Semi-annual Report for the 4th Period(From October 1, 2016 to March 31, 2017)

From the Executive Director

Thanks to your support, Kenedix Retail REIT Corporation (“KRR”) has reported its results ofoperations for the fourth fiscal period (from October 1, 2016 to March 31, 2017).
We became the first J-REIT to focus primarily on neighborhood, community and other shopping
centers that cater to the day-to-day needs of local area customers upon our listing in February
2015. Japan is undergoing unprecedented demographic changes that, we believe, are influencing
the nature of local retail markets. In particular, the aging of the Japanese population and theincreased concentration of populations in urban areas have resulted in shrinkage of retail tradeareas for shopping centers. We have also observed an increase in market share of specialty storesas consumer tastes change. Accordingly, we expect continued high demand for such local
shopping centers for daily needs because of their convenience. We believe our selective
investments in these shopping centers contribute further increase in unitholder’s value.
For the fourth fiscal period, operating revenue totaled 6,430 million yen, operating income was
3,021 million yen, ordinary income was 2,556 million yen and net income was 2,552 million yen.
The distribution to unitholders was 6,044 yen per unit.
At the end of the fourth fiscal period, our portfolio, consisted of 42 properties for 164,338 million
yen in acquisition price, has more than doubled in size in two years since we acquired 18
shopping centers with acquisition price of 80,843 million yen upon our listing. We acquired two
shopping centers for daily needs and completed an additional acquisition of a new restaurant
building through a property expansion within Unicus Ina during the fourth fiscal period.
Going into the fifth fiscal period, we acquired 8 properties in connection with public offering,increasing the portfolio size to 197,002 million yen in acquisition price with 50 properties.
We believe that AUM growth contribute to diversification of our portfolio and stability of ourearnings base. With increase in market capitalization, we were included in a global index in June
2016 and our long-term issuer credit rating outlook was revised upward in December 2016.
We dedicate ourselves to the maximization of unitholder value by continuing implementation of
our growth strategy extensively supported from our Sponsor and the Alliance Companies.
We respectfully look forward to your continued support.

Akihiro Asano

Executive Director, Kenedix Retail REIT Corporation
Director & COO, Head of Retail REIT Department,
Kenedix Real Estate Fund Management, Inc.
1

Highlights

For the 4th fiscal period ended March 31, 2017
Distribution per unit

JPY 6,044

Forecast DPU for the 5th fiscal period

JPY 6,051(Includes 11 yen distribution in excess of earnings per unit)

Operating revenue

JPY 6,430 mn

Operating income

JPY 3,021 mn

Net income

JPY 2,552 mn

Total assets

JPY 185,037 mn

Total net assets

JPY 96,823 mn

Net assets per unit

JPY 229,195

Number of properties / tenants
Occupancy rate at the end of period

42 properties / 409 tenants
99.6 %

contents
I. Overview of KRR
From the Executive Director
Highlights
Key Characteristics
Pipeline Expansion
Internal Growth
Financial Highlights
New Acquisitions
Portfolio List
Portfolio Map
CSR Initiatives
Close-up KRR Vol.4
Summary of Investment Unit

II. Asset Management Report
Overview of Asset Management
Profile of KRR
Status on Investment Properties
Capital Expenditures
Expenses and Liabilities
Acquisition and Disposition
Accounting
Others2

Key Characteristics

Focus on shopping centers for daily needs
1

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

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

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

High volume of customer traffic

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

Specialty store tenant diversity

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

NSC

SM

Supermarkets

Neighborhood
Shopping Centers

Retail trade area
3 km radius

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

Shopping centerswith a supermarket
as an anchor or coretenantLife Kameido

Urban
Station-Front
Shopping Centers
Retail trade area
3 – 10 km radius

Shopping centers in
the immediate vicinityof an urban public
transportation station

CSC

Retail trade area
5 – 10 km radius

Daikanyama Address Dixsept2

Community
Shopping Centers

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

Blumer Maitamon

SS

Specialty Stores

Retail trade area
1 – 10 km radius

Fululu Garden YachiyoSpecialty stores suchas drug stores,
convenience stores,
health clubs orelectronic appliancestoresHomecenter Kohnan Sunadabashi

Investment in major metropolitan areas with population concentrations

Primary geographic target areas

Population share in Japan by area

The four major metropolitan areas of Japan,
which have relatively stable populations:• Tokyo metropolitan area
• Greater Osaka area
• Greater Nagoya area
• Fukuoka area（％）
70

* KRR may also from time to time
consider investing in ordinancedesignated cities, core cities and otherareas(Note), which would allow KRR tobuild a more diversified portfolio thatprovides flexibility and positive returns,
consistent with KRR’s investment goals,
when attractive opportunities arise.
Tokyo metropolitan area

Projection

60
50
40
30
20
10
0

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Greater Osaka area
Four major metropolitan areas

Other areas

Ordinance-designated cities and core cities
Fukuoka area

Greater
Nagoya area

Source: Ministry of Internal Affairs and Communications (MIC), National
Institute of Population and Social Security Research

Note: "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.

3

3

Steady AUM growth through three follow-on offerings in approximately two years since KRR’s IPO(AUM)Operating years since IPO

Approx. 2 years

AUM growth

Approx. 2.4 x(JPY bn)
200

32.6

28.6

158.7

5.4

150

48.9

197.0

Inclusion in
the FTSE EPRA/NAREIT Global
Real Estate IndexSeries130.1

Aiming forsteady growthof asset value
going forward

Upwardrevision of
long-term issuer
credit rating
outlookJCR
A (Positive)

100

80.8

50

New allianceagreement with
ITOCHU
Corporation0
Properties
acquired
upon IPO(Mar. 2015)

Properties
After the 1st
acquired upon follow-on
1st follow-on
offering
offering(Dec. 2015)

Properties
After the 2nd
Properties
Properties
Ample external growth
After the 3rd
acquired upon follow-on
acquired after acquired upon
opportunities
follow-on（注）
比較的緩やかな
2nd follow-on
offering
2nd follow-on 3rd follow-on 公募増資後(Note)
Relatively moderateoffering
offering(May 2016)
offering
offering
favorable acquisition
marketNumber ofproperties

18

14

32

8

40

2

8

50

Number oftenants

KRR’s core strengths
for external growth

279

108

390

15

404

2

86

495

Diversified acquisitionroutesDifferentiated acquisition
methods

Note: “Number of properties” and “Number of tenants” after the 3rd follow-on offering is as of May 18, 2017 and Mar. 31, 2017, respectively.

4

Inclusion in a global index and upward revision of long-term issuer credit rating outlook■ Inclusion in a global index
KRR believes that its inclusion in the
Index will contribute to further
broadening its potential investor baseand increasing the liquidity of its
investment units.

June 2016

Inclusion in the FTSE EPRA/NAREIT
Global Real Estate Index Series■ Upward revision of long-term issuer credit rating outlook
Japan Credit rating Agency, Ltd.
(“JCR”) revised the long–term issuer
credit rating outlook of KRR upward.

December 2016
Credit rating
agencyBeforerevisionAfterrevision

JCR

A(Stable)A(Positive)4

Pipeline Expansion

1

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

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

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

Note: Kenedix, Inc., the asset manager of the retail property development fund jointly created by ITOCHU Corporation (“Kenedix – ITOCHU Fund”), agrees to provide
preferential access to potential acquisition opportunities regarding the fund, to KRR and KFM.

2

Preferential access to potential acquisition opportunities

KRR seeks 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 KRR’s Alliance Companies.
Example of properties underdevelopment by Sponsor
First project of the retail property
development fund (Note 1)
Location: Kanagawa Pref.
Plannedcompletion inautumn 2017

Examples of properties owned
by KRR’s Alliance Companies
Unicus Urawamisono (Land)
Location: Saitama, Saitama

Across Plaza Urayasu Higashino (Land)
Location: Urayasu, Chiba

Opened inMar. 2017

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

Planned toopen inwinter 20175

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

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

Enhance tenantsatisfaction and reduce
cost through effective
utilization of capital
expenditure

Enhance profitability andasset value throughbuilding expansions

Adopt optimal leasing
structures for competitive
tenant mix and rental
upsideBuilding expansion at Unicus Ina
KRR completed the second building expansion project, which KRR constructed a restaurant building byinvesting a total construction cost of JPY 91 million. KRR acquired the building in January 2017.
Newly constructed restaurant building

Aerial photo of Unicus Ina

Specialty stores at Unicus Ina

建設地

Examples of effective utilization of CAPEXKRR seeks to use proper and well-timed capital expenditures to reduce costs, increase satisfaction oftenants and increase stability of revenue through making KRR’s properties more competitive.
Example 1: MONA Shin-Urayasu (planned)
Repair and renovation of outdoor facilities and signboards
to improve commercial environment (Note)
BeforeAfter

Example 3: Ashico Town Ashikaga
Reopened a cinema complex and achieved full occupancy
with new tenants in February 2017

Example 2: Blumer HAT Kobe (planned)
Change in layout and contracting of new tenants toincrease rent revenues (Note)
BeforeAfter

Example 4: Blumer Maitamon
Replacement of flooring materials to reduce maintenancecosts
BeforeNote: The illustrations above are completion images based on design drawings and may differ from the actual buildings after completion.

After

6

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

1

Financial highlights (as of March 31, 2017)
Long-term debt ratio

Fixed interest debt ratio

Average interest rate

Average remaining years
to maturity

Number of lenders

Japan Credit Rating Agency
(JCR)

84.6%

84.6%
11

4.5 years

2

0.99%

A (Positive)

Diversifying KRR’s lending sources■ Issued investment corporation bonds
KRR issued invest ment co rpo rat io n bo nds
fo r the first time o n Oct o ber 31, 2016.
Issue

Maturity

Amount

1st unsecured
investment corporation 5 years JPY 1.0 bn
bonds
2nd unsecured
investment corporation 10 years JPY 1.0 bn
bonds
Total
JPY 2.0 bn

3Annualinterest rate
0.200%
0.600%■ Established commitment lines
KRR established commitment lines with
Sumitomo Mitsui Banking Corporation andMizuho Bank, Ltd. from April, 2017. Thisestablishment is first activity in J-REITs thathave “A” of long-term credit rating listing after
2012.
Commitment credit lines

JPY 2.0 bn-

Debt maturity schedule (as of May 31, 2017)

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

Debt outstanding JPY 89,400 mn (excluding interest-bearing tenant leasehold and security deposits)(JPY mn)
10,000Borrowings

Investment corporation bonds

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
5th
6th
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd 23rd
24th
25th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

7New Acquisitions
Assets acquired in the 4th and the 5th fiscal periods
Properties

N-5

K's Denki ShinMoriyama (Land)
SS

4th

R-9

Seiyu Rakuichi
Moriya (Land)
NSC

T-18

Totsuka-Fukaya
Shopping Center(Land)NSC

T-19

Yumemachi
Narashinodai Mall
NSC

T-20

Kawamachi
Yahagi Mall
NSC

T-21

Prime Square
Jiyugaoka
SS

5th

T-22

Round1
Ichikawa-Onitaka
SS

F-2

F-3

Location

Land on which an
electronics retail store
resides. Located in a highpopulation growth area,facing a major roadway
with heavy traffic

1,370

4.4

Greater
Nagoya area
(approx. 17 min
to Nagoya Station)

Undisclosed(Note 2)

+2.1

4.1

Ordinancedesignated cities,
core cities and otherareas(approx. 32 min
to Akihabara Station

Seiyu GK

+13.3

4,170

4.6

Tokyo
Royal Home
metropolitan area
Center Co.,(approx. 10 min to
Ltd.
Yokohama Station)

+1.3

3,416

5.2

Tokyo
metropolitan area
Nojima(approx. 35 min to Corporation
Otemachi Station)

+4.2

3,097

5.2

Tokyo
metropolitan area
(approx. 40 min toTokyo Station)

Landrome
Japan, Ltd.

+6.1

2,820

4.1

Tokyo
metropolitan area
(approx. 9 min
to Shibuya Station)

CentralSportsCo., Ltd.

+2.5

1,880

5.2

Tokyo
metropolitan area
(approx. 28 min
to Tokyo Station)

Round One
Corporation

+3.5

5,020

5.7

Fukuoka area
(approx. 3 min
to Hakata Station)

Round One
Corporation

+8.4

1,515

6.0

Fukuoka area
(approx. 34 min
to Hakata Station)

Maxvalu
Kyushu Co.,
Ltd.

+0.1

5.8

Ordinancedesignated cities,
core cities andother areas

Seiyu GK

+7.7

An NSC (Land) highly
popular among
consumers, with a grocery
supermarket as theanchor tenant
An NSC (Land) located ina high population growtharea and opened in
March 2015

Located in an area withhigh population growth,housing a competitive
supermarket as theanchor tenant
A new NSC developed by
Kenedix housing tenantswith a high level ofcustomer attraction
Located in theneighborhood of Jiyugaoka
along the Tokyu Toyoko
Line and leased to Central
Sports Co., Ltd., a leading
fitness club operator
A road-side amusement
facility located in an areawith easy access and highpopulation growth

A large-scale flagshipstore for Round One thatoffers a variety ofamusement and sporting
facilities

Kurume-Nishi
Shopping Center

An NSC located in a
residential district near
downtown Kurume Cityand tenants include agrocery supermarket anda drug store ,etc.

NSC

R-10

Highlights

Appraisal
NOI yield(%)

Round1 Stadium
HakataHanmichibashi
SS

Sun Street
Hamakita
NSC

Retail tradeareaCore tenant population
increase (%)(Note 1)

Acquisition
price(JPY mn)

Located in an area withhigh population growthand expected to generatesynergies among thetenants that offer services
and experiences, with Seiyu
as the core tenant

4,111

10,7468

Note 1: "Retail trade area population increase" is calculated as the growth rate of population within a 3 km radius of each property from 2005 to 2010, according to the national census in 2010.
Note 2: KRR has not obtained consent from the tenants of the relevant property to release the information.

Portfolio List as of May 18, 2017
Total
acquisition price

Weighted averageoccupancy rate

Number of
Tenants¥197,002 mn

99.5 %

496

No.

Name of property

Location
Acquisition price Occupancy rate Number of(city / ward, prefecture)(JPY mn)(%) (Note 1)
tenants (Note 2)

T-1 Fululu Garden Yachiyo

Yachiyo, Chiba

14,848

98.2

48

T-2 MONA Shin-Urayasu

Urayasu, Chiba

8,063

95.7

70

T-3 Passaggio Nishiarai

Adachi ward, Tokyo

5,850

98.1

41

T-4 Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

97.0

26

T-5 Unicus Ina

Kitaadachi-gun, Saitama

4,470

100.0

1

T-6 Yorktown Kita-Kaname

Hiratsuka, Kanagawa

4,000

100.0

1

T-7 Unicus Yoshikawa

Yoshikawa, Saitama

3,600

100.0

11

T-8 Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

T-9 Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

100.0

1

T-10 K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

100.0

1

T-11 Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

100.0

1

T-12 Unicus Konosu (Land)

Konosu, Saitama

1,700

100.0

1

T-13 Inageya Yokohama Minamihonjuku (Land)

Yokohama, Kanagawa

1,442

100.0

1

T-14 Gourmet City Chiba-Chuo

Chiba, Chiba

760

100.0

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-1 Blumer Maitamon

Kobe, Hyogo

8,389

99.2

50

O-2 Central Square Takadono (Land)

Osaka, Osaka

2,685

100.0

1

O-3 Piago Kahma Home Center Omihachiman

Omihachiman, Shiga

2,140

100.0

2

O-4 Blumer HAT Kobe

Kobe, Hyogo

11,00099.1

41

O-5 Carino Esaka

Suita, Osaka

6,555

97.8

30

O-6 COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

O-7 Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

100.0

1

O-8 Welcia Kishiwadakamori (Land)

Kishiwada, Osaka

487

100.0

1

O-9 Life Nishi-Tengachaya

Osaka, Osaka

1,505

100.0

1

O-10 Million Town Tsukaguchi (Land)

Amagasaki, Hyogo

3,723

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

N-4 Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

N-5 K’s Denki Shin-Moriyama (Land)

Nagoya, Aichi

1,370

100.0

1

F-1 Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

R-1 Roseo Mito

Mito, Ibaraki

10,046

99.7

22

R-2 K's Denki Aomori Honten

Aomori, Aomori

1,469

100.0

1

R-3 Super Sports Xebio Aomori-Chuo

Aomori, Aomori

898

100.0

1

R-4 Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

100.0

29

R-5 Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

2

R-6 Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

R-7 Solala Plaza

Sendai, Miyagi

5,720

100.0

1

R-8 P-1 Plaza Tenno

Hamamatsu, Shizuoka

4,010

100.0

7

R-9 Seiyu Rakuichi Moriya (Land)

Moriya, Ibaraki

4,111

100.0

1

164,338

99.6

409

Total of assets acquired by the end of the 4th period

9

No.

Name of property

Location
Acquisition price Occupancy rate Number of(city / ward, prefecture)(JPY mn)(%) (Note 1)
tenants (Note 2)

T-18 Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

100.0

2

T-19 Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

100.0

13

T-20 Kawamachi Yahagi Mall

Chiba, Chiba

3,097

100.0

12

T-21 Prime Square Jiyugaoka

Meguro ward, Tokyo

2,820

100.0

2

T-22 Round1 Ichikawa-Onitaka

Ichikawa, Chiba

1,880

100.0

1

F-2 Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

100.0

1

F-3 Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

100.0

4

R-10 Sun Street Hamakita

Hamamatsu, Shizuoka

10,74697.9

52

Total of assets acquired in Apr. and May 201732,664

99.2

87

Total

197,00299.5

496

Note 1: “Occupancy rate” is as of March 31, 2017.
Note 2: “Number of tenants” indicates the number of end-tenants as of March 31, 2017.

Location(by acquisition price)

Types of retail property(by acquisition price)

CSC
7.5%

Ordinance-designed cities,
core cities andother areas
23.0%

4 major
Metropolitan
areas

Fukuoka area
4.1%

77.0％

NSC
51.2%

100%

Greater Nagoya
area
7.0%

Urban
Station-Front
19.3%

Greater Osaka
area
22.4%

Top 5 propeties(by acquisition price)

Percentage of tenants’ category(based on rents)

Fululu Garden Yachiyo
7.5%
Blumer HAT Kobe
5.6%

Interior goods
3.3%
Restaurants
3.6%

Sun Street Hamakita
5.5%

Others
72.1%

Shopping
centersfordaily needs

SS
16.1%

Tokyo
metropolitan
area
43.5%

SM
5.8%

Top 5
properties

27.9％

Others11.1%

Groceries
24.2%

Sports clubs
4.3%

Roseo Mito 5.1%
Blumer Maitamon
4.3%

GMS
4.9%
Clothing
5.7%

Consumer electronics
6.2%
Home & garden
9.0%

Service businesses
14.5%
Other retailers
13.0%

10

Portfolio Map as of May 18, 2017
R-4
T-11

R-1

T-12

NSC
SM

R-6

T-5
T-9

CSC
Urban
Station-Front SC

Seiyu Rakuichi Moriya (Land)

T-7

R-9

SS

Round1 Ichikawa-Onitaka
Yumemachi
T-22
T-19 Narashinodai Mall

T-3
T-8

T-17

T-4
Prime Square Jiyugaoka T-21

T-2

T-1

T-14

R-2

Kawamachi Yahagi

R-3

T-20 Mall

T-15

T-16

R-7

T-13
T-6

T-10

T-18

R-5

Totsuka-Fukaya Shopping Center (Land)

O-3

F-2
F-1

Round1 Stadium
Hakata-Hanmichibashi

O-4

O-10

O-1

F-3

O-9

Kurume-Nishi
Shopping Center

O-7

N-2
N-3
N-1

K's Denki Shin-Moriyama

N-5 (Land)
N-4

O-5
O-2
Sun Street Hamakita R-10

O-6

R-8

O-8

T-1 Fululu Garden Yachiyo

Yorktown

T-6 Kita-Kaname

T-2 MONA Shin-Urayasu

T-3 Passaggio Nishiarai

T-4 Daikanyama
Address Dixsept

T-5 Unicus Ina

T-7

Club
T-8 Sports
Renaissance Fujimidai

Viva Home
T-9 Super
Iwatsuki (Land)

Denki
T-10 K’s
Shonan-Fujisawa (Land)

Unicus Yoshikawa

11

T-11 Unicus Kamisato (Land)

Inageya Yokohama

T-15 Tokyu Store

Central Square

O-3 Center Omihachiman

O-7 Hirakatadeguchi

Hankyu Oasis

O-8 Kishiwadakamori (Land)

T-13 Minamihonjuku (Land)

T-14 Chiba-Chuo

T-16 Nagatsuta Minamidai
T-16

T-17 Life Kameido

O-1 Blumer Maitamon

O-2 Takadono (Land)

O-4 Blumer HAT Kobe

O-5 Carino Esaka

O-6 COMBOX Komyoike

O-9 Life Nishi-Tengachaya

O-10 Tsukaguchi (Land)

Central Wellness Club

Kahma Home Center

Nakamachidai

Gourmet City

T-12 Unicus Konosu (Land)

Piago Kahma Home

WelciaMillion Town

N-1 Nakagawa Tomita (Land)

N-2 Valor Ichinomiya-Nishi

N-3 Tomita (Land)
N-3

K’s Denki Nakagawa

K’s Denki

N-4 Sunadabashi

Homecenter Kohnan

N-5 Shin-Moriyama (Land)

F-1 Sunny Noma

R-1 Roseo Mito

R-2

Sports Xebio
R-3 Super
Aomori-Chuo

R-4 Ashico Town Ashikaga

R-5 Yorktown
Shinden-Higashi

R-6 Kasumi
Technopark Sakura

R-7 Solala Plaza

R-8

R-9 (Land)
R-9

Totsuka-Fukaya

T-19 Yumemachi
Narashinodai Mall

T-20 Kawamachi Yahagi Mall

Seiyu Rakuichi Moriya

P-1 Plaza Tenno

T-18 Shopping Center (Land)

NEW

T-21 Prime Square Jiyugaoka

T-22 Round1 Ichikawa-Onitaka

NEW

NEW

Round1 Stadium

F-2 Hakata-Hanmichibashi

NEW

NEW

Kurume-Nishi

F-3 Shopping Center

K’s Denki Aomori Honten

NEW

R-10 Sun Street Hamakita

NEW

NEW

12

CSR Initiatives

1

Environmental policies

KRR undertakes investment management operations in accordance with the following
environmental policies.
Compliance with environmental
laws and regulations

Promotion of energy
conservation measures

Disclosure of environmental
information

2

Reduction of environmental
burdenEnvironmental education

Evaluation of KRR’s environmental initiatives■ DBJ Green Building Certification
The following nine properties have been awarded the "DBJ Green Building Certification" for theirenvironmental initiatives.
Properties with outstanding environmental & social awareness（★★★★）
T-1

Properties with excellent environmental& social awareness (★★★)

Fululu Garden Yachiyo

Properties with high environmental& social awareness (★★)

T-2

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

O-4Blumer HAT Kobe

T-5

Unicus Ina

R-1

Roseo Mito

T-7

Unicus Yoshikawa

R-4

Ashico Town Ashikaga

O-1

Blumer Maitamon■ GRESB Real Estate Assessment 2016
 Awarded a “Green Star” Rating at its first participation in 2016
 Received high evaluation on both “implementation and measurement”
and “management and policy”

3

Help enliven local communities

Seek to enhance the medium to longterm asset value of our retail properties
by attracting tenants engaged in service
businesses and holding local events at
KRR’s properties to enliven the local
community

4

Summer festival (Unicus Ina)

Kamisato farmer's market(Unicus Kamisato)

Collaboration with local communities

KRR entered into an agreement with
Yoshikawa City under which a part of thebuilding of Unicus Yoshikawa can be used
as a temporary shelter at times of
emergency.
Unicus Yoshikawa (Aerial photo)

Signing of agreement

13

Close-up KRR

O-4

Vol. 4NSC Neighborhood Shopping Center

Blumer HAT Kobe
NSC for Daily Needs in Eastern Kobe
Blumer HAT Kobe is a neighborhood shopping center
opened in October 2005 in the HAT Kobe(Note 1) area, which
was developed as a symbol of the Kobe reconstruction planfollowing the 1995 Great Hanshin-Awaji Earthquake. The
location is near the waterfront about two kilometers east of
Sannomiya Station, which is the center of downtown Kobe.
Shoppers can visit Blumer HAT Kobe easily by car via
National Route 2 or by train on the nearby JR and Hanshinlines.
The shopping center serves a trade area with a large
number of public-sector housing developments that wereconstructed as part of the earthquake recovery projects.
Proximity to Sannomiya Station is another reason for thehigh population density of HAT Kobe. In addition, a nearby
high-rise assisted living apartment building for seniors with
483 units is scheduled to open in June 2017, and continued
population growth is expected in this area. HAT Kobe isalso home to a number of public-sector offices andfacilities, notably the Disaster Reduction and Human
Renovation Institution, Hyogo Prefectural Museum of Art
and Japan International Cooperation Agency. The daytime
population is high as well as Kobe Steel has its head officein the area.
On the first floor, Blumer HAT Kobe has a grocery store,
clothing stores, a baby goods store among other stores.
The second floor tenants include a cinema complex, anamusement center, more clothing stores, a book store,
restaurants, service providers, and variety goods stores.
After KRR started operating this shopping center, thecinema complex, which is a core tenant, introduced the first
4DX(Note 2) theater in Kobe in April 2016. KRR used this as anopportunity to conduct a major renovation of common
areas to improve the overall appearance of the property.
Sales have increased by about 3% from the previous year
after the completion of the renovation project.

KRR will continue to work on attracting tenants selling
products and services that people purchase frequently inorder to reinforce the shopping center’s strong ties tolocal communities. In the second phase of the shopping
center’s renovation, a large retailer selling householdproducts, food, and beauty and health care products will
open in June 2017 on the first floor.
Blumer HAT Kobe frequently hosts community events,
including events on the rooftop garden in which shoppers
can participate. Examples of special events include
performances by the band from a nearby junior highschool and periodic rakugo (Japanese comedy)
performances, a form of entertainment that rarely takes
place at a shopping center. In recognition of these
activities, Blumer HAT Kobe was awarded DBJ(Development Bank of Japan) Green Building Certification(three-star rank) in June 2016 as a property with excellent
environment and social awareness. KRR will continue toput effort into making the facility more attractive as an
NSC that provides both daily necessities and amusement
such as cinema complex.
Note 1: HAT Kobe is the name of the area in eastern Kobe,
redeveloped after the Great Hanshin-Awaji Earthquake. “HAT” stands
for “Happy Active Town,” a name chosen from public submissions.
Note 2: 4DX is a new motion picture technology, which allows amotion picture presentation to be augmented with attraction effects
such as seat motion, wind, rain (mist), scents, and smoke.
Acquisition price

JPY 11,000 mn

Location

Kobe, Hyogo

Land area

19,116.12m2

Gross floor area

50,538.47m2

Core tenant

TOKYU Recreation
Co., Ltd.

14

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

320,000

40,000
Unit price

TSE REIT index

Volume300,000

35,000280,000

30,000260,000

25,000240,000

20,000220,000

15,000200,000

10,000180,000

5,000

160,000

0Feb. End End End End End End End End End End End End ofEnd End End End End End End End End End End End ofEnd End End
10,
of
of
of
of
of
of
of
of
of
of
of
Jan. of
of
of
of
of
of
of
of
of
of
of
Jan. ofofof2015 Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2016 Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2017 Feb. Mar. Apr.

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

General breakdown of unitholders
As of March 31, 2017

Ownership ratio
by investor type
Individuals
and others
4 0 , 6 5 3 units(9.6%)

Brokerage firms
3 , 1 8 0 units(0.8%)

Foreigninvestors
1 4 1 , 4 1 0 units(33.5%)

Number of unitholders
by investor type422,450

Foreign investors
204(2.0%)

Financial
institutions
92(0.9%)

Brokerage firms
23(0.2%)

10,072units

Financial
institutions
2 2 1 , 7 5 9 units(52.5%)
Other domestic
corporations
1 5 , 4 4 8 units(3.7%)

Other domestic
corporations
241(2.4%)

Individuals
and others
9,512(94.4%)

15

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

Second fiscal period

Third fiscal period

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

Millions of yen

5,103

5,541

6,374

6,430

Millions of yen

5,103

5,541

6,374

6,427

Millions of yen

2,639

2,715

3,400

3,409

Millions of yen

2,246

2,235

2,860

2,817

Operating income

Millions of yen

2,463

2,826

2,973

3,021

Ordinary income

Millions of yen

1,939

2,428

2,519

2,556

Net income

Millions of yen

1,933

2,427

2,518

2,552

Total assets

Millions of yen

108,382

150,009179,360

185,037(-)(+38.4)(+19.6)(+3.2)

59,79080,03496,73996,823(-)(+33.9)(+20.9)(+0.1)

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

57,85777,606

94,256

94,256

Units

260,750

355,250

422,450

422,450

Yen

229,301

225,291

228,996229,195

Millions of yen

1,933

2,432

2,523

2,553

Distributions per unit

Yen

7,414

6,846

5,974

6,044

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

Yen

7,414

6,834

5,888

6,044

Yen

-

12

86

-

Distributions[Annualized] (Note 4)%

Return on net assets (Note 5)

2.0

1.9

1.5

1.4

(3.1)

(3.7)

(3.1)

(2.8)

3.3

3.5

2.8

2.6

(5.2)

(6.9)

(5.7)

(5.3)

55.2

53.4

53.9

52.3

(-)

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

Days

363

183

183

182

%

100.0

100.0

98.8

100.0

19

33

40

42

m2

306,225.83

609,026.59

674,491.03

719,906.77

321

389

405

409

%

99.6

99.6

99.7

99.6

Depreciation expense

Millions of yen

560

565

714

721

Capital expenditures

Millions of yen

133

530

264

276

Rental NOI (Net operating income) (Note 9)

Millions of yen

3,417

3,871

4,228

4,331

FFO (Funds from operation) (Note 10)

Millions of yen

2,548

3,058

3,315

3,358

[Annualized] (Note 4)%

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

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

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

16

(2) Status of Asset Management(Overview of the Fiscal Period ended March 31, 2017)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local
Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on
the Real Estate Investment Trust Securities (“J-REIT”) Market of Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public offerings,
including an international offering. As a result, the number of investment units issued at the end of the fiscal period
ended March 31, 2017 was 422,450 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day
needs of local area customers and have stable demand from retailers and customers, in order to provide stable
investment returns over the long term. Sponsored by Kenedix, Inc., a leading, independent real estate asset
management company, KRR entrusts its asset management and investment operations to Kenedix Real Estate FundManagement, Inc. (“KFM”), with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail properties that generally have the following characteristics:
a. Retail trade area of approximately a one to ten kilometer radius (and generally, a three to five kilometer radius), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and servicesii) Investment Environment
There were signs of a moderate economic rebound in Japan with recoveries in employment and income environment.
Real GDP growth (second preliminary estimate) in the fourth quarter of 2016 was positive 1.2% on an annualized basis,
with capital investment leading the growth. However, uncertainty in economy remains due to the policies of the new
U.S. administration, a rise in protectionism, etc.
As for Japan’s retail market, disparities among the retail market are seen as general merchandize stores (“GMS”) are
reported to be struggling, but supermarkets and drugstores are performing relatively well.
The financial environment remained unstable due to global market events such as the policies of the new U.S.
administration. In addition, because of the Federal Reserve rate hike in the U.S. and the introduction of “Quantitativeand Qualitative Monetary Easing with Yield Curve Control” including the negative interest rate policy by the Bank ofJapan, the market got weak as expectation of additional monetary easing receded. On the other hand, in the real estatemarket, J-REITs continue to purchase a substantial number of properties because of monetary easing and brisk equity
raising activities by J-REITs.

17iii) Management Performance(A) Acquisition of Assets
KRR acquired and started the operations of the following trust beneficiary interests in real estate (one property
acquired on November 1, 2016 with acquisition price of 1,370 million yen and one property acquired on January 31,2017 with acquisition price of 4,111 million yen). In addition, KRR completed an additional acquisition of a newbuilding through a property expansion within Unicus Ina (acquisition price of 91 million yen) on January 16, 2017. As
a result, the portfolio at the end of the fiscal period under review (March 31, 2017) consists 42 properties with the totalacquisition price of 164,338 million yen.
Property
numberN-5

Propertytype

Property name(Note 1)

SS

T-5

NSC

R-9

NSC

K’s Denki Shin-Moriyama (Land)
Unicus Ina(Note 3)

Seiyu Rakuichi Moriya (Land)

Location(City/ward,
prefecture)

Acquisition
price(million yen)

Acquisition date

(Note 2)

Nagoya, Aichi

1,370

November 1, 2016

Kitaadachi-gun, Saitama

91

January 16, 2017

Moriya, Ibaraki

4,111January 31, 2017

Total

5,572

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

Features

Trade area

NSC (Neighborhood Shopping Centers)

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

Three to fivekilometer

SM (Supermarkets)

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

Three kilometer

CSC (Community Shopping Centers)

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

Five to ten
kilometer

Urban Station-Front Shopping Centers

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

Three to ten
kilometer

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 theacquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; androunded down to the nearest one million yen).
Note 3: KRR acquired the restaurant 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)

KRR also acquired a silent partnership equity interest (acquisition price of 100 million yen) of JRP8 GK, which
acquired trust beneficiary interest of Yumemachi Narashinodai Mall, to secure flexible acquisition opportunities in
the future as well as opportunities for additional revenues on October 31, 2016. Kenedix, Inc. acquired the rest of thesilent partnership equity interest of JRP8 GK.

18

(B) Management and Operation of Assets
KFM provides property management services for all of the properties owned by KRR at the end of the fiscal period
under review (March 31, 2017). By using the same company for both asset management and property management
services, KRR aims to build stronger relationships with tenants and increase returns from its portfolio. Furthermore, byimplementing retail property management that better reflects the needs of KRR’s tenants, KRR strives to accumulate
know-how and improve tenant satisfaction. KRR invests primarily in neighborhood and community shopping centersthat cater to the day-to-day needs of customers. The portfolio is diversified in terms of properties, tenants and othercharacteristics with a goal to generate consistent long-term cash flows. At the same time, a portion of the rent includes
sales-linked rent to explore the upside potential (Note 1) for rental income. By using these measures, KRR aims to pursue a
portfolio that achieves both stability and growth.
As of the end of the fiscal period under review, the portfolio as a whole performed well with an overall occupancy ratioof 99.6%. Furthermore, the portfolio is diversified in terms of tenants as there are 409 end-tenants (Note 2).
Note 1:
Note 2:“Upside potential” represents feasibility of rental income or cash flow growth.
The number of end-tenants is the sum of the number of end-tenants in a pass-through type master lease and the number of masterleassees in a sublease type master lease.

(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and the costof the funds with the objectives to achieve stable medium to long-term returns and consistent growth of assets undermanagement.
(Debt Finance)
During the fiscal period under review, KRR borrowed 4,000 million yen for the acquisition of properties and 6,500
million yen for refinancing. On the other hand, KRR prepaid 600 million yen using the proceeds from the issuance ofinvestment corporation bonds. Consequently, borrowings totaled 72,700 million yen and interest-bearing debt
including investment corporation bonds (excluding interest-bearing tenant leasehold and security deposits) totaled
74,700 million yen at the end of the fiscal period under review (March 31, 2017).
When undertaking borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. On the other
hand, KRR partially borrowed short-term loans from the point of flexibility under the financing strategy, also
controlling financing cost. KRR may use swaps to fix the interest payments to hedge against the risk of a rise in interest
rates.
(Investment Corporation Bonds)
To diverse financing methods, KRR issued investment corporaion bonds as follows. Investment corporation bonds atthe end of the fiscal period under review (March 31, 2017) totaled 2,000 million yen. Of the total amount raised, 1,380
million yen was used for the acquisition of K's Denki Shin-Moriyama (Land) on November 1, 2016 and certain related
costs pertaining to the acquisition, and 600 million yen was used for partial prepayment of borrowings with drawdown
date of October 3, 2016.
Bonds
1st Series Unsecured Investment
Corporation Bonds
2nd Series Unsecured Investment
Corporation Bonds
Note:

Issuance date
October 31,
2016
October 31,
2016

Balance as ofMarch 31, 2017
(million yen)Interest rate
(%)

1,000

0.200

1,000

0.600

Maturity date

Redemption
methodRemarks

October 29,
2021
October 30,
2026

Full onmaturity(Note)

Ranking pari passu among the specified investment corporation bonds

As a result, the average remaining years to maturity is 4.5 years, the weighted average interest rate is 0.99%, thelong-term debt ratio (Note 1) is 84.6% and the LTV ratio (Note 2) is 40.4%.
Note 1:
Note 2:Long-term debt ratio = (Long-term borrowings + Investment corporation bonds) / (Borrowings + Investment corporation bonds)
KRR has changed the definition of LTV ratio on May 18, 2017 as follows.
(Before the change)
LTV ratio = (Loans payable + Investment corporation bonds + Tenant leasehold and security deposits - Amounts reserved for return oftenant leasehold and security deposits) / (Total assets - Amounts reserved for return of tenant leasehold and security deposits)(After the change)
LTV ratio = (Loans payable + Investment corporation bonds) / Total assets
LTV ratios before and after the definition change from the end of the first fiscal period to the end of the third fiscal period are as follows.
First fiscal period
Second fiscal period
Third fiscal period
as of September 30, 2015
as of March 31, 2016as of September 30, 2016
LTV (Before the change)

40.6%

42.7%

42.5%

LTV (After the change)

35.4%

38.3%

38.6%

19

(Credit Ratings)
The status of the credit ratings as of March 31, 2017 is as follows.
Credit rating agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the ratings
Long-term issuer rating

A (Outlook: Positive)

Rating on bonds

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

100,000,000,000 yen

Planned issuance period

October 7, 2016 to October 6, 2018

Use of funds

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

KRR issued the 1st Series Unsecured Investment Corporation Bonds (1,000 million yen) and the 2nd Series
Unsecured Investment Corporation Bonds (1,000 million yen) on October 31, 2016, based on this shelf registration
statement.
iv) Results of Operations
For this fiscal period, revenue was 6,430 million yen, operating income was 3,021 million yen, ordinary income was2,556 million yen and net income was 2,552 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distributionof 2,553,287,800 yen which is almost equivalent to the earnings (as defined in Article 136-1 of Act of Investment Trustand Investment Corporations) excluding the reversals of allowance for temporary adjustment (as defined in Article
2-2-30 of the Ordinance on Accountings of Investment Corporations) for the fiscal period. Cash distributions are paidin accordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments).
Consequently, the distribution per unit for the fiscal period was 6,044 yen.

20

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

Type of issue

Notes
Increase

October 3, 2014

Private placement forincorporation

February 9, 2015

Unitholders’ capital(in million yen)

Total number of units issued andoutstanding (units)
Balance

Increase

Balance

750

750

150

150

(Note 1)

Public offering

254,250

255,000

56,43056,580(Note 2)

March 11, 2015

Capital increase throughthird-party allocation

5,750

260,750

1,276

57,857(Note 3)October 1, 2015

Public offering

88,750349,500

18,54776,404(Note 4)

October 21, 2015

Capital increase throughthird-party allocation

5,750

355,250

1,201

77,606(Note 5)

April 20, 2016

Public offering

64,000419,250

15,856

93,463(Note 6)

Capital increase through
3,200
422,450
792
94,256third-party allocation
Issued at issue price of 200,000 yen per unit for incorporation.
Issued at issue price of 230,000 yen per unit (issue amount of 221,950 yen per unit) for acquisition of new properties.
Issued at issue amount of 221,950 yen per unit for repayment of borrowings.
Issued at issue price of 216,543 yen per unit (issue amount of 208,991 yen per unit) for acquisition of new properties.
Issued at issue amount of 208,991 yen per unit for repayment of borrowings.
Issued at issue price of 256,717 yen per unit (issue amount of 247,764 yen per unit) for acquisition of new properties.
Issued at issue amount of 247,764 yen per unit for repayment of borrowings.

May 18, 2016
Note 1:
Note 2:
Note 3:Note 4:Note 5:Note 6:Note 7:(Note 7)(Changes in Unit Price at Tokyo Stock Exchange)
The highest and lowest closing prices of the investment units listed on J-REIT section of the Tokyo Stock Exchange
for each fiscal period are as follows.
Fiscal period
For the fiscal period
endedFirst fiscal period

Second fiscal period

Third fiscal period

Fourth fiscal period

September 30, 2015

March 31, 2016

September 30, 2016

March 31, 2017

Highest

JPY 309,500

JPY 282,700

JPY 296,100

JPY 275,000

LowestJPY 224,500

JPY 226,800

JPY 240,000

JPY 235,200

,

,

,

21

(4) Distributions
In accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution of
2,553,287,800 yen, which is almost equivalent to the earnings (as defined in Article 136-1 of Act of Investment Trustand Investment Corporations) excluding the reversals of allowance for temporary adjustment (as defined in Article
2-2-30 of the Ordinance on Accountings of Investment Corporations) for the fiscal period. Cash distributions are paidin accordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments).
Consequently, the distribution per unit for the fiscal period was 6,044 yen.
(in thousands of yen)
Fiscal period
For the fiscal period ended

First fiscal period
September 30, 2015

Second fiscal period
March 31, 2016

Third fiscal period
September 30, 2016

Fourth fiscal period
March 31, 2017

1,933,270

2,427,985

2,518,802

2,584,343

70

206

31,417216

1,933,200

2,432,041

2,523,716

2,553,287[7,414 yen]

[6,846 yen]

[5,974 yen]

[6,044 yen]

1,933,200

2,427,778

2,487,385

2,553,287[7,414 yen]

[6,834 yen]

[5,888 yen]

[6,044 yen]

－

4,263

36,330－[－][12 yen][86 yen]

[－]

－

4,263

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

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

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

22

(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, attention should be paid touncertainties about the overseas economy and politics regarding the direction of U.S. financial policies, the policies of
the new U.S. administration, etc. Attention also needs to be paid to changes in domestic economic environment, suchas fluctuation of yen due to a rise in protectionism and effects of “Quantitative and Qualitative Monetary Easing with
Yield Curve Control” including 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 KRR anticipates that
this trend to continue.
In the real estate trading market, KRR anticipates the high level of transaction volume to continue because of the strong
appetite of J-REITs and other investors to acquire properties. The Bank of Japan’s monetary easing measures will help
provide continuous supply of adequate funds in the real estate market. However, investors should also keep in mind therisk of changes in banks’ lending attitude towards real estate sector, as amount of banks’ outstanding loans towards realestate sector reached new highs.
From a medium to long-term perspective, to generate a steady stream of rental revenue, consistently increase KRR’s
assets and establish a suitable financial position, KRR will continue to manage assets based on the following policies.
(A) Investment Strategy for New Properties and Disposition Policy
KRR receives a variety of support from many sources in order to achieve steady growth of KRR’s assets and increase
the value of KRR’s assets. One source is the Kenedix Group, including Kenedix, Inc., the parent company of KFM (Note).
KRR also receives support from KRR’s Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., Nippon
Commercial Development Co., Ltd., P&D Consulting Co., Ltd., and ITOCHU Corporation. KRR is implementing a
growth strategy that takes full advantage of the external growth opportunities created by the large and diverse
acquisition pipeline made possible by the support of these companies.
When acquiring properties, KRR makes decisions based on all applicable factors with emphasis on four parameters: theretail property’s attractiveness, location, profitability and the tenant mix. By using this selection process, KRR invests
in retail properties that have competitive advantages, and prospects for stable cash flow and asset value growth. KRR
also invests in land ownership interests underlying retail properties. Regarding land-only properties, KRR makes theseinvestments after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset value ofthe land, and the proportion of land-only properties in KRR’s portfolio. KRR may also consider making an equity
investment in a tokumei kumiai (silent partnership) for the acquisition of preferential negotiation rights andopportunities for additional revenues, provided that KRR is given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, KRR makes decisions based primarily on the significance of theseproperties in the context of the portfolio. This is assessed by comprehensive evaluation of the outlook for future
profitability and asset value determined based on its current profitability and market trends.
Note:

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

(B) Management Strategy for Existing Properties
KRR is committed to building a portfolio that can pursue both stability and growth. KRR believes that implementing
integrated asset and property management services makes it possible to properly manage retail properties and pursue
internal growth. Furthermore, this integrated management framework facilitates activities to enliven local communities
where KRR’s properties are located, enabling KRR to aim for medium to long-term growth in asset value.
To accomplish these goals, KFM oversees properties owned by KRR while placing priority on the following themes.
・“One-stop” asset management and property management services
・Continuously implementing a retail property management cycle through KRR’s in-house property management
services
・Pursuit of internal growth through management of retail properties
・Directing investments and management policies to enliven local communities in the medium to long-term“One-stop” asset management and property management services
KRR plans to use the integrated asset management and property management services of KFM for strengthening
relationships with tenants and making the portfolio more profitable.
Continuously implementing a retail property management cycle through KRR’s in-house property management
services
KFM provides property management services for all of KRR’s properties for the purposes of performing retail property
management that better reflects the needs of the tenants as well as accumulating know-how and improving tenantsatisfaction. Specifically, KRR uses direct contact with tenant companies at KRR’s properties in order to strengthen
tenant relationships and make properties more profitable. To this end, KRR maintains periodic communication withtenants and perform questionnaire surveys to customers for monitoring of market conditions, so that KRR can identify
the needs of tenants and the customers visiting their sites. This process makes it possible to find issues that stand in theway of achieving greater satisfaction for tenants and their customers. Once KRR has discovered points that require
attention, KRR takes actions that take full advantage of the resources and knowledge regarding retail properties within23the Kenedix Group. Solutions include measures such as the effectively utilizing capital expenditures, optimizing tenantmix, realizing growth in asset value by pursuing property expansions, and cutting costs, to improve tenant satisfaction
and acquire more know-how.
Pursuit of internal growth through management of retail properties
KRR seeks to improve the profitability and value of its portfolio through proper management of retail properties.
i. Effectively utilize capital expenditure
KRR will use proper and well-timed capital expenditures to increase the satisfaction of tenants and make its
properties more competitive.
ii. Optimize tenant mix
KRR will constantly work on attracting new tenants that are highly appealing to shoppers and replace tenants withothers, optimizing tenant composition, in order to seek stable revenue and higher profitability by attracting morecustomers.
iii. Realize growth in asset value by pursuing property expansions
KRR will use the extensive knowledge involving retail properties of the Kenedix Group and KRR’s Alliance
Companies to utilize the underutilized space (Note) at properties and expand properties. These measures will take into
account the competitive position of each property, the effect on KRR’s financial position and other factors. By
increasing space that can be leased, KRR aims to increase revenue and asset value.
Note:

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

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

24

(6) Important Subsequent Events
KRR passed resolutions at the Board of Directors Meeting held on March 31, 2017 and April 11, 2017, to issue newinvestment units to fund the acquisition of specified assets. Payments for the issuance of new investment units
through public offering and through third-party allotment have been completed on April 18, 2017 and May 17, 2017,
respectively. KRR used the net proceeds through third-party allotment for the repayment of the short-term loans
payable.
As a result, unitholders' capital totaled 113,399,022,050 yen and total number of investment units issued andoutstanding increased to 507,700 as of May 17, 2017.
Issuance of new investment units through public offerings

Total number of units issued:
Issue price (offer price):
Total amount of issue price (total offer price):
Paid-in amount (issue amount):
Total paid-in amount (total issue amount):
Payment date:81,250 units(Domestic 44,592 units, International 36,658 units)
232,537 yen per unit
18,893,631,250 yen
224,547 yen per unit
18,244,443,750 yen
April 18, 2017

Issuance of new investment units through third-party allotment

Total number of units issued:
Paid-in amount (issue amount):
Total paid-in amount (total issue amount):
Payment date:
Allottee:

4,000 units
224,547 yen per unit
898,188,000 yen
May 17, 2017
SMBC Nikko Securities Inc.

25

(Reference Material)(A) Acquisition of Assets
KRR acquired eight assets (acquisition price of 32,664 million yen).
“Acquisition price” represents the amount specified in the sale and purchase agreement for the trust beneficiaryinterests, exclusive of the various expenses (acquisition expenses, property tax, city planning tax, consumption tax,etc.) required in the acquisition of the following assets.
Property Property
numbertype

Property nameLocation

SellerAcquisition price(million yen)Appraisal value(million yen)

Acquisition date

T-18

NSC

Totsuka-Fukaya Shopping
Center (Land)

Yokohama,
Kanagawa

Sumitomo Mitsui Financeand Leasing Co., Ltd.

4,170

4,290

April 19, 2017

T-19

NSC

Yumemachi Narashinodai Mall

Funabashi,
Chiba

JRP8 GK

3,416

3,520

April 19, 2017

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

GK KRF63

3,097

3,220

May 18, 2017

T-21

SS

Prime Square Jiyugaoka

Meguro ward,
Tokyo

Undisclosed (Note)

2,820

2,850

April 19, 2017

T-22

SS

Round1 Ichikawa-Onitaka

Sumitomo Mitsui Finance
Ichikawa, Chiba and Leasing Co., Ltd.

1,880

1,970

April 19, 2017

F-2

SS

Round1 Stadium
Hakata-Hanmichibashi

Fukuoka,
Fukuoka

Sumitomo Mitsui Financeand Leasing Co., Ltd.

5,020

5,190

April 19, 2017

F-3

NSC

Kurume-Nishi Shopping Center

Kurume,Fukuoka

M&K Tokutei Mokuteki
Kaisha

1,515

1,600

April 19, 2017

R-10

NSC

Sun Street Hamakita

JRP9 GK

10,746

10,890April 27, 201732,66433,530

-

Total
Note:

Hamamatsu,
Shizuoka--

Undisclosed as KRR has not obtained consent from the previous owner.

(B) Financing
KRR borrowed funds for the acquisitions on April 19, 2017 (1,200 million yen for Series 11), on April 27, 2017(11,300 million yen for Series 13) and on May 18, 2017 (3,200 million yen for Series 14) and for the repayment of theborrowings on April 21, 2017 (5,570 million yen for Series 12).
KRR also entered into agreements on commitment lines on March 31, 2017 to secure flexibility and stability infinancing method, for potential needs of funds as follows.
Counterparty

Limit of maximum amount(million yen)Contract period

Remarks

Sumitomo Mitsui Banking Corporation

1,000

April 1, 2017 to March 31, 2018

Unsecured, unguaranteed

Mizuho Bank, Ltd.

1,000

April 1, 2017 to March 31, 2019

Unsecured, unguaranteed

26

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

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

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

260,750 units

355,250 units

422,450 units

422,450 units

Unitholders’ capital

57,857 million yen

77,606 million yen

94,256 million yen

94,256 million yen

Number of unitholders

8,954

10,876

10,618

10,072(2) Matters Concerning Investment Units
The following is a list of major unitholders as of March 31, 2017.
Name

Location

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

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

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

87,101

20.61

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

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

43,753

10.35

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

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

29,193

6.91

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

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

16,873

3.99

16,318

3.86

12,758

3.02

8,018

1.89

5,857

1.38

JP MORGAN CHASE BANK 385628

THE BANK OF NEW YORK MELLON SA/NV 10
THE BANK OF NEW YORK,NON-TREATY JASDEC ACCOUNTSIX SIS LTD.

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

KENEDIX, INC.

6-5 Nihonbashi Kabutocho, Chuo-ku, Tokyo

5,750

1.36

GOLDMAN SACHS INTERNATIONAL

Roppongi Hills Mori Tower
6-10-1 Roppongi, Minato-ku, Tokyo
Standing proxy: Goldman Sachs Japan Co., Ltd.

5,248

1.24

230,869

54.65

Total
Note: “Ratio” is the ratio to total number of units issued and outstanding, 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, 2017
Position

Name

Executive Director Akihiro Asano

Director & COO, Head of Retail REIT Department, KFM

1,500

Yoshitoshi Yasu

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

1,500

Mai Ishiwatari

Partner, Shiroyama-Tower Law OfficeDirector, Cocone Corporation

1,500

－

12,900Supervisory
Director(Note 1)

Independent
Auditor

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

Other concurrent title

Ernst & 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 writing a comfort letter for the issuance of investment corporation bonds.

ii) Policy on Decisions to Terminate or not Reappoint the Accounting Auditor
The KRR Board of Directors will consider the termination of the Accounting Auditor pursuant to the provisions of theInvestment Trust Act of Japan. The directors will also consider not reappointing the Accounting Auditor after
examining the quality of audits, compensation for auditing and other applicable items.
(4) Asset Manager, the Custodian and Administrators
Asset manager, the custodian and administrators as of March 31, 2017 are as follows.
Operational role

Name

Asset Manager

Kenedix Real Estate Fund Management, Inc.

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

Financial Agent for Investment Corporation Bonds

Sumitomo Mitsui Trust Bank, Ltd.

28

Status on Investment Properties(1) Component of Assets
Third fiscal period
as of September 30, 2016
Type ofspecified asset

Fourth fiscal period
as of March 31, 2017

Areas

Property type

(Note 1)

Total amount held
(Millions of yen)

Total amount held
(Millions of yen)

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

Tokyo metropolitan
area

71,15939.7

71,122

38.4

Greater Osaka area

45,11725.2

45,000

24.3

Greater Nagoya area

12,636

7.0

13,971

7.6

Fukuoka area

1,499

0.8

1,485

0.8

Ordinance-designatedcities, core cities andother areas

30,99517.3

35,200

19.0

－

－

－

－

161,408

90.0

166,782

90.1

－

－

101

0.1

Bank deposits and other assets

17,951

10.0

18,153

9.8

Total assets

179,360

100.0

185,037

100.0

Neighborhood,community andother shopping
centers for daily
needs

Other retailproperties－

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

29

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

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

Leased area(m2)

(Note 1)

(Note 2)

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

T-1

Fululu Garden Yachiyo

14,94877,057.56

75,694.45

98.2

11.6

RetailO-4Blumer HAT Kobe

11,48924,185.02

23,968.51

99.1

7.5

RetailR-1

Roseo Mito

10,031

48,296.15

48,161.79

99.7

5.8

Retail

T-2

MONA Shin-Urayasu

8,421

9,592.65

9,180.34

95.7

7.9

RetailO-1

Blumer Maitamon

8,416

30,037.11

29,790.80

99.2

7.5

RetailN-4

Homecenter Kohnan Sunadabashi

7,165

20,329.07

20,329.07

100.0(Note 5)RetailO-5Carino Esaka

6,622

7,540.58

7,371.52

97.8

4.5

RetailO-6

COMBOX Komyoike

6,436

25,530.44

25,530.44

100.0

3.5

Retail

T-3

Passaggio Nishiarai

5,883

10,546.25

10,342.77

98.1

4.8

Retail－－R-7

Solala Plaza
Total

Note 1:
Note 2:

Note 3:Note 4:Note 5:

5,718(Note 5)

85,135(Note 5)－(Note 5)－(Note 5)

－

－

100.0

(Note 5)99.0

(Note 5)Retail－“Leasable area” is equivalent to gross floor area of space that KRR considers to be available for lease in each property, rounded to the nearest
tenth. For land-only properties, leasable area is equivalent to land area as described in the property registry.
“Leased area” indicates the total leased area based on the lease agreements for each property as of March 31, 2017. 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, 2017 is shown. As for sublease type master leases (the master
lease in which a fixed amount of rent is received from the master lessee.), the leased area to the master lessee is shown.
“Occupancy rate” is calculated by dividing leased area by leasable area as of March 31, 2017, rounded to the nearest tenth.
“Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
KRR has 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, 2017.
Area(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
formBook value(in millions)(Note 2)

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

T

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

Fululu Garden Yachiyo

Yachiyo, Chiba

MONA Shin-Urayasu

Urayasu, Chiba

Passaggio Nishiarai

Adachi ward, Tokyo

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

T-5

NSC

Unicus Ina

Kitaadachi-gun, Saitama

T-6

NSC

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

T-7

NSC

Unicus Yoshikawa

Yoshikawa, Saitama

T-8

SS

T-9

NSC

T-10

SS

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

Life Kameido

Koto ward, Tokyo

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

O-3

NSC

O-4

NSC

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

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

Inageya Yokohama
Minamihonjuku (Land)
Gourmet City
Chiba-Chuo
Nakamachidai
Tokyu Store
Central Wellness Club
Nagatsuta Minamidai

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
Welcia Kishiwadakamori
SS(Land)

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

Yokohama, Kanagawa
Chiba, Chiba
Yokohama, Kanagawa
Yokohama, Kanagawa

Osaka, Osaka
Omihachiman, Shiga
Kobe, Hyogo
Suita, Osaka
Izumi, Osaka
Hirakata, Osaka
Kishiwada, Osaka

O-9

SM

Life Nishi-Tengachaya

Osaka, Osaka

O-10

NSC

Million Town
Tsukaguchi (Land)

Amagasaki, Hyogo

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

Evaluation value(in millions)(Note 3)

14,94815,200

8,421

8,470

5,883

6,360

5,427

5,790

4,432

4,750

3,982

4,300

3,622

3,840

2,561

2,750

4,890

5,380

3,210

3,480

3,043

3,050

1,726

1,770

1,462

1,430

770

807

3,472

3,820

1,795

1,910

1,470

1,520

8,416

9,230

2,727

2,980

2,147

2,430

11,48911,600

6,622

6,770

6,436

6,950

1,322

1,330

497

488

1,568

1,660

3,772

3,820

31

Area
(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
form(Note 2)

N

F

R

N-1

SS

Kahma Home Center
Nagoya, Aichi
Nakagawa Tomita (Land)

N-2

NSC

Valor Ichinomiya-Nishi
K’s Denki
Nakagawa Tomita (Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama (Land)

N-3

SS

N-4

SS

N-5

SS

F-1

SM

Sunny Noma

Fukuoka, Fukuoka

R-1

NSC

Roseo Mito

Mito, Ibaraki

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R-7
R-8
R-9

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

Note 2:
Note 3:

Nagoya, Aichi
Nagoya, Aichi
Nagoya, Aichi

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

NSC

P-1 Plaza Tenno

Hamamatsu, Shizuoka

NSC

Seiyu Rakuichi Moriya(Land)Moriya, Ibaraki

Total
Note 1:

Ichinomiya, Aichi

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

Evaluation value(in millions)(Note 3)

2,351

2,590

2,155

2,310

907

980

7,165

7,310

1,390

1,420

1,485

1,530

10,031

11,000

1,480

1,550

898

928

4,379

5,060

3,329

3,330

854

873

5,718

5,960

4,187

4,340

4,320

4,210

166,782

175,276“T”, “O”, “N”, “F” and “R” hereinafter refers to Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated cities, core cities and other areas, respectively.
“Location” indicates the residential address. For those without a residential address, the building or land address on the registry is shown.
“Evaluation value” shows the appraisal value stated on the real estate appraisal report created by the real estate appraisers of Daiwa Real EstateAppraisal Co., Ltd., Japan Real Estate Institute and The Tanizawa Sōgō Appraisal Co., Ltd. in accordance with the methods and standards for asset
valuation as stipulated in the KRR Articles of Incorporation as well as the regulations as stipulated by The Investment Trusts Association, Japan.

32

[Earnings Performance for the Individual Properties]
Third fiscal period
as of September 30, 2016
Area

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4

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

49

99.6

736

11.6

48

98.2

744

11.6

MONA Shin-Urayasu

1(71)

95.6

497

7.8

1(70)

95.7

506

7.9

Passaggio Nishiarai

1(41)

98.1

326

5.1

1(41)

98.1

309

4.8

Daikanyama Address
Dixsept

1(26)

98.2

268

4.2

1(26)

97.0

258

4.0

2.1

1

100.0

138

2.2

NSC

Unicus Ina

1

100.0

131

T-6

NSC

Yorktown KitaKaname

1

100.0

－

－

100.0

－

(Note 3)

1－(Note 3)(Note 3)(Note 3)

T-7

NSC

Unicus Yoshikawa

1(11)

100.0

130

2.0

1(11)

100.0

133

2.1

T-8

SS

1

100.0

1

100.0

T-9

NSC

1

100.0

1

100.0

T-10

SS

T-11

NSC

T-12

NSC

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

O-1

NSC

O-2

SM

O-3
O-4
O-5
O-6
O-7
O-8
O-9
O-10
N-1
N

Fululu Garden
YachiyoRentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%) (millions) revenue
rate (%) (millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)

T-5

T

O

Property name

Fourth fiscal period
as of March 31, 2017

N-2
N-3

NSC
NSC

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa(Land)
Unicus Kamisato(Land)－－(Note 3)(Note 3)

1

100.0

1

100.0

72

1

100.0

41

1

100.0

1

100.0

1

100.0

2

100.0

53

Life Kameido

1

100.0

－

－

(Note 3)Blumer Maitamon

49

99.1

510

1

100.0

Unicus Konosu (Land)
Inageya Yokohama
Minamihonjuku(Land)
Gourmet City
Chiba-Chuo
Nakamachidai Tokyu
Store
Central Wellness Club
Nagatsuta Minamidai

Central Square
Takadono (Land)
Piago Kahma Home
Center Omihachiman
Blumer HAT Kobe

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

1

100.0

1.1

1

100.0

72

1.1

0.7

1

100.0

41

0.6

1

100.0

1

100.0

1

100.0

2

(Note 3)－－(Note 3)(Note 3)

100.0

59

0.9

1

100.0

－

－

(Note 3)(Note 3)

8.0

50

99.2

480

7.5

－

－

1

100.0

(Note 3)(Note 3)2100.0(Note 3)－(Note 3)

0.8

－

－

(Note 3)(Note 3)

99.1

482

7.5

1(30)

97.8

289

4.5

1

100.0

226

3.5

1

100.0

1

100.0

1

2

100.0

1(41)

99.1

491

7.7

1(41)

1(30)

99.1

295

4.6

1

100.0

226

3.5

1

100.0
－

－

(Note 3)(Note 3)

1

100.0

1

100.0

44

1

100.0

－

－

(Note 3)(Note 3)

1

100.0

1

100.0

1

100.0

0.7

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

100.0

44

0.7

1

100.0

－

－

(Note 3)(Note 3)

1

100.0

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

33

Area

Property
number

Property
type

N-4

SS

N-5

SS

F-1

SM

R-1

NSC

N

F

R-2

R

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R-7

Third fiscal period
Fourth fiscal period
as of September 30, 2016as of March 31, 2017
RentalRatio toRentalNumberNumber
Occupancy revenue total rental
Occupancy revenueof tenantsof tenants
rate (%) (millions) revenue
rate (%) (millions)(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
－
－
1
100.0
1
100.0
(Note 3)(Note 3)

Property name

Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama(Land)

－

－

－
－

－

Sunny Noma

1

100.0

(Note 3)

Roseo Mito

1(22)

99.7

378

1

100.0

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

Note 2:
Note 3:

100.0

1(26)

99.1

2

100.0

1

100.0

1

100.0

1

100.0

(Note 3)

1

100.0

5.9

1(22)

99.7

－

－

1

100.0

(Note 3)(Note 3)

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

278

4.4

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

375

5.8

－

－

(Note 3)(Note 3)

270

4.2

－

－

(Note 3)(Note 3)

2.1

R-8

NSC

P-1 Plaza Tenno

7

100.0

127

2.0

7

100.0

136

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

－

－

－

－

1

100.0

(Note 3)(Note 3)

405

99.7

6,374

100.0

409

99.6

6,427

100.0

Total
Note 1:

1－

Ratio tototal rental
revenue(%)－－

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

[Overview of Investment Securities]
The following summarizes the investment securities owned by KRR as of March 31, 2017.

Asset name

Type of asset

Silent partnership equity
interest of JRP8 GK (Note 2)

Silentpartnership
equity interest

Total
Note 1:
Note 2:

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

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

Price

Price

Evaluation
profits/losses(in millions)Remarks

－

－

101

－

101

－

－

－

－

101

－

101

－

－

“Evaluation value” indicates the book value.
Asset under management is the trust beneficiary interest in real estate of “Yumemachi Narashinodai Mall”.

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

Due after one year

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

Interest rate swaps:
Receive floating / pay fixed

50,74046,890

23

Total

－

50,74046,89023

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 based on “Accounting Standards for Financial Instruments” under Japanese GAAP.
Note 3: Based on the amount provided by counterparty financial institutions.

34

(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.

35

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures (Note) for renovations, repairs and other projects that are planned forthe fifth fiscal period ending September 30, 2017. These expenditures are for real estate owned by KRR and real estatein trusts in which KRR owns trust beneficiary rights. These planned projects may include some expenditure that will berecorded as expenses rather than capital expenditures for accounting purposes.
Property
number

Property nameLocation

PurposeT-2

MONA
Shin-Urayasu

Urayasu, Chiba

First phase of renewal

O-4

Blumer HAT Kobe

Kobe, Hyogo

Changing of layout

T-6

Yorktown
Kita-Kaname

Hiratsuka,
Kanagawa

Roof waterproof

O-1

Blumer Maitamon

Kobe, Hyogo

O-5

Carino Esaka

Suita, Osaka

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

Schedule
From March 2017
to July 2017
From March 2017
to June 2017

134

－

－

85

－

－

From April 2017
to September 2017

63

－

－

LED installation to common
area

From April 2017
to September 2017

46

－

－

Escalator renewal

From April 2017
to September 2017

24

－

－

(2) Capital Expenditures during the Fiscal Period under Review
The table below shows major capital expenditures for renovations, repairs and other projects in the fiscal period underreview.
The amount of capital expenditures in the fiscal period under review was 276 million yen. There were also
expenditures of 157 million yen that were recorded as repair expenses. In total KRR spent 433 million yen on the
projects.
Property
number

Property nameLocation

PurposeSchedule

Capital expenditure(Millions of yen)

O-5

Carino Esaka

Suita, Osaka

Elevator and escalator renewal

From February 2017
to March 2017

59

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

PMAC replacement

From July 2016
to December 2016

48

R-4

Ashico Town
Ashikaga

Ashikaga, Tochigi

LED installation to common area

From January 2017
to March 2017

31

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Installation of safety devices to fire
shutters

From December 2016
to March 2017

18

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

PMAC cooling water pump replacement

From January 2017
to March 201714

Others

102

Total

276

Note: The construction of a new restaurant building in Unicus Ina is not including in the above list because it involves an acquisition of a new building.

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable36

Expenses and Liabilities(1) Expenses related to Asset Management
Third fiscal period(From April 1, 2016
to September 30, 2016)
Asset management fees (Note)(in thousands of yen)
Fourth fiscal period(From October 1, 2016
to March 31, 2017)438,769

488,477

Asset custody fees

6,375

7,549

Administrative service fees

21,792

23,972

Directors' compensation

4,500

4,500

Other operating expenses

69,052

67,039540,489591,538

Total

Note: The amount of asset management fees capitalized in addition to the amount above are 271,270 thousand yen for the third fiscal period and 55,810 thousand
yen for the fourth fiscal period.

37

(2) Status of Borrowings
Borrowings on a financial institution basis as of March 31, 2017 are as follows.
Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Sumitomo M itsui Banking Corporation

2,050,000-

2,050,000

-

0.530

October 2, 2016

Sumitomo M itsui Banking Corporation

2,450,000-

2,450,000

-

0.530

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

0.480

February 10, 2017

Resona Bank, Ltd.

250,000-

250,000-

Aozora Bank, Ltd.

250,000-

250,000-

Sumitomo M itsui Trust Bank, Ltd.

200,000-

200,000-

4,140,000--

4,140,000
0.480

April 21, 2017

360,000--

360,000

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderShort-Term Loans Payable

Sumitomo M itsui Banking Corporation
M izuho Bank, Ltd.
The Bank of Tokyo-M itsubishi UFJ, Ltd.

Averageinterest rate
(Note 2)
(Note 3)(％)

Balance at theend of period(Thousands ofyen)

Payment due date
（Note 4）Current Portion ofLong-Term
Loans Payable

1,070,000--

1,070,000

0.480

April 21, 2017

Sumitomo M itsui Banking Corporation（Note 7）-

4,500,000

600,000

3,900,000

0.480

October 3, 2017

Sumitomo M itsui Banking Corporation-

450,000-

450,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

-

450,000-

450,000

M izuho Bank, Ltd.

-

400,000-

400,000
0.430

February 10, 2018

Resona Bank, Ltd.

-

250,000-

250,000

Aozora Bank, Ltd.

-

250,000-

250,000

Sumitomo M itsui Trust Bank, Ltd.

-

200,000-

200,000

Sub Total

12,070,000

6,500,000

7,100,000

11,470,000

0.545

February 10, 2018

0.751

February 10, 2020

0.865

February 10, 2021

0.978

February 10, 2022

Sumitomo M itsui Banking Corporation (Note 8)

2,300,000--

2,300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. (Note 8)

800,000--

800,000

M izuho Bank, Ltd. (Note 8)

400,000--

400,000

M izuho Trust & Banking Co., Ltd. (Note 8)

350,000--

350,000

3,850,000--

3,850,000

Sumitomo M itsui Banking Corporation

2,400,000--

2,400,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000

M itsubishi UFJ Trust and Banking Corporation

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000

Resona Bank, Ltd.

500,000--

500,000

The Gunma Bank, Ltd.

400,000--

400,000

The M usashino Bank, Ltd.

400,000--

400,000

M izuho Bank, Ltd.

350,000--

350,000

M izuho Trust & Banking Co., Ltd.

300,000--

300,000

Sumitomo M itsui Banking Corporation

3,000,000--

3,000,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

700,000--

700,000

Sumitomo M itsui Trust Bank, Ltd.

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Ltd.

450,000--

450,000

M izuho Bank, Ltd.

400,000--

400,000

Sumitomo M itsui Banking Corporation

2,600,000--

2,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd.

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

600,000--

600,000

Aozora Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M izuho Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

Development Bank of Japan Inc.（Note 6）

1,500,000--

1,500,000

0.925

February 10, 2021

Development Bank of Japan Inc.（Note 6）

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

Sub Total

Long-Term Loans Payable

Use

Remarks(Note 5)

Unsecured/Non-guaranteed(Note 5)

Unsecured/Non-guaranteed(Note 5)

Unsecured/Non-guaranteed38

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

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

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

Resona Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M itsubishi UFJ Trust and Banking Corporation

400,000--

400,000

Development Bank of Japan Inc.（Note 6）

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.（Note 6）

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

M izuho Bank, Ltd.

710,000--

710,000

Sumitomo M itsui Trust Bank, Ltd.

620,000--

620,000

Sumitomo M itsui Trust Bank, Ltd.

450,000--

450,000

0.803 September 30, 2024

Development Bank of Japan Inc.（Note 6）

890,000--

890,000

0.760 September 30, 2024

Sumitomo M itsui Banking Corporation

2,670,000--

2,670,000

0.932

April 21, 2026

The Bank of Tokyo-M itsubishi UFJ, Ltd.

890,000--

890,000

0.888

October 31, 2025

0.550 September 30, 2021

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderThe Bank of Tokyo-M itsubishi UFJ, Ltd.

Averageinterest rate
(Note 2)
(Note 3)(％)

Payment due date
（Note 4）Long-Term Loans Payable

0.534

M arch 31, 2019

0.975

M arch 31, 2023

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

Use

Remarks(Note 5)

Unsecured/Non-guaranteed

0.368 September 30, 2019

The Gunma Bank, Ltd.（Note 6）-

500,000-

500,000

Development Bank of Japan Inc.（Note 6）-

2,000,000-

2,000,000

1.049

M izuho Trust & Banking Co., Ltd.（Note 6）-

1,000,000-

1,000,000

1.049

Resona Bank, Ltd.

-

500,000-

500,000

1.002

Sub Total
Total

53,380,000

4,000,000-

57,380,000

69,300,000

10,500,000

7,100,000

72,700,000

January 31, 2027

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

5,650,000

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

Due after 3 years
through 4 years
7,000,000

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

Due after 5 years
28,900,000

Note 2: All debts except for the following Note 6 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 consideration the effects of the interest rate swaps are indicated.
Note 4: All the repayment methods of debt financing except for the following Note 7 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: Borrowings at a fixed rate.
Note 7: Partial prepayment of 600,000 thousand yen was made on October 31, 2016.
Note 8: Borrowings are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal period.

39

(3) Status of Investment Corporation Bonds
Balance as of
Balance as ofInterest rate
Redemption
Issuance date October 1, 2016 March 31, 2017
Maturity date(%)
method(million yen)(million yen)
1st Series Unsecured Investment October 31,
October 29,
1,000
0.200
－
Corporation Bonds
2016
2021
Full onmaturity
2nd Series Unsecured Investment October 31,
October 30,
1,000
0.600
－
Corporation Bonds
2016
2026
Bonds

Use

Remarks(Note 1)

(Note 2)

Note 1: “Use” is acquisition funds for specified assets, repayment funds for borrowings, etc.
Note 2: Ranking pari passu among the specified investment corporation bonds(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable40

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

Acquisition price(in millions)(Note 1)

(Note 1)

Trust beneficiaryinterest in real estate

T-5

Unicus Ina (Note 2)

January 16, 2017

91

－

－

－

－

Trust beneficiaryinterest in real estate

N-5

K’s Denki
Shin-Moriyama (Land)

November 1, 2016

1,370

－

－

－

－

Trust beneficiaryinterest in real estate

R-9

Seiyu Rakuichi Moriya(Land)

January 31, 2017

4,111

－

－

－

－

Silent partnership
equity interest－

Silent partnership equity
interest of JRP8 GK

October 31, 2016

100

－

－

－

－

5,672

－

－

－

－

Total

Note 1: “Acquisition price” and “Disposition price” represent the purchase price of each trust beneficiary interest specified in purchase agreement in relation
to the acquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; and rounded
down to the nearest one million yen).
Note 2: KRR acquired the restaurant 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.

(2) Acquisition and Disposition of Other Assets
Other assets except real estate properties and asset-backed securities mentioned above mostly consist of cash anddeposits and cash and deposits in trust.
(3) Appraisal Values of Specific Assetsi) Real Estate
Acquisition Ownership Property/disposition
form
numberTrust
beneficiary
Acquisition interest inreal estate

N-5

Property name

K’s Denki
Shin-Moriyama (Land)

Acquisition dateNovember 1, 2016

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

(Note 2)

1,370

1,410

Appraiser

Evaluation dateJapan Real Estate
InstituteOct.1, 2016

Daiwa Real Estate
Jan.1, 2017
Appraisal Co., Ltd.
Note 1: “Acquisition price” represents the purchase amount (excluding acquisition costs and consumption taxes) of each property or beneficiary right ofreal estate in trust as stated in the Sales and Purchase Agreement.
Note 2: “Appraisal value” of specific assets above was calculated in accordance with the guideline of “Real Estate Appraisal Standards, Chapter 3,
Appraisal of Securitized Real Estate.”
R-9

Seiyu Rakuichi Moriya(Land)

January 31, 2017

4,111

4,190

ii) Investment Securities
Acquisition/disposition
Acquisition

Type of asset

Silent partnership equity interest of JRP8 GK

Acquisition date

October 31, 2016

Acquisition price(in millions)Appraisal value(in millions)(Note 1)

(Note 2)100

110Note 1: “Acquisition price” represents the purchase amount (excluding acquisition costs) of the silent partnership equity interest as stated in the Silent
Partnership Agreement.
Note 2: “Appraisal value” above was reported by Ernst & Young ShinNihon LLC in accordance with the Japan Institute of Certified Public
Accountants Industrial Audit Committee Report No.23, “Research for Specified Assets Value held by Investment Trusts and Investment
Corporations” at the time of acquisition or disposition of assets, which KRR received.

iii) Others
With regard to transactions and contracts entered by KRR whose values shall be investigated based on the Article 201of the Act on Investment Trusts and Investment Corporations, Ernst & Young ShinNihon LLC performs aninvestigation of transactions other than those stated in “(1) Real Estate” above. For the fiscal period from October 1,
2016 to March 31, 2017, the transaction subject to such investigation was one interest rate swap transaction, for which
KRR received a report from Ernst & Young ShinNihon LLC.

41

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

Sale

5,581

-

Transaction with related-party
JRP8 GK100(1.8%)

-

(-%)

Total

100

(1.8%)-(-%)ii) Amounts of Fees Paid
Not applicableNote:

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

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

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” and “Notes to Financial Statements” presented later in this report.
(2) Change in Calculation of Depreciation
Not applicable(3) Change in Valuation of Real Estate Properties and Infrastructure Assets
Not applicable(4) 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 applicable

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.

43Financial Statements(3rd Fiscal Period: from April 1, 2016 to September 30, 2016)(4th Fiscal Period: from October 1, 2016 to March 31, 2017)
Independent Auditor’s Report
Balance Sheets
Statements of Income and Retained Earnings
Statements of Changes in Net Assets
Statements of Cash Flows
Notes to Financial Statements

45

Kenedix Retail REIT Corporation

Balance Sheets
As of March 31, 2017 and September 30, 2016
As of March 31, 2017

As of September 30, 2016

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 8 and 10)¥5,258,633¥4,367,293

Cash and deposits in trust (Notes 8 and 10)

11,575,715

11,615,129

Operating accounts receivable

182,993

206,398

Prepaid expenses

41,020112,712

Consumption taxes receivable
Other
Total current assets-

477,707

2,987

432

17,061,349

16,779,673

Non-current assets
Property, plant and equipment (Notes 16 and 19)
Construction in progress-

35,24342,757,457

42,409,745

Accumulated depreciation(2,377,464)(1,707,093)

Buildings in trust, net (Note 3)

40,379,992

40,702,651

1,822,887

1,808,630

Accumulated depreciation(145,181)(106,872)

Structures in trust, net (Note 3)

1,677,705

1,701,758

Machinery and equipment in trust

203,295

203,295

Accumulated depreciation(11,445)(6,582)

Machinery and equipment in trust, net

191,850

196,712

Buildings in trust

Structures in trust

Tools, furniture and fixtures in trust

60,63551,813

Accumulated depreciation(10,639)(6,700)Tools, furniture and fixtures in trust, net (Note 3)

49,995

45,112

123,937,095

118,225,350

24,78412,015

166,261,423

160,918,844

520,598

524,576

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 16)
Other

2,064

1,883

522,662

526,460

Investment securities

101,690-

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

36,03536,035Long-term prepaid expenses

648,066

651,956

Long-term deposits

124,960

124,960

Other

23,395-

Total intangible assets
Investments and other assets

Total investments and other assets

944,147

822,951

167,728,234

162,268,256

Organization costs

25,33130,369Investment corporation bond issuance costs

17,671-

Investment unit issuance costs

204,840

281,763

Total deferred assets

247,843

312,132¥185,037,427¥179,360,062

Total non-current assets
Deferred assets

Total assets

See accompanying notes to financial statements.

46

As of March 31, 2017

As of September 30, 2016

(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥516,631¥453,515

Short-term loans payable (Notes 10 and 20)

11,470,000

12,070,000

Current portion of long-term loans payable (Notes 10 and 20)

3,850,000-

Accounts payable-other

280,035

267,670

Accrued expenses

12,501

7,108

Income taxes payable

3,275

1,081

Accrued consumption taxes

245,842-

Advances received

878,241

859,300

Deposits received

124,240

122,669

17,380,767

13,781,345

Total current liabilities
Non-current liabilities
Investment corporation bonds (Notes 10 and 21)

2,000,000-

Long-term loans payable (Notes 10 and 20)

57,380,000

57,230,000

Tenant leasehold and security deposits (Note 10)

-

2,500

11,397,149

11,518,586

Asset retirement obligations (Note 14)

23,33523,190Other

32,63964,677

70,833,124

68,838,953

88,213,892

82,620,298

94,256,390

94,256,390(40,593)(4,263)Tenant leasehold and security deposits in trust (Notes 3 and 10)

Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments (Note 4)
Total deduction from unitholders' capital
Unitholders' capital, net(40,593)(4,263)

94,215,796

94,252,127

2,584,343

2,518,802Surplus
Unappropriated retained earnings
Total surplus

2,584,343

2,518,802

96,800,139

96,770,929

Deferred gains or losses on hedges (Notes 10 and 11)

23,395(31,166)

Total valuation and translation adjustments

23,395(31,166)

Total unitholders' equity
Valuation and translation adjustments

Total net assets (Note 5)

96,823,535

96,739,763

Total liabilities and net assets¥185,037,427¥179,360,062

See accompanying notes to financial statements.

47

Kenedix Retail REIT Corporation

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

From April 1, 2016

to March 31, 2017

to September 30, 2016

(in thousands of yen)
Operating revenues
Rent revenue-real estate (Note 6)
Other lease business revenue (Note 6)
Dividend income
Total operating revenues¥5,524,740¥5,405,789

902,740

968,3783,131-

6,430,612

6,374,168

2,817,984

2,860,183

488,477

438,769

Operating expenses
Expenses related to rent business (Note 6)
Asset management fees
Asset custody fees

7,549

6,375

Administrative service fees

23,972

21,792

Directors' compensation

4,500

4,500

Other operating expenses

67,03969,052

Total operating expenses

3,409,522

3,400,673

3,021,090

2,973,494

Interest income

52

51Interest on refund

164

251

Total non-operating income

217

303

Operating income
Non-operating income

Non-operating expenses
Interest expenses

310,372

306,343

Interest expenses on investment corporation bonds

3,337

-

Financing-related expenses

67,38565,780

Amortization of organization costs

5,038

5,066

Amortization of investment corporation bond issuance costs

1,404

-

Amortization of investment unit issuance costs

76,922

76,922

464,459

454,113

Ordinary income

Total non-operating expenses

2,556,848

2,519,684

Income before income taxes

2,556,848

2,519,684

3,922

1,088

Income taxes
Current
Total income taxes
Net income

3,922

1,088

2,552,926

2,518,595

Retained earnings brought forward

31,417

206

Unappropriated retained earnings¥2,584,343¥2,518,802

See accompanying notes to financial statements.

48

Kenedix Retail REIT Corporation

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

Surplus

Deduction from unitholders'
capitalUnitholders'

Allowance for

Total

Unitholders'

capitaltemporary

deduction from

capital, netdifference

unitholders'adjustments

capitalUnappropriatedretainedearnings

Total
Total

unitholders'surplusequity¥2,427,985¥80,034,634(in thousands of yen)
Balance as of April 1,2016 (Note 7)¥77,606,649

¥

-

¥

-

¥77,606,649¥2,427,985

Changes of items during
the period
Issuance of new
investment units

16,649,740

16,649,740

16,649,740

Dividends fromsurplus(2,427,778)(2,427,778)(2,427,778)

Distributions inexcess of earnings
from allowance fortemporary difference
adjustments(4,263)(4,263)(4,263)

Net income(4,263)2,518,595

2,518,595

2,518,595

Net changes of items
other thanunitholder’s equity
Total changes of items
during the period

16,649,740(4,263)(4,263)

16,645,477

90,81790,817

16,736,294¥94,256,390¥(4,263)¥(4,263)¥94,252,127¥2,518,802¥2,518,802¥96,770,929(2,487,385)(2,487,385)(2,487,385)

2,552,926

2,552,926

2,552,926

Balance as of September
30, 2016 (Note 7)
Changes of items during
the period
Dividends fromsurplusDistributions inexcess of earnings
from allowance fortemporary difference(36,330)

adjustments(36,330)(36,330)

Net income(36,330)

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

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

Balance as of March 31,2017 (Note 7)49

Valuation and translation
adjustments
Deferred gains

Total valuation

or losses on

and translation

hedgesadjustments

Total net assets(in thousands of yen)
Balance as of April 1,2016 (Note 7)

¥

-

¥

-

¥80,034,634

Changes of items during
the period
Issuance of new
investment units

16,649,740

Dividends fromsurplus(2,427,778)

Distributions inexcess of earnings
from allowance fortemporary difference
adjustments(4,263)

Net income

2,518,595

Net changes of items
other thanunitholder’s equity(31,166)(31,166)(31,166)(31,166)(31,166)

16,705,128¥(31,166)¥(31,166)¥96,739,763

Total changes of items
during the period
Balance as of September
30, 2016 (Note 7)
Changes of items during
the period
Dividends fromsurplus(2,487,385)

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

Net income

2,552,926

Net changes of items
other thanunitholder’s equity

54,56254,56254,56254,56254,562

83,772¥23,395¥23,395¥96,823,535

Total changes of items
during the period
Balance as of March 31,2017 (Note 7)

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

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

From April 1, 2016

to March 31, 2017

to September 30, 2016

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥2,556,848¥2,519,684

Depreciation and amortization

721,929

714,452

5,038

5,066

Amortization of organization costs
Amortization of investment corporation bond issuance costs

1,404

-

Amortization of investment unit issuance costs

76,922

76,922

Interest income

(52)

(51)

Interest expenses

313,709306,343

Decrease (increase) in operating accounts receivable

23,405(14,367)

Decrease (increase) in consumption taxes receivable

477,707

32,815Decrease (increase) in prepaid expenses

71,692(78,961)

Increase (decrease) in operating accounts payable(2,220)(25,321)

Increase (decrease) in accounts payable-other

11,825(19,393)

Increase (decrease) in accrued consumption taxes

245,842-

Increase (decrease) in advances received

18,941

111,123

Increase (decrease) in deposits received

1,571(13,799)

3,889(68,932)

Decrease (increase) in long-term prepaid expenses
Other(6,558)(4,103)

Subtotal

4,521,894

3,541,476

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

52

51(308,315)(305,756)(1,728)(940)

4,211,903

3,234,831

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 in trust
Purchase of investment securities
Proceeds from investment securities
Payments for lease and guarantee deposits in trust
Proceeds from tenant leasehold and security deposits-(35,243)(5,994,725)(28,233,179)

(504)

-

(101,690)

-

3,131

-

-

(20)

-

2,500

Repayments of tenant leasehold and security deposits in trust(317,595)(314,140)

Proceeds from tenant leasehold and security deposits in trust

193,659

1,202,094

Proceeds from restricted bank deposits in trust

215,676

215,676(6,002,048)(27,162,312)

Proceeds from short-term loans payable

6,500,000

6,370,000

Payments of short-term loans payable(7,100,000)(800,000)

Proceeds from long-term loans payable

4,000,000

6,230,000

Proceeds from issuance of investment corporation bonds

1,980,924--

16,531,819

Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities

Proceeds from issuance of investment units(2,523,176)(2,430,448)

Net cash provided by (used in) financing activities

2,857,747

25,901,371

Net increase (decrease) in cash and cash equivalents

1,067,602

1,973,891

Payments of dividends

Cash and cash equivalents at the beginning of the period

13,229,301

11,255,410

Cash and cash equivalents at the end of the period (Note 8)¥14,296,903¥13,229,301

See accompanying notes to financial statements.

51

Kenedix Retail REIT Corporation

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

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporationsof Japan (the “Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local Finance Bureau(registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on the Real Estate Investment Trust Securities(J-REIT) Market of Tokyo Stock Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453) on February 10, 2015. Subsequently, KRR
raised funds through public offerings, including international offerings. As a result, the number of investment units issued as of March 31, 2017 was422,450 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needs of local area
customers and have stable demand from retailers and customers, in order to provide stable investment returns over the long term. Sponsored by
Kenedix, Inc., a leading, independent real estate asset management company, KRR entrusts its asset management and investment operations to
Kenedix Real Estate Fund Management, Inc. (“KFM”), with the following strategies.
(Note) For management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail properties that generally have the following characteristics:
a. Retail trade area of an approximate radius of one to ten kilometers (and generally, a radius of three to five kilometers), withcustomers predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods andservices
KRR acquired trust beneficiary interests in real estate (a property acquired on April 20, 2016 with an acquisition price of 1,724 million yen, 5properties acquired on April 21, 2016 with an acquisition price of 21,393 million yen and a property acquired on April 22, 2016 with an acquisition
price 4,010 million yen). For the period ended September 30, 2016, the portfolio of 40 properties as a whole performed well with an overall
occupancy ratio of 99.7% as of September 30, 2016.
KRR acquired trust beneficiary interests in real estate (a property acquired on November 1, 2016 with an acquisition price of 1,370 million yen
and a property acquired on January 31, 2017 with an acquisition price of 4,111 million yen). In addition, KRR completed an additional acquisition ofa new building through a property expansion within Unicus Ina (acquisition price of 91 million yen) on January 16, 2017. For the period ended
March 31, 2017, the portfolio of 42 properties as a whole performed well with an overall occupancy ratio of 99.6% as of March 31, 2017.
Furthermore, the portfolio was diversified in terms of tenants as there were 405 and 409 end-tenants as of September 30, 2016 and March 31,2017 in KRR’s properties, respectively.
Basis of Presentation
KRR maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted inJapan (Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments andExchange Act of Japan and related regulations, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance withJapanese GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically inorder to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain
information that might not be required under Japanese GAAP but is presented herein as additional information.
KRR’s fiscal period is a six-month period which ends at the end of March or September. KRR does not prepare consolidated financial
statements because it has no subsidiaries.

52

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

Buildings

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

From April 1, 2016
to September 30, 2016
2-70 years

Structures

8-59 years

8-59 years

Machinery and equipment

10-25 years

10-25 years

Tools, furniture and fixtures

4-10 years

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

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

53

(J) Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar
year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to said period.
Under Japanese tax regulations, the seller of the property is liable for these taxes on the property from the date of disposal to the end of thecalendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax
liabilities.
When KRR purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchasedate of each property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes arecapitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to ¥21,351 thousand and¥106,443 thousand as of March 31, 2017 and September 30, 2016, respectively.
(K) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets
and liabilities using the statutory tax rates.
(L) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes
applicable to the acquisition of assets are included in the cost of acquisition for each asset.
(M) Derivative Financial Instruments
KRR utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes ininterest rates. KRR deferred recognition of gains or losses resulting from changes in fair value of interest-rate swap contracts because thesecontracts met the criteria for deferral hedge accounting. However, KRR adopted the special treatment for interest-swap contracts if they met
the criteria for hedge accounting under this treatment. An assessment of the effectiveness of hedging is omitted for interest rate swaps
because they fulfill the requirements for the special treatment.
(N) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which are highly liquid, readily
convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of purchase.
(O) Presentation of Amounts
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed with regulatory
authorities in Japan. Unless otherwise noted, amounts are rounded down and ratios are rounded off in the accompanying financial
statements. Totals shown in the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

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

As of March 31, 2017

As of September 30, 2016
(in thousands of yen)

Buildings in trust¥2,724,085¥2,755,048

Structures in trust

52,35553,947

Tools, furniture and fixtures in trust
Land in trust
Total

2,661

2,962

7,811,297

7,811,297

10,590,399

10,623,255

54

Secured liabilities

As of March 31, 2017

As of September 30, 2016

3,245,943

3,468,617¥3,245,943¥3,468,617

Tenant leasehold and security deposits in trust
Total

4. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
The following summarizes allowance for temporary difference adustments as of March 31, 2017
1. Reasons, related assets, initial amount and allowance
Related assets, etc.

Reason for allowance

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

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

Total

Initial amount

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

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

Balance atthe end of
the period

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

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

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

Deferred gains or losses on hedges

Based on changes in the fair value of the hedging instruments, the corresponding amount is scheduled to bereversed.

The following summarizes allowance for temporary difference adustments as of September 30, 2016
1. Reasons, related assets, initial amount and allowance
Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥4,263

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

¥4,263¥

Balance atthe end of
the period-¥4,263

Reason forreversal-

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

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

5. 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.

55

6. 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, 2016 to March 31, 2017 and from April 1, 2016
to September 30, 2016 consist of the following:
From October 1, 2016

From April 1, 2016

to March 31, 2017

to September 30, 2016
(in thousands of yen)

Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues¥4,467,838¥4,393,233

Rental revenues from limited proprietary rights of land

728,620680,862

Common area charges

328,281

331,6935,524,740

5,405,789

Parking space rental revenues

162,994

163,358

Utility charge reimbursement455,670

540,060

Miscellaneous

284,075

264,959

Subtotal

902,740

968,378

6,427,481

6,374,168

Property management fees and facility management fees

691,625

684,963

Utilities

438,881523,159

Taxes

482,777

482,449

Repairs and maintenance

157,638

150,915

Insurance

12,281

12,341

Subtotal
Other lease business revenue:

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

Trust fees

17,79017,294

Depreciation

721,606

714,171

Others295,382

274,888

Total property-related expenses

2,817,984

2,860,183

Net operating income from real estate rental business¥3,609,497¥3,513,984

7. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From October 1, 2016

From April 1, 2016

to March 31, 2017

to September 30, 2016

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

422,450 units

422,450 units56

8. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of March 31, 2017 and September 30, 2016:
As of March 31, 2017

As of September 30, 2016

(in thousands of yen)
Cash and deposits¥5,258,633¥4,367,293

Cash and deposits in trust

11,575,715

11,615,129

Restricted bank deposits in trust *(2,537,444)(2,753,121)

Cash and cash equivalents¥14,296,903¥13,229,301*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

9. LEASES(As lessee)
Future minimum lease payments under non-cancelable operating leases as of March 31, 2017 and September 30, 2016 are as follows:
As of March 31, 2017

As of September 30, 2016

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

199,048204,298

Total¥209,548¥214,798(As lessor)
Future minimum lease income under the non-cancelable operating leases as of March 31, 2017 and September 30, 2016 are as follows:
As of March 31, 2017

As of September 30, 2016

(in thousands of yen)
Due within 1 year

¥6,112,316¥5,754,371

Due after 1 year

49,962,185

47,304,424

Total¥56,074,501¥53,058,796

57

10. FINANCIAL INSTRUMENTS(A). Overview(1) Policy for financial instruments
KRR procures funds for asset acquisitions, repairs, payment of distributions, repayment of loans, etc. through loans from financial institutions,issuance of investment corporation bonds, issuance of investment units and other means. With regard to the procurement of interest-bearing debts,
KRR ensures that it can effectively combine stable long-term funds with flexible short-term funds. Management of surplus funds is undertaken
through various bank deposits focusing on safety, liquidity and effectiveness. KRR uses derivatives for the purpose of hedging its exposure tochanges in interest rates and other risks and does not enter into derivative transactions for speculative or trading purposes.
(2) Types of financial instruments and related risk
Bank deposits are for managing KRR’s surplus funds and are exposed to credit risk such as the bankruptcy of financial institutions at which funds
are deposited.
Investment securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer, property value fluctuation risk
and interest rate fluctuation risk.
Borrowings, and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of realestate and trust beneficiary interests in real estate and have a repayment date of a maximum of 9 years and 10 month for borrowings and also
have a redemption date of a maximum of 9 years and 7 months for investment corporation bonds as of March 31, 2017, the end of the fourth fiscal
period, are exposed to liquidity risk where alternative funds may not be procured by the repayment date. Also, borrowings with floating interest
rates are exposed to interest rate fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portionof the 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. Investment
securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer. To manage this credit risk, theInvestment Corporation regularly evaluates the results of operations and the financial condition of the issuer, etc. In utilizing derivatives, KRR aims
to mitigate counterparty risk such as by transacting with financial institutions with favorable ratings.
b. Market risk
While borrowings with floating rates are exposed to interest rate fluctuation 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. While investment securities, which are equity investments in a silent partnership, are exposed to credit risk of
the issuer and property value fluctuation risk, the Investment Corporation periodically reviews the value of the property and financial condition of
the issuer with regard to these investment securities. A risk management policy is established with regard to the execution and management ofderivatives and such transactions 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).
As of March 31, 201758

Carrying amount

Estimated fair value

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

11,575,715

11,575,715

-

Total

¥

-

16,834,348

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

11,470,000

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

3,850,000

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

2,000,000

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

57,380,000

57,540,509

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

3,147,555

3,151,660

4,105

77,847,555

77,993,518¥23,395¥23,395

Total
Derivative transactions

145,963¥-

As of September 30, 2016
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥4,367,293¥4,367,293(2) Cash and deposits in trust

11,615,129

11,615,129-

15,982,422

15,982,422-

12,070,000

12,070,000-(2) Current portion of long-term loans payable

-

-

-

(3) Investment corporation bonds

-

-

-

(4) Long-term loans payable

57,230,000

57,710,245

480,245(5) Tenant leasehold and security deposits in trust

3,408,166

3,443,698

35,531

72,708,166

73,223,944¥(31,166)¥(31,166)

Total(1) Short-term loans payable

Total
Derivative transactions¥-

515,777¥-*1: Methods to determine the estimated fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time with floating interest rates, their carrying amount approximates fair value.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
Among these items, the fair value of loans payable with fixed interest rates is calculated based on the present value, which is the total amount ofprincipal and interest discounted by the estimated interest rate to be applied in the event that KRR conducts new loans of the same type. As for thefair value of loans payable with floating interest rates, it is based on the carrying amount since market interest rates are reflected in the short term
and the fair value is believed to approximate the carrying amount as the credit standing of KRR has not changed significantly since the loans were
made. (However, the fair value of long-term loans payable subject to the special treatment for interest-rate swaps is based on the present value ofthe total of principal and interest, accounted for together with the applicable interest-rate swaps, discounted by the estimated interest rate to be
applied in the event that KRR conducts new loans payable of the same type.)(3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(5) Tenant leasehold and security deposits in trust
The fair value is determined based on the present value of contractual cash flows discounted at the discount rate into which the period to therepayment date and the credit risk are reflected.

59

Derivative transactions
Please refer to Note “11. DERIVATIVE TRANSACTIONS”.
*2: Financial instruments whose fair values are extremely difficult to determineClassification

As of March 31, 2017

As of September 30, 2016

(in thousands of yen)¥101,690

Investment securities (Note1)
Tenant leasehold and security deposits(Note2)¥-

Tenant leasehold and security deposits in trust (Note2)
Total

2,500

8,249,594

8,110,419¥ 8,351,284¥8,112,919(Note1) Fair values of investment securities are not subject to disclosure of fair value as they have no market price and their fair values arerecognized to be extremely difficult to grasp.
(Note2) Because no quoted market price is available and it is extremely difficult to determine their fair values based on estimated future cash
flows because the repayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits in trust 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, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

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

Cash and deposits in trust

11,575,715

Total

¥

-

¥

-

¥16,834,348

¥

-

-

¥

-

¥

¥

-

-

-

¥

-

¥

-

¥

-

¥

-

As of September 30, 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¥4,367,293

Cash and deposits in trust

11,615,129

Total

¥

-

¥

-

¥15,982,422

¥

-

-

¥

-

¥

-

¥

-

¥

-

¥

-

¥

-

¥

-

*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, 2017
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥11,470,000

-

¥

-

¥

-

¥

-

¥

-

1,000,000-

1,000,000¥-

3,850,000

5,650,000

8,330,000

7,000,000

7,500,000

28,900,000

435,430

435,430

435,430

435,430

435,430

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

60

As of September 30, 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¥12,070,000

Long-term loans payable-

3,850,000

6,980,000

7,000,000

7,000,000

32,400,000

435,430

435,430

435,430

435,430

435,430

546,223¥12,505,430¥4,285,430¥7,415,430¥7,435,430¥7,435,430¥32,946,223

Tenant leasehold and security
deposits in trust
Total

¥

-

¥

-

¥

-

¥

-

¥

-

11. DERIVATIVE TRANSACTIONS
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2017 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps

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

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥5,840,000¥5,840,000¥44,900,000¥41,050,000

Fair value(in thousands of yen)

¥23,395

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions*-*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 “10. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2016 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps

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

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥5,340,000¥5,340,000¥44,900,000¥44,900,000

Fair value(in thousands of yen)¥(31,166)*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions-*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 “10. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）61

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

13. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 35%. However, KRR may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements under the Special Taxation Measures Law of Japan are met, including arequirement that it currently distributes in excess of 90% of its net income for the fiscal period in order to be able to deduct such amounts. If KRR
does not satisfy all of the requirements, the entire taxable income of KRR will be subject to regular corporate income taxes. Since KRR distributed
in excess of 90% of its distributable income in the form of cash distributions totaling ¥2,553 million and ¥2,523 million for the periods ended March
31, 2017 and September 30, 2016, respectively, the distributions were treated as deductible distributions for purposes of corporate income taxes.
The effective tax rates on KRR’s income were 0.15% and 0.04% for the periods ended March 31, 2017 and September 30, 2016, respectively. The
following table summarizes the significant differences between the statutory tax rate and the effective tax rate:
As of March 31, 2017

As of September 30, 2016

Statutory tax rate

34.81%

31.74%

Deductible cash distributions(34.76)(31.79)Others0.10

0.09

Effective tax rate

0.15%

0.04%

The significant components of deferred tax assets and liabilities:
As of March 31, 2017

As of September 30, 2016

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

¥

242

¥

23

Amortization of leasehold right in trust

5,446

4,189

Depreciation

1,960

1,508

Asset retirement obligations

7,371

7,325

‐

9,845

Deferred gains or losses on hedges
Subtotal deferred tax assets

15,02022,892

Valuation allowance(15,020)(22,892)¥¥

Total deferred tax assets

-

-

62

14. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations reported on balance sheets
1. Summary of the asset retirement obligations
KRR has recognized the original state restoration obligations assumed under the fixed-term business-purpose land leasehold agreement as theasset retirement obligations in connection with Sunny Noma acquired on February 10, 2015.
2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated based on a discount rate of 1.256% after the useful life has been estimated to be 22 years and twomonths based on the time period from the date of acquisition to the expiration of the agreement.
3. Changes in the amount of applicable asset retirement obligations consisted of the following
From April 1, 2016

From October 1, 2016
to March 31, 2017

to September 30, 2016

(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,190¥23,045

145

144¥23,335¥23,190

15. SEGMENT INFORMATION
Segment information for the period ended from October 1, 2016 to March 31, 2017 and April 1, 2016 to September 30, 2016 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.

6316. 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, 2016

From April 1, 2016

to March 31, 2017

to September 30, 2016
(in thousands of yen)Book value
Balance at the beginning of the period
Changes during the period
Balance at the end of the period
Fair value at the end of the period¥161,443,421¥134,016,587

5,338,600

27,426,833

166,782,022

161,443,421¥175,276,000¥168,164,000

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 September 30, 2016, theprincipal increase was due to the acquisitions of real estate trust beneficiary interests in 7 properties totaling 27,834,390 thousand yen andthe principal decrease was due to depreciation amounting to 714,026 thousand yen and during the fiscal period ended March 31, 2017, theprincipal increase was due to the acquisitions of real estate trust beneficiary interests in 2 properties totaling 5,711,745 thousand yen andadditional acquisition of real estate trust beneficiary interest amounting to 94,633 thousand yen and the principal decrease was due todepreciation amounting to 721,460 thousand yen.
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, 2017 and September 30, 2016 concerning investment and rental properties is included in Note “6.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES.”

17. PER UNIT INFORMATION

Net asset value per unit

From October 1, 2016

From April 1, 2016

to March 31, 2017

to September 30, 2016

¥229,195¥228,996¥6,043¥6,069Net income per unit

Net income per unit is calculated by dividing net income by the day-weighted average number of investment units outstanding during the fiscal
period ended March 31, 2017 (422,450 units) and during the fiscal period ended September 30, 2016 (414,983 units). Net income per unit after
adjusting for residual units is not included because there were no residual investment units.
The basis for calculating net income per unit is as follows:

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

From October 1, 2016

From April 1, 2016

to March 31, 2017

to September 30, 2016

¥2,552,926¥2,518,595--¥2,552,926¥2,518,595

422,450

414,98364

18. SIGNIFICANT SUBSEQUENT EVENTSIssuance of new investment units
KRR passed resolutions at the Board of Directors’ meetings held on March 31, 2017 and April 11, 2017, 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 18, 2017 and May 17, 2017, respectively. KRR used the net proceeds through third-party allotment for the repayment ofloans payable.
As a result, unitholders' capital totaled ¥113,399,022,050 and total number of investment units issued and outstanding increased to 507,700 as of
May 17, 2017.
(Issuance of new investment units through public offerings)
Total number of units issued:
81,250 units (Domestic 44,592 units, International 36,658 units)¥232,537 per unit
Issue price (offer price):¥18,893,631,250
Total amount of issue price (total offer price):¥224,547 per unit
Paid-in amount (issue amount):¥18,244,443,750
Total paid-in amount (total issue amount):
Payment date:
April 18, 2017
(Issuance of new investment units through third-party allotment)
Total number of units issued:
4,000 units¥224,547 per unit
Paid-in amount (issue amount):¥898,188,000
Total paid-in amount (total issue amount):
Payment date:
May 17, 2017
Allottee:
SMBC Nikko Securities Inc.

65

19. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of March 31, 2017:
Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

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

Subtotal-¥35,243

35,243-35,243----

Buildings in trust

42,409,745

347,711-42,757,457

2,377,464

670,371

40,379,992

Structures in trust

1,808,630

14,256-

1,822,887

145,181

38,3091,677,705

203,295--

203,295

11,445

4,862

191,850

51,813

8,822-

60,635

10,6393,938

49,995

118,225,350

5,711,745-

123,937,095--

123,937,095

12,015

18,167

5,398

24,784--24,784

162,710,850

6,100,703

5,398

168,806,155

2,544,731

717,482

166,261,423

162,746,093

6,100,703

40,642

168,806,155

2,544,731

717,482

166,261,423

537,838--

537,838

17,2403,978

520,598

2,809

504

-

3,314

1,249

323

2,064

¥540,648¥504-¥541,153¥18,490¥4,301¥522,662

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, 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-¥35,243-

Buildings in trust
Structures in trust

Subtotal

Machinery andProperty,plant andequipment

equipment in trust

¥

¥

-

¥35,243

35,243-35,24333,894,083

8,515,661-

1,584,525

224,105-

29,194

174,101

47,611¥-¥-¥35,243--

35,24342,409,745

1,707,093

664,015

40,702,651

1,808,630

106,872

37,882

1,701,758-

203,295

6,582

4,862

196,7124,201-

51,813

6,700

3,287

45,112

99,044,234

19,181,116-

118,225,350--

118,225,350

5,583

6,616

185

12,015--12,015

134,605,233

28,105,802

185

162,710,850

1,827,249

710,047

160,883,601

134,605,233

28,141,045

185

162,746,093

1,827,249

710,047

160,918,844

537,838--

537,838

13,261

3,978

524,576

2,809

-

-

2,809

926

280

1,883

-

¥540,648¥14,188¥4,259¥526,460*

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

Total
Intangible
assets
Total

Leasehold rightin trust
Other¥540,648

¥

-

¥

*

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

66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, 2017:Classification
LenderBalance atthe beginningof the period

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

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

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

¥2,050,000¥-¥2,050,000

2,450,000-

450,000¥

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed

October 2,
2016
October 2,
2016

-

0.530

2,450,000

-

0.530

-

450,000-

450,000-

450,000-

400,000
250,000
250,000-

400,000
250,000
250,000-

200,000-

200,000-

4,140,000--

4,140,000

360,000--

360,000

1,070,000--

1,070,000

0.480

April 21,2017-

4,500,000

600,000

3,900,000

0.480

October 3,
2017-

450,000-

450,000-

450,000-

450,000-

400,000-

400,000

0.430

February 10,
2018

Resona Bank, Ltd.

-

250,000-

250,000

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

-

250,000-

250,000-

200,000-

200,000

12,070,000

6,500,000

7,100,000

11,470,000

2,300,000--

2,300,000

800,000--

800,000
0.545

February 10,
2018(Note5)

Unsecured/
Nonguaranteed

0.751

February 10,2020(Note5)

Unsecured/
Nonguaranteed

400,000--

400,000

350,000--

350,000

3,850,000--

3,850,000

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

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

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

Mizuho Trust &Banking Co., Ltd.

0.480

February 10,
2017

0.480

April 21,2017

67

Classification
LenderBalance atthe beginningof the period

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

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

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

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

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

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

400,000--

400,000

400,000--

400,000

Mizuho Bank, Ltd.

300,000--

300,000

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

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

750,000--

750,000

Aozora Bank, Ltd.

500,000--

500,000

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

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

300,000--

300,000

250,000--

250,000

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

Payment due
date（Note4）0.865

February 10,
2021

0.978

February 10,
2022

Use

Remarks(Note5)

Unsecured/
Nonguaranteed

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

0.534

March 31,
2019

0.975

March 31,
2023

0.994

March 31,
2023

0.545

March 31,2019

68

Classification

Balance atthe beginningof the period

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

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

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

1,150,000--

1,150,000

1,000,000--

1,000,000

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

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

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

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

Subtotal

Payment due
date（Note4）0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,
2025

0.368

September 30,
2019

400,000--

400,000

710,000--

710,000

620,000--

620,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

October 31,
2025-

500,000-

500,000

0.550

September 30,
2021-

2,000,000-

2,000,000

1.049

-

1,000,000-

1,000,000

1.049

-

500,000-

500,000

1.002

Resona Bank, Ltd.
Total

Averageinterest rate
（Note2）（Note3）(%)

53,380,000

4,000,000-

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

Use

Remarks(Note5)

Unsecured/
Nonguaranteed

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

January 31,
2027

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

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

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

Due after 4 years
through 5 years

Due after 5 years¥7,500,000¥28,900,000

Note2: All debts except for the following Note6 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 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: Borrowings at a fixed rate.
Note7: Partial prepayment of 600,000 thousand was made on October 31, 2016.
Note8: Borrowings listed in the current portion of long-term loans payable were listed in long-term loans payable in the previous fiscal period.

69

The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 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
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Mizuho Bank, Ltd.
Short-termloanspayable

¥

-

¥

-

¥2,050,000

0.539
0.539

-

-

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.
Sumitomo Mitsui Trust
Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.

250,000--

250,000

200,000--

200,000-

4,140,000-

4,140,000-

360,000-

360,000-

800,000

800,000-

1,070,000

6,500,000

0.489

-

0.488

April 21,2017-

1,070,000

0.484

April 21,2017

6,370,000

800,000

12,070,000

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

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.

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.

400,000--

400,000

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

(Note5)

Unsecured/
Nonguaranteed(Note5)

Unsecured/
Nonguaranteed

February 10,
2017

April 21,2017

Mizuho 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.

Remarks

October 2,
2016
October 2,
2016

0.484

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

Use

(%)

2,450,000

Sumitomo Mitsui
Banking Corporation（Note7）The Bank ofTokyo-Mitsubishi UFJ,Ltd.
SubtotalLong-term
loans
payable¥2,050,000

Payment due
date（Note4）0.865

February 10,
2021

70

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited
Development Bank ofJapan Inc.（Note6）
Development Bank ofJapan Inc.（Note6）
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,Ltd.
Aozora Bank, Ltd.
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

Long-term
loans
payableThe 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.（Note6）
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.（Note6）

Averageinterest rate
（Note2）（Note3）

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed(%)

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

750,000--

750,000

500,000--

500,000

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

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

0.978

0.534

February 10,2022

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

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

71

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)

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

Total

Averageinterest rate
（Note2）（Note3）

Payment due
date（Note4）Use

Remarks(Note5)

Unsecured/
Nonguaranteed(%)

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000
1.110

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000
1.243

April 16,
2025

0.368

September 30,
2019

400,000--

400,000-

710,000-

710,000-

620,000-

620,000-

450,000-

450,000

0.803-

890,000-

890,000

0.760-

2,670,000-

2,670,000

0.932

-

890,000-

890,000

0.888

51,000,000

6,230,000-

57,230,000¥ 57,500,000¥12,600,000¥800,000¥69,300,000

March 31,2024

September 30,
2024
September 30,
2024
April 21,2026
October 31,
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
payable¥3,850,000

Due after 2 years
through 3 years¥6,980,000

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

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

Due after 5 years¥32,400,000

Note2: All debts except for the following Note6 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 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: Borrowings at a fixed rate.
Note7: Prepayment was made on May 31, 2016.

72

21. INVESTMENT CORPORATION BONDS
Outstanding Investment corporation bonds as of March 31, 2017 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period

Interest rate

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

October 31,
2016¥

October 31,
2016

-

¥

¥

-

¥

Repayment date

Use

Remarks(Note2)

Unsecured(%)-¥1,000,000

0.200

October 29,
2021-

1,000,000

0.600

October 30,
2026-¥2,000,000

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

Due after 1 year
through 2 years-¥

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

Due after 3 years
through 4 years-¥

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

Outstanding Investment corporation bonds as of September 30, 2016
Not applicable7322. DISTRIBUTIONS
From October 1, 2016
to March 31, 2017

I. Retained earnings at the end of period

From April 1, 2016
to September 30, 2016

¥2,584,343,087¥2,518,802,609

II. Distributions in excess of earnings-¥36,330,700

Of which, allowance for temporary
difference adjustments-¥36,330,700

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

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

IV. Total distributions¥2,553,287,800¥2,523,716,300

Distributions per unit

¥6,044¥5,974¥2,553,287,800¥2,487,385,600¥6,044¥5,888-¥36,330,700-¥86¥216,437¥31,417,009

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

In accordance with the policy described in Article 39-1
of its Articles of Incorporation, KRR determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as stipulated
in Article 67-15 of the Special Taxation Measures Law
and shall be up to its profits as the maximum amount.
Following this policy, KRR has decided that it shall
distribute ¥2,487,385,600 which is almost the entire
amount of income as defined in Article 136-1 of theInvestment Trust Act. 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 ¥36,330,700
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 (as defined in Article 2-2-30 (a) of the Ordinance on
Accountings of Investment Corporations) in association
with the amortization of fixed-term land leasehold rights
and of the item deducted from net asset (as defined in
Article 2-2-30 (b) of the Ordinance on Accountings ofInvestment Corporations) in association with deferredlosses on hedges.

Of which, distributions of earnings
Of which, distributions of earnings perunit
Of which, allowance for temporary
difference adjustments
Of which, distributions in excess ofearnings per unit (allowance fortemporary difference adjustments)
V. Retained earnings brought forward to
the next period

Method of calculating distribution amount4th Fiscal Period (From October 1, 2016 to March 31, 2017)
1. Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.
Deferred gains or losses on hedges

ReasonChanges in the fair value of derivative instruments

Allowance for temporary
difference adjustments¥30,83874

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

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

Deferred gains or losses on hedges

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

3rd Fiscal Period (From April 1, 2016 to September 30, 2016)
1. Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.

Allowance for temporary
difference adjustments

ReasonBuildings in trust,
Leasehold right in trust

Amortization of leasehold right in trust and the amount in excess ofdepreciation¥5,491

Deferred gains or losses on hedges

Loss on interest-rate swaps recognized at the end of the fiscal period¥30,838

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

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

Deferred gains or losses on hedges

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

75