Semi-annual Report for the 2nd Period(From October 1, 2015 to March 31, 2016)

Focus on shopping centers for daily needs

From the Executive Director
Thanks to your support, Kenedix Retail REIT Corporation (KRR) has reported its
results of operations for the second fiscal period (from October 1, 2015 to March 31,2016).
We seek to build a portfolio of primarily neighborhood, community and othershopping centers that cater to the day-to-day needs of local area customers.
Japanese consumers tend to shop frequently, often daily, for day-to-day necessities,
and purchase smaller amounts on each trip. This reflects longstanding consumer
tastes in Japan for eating fresh or convenience foods prepared daily and storing lessat home. Moreover, Japan is undergoing unprecedented demographic changes that,
we believe, are influencing the nature of local retail markets. In particular, the agingof the Japanese population and the increased concentration of populations in urban
areas has resulted in shrinkage of retail trade areas for shopping centers. We havealso observed an increase in market share of specialty stores as consumer tastes
change. Accordingly, we expect continued high demand for such local shopping
centers for daily needs because of their convenience. We believe those shopping
centers provide ample investment opportunities, and hence our selective
investments contribute further increase in unitholder’s value.
Upon listing, we acquired 18 shopping centers for daily needs with acquisition priceof 80,843 million yen and we additionally acquired one property of 11,000 million yen
in April, 2015. At the end of the second fiscal period, we own 33 properties for
131,639 million yen based on accumulated acquisition price upon acquisition of 13
properties for 37,920 million yen in connection with the first public offering after IPO
on October 2015 and additional one property for 1,505 million yen on January 2016.
As a result, operating revenue totaled 5,541 million yen, operating income was 2,826
million yen, ordinary income was 2,428 million yen and net income was 2,427 million
yen for the second period. The distribution to unitholders, including distribution inexcess of retained earnings 12 yen per unit, was 6,846 yen per unit.
Going into the third fiscal period, we issued new investment units and acquired 7
shopping centers for daily needs. As a result, our portfolio size by acquisition pricealmost doubled from the time of the IPO to 158,766 million yen with 40 properties.
We dedicate ourselves to the maximization of unitholder value by continuing
implementation of growth strategy.
We respectfully look forward to your continued support.

Akihiro Asano
Executive Director, Kenedix Retail REIT Corporation
Director and COO, Head of Retail REIT Division,
Kenedix Real Estate Fund Management, Inc.

Financial Highlights
For 2nd fiscal period(October 1, 2015 to March 31, 2016)

Distribution per Unit

¥ 6,864mn（Includes distribution in excess of earnings per Unit : 12 yen）

Forecast DPU for 3rd fiscal period（Includes distribution in excess of earnings per Unit : 13 yen）

¥ 5,865mn

Operating revenue¥ 5,541 mn

Operating income¥ 2,826 mn

Net income¥ 2,427 mn

Total assets¥ 150,009 mn

Total net assets¥ 80,034 mn

Net assets per Unit

¥ 225,291 mn

Number of properties / tenants

33 properties / 389 tenants

Occupancy rate at the end of period

99.6%

Contents
I. Overview of KRR
From the Executive Director
Financial Highlights
Key Characteristics
Strong Sponsor & Alliance Company Support
Active Management Strategies
Asset Acquired in 2nd Fiscal Period
Summary of 2nd Public Offering
Portfolio Map
Portfolio List
Close-up KRR Vol.2
Summary of Investment Unit

1

II. Asset Management Report
Overview of Asset Management
Profile of KRR
Status on Investment Properties
Capital Expenditures
Expenses and Liabilities
Acquisition and Disposition
Accounting
OthersIII. Financial Statement

Key Characteristics

Focus on shopping centers for daily needs
1 The only J-REIT to focus on shopping centers for daily needs
We are the only listed J-REIT to focus on neighborhood, community and other shopping centers for dailyneeds. We seek to generate both long-term stable cash flow and profitability growth.

Large

Large-scale suburban
retail properties• RSC (Regional Shopping Center)• GMS (General Merchandise Storeon a stand-alone basis )• Outlet malls

Our core investment targets

Urban retailproperties featuringhigh-end

Small

Property size

Neighborhood, community andother shopping centers for daily needs• Brand shops

NSC

SM

CSC

Neighborhood
Shopping
Centers

Supermarkets

Community
Shopping
Centers

Urban
StationFront
Shopping
Centers

Shopping
centers with asupermarket
as an anchor orcore tenant

Stand-alone
stores thatprimarily provide
groceries

Larger shopping
centers than
NSC, with asupermarket as
an anchor orcore tenant

Shopping
centers in the
Immediatevicinity of anurban public
transportation
stationSS
Specialty Stores

Specialty storessuch as drug
stores,convenience
stores, healthclubs orelectronic
appliance stores

The majority of portfolio
properties of other listed
retail-focused J-REITs
consist of large-scale
suburban retail properties
and urban retail properties
featuring high-end brandshops

Retail trade area in radius (approximate)

3-5km

3km

High

5-10km3-10km

1-10kmFrequency of customer visits

Low

Characteristics of shopping centers for daily needs
Located within residential districts or adjacent to major roads or streets, which provide daily
goods and services

1. Retail trade area••

Approximately 1 to 10 kilometer radius (generally 3 to 5 kilometer radius)
Customers predominantly from local areas

2. Operational features••

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

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

3. Tenant composition

Note: The size of property, frequency of customer visits and retail trade areas referenced above have been defined by us based on generalcharacteristics of shopping centers for daily needs.

22 Ample investment opportunities in shopping centers for daily needs
Our market opportunity and investment focus–Shopping centers for daily needs

Ample investment opportunities from the perspective of consumer spending,demographics and number of properties
Tenants with high demand fromconsumers

Properties located in areas with highpopulation density

Ample investment opportunities

Share of frequently purchased items
for daily needs as a % of total
household expenditure on consumer
products% of Japan's total population
living in suburban areas within thefour major metropolitan areas% of medium- or small-sized retailfacilities in "retail property opening
applications"

Based on a survey conducted by the Statistics Bureau of the
Ministry of Internal Affairs and Communications in 2014.

Based on a survey conducted by the Statistics Bureau of the
Ministry of Internal Affairs and Communications in 2015.

Based on the number of applications submitted to develop new
retail properties with a total floor area of 10,000 m 2 or less.

55.4%

92.3%

77.2%

3 Convenient shopping experience
We expect continued high demand for shopping centers for daily needs because of theirconvenience. In particular, we anticipate that such demand will increase as the Japanese
population ages.
Large ground parking lot

Low-rise facility

Unicus Iba

Easy access by foot or bicycle

Sunny Noma

Life Kameido

Buying behavior of Elderly Residents in Tokyo
Frequent shoppers

Preference for supermarkets

Access by foot or bicycle

Consumers who go shopping "almost daily"or "3 to 4 times a week"

Consumers who identify supermarkets as"most frequently used type of retail property
for purchasing groceries"

Consumers who travel to "most frequently
used retail properties" by foot or bicycle

50.0%

69.4%

72.7%

Source： Bureau of Industrial and Labor Affairs of the Tokyo Metropolitan Government "Reports on shopping trends of the elderly" (Dec. 2011)(Note) We believe that above characteristics are typically found in shopping centers for daily needs:. We do not guarantee that all shopping
centers for daily needs have the characteristics shown above.

3

Strong Sponsor & Alliance Company Support

1 Leveraging extensive support from Sponsor and Alliance Companies
We have strong support from our Sponsor, Kenedix, Inc. as well as our Alliance Companies forboth internal and external growth. With their support, we have access to a large and diverse
pipeline of acquisition opportunities as well as a variety of technical expertise.

Alliance Companies

SponsorOther
supportSupport for internal
growthSupport forexternal
growthType of support
Pipeline support

●

●

●

●

Warehousing services●●

Leasing services

●

●

●

PM services

●

●

●

Environmentally friendly
technology/knowhow●

Evaluation of operating conditions
and advisory on operations●

Personnel support●

Right to use trademarks●●●

2 Preferential access to potential acquisition opportunities
We seek to achieve external growth by selectively acquiring properties managed or developedby the Kenedix Group and taking advantage of preferential negotiation rights for properties
owned by our Alliance Companies
Examples of properties owned by our Alliance Companies(*)
SS
Royal Home Center
Totsuka-Fukaya
Location: Yokohama, Kanagawa

SM
Yorkmart Totsuka-Fukayacho
Location: Yokohama, Kanagawa

NSC
Unicus Urawamisono
Location: Saitama, Saitama(Note) The illustration above is a completion image based on design drawing and may differ from actual buildings after completion.

4

Active Management Strategies

1 Adopt optimal leasing structures for competitive tenant mix
We seek opportunities for rental upside continuously by reshuffling our tenants mix to maintainand enhance the attractiveness and competitiveness of our properties whose tenants aresupermarket as anchor tenants and other specialty stores.
Example of leasing structure (Blumer Maitamon)
Non-anchor
tenants

NSC

AnchortenantAnchor tenants
AnchortenantGroundparking lot

Non-anchor tenants

Grocery supermarket

Household goods

Dental clinic

Major clothing retailer

Fashion stores

Sporting goods

Electronics store

Drug stores

Restaurants

Total of 45 tenants

2 Completed property expansion of Roseo Mito
We added a new building housing a secondhand shop on the underutilized space of Roseo
Mito.
Before the expansion
Total leasable area
Acquisition priceAppraisal value
Appraisal NOI
Appraisal NOI yield

Before the expansion

New building

45,654.67 m2
JPY9,675 mn
JPY9,780 mn
JPY554 mn
5.7%

2,641.48 m2
JPY371 mn

After the expansion

After the expansion
48,296.15 m2
JPY10,046 mn
JPY10,700 mn
JPY595 mn
5.9%After the opening

Expansionsite

3 Effective utilization of CAPEX
We seek to reduce our cost of operation and enhance the satisfaction of our tenants througheffective utilization of CAPEX.
Examples of effective use of CAPEXExample 1:
Installation of LED lighting

Example 2:
Renovation of restroom area
MONA Shin-Urayasu

Passaggio Nishiarai

Example 3 :Replacement of the flooringmaterial
Blumer HAT Kobe

Example 4:
Installation of escalators
Ashico Town Ashikaga

5

Asset Acquired in 2nd Fiscal Period

O-5 Carino Esaka
Attractively located near Esaka Station, only 5 stops/10 minutes away from Umeda Station
Urban Station-Front SC

Acquisition priceJPY 6,555 mn

Location

Suita, OsakaLand area(*)

5,830.66 m2

(*)

GFA

42,681.56 m2

Core tenant

Tokyu Hands Inc.



The retail portion of entire facility consisting of
shopping center (SC) on its lower floors and a
hotel in the upper floors. One of the landmark
SC in the neighborhood of Esaka Station with awell-known variety goods store as the anchor
tenantDue to easy access to Esaka Station close tocentral Osaka, the trade area is popular amongfamilies with young children recognized as
high-quality living environment(*) Figures for the whole building are shown in the table

T-10

T-11

Super Viva Home Iwatsuki (Land)

K’s Denki Shonan-Fujisawa (Land)

Unicus Kamisato (Land)

Underlying land with strong value growthpotential, in the proximity to a national route

Easy car access and a long-term fixedbusiness land lease

Underlying land of a shopping center with acinema complex in the Kamisato area

T-9

NSC

T-12

NSC

SS

T-14

T-13

Unicus Konosu (Land)

Inageya Yokohama Minamihonjuku (Land)

Gourmet City Chiba-Chuo

Underlying land of one of the largest
shopping centers in the Konosu area

Underlying land of a March 2015-opened
SM in a highly populated trade area

A 24-hour supermarket housing a clinic in
the complex

NSC

SM

SM

O- 6

O- 7

O- 8

COMBOX Komyoike

Hankyu Oasis Hirakatadeguchi

Welcia Kishiwadakamori (Land)

Largest retail property in the Komyoike Sta.
area with multiple large-scale specialty stores

SM located in a highly populated area, with
10,000 residents within a 500m radius

Underlying land of a leading domestic
drug store brand newly opened in 2015

Urban Station-Front SC

SM

6

SS

R-4 Ashico Town Ashikaga
Large-scale NSC with cinema complex re-opened in March 2016

NSC
NSC

Acquisition price

JPY4,180 mn

Location

Ashikaga, Tochigi

Land area

101,808.44 m2

GFA

Shopping mall: 18,101.06 m2 ;Expansion: 430.74 m2
Cinema complex: 7,200.15 m2 ;Road-side wing: 698.31 m2

Core tenant

Cainz Corporation

A large-scale multi-tenant NSC with thoroughrenovation conducted in November 2014,
consisting of multiple wings, housing highly
recognizable national chain stores



Easily accessible by car due to its location
along a major local avenue. Highly accessible
from distant regions as wellCinema complex has opened in March 2016
after acquisition by KRR

O-9

R-5

R-6

Life Nishi-Tengachaya

Yorktown Shinden-Higashi

Kasumi Technopark Sakura

Located in a densely populated area, withapprox. 16,000 people living in a 500m radius

Located in a rapidly-growing commuting
neighborhood close to central Sendai

A 24-hour operated store of a leading
supermarket brand headquartered in Tsukuba

NSC

SM

SM

Environmental initiatives■ Environmental Policies
We have established “Environmental Policies” in October 2015 and undertake operations in accordance with it.
Compliance withEnvironmental Laws andRegulations

Promotion of Energy
Conservation Measures

Reduction ofEnvironmental
BurdenDisclosure ofEnvironmental
Information

Environmental Education■ DBJ Green Building Certification
The DBJ Green Building Certification System is a system (“the System”) established by DBJ in April 2011 to support real estate that meetsenvironmental and social considerations. The System evaluates and certifies real estate with environmental and social considerations, taking into
account each property’s environmental features and measures taken for various stakeholders, such as disaster and community-conscious
measures.
We received DBJ Green Building Certification for five of our own properties

Properties with excellent
environmental & social awareness

Rank

T-1

T-2

Fululu Garden Yachiyo MONA Shin-Urayasu

Properties with high environmental &social awareness

O-1

T-5

T-7

Blumer Maitamon

Unicus Ina

Unicus Yoshikawa

Property
Name

7Summary of 2nd Public Offering

1 Steady growth in AUM (Based on acquisition price)
Upon continuous acquisition of assets, the total asset value of our portfolio by acquisition
price become 158.7 billion yen, which nearly doubled from the time of our IPO. In addition, we
have enhanced earnings stability through portfolio diversification and increase in liquidity ofunits by issuance of new units and expansion of market capitalization.

(AUM)(JPY bn)200

SponsorAlliance Companies
External Sources

27.1

158.7

Properties
acquired in
Apr. 2016

After
acquisition inconnection
with 2nd PO

150

100

39.7

131.6

Properties
acquired in
2nd fiscal
periodEnd of 2nd
fiscal period(as of Mar. 31,
2016)

91.8
80.8

50

0
Properties
acquired
upon IPO(as of Mar. 31,
2015)

End of 1st
fiscal period(as of Sep. 30,
2015)

Aiming forsteady growthof asset value
going forward

Our core strengths for external growth
Ample external
growthopportunities

The only J-REIT to focus onneighborhood, communityand other shopping centers
for daily needs

8

Multiple acquisition
channels

Differentiatedacquisition methods

2 Summary of properties newly acquired
1 Located in the four major metropolitan areas or ordinance-designated cities
2 Retail trade areas that benefit from increases in population
3 Highly accessible properties
4 Tenant mix attractive to customers
Acquisition
Price(JPY mn)

Properties

Appraisal
Value(JPY mn)

Appraisal
NOI yield(%)

LocationCore tenant

5.4

Tokyo
metropolitan
area(18 min to
Yokohama)

Tokyu Store
Corporation

5.7

Tokyo
metropolitan
area(29 min to
Shibuya)Central Sports
Co., Ltd

4.5

Tokyo
metropolitan
area(12 min toTokyo)

Life
Corporation

5.2

Greater
Osaka area
(16 min to
Osaka)

Life
Corporation

4.6

Greater
Osaka area
(13 min to
Osaka)

MandaiCo., Ltd.

5.2

Greater
Nagoya area
(24 min to
Nagoya)KohnanShoji Co.,Ltd.

OtsukaKagu, Ltd

Kyorindo
Co., Ltd

NSC
T-15

3,360

Nakamachidai
Tokyu Store

T-16

3,780

SS

Central Wellness
Club Nagatsuta
Minamidai

1,724

1,880

SM
T-17

1,450

1,500

Life Kameido

O-9

SM

Life
Nishi-Tengachaya

1,505

1,620

(Acquired in Jan. 2016)
O-10

NSC

Million Town
Tsukaguchi(Land)

N-4

3,723

3,730

SS

Homecenter
KohnanSunadabashi

7,140

7,220

5,720

5,740

5.0

Ordinancedesignatedcities(3 min to
Sendaion foot)

4,010

4,230

5.7

Ordinancedesignatedcities

Urban
Station-Front

R-7

Solala Plaza

R-8

P-1 Plaza
Tenno

NSC

9

Portfolio Map as of April 22, 2016
Tokyo metropolitan area
T-11

T-12
T-5
T-9
T-7
T-3
T-17

T-8
T-4

T-1
T-14

T-2

R-2
R-3

T-15

T-16

T-13
T-6

T-10

R-7
R-5

NSC
R-4

R-1

CSC

R-6

Urban
Station-Front SC
SS

R-8

F-1

Greater Osaka area

Greater Nagoya area

N-2

O-3

O-4

O-10

O-1
O-9
O-8

SM

N-3
N-1

O-7
O-5
O-2
O-6

Location(by acquisition price)

N-4

Types of retail property(by acquisition price)SM
7.2%

Ordinancedesignatedcities, corecities and other
areas
19.2%

CSC
9.4%

Fukuoka area
0.9%

4 majormetropolitan
areasGreater
Nagoya area
7.9%

80.8%

Tokyo
metropolitan
area
44.2%

Greater Osaka
area
27.8%

SS
13.0%

100%

Urban Station-Front
Shopping Centers
24.0%

10

Shopping
centers
for daily needs

NSC
46.5%

Fululu Garden

T-2 Shin-Urayasu

Yorktown

T-7 Yoshikawa

MONA

T-1 Yachiyo

Passaggio

T-3 Nishiarai

Unicus

T-6 Kita-Kaname

Unicus Kamisato

T-11 (Land)

Unicus Konosu

Super Viva HomeSports Club

T-9 Iwatsuki (Land)

Inageya Yokohama

T-14 Chiba-Chuo

T-8 Renaissance Fujimidai

T-13 Minamihonjuku (Land)

T-12 (Land)

Daikanyama Address

T-4 Dixsept

T-5 Unicus Ina

K's Denki Shonan-

T-10 Fujisawa (Land)

Nakamachidai

Gourmet City

T-15 Tokyu StoreNEW

Wellness Club
T-16 Central
Nagatsuta MinamidaiNEW

O-4 Blumer HAT Kobe

Life

O-9 Nishi-Tengachaya

Homecenter Kohnan

Central Square

O-2 Takadono (Land)

Piago Kahma Home

O-3 Center Omihachiman

NEW

COMBOX

O-5 Carino Esaka

O-6 Komyoike

Million Town

O-10 Tsukaguchi (Land)NEW

N-4 Sunadabashi

Blumer

O-1 Maitamon

T-17 Life Kameido

Kahma Home Center

Hankyu Oasis

O-7 Hirakatadeguchi

Valor

Welcia Kishiwadakamori

O-8 (Land)

K's Denki

N-1 Nakagawa Tomita (Land)

N-2 Ichinomiya-Nishi

R-1 Roseo Mito

R-2 Honten

R-3 Aomori-Chuo

R-7 Solala Plaza

R-8 P-1 Plaza Tenno

N-3 Nakagawa Tomita (Land)NEW

F-1 Sunny Noma

K's Denki Aomori

Super Sports Xebio

NEW

Ashico Town

R-4 Ashikaga

Yorktown

R-5 Shinden-Higashi

Kasumi Technopark

R-6 Sakura

NEW

11

NEW

Portfolio List as of April 22, 2016
Total acquisition
price¥158,766mn

No.

Name of property

Weighted averageoccupancy rate

99.7%

Number oftenants

403

Location
Acquisition
Occupancy rate Number of(city / ward, prefecture) price (JPY mn)(%) (Note1)
tenants (Note2)

T-1 Fululu Garden Yachiyo

Yachiyo, Chiba

14,848

99.4

48

T-2 MONA Shin-Urayasu

Urayasu, Chiba

8,063

96.1

72

T-3 Passaggio Nishiarai

Adachi ward, Tokyo

5,850

98.3

40

T-4 Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

98.7

27

T-5 Unicus Ina

Kitaadachi-gun, Saitama

4,379

100.0

1

T-6 Yorktown Kita-Kaname

Hiratsuka, Kanagawa

4,000

100.0

1

T-7 Unicus Yoshikawa

Yoshikawa, Saitama

3,600

99.2

10

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

760

100.0

1

O-1 Blumer Maitamon

Kobe, Hyogo

8,389

99.5

48

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

11,00098.7

40

O-5 Carino Esaka

Suita, Osaka

6,555

99.1

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

N-1 Kahma Home Center Nakagawa Tomita (Land)

Nagoya, Aichi

2,311

100.0

1

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

F-1 Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

R-1 Roseo Mito

Mito, Ibaraki

10,046100.0(Note3)23

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

(Note3)26
2

R-4 Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

R-5 Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

R-6 Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

131,63999.6

389

Total of assets acquired by the end od 2nd period

99.1

T-15 Nakamachidai Tokyu Store

Yokohama, Kanagawa

3,360

100.0

1

T-16 Central Wellness Club Nagatsuta Minamidai

Yokohama, Kanagawa

1,724

100.0

2

T-17 Life Kameido

Koto ward, Tokyo

1,450

100.0

1

O-10 Million Town Tsukaguchi (Land)

Amagasaki, Hyogo

3,723

100.0

1

N-4 Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

R-7 Solala Plaza

Sendai, Miyagi

5,720

100.0

1

R-8 P-1 Plaza Tennno

Hamamatsu, Shizuoka

4,010

100.0

7

Total of assets acquired in April, 201627,127

100.0

14

Total

158,766

99.7

403(Note1) "Occupancy rate" and "number of tenants" are as of March 31, 2016
(Note2) “Number of tenants” indicates the number of end-tenants as of March 31, 2016
(Note3) Although the building and the land are leased separately to different tenants, the occupancy rate reflects the occupancy ofboth the building and the land

12

Close-up KRR Vol. 2
O-1

NSC Neighborhood Shopping Center

Blumer Maitamon
NSC located in a newly developed residential area

Blumer Maitamon is a neighborhood shopping centerin Kobe which opened in July 2006. The shopping
center is a part of the Garden City Maitamon housingdevelopment which was created by the national
government-affiliated Urban Renaissance Agency.
The first floor tenants include a grocery store, a home
appliance store, clothing stores, variety goods stores
and a restaurant. The second floor tenants include alarge clothing store, a furniture store, a baby goods
store, a book store, variety goods stores andrestaurants.

Since taking over operations, KRR has repositioned the
shopping center as “Nearby and Wonderful (Maitamon,
My Town).” The aim is to make this facility something
more than simply a convenient place to shop forresidents of this area. KRR plans to transform this intoa shopping center with ideas for new life styles in orderto earn the support of residents who keep up with thelatest trends. For example, the shopping center has
generated a strong response with two innovative
events. One is Tarumi Marché, which brings together
small retailers and art galleries in this area. Another is
Ironoha, where stores operating for a limited time sell
Proximity to the Kobe West Bypass, Daini-Shinmei
accessories and other handmade products created by
Road and Kobe-Awaji-Naruto Expressway makes it
mothers with children at home. To prepare for the 10theasy for shoppers to drive to Blumer Maitamon. The
anniversary in July 2016, the shopping center
shopping center is also near the railway stations of JR, underwent a major renovation and held a grand
Sanyo Electric Railway and Kobe Municipal Subway.
opening with its new look in April 2016. KRR will
Residents of this area can commute to central Kobe
continue to operate this facility while placing emphasisand even to Osaka for work or school. In addition, this on connections in order to become an integral
district provides convenient access to Shin-Kobecomponent of this district in Kobe.
Station for the Shinkansen bullet train and to Kobe
Airport.
Property Summary

The area surrounding Blumer Maitamon is a highly
attractive market. There is a growing population offamilies because of the ongoing development of
housing projects. In April 2016, a new elementary
school, which is very few nowadays in Japan, openedin this area.

13

Acquisition price

8,389 million yen

Location

Kobe, Hyogo

Land area

54,838.70 m2

GFA

36,349.60 m2

Core tenant

EDION Corporation

Summary of investment unit
Performance of Investment Unit
(Units)100, 000(Yen)
320,000

40, 000
平成27年2月10日終値
266,100円

Unit Price

TSE REIT Index

Volume

平成28年4月28日終値
285,500円

300,000

35, 000

280,000

30, 000

260,000

25, 000

240,000

20, 000

220,000

15, 000

200,000

10, 000

180,000

5,000

0

160,000
Feb. 10, End of
2015
Feb.

End ofMar.

End ofApr.

End ofMay

End ofJun.

End ofJul.

End ofAug.

End ofSep.

End ofOct.

End ofNov.

End ofDec.

End of
End ofJan. 2016 Feb.

End ofMar.

End of
Apr.

(Note) TSE REIT Index adjusted to KRR's closing unit price of JPY266,100 as of February 10, 2015.

Summary of Unitholder
As of March 31, 2016

Ownership ratio
by investor type
Brokerage firms
6,286 units
1.8%

Foreign investors
121,601 units
34.2%

Other domestic
corporations
16,023 units
4.5%

Number of unitholders
by investor type

Individuals andothers45,564 units
12.8%

Other
domestic
corporations
280
2.6%
Financial
institutions
74
0.7%

355,250
units

Financial
institutions
165,776 units
47%

14

Foreigninvestors
136
1.3%

Brokerage
firms
25
0.2%

10,876
Individuals
and others
10,361
95.3%

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

2nd period(From October 3, 2014
to September 30, 2015)(From October 1, 2015
to March 31, 2016)

Millions of Yen

5,103

5,541

Millions of Yen

5,103

5,541

Millions of Yen

2,639

2,715

Millions of Yen

2,246

2,235

Operating income

Millions of Yen

2,463

2,826

Ordinary income

Millions of Yen

1,939

2,428

Net income

Millions of Yen

1,933

2,427

Total assets

Millions of Yen

108,382

150,009(-)(+38.4)

59,79080,034

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](-)(+33.9)Millions of Yen

57,85777,606

Units

260,750

355,250%

Unitholders’ capital
Number of investment units issued andoutstanding
Net assets per unit

Yen

229,301

225,291

Millions of Yen

1,933

2,432

Distributions per unit

Yen

7,414

6,846

Of which, Distributions of earnings
Of which, Distributions in excess ofretained earnings
Ordinary Income to Total Assets (Note 2)

Yen

7,414

6,834

Yen

-

12

Distributions%[Annualized] (Note 3)
Return on Net Assets (Note 4)[Annualized]%(Note 3)

Net Assets to Total Assets (Note 5)

1.9
(3.7)

3.3

3.5

(5.2)

(6.9)

55.2

53.4

(-)

(-1.8)%[Period-on-period changes]

2.0
(3.1)

Operating days

Days

363

183

Payout Ratio (Note 6)

%

100.0

100.0

19

33

m2

306,225.83

609,026.59

321

389

Number of properties
Leasable area
Number of tenants (Note 7)
Occupancy ratio

%

99.6

99.6

Depreciation expense

Millions of Yen

560

565

Capital expenditures

Millions of Yen

133

530

Millions of Yen

3,417

3,871

Millions of Yen

2,548

3,058

Yen

9,772

8,609

Rental NOI (Net Operating Income)FFO (Funds from Operation) (Note 9)
FFO per unit

(Note 10)(Note 8)(Note 1)
(Note 2)

Figures above are rounded down for monetary amounts and rounded off for ratios
Ordinary Income to Total Assets= Ordinary Income/{(Total assets at beginning of period+Total assets at end of period)/2}x100
Total assets at beginning of period above is the total assets on February 10, 2015, when the actual operation began.
(Note 3) Annualized as if the operation began from February 10, 2015, when the actual operation began.
(Note 4) Return on Net Assets=Net income/{( Net assets at beginning of period+Net assets at end of period)/2}x100
Net Assets at beginning of period above is the total assets on February 10, 2015, when the actual operation began.
(Note 5) Net Assets to Total Assets= Net assets at end of period/Total assets at end of period x 100(Note 6) Payout Ratio=Distibutions(without distribution in excess of retained earnigs)/Net income x 100(Note 7) 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, thenumber of end-tenants is shown in parentheses. In a sublease-type master lease, the number of master lessee is shown.
(Note 8) Rental NOI= Property-related revenues-Property-related expenses+Depreciation expenses(Note 9) FFO= Net income+Depreciation+Amortization- Gain on sale of property+Loss on sale of property(Note 10) FFO per unit= FFO/ Number of investment units issued and outstanding15

(2) Status of Asset Management(Overview of the Period ending September 30, 2015)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan (theInvestment 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 aninternational offering. As a result, the number of investment units issued at the end of the period ended March 31, 2016 was355,250 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needsof 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 thefollowing strategies.
Note: For our management purposes and ease of classification, we define neighborhood, community and other shopping centers for daily needs asretail 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 an economic rebound in Japan with recoveries in corporate earnings under Abenomics. However, real
GDP growth (2nd preliminary estimate) in the fourth quarter of 2015 was negative 0.3%, a return to the negative zone
following a positive figure in the previous quarter due to weak consumer spending and decline in exports resulting mainly
from economic slowdown in developing countries.
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 well.
In the financial environment, Nikkei 225 Index fell sharply entering into 2016 due to global market events such as
economic slowdown in China and fall in price of oil leading to unstable effects, including appreciation of yen. On the other
hand, interest rates have been declining following the introduction of negative interest rate policy by the Bank of Japan in
January 2016. As funds flowed into the J-REIT market after the policy change, especially from foreign investors, the TSE
REIT Index rallied to the 1,900 level in March 2016. In the real estate market, J-REITs continue to purchase a substantial
number of properties because of monetary easing and brisk equity raising activities by J-REITs.

16iii) Management Performance(A) Acquisition of Assets
KRR acquired the following trust beneficiary interests in real estate (13 properties acquired on October 2, 2015 with totalacquisition price of 37,920 million yen and one property acquired on January 21, 2016 with acquisition price 1,505 millionyen). In addition, KRR completed an additional acquisition of a new building through a property expansion within Roseo
Mito (acquisition price of 371 million yen) on November 26, 2015. As a result, the portfolio at the end of the period underreview (March 31, 2016) consists 33 properties with the total acquisition price of 131,639 million yen.
Property
number

Property
Type(Note 1)

Property nameLocation(City or Ward,
Prefecure)

AcquisitionPrice(million yen)(Note 2)

Acquisition Date

T-9

NSC

Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

October 2, 2015

T-10

SS

K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

October 2, 2015

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

October 2, 2015

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

1,700

October 2, 2015

T-13

SM

Inageya Yokohama Minamihonjuku(Land)

Yokohama, Kanagawa

1,442

October 2, 2015

T-14

SM

Gourmet City Chiba-Chuo

Chiba, Chiba

760

October 2, 2015

O-5

Urban Station-Front SC

Carino Esaka

Suita, Osaka

6,555

October 2, 2015

O-6

Urban Station-Front SC

COMBOX Komyoike

Izumi, Osaka

6,450

October 2, 2015

O-7

SM

Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

October 2, 2015

O-8

SS

Welcia Kishiwadakamori (Land)

Kishiwada, Osaka

487

October 2, 2015

O-9

SM

Life Nishi-Tengachaya

Osaka, Osaka

1,505

January 21, 2016

R-1

NSC

Roseo Mito (Note 3)

Mito, Ibaraki

R-4

NSC

Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

October 2, 2015

R-5

NSC

Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

October 2, 2015

R-6

SM

Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

October 2, 2015

Total

371 November 26, 2015

39,796Note 1: Properties are categorized into the following five types of shopping centers for daily needs: NSC (Neighborhood Shopping Center), SM (Supermarket),
CSC (Community Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center) and SS (Specialty Store). We categorize theseproperties generally into five separate groups as follows.
Type of shopping centers for daily needs

Features

Trade area

NSC (Neighborhood Shopping Centers)

Shopping centers with a supermarket as an anchor or coretenant 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

Single- or multiple-tenant shopping centers that specialize in a single type
one to tenof merchandise or service, such as drug stores, convenience stores,healthkilometerclubs or electronic appliance stores
Note 2: “Acquisition price” represents 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).
Note 3: KRR acquired the secondhand shop building through a new building construction (property expansion). Acquisition price represents the payment price(excluding expenses and taxes and rounded down to the nearest million yen) on the construction contract and construction design/supervision
outsourcing contracts related to construction of the building.
SS (Specialty Stores)

17

(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 under review(March 31, 2016). 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, by implementing retailproperty management that better reflects the needs of our tenants, KRR strives to accumulate know-how and improvetenant satisfaction. KRR invests primarily in neighborhood and community shopping centers that cater to the day-to-day
needs of customers. The portfolio is diversified in terms of properties, tenants and other characteristics with a goal togenerate consistent long-term cash flows. At the same time, a portion of the rent includes sales-linked rent to explore theupside potential for rental income. By using these measures, we aim to pursue a portfolio that achieves both stability andgrowth.
As of the end of the period under review, portfolio as a whole performed well with an overall occupancy ratio of 99.6%.
Furthermore, the portfolio is diversified in terms of tenants as there are 389 end-tenants in our retail properties.
(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and theefficiency of the cost of the funds with the objectives to achieve stable medium- to long-term returns and consistent growthof assets under management.
(Equity Finance)
In the fiscal period under review, KRR sold a total of 88,750 newly issued units offered in Japan and overseas, and raised
18,547 million yen. In addition, 5,750 units were issued through third-party allotment on October 21, 2015, raising 1,201
million yen that was used to prepay a portion of borrowing for acquisition of properties. Due to these activities, unitholders’capital increased to 77,606 million yen as of March 31, 2016.
(Debt Finance)
During the fiscal period under review, KRR borrowed for the acquisition of properties and used the proceeds from theissuance of newly issued units through third-party allotment for the early repayment of debt. Consequently, debt totaled
57,500 million yen at the end of the fiscal period under review (March 31, 2016).
When undertaking borrowings, we combine a number of loans, spreading out repayment dates, considering the interest rate
trends and other financial environment. We use swaps to fix the interest payments to hedge against the risk of a rise ininterest rates.
The below are borrowings at the end of the fiscal period.
SeriesLender

4-A Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4-B Sumitomo Mitsui Trust Bank, Ltd.
Resona Bank, Ltd.
The Musashino Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4-C Resona Bank, Ltd.
The Musashino Bank,Ltd.
4-D Development Bank of Japan Inc.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4-E
Mizuho Trust & Banking Co., Ltd.
Sumitomo Mitsui Trust Bank, Ltd.
Resona Bank, Ltd.
Sumitomo Mitsui Banking Corporation
4-F
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
4-G
(Note 4) Sumitomo Mitsui Banking Corporation

Amount(in thousandsof yen)2,050,000

3,450,000

800,000
1,500,000

7,000,000

1,900,000
3,650,000

Interest rate
JBA 1-month
Japanese Yen
TIBOR+0.50%

0.54510%(Note 2)0.98675%(Note 2)

1.01262%(Note 3)1.11010%(Note 2)

1.24300%

Repayment
date

Repayment
methodRemarks(Note 1)

October 2, 2015

October 2,
2016

Full onmaturity

Unsecured/
Unguaranteed

October 2, 2015

March 31,2019

Full onmaturity

Unsecured/
Unguaranteed

October 2, 2015

March 31,2023

Full onmaturity

Unsecured/
Unguaranteed

October 2, 2015

March 31,2023

Full onmaturity

Unsecured/
Unguaranteed

October 2, 2015

March 31,2024

Full onmaturity

Unsecured/
Unguaranteed

April 16,2025
October 2,
2016

Full onmaturity
Full onmaturity

Unsecured/
Unguaranteed
Unsecured/
Unguaranteed

Drawdown date

(Note 2)October 2, 2015

JBA 1-month
Japanese Yen +0.50%

October 2, 2015

5-1 Sumitomo Mitsui Banking Corporation
450,000
5-2 The Bank of Tokyo-Mitsubishi UFJ, Ltd.
450,000
JBA 1-month
5-3 Mizuho Bank, Ltd.
400,000
February 10,
Full on
Unsecured/Japanese Yen
February 10, 20162017
maturity Unguaranteed
5-4 Resona Bank, Ltd.
250,000
TIBOR+0.45%
5-5 Aozora Bank, Ltd.
250,000
5-6 Sumitomo Mitsui Trust Bank, Ltd.
200,000
Note 1: The repayment date will be the following business day in case such date falls on a day that is not a business day or the preceding business day
in case such date falls in the next calendar month.
Note 2: These borrowings are floating interest rates. However, we have entered into interest rate swap agreements to hedge the risks of interest rate
volatility. These rates are the interest rates including the effect of the swaps (i.e., fixed interest rates).

18

Note 3: These borrowings are fixed rates.
Note 4: As for Series 4-G, the balance as of March 31, 2016 was 2,450,000 thousand yen as a portion of the debt was prepaid on October 30, 2015.
The repayment of Series 4-G was funded by net proceeds from the sale of new investment units through a third-party allotment with a October
21, 2015 payment date.

As a result, the average remaining years to maturity is 5.1 years, the weighted average interest rate is 0.88%, the long-term
debt ratio is 88.7% and the LTV ratio (note), is 42.7%.
Note: The LTV ratio, or loan-to-value ratio, is the ratio of the total amount of borrowings, corporate bonds and tenant leasehold and security deposits(net of amounts reserved for return of tenant leasehold and security deposits), to the total assets minus amounts reserved for return of tenantleasehold and security deposits.

(Credit ratings)
The status of the credit ratings as of March 31, 2016 is as follows.
Credit Rating Agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the Ratings
Long-Term Issuer Rating

A (Outlook: Stable)iv) Results of Operations
For this period, revenue was 5,541 million yen, operating income was 2,826 million yen, ordinary income was 2,428
million yen and net income was 2,427 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution(excluding excess of earnings) of 2,427,778,500 yen for the fiscal period, which is an integral multiple of 355,250, the total
number of investment units outstanding and does not exceed the unappropriated retained earnings of the fiscal period. Cashdistributions are paid in accordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957,
including subsequent amendments). Consequently, the distribution per unit (including the distributions in excess ofearnings) was 6,834 yen.
Furthermore, in accordance with the policy for “Distribution of Money in Excess of Profits” as stated in the KRR Articles
of Incorporation, KRR made a distribution in excess of earnings for the 4,263,000 yen allowance for temporary adjustment(as defined in Article 2-2-30 of the Ordinance on Accountings of Investment Corporations) for the purpose of reflecting theeffect on distributions of the difference in earnings calculated under Japanese GAAP and Japanese tax laws in association
with the amortization of fixed-term land lease rights (as defined in Article 2-2-30 (b) of the Ordinance on Accountings ofInvestment Corporations). This resulted in a distribution in excess of earnings per unit of 12 yen.
Consequently, the distribution per unit for the fiscal period, including this excess distribution, was 6,846 yen (of which the
distribution in excess of earnings per unit was 12 yen).

19

(3) Movements in Investment Units Issued and Outstanding
Movements 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

Unitholders’ Capital(in million yen)

Total Number of Units Issued
and Outstanding (units)
Balance

Increase

Balance

750

750

150

150

(Note 1)February 9, 2015

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)

Capital increase through
5,750
355,250
1,201
77,606third-party allocation
Note 1: Issued at issue price of 200,000 yen per unit for incorporation.
Note 2: Issued at issue price of 230,000 yen per unit (issue amount of 221,950 yen per unit) for acquisition of new properties.
Note 3: Issued at issue amount of 221,950 yen per unit for repayment of borrowings.
Note 4: Issued at issue price of 216,543 yen per unit (issue amount of 208,991 yen per unit) for acquisition of new properties.
Note 5: Issued at issue amount of 208,991 yen per unit for repayment of borrowings.

(Note 5)October 21, 2015

(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 foreach period are as follows
Fiscal period
For the fiscal period
ended

1st period

2nd period

September 30, 2015

March 31, 2016

Highest

JPY 309,500

JPY 282,700

LowestJPY 224,500

JPY 226,800

,

20

,

,

,

(4) Distributions
The distribustions of earnigs for second period is 6,834 yen per unit. In order to maintain our favorable tax treatment,
which is available to J-REITs under Article 67-15 of the Special Taxation Measures Act, we intend to distribute most of
our retained earnings.
Furthermore, KRR made a distribution in excess of earnings for the allowance for temporary adjustment for the purpose ofreflecting the effect on distributions of the difference in earnings calculated under Japanese GAAP and Japanese tax laws inassociation with the amortization of fixed-term land lease rights. This resulted in a distribution in excess of earnings perunit of 12 yen.
Fiscal period

1st period(in thousand of yen)
2nd period

For the fiscal period ended
Unappropriated retained
earnings
Retained earnings carriedforwardSeptember 30, 2015

March 31, 2016

1,933,270

2,427,985

70

206

Total distributions

1,933,200

2,432,041[Distributions per unit][7,414 yen]

[6,846 yen]

1,933,200

2,427,778[7,414 yen]

[6,834 yen]

－

4,263

[－]

[12 yen]－

4,263[Distributions per unit][－][12 yen]Total distributions in excessof earnings from theunitholders’ capital for tax
purposes－－[Distributions per unit]

[－]

[－]

Of which, distribustions ofearnigs
Distribustions of earnigs perunits
Of which, distribustions inexcess of retained earnigs
Distribustions in excess ofretained earnigs per units
Total distributions in excessof earnings for the allowancefor temporary adjustment

21

(5) Management Policy and Issues to be Addressedi) 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 regarding the economic slowdown in China, fall in the price of oil, the directionof U.S. financial policies, etc. We also need to pay attention to changes in domestic economic environment, such as
appreciation of yen, stock market decline and effects of the negative interest rate policy.
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 we anticipate that this trend tocontinue.
In the real estate trading market, we anticipate the high level of transaction volume to continue because of the strong
appetite of J-REIT and other investors to acquire properties. The Bank of Japan’s aggressive monetary easing measures
will help provide continuous supply of adequate funds in the real estate market. However, investors should also keep inmind the risk of rise in interest rates in the future and impact of oversea economic events.
From a medium to long-term perspective, to generate a steady stream of rental revenue, consistently increase our assets andestablish a suitable financial position, KRR will continue to manage assets based on the following policies.
(A) Investment Strategy for New Properties and Disposition Policy
We receive a variety of support from many sources in order to achieve the steady growth of our assets and increase thevalue of our assets. One source is the Kenedix Group, including Kenedix, Inc., the parent company of KFM (note). We also
receive support from our Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., Nippon Commercial
Development Co., Ltd., and P&D Consulting Co., Ltd. We are implementing a growth strategy that takes full advantage ofthe external growth opportunities created by the large and diverse acquisition pipeline made possible by the support ofthese companies.
When acquiring properties, we make decisions based on all applicable factors with emphasis on four parameters: the retailproperty’s attractiveness, its location, the property’s profitability and the tenant mix. By using this selection process results,
we invest in retail properties with a competitive edge, and good prospects for consistent rental revenue and growth in asset
value. We also invest in land ownership interests underlying retail properties. While many of the land-only properties are
selected from the “JINUSHI BUSINESS” portfolio held by Nippon Commercial Development, we make these investments
after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset value of the land, and the
proportion of land-only properties in our portfolio. We may also consider making an equity investment in a tokumei kumiai(silent partnership) for warehousing properties, provided that we are given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, we make decisions based primarily on the significance of these properties 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. We believe 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 our properties are located, enabling us 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 our 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 our in-house property management services
KFM provides property management services for all of KRR’s properties. We do this for the purposes of performing retailproperty management that better reflects the needs of the tenants as well as accumulating know-how and improving tenantsatisfaction. Specifically, we use direct contact with tenant companies at our properties in order to strengthen tenant
relationships and make properties more profitable. To this end, we perform periodic monitoring of market conditions sothat we can identify the needs of tenants and the customers visiting their sites. This process makes it possible to find issues
that stand in the way of achieving greater satisfaction for tenants and their customers. Once we have discovered points that
require attention, we take 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 tenant mix,22

realizing growth in asset value by pursuing property expansions, and cutting costs, to improve tenant satisfaction andacquire more know-how.
Pursuit of internal growth through management of retail properties
KRR seeks to use the proper management of retail properties to achieve the goals of consistent revenue, higher profitability
and growth in asset value.
i. Effectively utilize capital expenditure
We will use proper and well-timed capital expenditures to increase the satisfaction of tenants and make our properties
more competitive.
ii. Optimize tenant mix
We will constantly work on attracting new tenants that are highly appealing to shoppers and replace tenants with others,
optimizing tenant composition, in order to seek stable revenue and higher profitability by attracting more customers.
iii. Realize growth in asset value by pursuing property expansions
We will use the extensive knowledge involving retail properties of the Kenedix Group and our Alliance Companies toutilize the underutilized space (note) at properties and expand properties. These measures will take into account thecompetitive position of each property, the effect on our financial position and other factors. By increasing space that canbe leased, we would like 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 the buildingto thesite area, which is prescribed in Article 52 of the Building Standards Act and applied to each retail property in accordance with the BuildingStandards Act, City Planning Act and other laws and regulations, by the land area that is allowed to be used as a retail prop erty 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 our retail properties, we seek tenants that provide services, hold community involved events and use other measures tohelp enliven the local communities where our properties are located. We believe these activities will contribute to themedium to long-term growth in the asset value of these properties.
(C) Financing
We 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. Our goal is to selectfinancing methods that result in the optimum balance between financial stability and the financing cost.
(D) Disclosure of Information
Our policy concerning disclosure activities is to use extensive investor relations activities to distribute a broad range of
information to investors and other related parties as well as to announce information as soon and as accurately as we can.
We use TDnet (Timely Disclosure network) and press releases to meet the timely-disclosure requirements of the Tokyo
Stock Exchange. In addition, we proactively post information on our 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 andreal 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 isstructured to prevent improper allocation of acquisition opportunities as well as conflicts of interest among the REIT andfunds managed by KFM. Through these measures, KFM is taking suitable actions regarding conflicts of interest.

23

(6) Important Subsequent Events
Issuance of new investment units
KRR passed resolutions at the Board of Directors Meeting held on March 31, 2016 and April 13, 2016, to issue newinvestment units to fund the acquisition of specified assets. Payments for the issuance of new investment units throughpublic offering and through third-party allotment have been completed on April 20, 2016 and May 18, 2016, respectively.
KRR plans to use the net proceeds through third-party allotment for the repayment of the loans payable of 800,000
thousand yen.
As a result, unitholders' capital totaled 94,256,390,300 yen and total number of investment units issued and outstanding
increased to 422,450 as of May 18, 2016.
Issuance of new investment units through public offerings
Total number of units issued:
64,000 units (Domestic 31,744 units, International 32,256 units)
Issue price (offer price):
256,717 yen per unit
Total amount of issue price (total offer price): 16,429,888,000 yen
Paid-in amount (issue amount):
247,764 yen per unit
Total paid-in amount (total issue amount):
15,856,896,000 yen
Payment date:
April 20, 2016
Issuance of new investment units through third-party allotment
Total number of units issued:
3,200 units
Paid-in amount (issue amount):
247,764 yen per unit
Total paid-in amount (total issue amount):
792,844,800 yen
Payment date:
May 18, 2016
Allottee:
SMBC Nikko Securities Inc.

24

(Reference Material)(A) Acquisition of Assets
KRR acquired 7 assets (acquisition price of 27,127 million yen).
“Acquisition price” represents the amount specified in the sale and purchase agreement for the trust beneficiary interests,
exclusive of the various expenses (acquisition expenses, property tax, city planning tax, consumption tax, etc.) required in
the acquisition of the following assets.
Property
number

Property type

T-15

NSC

Nakamachidai
Tokyu Store

Yokohama, Kanagawa

T-16

SS

Central Wellness Club
Nagatsuta Minamidai

Yokohama, Kanagawa Individual

T-17

SM

Life Kameido

Koto-ku, Tokyo

O-10

NSC

Million Town Tsukaguchi(Land)

Amagasaki, Hyogo

N-4

SS

Homecenter Kohnan
Sunadabashi

R-7

Urban
Station-Front
SC

Solala Plaza

R-8

NSC

Property name

P-1 Plaza Tenno
Total

Location

SellerMitsubishi Jisho
Residence Co., Ltd.

Acquisition
price(million yen)Appraisalvalue(million yen)

Acquisition
date

3,360

3,780 April 21, 2016

1,724

1,880 April 20, 2016

G.K. KRF60.

1,450

1,500 April 21, 2016

Sumitomo Mitsui
Finance and Leasing
Co., Ltd.

3,723

3,730 April 21, 2016

Nagoya, Aichi

JRP6 G.K.

7,140

7,220 April 21, 2016

Sendai, Miyagi

G.K. FOX Investment

5,720

5,740 April 21, 2016

Hamamatsu, Shizuoka

Kondo Cotton SpinningCo., Ltd.

4,010

4,230 April 22, 2016--27,12728,080-In addition to assets acquired shown above, a new building with 394.38 m2 gross floor area (hereinafter the “restaurant
building”) is planed to be constructed on the underutilized site of Unicus Ina, a property owned by KRR. KRR expects thetotal construction cost for the restaurant building to be 107 million yen and plans to complete the construction by
mid-January 2017.

25

(C) Financing
KRR borrowed funds for the acquisition on April 21, 2016 and April 22, 2016.
Series
6-A-1

LenderSumitomo Mitsui Banking
Corporation

Amount(in thousandsof yen)4,140,000

Interest rate

Drawdown date

Repayment date
(Note 1)

Repayment
methodRemarks

JBA 1-month
Japanese Yen
TIBOR+0.45%

April 21,2016

April 21, 2017

Full onmaturity

Unsecured/
Unguaranteed

0.36800%

April 21,2016

September 30,
2019

Full onmaturity

Unsecured/
Unguaranteed

6-A-2

Mizuho Bank, Ltd.

360,000

6-B-1

Mizuho Bank, Ltd.

710,000

6-B-2

Sumitomo Mitsui Trust Bank,
Ltd.

620,000

6-C

Sumitomo Mitsui Trust Bank,
Ltd.

450,000

0.80300% (Note2)

April 21,2016

September 30,
2024

Full onmaturity

Unsecured/
Unguaranteed

6-D

Development Bank of Japan
Inc.

890,000

0.76031% (Note3)

April 21,2016

September 30,
2024

Full onmaturity

Unsecured/
Unguaranteed

6-E

Sumitomo Mitsui Banking
Corporation

2,670,000

0.93200% (Note2)

April 21,2016

April 21, 2026

Full onmaturity

Unsecured/
Unguaranteed

6-F

Sumitomo Mitsui Banking
Corporation

800,000

April 21,2016

April 21, 2017

Full onmaturity

Unsecured/
Unguaranteed

7-A

The Bank ofTokyo-Mitsubishi UFJ, Ltd.

1,070,000

JBA 1-month
Japanese Yen
TIBOR+0.45%
JBA 1-month
Japanese Yen
TIBOR+0.45%

April 22,2016

April 21, 2017

Full onmaturity

Unsecured/
Unguaranteed

Full on
Unsecured/maturity
Unguaranteed
Note 1: The repayment date will be the following business day in case such date falls on a day that is not a business day or the preceding business day in casesuch date falls in the next calendar month.
Note 2: These borrowings are floating interest rates. However, we have entered into interest rate swap agreements to hedge the risks of interest rate volatility.
These rates are the interest rates including the effect of the swaps (i.e., fixed interest rates).
Note 3: These borrowings are fixed interest rates.
Note 4: As for Series 6-F, it will be prepaid in full on May 31, 2016, and there will be no balance before its repayment date. The repayment of Series 6-F was
funded by net proceeds from the sale of new investment units through a third-party allotment with a May 18, 2016 payment date.
7-B

The Bank ofTokyo-Mitsubishi UFJ, Ltd.

890,000

0.88800%

26

April 22,2016

October 31, 2025

Profile of KRR(1) Status of Unitholders’ Capital
1st period
2nd period(From October 3, 2014 to (From October 1, 2015 to
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

260,750 units

355,250 units

Unitholders’ Capital

57,857 million yen

77,606 million yen

Number of unitholders

8,954

10,876(2) Matters Concerning Investment Units
The following is a list of major unitholders as of March 31, 2016.
Name

Location

Number of units
held(Units)Ratio to total
number of units issued
and outstanding (%)(Note)

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

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

66,161

18.62

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

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

33,0699.30

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

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

27,319

7.69

THE BANK OF NEW YORK,NON-TREATY JASDEC ACCOUNT

2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.

15,185

4.27

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

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

12,099

3.40

Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, 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.

11,288

3.17

10,497

2.95

5,934

1.67

KENEDIX, INC.

6-5 Nihonbashi Kabutocho, Chuo-ku, Tokyo

5,750

1.61

STATE STREET BANK AND TRUSTCOMPANY 505223

Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.

4,811

1.35

192,11354.07

JP MORGAN CHASE BANK 385628
STATE STREET BANK AND TRUSTCOMPANY 505225
THE BANK OF NEW YORK MELLON SA/NV 10

Total
Note:

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

27

(3) Matters Concerning Directors and auditori) Executive Director, Supervisory Director, and Independent Auditor as of March 31, 2016 are as follows
Position

Name

Executive Director Akihiro Asano

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

Other concurrent title

Director and COO, General Manager of the Retail REIT Division, KFM

1,500

Yoshiyuki Wada

Representative partner, Grant Thornton Taiyo LLC
Auditor, Zero Co., Ltd.
Outside director, Forval Telecom, Inc.
Director, Waseda Senior High School
Director, Career Design Center Co.,Ltd.

1,500

Mai Ishiwatari

Partner, Shiroyama-Tower Law Office
Executive director, Cocone Corporation

1,500

－

29,800Supervisory
Director(Note 1)

Independent
AuditorErnst & Young ShinNihon LLC(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 procedures for which an agreement has been reached involving the issuanceof new investment units, which is a service not prescribed in Article 2 (1) of the Certified Public Accountants Act of Japan (Act No. 103,
1948).

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 March 31, 2016 are as follows
Operational Role

Name

Asset Manager

KFM

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

28

Status on Investment Properties(1) Component of Assets
First fiscal period
as of September 30, 2015
Type ofSpecified Asset

Second fiscal period
as of March 31, 2016

Areas

Property type

(Note 1)

Total Amount Held
(Millions of Yen)

Total Amount Held
(Millions of Yen)

Ratio (%)
(Note 3)(Note 2)

Ratio (%)
(Note 3)(Note 2)

Tokyo metropolitan
area

49,40545.6

64,434

43.0

Greater Osaka area

24,89823.0

41,49927.7

Greater Nagoya area

5,458

5.0

5,444

3.6

Fukuoka area

1,527

1.4

1,513

1.0

Ordinance-designatedcities, core cities andother areas areas

12,188

11.2

21,125

14.1

－

－

－

－

Total of Trust Beneficiary Interests in Real Estate

93,47886.2

134,016

89.3

Bank Deposits and Other Assets

14,90313.8

15,992

10.7

Total Assets

108,382

100.0

150,009

100.0

Trust
BeneficiaryInterest in Real

Neighborhood,community andother shopping
centers for daily
needs

EstateOther retailproperties－

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 to the“Greater Nagoya area” are to the area that consists of Aichi, Gifu and Mie prefectures. References to the “Fukuoka area” are to the area that consists ofFukuoka prefecture. “Ordinance-designated cities, core cities and other areas” refers to cities designated by government ordinance, which have
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 we believe will have suitable customer traffic from surrounding areas.
Note 2: “Total Amount Held” is the amount allocated in the balance sheets as of March 31, 2016 (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.

29

(2) Major Assets Owned
The following are major assets owned (the 10 largest properties by book value) by KRR as of March 31, 2016.
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

15,026

77,057.56

76,563.55

99.4

13.4

RetailO-4Blumer HAT Kobe

11,58524,185.02

23,871.33

98.7

8.9

RetailR-1

Roseo Mito

10,112

48,296.15

48,296.15

100.0

6.7

RetailO-1

Blumer Maitamon

8,494

30,037.11

29,888.11

99.5

8.8

Retail

T-2

MONA Shin-Urayasu

8,275

9,568.31

9,191.77

96.1

9.1

RetailO-5Carino Esaka

6,612

7,540.58

7,474.92

99.1

5.5

RetailO-6

COMBOX Komyoike

6,502

25,530.44

25,530.44

100.0

4.1

Retail

T-3

Passaggio Nishiarai

5,934

10,546.25

10,366.25

98.3

5.6

Retail

T-4

Daikanyama Address Dixsept

5,441

5,056.39

4,991.03

98.7

4.8

Retail

T-9

Super Viva Home Iwatsuki (Land)
Total

Note 1:
Note 2:

Note 3:Note 4:Note 5:－

4,890

67,325.95

67,325.95

100.0(Note 5)82,876305,143.76

303,499.50

99.5(Note 5)Retail－“Leasable area” is equivalent to gross floor area of space that we consider 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 March 31, 2016. As for lease agreementsof buildings, the leased area of warehouses and land are excluded. As for pass-through type master leases (the master lease in which 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 thelease agreements between the master lessee and the end-tenants as of March 31, 2016 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.
The occupancy rate is calculated by dividing leased area by leasable area as of March 31, 2016, rounded to the nearest tenth. The “Total” of“Occupancy rate” represents the average occupancy rate of all properties in the initial portfolio.
“Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
We have not obtained consent from the tenant(s) to release this information.

30

(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, 2016.
Area(Note1)

Property
number
T-1
T-2

T-3

T-4

T

O

F

Property name(Note 2)CSC
Urban
Station-Front
SC
Urban
Station-Front
SC
Urban
Station-Front
SC

Location(City or Ward,
Prefecure)

15,026

15,200MONA Shin-Urayasu

Urayasu, Chiba

Trust beneficiaryinterest in real estate

8,275

8,500

Passaggio Nishiarai

Adachi ward, Tokyo

Trust beneficiaryinterest in real estate

5,934

6,280

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

Trust beneficiaryinterest in real estate

5,441

5,620

4,381

4,420

4,018

4,300

3,642

3,770

2,591

2,720

4,890

5,260

3,210

3,390

3,043

3,010

1,726

1,740

1,462

1,460

788

799

8,494

8,780

2,727

2,870

2,168

2,410

11,585

11,600

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

SM

O-1

NSC

O-2

SM

O-3

NSC

O-4

NSC

O-5

Urban
Station-Front
SC
Urban
Station-Front
SC(Note 4)

Trust beneficiaryinterest in real estate

Kitaadachi-gun, Saitama

T-14

Evaluation value(in millions)

Yachiyo, Chiba

Unicus Ina

SMBook value(in millions)

Fululu Garden Yachiyo

NSC

T-13

Ownership
form(Note 3)

T-5

O-6

N

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

Inageya Yokohama
Minamihonjuku (Land)
Gourmet City
Chiba-Chuo
Blumer Maitamon
Central Square
Takadono (Land)
Piago Kahma Home
Center Omihachiman

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

Yokohama, Kanagawa
Chiba, Chiba
Kobe, Hyogo
Osaka, Osaka
Omihachiman, Shiga

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

Blumer HAT Kobe

Kobe, Hyogo

Carino Esaka

Suita, Osaka

Trust beneficiaryinterest in real estate

6,612

6,590

COMBOX Komyoike

Izumi, Osaka

Trust beneficiaryinterest in real estate

6,502

6,920

1,333

1,310

497

500

1,577

1,620

2,351

2,500

2,184

2,230

907

945

1,513

1,520

Hankyu Oasis
Hirakatadeguchi
Welcia Kishiwadakamori(Land)

O-7

SM

Hirakata, Osaka

O-8

SS

O-9

SM

Life Nishi-Tengachaya

Osaka, Osaka

N-1

SS

Kahma Home Center
Nakagawa Tomita(Land)

Nagoya, Aichi

N-2

NSC

Valor Ichinomiya-Nishi

Ichinomiya, Aichi

N-3

SS

K’s Denki
Nakagawa Tomita (Land)

Nagoya, Aichi

F-1

SM

Sunny Noma

Fukuoka, Fukuoka

Kishiwada, Osaka

31

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Property
number

Property
type(Note 1)

Property name

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R

R-5

NSC

R-6

SM

Location(City or Ward,
Prefecure)(Note 2)
Roseo Mito

Ownership
form
Mito, Ibaraki

K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
SakuraAomori, Aomori
Aomori, Aomori
Ashikaga, Tochigi
Sendai, Miyagi
Tsukuba, Ibaraki

Total

Book value(in millions)
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)

Property
number10,112

10,700

1,493

1,570

908

909

4,398

5,060

3,352

3,310

859

861

134,016

138,674

Note 1: “T” “O” “N” “F” and “R” herein after 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.
Note 2: Properties herein after are categorized into the following five types of retail properties for daily needs: NSC (Neighborhood Shopping Center), SM(Supermarket), CSC (Community Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center) and SS (Specialty Store).
Note 3: “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.

32

[Earnings Performance for the Individual Properties]
First fiscal period
as of September 30, 2015
Area

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4
T-5

T

978

19.2

48

99.4

MONA Shin-Urayasu

1(72)

98.0

672

13.2

1(72)

96.1

Passaggio Nishiarai

1(40)

98.3

404

7.9

1(40)

98.3

Daikanyama Address
Dixsept

1(26)

93.9

324

6.4

1(27)

98.7

1

100.0

169

3.3

1

100.0

1

100.0

－
(Note 3)－(Note 3)

1

100.0

1(11)

100.0

167

3.3

1(10)

99.2

1

100.0

－
(Note 3)－(Note 3)

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

48

99.5

630

12.4

48

99.5

－
(Note 3)－(Note 3)

1
2

100.0

T-6

NSC

T-7

NSC

Unicus Yoshikawa

SS

T-9

NSC

T-10

SS

T-11

NSC

T-12

NSC

T-13

SM

T-14

SM

O-1

NSC

O-2

SM

O-3

NSC

O-5

O-7
O-8
O-9
N-1
N-2
N-3

F

99.5

Yorktown KitaKaname

T-8

F-1

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
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
Kahma Home Center
SS
Nakagawa Tomita(Land)
Valor IchinomiyaNSC
Nishi
K’s Denki
SS
Nakagawa Tomita(Land)
SM

Ratio toRatio toNumberrentalNumberrentalOccupancy
total rental
Occupancy
total rentalof tenants
revenueof tenants
revenuerate (%)
revenuerate (%)
revenue(Note 1)(millions)(Note 1)(millions)
(%)
(%)
49

Unicus Ina

O-6

N

Fululu Garden
Yachiyo

NSC

O-4
O

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

Property name

Second fiscal period
as of March 31, 2016

Sunny Noma

1

100.0

100.0

2

100.0

1(41)

99.5

473

9.3

1(40)

98.7

－

－

－

－

1(30)

99.1

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

33

－
(Note 3)－(Note 3)

741

13.4

503

9.1

309

5.6

263

4.8

132
－
(Note 3)

2.4－
(Note 3)

138

2.5

－
(Note 3)－(Note 3)

72

1.3

41

0.7

－
(Note 3)－(Note 3)

487

8.8

－
(Note 3)－(Note 3)

491

8.9

302

5.5

225

4.1

－
(Note 3)－(Note 3)

17

0.3

－
(Note 3)－(Note 3)

First fiscal period
as of September 30, 2015
Area

Property
number

Property
type

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R

Property name

Second fiscal period
as of March 31, 2016

Ratio toRatio toNumberrentalNumberrentalOccupancy
total rental
Occupancy
total rentalof tenants
revenueof tenants
revenuerate (%)
revenuerate (%)
revenue(Note 1)(millions)(Note 1)(millions)(%)(%)

Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
Sakura

Total

1(22)

100.0

456

9.0

1(23)

100.0

371

6.7

1

100.0

100.0

100.0

－
(Note 3)1

1－(Note 3)

1

100.0

－
(Note 3)－(Note 3)

－

－

－

－

1(26)

99.1

260

4.7

－

－

－

－

2

100.0

－

－

－

－

1

100.0

－
(Note 3)－(Note 3)

321

99.6

5,103

100.0

389

99.6

5,541

100.0

Note 1: 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, 2016. Where one lessee leases more than one section of theproperty, the lessee is counted as a tenant for each section leased within the property. Where pass-through type master lease agreements are entered 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. The “Total” of “Number of tenants” shows the total number of tenants. As for pass-through typemaster leases, the number of end-tenants is used for calculation. As for sublease type master leases, the number of master lessee is used for calculation.
Note 2: Rental revenue is based on total rental and other operating revenues of each property.
Note 3: We have not obtained consent from the tenant(s) to release this information.

(4) Specified Transaction
As of March 31, 2016, 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
OTC
Total

Interest rate swaps:
Receive floating/ pay fix－

Fair value(million yen)(Note 2)

44,90044,900－44,90044,900－Note 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 basedon “Accounting Standards for Financial Instruments” under Japanese GAAP.

(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.

34

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures for renovations, repairs and other projects that are planned for the third
fiscal period ending September, 2017. These expenditures are for real estate owned by KRR and real estate in trusts inwhich KRR owns trust beneficiary rights. These planned projects may include some expenditure that will be recorded as
expenses rather than capital expenditures for accounting purposes.
Property
number

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

Location

PurposeSchedule
From January 2016
to April 2016
From April 2016
to September 2016

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Replacement of water
generator and rooftop piping

O-1

Blumer Maitamon

Kobe, Hyogo

Common area refurbishment

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Reparement of cooling tower

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

103

－

－

23

－

－

From April 2016
to September 2016

22

－

－

Reparement of shutter

From April 2016
to September 2016

22

－

－

Roof waterproof

From April 2016
to September 2016

18

－

－

(2) Capital expenditures during the period under review
The table below shows major capital expenditures for renovations, repairs and other projects in the period under review.
The amount of capital expenditures in the period under review was 530 million yen. There were also expenditures of 201
million yen that were recorded as repair expenses. In total we spent 731 million yen on the projects.
Property
number

Property nameLocation

O-4

Blumer HAT Kobe

Kobe, Hyogo

RenewalFrom January 2016
to March 2016

127

R-4

Ashico Town
Ashikaga

Ashikaga, TochigiInstallation of escalators

From November 2015
to February 2016

117

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

PMAC replacement

From June 2015
to January 2016

68

R-4

Ashico Town
Ashikaga

Ashikaga, Tochigi

Cinema building renovation

From December 2015
To February 2016

61

O-1

Blumer Maitamon

Kobe, Hyogo

Floor renewal

From February 2016
To March 201643

PurposeSchedule

Capital expenditure(Millions of yen)

Other

112

Total

530

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable35

Expenses and Liabilities(1) Expenses related to Asset Management
1st period(From October 3, 2014
to September 30, 2015)(in thousands of yen)
2nd period(From October 1, 2015
to March 31, 2016)

313,577

405,144

Asset custody fees

5,761

4,658

Administrative service fees

20,25816,454

Directors' compensation

8,931

4,500

Other operating expenses

45,112

48,444

393,641

479,202

Asset management fees (Note)

Total

Note: the amount of asset management fees capitalized in addition to the amount above are 918,430 thousand yen for the 1st period and 394,250 thousand yen
for the second period.

36

(2) Status of Borrowings
Borrowings on a financial institution basis as of March 31, 2016 are as follows.
Balance at the
beginning of
period(Thousands ofyen)

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

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-

Resona Bank, Ltd.

250,000-

250,000-

Aozora Bank, Ltd.

250,000-

250,000-

Sumitomo M itsui Trust Bank, Ltd.

200,000-

200,000--

2,050,000-

2,050,000

0.620

October 2, 2016-

3,650,000

1,200,000

2,450,000

0.621

October 2, 2016

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

Resona Bank, Ltd.

-

250,000-

250,000

Aozora Bank, Ltd.

-

250,000-

250,000

Sumitomo M itsui Trust Bank, Ltd.

-

200,000-

200,000

Sub Total

2,000,000

7,700,000

3,200,000

6,500,000

Sumitomo M itsui Banking Corporation

2,300,000--

2,300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000

M izuho Bank, Ltd.

400,000--

400,000

Classification

LenderBalance at theend of period(Thousands ofyen)

Averageinterest rate
（Note2）（Note3）(％)

Payment due date
（Note4）Use

Remarks(Note5)

Unsecured/Non-guaranteed(Note5)

Unsecured/Non-guaranteed

0.430 February 10, 2016

Sumitomo M itsui Banking Corporation
Short-Term Payable Sumitomo M itsui Banking Corporation（Note6）

0.535 February 10, 2017

0.545 February 10, 2018
M izuho Trust & Banking Co., Ltd.

350,000--

350,000

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

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

0.751 February 10, 2020
Long-Term Payable

0.865 February 10, 2021

37

Balance at the
beginning of
period(Thousands ofyen)

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

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

Development Bank of Japan Inc.（Note7）

1,500,000--

1,500,000

0.925 February 10, 2021

Development Bank of Japan Inc.（Note7）

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

400,000--

400,000

Classification

LenderThe Bank of Tokyo-M itsubishi UFJ, Ltd.

Long-Term Payable M izuho Trust & Banking Co., Ltd.
M itsubishi UFJ Trust and Banking Corporation

400,000--

400,000

1,500,000--

1,500,000

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

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

The M usashino Bank, Ltd.

-

150,000-

150,000

Development Bank of Japan Inc.（Note7）-

1,500,000-

1,500,000

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.

-

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

36,350,000

14,650,000-

51,000,000

38,350,000

22,350,000

3,200,000

57,500,000

Development Bank of Japan Inc.（Note7）

Sub Total
Total

Averageinterest rate
（Note2）（Note3）(％)

Payment due date
（Note4）Use

Remarks(Note5)

Unsecured/Non-guaranteed

0.978 February 10, 2022

0.994

M arch 31, 2023

0.545

M arch 31, 2019

0.987

M arch 31, 2023

1.013

M arch 31, 2023

1.110

M arch 31, 2024

1.243

April 16, 2025

Note 1: 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:(Thousands of yen)
Due after 1 year
through 2 years
Long-term loans payable

Due after 2 years
through 3 years

3,850,000

Due after 3 years
through 4 years

5,650,000

7,000,000

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

Due after 5 years
27,500,000

Note 2:All debts except for the following Note7 are borrowings at a floating rate.
Note 3: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 for which interest rate swap transactions were
implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideratio n the effects of the interest rate swaps are indicated.
Note 4:All the repayment methods of debt financing except for the following Note6 are lump-sum repayments on the due date.
Note 5: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 of debts.
Note 6:Partial prepayment of 1,200,000 thousand yen was made on October 30, 2015.
Note 7:Borrowings at a fixed rate.

38

(3) Status of Investment Corporation Bonds
Not applicable(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable39

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

Aqcisition price(in millions)

Date(Note)

Disposition
Book value Gain/Lossprice(in millions) (in millions)(in millions)

Trust beneficiaryinterest in real estate

T-9

Super Viva Home
Iwatsuki (Land)

October 2, 2015

4,815

－

－

－

－

Trust beneficiaryinterest in real estate

T-10

K’s Denki
Shonan-Fujisawa (Land)

October 2, 2015

3,169

－

－

－

－

Trust beneficiaryinterest in real estate

T-11

Unicus Kamisato (Land)

October 2, 2015

3,000

－

－

－

－

Trust beneficiaryinterest in real estate

T-12

Unicus Konosu (Land)

October 2, 2015

1,700

－

－

－

－

Trust beneficiaryinterest in real estate

T-13

Inageya Yokohama
Minamihonjuku (Land)

October 2, 2015

1,442

－

－

－

－

Trust beneficiaryinterest in real estate

T-14

Gourmet City
Chiba-Chuo

October 2, 2015

760

－

－

－

－

Trust beneficiaryinterest in real estate

O-5

Carino Esaka

October 2, 2015

6,555

－

－

－

－

Trust beneficiaryinterest in real estate

O-6

COMBOX Komyoike

October 2, 2015

6,450

－

－

－

－

Trust beneficiaryinterest in real estate

O-7

Hankyu Oasis
Hirakatadeguchi

October 2, 2015

1,280

－

－

－

－

Trust beneficiaryinterest in real estate

O-8

Welcia Kishiwadakamori(Land)

October 2, 2015

487

－

－

－

－

Trust beneficiaryinterest in real estate

O-9

Life Nishi-Tengachaya

January 21, 2016

1,505

－

－

－

－

Trust beneficiaryinterest in real estate

R-1

Roseo Mito (Note 2)

November 26, 2015

371

－

－

－

－

Trust beneficiaryinterest in real estate

R-4

Ashico Town Ashikaga

October 2, 2015

4,180

－

－

－

－

Trust beneficiaryinterest in real estate

R-5

Yorktown
Shinden-Higashi

October 2, 2015

3,252

－

－

－

－

Trust beneficiaryinterest in real estate

R-6

Kasumi Technopark
SakuraOctober 2, 2015

830

－

－

－

－

39,796

－

－

－

－

Total
Note1 :
Note 2:“Acquisition price” represents the purchase price of each trust beneficiary interest specified in purchase agreement in relation to the acquisition ofeach property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; and rounded down to the nearest
one million yen).
KRR acquired the secondhand shop building through a new building construction (property expansion). Acquisition price represents thepayment price (excluding expenses and taxes and rounded down to the nearest million yen) on the construction contract and construction
design/supervision outsourcing contracts related to construction of the building.

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

40

(3) Appraisal Values of Specific Assetsi) Real estate
Aqcisition/ Ownership Property
Disposition
form
number

Property name

Aqcisition Date

Aqcisition
price(in millions)(Note 1)Trust
beneficiary
Aqcisition interest inreal estate

Note 2:

Appraiser

Evaluation date

T-9

Super Viva Home
Iwatsuki (Land)

October 2, 2015

4,815

5,210

The Tanizawa Sōgō
Appraisal Co., Ltd.

Jul.1, 2015

T-10

K’s Denki
Shonan-Fujisawa (Land)

October 2, 2015

3,169

3,410

The Tanizawa Sōgō
Appraisal Co., Ltd.

Jul.1, 2015

T-11

Unicus Kamisato (Land)

October 2, 2015

3,000

3,010

The Tanizawa Sōgō
Appraisal Co., Ltd.

Jul.1, 2015

T-12

Unicus Konosu (Land)

October 2, 2015

1,700

1,730

The Tanizawa Sōgō
Appraisal Co., Ltd.

Jul.1, 2015

T-13

Inageya Yokohama
Minamihonjuku (Land)

October 2, 2015

1,442

1,460

Japan Real Estate
Institute

Jul.1, 2015

T-14

Gourmet City
Chiba-Chuo

October 2, 2015

760

780

Daiwa Real EstateAppraisal Co., Ltd.

Jul.1, 2015

O-5

Carino Esaka

October 2, 2015

6,555

6,580

Japan Real Estate
Institute

Jul.1, 2015

O-6

COMBOX Komyoike

October 2, 2015

6,450

6,840

Daiwa
Real
EstateAppraisal Co., Ltd.

Jul.1, 2015

O-7

Hankyu Oasis
Hirakatadeguchi

October 2, 2015

1,280

1,290

Daiwa
Real
EstateAppraisal Co., Ltd.

Jul.1, 2015

O-8

Welcia Kishiwadakamori
October 2, 2015
(Land)

487

500

Japan Real Estate
Institute

Jul.1, 2015

O-9

Life Nishi-Tengachaya

January 21, 2016

1,505

1,620

The Tanizawa Sōgō
Appraisal Co., Ltd.

Sep.1, 2015

R-4

Ashico Town Ashikaga

October 2, 2015

4,180

5,050

Daiwa Real EstateAppraisal Co., Ltd.

Jul.1, 2015

R-5

Yorktown
Shinden-Higashi

October 2, 2015

3,252

3,320

Daiwa Real EstateAppraisal Co., Ltd.

Jul.1, 2015

Daiwa Real Estate
Jul.1, 2015
Appraisal Co., Ltd.
“Acquisition price” represents the purchase amount (excluding acquisition costs and consumption taxes) of each property or beneficiary rightof real estate in trust as stated in the Sales and Purchase Agreement.
“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-6

Note 1:

Appraisalvalue(in millions)

Kasumi Technopark
SakuraOctober 2, 2015ii) Others
Not applicable

41

830

847

(4) Related-party transactioni) Transactions
Not applicableii) Amounts of fees paid
Not applicable
KRR has capitalized the amount paid, 15 million yen, to Kenedix, inc. for transfering the status and rights under thepurchase and sales agreement with the seller in connection with acquisition of Life Nishi-tengachaya whose price was
1,505 million yen on January 21, 2016.
Note: 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) Status on Transactions with Asset Manager in connection with Concurrent Business conducted by the AssetManager
No transaction business with Asset Manager, KFM, regarding to the Type II Financial Instruments Business, and Building
Lots and Buildings Transaction Business. Furthermore, KFM does not concurrently engage in any of Type I Financial
Instruments Business, Real Estate Specified Joint Business.

42

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,” “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) Status 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 applicable43

Others(1) Noticei) General Meeting of Unitholders
Not applicableii) Board of Directors
Not applicable(2) Others
In this report, any fraction is rounded down for monetary amounts and rounded off for ratios unless otherwise stated.

44

45

III. Financial Statements(1st Fiscal Period: from October 3, 2014 to September 30, 2015)(2nd Fiscal Period: from October 1, 2015 to March 31, 2016)
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

46

Kenedix Retail REIT Corporation

Balance Sheets
As of March 31, 2016 and September 30, 2015
As of March 31, 2016

As of September 30, 2015

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 7 and 9)¥3,882,955¥3,950,551

Cash and deposits in trust (Notes 7 and 9)

10,341,252

7,829,874

Operating accounts receivable

192,030

163,767

Prepaid expenses

33,75016,763

Consumption taxes receivable

510,5222,071,748-

10,783

14,960,512

14,043,489-

96,745

Other
Total current assets
Non-current assets
Property, plant and equipment (Notes 15 and 19)
Construction in progress
Buildings in trust

33,894,083

25,766,439

Accumulated depreciation(1,043,077)(518,285)

Buildings in trust, net (Note 3)

32,851,006

25,248,154

1,584,525

1,118,727

Structures in trust
Accumulated depreciation( 68,990)(35,074)

Structures in trust, net (Note 3)

1,515,535

1,083,653

Machinery and equipment in trust

29,19429,194

Accumulated depreciation(1,720)(869)

Machinery and equipment in trust, net

27,47328,32447,611

26,211

Accumulated depreciation(3,413)(1,231)Tools, furniture and fixtures in trust, net

44,19824,97999,044,234

66,910,436

5,583

12,025

133,488,032

93,404,319

528,555

171,078

Tools, furniture and fixtures in trust

Land in trust (Note 3)
Construction in progress in trust
Total property, plant and equipment, net
Intangible assets (Note 19)
Leasehold right in trust (Note 15)
Other

2,164

2,445

530,719

173,523

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

36,015

5,320

Long-term prepaid expenses

583,023

418,520

Long-term deposits

124,960

124,960

Total investments and other assets

753,998

558,800

134,772,750

94,136,642

Organization costs

35,43540,501

Investment unit issuance costs

240,764

161,506

Total deferred assets

276,199

202,008¥150,009,463¥108,382,141

Total intangible assets
Investments and other assets

Total non-current assets
Deferred assets

Total assets

See accompanying notes to financial statements.

47

As of March 31, 2016

As of September 30, 2015

(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥606,400¥330,055

Short-term loans payable (Notes 9 and 20)

6,500,000

2,000,000

285,470

257,854

6,520

3,412

932

6,321

Advances received

748,176

518,706

Deposits received

136,468

359,954

8,283,968

3,476,305

51,000,000

36,350,000-

20,000

10,633,432

8,722,663

23,04522,901

Accounts payable-otherAccrued expenses
Income taxes payable

Total current liabilities
Non-current liabilities
Long-term loans payable (Notes 9 and 20)
Tenant leasehold and security deposits (Note 9)
Tenant leasehold and security deposits in trust (Notes 3 and 9)
Asset retirement obligations (Note 13)
Other34,382-

61,690,859

45,115,565

69,974,828

48,591,870

77,606,649

57,857,000

Unappropriated retained earnings

2,427,985

1,933,270

Total surplus

2,427,985

1,933,270

Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Surplus80,034,634

59,790,270

Total net assets (Note 4)

Total unitholders' equity

80,034,634

59,790,270

Total liabilities and net assets¥150,009,463¥108,382,141

See accompanying notes to financial statements.

48

Kenedix Retail REIT Corporation

Statements of Income and Retained Earnings
For the period from October 1, 2015 to March 31, 2016 and the period from October 3, 2014 to September 30, 2015
From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015

(in thousands of yen)
Operating revenues
Rent revenue-real estate (Note 5)¥4,656,391

Other lease business revenue (Note 5)
Total operating revenues¥4,128,035

884,665

975,033

5,541,057

5,103,069

2,235,833

2,246,179

Operating expenses
Expenses related to rent business (Note 5)
Asset management fees

405,144

313,577

Asset custody fees

4,658

5,761

Administrative service fees

16,454

20,258

Directors' compensation

4,500

8,931

Other operating expenses

48,444

45,112

Total operating expenses

2,715,035

2,639,820

2,826,021

2,463,248

Interest income

937

1,071

Interest on refund

715

-

1,652

1,071

Interest expenses

275,159

208,576

Financing-related expenses

59,213

262,279

Amortization of organization costs

5,066

10,049Operating income
Non-operating income

Total non-operating income
Non-operating expenses

Amortization of investment unit issuance costs

59,24443,605

Total non-operating expenses

398,683

524,510

Ordinary income

2,428,991

1,939,809

Income before income taxes

2,428,991

1,939,809

1,075

6,539

1,075

6,539

Income taxes
Current
Total income taxes
Net income

2,427,915

1,933,270

Retained earnings brought forward

70-

Unappropriated retained earnings¥2,427,985¥1,933,270

See accompanying notes to financial statements.

49

Kenedix Retail REIT Corporation

Statements of Changes in Net Assets
For the period from October 1, 2015 to March 31, 2016 and the period from October 3, 2014 to September 30, 2015

Unitholders' equity
Surplus
Unitholders'

UnappropriatedTotal

capitalretained earnings

surplusTotal
unitholders'

Total net assets

equity(in thousands of yen)
Balance at the beginningof the period

¥

-

¥

-

¥

-

¥

-

¥

-

Changes of items during
the period
Issuance of new
investment units

57,857,000

57,857,000

57,857,000

1,933,270

1,933,270

1,933,270

1,933,270

57,857,000

1,933,270

1,933,270

59,790,270

59,790,270¥57,857,000¥1,933,270¥1,933,270¥59,790,270¥59,790,270

19,749,649

19,749,649

Dividends from surplus（1,933,200)（1,933,200)（1,933,200)（1,933,200)

Net income

2,427,915

2,427,915

2,427,915

2,427,915

19,749,649

494,714494,714

20,244,364

20,244,364¥77,606,649¥2,427,985¥2,427,985¥80,034,634¥80,034,634

Net income
Total changes of items
during the period
Balance as of September
30, 2015 (Note 6)
Changes of items during
the period
Issuance of new
investment units

19,749,649

Total changes of items
during the period
Balance as of March 31,
2016 (Note 6)

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Statements of Cash Flows
For the period from October 1, 2015 to March 31, 2016 and the period from October 3, 2014 to September 30, 2015
From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥2,428,991¥1,939,809

Depreciation and amortization

566,142561,321

Amortization of organization costs

5,066

10,049Amortization of investment unit issuance costs

59,24443,605Interest income(937)(1,071)

Interest expenses

275,159

208,576

Decrease (increase) in operating accounts receivable(28,262)(163,767)

Decrease (increase) in consumption taxes receivable

1,561,226(2,071,748)

Decrease (increase) in prepaid expenses(16,987)(16,763)

Increase (decrease) in operating accounts payable

94,580304,096

Increase (decrease) in accounts payable-other

25,738257,854

Increase (decrease) in advances received

229,469

518,706

Increase (decrease) in deposits received(223,486)

359,954

Decrease (increase) in long-term prepaid expenses(164,503)(418,520)-(124,960)-(50,551)

Decrease (increase) in long-term deposits
Payments of organization costs
Other

36,767-

Subtotal

4,848,210

1,356,591

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

937

1,071

(272,051)(205,164)(6,464)(217)

4,570,631

1,152,280

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Purchase of intangible assets
Purchase of intangible assets in trust
Payments for lease and guarantee deposits
Payments for lease and guarantee deposits in trust
Proceeds from tenant leasehold and security deposits-(96,745)(40,463,688)(93,814,364)-(2,809)(361,455)(176,383)-(10,000)(30,695)(5,320)-20,000

Repayments of tenant leasehold and security deposits in trust(286,205)(393,751)

Proceeds from tenant leasehold and security deposits in trust

2,185,372

9,116,415-(3,917,992)

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

661,625

287,569(38,295,047)(88,993,382)

Net cash provided by (used in) financing activities
Proceeds from short-term loans payable

7,700,000

10,222,500

Payments of short-term loans payable(3,200,000)(8,222,500)

Proceeds from long-term loans payable

14,650,000

36,350,000

Proceeds from issuance of investment units

19,611,147

57,651,888

Payments of dividends(1,931,323)--(10,783)

Net cash provided by (used in) financing activities

36,829,824

95,991,104

Net increase (decrease) in cash and cash equivalents

3,105,407

8,150,002

Cash and cash equivalents at the beginning of the period

8,150,002-

Cash and cash equivalents at the end of the period (Note 7)¥11,255,410¥8,150,002

Other

See accompanying notes to financial statements.

51

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from October 1, 2015 to March 31, 2016 and the period from October 3, 2014 to September 30, 2015

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, with unitholders’ capital of ¥150 million (750 units) and with
Kenedix Real Estate Fund Management Inc. (“KFM”) as the organizer 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 issued new investment units (254,250 units) through a public offeringwith the payment completed on February 9, 2015, which were listed on the Real Estate Investment Trust Securities (J-REIT) Market of the Tokyo
Stock Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public
offerings and other means including global offerings. As a result, the number of investment units issued as of March 31, 2016, the end of the period,
was 355,250 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
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 and started the operations of trust beneficiary interests in real estate (18 properties; total acquisition price: ¥80,843 million) on
February 10, 2015. In addition, KRR acquired a property (acquisition price: ¥11,000 million) on April 16, 2015. For the period ended September 30,
2015, the portfolio of 19 properties as a whole performed well with an overall occupancy ratio of 99.6% as of September 30, 2015.
KRR acquired trust beneficiary interests in real estate (13 properties; total acquisition price: ¥37,920 million) on October 2, 2015, and acquired aproperty (acquisition price: ¥1,505 million) on January 21, 2016. In addition, KRR completed construction of a new building (acquisition price: ¥371
million) on November 26, 2015 as additional acquisition at Roseo Mito. For the period ended March 31, 2016, the portfolio of 33 properties as awhole performed well with an overall occupancy ratio of 99.6% as of March 31, 2016.
Furthermore, the portfolio was diversified in terms of tenants as there were 321 and 389 end-tenants as of September 30, 2015 and March 31,
2016 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.

52

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) 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 basis over theestimated useful lives of the assets ranging as stated below:

Buildings

From October 1, 2015
to March 31, 2016
2-70 years

From October 3, 2014
to September 30, 2015
2-64 years

Structures

8-59 years

8-59 years

Machinery and equipment

10-25 years

10-25 years

Tools, furniture and fixtures

4-10 years

5-10 years(B) Intangible assets (including trust assets)
Intangible assets are amortized by the straight-line method.
(C) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(D) Organization costs
Organization costs are amortized over a period of 5 years under the straight-line method.
(E) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of 3 years under the straight-line method.
(F) 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.
(G) 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.
(H) 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 ¥73,320 thousand and¥600,480 thousand as of March 31, 2016 and September 30, 2015, respectively.

53

(I)

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.

(J) 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.
(K) 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.
(L) 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.
(M) 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 March 31, 2016

As of September 30, 2015
(in thousands of yen)

Buildings in trust¥2,797,203¥2,475,636

Structures in trust

55,53848,7487,811,297

6,595,863

Land in trust
Total
Secured liabilities

10,664,039
As of March 31, 2016

Tenant leasehold and security deposits in trust
Total

9,120,248
As of September 30, 2015

3,691,291

3,630,423¥3,691,291¥3,630,423

4. 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

5. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUESAND PROPERTY-RELATED EXPENSES
Rental and other operating revenues and property-related expenses for the period from October 1, 2015 to March 31, 2016 and from October 3,
2014 to September 30, 2015 consist of the following:
From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015
(in thousands of yen)

Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues¥3,761,328¥3,643,804

Rental revenues from limited proprietary rights of land

598,355

220,680

Common area charges

296,707

263,549

4,656,391

4,128,035

Parking space rental revenues

162,060

126,629

Utility charge reimbursement453,733

500,044

Miscellaneous

268,871348,360

Subtotal
Other lease business revenue:

Subtotal

884,665

975,033

5,541,057

5,103,069

Property management fees and facility management fees

637,809655,263

Utilities

495,520

548,099

Taxes

216

1,280

Repairs and maintenance

201,226

144,732

Insurance

10,531

9,662

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

Trust fees

14,49912,214

Depreciation

565,861

560,957

Others

310,168

313,968

Total property-related expenses

2,235,833

2,246,179

Net operating income from real estate rental business¥3,305,224¥2,856,889

6. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

355,250 units

260,750 units55

7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of March 31, 2016 and September 30, 2015:
As of March 31, 2016

As of September 30, 2015

(in thousands of yen)
Cash and deposits¥3,882,955¥3,950,551

Cash and deposits in trust

10,341,252

7,829,874

Restricted bank deposits in trust *(2,968,798)(3,630,423)

Cash and cash equivalents¥11,255,410¥8,150,002*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

8. LEASES(As lessee)
Future minimum lease payments under non-cancelable operating leases as of March 31, 2016 and September 30, 2015 are as follows:
As of March 31, 2016

As of September 30, 2015

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

209,548

214,798

Total¥220,048¥225,298(As lessor)
Future minimum lease income under the non-cancelable operating leases as of March 31, 2016 and September 30, 2015 are as follows:
As of March 31, 2016

As of September 30, 2015

(in thousands of yen)
Due within 1 year

¥4,184,868¥2,080,978

Due after 1 year

37,858,429

17,941,367

Total¥42,043,297¥20,022,34556

9. 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 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 to changes in interest rates and other risks anddoes 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.
Borrowings, which are made primarily for the purpose of procuring funds for the acquisition of real estate and trust beneficiary interests in realestate and have a repayment date of a maximum of 9 years and 1 month as of March 31, 2016, the end of the second fiscal period, are exposed toliquidity risk where alternative funds may not be procured by the repayment date. Also, borrowings with floating interest rates are exposed tointerest rate fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portion of the borrowings.
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. In utilizing
derivatives, KRR aims to mitigate counterparty risk such as by transacting with financial institutions with favorable ratings.
b. Market risk
While borrowings with floating rates are exposed to interest rate volatility risk, such risk is monitored by adjusting the rate of the balance ofborrowings with floating rates against the total borrowings according to the financial environment, interest rate forecasts by continuous monitoring,etc. and by using derivatives, etc. A risk management policy is established with regard to the execution and management of derivatives and suchtransactions are conducted based on this policy.
c.

Liquidity risk

Though borrowings 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 March 31, 2016
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥3,882,955¥3,882,955(2) Cash and deposits in trust

10,341,252

10,341,252

-

Total

¥

-

14,224,208

14,224,208-(1) Short-term loans payable

6,500,000

6,500,000-(2) Long-term loans payable

51,000,000

51,377,832

377,832(3) Tenant leasehold and security deposits in trust

3,509,658

3,546,858

37,20061,009,658

61,424,691

¥

¥

Total
Derivative transactions--

415,033¥-

As of September 30, 2015
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥3,950,551¥3,950,551(2) Cash and deposits in trust

7,829,874

7,829,874

-

Total

¥

-

11,780,426

11,780,426-(1) Short-term loans payable

2,000,000

2,000,000-(2) Long-term loans payable

36,350,000

35,739,489(610,510)(3) Tenant leasehold and security deposits in trust

3,344,264

3,376,087

31,823

41,694,264

41,115,576

¥

¥

Total
Derivative transactions--(578,687)¥-*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) 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) 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 “10. DERIVATIVE TRANSACTIONS”.
*2: Financial instruments whose fair values are extremely difficult to determine

58

Classification

As of March 31, 2016

As of September 30, 2015

(in thousands of yen)-

¥20,000

Tenant leasehold and security deposits in trust

7,123,774¥

5,378,399

Total¥7,123,774¥5,398,399

Tenant leasehold and security deposits

Because no quoted market price is available and it is extremely difficult to determine their fair value based on estimated future cash flows because
the repayment dates of those deposits are not certain. Therefore, these financial instruments are not included in the above quantitative
information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of March 31, 2016
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¥3,882,955

Cash and deposits in trust

10,341,252

Total

¥

-

¥

-

¥14,224,208

¥

-

¥

-

-

-

¥

¥

-

-

-

¥

-

¥

-

¥

-

¥

-

As of September 30, 2015
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¥3,950,551

Cash and deposits in trust

7,829,874

Total

¥

-

¥

-

¥11,780,426

¥

-

¥

-

-

-

¥

-

¥

-

¥

-

¥

-

¥

-

¥

-

*4: Redemption of long-term loans payable and other interest-bearing debt scheduled to be due after the balance sheet date
As of March 31, 2016
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¥6,500,000

Long-term loans payable-

3,850,000

5,650,000

7,000,000

7,000,000

27,500,000

435,430

435,430

435,430

435,430

435,430

763,938¥6,935,430¥4,285,430¥6,085,430¥7,435,430¥7,435,430¥28,263,938

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

Tenant leasehold and security
deposits in trust
Total

¥

-

¥

-

¥

-

¥

-

¥

-

As of September 30, 2015
Due after 5 years(in thousands of yen)
Short-term loans payable¥2,000,000

Long-term loans payable
Tenant leasehold and security
deposits in trust
Total

¥

-

¥

-

-

3,850,000

2,200,000

7,000,000

23,300,000

421,435

421,435

421,435

421,435

421,435

842,870¥2,421,435¥421,435¥4,271,435¥2,621,435¥7,421,435¥24,142,870

59

-

¥

-

¥

-

¥

-

10. DERIVATIVE TRANSACTIONS
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2016 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Specialtreatment ofinterest-rate
swapsInterest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥44,900,000¥44,900,000

Fair value(in thousands of yen)Calculation method for
applicable fair value*-*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 “9. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2015 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Specialtreatment ofinterest-rate
swapsInterest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥31,750,000¥31,750,000

Fair value(in thousands of yen)Calculation method for
applicable fair value*-*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 “9. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Long-term loans payable.）

11. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
2nd Fiscal Period (October 1, 2015 to March 31, 2016) and 1st Fiscal Period (October 3, 2014 to September 30, 2015): Not applicable
2．Affiliated companies and other
2nd Fiscal Period (October 1, 2015 to March 31, 2016) and 1st Fiscal Period (October 3, 2014 to September 30, 2015): Not applicable
3．Fellow subsidiary companies and other
2nd Fiscal Period (October 1, 2015 to March 31, 2016) and 1st Fiscal Period (October 3, 2014 to September 30, 2015): Not applicable
4．Directors, major individual unitholders and other
2nd Fiscal Period (October 1, 2015 to March 31, 2016) and 1st Fiscal Period (October 3, 2014 to September 30, 2015): Not applicable60

12. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 32%. 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 ¥2,432 million and ¥1,933 million for the periods ended March
31, 2016 and September 30, 2015, respectively, the distributions were treated as deductible distributions for purposes of corporate income taxes.
The effective tax rates on KRR’s income were 0.04% and 0.34% for the periods ended March 31, 2016 and September 30, 2015, respectively. The
following table summarizes the significant differences between the statutory tax rate and the effective tax rate:
As of March 31, 2016

As of September 30, 2015

Statutory tax rate

32.31%

37.11%

Deductible cash distributions(32.35)(36.98)Others0.08

0.21

Effective tax rate

0.04%

0.34%

The significant components of deferred tax assets and liabilities:
As of March 31, 2016

As of September 30, 2015

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

¥

22

¥

360

Amortization of leasehold right in trust

2,932

Depreciation

1,055

391

Asset retirement obligations

7,280

7,399

Subtotal deferred tax assets

11,2909,866Valuation allowance(11,290)(9,866)¥¥

Total deferred tax assets

-

1,713

-

13. 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 October 3, 2014

From October 1, 2015
to March 31, 2016

to September 30, 2015

(in thousands of yen)
Balance at the beginning of the period¥22,901

Increase due to acquisition of properties--

22,711

143

190¥23,045¥22,901

Accretion adjustment
Balance at the end of the period¥

6114. SEGMENT INFORMATION
Segment information for the period ended from October 1, 2015 to March 31, 2016 and October 3, 2014 to September 30, 2015 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.

15. 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 October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015
(in thousands of yen)Book value
Balance at the beginning of the period¥93,575,397¥-

Changes during the period

40,441,190

93,575,397

Balance at the end of the period

134,016,587

93,575,397¥138,674,000¥95,706,000

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, 2016, the principal
increase was the acquisitions of real estate trust beneficiary interests in 14 properties totaling ¥40,195,716 thousand and additional
acquisition of real estate trust beneficiary interests amounting to ¥383,790 thousand and the principal decrease was depreciation
amounting to ¥565,717 thousand and during the fiscal period ended September 30, 2015, the principal increase was the acquisitions ofreal estate trust beneficiary interests in 19 properties totaling ¥93,873,555 thousand and the principal decrease was depreciation
amounting to ¥560,766 thousand.
Note 3: The fair value at the end of the period is the appraisal value determined by outside appraisers.
The profit or loss for the period ended March 31, 2016 and September 30, 2015 concerning investment and rental properties is included in Note “5.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES.”62

16. PER UNIT INFORMATION

Net asset value per unit
Net income per unit

From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015

¥225,291¥229,301¥6,846¥11,515(¥7,434)

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 March 31, 2016 (354,622 units) and during the fiscal period ended September 30, 2015 (167,878 units). The figure in brackets
shows net income per unit based on the day-weighted average number of investment units outstanding during the fiscal period ended
September 30, 2015 (260,034 units) assuming the beginning of the fiscal period is February 10, 2015, the date that the asset management
actually started. 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)

From October 1, 2015

From October 3, 2014

to March 31, 2016

to September 30, 2015

¥2,427,915

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)¥1,933,270--¥2,427,915¥1,933,270

354,622

167,878

17. SIGNIFICANT SUBSEQUENT EVENTSIssuance of new investment units
KRR passed resolutions at the Board of Directors Meeting held on March 31, 2016 and April 13, 2016, to issue new investment units to fund theacquisition of specified assets. Payments for the issuance of new investment units through public offering and through third-party allotment havebeen completed on April 20, 2016 and May 18, 2016, respectively. KRR used the net proceeds through third-party allotment for the repayment of
the short-term loans payable of ¥800,000 thousand.
As a result, unitholders' capital totaled ¥94,256,390,300 and total number of investment units issued and outstanding increased to 422,450 as of
May 18, 2016.
(Issuance of new investment units through public offerings)
Total number of units issued :64,000 units (Domestic 31,744 units, International 32,256 units)

Issue price (offer price) :¥256,717 per unit

Total amount of issue price (total offer price) :¥16,429,888,000

Paid-in amount (issue amount) :¥247,764 per unit

Total paid-in amount (total issue amount) :¥15,856,896,000

Payment date :April 20, 2016

(Issuance of new investment units through third-party allotment)
Total number of units issued :3,200 units

Paid-in amount (issue amount) :¥247,764 per unit

Total paid-in amount (total issue amount) :¥792,844,800

Payment date :May 18, 2016

Allottee :SMBC Nikko Securities Inc.

18. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
2nd Fiscal Period (October 1, 2015 to March 31, 2016)
In Note “21. DISTRIBUTIONS”, KRR allocated an addition of ¥4,263 thousand to the allowance for temporary difference adjustments concerning
the amortization of leasehold right in trust and the amount in excess of depreciation with regard to leasehold rights in trust of Sunny Noma. KRR
plans to reverse a corresponding amount when Sunny Noma is disposed.

6319. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of March 31, 2016:
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¥96,745

Subtotal-¥96,745

96,745-96,745----

Buildings in trust

25,766,439

8,127,644-

33,894,083

1,043,077

524,792

32,851,006

Structures in trust

1,118,727

465,797-

1,584,525

68,99033,915

1,515,535

29,194--29,1941,720

850

27,473

26,211

21,400-47,611

3,413

2,181

44,19866,910,436

32,133,798-

99,044,234--

99,044,234

12,025

185

6,627

5,583

-

-

5,583

93,863,035

40,748,825

6,627

134,605,233

1,117,201

561,739

133,488,032

93,959,781

40,748,825

103,373

134,605,233

1,117,201

561,739

133,488,032

176,383

361,455-

537,838

9,283

3,978

528,555

2,809

-

-

2,809

645

280

2,164

¥179,192¥361,455-¥540,648¥9,928¥4,259¥530,719

Machinery andProperty,plant andequipment

equipment in trust

¥

¥

-

¥

-

¥

-

¥

-

*

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

Total
Intangible
assetsLeasehold rightin trust
Other

Total

¥

*

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties.
Property, plant and equipment consists of the following as of September 30, 2015:

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¥-¥96,745

Subtotal-

Buildings in trust
Structures in trust
Machinery andProperty,plant andequipment

equipment in trust¥-¥96,745

96,745-96,745-25,766,439--

1,118,727--

29,194

-

¥

-

¥

-

¥96,745--

96,74525,766,439

518,285

518,285

25,248,154*

1,118,727

35,07435,074

1,083,653*-

29,194869

869

28,324

26,211-

26,211

1,231

1,231

24,979-66,910,436-

66,910,436--

66,910,436-

12,025-

12,025--

12,025-93,863,035-

93,863,035

555,462

555,462

93,307,573-

93,959,781-

93,959,781

555,462

555,462

93,404,319-

176,383-

176,383

5,304

5,304

171,078

-

2,809

-

2,809

364

364

2,445

-

¥179,192-¥179,192¥5,669¥5,669¥173,523

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

Total
Intangible
assets
Total

Leasehold rightin trust
Other
¥

¥

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties.

64*20. SHORT-TERM LOANS PAYABLE AND LONG-TERM LOANS PAYABLE
The following summarizes short-term loans payable and long-term loans payable outstanding as of March 31, 2016:
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
The Bank ofTokyo-Mitsubishi UFJ,Ltd.

Short-termloanspayable-450,000-

450,000-

450,000-

Mizuho Bank, Ltd.

400,000-

400,000-

Aozora Bank, Ltd.

250,000-

250,000-

Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.

250,000-

250,000-

200,000-

200,000--

2,050,000-

2,050,000-

3,650,000

1,200,000

2,450,000-

450,000-

450,000-

450,000-

450,000-

400,000-

400,000

Resona Bank, Ltd.

-

250,000-

250,000

Aozora Bank, Ltd.

-

250,000-

250,000-

200,000-

200,000

2,000,000

7,700,000

3,200,000

6,500,000

2,300,000--

2,300,000

800,000--

800,000

400,000--

400,000

350,000--

350,000

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

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

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

Long-term
loans
payableMizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

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

Long-term

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.

400,000--

400,000

Sumitomo Mitsui
Banking Corporation

2,600,000--

2,600,000

65

Use

Remarks(%)

450,000

Sumitomo Mitsui Trust
Bank, Ltd.
Subtotal

Payment due
date（Note4）0.430

February 10,
2016

0.620

October 2,
2016

0.621

October 2,
2016

0.535

February 10,
2017

0.545

February 10,
2018

0.751

February 10,
2020

Unsecured/(Note5)

Nonguaranteed

Unsecured/(Note5)

Nonguaranteed

0.865

February 10,
2021

0.978

February 10,2022(Note5)

Unsecured/Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)loans
payableThe Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Resona Bank, Limited
Mizuho Bank, Ltd.
Development Bank ofJapan Inc.（Note7）
Development Bank ofJapan Inc.（Note7）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Aozora Bank, Ltd.
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.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Development Bank ofJapan Inc.（Note7）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.
The Musashino Bank,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Resona Bank, Ltd.
The Musashino Bank,Ltd.
Development Bank ofJapan Inc.（Note7）
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.

Long-term
loans
payableThe Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Resona Bank, Ltd.

Averageinterest rate
（Note2）（Note3）-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

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-

450,000-

450,000-

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-

700,000-

700,000--

500,000-

66

Remarks

Non--

650,000

Use(%)

800,000-

Payment due
date（Note4）650,000
500,000

guaranteed

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,
2019

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.110

March 31,2024

Unsecured/(Note5)

NonguaranteedClassification

Balance atthe beginningof the period

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

1,500,000

Averageinterest rate
（Note2）（Note3）

Payment due
date（Note4）400,000

36,350,000
38,350,000

Remarks(%)-

1,500,000

April 16,

1.243
-

Use

-

400,000

14,650,000-

51,000,000

22,350,000

3,200,000

57,500,000

2025

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
payable3,850,000

Due after 2 years
through 3 years

Due after 3 years
through 4 years（in thousands yen）

5,650,000

7,000,000

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

Due after 5 years

27,500,000

Note2: All debts except for the following Note7 are borrowings 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 toborrowings 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 Note6 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: Partial prepayment of ¥1,200,000 thousand was made on October 30, 2015.
Note7: Borrowings at a fixed rate.

67

The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 2015:
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
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Short-termloanspayableLong-term
loans
payableLong-term

Payment due
date（Note4）

Remarks(%)-

450,000-

450,000-

450,000-

450,000

Mizuho Bank, Ltd.

-

400,000-

400,000

Aozora Bank, Ltd.

-

250,000-

250,000

Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation（Note6）
Sumitomo Mitsui
Banking Corporation（Note7）-250,000-

250,000-

200,000-

200,000-

1,322,500

1,322,500

-

0.630

February 10,
2016-

6,900,000

6,900,000

-

0.430

April 16,
2016

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

10,222,500

8,222,500

2,000,000-

2,300,000-

2,300,000-

800,000-

800,000

0.545

February 10,
2018-

400,000-

400,000-

350,000-

350,000-

2,400,000-

2,400,000-

800,000-

800,000-

800,000-

800,000-

550,000-

550,000

Aozora Bank, Ltd.

-

500,000-

500,000

0.751

February 10,
2020

Resona Bank, Limited-

500,000-

500,000

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

-

400,000-

400,000-

400,000-

400,000-

350,000-

350,000-

300,000-

300,000-

3,000,000-

3,000,000-

700,000-

700,000-

500,000-

500,000-

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.
Resona Bank, Limited-

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

Mizuho Bank, Ltd.

-

300,000-

300,000

68

Use

0.430

February 10,2016Unsecured/(Note5)

Nonguaranteed

Unsecured/(Note5)

Nonguaranteed

0.865

February 10,
2021

0.978

February 10,
2022

0.978

February 10,2022(Note5)

Unsecured/Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)loans
payableDevelopment Bank ofJapan Inc.（Note8）
Development Bank ofJapan Inc.（Note8）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Aozora Bank, Ltd.

-

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.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation
Development Bank ofJapan Inc.（Note8）
Subtotal
Total

1,500,000

Averageinterest rate
（Note2）（Note3）

Payment due
date（Note4）Use

Remarks(%)-

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-

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-

36,350,000-

36,350,000-

46,572,500

8,222,500

38,350,000

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

0.534

March 31,
2019

0.975

March 31,
2023

0.994

March 31,2023

Nonguaranteed

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
payableDue after 2 years
through 3 years-

Due after 3 years
through 4 years（in thousands yen）

3,850,000

2,200,000

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

Due after 5 years

23,300,000

Note2: All debts except for the following Note8 are borrowing 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 toborrowings 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 Note6 and 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: Prepayment was made on March 16, 2015.
Note7: Prepayment was made on September 30, 2015.
Note8: Borrowings at a fixed rate.

6921. DISTRIBUTIONS
From October 1, 2015
to March 31, 2016

I. Retained earnings at the end of period

From October 3, 2014
to September 30, 2015

¥2,427,985,431¥1,933,270,617¥4,263,000-¥4,263,000-

III. Total distributions¥2,432,041,500¥1,933,200,500

Distributions per unit

¥6,846¥7,414¥2,427,778,500¥1,933,200,500¥6,834¥7,414

Of which, allowance for temporary
difference adjustments¥4,263,000-

Of which, distributions in excess ofearnings per unit (allowance fortemporary difference adjustments)¥12-

IV. Retained earnings brought forward to
the next period¥206,931¥70,117

Method of calculating distribution amountIn 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 ¥2,427,778,500 which is the maximum integral
multiple of 355,250 units issued and outstanding as the
distribution of earnings. Procedures for the distribution ofamounts exceeding distributable income are outlined in
Article 39-2 of KRR’s Articles of Incorporation.
Furthermore, in accordance with the policy for“Distribution of Money in Excess of Profits” as stated in
Article 39-2 of KRR’s Articles of Incorporation, KRR
made a distribution in excess of earnings of ¥4,263,000
for allowance for temporary difference adjustments (asdefined in Article 2-2-30 of the Ordinance on Accountingsof Investment Corporations) for the purpose of reflecting
the effect on distributions of the difference in earnings
calculated under Japanese GAAP and Japanese tax
laws in association with the amortization of fixed-term
land leasehold rights (as defined in Article 2-2-30 (b) of
the Ordinance on Accountings of Investment
Corporations.

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 ¥1,933,200,500 which is the maximum integral
multiple of 260,750 units issued and outstanding as the
distribution of earnings. Procedures for the distribution ofamounts exceeding distributable income are outlined in
Article 39-2 of KRR’s Articles of Incorporation. In the firstfiscal period, KRR has decided not to distribute cash inexcess of distributable profit.

II. Distributions in excess of retained
earnings
Of which, allowance for temporary
difference adjustments

Of which, distributions of earnings
Of which, distributions of earnings perunit70