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453) on February 10, 2015. Subsequently, KRR
raised funds through public offerings, including international offerings. As a result, the number of investment units issued as of September 30, 2017
was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needs of local area
customers and have stable demand from retailers and customers, in order to provide stable investment returns over the long term. Sponsored by
Kenedix, Inc., a leading, independent real estate asset management company, KRR entrusts its asset management and investment operations to
Kenedix Real Estate Fund Management, Inc. (“KFM”), with the following strategies.
(Note) For management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail properties that generally have the following characteristics:
a. Retail trade area of an approximate radius of one to ten kilometers (and generally, a radius of three to five kilometers), withcustomers predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods andservices
KRR acquired trust beneficiary interests in real estate (a property acquired on November 1, 2016 with an acquisition price of 1,370 million yen
and a property acquired on January 31, 2017 with an acquisition price of 4,111 million yen). In addition, KRR completed an additional acquisition ofa new building through a property expansion within Unicus Ina (acquisition price of 91 million yen) on January 16, 2017. For the period ended
March 31, 2017, the portfolio of 42 properties as a whole performed well with an overall occupancy ratio of 99.6% as of March 31, 2017.
KRR acquired trust beneficiary interests in real estate (six properties acquired on April 19, 2017 with an acquisition price of 18,821 million yen, aproperty acquired on April 27, 2017 with an acquisition price of 10,746 million yen, a property acquired on May 18, 2017 with an acquisition price of
3,097 million yen and a property acquired on August 1, 2017 with an acquisition price of 7,911 million yen). For the period ended September 30,
2017, the portfolio of 51 properties as a whole performed well with an overall occupancy ratio of 99.6% as of September 30, 2017.
Furthermore, the portfolio was diversified in terms of tenants as there were 409 and 542 end-tenants as of March 31, 2017 and September 30,
2017 in KRR’s properties, respectively.
Basis of Presentation
KRR maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted inJapan (Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments andExchange Act of Japan and related regulations, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance withJapanese GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically inorder to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain
information that might not be required under Japanese GAAP but is presented herein as additional information.
KRR’s fiscal period is a six-month period which ends at the end of March or September. KRR does not prepare consolidated financial
statements because it has no subsidiaries.

51

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Other securities without market value are stated using the moving average cost method. Equity investments in a silent partnershipare stated, the amount equivalent to the corresponding equity interests including net amount of gain or loss from the silent partnership.
(B) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line method over theestimated useful lives of the assets ranging as stated below:

Buildings

From April 1, 2017
to September 30, 20172-70 years

From October 1, 2016
to March 31, 20172-70 years

Structures

8-59 years

8-59 years

Machinery and equipment

5-25 years

10-25 years

Tools, furniture and fixtures

3-15 years

4-10 years(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(E) Organization Costs
Organization costs are amortized over a period of 5 years under the straight-line method.
(F) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of 3 years under the straight-line method.
(G) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.
(H) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan, all relevant
assets and liabilities in trust are recorded on the balance sheets and the statements of income and retained earnings.
(I)

Revenue Recognition
Operating revenues consist of rental revenues including base rents, common area charges and other operating revenues, which include
utility charge reimbursements, parking space rental revenues and other miscellaneous revenues. Rental revenues are generally recognizedon an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can bereasonably estimated. Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and suchamounts are recorded both as revenues and expenses during the fiscal period.

52

(J) Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar
year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to said period.
Under Japanese tax regulations, the seller of the property is liable for these taxes on the property from the date of disposal to the end of thecalendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax
liabilities.
When KRR purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchasedate of each property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes arecapitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to ¥137,530 thousand and¥21,351 thousand as of September 30, 2017 and March 31, 2017, respectively.
(K) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets
and liabilities using the statutory tax rates.
(L) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes
applicable to the acquisition of assets are included in the cost of acquisition for each asset.
(M) Derivative Financial Instruments
KRR utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes ininterest rates. KRR deferred recognition of gains or losses resulting from changes in fair value of interest-rate swap contracts because thesecontracts met the criteria for deferral hedge accounting. However, KRR adopted the special treatment for interest-swap contracts if they met
the criteria for hedge accounting under this treatment. An assessment of the effectiveness of hedging is omitted for interest rate swaps
because they fulfill the requirements for the special treatment.
(N) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which are highly liquid, readily
convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of purchase.
(O) Presentation of Amounts
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed with regulatory
authorities in Japan. Unless otherwise noted, amounts are rounded down and ratios are rounded off in the accompanying financial
statements. Totals shown in the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

3. COLLATERAL
Assets pledged as collateral and related secured liabilities are as follows:
Assets pledged as collateral

As of September 30, 2017

As of March 31, 2017
(in thousands of yen)

Buildings in trust¥2,707,274¥2,724,085

Structures in trust

50,76452,355Tools, furniture and fixtures in trust

2,359

2,661

7,811,297

7,811,297

10,571,696

10,590,399

Land in trust
Total

53

Secured liabilities

As of September 30, 2017

As of March 31, 2017

3,023,268

3,245,943¥3,023,268¥3,245,943

As of September 30, 2017

As of March 31, 2017

Tenant leasehold and security deposits in trust
Total

4. COMMITMENT LINE CONTRACTSKRR has commitment line contracts with the banks with which it does business.
(in thousands of yen)
Total amount of commitment line contracts¥2,000,000

Balance of loans payable outstanding-

Remaining amount¥2,000,000

¥

-

¥

-

-

5. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
The following summarizes allowance for temporary difference adjustments as of September 30, 2017
1. Reasons, related assets, initial amount, allowance and reversal
Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥9,754

Deferred gains or losses
on hedges

Loss on interest-rate
swaps recognized at theend of the fiscal period

Total

Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)
¥9,75430,83830,838¥40,593¥40,593

¥

¥

-

¥

Balance atthe end of
the period-

Reason forreversal¥9,754--(30,838)-

Changes infair value ofderivativetransactions-¥(30,838)¥9,754-

2. Method of reversal
Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

Deferred gains or losses on hedges

Based on changes in the fair value of derivative transactions used as hedging instruments, the corresponding
amount is scheduled to be reversed.

The following summarizes allowance for temporary difference adjustments as of March 31, 2017
1. Reasons, related assets, initial amount and allowance
Related assets, etc.

Reason for allowance

Buildings in trust,
Leasehold right in trust
Deferred gains or losses
on hedges

Amortization ofleasehold right in trust
and the amount inexcess of depreciation
Loss on interest-rate
swaps recognized at theend of the fiscal period

Total

Initial amount

Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

¥9,754¥4,263¥5,49130,838-30,838¥40,593¥4,263¥36,330¥¥

Balance atthe end of
the period

Reason forreversal-¥9,754--30,838--¥40,593-

2. Method of reversal
Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

Deferred gains or losses on hedges

Based on changes in the fair value of derivative transactions used as hedging instruments, the corresponding
amount is scheduled to be reversed.

6. NET ASSETSKRR issues only non-par value units in accordance with the Investment Trust Act. The entire amount of the issue price of new units is designatedas stated capital. KRR is required to maintain net assets of at least ¥50 million as required by the Investment Trust Act.

54

7. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUESAND PROPERTY-RELATED EXPENSES
Rental and other operating revenues and property-related expenses for the period from April 1, 2017 to September 30, 2017 and from October 1,
2016 to March 31, 2017 consist of the following:
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

(in thousands of yen)
Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues
Rental revenues from limited proprietary rights of landCommon area charges¥5,361,334¥4,467,838

938,809728,620

337,034

328,281

6,637,179

5,524,740

Parking space rental revenues

195,782

162,994

Utility charge reimbursement

661,928455,670

Miscellaneous

302,783

284,075

Subtotal

1,160,494

902,740

7,797,673

6,427,481

Property management fees and facility management fees

808,367

691,625

Utilities

650,115

438,881Taxes

563,716

482,777

Repairs and maintenance

189,071

157,638

Insurance

13,507

12,281

Trust fees

21,137

17,790Depreciation

885,100

721,606

Others337,504

295,382

Total property-related expenses

3,468,519

2,817,984

Net operating income from real estate rental business¥4,329,153¥3,609,497

Subtotal
Other lease business revenue:

Total rental and other operating revenues
Property-related expenses:
Expenses related to rent business:

8. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

507,700 units

422,450 units55

9. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of September 30, 2017 and March 31, 2017:
As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Cash and deposits¥5,265,120¥5,258,633

Cash and deposits in trust

13,908,498

11,575,715

Restricted bank deposits in trust *(2,321,767)(2,537,444)

Cash and cash equivalents¥16,851,851¥14,296,903*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

10. LEASES(As lessee)
Future minimum lease payments under non-cancelable operating leases as of September 30, 2017 and March 31, 2017 are as follows:
As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

193,798

199,048

Total¥204,298¥209,548(As lessor)
Future minimum lease income under the non-cancelable operating leases as of September 30, 2017 and March 31, 2017 are as follows:
As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Due within 1 year

¥8,424,336¥6,112,316

Due after 1 year

63,081,778

49,962,185

Total¥71,506,114¥56,074,501

56

11. FINANCIAL INSTRUMENTS(A). Overview(1) Policy for financial instruments
KRR procures funds for asset acquisitions, repairs, payment of distributions, repayment of loans, etc. through loans from financial institutions,issuance of investment corporation bonds, issuance of investment units and other means. With regard to the procurement of interest-bearing debts,
KRR ensures that it can effectively combine stable long-term funds with flexible short-term funds. Management of surplus funds is undertaken
through various bank deposits focusing on safety, liquidity and effectiveness. KRR uses derivatives for the purpose of hedging its exposure tochanges in interest rates and other risks and does not enter into derivative transactions for speculative or trading purposes.
(2) Types of financial instruments and related risk
Bank deposits are for managing KRR’s surplus funds and are exposed to credit risk such as the bankruptcy of financial institutions at which funds
are deposited.
Investment securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer, property value fluctuation risk
and interest rate fluctuation risk.
Loans payable, and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of realestate and trust beneficiary interests in real estate and have a repayment date of a maximum of 11 years for loans payable and also have aredemption date of a maximum of 9 years and 11 months for investment corporation bonds as of September 30, 2017, the end of the fifth fiscal
period, are exposed to liquidity risk where alternative funds may not be procured by the repayment date. Also, loans payable with floating interest
rates are exposed to interest rate fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portionof the loans payable.
Tenant leasehold and security deposits are deposits received from tenants, which are exposed to liquidity risks when the tenants vacate theproperties.
(3) Risk management for financial instruments
a. Credit risk
While bank deposits are exposed to credit risk such as the bankruptcy of financial institutions at which funds are deposited, such risk is monitored
by deposits in non-interest bearing ordinary savings accounts or with financial institutions with credit ratings above a certain level. Investment
securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer. To manage this credit risk, theInvestment Corporation regularly evaluates the results of operations and the financial condition of the issuer, etc. In utilizing derivatives, KRR aims
to mitigate counterparty risk such as by transacting with financial institutions with favorable ratings.
b. Market risk
While loans payable with floating rates are exposed to interest rate fluctuation risk, such risk is monitored by adjusting the rate of the balance ofloans payable with floating rates against the total loans payable according to the financial environment, interest rate forecasts by continuous
monitoring, etc. and by using derivatives, etc. While investment securities, which are equity investments in a silent partnership, are exposed tocredit risk of the issuer and property value fluctuation risk, the Investment Corporation periodically reviews the value of the property and financial
condition of the issuer with regard to these investment securities. A risk management policy is established with regard to the execution andmanagement of derivatives and such transactions are conducted based on this policy.
c. Liquidity risk
Though loans payable are subject to liquidity risk, KRR reduces such risk by spreading out payment due dates and by diversifying financial
institutions. Liquidity risk is also managed by such means as regularly checking the balance of cash reserves.
Though tenant leasehold and security deposits are subject to liquidity risk, in principle, KRR reduces such risk by retaining funds that would
enable KRR to return necessary amounts to tenants.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value
is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could
result in a different fair value.
(B). Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheets and estimated fair value are shown in the following table. Items whose fairvalues are difficult to determine are not included in the following table (*2).

57

As of September 30, 2017
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥5,265,120¥5,265,120(2) Cash and deposits in trust

13,908,498

13,908,498

-

Total

¥

-

19,173,618

19,173,618-(1) Short-term loans payable

12,670,000

12,670,000-(2) Current portion of long-term loans payable

3,850,000

3,837,976(12,023)(3) Investment corporation bonds

5,000,000

4,976,700(23,300)(4) Long-term loans payable

76,380,000

76,284,508(95,491)(5) Tenant leasehold and security deposits in trust

2,887,549

2,886,747(802)

100,787,549

100,655,932¥22,553¥22,553

Total
Derivative transactions(131,617)¥-

As of March 31, 2017
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥5,258,633¥5,258,633(2) Cash and deposits in trust

11,575,715

11,575,715

-

Total

¥

-

16,834,348

16,834,348-(1) Short-term loans payable

11,470,000

11,470,000-(2) Current portion of long-term loans payable

3,850,000

3,847,148(2,851)(3) Investment corporation bonds

2,000,000

1,984,200(15,800)(4) Long-term loans payable

57,380,000

57,540,509

160,509(5) Tenant leasehold and security deposits in trust

3,147,555

3,151,660

4,105

77,847,555

77,993,518¥23,395¥23,395

Total
Derivative transactions

145,963¥-*1: Methods to determine the estimated fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time with floating interest rates, their carrying amount approximates fair value.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
Among these items, the fair value of loans payable with fixed interest rates is calculated based on the present value, which is the total amount ofprincipal and interest discounted by the estimated interest rate to be applied in the event that KRR conducts new loans of the same type. As for thefair value of loans payable with floating interest rates, it is based on the carrying amount since market interest rates are reflected in the short term
and the fair value is believed to approximate the carrying amount as the credit standing of KRR has not changed significantly since the loans were
made. (However, the fair value of long-term loans payable subject to the special treatment for interest-rate swaps is based on the present value ofthe total of principal and interest, accounted for together with the applicable interest-rate swaps, discounted by the estimated interest rate to be
applied in the event that KRR conducts new loans payable of the same type.)(3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.

58

(5) Tenant leasehold and security deposits in trust
The fair value is determined based on the present value of contractual cash flows discounted at the discount rate into which the period to therepayment date and the credit risk are reflected.
Derivative transactions
Please refer to Note “12. DERIVATIVE TRANSACTIONS”.
*2: Financial instruments whose fair values are extremely difficult to determineClassification

As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Investment securities (Note1)¥2,790¥101,690

Tenant leasehold and security deposits in trust (Note2)

10,045,743

8,249,594

Total¥10,048,533¥8,351,284(Note1) Fair values of investment securities are not subject to disclosure of fair value as they have no market price and their fair values arerecognized to be extremely difficult to grasp.
(Note2) It is extremely difficult to determine their fair values based on estimated future cash flows because no quoted market price is available
and the repayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits in trust are not includedin the above quantitative information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of September 30, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits¥5,265,120

Cash and deposits in trust

13,908,498

Total

¥

-

¥

-

¥19,173,618

¥

-

-

¥

-

¥

¥

-

-

-

¥

-

¥

¥

-

-

¥

-

As of March 31, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits¥5,258,633

Cash and deposits in trust

11,575,715

Total

¥

-

¥

-

¥16,834,348

¥

-

-

¥

-

¥

-

¥

-

¥

-

¥

¥

-

-

¥

-

*4: Redemption of long-term loans payable and other interest-bearing debt scheduled to be due after the balance sheet date
As of September 30, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥12,670,000

¥

-

¥

-

¥

-

¥

-

¥

-

-

-

-

-

2,000,000

3,000,000

3,850,000

6,980,000

7,000,000

13,300,000

7,000,000

42,100,000

435,430

435,430

435,430

435,430

435,430

110,793¥16,955,430¥7,415,430¥7,435,430¥13,735,430¥9,435,430¥45,210,79359As of March 31, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable¥11,470,000

Investment corporation bonds
Long-term loans payable

-

¥

-

¥

-

¥

-

¥

-

-

-

-

-

1,000,000

1,000,000

3,850,000

5,650,000

8,330,000

7,000,000

7,500,000

28,900,000

435,430

435,430

435,430

435,430

435,430

328,508¥15,755,430¥6,085,430¥8,765,430¥7,435,430¥8,935,430¥30,228,508

Tenant leasehold and security
deposits in trust
Total

¥

12. DERIVATIVE TRANSACTIONS
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2017 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps
Total

Type of derivativetransactions
Interest rate swap
transaction:
Receive/floating andpay/fixed
Interest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥16,940,000¥16,940,000

44,900,000

41,050,000¥61,840,000¥57,990,000

Fair value(in thousands of yen)

¥22,553

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions*¥22,553*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2017 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps
Total

Type of derivativetransactions
Interest rate swap
transaction:
Receive/floating andpay/fixed
Interest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥5,840,000¥5,840,000

44,900,000

41,050,000¥50,740,000¥46,890,000

Fair value(in thousands of yen)

¥23,395*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥23,395*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）60

13. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
5th Fiscal Period (April 1, 2017 to September 30, 2017) and 4th Fiscal Period (October 1, 2016 to March 31, 2017): Not applicable
2．Affiliated companies and other
5th Fiscal Period (April 1, 2017 to September 30, 2017) and 4th Fiscal Period (October 1, 2016 to March 31, 2017): Not applicable
3．Fellow subsidiary companies and other
5th Fiscal Period (April 1, 2017 to September 30, 2017) and 4th Fiscal Period (October 1, 2016 to March 31, 2017): Not applicable
4．Directors, major individual unitholders and other
5th Fiscal Period (April 1, 2017 to September 30, 2017) and 4th Fiscal Period (October 1, 2016 to March 31, 2017): Not applicable

14. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 35%. However, KRR may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements under the Special Taxation Measures Law of Japan are met, including arequirement that it currently distributes in excess of 90% of its net income for the fiscal period in order to be able to deduct such amounts. If KRR
does not satisfy all of the requirements, the entire taxable income of KRR will be subject to regular corporate income taxes. Since KRR distributed
in excess of 90% of its distributable income in the form of cash distributions totaling ¥3,104 million and ¥2,553 million for the periods ended
September 30, 2017 and March 31, 2017, respectively, the distributions were treated as deductible distributions for purposes of corporate income
taxes. The effective tax rates on KRR’s income were 0.12% and 0.15% for the periods ended September 30, 2017 and March 31, 2017,
respectively. The following table summarizes the significant differences between the statutory tax rate and the effective tax rate:
As of September 30, 2017

As of March 31, 2017

Statutory tax rate

34.81%

34.81%

Deductible cash distributions(34.77)(34.76)

Others0.08

0.10

Effective tax rate

0.12%

0.15%

The significant components of deferred tax assets and liabilities:
As of September 30, 2017

As of March 31, 2017

(in thousands of yen)
Deferred tax assets:
Enterprise tax payable

¥

222

¥

242

Amortization of leasehold right in trust

6,703

5,446

Depreciation

2,412

1,960

7,418

7,371

Subtotal deferred tax assets

Asset retirement obligations

16,75615,020

Valuation allowance(16,756)(15,020)¥¥

Total deferred tax assets

-

-

61

15. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations reported on balance sheets
1. Summary of the asset retirement obligations
KRR has recognized the original state restoration obligations assumed under the fixed-term business-purpose land leasehold agreement as theasset retirement obligations in connection with Sunny Noma acquired on February 10, 2015.
2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated based on a discount rate of 1.256% after the useful life has been estimated to be 22 years and twomonths based on the time period from the date of acquisition to the expiration of the agreement.
3. Changes in the amount of applicable asset retirement obligations consisted of the following
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,335¥23,190

146

145¥23,482¥23,335

16. SEGMENT INFORMATION
Segment information for the period ended from April 1, 2017 to September 30, 2017 and October 1, 2016 to March 31, 2017 is as follows:(A) Segment information
Disclosure is omitted because the real estate leasing business is KRR’s sole business and it has no reportable segment information to disclose.
(B) Related information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating revenue
on the statements of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statements ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount of property,
plant and equipment on the balance sheets.
(3) Information about each major customer
Disclosure is omitted because no net sales to a single external customer accounts for more than 10% of the operating revenue on the statements
of income and retained earnings.

6217. INVESTMENT AND RENTAL PROPERTIESKRR owns retail properties for rental purposes mainly in the four major metropolitan areas and other regional areas of Japan.
The book value and fair value concerning the above real estate for rental purposes are as follows.
From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

(in thousands of yen)Book value
Balance at the beginning of the period¥166,782,022¥161,443,421

Changes during the period

40,989,196

5,338,600

Balance at the end of the period

207,771,218

166,782,022¥218,766,000¥175,276,000

Fair value at the end of the period

Note 1: Book value is acquisition cost less accumulated depreciation.
Note 2: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period ended March 31, 2017, the principal
increase was due to the acquisitions of real estate trust beneficiary interests in 2 properties totaling 5,711,745 thousand yen and additional
acquisition of real estate trust beneficiary interest amounting to 94,633 thousand yen and the principal decrease was due to depreciation
amounting to 721,460 thousand yen and during the fiscal period ended September 30, 2017, the principal increase was due to theacquisitions of real estate trust beneficiary interests in 9 properties totaling 41,517,461 thousand yen and the principal decrease was due todepreciation amounting to 884,953 thousand yen.
Note 3: The fair value at the end of the period is the appraisal value determined by outside appraisers. In addition, the fair value of K’s Denki
Nakagawa Tomita (Land) as of September 30, 2017, which will be sold on April 27, 2018, is based on the sales price (1,128,000 thousandyen) under the trust beneficiary interest sales contracts entered into on November 14, 2017.
The profit or loss for the period ended September 30, 2017 and March 31, 2017 concerning investment and rental properties is included in Note “7.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES.”

18. PER UNIT INFORMATION

Net asset value per unit

From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

¥229,498¥229,195¥6,219¥6,043

Net income per unit

Net income per unit is calculated by dividing net income by the day-weighted average number of investment units outstanding during the fiscal
period ended September 30, 2017 (499,147 units) and during the fiscal period ended March 31, 2017 (422,450 units). Net income per unit after
adjusting for residual units is not included because there were no residual investment units.
The basis for calculating net income per unit is as follows:

Net income (in thousands of yen)
Net income not attributable to ordinary unitholders (in thousands of yen)
Net income attributable to ordinary unitholders (in thousands of yen)
Weighted average number of units during the period (units)

From April 1, 2017

From October 1, 2016

to September 30, 2017

to March 31, 2017

¥3,104,524¥2,552,926--¥3,104,524¥2,552,926

499,147

422,450

19. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

6320. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of September 30, 2017:
Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks*(in thousands of yen)
Buildings in trust¥42,757,457¥11,770,697

Structures in trust

1,822,887

Machinery andequipment in trust
Property,plant andequipment-¥54,528,155¥3,197,167¥819,702¥51,330,987

974,180-

2,797,067

196,396

51,2142,600,670

203,295

11,215-

214,510

16,977

5,532

197,533

60,635

10,536-

71,172

15,164

4,525

56,007

123,937,095

25,304,891-

149,241,987--

149,241,987

24,784

3,275

13,76814,291--

14,291

168,806,155

38,074,797

13,768206,867,184

3,425,706

880,975

203,441,477

168,806,155

38,074,797

13,768206,867,184

3,425,706

880,975

203,441,477

537,838

3,812,078-

4,349,916

21,2193,9784,328,697

3,314

1,141

-

4,455

1,679

429

2,776

¥541,153¥3,813,219-¥4,354,372¥22,898¥4,408¥4,331,474

Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust
Subtotal

Total
Intangible
assets¥Leasehold rightin trust
Other

Total

¥

*

*

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties and capital expenditures.
Property, plant and equipment consists of the following as of March 31, 2017:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks(in thousands of yen)
Construction inprogress
Subtotal¥-¥35,243

¥

-

¥

-

¥

-

¥

-

35,243-35,243----

Buildings in trust

42,409,745

347,711-42,757,457

2,377,464

670,371

40,379,992

Structures in trust

1,808,630

14,256-

1,822,887

145,181

38,3091,677,705

203,295--

203,295

11,445

4,862

191,850

51,813

8,822-

60,635

10,6393,938

49,995

118,225,350

5,711,745-

123,937,095--

123,937,095

12,015

18,167

5,398

24,784--24,784

162,710,850

6,100,703

5,398

168,806,155

2,544,731

717,482

166,261,423

162,746,093

6,100,703

40,642

168,806,155

2,544,731

717,482

166,261,423

537,838--

537,838

17,2403,978

520,598

Machinery andProperty,plant andequipment¥35,243

equipment in trust
Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust
Subtotal

Total
Intangible
assets
Total

Leasehold rightin trust
Other

2,809

504

¥540,648

¥504

¥

-

3,314

1,249

323

2,064

-

¥541,153¥18,490¥4,301¥522,662**The amount of increase during the period is primarily attributable to the acquisition of the real estate properties.

6421. SHORT-TERM LOANS PAYABLE AND LONG-TERM LOANS PAYABLE
The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 2017:Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note2）（Note3）

Balance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.

Short-termloanspayableCurrent
portion of
long-term
loans
payable¥4,140,000¥

Payment due
date（Note4）

Remarks(Note5)

Unsecured/
Nonguaranteed(Note5)

Unsecured/
Nonguaranteed(%)-¥4,140,000¥-

360,000-

360,000-

1,070,000-

1,070,000

3,900,000-

450,000

0.480

April 21,
2017

-

0.480

April 21,2017-

3,900,000

0.480

October 3,
2017

-

-

450,000

450,000--

450,000

400,000-

400,000

0.430

February 10,
2018

0.430

April 19,
2018

0.430

April 21,2018

Resona Bank, Ltd.

250,000

Aozora Bank, Ltd.

250,000-

200,000--

200,000-

900,000-

900,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.

-

300,000-

300,000-

2,600,000-

2,600,000-

1,070,000-

1,070,000

Aozora Bank, Ltd.

-

640,000-

640,000

Resona Bank, Ltd.

-

400,000-

400,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Sumitomo Mitsui
Banking Corporation（Note 7）
Sumitomo Mitsui Trust
Bank, Ltd. （Note 8）-

360,000-

360,000-

300,000-

300,000-

200,000-

200,000-

1,000,000

1,000,000

-

0.430

April 27,2018-

8,500,000

8,500,000

-

0.430

July 31,2018

Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Subtotal

11,470,000

16,270,000

15,070,000

12,670,000

2,300,000--

2,300,000

800,000--

800,000

0.545

February 10,
2018

400,000--

400,000

Sumitomo Mitsui Trust
Bank, Ltd.
Sumitomo Mitsui
Banking Corporation

Use

250,000
250,000

350,000--

350,000

3,850,000--

3,850,000

65

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note2）（Note3）--2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.
The Musashino Bank,
Ltd.

400,000--

400,000

400,000--

400,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

350,000--

350,000

300,000--

300,000

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

0.751

February 10,
2020

0.865

February 10,2021

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

750,000--

750,000

500,000--

500,000

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
The Musashino Bank,
Ltd.

Use

Remarks(Note5)

Unsecured/
Nonguaranteed(%)

2,400,000

Resona Bank, Limited
Development Bank ofJapan Inc.（Note6）
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Aozora Bank, Ltd.

Payment due
date（Note4）

0.978

0.534

February 10,2022

February 10,2021
February 10,
2022
April 16,2025

March 31,201966

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payable--1,000,000

600,000--

600,000

Mizuho Bank, Ltd.

400,000--

400,000

Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

Resona Bank, Ltd.
The Musashino Bank,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation

300,000--

300,000

250,000--

250,000

450,000--

450,000

Resona Bank, Ltd.
The Musashino Bank,Ltd.
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000

Resona Bank, Ltd.

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed(%)

1,000,000

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
The Gunma Bank, Ltd.
（Note6）Development Bank ofJapan Inc.（Note6）
Mizuho Trust &Banking Co., Ltd.
（Note6）

Averageinterest rate
（Note2）（Note3）0.975

March 31,
2023

0.994

March 31,
2023

0.545

March 31,
2019

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,
2025

0.368

September 30,
2019

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

710,000--

710,000

620,000--

620,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

October 31,
2025

500,000--

500,000

0.550

September 30,
2021

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

September 30,
2024
September 30,
2024
April 21,2026

January 31,
2027

67

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 6)
Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Ltd.
Aozora Bank, Ltd.

Long-term
loans
payableResona Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 6)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc.（Note 6）
Mizuho Trust &Banking Co., Ltd.
（Note 6）The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 6)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.
Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 6)
Sumitomo Mitsui Trust
Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Ltd.
Subtotal

Total

Averageinterest rate
（Note2）（Note3）

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed(%)-

2,600,000-

2,600,000-

500,000-

500,000-

400,000-

400,000-

300,000-

300,000-

300,000-

300,000-

600,000-

600,000

0.400-

500,000-

500,000

0.553-

400,000-

400,000

0.553-

200,000-

200,000

0.553-

1,500,000-

1,500,000-

400,000-

400,000-

400,000-

400,000-

300,000-

300,000-

600,000-

600,000

0.696-

600,000-

600,000

0.815

0.485

0.772

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024-

500,000-

500,000

0.814-

200,000-

200,000

0.814-

500,000-

500,000

0.903

October 31,
2026-

500,000-

500,000-

500,000-

500,000

1.033

May 18,2027-

400,000-

400,000-

500,000-

500,000

1.050-

500,000-

500,000

1.049-

300,000-

300,000

1.050-

500,000-

500,000

0.670

September
29, 2023-

1,500,000-

1,500,000

0.918

September
30, 2026-

500,000-

500,000

0.930-

1,500,000-

1,500,000

1.029

-

1,500,000-

1,500,000

1.100

57,380,000

19,000,000-

76,380,000¥72,700,000¥35,270,000¥15,070,000¥92,900,000

May 18,2027

September
29, 2027
September
29, 2028

68

Note1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as
follows:
Due after 1 year
through 2 years
Long-term loans
payable¥6,980,000

Due after 2 years
through 3 years¥7,000,000

Due after 3 years
through 4 years（in thousands yen）
¥13,300,000

Due after 4 years
through 5 years¥7,000,000

Due after 5 years¥42,100,000

Note2: All debts except for the following Note6 are loans payable at a floating rate.
Note3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans
payable for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates
taking into consideration the effects of the interest rate swaps are indicated.
Note4: All the repayment methods of debt financing except for the following Note7 and Note8 are lump-sum repayments on the due date.
Note5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) andrepayment of debts.
Note6: Loans payable at a fixed rate.
Note7: Prepayment was made on May 31, 2017.
Note8: Prepayment of 3,000,000 thousand yen and 5,500,000 thousand yen was made on August 31, 2017 and September 29, 2017, respectively.

69

The following summarizes short-term loans payable and long-term loans payable outstanding as of March 31, 2017:Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note2）（Note3）(%)

Balance atthe end of
the period(in thousands of yen)

Short-termloanspayableCurrent
portion of
long-term
loans
payableLong-term
loans
payableSumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.
Resona Bank, Ltd.
Aozora Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui
Banking Corporation(Note7)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.

¥2,050,000¥-¥2,050,000

2,450,000-

450,000¥

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed

October 2,
2016
October 2,
2016

-

0.530

2,450,000

-

0.530

-

450,000-

450,000-

450,000-

400,000
250,000
250,000-

400,000
250,000
250,000-

200,000-

200,000-

4,140,000--

4,140,000

360,000--

360,000

1,070,000--

1,070,000

0.480

April 21,2017-

4,500,000

600,000

3,900,000

0.480

October 3,
2017-

450,000-

450,000-

450,000-

450,000-

400,000-

400,000

0.430

February 10,
2018

Resona Bank, Ltd.

-

250,000-

250,000

Aozora Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Subtotal
Sumitomo Mitsui
Banking Corporation（Note8）The Bank ofTokyo-Mitsubishi UFJ,
Ltd. （Note8）
Mizuho Bank, Ltd.
（Note8）Mizuho Trust &Banking Co., Ltd.
（Note8）Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

-

250,000-

250,000-

200,000-

200,000

12,070,000

6,500,000

7,100,000

11,470,000

2,300,000--

2,300,000

800,000--

800,000
0.545

February 10,
2018(Note5)

Unsecured/
Nonguaranteed

0.751

February 10,2020(Note5)

Unsecured/
Nonguaranteed

400,000--

400,000

350,000--

350,000

3,850,000--

3,850,000

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.
The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

Mizuho Trust &Banking Co., Ltd.

0.480

February 10,
2017

0.480

April 21,2017

70

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note2）（Note3）(%)

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

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

400,000--

400,000

400,000--

400,000

Mizuho Bank, Ltd.

300,000--

300,000

Resona Bank, Limited
Development Bank ofJapan Inc.（Note6）
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

750,000--

750,000

Aozora Bank, Ltd.

500,000--

500,000

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
The Musashino Bank,Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

300,000--

300,000

250,000--

250,000

Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.
The Musashino Bank,
Ltd.

Payment due
date（Note4）0.865

February 10,
2021

0.978

February 10,
2022

Use

Remarks(Note5)

Unsecured/
Nonguaranteed

February 10,2021
February 10,
2022
April 16,
2025

0.534

March 31,
2019

0.975

March 31,
2023

0.994

March 31,
2023

0.545

March 31,201971

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Mitsubishi UFJ Trustand Banking
Corporation
Resona Bank, Ltd.

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.

1,150,000--

1,150,000

1,000,000--

1,000,000

Resona Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.

The Musashino Bank,Ltd.
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation

Long-term
loans
payableSumitomo Mitsui Trust
Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
The Gunma Bank, Ltd.
（Note6）Development Bank ofJapan Inc.（Note6）
Mizuho Trust &Banking Co., Ltd.
（Note6）700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

Subtotal

Payment due
date（Note4）0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,
2025

0.368

September 30,
2019

400,000--

400,000

710,000--

710,000

620,000--

620,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

October 31,
2025-

500,000-

500,000

0.550

September 30,
2021-

2,000,000-

2,000,000

1.049

-

1,000,000-

1,000,000

1.049

-

500,000-

500,000

1.002

Resona Bank, Ltd.
Total

Averageinterest rate
（Note2）（Note3）(%)

53,380,000

4,000,000-

57,380,000¥69,300,000¥10,500,000¥7,100,000¥72,700,000

Use

Remarks(Note5)

Unsecured/
Nonguaranteed

September 30,
2024
September 30,
2024
April 21,2026

January 31,
2027

Note1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as
follows:
Due after 1 year
through 2 years
Long-term loans
payable¥5,650,000

Due after 2 years
through 3 years¥8,330,000

Due after 3 years
through 4 years（in thousands yen）
¥7,000,000

Due after 4 years
through 5 years¥7,500,000

Due after 5 years¥28,900,000

Note2: All debts except for the following Note6 are loans payable at a floating rate.
Note3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans
payable for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates
taking into consideration the effects of the interest rate swaps are indicated.
Note4: All the repayment methods of debt financing except for the following Note7 are lump-sum repayments on the due date.
Note5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) andrepayment of debts.
Note6: Loans payable at a fixed rate.
Note7: Partial prepayment of 600,000 thousand yen was made on October 31, 2016.
Note8: Loans payable listed in the current portion of long-term loans payable were listed in long-term loans payable in the previous fiscal period.

7222. INVESTMENT CORPORATION BONDS
Outstanding Investment corporation bonds as of September 30, 2017 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period

Interest rate

(in thousands of yen)First series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Total

October 31,
2016¥1,000,000

October 31,
2016

Repayment date

¥1,000,000

0.200

October 29,
2021

1,000,000-

1,000,000

0.600

October 30,
2026

August 31,
2017

-

-

1,000,000

0.320

August 31,
2022

August 31,
2017

-

-

2,000,000

0.700

August 31,
2027-¥5,000,000¥2,000,000¥

Remarks

(%)

-

¥

Use

(Note2)
Unsecured(Note3)Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Investment corporation bonds were used as the funds for repayment of debts.
Note 4: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-¥

Due after 3 years
through 4 years-¥

Due after 4 years
through 5 years-¥2,000,000

Repayment date

Use

Remarks(Note2)

Unsecured

Outstanding Investment corporation bonds as of March 31, 2017 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period

Interest rate

(in thousands of yen)First series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)Total

October 31,
2016¥

October 31,
2016

-

¥

-

¥

-

¥

(%)
¥1,000,000-

1,000,000-¥2,000,000

0.200

October 29,
2021

0.600

October 30,
2026

Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-¥

Due after 3 years
through 4 years-¥

Due after 4 years
through 5 years-¥1,000,000

73

23. DISTRIBUTIONS
From April 1, 2017
to September 30, 2017

From October 1, 2016
to March 31, 2017

I. Retained earnings at the end of period¥3,104,740,879¥2,584,343,087

II. Incorporation into unitholders' capital-¥30,838,850

Of which, reversal of allowance fortemporary difference adjustments-¥30,838,850

III. Total distributions¥3,104,585,500¥2,553,287,800

Distributions per unit

¥6,115¥6,044¥155,379¥216,437

In accordance with the policy described in Article 39-1 of
its Articles of Incorporation, KRR determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as stipulated
in Article 67-15 of the Special Taxation Measures Law
and shall be up to its profits as the maximum amount.
Following this policy, KRR has decided that it shall
distribute ¥3,104,585,500 which is almost the entire
amount of retained earnings as the distributions ofearnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the fifth fiscal period, KRR
has decided not to distribute cash in excess of
distributable profit.

In accordance with the policy described in Article 39-1 of
its Articles of Incorporation, KRR determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as stipulated
in Article 67-15 of the Special Taxation Measures Law
and shall be up to its profits as the maximum amount.
Following this policy, KRR has decided that it shall
distribute ¥2,553,287,800 which is almost the entire
amount of income as defined in Article 136-1 of theInvestment Trust Act after deduction of reversal of
allowance for temporary difference adjustments (asdefined in Article 2-2-30 of the Ordinance on Accountingsof Investment Corporations).
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the fourth fiscal period, KRR
has decided not to distribute cash in excess of
distributable profit.

IV. Retained earnings brought forward to
the next period

Method of calculating distribution amount

Additional Information for Allowance for Temporary Difference Adjustments
5th Fiscal Period (From April 1, 2017 to September 30, 2017)
Not applicable
4th Fiscal Period (From October 1, 2016 to March 31, 2017)
1. Reasons, related assets and reversal of allowance(in thousands of yen)
Related assets, etc.
Deferred gains or losses on hedges

Reversal of allowance for temporary
difference adjustments

ReasonChanges in the fair value of derivative instruments¥30,838

2. Method of reversal
Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

Deferred gains or losses on hedges

Based on changes in the fair value of derivative transactions used as the hedging instruments, the corresponding
amount is scheduled to be reversed.

74