Semiannual Report April 2023 Fiscal Period
November 1, 2022‒April 30, 2023

2-1-6 Uchisaiwaicho, Chiyoda-ku, Tokyo
https://www.kdo-reit.com/en/

Security code: 8972
Kenedix Ofﬁce Investment Corporation1

To Our Unitholders
We would like to take this opportunity to thank you for your continued support of Kenedix Office Investment Corporation (KDO).
Although we were exposed to the waves of various environmental changes in the 36th fiscal period (the fiscal period
ended April 30, 2023), we were able to increase the distributions per unit (DPU) to 7,647 yen due to the sale of KDX
Kawasaki-Ekimae Hon-cho Building and other factors. We expect to be able to make stable distributions for the 37th
fiscal period (the fiscal period ending October 31, 2023) by utilizing gain on the partial sale of the silent partnership equity interest.
For future growth, KDO entered into a merger agreement with Kenedix Residential NEXT Investment Corporation and
Kenedix Retail REIT Corporation on June 13, 2023, whereby KDO will be the surviving
corporation. Subject to approval at the General Meetings of Unitholders of the three investment corporations, the merged entity is expected to begin operation on November 1,
2023.
With the merger, we expect to become one of the top J-REITs in terms of asset size andnumber of properties, and we anticipate improved liquidity of investment units and stability of earnings. In addition, we will aim to achieve sustainable growth by expanding
our portfolio of investments and creating a wide variety of acquisition opportunities.
For details of the merger, please refer to our website. We would appreciate your approvalof the merger and your continued support and encouragement.
Executive Director, Kenedix Office Investment Corporation
Director and COO, Head of Office REIT Department,
Kenedix Real Estate Fund Management, Inc.

Hiroaki Momoi

Conditions and topics during the 36th fiscal period(fiscal period ended April 30, 2023)● AUM (Total of acquisition price)

453.3
billion yen● JCR ratingAA(Stable)

● DPU

7,647

yen

(period over period +403 yen, +5.6%)

In the 36th fiscal period (the fiscal period ended April 30, 2023), DPU increased considerably over the previous period
due to the sale of KDX Kawasaki-Ekimae Hon-cho Building at a price significantly above its book value. At the sametime, we retained some of the proceeds as a reserve for reduction entry for stabilizing DPU in the next fiscal period andbeyond. Occupancy rate was high at 98.4%, 0.6 percentage points higher than at the end of the previous fiscal period,
thanks to proactive leasing strategies based on market trends and tenant needs.
In the 37th fiscal period (the fiscal period ending October 31, 2023), we plan to sell the part of the silent partnership eq­
uity interest, and we will continue to aim for stable payment of distributions.

About the merger
KDO concluded a merger agreement with Kenedix Residential NEXT Investment Corporation and Kenedix Retail REIT Corporation, whereby KDO will be the surviving corporation in the absorption-typemerger, to achieve sustainable growth through the expansion of its investment universe, improve its
market presence and stability, and demonstrate further commitment to sustainability. For further information regarding this merger, please refer to the special section on the KDO website.

2

Financial Summary
Historical Operating Trends
For the 32nd-36th Fiscal Periods
PeriodUnit

32nd Period(Apr. 2021)

33rd Period(Oct. 2021)

34th period(Apr.2022)

35th Period(Oct.2022)

36th Period(Apr.2023)

Operating revenues

millions of yen

16,301

15,02815,891

16,266

17,290(Rental revenues)

millions of yen

15,11914,981

15,07815,96016,072

Operating expenses

millions of yen

8,310

8,170

8,463

8,886

9,132

(Property-related expenses)

millions of yen

6,880

7,054

7,309

7,707

7,793

Operating income

millions of yen

7,990

6,857

7,427

7,379

8,157

Ordinary income

millions of yen

7,017

5,911

6,497

6,452

7,208

Net income (a)millions of yen

7,016

5,909

6,496

6,451

7,205

Total assets (b)(Period over period)
Interest-bearing debt (c)(Period over period)
Net assets (d)(Period over period)
Unitholders’ capital(Period over period)

millions of yen%
millions of yen%
millions of yen%
millions of yen%

457,505(–0.5)
198,750(–1.5)
230,981(+0.1)
220,970(0.0)

456,327(–0.3)
198,750(0.0)
230,544(–0.2)
220,970(0.0)

464,802(+1.9)
205,150(+3.2)
231,763(+0.5)
220,970(0.0)

473,013(+1.8)
214,950(+4.8)
229,562(-0.9)
217,970(-1.4)

474,274(+0.3)
214,950(0.0)
230,482(+0.4)
217,970(0.0)

Number of investment units issued and outstanding (e)unit

428,510428,510428,510424,215

848,430

Net assets per unit *1 (d)/(e)yen539,034

538,015

540,859

270,573271,657

millions of yen

6,592

5,999

5,999

6,146

6,487

Distributions per unit (f )/(e)yen

15,38414,00014,00014,488

7,647(Profit distribution per unit)

yen

15,38414,00014,00014,488

7,647(Distributions in excess of earnings per unit)

yen

ー

ー

ー

ー

ー

Ordinary income to total assets (annualized) *2, 3%

1.5(3.1)

1.3(2.6)

1.4(2.8)

1.4(2.7)

1.5(3.1)

Return on unitholders’ equity (annualized) *3, 4%

3.0(6.1)

2.6(5.1)

2.8(5.7)

2.8(5.5)

3.1(6.3)

50.5(+0.3)
43.4(–0.4)

50.5(+0.0)
43.6(+0.1)

49.9(-0.7)
44.1(+0.6)

48.5(-1.3)
45.4(+1.3)

48.6(+0.1)
45.3(–0.1)

%

93.9

101.5

92.3

95.2

90.0

Number of properties

properties

96

96

97

98

97

Total leasable ﬂoor aream2

482,299.10

482,247.31

491,113.35

500,015.61

494,827.85

Occupancy rate at end of period

%

96.7

97.6

98.3

97.8

98.4

Depreciation for the period

millions of yen

2,548

2,567

2,588

2,631

2,617

Capital expenditures for the period

millions of yen

1,420

988

1,289

866

997

Leasing NOI (Net Operating Income)*6

millions of yen

10,787

10,495

10,356

10,884

10,896

FFO (Funds from Operation)*7

millions of yen

8,635

8,477

8,314

8,841

8,654

yen

20,153

19,782

19,403

10,421

10,201

Total distributions (f )Net assets to total assets at end of period (d)/(b)(Period-on-period change)
Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)
Payout ratio*5 (f )/(a)%%Other references

FFO per unit*1, 8*1 The Investment Corporation implemented a two-for-one split of investment units with October 31, 2022, as the record date of the split and November 1, 2022, as the effective date. Net assets per unit and FFO
per unit are calculated based on the assumption that the split of the investment units was implemented at the beginning of the 35 Fiscal Period.
*2 Ordinary income to total assets = Ordinary income / {(Total assets at beginning of period + Total assets at end of period) / 2} × 100*3 Annualized values for the 32nd Fiscal Period are calculated based on a period of 181 days, 184 days for the 33rd Fiscal Period, 181 days for 34th Fiscal Period, 184 days for 35th Fiscal Period and 181days for 36th
Fiscal Period.
*4 Return on unitholders’ equity = Net income / {(Total net assets at beginning of period + Total net assets at end of period) / 2} × 100*5 Payout ratio is rounded down to the ﬁrst decimal place.
*6 Leasing NOI = Rental revenues – Property-related expenses + Depreciation for the period*7 FFO = Net income + Depreciation for the period – Gain on sale of real estate + Loss on sale of real estate
Kenedix Ofﬁce Investment Corporation*8 FFO per unit = FFO / Number of investment units issued and outstanding (figures below ¥1 rounded down.)
3

Financial StatementsofKenedix Office Investment Corporation
Thirty-sixth Fiscal Period: For the period from November 1, 2022 to April 30, 2023
With Independent Auditor’s Report4Kenedix Office Investment Corporation

Balance Sheet
As of April 30, 2023
As of April 30, 2023
AssetsCurrent assets
Cash and deposits (Notes 3)
Cash and deposits in trust (Notes 3)
Operating accounts receivable
Prepaid expenses
Other
Total current assets
Non-current assets
Property, plant and equipment (Notes 4 and 18)
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust (Note 7)
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Total property, plant and equipment, net
Intangible assets (Note 4)
Leasehold right (Note 18)
Leasehold right in trust (Note 18)
Other
Total intangible assets
Investments and other assets
Investment securities (Note 15)
Lease and guarantee deposits
Lease and guarantee deposits in trust
Long-term prepaid expenses
Other (Notes 10,15 and 16)
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

As of October 31, 2022

In thousands of yen¥¥

26,871,012
11,636,598
352,851
74,513
9,398
38,944,374¥

20,376,036
11,745,529
396,242
112,649
13,24032,643,699

17,314,188(7,122,069)
10,192,119
39,836(23,007)
16,828463,508(348,262)
115,245
102,389(84,747)
17,642
27,918,010
131,523,808(44,709,397)
86,814,411
435,544(248,540)
187,004
2,245,231(1,105,353)
1,139,878
766,142(484,568)
281,574
305,091,543
431,774,258

19,208,618(7,768,708)
11,439,910
44,224(22,699)
21,524
464,676(336,018)
128,658
106,355(83,487)
22,86830,128,905
130,699,106(42,535,054)
88,164,051
429,675(235,561)
194,114
2,123,432(1,038,762)
1,084,669
748,177(458,579)
289,597
305,091,543
436,565,845

285,257
344,55439
629,852

285,257
345,32957
630,644

1,136,228
10,000122,889932,240
678,437
2,879,795
435,283,905

1,138,413
10,000122,889
1,034,645
813,924
3,119,872
440,316,362

45,75445,754474,274,035

53,34653,346
473,013,408¥

Kenedix Ofﬁce Investment Corporation5

As of April 30, 2023
Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable (Notes 6)
Current portion of investment corporation bonds(Notes 6 and 15)
Current portion of long-term loans payable (Notes 6,15 and 16)
Accounts payable–otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Other
Total current liabilities
Non-current liabilities
Investment corporation bonds (Notes 6 and 15)
Long-term loans payable (Notes 6, 15 and 16)
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Other (Notes 15 and 16)
Total non-current liabilities
Total liabilities
Net Assets(Note 11)
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Unitholders' capital, net
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total voluntary retained earnings
Unappropriated retained earnings
Total surplus
Total unitholders' equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Notes 15 and 16)
Total valuation and translation adjustments
Total net assets (Note 11)
Total liabilities and net assets
See accompanying notes to the financial statements.

6

As of October 31, 2022

In thousands of yen¥¥

1,527,774
300,000
2,000,000
19,700,000
801,842
106,022
1,509
437,5972,874,538
16,180566
27,766,031¥

1,737,357
300,000－
14,300,000
559,553
101,839831
308,775
2,774,028
4,987－
20,087,373

11,000,000
181,950,000
2,196,875
20,875,109
3,548
216,025,533
243,791,565

13,000,000
187,350,000
2,284,874
20,728,309
537
223,363,720
243,451,094

220,970,508(2,999,551)
217,970,957

220,970,508(2,999,551)
217,970,957

4,630,856
4,630,856
7,206,005
11,836,861
229,807,819

4,326,003
4,326,003
6,451,096
10,777,100
228,748,057

674,650
674,650
230,482,469
474,274,035

814,256
814,256
229,562,314
473,013,408¥

Kenedix Office Investment Corporation

Statement of Income and Retained Earnings
For the period from November 1, 2022 to April 30, 2023
From November 1, 2022

From May 1, 2022

to April 30, 2023

to October 31, 2022

In thousands of yen
Operating revenues
Rent revenue – real estate (Note 13)¥

13,896,892¥

13,841,688

Other lease business revenue (Note 13)

2,176,002

2,119,236

Gain on sale of real estate properties (Note 13)

1,168,433

240,982

49,38564,462

17,290,713

16,266,370

Expenses related to rent business (Note 13)

7,793,647

7,707,795

Asset management fees

1,117,455

976,930

Directors' compensation

6,300

6,300

Dividends income
Total operating revenues
Operating expenses

Asset custody fees

24,07523,870Administrative service fees

61,41959,530

Audit fees

13,20012,800

Other operating expenses

116,749

99,583

Total operating expenses

9,132,847

8,886,810

Operating income

8,157,866

7,379,560

Non-operating income
Interest income

45

45Gain on forfeiture of unclaimed dividends

271

383

2

525

319

954

725,038

732,865Interest on refund
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds

35,691

35,987

Financing-related expenses

131,494

139,175

7,592

7,659

Amortization of investment corporation bond issuance costs

49,566

12,386

949,384

928,074

Ordinary income

7,208,802

6,452,439

Income before income taxes

7,208,802

6,452,439

Current

3,154

1,349

Deferred

(140)

(6)

Total income taxes

3,014

1,343

7,205,788

6,451,096

217－

Other non-operating expenses
Total non-operating expenses

Income taxes (Note 10)

Net income
Retained earnings brought forward
Unappropriated retained earnings¥

7,206,005¥

6,451,096

See accompanying notes to the financial statements.

KENEDIX Office Investment Corporation

Kenedix Ofﬁce Investment Corporation

7

Kenedix Office Investment Corporation

Statement of Changes in Net Assets
For the period from November 1, 2022 to April 30, 2023
Unitholders' equity (Note 5)

Unitholders' capital

Surplus
Voluntary
retainedearnings

Deduction from

UnappropriatedUnitholders'unitholders'

Unitholders'

Reserve forretained earnings

Total

capitalcapital(Note11)

capital, net

reduction entry(Note 21)

surplusIn thousands of yen
Balance as ofApril 30, 2022¥

220,970,508

¥

–

¥

220,970,508¥

3,828,434¥

6,496,709¥

10,325,143

Changes during the fiscal period
Provision of reserve for

–

–

–

497,569(497,569)–

Dividends of surplus

–

–

–

–

(5,999,140)(5,999,140)

Net income

–

–

–

–

6,451,096

6,451,096

–

–

–

–

–

–

–

(2,999,551)(2,999,551)

–

–

–

–

–

–

–

–

–

–

(2,999,551)(2,999,551)

497,569(45,612)451,956

reduction entry

Purchase of treasury
investment units
Cancellation of treasury
investment units
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of
October 31, 2022¥

220,970,508¥(2,999,551)¥

217,970,957¥

4,326,003¥

6,451,096¥

10,777,100

Changes during the fiscal period
Provision of reserve for

–

–

–

304,852(304,852)–

Dividends of surplus

–

–

–

–

(6,146,026)(6,146,026)

Net income

–

–

–

–

7,205,788

7,205,788

–

–

–

–

–

–

–

–

–

304,852

754,908

1,059,761

reduction entry

Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as ofApril 30, 2023

8¥

220,970,508¥(2,999,551)¥

217,970,957¥

4,630,856¥

7,206,005¥

11,836,861

Valuation andUnitholders' equity (Note 5)translation
adjustments

Own investment

Total unitholders'

Deferred gains orunits(Note11)

equitylosses on hedges

Total net assets

In thousands of yen
Balance as ofApril 30, 2022

¥

–

¥

231,295,652¥

468,158¥

231,763,810

Changes during the fiscal period
Provision of reserve for

–

–

–

–

Dividends of surplus–(5,999,140)–(5,999,140)

Net income–

6,451,096–

6,451,096(2,999,551)(2,999,551)–(2,999,551)

2,999,551

–

–

–

–

–

346,097

346,097–(2,547,594)

346,097(2,201,496)

reduction entry

Purchase of treasury
investment units
Cancellation of treasury
investment units
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of
October 31, 2022

¥

–

¥

228,748,057¥

814,256¥

229,562,314

Changes during the fiscal period
Provision of reserve for

–

–

–

–

Dividends of surplus–(6,146,026)–(6,146,026)

Net income–

7,205,788–

7,205,788––(139,605)(139,605)–

1,059,761(139,605)

920,155

reduction entry

Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as ofApril 30, 2023

¥

–

¥

229,807,819¥

674,650¥

230,482,469

See accompanying notes to the financial statements.

Kenedix Ofﬁce Investment Corporation

9

Kenedix Office Investment Corporation
Statement of Cash Flows
For the period from November 1, 2022 to April 30, 2023

From November 1, 2022
to April 30, 2023

From May 1, 2022
to October 31, 2022

In thousands of yen

Cash flows from operating activities
Income before income taxes¥

Depreciation
Amortization of long-term prepaid expenses¥

6,452,439
2,631,665

119,860

117,004

Interest income

(45)

(45)

Interest expenses

760,730

768,853

7,592

7,659

Decrease (increase) in operating accounts receivable

43,391(116,515)

Decrease (increase) in prepaid expenses

38,136(41,429)

Amortization of investment corporation bond issuance costs

Increase (decrease) in operating accounts payable(209,465)

205,756

Increase (decrease) in accounts payable–other242,170(19,922)

Increase (decrease) in accrued consumption taxes

128,82189,892

Increase (decrease) in advances received

100,510(71,540)

Increase (decrease) in deposits received

11,192(2,211)－1,350,357

Decrease in property, plant and equipment in trust due to sale
Decrease in property, plant and equipment due to sale

3,189,768－

Decrease (increase) in long-term prepaid expenses(17,456)(107,663)

Other, net(19,499)(11,589)

14,222,057

11,252,712

SubtotalInterest income received
Interest expenses paid
Income taxes paid

4545(756,547)(755,906)

(837)

(801)

13,464,718

10,496,050(74,720)(3,668,262)

Purchases of property, plant and equipment in trust(746,370)(11,021,726)

Repayments of tenant leasehold and security deposits(191,634)(30,007)

Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchases of property, plant and equipment

Proceeds from tenant leasehold and security deposits

121,410

172,628

Repayments of tenant leasehold and security deposits in trust(697,843)(551,922)

Proceeds from tenant leasehold and security deposits in trust

656,121

1,302,971

Payments of restricted deposits in trust(2,513)(31,536)

Proceeds from restricted deposits in trust

32,441

302,201(903,109)(13,525,653)－

7,800,000

Repayments of short-term loans payable－(16,100,000)

Proceeds from long-term loans payable

4,800,000

26,750,000

Repayments of long-term loans payable

Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans payable(4,800,000)(8,650,000)

Proceeds from issuance of investment corporation bonds－

990,148

Redemption of investment corporation bonds－(1,000,000)

Purchase of treasury investment units－(3,000,300)

Dividends paid

(6,145,636)(5,998,599)

Net cash provided by (used in) financing activities(6,145,636)

791,248

Net increase (decrease) in cash and cash equivalents

6,415,972(2,238,355)

Cash and cash equivalents at the beginning of period

30,917,994

33,156,349

Cash and cash equivalents at the end of period (Note 3)
See accompanying notes to the financial statements.

10

7,208,802
2,617,548¥

37,333,966¥

30,917,994

Kenedix Office Investment Corporation

Notes to the Financial Statements
For the period from November 1, 2022 to April 30, 2023

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Office Investment Corporation (“the Investment Corporation”) is a real estate investment corporation whose units are listedon the Tokyo Stock Exchange. The Investment Corporation is engaged in the ownership and operation of selected mainly officebuildings in Japan, with a focus on mid-sized office buildings in the Tokyo metropolitan area. The Investment Corporation wasincorporated on May 6, 2005 as an investment corporation under the Law Concerning Investment Trusts and Investment Corporationsof Japan, or “the Investment Trust Law.” On July 21, 2005, the Investment Corporation was listed on the Real Estate Investment Trust
Market of the Tokyo Stock Exchange with a total of 75,400 investment units issued and outstanding (Securities Code: 8972).
Subsequently, the Investment Corporation raised funds through eight public offerings. Pursuant to the Investment Trust Law, theInvestment Corporation is externally managed by a registered asset management company, Kenedix Real Estate Fund Management,
Inc. (“the Asset Management Company”), a subsidiary of Kenedix, Inc. (“Kenedix”). In concert with the Asset Management Company,
the Investment Corporation strives to maximize cash distribution to investors by securing stable earnings and sustainable investment
growth. To this end, the Investment Corporation adopts a dynamic and flexible investment stance that accurately reflects its
environment and market trends, and endeavors to ensure a timely response to each and every opportunity.
During the period ended October 31, 2022, the Investment Corporation acquired two office building (Edobashi Building:Acquisition price 9,600 million yen, Shionogi Kobe Building: Acquisition price 3,450 million yen) and sold an office building (KDX
Kiba Building: Acquisition price 1,580 million yen, Sale price 1,650 million yen ) .
During the period ended April 30, 2023, the Investment Corporation sold an office building (KDX Kawasaki-Ekimae Hon-cho
Building: Acquisition price 3,760 million yen, Sale price 4,508 million yen ) .
At the end of the thirty-fifth fiscal period (fiscal period ended October 31, 2022), the Investment Corporation had total unitholders’capital, net of ¥217,970 million with 424,215 investment units outstanding. At the end of thirty-sixth fiscal period (fiscal period endedApril 30, 2023), the Investment Corporation had total unitholders’ capital, net of ¥217,970 million with 848,430 investment units
outstanding. The Investment Corporation owned a portfolio of 98 properties (consisting of 97 office buildings and one other property)
and 97 properties (consisting of 96 office buildings and one other property) with total acquisition prices of ¥457,076 million and¥453,316 million at the end of the thirty-fifth and thirty-sixth fiscal periods, respectively. The occupancy ratios were approximately
97.8% and 98.4% at the end of the thirty-fifth and thirty-sixth fiscal periods, respectively.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust Act ofJapan, the Financial Instruments and Exchange Law of Japan and related regulations, and in conformity with accounting principles
and practices generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of the International Financial Reporting Standards or accounting principles generally accepted in the UnitedStates of America.
The accompanying financial statements are basically a translation of the audited financial statements that were prepared for Japanese
domestic purposes from the accounts and records maintained by the Investment Corporation and filed with the Kanto Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. In preparing the accompanying
financial statements, relevant notes have been added and certain reclassifications have been made to the financial statements issued
domestically in order to present them in a form that is more familiar to readers outside Japan. The Investment Corporation’s fiscal
period is a six-month period that ends at the end of April and the end of October each year. The Investment Corporation does notprepare consolidated financial statements because it has no subsidiaries.

Kenedix Ofﬁce Investment Corporation11

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving
average method. Concerning silent partnership (tokumei kumiai, “TK”) interests, the method of incorporating the amount ofequity equivalent to the portion that corresponds to the net gain or loss of the TK is adopted.
(B) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line
basis over the estimated useful lives of the assets ranging as stated below:
From November 1, 2022
to April 30, 2023
Buildings
2–49 years

From May 1, 2022
to October 31, 2022
2–49 years

Structures

2–45 years

2–45 years

Machinery and equipment

3–17 years

3–17 years

Tools, furniture and fixtures

3–20 years

3–20 years(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
Leasehold right: Fixed-term land leasehold is amortized over a contractual period of 48 years and 9 months under the straightline method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(E) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of three years under the straight-line method.
(F) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.
(G) 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, allassets and liabilities in trust are recorded in the relevant balance sheets and statements of income and retained earnings.
(H) Revenue Recognition
Operating revenues consist of rental revenues including base rents, common area charges and other operating revenues, which
include utility charge reimbursement, parking space rental revenues and other miscellaneous revenues. Rental revenues are
generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned
and their amounts can be reasonably estimated. Reimbursements from tenants including utility charge reimbursements arerecorded on a gross basis and such amounts are recorded both as revenues and expenses during the fiscal period.

12

(I)

Taxes on Property, Plant and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on acalendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes
corresponding to the said period. Under Japanese tax rules, the seller of property at the time of disposal is liable for these taxes on
the property from the date of disposal to the end of the calendar year in which the property is disposed. The seller, however, isgenerally reimbursed by the purchaser for these accrued property-related tax liabilities.
When the Investment Corporation purchases properties, it typically allocates the portion of the property-related taxes related tothe period following the purchase date of each property through the end of the calendar year. The amounts of those allocatedportions of the property-related taxes are capitalized as part of the acquisition costs of the related properties. Capitalized propertyrelated taxes amounted to ¥28,034 thousand as of October 31, 2022. There were no capitalized property-related taxes as of April
30, 2023. In subsequent calendar years, such property-related taxes are charged as operating expenses in the fiscal period to which
the installments of such taxes correspond.

(J) Accounting for revenues
The main content of the performance obligation regarding the revenue from contracts with the customers of the Investment
Corporation and the normal point of time when satisfying the said performance obligation (normal point of time when recognizing
revenue) are as follows.
1. Sale of real estate property
For the revenue from sale of real estate, etc., revenue is recorded when the buyer who is a customer gains control of
the real estate by performing the obligation of handover stipulated in the contract for real estate sales.
2. Utility charge reimbursements
For utility charge reimbursement, revenue is recorded in accordance with the supply of electricity, tap water, etc. tothe lessee who is a customer based on the lease agreement of real estate, etc. and the content of agreement incidental
to it.
Of the utility charge reimbursement, for those that are determined to fall under the category of an agent by theInvestment Corporation, the net amount obtained by deducting the amount paid to other related parties supplying
electricity, gas, etc. from the amount received as the fee of electricity, gas, etc. is recognized as revenue.
(K) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases ofassets and liabilities using the statutory tax rates.
(L) Non-deductible 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
The Investment Corporation utilizes interest-rate swap contracts as derivative financial instruments only for the purpose ofhedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains or losses resulting
from changes in fair value of interest-rate swap contracts because these contracts met the criteria for deferral hedging accounting.
However, the Investment Corporation adopted special treatment for interest-rate swap contracts if they met the criteria for hedging
accounting under this treatment. The hedge effectiveness for the interest-rate swap contracts is assessed each fiscal period except
for those that meet the criteria of 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 fromthe date of purchase.

Kenedix Ofﬁce Investment Corporation

13

(O) Presentation of Amounts
Amounts of less than one thousand yen have been truncated in the Japanese financial statements prepared in accordance withJapanese GAAP and filed with regulatory authorities in Japan. Unless otherwise noted, amounts are rounded down and ratios arerounded 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. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of April 30, 2023, and October 31, 2022.
As of April 30, 2023

As of October 31, 2022

In thousands of yen
Cash and deposits¥

26,871,012¥

20,376,036

Cash and deposits in trust

11,636,598

11,745,529

Restricted deposits in trust (Note)(1,173,644)(1,203,571)

Cash and cash equivalents in trust¥

37,333,966¥

30,917,994

Note: Restricted deposits in trust are retained for the repayment of tenant leasehold and security deposits in trust.

4. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of April 30, 2023.
Type of asset

Balance atthe beginningof period

Decreaseduring theperiodIncreaseduring theperiodBalance atthe end of
periodDepreciation
Accumulated
depreciation

Depreciation
for the periodNetbalance atthe end of
periodRemarks

Note 1(in thousands of yen)
Buildings¥ 19,208,618¥ 40,122¥ 1,934,552¥ 17,314,188¥ 7,122,069¥ 319,201¥ 10,192,119

44,224–

4,387

39,83623,007

1,175

16,828464,676

1,848

3,017

463,508348,262

13,230115,245

Structures
Machinery andequipment
Tools, furnitureand fixturesLand

106,355

400

4,366

102,389

84,747

3,248

17,64230,128,905

2,230

2,213,125

27,918,010––

27,918,010

Subtotal

49,952,781

44,601

4,159,449

45,837,933

7,578,087

336,855

38,259,846¥ 130,699,106¥ 824,702–¥ 131,523,808¥ 44,709,397¥ 2,174,342¥ 86,814,411

429,675

5,869–

435,544248,540

12,979187,004

2,123,432

121,799–2,245,231

1,105,353

66,5901,139,878

748,177

17,964–

766,142484,568

25,988281,574

Land in trust

305,091,543––

305,091,543––

305,091,543

Subtotal

439,091,935

970,336–

440,062,272

46,547,860

2,279,900

393,514,412

Total property, plant andequipment

489,044,717

1,014,937

4,159,449

485,900,205

54,125,947

2,616,756

431,774,258

¥

¥

–

¥ 290,050¥ 4,792

Property,plant andequipment

Intangible
assetsBuildings in
trust
Structures intrust
Machinery andequipment in
trust
Tools, furnitureand fixtures in
trust

¥

Leasehold right¥ 290,050

Leasehold rightin trust

363,784––

363,784

6,306

–

–

660,141–¥ 489,704,858¥ 1,014,937

Other
Total intangible assets
Total

–

¥

–

¥ 285,257

19,229774

344,554

6,306

6,267

18

39

–

660,141

30,289792

629,852¥ 4,159,449¥ 486,560,346¥ 54,156,236¥2,617,548¥ 432,404,110

Note1: The amount of decrease during the period is primarily attributable to the sales of real estate of 1 property.

14

Note 1

Property, plant and equipment and intangible assets consist of the following as of October 31, 2022.
Type of asset

Balance atthe beginningof period

Decreaseduring theperiodIncreaseduring theperiodDepreciation

Balance atthe end of
periodAccumulated
depreciation

Depreciation
for the periodNetbalance atthe end of
periodRemarks

Note 1(in thousands of yen)
Buildings¥ 18,127,176¥ 1,081,442

44,224¥–¥ 19,208,618¥ 7,768,708¥ 319,139¥ 11,439,910––

44,224

22,6991,230

21,524456,2328,444–

464,676

336,018

13,106

128,658

Structures
Machinery andequipment
Tools, furnitureand fixtures
Land

104,5541,800–

106,355

83,487

3,732

22,86827,520,902

2,608,002–

30,128,905––

30,128,905

Subtotal

46,253,090

3,699,690–

49,952,781

8,210,912

337,20941,741,868¥ 130,362,510¥ 1,255,991¥ 919,395¥ 130,699,106¥ 42,535,054¥ 2,187,286¥ 88,164,051

429,795

3,631

3,751

429,675

235,561

13,719194,1142,075,571

60,065

12,205

2,123,432

1,038,762

65,8101,084,669

739,174

12,3603,356

748,177

458,579

26,845289,597296,760,716

9,180,430

849,602305,091,543––

305,091,543

800

–

800

–

–

–

–

Subtotal

430,368,567

10,512,479

1,789,110

439,091,935

44,267,959

2,293,663

394,823,976

Total property, plant andequipment

476,621,658

14,212,169

1,789,110

489,044,717

52,478,872

2,630,872

436,565,845–¥ 290,050¥ 4,792

Property,plant andequipment

Buildings in
trust
Structures intrust
Machinery andequipment in
trust
Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust

Intangible
assetsLeasehold right¥ 290,050

Leasehold rightin trust

363,784––

363,784

6,306

–

–

660,141–¥ 477,281,799¥ 14,212,169

Other
Total intangible assets
Total

¥

–

¥

¥

–

¥ 285,257

18,455774

345,329

6,306

6,248

18

57

–

660,141

29,496792

630,644¥ 1,789,110¥ 489,704,858¥ 52,508,368¥2,631,665¥ 437,196,489

Note 1
Notes 1
and 2

Notes 1
and 2

Note1: The amount of increase during the period is primarily attributable to the acquisition of 1 real estate property and trust
beneficiary interest in real estate of 1 property.
Note2: The amount of decrease during the period is primarily attributable to the sales of trust beneficiary interest in real estate of 1
property.

5. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:

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

From November 1, 2022
to April 30, 2023
4,000,000

From May 1, 2022
to October 31, 2022
2,000,000

848,430

424,215

Kenedix Ofﬁce Investment Corporation

15

6. SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENTCORPORATION BONDS
The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as ofApril 30, 2023:
Classification
Short-term loans payable

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)August 31, 2022

August 31, 2023

0.233%¥

300,000

June 14, 2019

June 30, 2023

0.246%¥

500,000

July 10, 2019

July 31, 2023

0.230%

500,000

July 31, 2019

July 31, 2023

0.295%

1,000,000

Subtotal
Current portion of long-term loans payable

300,000

August 31, 2017

August 31, 2023

0.544%

1,000,000

September 21, 2021

August 31, 2023

0.300%

2,000,000

October 31, 2014

October 31, 2023

1.071%

2,000,000

October 31, 2014

October 31, 2023

1.126%

1,500,000

October 31, 2014

October 31, 2023

1.071%

1,000,000

January 29, 2021

January 31, 2024

0.287%

1,000,000

February 18, 2015

February 29, 2024

1.157%

1,700,000

September 21, 2021

February 29, 2024

0.300%

1,000,000

September 21, 2017

March 31, 2024

0.555%

1,000,000

April 28, 2016

April 30, 2024

0.654%

2,000,000

April 28, 2022

April 30, 2024

0.264%

1,000,000

April 28, 2022

April 30, 2024

0.230%

2,500,000

October 31, 2014

October 31, 2024

1.257%

October 31, 2014

October 31, 2024

1.259%

1,000,000

January 30, 2015

January 31, 2025

1.161%

1,500,000

SubtotalLong-term loans payable

16

19,700,000¥

2,000,000

February 18, 2015

February 28, 2025

1.314%

1,250,000

February 27, 2015

February 28, 2025

1.153%

2,100,000

March 12, 2015

February 28, 2025

1.218%

1,000,000

March 31, 2015

March 31, 2025

1.266%

2,500,000

September 30, 2015

September 30, 2024

1.065%

2,000,000

October 30, 2015

October 31, 2024

0.989%

1,000,000

October 30, 2015

October 30, 2025

1.114%

1,500,000

October 30, 2015

October 30, 2025

1.114%

2,000,000

October 30, 2015

October 30, 2025

1.114%

2,500,000

October 30, 2015

October 30, 2025

1.121%

2,500,000

November 12, 2015

November 30, 2025

1.173%

1,000,000

January 29, 2016

January 29, 2026

1.074%

2,000,000

January 29, 2016

January 29, 2026

1.024%

1,800,000

February 18, 2016

February 18, 2026

0.998%

1,000,000

February 18, 2016

February 18, 2026

0.998%

500,000

March 31, 2016

March 31, 2026

0.898%

1,000,000

April 28, 2016

April 30, 2026

0.835%

2,000,000

April 28, 2016

April 30, 2026

0.865%

1,000,000

July 29, 2016

July 31, 2026

0.613%

1,500,000

August 2, 2016

July 31, 2026

0.544%

1,000,000

October 31, 2016

October 31, 2024

0.668%

1,000,000

October 31, 2016

October 31, 2026

0.876%

2,500,000

October 31, 2016

October 31, 2026

0.760%

1,000,000

October 31, 2016

October 31, 2026

0.734%

4,000,000

October 31, 2016

October 31, 2026

0.826%

1,500,000

Classification
Long-term loans payable

KENEDIX Office Investment Corporation

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)

December 12, 2016

November 30, 2026

0.982%

December 28, 2016

December 28, 2026

0.950%¥

1,500,000

500,000

January 16, 2017

January 31, 2027

0.860%

500,000

January 31, 2017

January 31, 2027

0.853%

700,000

March 28, 2017

March 31, 2027

0.850%

500,000
1,500,000

June 30, 2017

June 30, 2027

0.849%

August 10, 2017

July 28, 2027

0.800%

3,500,000

September 21, 2017

September 30, 2025

0.680%

1,500,000

September 21, 2017

March 31, 2027

0.732%

1,000,000

September 21, 2017

September 21, 2027

0.873%

1,000,000

September 21, 2017

September 30, 2027

0.851%

2,500,000

October 31, 2017

October 31, 2027

0.810%

2,500,000

November 13, 2017

November 13, 2027

0.931%

3,000,000

December 7, 2017

November 30, 2027

0.899%

1,400,000

December 7, 2017

November 30, 2027

0.820%

1,200,000

December 7, 2017

November 30, 2027

0.969%

1,000,000

December 7, 2017

November 30, 2027

0.939%

1,000,000

December 7, 2017

November 30, 2027

0.869%

1,000,000

December 7, 2017

November 30, 2027

0.899%

800,000

December 7, 2017

November 30, 2027

0.869%

600,000

December 28, 2017

December 28, 2025

0.744%

500,000

December 28, 2017

December 28, 2026

0.878%

500,000

December 28, 2017

December 28, 2027

0.864%

500,000

March 12, 2018

March 31, 2028

0.914%

1,500,000

March 26, 2018

March 31, 2027

0.808%

1,000,000

March 26, 2018

March 31, 2028

0.902%

1,000,000

July 31, 2018

July 31, 2028

0.988%

500,000

August 20, 2018

August 31, 2025

0.696%

500,000

August 20, 2018

August 31, 2028

1.003%

1,000,000

August 20, 2018

August 31, 2028

1.003%

1,000,000

August 20, 2018

August 31, 2028

1.003%

500,000

August 20, 2018

August 31, 2028

0.966%

500,000

August 31, 2018

August 31, 2025

0.700%

500,000

August 31, 2018

August 31, 2025

0.723%

300,000

August 31, 2018

August 31, 2028

1.012%

700,000

October 31, 2018

October 31, 2028

1.013%

1,500,000

October 31, 2018

October 31, 2028

0.910%

1,000,000

October 31, 2018

October 31, 2028

1.013%

500,000

March 28, 2019

March 31, 2029

0.838%

1,400,000

March 29, 2019

March 31, 2029

0.839%

2,950,000

June 14, 2019

December 28, 2026

0.517%

500,000

June 14, 2019

April 30, 2027

0.605%

1,000,000

June 14, 2019

March 31, 2029

0.725%

1,000,000

July 31, 2019

April 30, 2027

0.554%

1,000,000

July 31, 2019

April 30, 2027

0.554%

1,000,000

September 30, 2019

September 30, 2026

0.489%

1,000,000

September 30, 2019

March 31, 2027

0.531%

900,000

September 30, 2019

March 31, 2027

0.425%

800,000

January 31, 2020

January 31, 2025

0.406%

700,000

January 31, 2020

January 31, 2027

0.526%

1,500,000

January 31, 2020

January 31, 2029

0.675%

1,500,000

March 12, 2020

February 28, 2026

0.361%

1,800,000

March 31, 2020

March 31, 2028

0.642%

1,000,000

Kenedix Ofﬁce Investment Corporation17

Classification
Long-term loans payable

18

Drawdown dateJune 30, 2020

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)

June 30, 2028

0.646%¥

2,000,000

June 30, 2020

June 30, 2028

0.646%

2,000,000

June 30, 2020

June 30, 2028

0.646%

700,000

June 30, 2020

June 30, 2028

0.510%

2,000,000

July 31, 2020

July 31, 2028

0.636%

2,700,000

August 31, 2020

August 31, 2030

0.705%

1,500,000

September 30, 2020

September 30, 2025

0.396%

1,000,000

September 30, 2020

September 30, 2027

0.511%

1,000,000

September 30, 2020

September 30, 2030

0.738%

700,000

October 30, 2020

April 30, 2027

0.542%

1,400,000

October 30, 2020

October 31, 2030

0.803%

1,500,000

October 30, 2020

October 31, 2030

0.803%

300,000

November 12, 2020

April 30, 2027

0.552%

1,300,000

November 12, 2020

November 12, 2030

0.808%

700,000

November 12, 2020

November 12, 2030

0.808%

500,000

November 30, 2020

May 31, 2027

0.516%

200,000

November 30, 2020

November 30, 2030

0.763%

900,000

November 30, 2020

November 30, 2030

0.763%

800,000

November 30, 2020

November 30, 2030

0.763%

200,000

January 29, 2021

January 31, 2028

0.527%

1,200,000

January 29, 2021

January 31, 2030

0.678%

2,300,000

January 29, 2021

January 31, 2030

0.678%

2,000,000
2,000,000

January 29, 2021

January 31, 2030

0.678%

January 29, 2021

November 30, 2030

0.755%

800,000

July 12, 2021

June 30, 2028

0.484%

500,000

July 30, 2021

July 31, 2026

0.350%

1,000,000

November 30, 2021

October 31, 2024

0.289%

500,000

November 30, 2021

October 31, 2024

0.289%

500,000

November 30, 2021

October 31, 2024

0.289%

300,000

November 30, 2021

October 31, 2024

0.250%

2,500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

November 30, 2026

0.412%

500,000

November 30, 2021

November 30, 2026

0.412%

500,000

November 30, 2021

November 30, 2026

0.350%

500,000

November 30, 2021

November 30, 2026

0.384%

1,000,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.325%

1,000,000

November 30, 2021

November 30, 2026

0.350%

1,000,000

November 30, 2021

November 30, 2028

0.511%

1,000,000

November 30, 2021

November 30, 2029

0.450%

500,000

April 28, 2022

April 30, 2025

0.294%

1,000,000

April 28, 2022

May 31, 2027

0.350%

1,000,000

June 30, 2022

June 30, 2024

0.266%

2,000,000

June 30, 2022

June 30, 2024

0.266%

1,000,000

June 30, 2022

June 30, 2025

0.200%

2,000,000

June 30, 2022

June 30, 2025

0.200%

1,000,000

June 30, 2022

June 30, 2025

0.200%

500,000

Classification
Long-term loans payable

Subtotal
Current portion of investment corporation
bonds

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)August 31, 2022

August 31, 2024

0.350%¥

1,600,000

August 31, 2022

February 28, 2025

0.374%

1,600,000

August 31, 2022

August 31, 2025

0.395%

500,000

August 31, 2022

August 31, 2025

0.395%

1,000,000

August 31, 2022

August 31, 2025

0.395%

500,000

August 31, 2022

August 31, 2026

0.430%

2,700,000

August 31, 2022

August 31, 2027

0.501%

2,400,000

August 31, 2022

August 31, 2027

0.420%

1,000,000

August 31, 2022

August 31, 2027

0.350%

300,000

August 31, 2022

August 31, 2029

0.685%

1,950,000

August 31, 2022

August 31, 2029

0.685%

1,000,000

August 31, 2022

August 31, 2029

0.685%

500,000

August 31, 2022

August 31, 2029

0.685%

500,000

August 31, 2022

August 31, 2029

0.685%

500,000

August 31, 2022

August 31, 2029

0.685%

200,000

August 31, 2022

August 31, 2029

0.525%

1,000,000

August 31, 2022

August 31, 2029

0.525%

500,000

August 31, 2022

August 31, 2029

0.525%

1,000,000

August 31, 2022

August 31, 2029

0.525%

500,000

October 31, 2022

October 31, 2025

0.481%

500,000

October 31, 2022

April 30, 2026

0.373%

500,000

February 28, 2023

February 29, 2028

0.793%

1,000,000

March 13, 2023

March 31, 2030

1.050%

2,000,000

March 13, 2023

March 31, 2031

1.186%

1,800,000
181,950,000

February 15, 2019

February 15, 2024

0.390%¥

Subtotal

2,000,000
2,000,000

Investment corporation bonds

July 25, 2014

July 25, 2024

1.180%

April 28, 2016

April 28, 2028

0.900%¥

2,000,000
1,000,000

July 19, 2017

July 16, 2027

0.640%

2,000,000

January 30, 2020

January 30, 2025

0.250%

2,000,000

October 20, 2020

October 18, 2030

0.610%

1,000,000

July 28, 2021

July 31, 2026

0.180%

2,000,000

July 11, 2022

July 9, 2027

0.400%

1,000,000

Subtotal

11,000,000

Total

¥

214,950,000

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of
October 31, 2022:
Classification
Short-term loans payable

Drawdown dateAugust 31, 2022

Last repayment dateAugust 31, 2023

Weighted-average

Balanceinterest rate

(In thousands of yen)

0.245%¥

Subtotal
Current portion of long-term loans payable

300,000
300,000

September 21, 2021

February 28, 2023

0.300%March 12, 2014

March 12, 2023

1.358%¥

1,000,000
1,800,000

March 20, 2014

March 12, 2023

1.349%

2,000,000

June 14, 2019

June 30, 2023

0.246%

500,000

July 10, 2019

July 31, 2023

0.230%

500,000

July 31, 2019

July 31, 2023

0.295%

1,000,000

August 31, 2017

August 31, 2023

0.544%

1,000,000

September 21, 2021

August 31, 2023

0.300%

2,000,000

October 31, 2014

October 31, 2023

1.071%

2,000,000

Kenedix Ofﬁce Investment Corporation19

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)Classification

Drawdown dateCurrent portion of long-term loans payable

October 31, 2014

October 31, 2023

1.126%

October 31, 2014

October 31, 2023

1.071%¥

1,000,000

SubtotalLong-term loans payable20

1,500,000
14,300,000

October 31, 2014

October 31, 2024

1.257%

October 31, 2014

October 31, 2024

1.259%¥

2,000,000
1,000,000

January 30, 2015

January 31, 2025

1.161%

1,500,000

February 18, 2015

February 29, 2024

1.157%

1,700,000

February 18, 2015

February 28, 2025

1.314%

1,250,000

February 27, 2015

February 28, 2025

1.153%

2,100,000

March 12, 2015

February 28, 2025

1.218%

1,000,000

March 31, 2015

March 31, 2025

1.266%

2,500,000

September 30, 2015

September 30, 2024

1.065%

2,000,000

October 30, 2015

October 31, 2024

0.989%

1,000,000

October 30, 2015

October 30, 2025

1.114%

1,500,000

October 30, 2015

October 30, 2025

1.114%

2,000,000

October 30, 2015

October 30, 2025

1.114%

2,500,000

October 30, 2015

October 30, 2025

1.121%

2,500,000

November 12, 2015

November 30, 2025

1.173%

1,000,000

January 29, 2016

January 29, 2026

1.074%

2,000,000

January 29, 2016

January 29, 2026

1.024%

1,800,000

February 18, 2016

February 18, 2026

0.998%

1,000,000

February 18, 2016

February 18, 2026

0.998%

500,000

March 31, 2016

March 31, 2026

0.898%

1,000,000

April 28, 2016

April 30, 2024

0.654%

2,000,000

April 28, 2016

April 30, 2026

0.835%

2,000,000

April 28, 2016

April 30, 2026

0.865%

1,000,000

July 29, 2016

July 31, 2026

0.613%

1,500,000

August 2, 2016

July 31, 2026

0.544%

1,000,000

October 31, 2016

October 31, 2024

0.668%

1,000,000

October 31, 2016

October 31, 2026

0.876%

2,500,000

October 31, 2016

October 31, 2026

0.760%

1,000,000

October 31, 2016

October 31, 2026

0.734%

4,000,000

October 31, 2016

October 31, 2026

0.826%

1,500,000

December 12, 2016

November 30, 2026

0.982%

500,000

December 28, 2016

December 28, 2026

0.950%

1,500,000

January 16, 2017

January 31, 2027

0.860%

500,000

January 31, 2017

January 31, 2027

0.853%

700,000

March 28, 2017

March 31, 2027

0.850%

500,000

June 30, 2017

June 30, 2027

0.849%

1,500,000

August 10, 2017

July 28, 2027

0.800%

3,500,000

September 21, 2017

March 31, 2024

0.555%

1,000,000

September 21, 2017

September 30, 2025

0.680%

1,500,000

September 21, 2017

March 31, 2027

0.732%

1,000,000

September 21, 2017

September 21, 2027

0.873%

1,000,000

September 21, 2017

September 30, 2027

0.851%

2,500,000

October 31, 2017

October 31, 2027

0.810%

2,500,000

November 13, 2017

November 13, 2027

0.931%

3,000,000

December 7, 2017

November 30, 2027

0.899%

1,400,000

December 7, 2017

November 30, 2027

0.820%

1,200,000

December 7, 2017

November 30, 2027

0.969%

1,000,000

December 7, 2017

November 30, 2027

0.939%

1,000,000

Classification
Long-term loans payable

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)

December 7, 2017

November 30, 2027

0.869%

December 7, 2017

November 30, 2027

0.899%¥

1,000,000
800,000

December 7, 2017

November 30, 2027

0.869%

600,000

December 28, 2017

December 28, 2025

0.744%

500,000

December 28, 2017

December 28, 2026

0.878%

500,000

December 28, 2017

December 28, 2027

0.864%

500,000

March 12, 2018

March 31, 2028

0.914%

1,500,000

March 26, 2018

March 31, 2027

0.808%

1,000,000

March 26, 2018

March 31, 2028

0.902%

1,000,000
500,000

July 31, 2018

July 31, 2028

0.988%

August 20, 2018

August 31, 2025

0.696%

500,000

August 20, 2018

August 31, 2028

1.003%

1,000,000

August 20, 2018

August 31, 2028

1.003%

1,000,000

August 20, 2018

August 31, 2028

1.003%

500,000

August 20, 2018

August 31, 2028

0.966%

500,000

August 31, 2018

August 31, 2025

0.700%

500,000

August 31, 2018

August 31, 2025

0.723%

300,000

August 31, 2018

August 31, 2028

1.012%

700,000

October 31, 2018

October 31, 2028

1.013%

1,500,000

October 31, 2018

October 31, 2028

0.910%

1,000,000

October 31, 2018

October 31, 2028

1.013%

500,000

March 28, 2019

March 31, 2029

0.838%

1,400,000

March 29, 2019

March 31, 2029

0.839%

2,950,000

June 14, 2019

December 28, 2026

0.517%

500,000

June 14, 2019

April 30, 2027

0.605%

1,000,000

June 14, 2019

March 31, 2029

0.725%

1,000,000

July 31, 2019

April 30, 2027

0.554%

1,000,000

July 31, 2019

April 30, 2027

0.554%

1,000,000

September 30, 2019

September 30, 2026

0.489%

1,000,000

September 30, 2019

March 31, 2027

0.531%

900,000

September 30, 2019

March 31, 2027

0.425%

800,000

January 31, 2020

January 31, 2025

0.406%

700,000

January 31, 2020

January 31, 2027

0.526%

1,500,000

January 31, 2020

January 31, 2029

0.675%

1,500,000

March 12, 2020

February 28, 2026

0.361%

1,800,000

March 31, 2020

March 31, 2028

0.642%

1,000,000

June 30, 2020

June 30, 2028

0.646%

2,000,000

June 30, 2020

June 30, 2028

0.646%

2,000,000

June 30, 2020

June 30, 2028

0.646%

700,000

June 30, 2020

June 30, 2028

0.510%

2,000,000

July 31, 2020

July 31, 2028

0.636%

2,700,000
1,500,000

August 31, 2020

August 31, 2030

0.705%

September 30, 2020

September 30, 2025

0.396%

1,000,000

September 30, 2020

September 30, 2027

0.511%

1,000,000

September 30, 2020

September 30, 2030

0.738%

700,000

October 30, 2020

April 30, 2027

0.542%

1,400,000
1,500,000

October 30, 2020

October 31, 2030

0.803%

October 30, 2020

October 31, 2030

0.803%

300,000

November 12, 2020

April 30, 2027

0.552%

1,300,000

November 12, 2020

November 12, 2030

0.808%

700,000

November 12, 2020

November 12, 2030

0.808%

500,000

November 30, 2020

May 31, 2027

0.516%

200,000

November 30, 2020

November 30, 2030

0.763%

900,000

Kenedix Ofﬁce Investment Corporation

KENEDIX Office Investment Corporation

21

Classification
Long-term loans payable

22

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)

November 30, 2020

November 30, 2030

0.763%

November 30, 2020

November 30, 2030

0.763%¥

800,000

January 29, 2021

January 31, 2024

0.287%

1,000,000

January 29, 2021

January 31, 2028

0.527%

1,200,000

January 29, 2021

January 31, 2030

0.678%

2,300,000

January 29, 2021

January 31, 2030

0.678%

2,000,000

January 29, 2021

January 31, 2030

0.678%

2,000,000

January 29, 2021

November 30, 2030

0.755%

800,000

July 12, 2021

June 30, 2028

0.484%

500,000

200,000

July 30, 2021

July 31, 2026

0.350%

1,000,000

September 21, 2021

February 29, 2024

0.300%

1,000,000

November 30, 2021

October 31, 2024

0.289%

500,000

November 30, 2021

October 31, 2024

0.289%

500,000

November 30, 2021

October 31, 2024

0.289%

300,000

November 30, 2021

October 31, 2024

0.250%

2,500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

April 30, 2026

0.300%

500,000

November 30, 2021

November 30, 2026

0.412%

500,000

November 30, 2021

November 30, 2026

0.412%

500,000

November 30, 2021

November 30, 2026

0.350%

500,000

November 30, 2021

November 30, 2026

0.384%

1,000,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.384%

500,000

November 30, 2021

November 30, 2026

0.325%

1,000,000

November 30, 2021

November 30, 2026

0.350%

1,000,000

November 30, 2021

November 30, 2028

0.511%

1,000,000

November 30, 2021

November 30, 2029

0.450%

500,000

April 28, 2022

April 30, 2024

0.267%

1,000,000

April 28, 2022

April 30, 2024

0.230%

2,500,000

April 28, 2022

April 30, 2025

0.297%

1,000,000

April 28, 2022

May 31, 2027

0.350%

1,000,000

June 30, 2022

June 30, 2024

0.265%

2,000,000

June 30, 2022

June 30, 2024

0.265%

1,000,000

June 30, 2022

June 30, 2025

0.200%

2,000,000

June 30, 2022

June 30, 2025

0.200%

1,000,000

June 30, 2022

June 30, 2025

0.200%

500,000

August 31, 2022

August 31, 2024

0.350%

1,600,000

August 31, 2022

February 28, 2025

0.374%

1,600,000

August 31, 2022

August 31, 2025

0.395%

500,000

August 31, 2022

August 31, 2025

0.395%

1,000,000

August 31, 2022

August 31, 2025

0.395%

500,000

August 31, 2022

August 31, 2026

0.430%

2,700,000

August 31, 2022

August 31, 2027

0.501%

2,400,000

August 31, 2022

August 31, 2027

0.420%

1,000,000

August 31, 2022

August 31, 2027

0.350%

300,000

August 31, 2022

August 31, 2029

0.685%

1,950,000

August 31, 2022

August 31, 2029

0.685%

1,000,000

August 31, 2022

August 31, 2029

0.685%

500,000

August 31, 2022

August 31, 2029

0.685%

500,000

Classification
Long-term loans payable

Drawdown date

Last repayment date

Weighted-average

Balanceinterest rate

(In thousands of yen)August 31, 2022

August 31, 2029

0.685%¥

500,000

August 31, 2022

August 31, 2029

0.685%

200,000

August 31, 2022

August 31, 2029

0.525%

1,000,000

August 31, 2022

August 31, 2029

0.525%

500,000

August 31, 2022

August 31, 2029

0.525%

1,000,000

August 31, 2022

August 31, 2029

0.525%

500,000

October 31, 2022

October 31, 2025

0.481%

500,000

October 31, 2022

April 30, 2026

0.373%

500,000

Subtotal
Investment corporation bonds

187,350,000
July 25, 2014

July 25, 2024

1.180%

April 28, 2016

April 28, 2028

0.900%¥

1,000,000

2,000,000

July 19, 2017

July 16, 2027

0.640%

2,000,000

February 15, 2019

February 15, 2024

0.390%

2,000,000

January 30, 2020

January 30, 2025

0.250%

2,000,000

October 20, 2020

October 18, 2030

0.610%

1,000,000

July 28, 2021

July 31, 2026

0.180%

2,000,000

July 11, 2022

July 9, 2027

0.400%

1,000,000

Subtotal

13,000,000

Total

¥

214,950,000

7. REDUCTION ENTRY
The amount of reduction entry of property, plant and equipment acquired by government subsidy is as follows:
As of April 30, 2023
As of October 31, 2022
In thousands of yen
Buildings in trust¥

26,230¥26,2308. COMMITMENT LINE AGREEMENTThe Investment Corporation has concluded a commitment line agreement with bank of account, etc.
As of April 30, 2023

As of October 31, 2022

In thousands of yen
Maximum amount¥

9,000,000

Drawn credit facility¥

9,000,000–

Balance¥–

9,000,000¥

9,000,000

9. PER UNIT INFORMATION
From November 1, 2022
to April 30, 2023

From May 1, 2022
to October 31, 2022
Yen

Net asset value per unit¥

Net income per unit¥

Weighted-average number of units (units)271,657

¥

8,493

¥

848,430

270,573
7,566
852,530*1: Net income per unit is calculated by dividing net income by the weighted average (based on number of days) number ofunits. Net income per unit after adjusting for diluted investment units is not included because there were no dilutive
investment units.
*2: The Investment Corporation implemented a two-for-one split of the investment units with October 31, 2022, as the record date of
the split and November 1, 2022, as the effective date. Net assets per unit and net income per unit are calculated based on theassumption that the split was implemented at the beginning of the prior fiscal period.

Kenedix Ofﬁce Investment Corporation

23

10. INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 31%. However, theInvestment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements are
met under the Special Taxation Measures Law of Japan. Under this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distribute in excess of 90% of its net income for the fiscal period in order tobe able to deduct such amounts. If the Investment Corporation does not satisfy all of the requirements, the entire taxable income of
the Investment Corporation will be subject to regular corporate income taxes. The Investment Corporation distributed in excess of
90% of its distributable income in the form of cash distributions totaling ¥6,487 million and ¥6,146 million for the periods endedApril 30, 2023, and October 31, 2022, respectively. Therefore, such distributions were treated as deductible distributions forpurposes of corporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.04% and 0.02% for the
fiscal periods ended April 30, 2023, and October 31, 2022, respectively. The following table summarizes the significant differences
between the statutory tax rate and the effective tax rate.
From November 1, 2022
to April 30, 2023

From May 1, 2022
to October 31, 2022

Statutory tax rate

31.46%

31.46%

Deductible cash distributions(28.31)(29.97)

Provision of reserve for reduction entry(3.13)(1.49)

Others0.03

0.01

Effective tax rate

0.04%

0.02%

The significant components of deferred tax assets and liabilities as of April 30, 2023, and October 31, 2022, are as follows:
As of April 30, 2023

As of October 31, 2022

In thousands of yen
Deferred tax assets
Enterprise tax payable

¥

177

¥

37

Amortization of leasehold right6,049

Deferred gains or losses on hedges

1,294

168

7,521

6,012

Subtotal
Valuation allowance
Total deferred tax assets

5,806(7,344)(5,974)

¥

¥

177

37

11. NET ASSETSThe Investment Corporation issues only non-par value units in accordance with the Investment Trust Act. The entire amount of theissue price of new units is designated as stated capital. The Investment Corporation is required to maintain net assets of at least ¥50
million as required by the Investment Trust Act.

Information on the cancellation of treasury investment units during the six-month period ended April 30, 2023, and October 31, 2022,
is as follows:
As of April 30, 2023

As of October 31, 2022

Total number of units cancelled (Number of units)

4,295

4,295

Total amount of cancellation (Thousands of yen)

¥ 2,999,551¥ 2,999,551

12. RELATED-PARTY TRANSACTIONS(1) Parent Company, Major Corporate Unitholders and Other
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023) and Thirty-fifth fiscal period (From May 1, 2022 to October
31, 2022): Not applicable(2) Affiliated Companies and Other
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023) and Thirty-fifth fiscal period (From May 1, 2022 to October
31, 2022)

24

: Not applicable(3) Fellow Subsidiary Companies and Other
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023) and Thirty-fifth fiscal period (From May 1, 2022 to October
31, 2022): Not applicable(4) Directors, Major Individual Unitholders and Other
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023) and Thirty-fifth fiscal period (From May 1, 2022 to October
31, 2022): Not applicable

13. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATEDEXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATE PROPERTY
Rent revenue – real estate, expenses related to rent business, and gain and loss on sale of real estate property for the fiscal
periods from November 1, 2022 to April 30, 2023 and from May 1, 2022 to October 31, 2022 consist of the following:
From November 1, 2022

From May 1, 2022

to April 30, 2023

to October 31, 2022

In thousands of yen
Rental and other operating revenues
Rent revenue – real estate
Rental revenues
Common area charges
Subtotal¥ 12,439,185¥ 12,335,332

1,457,707

1,506,356

13,896,892

13,841,688

Others:Parking space rental revenues

516,938

507,846

Utility charge reimbursement

1,286,335

1,268,984

Miscellaneous

372,728

342,405

Subtotal

2,176,002

2,119,236¥ 16,072,895¥ 15,960,925¥ 1,509,353¥ 1,482,699

Total rental and other operating revenues
Property-related expenses
Expenses related to rent business
Property management fees and facility management fees
Utilities

1,552,159

1,445,057

Taxes

1,392,970

1,369,695

Repairs and maintenance351,470

398,775

Insurance

20,50020,280Trust fees

30,12730,194

Others319,516

329,428

2,617,548

2,631,665¥ 7,793,647¥ 7,707,795

Depreciation
Total expenses related to rent business
Gain and loss on sale of real estate properties
KDX Kiba Building－¥ 1,650,000

Cost of investment properties－

1,350,357

Other sales expenses－

58,659－¥ 240,982

Revenue from sale of investment properties

Gain on sale of real estate properties¥¥

KDX Kawasaki-Ekimae Hon-cho Building
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of real estate properties
KENEDIX Office Investment Corporation¥ 4,508,100¥－

3,189,768－

149,898－¥ 1,168,433¥－

Kenedix Ofﬁce Investment Corporation

25

14. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms ofgenerally two years for office buildings. The future minimum rental revenues under existing non-cancelable operating leases as ofApril 30, 2023, and October 31, 2022, are as follows:
As of April 30, 2023

As of October 31, 2022
In thousands of yen

Due within one year
Due after one year
Total

¥ 3,522,908¥ 3,478,791

7,066,262

7,628,983¥ 10,589,171¥ 11,107,775

15. FINANCIAL INSTRUMENTS
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation bonds and new investment units. The Investment Corporation uses
derivatives for the purpose of hedging its exposure to changes in interest rates and does not enter into derivatives for speculative or
trading purposes. Management of surplus funds is undertaken in a prudent manner that considers fully such factors as safety,
liquidity, interest-rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership (tokumei kumiai, “TK”) interests, are exposed to credit risk of the issuer
and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are used primarily for procuring funds necessary for the acquisition of properties
and have a redemption date of a maximum of approximately 7 years and 11 months following the accounting date. Although acertain portion of said liabilities are subject to interest-rate fluctuation risk, the Investment Corporation utilizes derivatives (interestrate swap transactions) in order to reduce such risk.
Interest-rate swap transactions are used as derivative financial instruments. Utilizing interest-rate swap transactions, the Investment
Corporation fixes its interest expense for long-term loans payable bearing interest at a variable rate. With regard to hedge accounting
methods, hedging instruments and hedged items, hedge policy, and the assessment of the effectiveness of hedging activities, please
see Note 2(M) “Derivative Financial Instruments.”(3) Risk management for financial instruments(a) Monitoring of market risk (the risks arising from fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap transactions in order to minimize risk arising from fluctuations in interest rates
on funds procured. The Investment Corporation periodically reviews the value of the property and financial condition of the issuer
with regard to investment securities.
(b) Monitoring of liquidity risk (the risk that the Investment Corporation may not be able to meet its obligations on scheduled
due dates) associated with procurement of funds
Although loans and other liabilities are subject to liquidity risk, the Investment Corporation reduces such risk by spreading out
payment due dates and by using diversified fund procurement methods. Liquidity risk is also managed by such means as regularly
checking the balance of cash reserves.
(4) Supplementary explanation of the estimated fair value of financial instruments
Because the factors incorporated into the calculation of fair value of financial instruments are subject to change, differing assumptions
are adopted which may alter fair value. Moreover, the contract amounts, etc. of derivative transactions in “(B) Estimated Fair Valueof Financial Instruments” do not indicate the market risk of derivative transactions.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2023 and estimated fair value are shown in thefollowing table. Moreover, because “Cash and deposits,” “Cash and deposits in trust” and “Short-term loans payable” are settled withcash in the short term, the fair value can be considered as equivalent to the book value. Therefore, the notes for these accounts havebeen omitted.

26

Carrying value

Estimated fair value

Difference

In thousands of yen(1) Current portion of investment corporation bonds

2,000,000

1,999,400(600)(2) Current portion of long-term loans payable

19,700,000

19,716,952

16,952(3) Investment corporation bonds

11,000,000

10,949,200(50,800)(4) Long-term loans payable

181,950,000

181,467,672(482,327)¥ 214,650,000¥ 214,133,225¥ (516,774)

674,650

674,650–

Subtotal
Derivative transactions(*)(*)The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing
the net liability position.
*1 Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivativetransactions
Liabilities(1) Current portion of investment corporation bonds and (3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices. The fair value of those for which no market priceis available is based on the quoted price obtained from counterparty financial institutions, etc.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate,
which is subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on thepresent value of the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by
the interest rate to be applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 16 “DERIVATIVE TRANSACTIONS.”*2 Redemption schedule for loans payable and investment corporation bonds
Due within
1 year or lessDue after

Due after

1 year through2 years throughDue after

2 years

3 years

Due after

Due after

3 years through 4 years through4 years

5 years

5 years

In thousands of yen
Investment corporation

2,000,000

bonds
Long-term loans payable
Total

4,000,000

19,700,000¥

21,700,000–

27,050,000¥

31,050,000¥

4,000,000

2,000,000

32,900,000

37,800,000

32,900,000¥ 39,800,000

1,000,000

33,100,000¥

37,100,000

51,100,000¥

52,100,000

Thirty-fifth fiscal period (From May 1, 2022 to October 31, 2022)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation bonds and new investment units. The Investment Corporation uses
derivatives for the purpose of hedging its exposure to changes in interest rates and does not enter into derivatives for speculative or
trading purposes. Management of surplus funds is undertaken in a prudent manner that considers fully such factors as safety,
liquidity, interest-rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership (tokumei kumiai, “TK”) interests, are exposed to credit risk of the issuer
and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are used primarily for procuring funds necessary for the acquisition of properties
and have a redemption date of a maximum of approximately 8 years and 1 month following the accounting date. Although a certain
portion of said liabilities are subject to interest-rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-rate
swap transactions) in order to reduce such risk.
Interest-rate swap transactions are used as derivative financial instruments. Utilizing interest-rate swap transactions, the Investment
Corporation fixes its interest expense for long-term loans payable bearing interest at a variable rate. With regard to hedge accounting
KENEDIX Office Investment Corporation

Kenedix Ofﬁce Investment Corporation27

methods, hedging instruments and hedged items, hedge policy, and the assessment of the effectiveness of hedging activities, please
see Note 2(M) “Derivative Financial Instruments.”(3) Risk management for financial instruments(a) Monitoring of market risk (the risks arising from fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap transactions in order to minimize risk arising from fluctuations in interest rates
on funds procured. The Investment Corporation periodically reviews the value of the property and financial condition of the issuer
with regard to investment securities.
(b) Monitoring of liquidity risk (the risk that the Investment Corporation may not be able to meet its obligations on scheduled
due dates) associated with procurement of funds
Although loans and other liabilities are subject to liquidity risk, the Investment Corporation reduces such risk by spreading out
payment due dates and by using diversified fund procurement methods. Liquidity risk is also managed by such means as regularly
checking the balance of cash reserves.
(4) Supplementary explanation of the estimated fair value of financial instruments
Because the factors incorporated into the calculation of fair value of financial instruments are subject to change, differing assumptions
are adopted which may alter fair value. Moreover, the contract amounts, etc. of derivative transactions in “(B) Estimated Fair Valueof Financial Instruments” do not indicate the market risk of derivative transactions.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2022, and estimated fair value are shown in thefollowing table. Moreover, because “Cash and deposits,” “Cash and deposits in trust” and “Short-term loans payable” are settled withcash in the short term, the fair value can be considered as equivalent to the book value. Therefore, the notes for these accounts havebeen omitted.
Carrying value
Estimated fair value
Difference
In thousands of yen(1) Current portion of investment corporation bonds(2) Current portion of long-term loans payable

－

－

－

14,300,000

14,338,060

38,060(3) Investment corporation bonds

13,000,000

12,971,800(28,200)(4) Long-term loans payable

187,350,000

186,596,720(753,279)¥ 214,650,000¥ 213,906,580¥ (743,419)

814,256

814,256–

Subtotal
Derivative transactions(*)(*)The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing
the net liability position.
*1 Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivativetransactions
Liabilities(1) Current portion of investment corporation bonds and (3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices. The fair value of those for which no market priceis available is based on the quoted price obtained from counterparty financial institutions, etc.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate,
which is subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on thepresent value of the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by
the interest rate to be applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 16 “DERIVATIVE TRANSACTIONS.”28

*2 Redemption schedule for loans payable and investment corporation bonds
Due within
1 year or lessDue after

Due after

1 year through2 years throughDue after

2 years

3 years

Due after

Due after

3 years through 4 years through4 years

5 years

5 years

In thousands of yen
Investment corporation–

4,000,000

2,000,000

2,000,000

3,000,000

2,000,000

14,300,000

25,600,000

29,950,000

30,800,000

38,500,000

62,500,000

bonds
Long-term loans payable
Total

¥

14,300,000¥

29,600,000¥

31,950,000¥

32,800,000¥

41,500,000¥

64,500,000

16. DERIVATIVE TRANSACTIONS
The following summarizes the contracted amount and the fair value of interest-rate swap contracts as of April 30, 2023:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Hedge

Type ofaccounting

derivative

methodtransactions

Principle method Interest-rate

Contracted amount

Hedgeditems

Fair value(In thousands of yen)
Maturing
after 1 year

(In thousandsof yen)Long-termswaps:

loans

Receive/floating

payableCalculation
method for
applicable fair value
Based on the¥82,450,000¥

77,950,000¥

674,650and pay/fixedamount provided bycounterparty
financial institutions

Special treatment Interest-rateLong-termof interest-rate

swaps:

loans

swaps

Receive/floating

payable30,100,000

25,400,000¥ 112,550,000¥ 103,350,000*

and pay/fixed
Total

¥

674,650(*)Interest-rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As aresult, their fair value is included in the fair value of the hedged long-term loans payable.
The following summarizes the contracted amount and the fair value of interest-rate swap contracts as of October 31, 2022:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Hedge

Type ofaccounting

derivative

methodtransactions

Principle method Interest-rate

Contracted amount

Hedgeditems

Fair value(In thousands of yen)
Maturing
after 1 year

(In thousandsof yen)Long-termswaps:

loans

Receive/floating

payableCalculation
method for
applicable fair value
Based on the¥82,450,000¥

79,950,000¥

814,256

and pay/fixedamount provided bycounterparty
financial institutions

Special treatment Interest-rateLong-termof interest-rate

swaps:

loans

swaps

Receive/floating

payable30,100,000

27,100,000¥ 112,550,000¥ 107,050,000*

and pay/fixed
Total

¥

814,256(*)Interest-rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As aresult, their fair value is included in the fair value of the hedged long-term loans payable.

Kenedix Ofﬁce Investment Corporation29

17. REVENUE RECOGNITION
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023)(1)

Information on the Breakdown of Revenue from Contracts with Customers
Thirty-sixth Fiscal Period (From November 1, 2022 to April 30, 2023)
Revenues generated from contracts
with customers*1

Sales to external customers(in thousands of yen)
Revenue from sale of realestate property¥4,508,100*2¥ 1,168,433

1,286,335

1,286,335

Other

–

14,835,944

Total¥5,794,435¥17,290,713

Utility charge reimbursements(*1)Rental revenues, etc. which are subject to Accounting Standard for Lease Transactions (ASBJ Statement No. 13) and the transfer
of real estate properties which is subject to the “Practical Guidelines on Accounting by Transferors for Securitization of Real
Estate Using Special Purpose Companies” (Accounting System Committee Report No.15 of the Japanese Institute of Certified
Public Accountants) are not included in the above amounts as they are excluded from revenue recognition accounting standards.
Furthermore, revenue generated from contracts with major customers include of revenue from sale of real estate properties andutility charge reimbursements.
(*2) Revenue from sale of real estate, etc. is recorded as gain and loss on sale of real estate, etc. in the statement of income. Therefore,
the amount calculated by deducting the cost of real estate, etc. sold and other sales expenses from the revenue from sale of realestate, etc. is indicated.
(2)

Information Utilized as the Base for Understanding Revenue from Contracts with Customers
Thirty-sixth Fiscal Period (From November 1, 2022 to April 30, 2023)
The information is as described in the notes on Summary of Significant Accounting Policies.

(3)

Information on relationship of Fulfillment of performance Obligations based with customers with cashflow generated
from said contracts and Amount and period of Revenue expected to be recognized in the next calculation period or
thereafter from contracts existing at the end of the current calculation period.

(a) Balance of contract assets and contract liabilities, etc.
From November 1, 2022
to April 30, 2023
(in thousands of yen)
Receivables generated from contracts with customers(balance at beginning of fiscal period)
Receivables generated from contracts with customers(balance at end of fiscal period)¥324,473
309,606

Contract assets (balance at beginning of fiscal period)–

Contract assets (balance at end of fiscal period)–

Contract liabilities (balance at beginning of fiscal period)–

Contract liabilities (balance at end of fiscal period)–(b)Transaction value allocated to remaining performance obligations
Not applicable.
With regard to utility charge reimbursements, as the Investment Corporation has the right to receive from customers anamount directly corresponding to the value for the lessees, or customers, of sections for which performance is complete by
the end of the fiscal period, the amount it has the right to claim is recognized as revenue in accordance with Paragraph 19 of
the Implementation Guidance on Accounting Standard for Revenue Recognition. Accordingly, such is not included in the30note on transaction value allocated to remaining performance obligations through application of the provisions of Paragraph80-22 (2) of the Accounting Standard for Revenue Recognition.
Thirty-fifth fiscal period (From May 1, 2022 to October 31, 2022)(1)

Information on the Breakdown of Revenue from Contracts with Customers
Thirty-fifth Fiscal Period (From May 1, 2022 to October 31, 2022)
Revenues generated from contracts
with customers*1

Sales to external customers(in thousands of yen)
Revenue from sale of realestate property¥1,650,000*2¥ 240,982

1,268,984

1,268,984

Other

–

14,756,403

Total¥2,918,984¥16,266,370

Utility charge reimbursements(*1)Rental revenues, etc. which are subject to Accounting Standard for Lease Transactions (ASBJ Statement No. 13) and the transfer
of real estate properties which is subject to the “Practical Guidelines on Accounting by Transferors for Securitization of Real
Estate Using Special Purpose Companies” (Accounting System Committee Report No.15 of the Japanese Institute of Certified
Public Accountants) are not included in the above amounts as they are excluded from revenue recognition accounting standards.
Furthermore, revenue generated from contracts with major customers include of revenue from sale of real estate properties andutility charge reimbursements.
(*2) Revenue from sale of real estate, etc. is recorded as gain and loss on sale of real estate, etc. in the statement of income. Therefore,
the amount calculated by deducting the cost of real estate, etc. sold and other sales expenses from the revenue from sale of realestate, etc. is indicated.
(2)

Information Utilized as the Base for Understanding Revenue from Contracts with Customers
Thirty-fifth Fiscal Period (From May 1, 2022 to October 31, 2022)
The information is as described in the notes on Summary of Significant Accounting Policies.

(3)

Information on relationship of Fulfillment of performance Obligations based with customers with cashflow generated
from said contracts and Amount and period of Revenue expected to be recognized in the next calculation period or
thereafter from contracts existing at the end of the current calculation period.

(a) Balance of contract assets and contract liabilities, etc.
From May 1, 2022
to October 31, 2022
(in thousands of yen)
Receivables generated from contracts with customers(balance at beginning of fiscal period)
Receivables generated from contracts with customers(balance at end of fiscal period)¥247,784
324,473

Contract assets (balance at beginning of fiscal period)–

Contract assets (balance at end of fiscal period)–

Contract liabilities (balance at beginning of fiscal period)–

Contract liabilities (balance at end of fiscal period)–(b)Transaction value allocated to remaining performance obligations
Not applicable.
With regard to utility charge reimbursements, as the Investment Corporation has the right to receive from customers anamount directly corresponding to the value for the lessees, or customers, of sections for which performance is complete by
the end of the fiscal period, the amount it has the right to claim is recognized as revenue in accordance with Paragraph 19 of
the Implementation Guidance on Accounting Standard for Revenue Recognition. Accordingly, such is not included in thenote on transaction value allocated to remaining performance obligations through application of the provisions of Paragraph80-22 (2) of the Accounting Standard for Revenue Recognition.
KENEDIX Office Investment Corporation

Kenedix Ofﬁce Investment Corporation

31

18. INVESTMENT AND RENTAL PROPERTIES
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating
rental revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2022

Net change

Fair value
As of April 30, 2023
(In thousands of yen)
¥ 551,161,000

As of April 30, 2023

¥ 437,196,489¥(4,792,379)¥ 432,404,110*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal
period under review of Harajuku F.F. Building and KDX Nagoya Sakae Building that are scheduled to be sold on November 1,
2023 respectively are calculated based on the anticipated sale price (Harajuku F.F. Building: 3,880 million yen; KDX Nagoya
Sakae Building: 6,050 million yen) in the transaction agreements on June 13, 2023.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal
increase/decrease factors were the sale of 1 real estate property totaling 3,189,768 thousand and depreciation amounting to2,617,548 thousand.
Income and loss in the fiscal period ended April 30, 2023, for real estate for rental purposes is listed in Note 13 “BREAKDOWN OFRENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF
REAL ESTATE PROPERTY.”
Thirty-fifth fiscal period (From May 1, 2022 to October 31, 2022)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating
rental revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of April 30, 2022

Net change

As of October 31, 2022

Fair value

As of October 31, 2022
(In thousands of yen)
¥ 553,221,000¥ 426,967,143¥ 10,229,346¥ 437,196,489*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal
increase/decrease factors were the acquisitions of 1 real estate property and trust beneficiary interest in real estate of 1 property
totaling 13,346,136 thousand, sale of trust beneficiary interest in real estate of 1 property totaling 1,350,357 thousand anddepreciation amounting to 2,631,665 thousand.

Income and loss in the fiscal period ended October 31, 2022, for real estate for rental purposes is listed in Note 13 “BREAKDOWNOF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE
OF REAL ESTATE PROPERTY.”

19. SEGMENT AND RELATED INFORMATION
Thirty-sixth fiscal period (From November 1, 2022 to April 30, 2023)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no reportablesegment subject to disclosure.
(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 theoperating revenues on the statement of income and retained earnings.

32

(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 revenues on the statementof income 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 ofproperty, plant and equipment on the balance sheet.
(3)

Information about each major customer

Disclosure is omitted because net sales to a single external customer account for less than 10% of the operating revenues on thestatement of income and retained earnings.
Thirty-fifth fiscal period (From May 1, 2022 to October 31, 2022)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no reportablesegment subject to disclosure.
(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 theoperating revenues on the statement 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 revenues on the statementof income 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 ofproperty, plant and equipment on the balance sheet.
(3)

Information about each major customer

Disclosure is omitted because net sales to a single external customer account for less than 10% of the operating revenues on thestatement of income and retained earnings.

20. SIGNIFICANT SUBSEQUENT EVENTS
Execution of the Merger Agreement by and among the Investment Corporation, Kenedix Residential Next Investment Corporation(“KDR”) and Kenedix Retail REIT Corporation (“KRR”; and KRR, KDO, and KDR are collectively referred to as “Each REIT”)
The Investment Corporation, KDR and KRR announced that each of them has, at Each Investment Corporation’s Board of Directors
Meeting held June 13, 2023, resolved to undertake the Merger with November 1, 2023, as the effective date, and have also executedthe Merger Agreement on the same date.
i. Purpose of the Merger
The Japanese economy is making a moderate recovery as movement restrictions to prevent the spread of COVID-19 infections
was removed, and its economic and social activities are being normalized. However, there are uncertain factors in theeconomic conditions in and outside Japan such as changes in the global affairs, emergence of geopolitical risks and effects ofeconomic sanctions related to these risks as a result of the invasion of Ukraine by Russia, continuous global inflation related
to rising commodity prices and fuel costs, increase of the policy interest rates by major countries, and bankruptcies of overseas
financial institutions.
In such environment, the current real estate investment trust securities market (the “J-REIT market”) is unstable and affectedby the concern for rising operational costs due to inflation and the fear for the rise in the long-term interest rates due to futurechanges of the monetary policies by the Bank of Japan.
Kenedix Ofﬁce Investment Corporation

KENEDIX Office Investment Corporation

33

The asset management company of Each REIT, the Asset Management Company was established as follows: Kenedix
Residential Partners, Inc. established in March 2011 merged with Kenedix Office Partners, Inc. and Kenedix Advisors, Inc.
(both established in November 2003) in October 2013 in an absorption-type merger, and changed its corporate name to thecurrent name of the asset management company. Each REIT has received sponsor support from Kenedix Group and has
achieved operational results.
Each REIT has implemented various measures to ensure the acquisition of stable profits and the continued growth ofinvestment assets by leveraging each characteristic.
However, the real estate market’s evaluations of the mid-sized office buildings, which are the Investment Corporation’s maininvestment target, have not changed because of their scarcity and liquidity. Thus, the capitalization rate remains low and it
remains hard to acquire mid-sized office buildings. Moreover, recently, unit prices of the Investment Corporation are
significantly below NAV per unit due to the concern for the market outlook regarding secondary vacancies and rent decline
due to large supplies of large office buildings, and there are limited opportunities for external growth that involve public
offering. Therefore, there are issues with ensuring continued future growth. As for KDR, although KDR has conducted public
offerings for five consecutive years, there is the possibility that the acquisition competition may escalate and the acquisition
opportunities may decrease due to the relatively stable profitability of residential properties, and recently unit price is below
NAV per unit. Moreover, KDR’s LTV is relatively high in the J-REIT market, and KDR has concerns regarding the increasein costs when interest rates are rising. As for KRR, although KRR has a rich real estate pipeline, it has been increasingly
difficult to acquire shopping centers for daily needs since the COVID-19 pandemic. In addition, there are concerns overincrease in costs caused by inflation, and there are issues such as limited room for the future internal growth as a whole dueto the long-term fixed rents.
Moreover, Each REIT is watching the trends of interest levels and price levels such as costs of utilities, which may have an
impact on the profitability of their portfolios in the future, and Each REIT recognizes this situation as their common issues.
In such circumstances, Each REIT agreed to start negotiation for merger and carefully deliberated on the issues in order todeal with the issues described above, respond flexibly to environmental changes and attain continued growth. As a result,
Each REIT came to the same conclusion that the Merger will contribute to maximize unitholders’ value by leading to thecontinued growth by expanding investment target sectors, improving their presence and stability in the market by increasing
the sizes of their assets, and enabling more commitment for sustainability. Therefore, the Merger Agreement was made andentered into by and among Each REIT.
Each Investment Corporation considers that the Merger has the following rationale:(i) Sustainable growth driven by expansion of investment universe
The New REIT (defined below) will continue to focus on their main investment target, i.e. mid-sized office buildings,
residential properties, healthcare facilities, and shopping centers for daily needs, and it will start to additionally focus on
logistics facilities and hotels, in which Each REIT has conducted only limited investments until now, to increase
opportunities for acquisitions. In addition, the Merger will enable asset reshuffling among different asset types, disposingof properties with less competitiveness or profitability, allow flexibly to the changes of the external environment
surrounding the real estate market, and activate the investments in the investment target sectors that are expected to grow,and thus leading to the improvement of portfolio profitability. As described above, the New REIT aims to attain continued
growth beyond the boundary of the strategic management for the existing specialized REIT through a strategic managementthat ensures a wide range of opportunities for acquisitions and flexibility related to the expansion of the investment target
sectors.
(ii) Improvement in the market presence and ability
Through the Merger, the asset size of the investment corporation after the Merger (the “New REIT”) will be ranked third
in the J-REIT market (Note 1) and this will significantly improve the presence in the market and liquidity of investment
units, and the portfolio is expected to own a total of 350 properties (Note 2) after the Merger. Having the largest expected
number of properties in the J-REIT market will enhance diversification and contribute to improve the stability of theportfolio. In addition, a property manager that leverages the advantage of its scale will contribute to increase resilienceagainst the pressure of the rising costs.
(iii) Further commitment to sustainability
Each REIT has recognized sustainability as a significant issue and has taken the initiative in implementing various
initiatives. Specifically, the Investment Corporation has become the first investment corporation in the J-REIT market to34

participate in GRESB Real Estate Assessment, KDR was the first J-REIT to issue social bonds, and KRR was the first JREIT to introduce investment unit performance fee. The New REIT plans to integrate and elevate expertise accumulated
by Each REIT through the Merger and aims to be a leading company in the sustainability initiatives. Moreover, the New
Investment Corporation plans to further enforce the sustainability initiatives under the management system with a highdegree of specialization and diversity by introducing a new management fee structure that is linked to unitholder value andsustainability metric, improving governance through the enhancement of supervisory officers, and promoting diversity.
Note 1: The amount of asset size after the Merger is calculated by totaling the asset size of Each REIT. The asset size of theInvestment Corporation is assumed to be the total of acquisition price of the properties in the portfolio as of April 30,
2023, plus the acquisition (scheduled) price reflecting the acquisitions and sales (including one that are scheduled) of
the properties from May 1, 2023, to the effective date of the Merger. The asset size of KDR and KRR is considered tobe the appraisal values of the properties as of the end of the latest fiscal period (relating to KDR, as of January 31,
2023 (provided, however, that, this includes the acquisitions of Sunny Life Tachikawa and Rehabili-home Bon Sejour
Minamisenzoku; relating to KRR, as of March 31, 2023). The asset sizes of the other investment corporations in the
J-REIT market are calculated based on the asset sizes including any properties that the other investment corporations
announced the acquisition and sale thereof in the J-REIT market as of April 30, 2023 (acquisition (scheduled) pricebasis). Therefore, it is not guaranteed that the New REIT after the Merger will have the third largest asset size in the
J-REIT market as of the effective date of the Merger. In regard to the asset size after the Merger, because it is planned
that assets of KDR and KRR will be succeeded at market price based on the purchase method by the Investment
Corporation as the acquiring corporation, the asset size will not be a simple sum of the total (scheduled) acquisition
price of the Investment Corporation and the total appraisal values of KDR and KRR as of the end of the latest
accounting period.
Note 2: The number of properties of the portfolio after the Merger is based on the number of properties of the Investment
Corporation, KDR and KRR as of the date hereof and reflecting the change in the number of the acquisitions and salesof the properties (including ones that are scheduled) by the effective date of the Merger. KDX Chofu Building is treatedas one property in the calculation of the number of properties of the portfolio after the Merger though the Investment
Corporation owns its office tower and KRR owns its retail wing respectively as of June 13, 2023. The numbers of theproperties of the other investment corporations in the J-REIT market is calculated based on the number of properties
including those that the other investment corporations announced acquisition and sale thereof in the J-REIT market asof April 30, 2023. Therefore, it is not guaranteed that the portfolio of the New REIT after the Merger will have thelargest number of properties in the J-REIT market as of the effective date of the Merger.
ii. Form of the Merger
The Investment Corporation will be the surviving corporation under an absorption-type merger and KDR and KRR will bedissolved in the Merger.
iii. Allocation ratio etc.
The Investment Corporation(Surviving corporationin the absorption-type merger)
Allocation of investment
units under the Merger

1

KDR(Dissolving corporationin the absorption-type merger)

KRR(Dissolving corporationin the absorption-type merger)

1.34

1.68

(Reference)
Before the Investment Unit Split
0.67(Reference)
Before the Investment Unit Split
0.84

Note 1: The number of the Investment Corporation’s new investment units to be issued as a result of the Merger (the numberof units taking into account the Investment Unit Split of the Investment Corporation): 2,446,037
Note 2: For details of the investment unit split refer to “iv. Split of Investment Units” below. The same applies hereinafter.
iv. Split of Investment Units
The Merger will be effected by way of an absorption-type merger with the Investment Corporation as the surviving corporation,with KDR and KRR having a merger ratio of 0.67 and 0.84, respectively, against one for the Investment Corporation, before
taking into account the Split of Investment Units. However, with this merger ratio, 0.67 Investment Corporation’s investment
units will be allotted against one KDR investment unit and 0.84 Investment Corporation’s investment units will be allottedagainst one KRR investment unit, resulting in a number of KDR and KRR unitholders that will receive Investment
Corporation’s investment units of less than one unit. For this reason, in order to enable the unitholders of KDR and KRR tocontinue to hold the Investment Corporation’s investment units after the Merger, we decided to split the Investment
Corporation’s investment units at a ratio of two investment units per one investment unit, for the purpose of providing at leastone Investment Corporation’s investment unit to all unitholders of KDR and KRR. As a result of the Split of Investment Units,
KENEDIX Office Investment Corporation

Kenedix Ofﬁce Investment Corporation

35

KDR unitholders will be allotted 1.34 Investment Corporation’s investment units after the Split of Investment Units against
each KDR investment unit, and KRR unitholders will be allotted 1.68 Investment Corporation’s investment units after the
Split of Investment Units against each KRR investment unit.
(i) Method of Split of Investment Units
The Investment Corporation will implement a two for one split of the investment units held by unitholders of the Investment
Corporation stated or recorded on the registry of unitholders as of Tuesday, October 31, 2023, which is the day preceding
the effective date of the Merger. The Split of Investment Units will become effective on Wednesday, November 1, 2023,
which is the effective date of the Merger, provided that the merger agreement pertaining to the Merger has not been
terminated or expired by the day before the effective date of the Merger.
(ii) Number of Investment Units to be Increased by the Split of Investment Units
1) Total number of Investment Corporation’s investment units issued
and outstanding before the Split of Investment Units:

848,430 units

2) Number of investment units to be increased through the Split ofInvestment Units:

848,430 units

3) Total number of Investment Corporation’s investment units issued
and outstanding after the Split of Investment Units:

1,696,860 units

4) Total number of Investment Corporation’s investment units issued
and outstanding after the Merger:

4,142,897 units (Note 1)5) Total number of authorized investment units after the Split ofInvestment Units and the Merger:
20,000,000 units (Note 2)
Note 1: The number of investment units will be calculated based on the assumption that one KDR investment unit willbe allotted 1.34 Investment Corporation’s investment units after the Split of Investment Units for all of KDR’sissued investment units as of June 13, 2023 (1,070,433 units), and one KRR investment unit will be allotted
1.68 Investment Corporation’s investment units after the Split of Investment Units for all of KRR’s issued
investment units as of June 13, 2023 (602,177 units).
Note 2: The current total number of authorized Investment Corporation’s investment units is 4,000,000 units. However,in connection with the Split of Investment Units, the Articles of Incorporation of the Investment Corporation
will be partially amended and the total number of authorized investment units will be changed as of the effective
date of the Merger.
(iii) Effect on the information per unit of the Investment Corporation
The information per unit for the fiscal period under assuming that the Split of Investment Units was conducted at the
beginning of this fiscal period is described as follows.
1) Net Assets per Unit: 135,828 yen
2) Net Income per Unit: 4,246 yen
v. Delivery of Payment upon the Merger
In addition to the above mentioned investment units, the Investment Corporation intends to pay unitholders of KDR and KRR(the unitholders stated or recorded in the final unitholders’ registers of KDR and KRR on the day before the effective date of
the Merger (excluding Each REIT and unitholders of KDR and KRR who has demanded the purchase of their investment
units pursuant to Article 149-3 of the Investment Trusts Act (excluding those who have withdrawn such demand for purchase)(hereinafter referred to as the “Unitholders Subject to Allocation”)), in lieu of cash distributions (distributions of profits) forthe last fiscal period of KDR and KRR which ends the day before the effective date of the Merger, the Payment upon the
Merger in the form of cash distributions based on distributable income of KDR and KRR for that same period of an amount(disregarding fractions of a yen) which is the quotient resulting from a division of the amount of distributable income of KDR
and KRR on the date before the effective date of the Merger by the number of issued investment units of KDR and KRR on
that date as reduced by the number of investment units held by unitholders other than the Unitholders Subject to Allocation.
The Payment upon the Merger will be paid within a reasonable period from the effective date of the Merger.

36

vi. Overview of the Previous Fiscal Period for KDR and KRR
Overview of the Previous Fiscal Period (ending January 31, 2023) for KDR
Business: To invest assets mainly in specified assets as set forth in the Investment Trust Act

Operating Revenues : 9,936 million yen
Net Profit: 4,593 million yen

Total Assets: 327,014 million yen

Total liabilities: 175,381 million yen

Net assets: 151,632 million yen

Overview of the Previous Fiscal Period (ending March 31, 2023) for KRR
Business: To invest assets mainly in specified assets as set forth in the Investment Trust Act

Operating Revenues : 9,924 million yen
Net Profit: 3,922 million yen

Total Assets: 287,569 million yen

Total liabilities: 145,002 million yen

Net Assets: 142,566 million yen

vii. Time of the Merger
Effective date of the Merger: November 1, 2023 (planned)

Kenedix Ofﬁce Investment Corporation

37

21. DISTRIBUTIONS
Thirty-sixth fiscal period(From November 1, 2022 to April 30, 2023)

Thirty-fifth fiscal period(From May 1, 2022 to October 31, 2022)

(Yen)

(Yen)

I. Retained earnings at the end of period¥ 7,206,005,509¥ 6,451,096,681

II. Total distributions¥ 6,487,944,210¥ 6,146,026,920

Distributions per unit

¥ 7,647¥ 14,488

Provision of reserve for reduction entry¥ 718,061,299¥ 304,852,318

Ⅳ. Retained earnings brought forward
to the next period¥-¥ 217,443

In accordance with the policy stipulated in Article
35 (1) of its Articles of Incorporation, theInvestment Corporation determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as
stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation, and shall be up to
the amount of its profits as the ceiling. Following
this policy, the Investment Corporation has
decided that, of the amount remaining after theprovision of reserve for reduction entry as
stipulated in Article 65-7 of the Act on Special
Measures Concerning Taxation is deducted fromunappropriated retained earnings, it shall
distribute the outstanding ¥6,487,944,210 as
profit distribution.
In addition, the Investment Corporation decided
not to distribute cash in excess of distributableprofit, stipulated in Article 35 (2) of its Articles ofIncorporation.

In accordance with the policy stipulated in Article
35 (1) of its Articles of Incorporation, theInvestment Corporation determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as
stipulated in Article 67-15 of the Act on Special
Measures Concerning Taxation, and shall be up to
the amount of its profits as the ceiling. Following
this policy, the Investment Corporation has
decided that, of the amount remaining after theprovision of reserve for reduction entry as
stipulated in Article 65-7 of the Act on Special
Measures Concerning Taxation is deducted fromunappropriated retained earnings, it shall
distribute the outstanding ¥6,146,026,920 as
profit distribution.
In addition, the Investment Corporation decided
not to distribute cash in excess of distributableprofit, stipulated in Article 35 (2) of its Articles ofIncorporation.

III. Voluntary reserve (provision)

Method of calculating distribution
amount38

Independent Auditor’s Report

The Board of Directors
Kenedix Office Investment Corporation
OpinionWe have audited the accompanying financial statements of Kenedix Office Investment
Corporation (the Company), which comprise the balance sheet as at April 30, 2023, and thestatements of income, and retained earnings, changes in net assets, and cash flows for the sixmonth period then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as at April 30, 2023, and its financial performance and its
cash flows for the six-month period then ended in accordance with accounting principles
generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance withthese requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention to Note 20. SIGNIFICANT SUBSEQUENT EVENTS to the financial
statements, which describes that the Company, at its Board of Directors meeting held on June
13, 2023, resolved to undertake an absorption-type merger, with November 1, 2023 as theeffective date, whereby the Company will be the surviving corporation and Kenedix Residential
Next Investment Corporation and Kenedix Retail REIT Corporation will be the dissolving
corporation in the merger, and also executed a merger agreement on June 13, 2023. Our opinion
is not modified in respect of this matter.
Other Information
The other information comprises the information included in the Semi-annual Report that
contains audited financial statements but does not include the financial statements and our
auditor’s report thereon. Management is responsible for preparation and disclosure of the otherinformation. The Supervisory Director is responsible for overseeing the Company’s reporting
process of the other information.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

Kenedix Ofﬁce Investment Corporation

39

If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, and Supervisory Director for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statementsin accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Supervisory Director is responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
・ Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the financial statements is not expressing an opinion on the effectiveness of the Company’s
internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation in accordance with accounting
principles generally accepted in Japan.

40

We communicate with the Executive Director regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Executive Director with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
July 28, 2023

/s/ Hitoshi Sakurai
Hitoshi Sakurai
Designated Engagement Partner
Certified Public Accountant/s/ Masahiro Yawata
Masahiro Yawata
Designated Engagement Partner
Certified Public Accountant

Kenedix Ofﬁce Investment Corporation

41

IR schedule
Fiscal period ended April
Nov.

Dec.

Jan.

Feb.

Mar.

Fiscal period ended October
Apr.

May

Fiscal period end

Financial results
announcement

Start of distribution payments
Asset management report publication

Jun.

Jul.

Aug.

Sep.

Oct.

Fiscal period end
Financial results
announcement
Start of distribution payments
Asset management report publication

Unitholder memorandum
Fiscal period end

April 30 and October 31 of each year

General Meeting ofUnitholders

Convened at least once every two years, in principle

Date of record forestablishment of unitholder
voting rights

Prescribed in Article 16 of the Articles of Incorporation

Record dates for distribution
payments

April 30 and October 31 (within three months from payment record dates)

Listing

Tokyo Stock Exchange (Securities code: 8972)

Newspaper for publicannouncements

Nihon Keizai Shimbun (Nikkei)

Unitholder registry andspecial account administrator

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Postal address and telephoneinquiries

Stock Transfer Agency Department Sumitomo Mitsui Trust Bank, Limited 8-4 Izumi
2-chome, Suginami-ku, Tokyo Toll-free tel: 0120 782 031

Receipt of Distributions

42

During receipt period

Take your distribution receipt to the head or branch ofﬁces of Japan Post Bank Co.,
Ltd. or post ofﬁces (bank agents).

After receipt period

Specify the receipt method on the back of the distribution receipt and mail it to the
Stock Transfer Agency Division of Sumitomo Mitsui Trust Bank, Limited, or receive
distributions at a branch of the bank.

Receiving future distributions

Distributions can be paid by remittances to bank or ordinary postal savings accounts.
If transfer designations or other procedures are preferred, you should contact
the brokerage with which you have an account, in principle. If you do not have a
brokerage account and have a special account, contact Sumitomo Mitsui Trust Bank,
Limited, the institution for managing special accounts.

Exclusion

Under the Articles of Incorporation of Kenedix Office Investment Corporation, you cannot
receive distributions after three years have elapsed from the commencement of distribution
payments, so please receive them as soon as possible.