Financial Section
Contents
Independent Auditor’s Report

25

Balance Sheets

26

Statements of Income and Retained Earnings

27

Statements of Changes in Net Assets

27

Statements of Cash Flows28

Notes to Financial Statements

29

Financial Summary (Unaudited)
Historical Operating Trends
For the 20th–24th Fiscal Periods
PeriodUnit

20th Period
21st Period
22nd Period
23rd Period
24th Period(as of Apr. 30, 2015) (as of Oct. 31, 2015) (as of Apr. 30, 2016) (as of Oct. 31, 2016) (as of Apr. 30, 2017)

Operating revenues

mn yen14,13013,74014,362

13,491

15,039(Rental revenues)

mn yen12,836

13,226

12,812

13,42913,327

Operating expenses

mn yen

7,593

7,800

8,260

7,703

9,137

(Property-related expenses)

mn yen

6,377

6,668

6,533

6,754

6,527

Operating income

mn yen

6,537

5,940

6,102

5,788

5,901

Ordinary income

mn yen

5,111

4,565

4,816

4,603

4,751

Net income (a)mn yen

5,110

4,564

4,815

4,601

4,750

Total assets (b)mn yen407,799407,217

408,813413,031410,166(Period-on-period change)

Interest-bearing debt (c)%mn yen(Period-on-period change)%

Unitholders’ equity (d)mn yen(Period-on-period change)%

Unitholders’ capitalmn yen(Period-on-period change)

Number of investment units issued andoutstanding (e)Unitholders’ equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(+5.1)(–0.1)(+0.4)(+1.0)(–0.7)

174,600

174,100

175,100

178,100

174,600(-7.0)(–0.3)(+0.6)(+1.7)(–2.0)

211,951

211,914

212,555

212,825

212,986(+17.2)(–0.0)(+0.3)(+0.1)(+0.1)

206,199

206,199

206,199

206,199

206,199%(+16.7)

(0.0)

(0.0)

(0.0)

(0.0)

unit

404,885

404,885

404,885

404,885

404,885
526,041yen

523,484

523,394

524,977

525,644mn yen

4,600

4,170

4,335

4,601

4,750

yen

11,363

10,30010,707

11,365

11,733
11,733(Earnings distributed per unit)

yen

11,363

10,30010,707

11,365(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

Return on assets (annualized) (Notes 1 and 2)%

1.3 (2.6)

1.1 (2.2)

1.2 (2.4)

1.1 (2.2)

1.2 (2.3)

Return on net assets (annualized) (Notes 2 and 3)%

2.6 (5.2)

2.2 (4.3)

2.3 (4.6)

2.2 (4.3)

2.2 (4.5)

52.0

52.0

52.0

51.5

51.9

(+5.4)(+0.1)(-0.0)(-0.5)(+0.4)

42.8

42.8

42.8

43.1

42.6

Net assets ratio 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 (Note 4) (f)/(a)%%%(-5.5)(–0.1)(+0.1)(+0.3)(–0.6)

90.0

91.3

90.0

99.9

99.9

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy ratio at end of period

97

97

97

99

97

453,999.44

453,681.06

457,774.90

462,533.92

459,567.57

%

96.5

94.9

96.9

96.9

97.9

Depreciation expenses for the period

mn yen

2,221

2,218

2,230

2,274

2,288

Capital expenditures for the period

mn yen

329

469

1,120

1,165

1,018

Leasing NOI (Net Operating Income) (Note 5)

mn yen

8,680

8,775

8,509

8,949

9,088

FFO (Funds From Operation) (Note 6)

mn yen

6,909

6,487

6,302

6,877

7,034

yen

17,06516,023

15,565

16,985

17,373

FFO per unit (Note 7)

Notes: 1. Return on assets = Ordinary income/{(Total assets at beginning of period + Total assets at end of period)/2} × 100
2.	Annualized values for the 20th Fiscal Period are calculated based on a period of 181 days, 184 days for the 21st Fiscal Period, 182 days for the 22nd Fiscal Period, 184
days for the 23rd Fiscal Period, 181 days for the 24th Fiscal Period.
3. Return on net assets = Net income/{(Total net assets at beginning of period + Total net assets at end of period)/2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Property-related expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate property + Loss on sale of real estate property
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)

24

25

Balance Sheets
Kenedix Office Investment Corporation
As of April 30, 2017 and October 31, 2016
In thousands of yen

AssetsCurrent assets:
Cash and bank deposits (Notes 3 and 13)
Operating accounts receivable
Other current assets (Note 8)
			Total current assets
Property, plant and equipment, at cost: (Notes 4 and 15)
Buildings and structures (Note 6)
Machinery and equipment
Tools, furniture and fixtures
Accumulated depreciation
Land
Construction in progress			 Net property, plant and equipment
Investments and other assets:
Leasehold right (Note 15)
Investment securities (Note 13)
Investment corporation bond issuance costs
Investment unit issuance costs
Other assets
			 Total investments and other assets
			Total assets
Liabilities and Net Assets
Liabilities
Current liabilities:
Operating accounts and other payables
	Short-term loans payable and current portion of long-term loans payable(Notes 5, 13 and 14)
Current portion of investment corporation bonds (Notes 5 and 13)
Deposits received
Advances received
Other current liabilities
			Total current liabilities
Non-current liabilities:
Investment corporation bonds (Notes 5 and 13)
Long-term loans payable (Notes 5, 13 and 14)
Tenant leasehold and security deposits
Other non-current liabilities
			Total non-current liabilities
			Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital		 Units authorized: 2,000,000 units		 Units issued and outstanding: 404,885 units
		 As of April 30, 2017, and October 31, 2016, respectively
Surplus
Voluntary retained earnings
		 Reserve for reduction entry
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Note 14)
		 Total valuation and translation adjustments
		Total net assets (Note 9)
			 Total liabilities and net assets
See accompanying notes to the financial statements.

26

As of April 30, 2017

As of October 31, 2016

¥ 23,832,680
329,429
85,51324,247,623¥ 20,710,565
330,775
115,403
21,156,743

136,208,100
2,078,516
535,315(30,793,020)
274,731,449
2,183
382,762,544

138,160,941
2,091,284
524,435(29,568,985)
277,637,658—
388,845,334

639,104
1,087,688
31,016
19,277
1,379,132
3,156,218¥410,166,386

351,685
1,093,584
36,49854,1591,493,754
3,029,682¥413,031,761¥¥

1,414,407

1,614,589

26,750,000

22,700,000

1,500,000
69,9242,170,062
673,815
32,578,209

4,500,000
2,896
2,143,523
422,783
31,383,793

4,800,000
141,550,000
18,251,916—
164,601,916
197,180,125

4,800,000
146,100,000
17,921,592
977
168,822,570
200,206,363

206,199,945

206,199,945

2,024,673
4,750,760
6,775,433
212,975,379

2,024,673
4,601,756
6,626,429
212,826,375

10,882
10,882212,986,261¥410,166,386

(977)
(977)
212,825,397¥413,031,761

Statements of Income and Retained Earnings
Kenedix Office Investment Corporation
For the period from November 1, 2016 to April 30, 2017 and the period from May 1, 2016 to October 31, 2016
In thousands of yen

Operating revenues:
Rent revenue - real estate (Note 11)
Gain on sale of real estate property (Note 11)
Dividends income
			Total operating revenues
Operating expenses:
Expenses related to rent business (Note 11)
Loss on sale of real estate property (Note 11)
Asset management fees
Administrative service and custodian fees
Other operating expenses
		 Total operating expenses
Operating income
Non-operating expenses:
Interest expenses
Financing-related expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Others, net
			Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 8)
Net income
Retained earnings brought forward
Unappropriated retained earnings

From November 1, 2016
to April 30, 2017

From May 1, 2016
to October 31, 2016

¥13,327,605
1,662,787
48,643
15,039,036¥13,429,773—
61,73913,491,513

6,527,688
1,657,160
766,673
78,232
107,363
9,137,118
5,901,917

6,754,675—
755,591
78,143
114,926
7,703,337
5,788,175

885,690
153,773
34,882
5,481
70,3191,150,147
4,751,770
4,751,770
1,248
4,750,521
238¥ 4,750,760

941,102
176,51056,4815,879
5,082
1,185,056
4,603,119
4,603,119
1,363
4,601,756—¥ 4,601,756

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Office Investment Corporation
For the period from November 1, 2016 to April 30, 2017 and the period from May 1, 2016 to October 31, 2016
In thousands of yen
Valuation andtranslation
adjustments

Unitholders’ equity
Surplus

Unitholders’capitalBalance as of April 30, 2016
Changes during the fiscal period
Provision of reserve for reduction entry
Dividends of surplus
Net income	Net changes of items other thanunitholder’s equity
			 Total changes during the fiscal period
Balance as of October 31, 2016
Changes during the fiscal period
Dividends of surplus
Net income	Net changes of items other thanunitholder’s equity
			 Total changes during the fiscal period
Balance as of April 30, 2017

Voluntary
retained earnings UnappropriatedTotal
unitholders’equityReserve for
reduction entry

retainedearnings

Total surplus¥206,199,946¥1,544,522¥4,815,255¥6,359,777 ¥212,559,723———

480,151——(480,151)(4,335,103)
4,601,756—(4,335,103)
4,601,756——¥206,199,945—
480,151¥2,024,673—(213,499)¥4,601,756——
266,652
266,652¥6,626,429 ¥212,826,375

—
—

—
—

(4,601,518)
4,750,521(4,601,518)
4,750,521——¥206,199,945——¥2,024,673—
149,003¥4,750,760——
149,003
149,003¥6,775,433 ¥212,975,379—(4,335,103)
4,601,756(4,601,518)
4,750,521

Deferred gains
or losses onhedgesTotal net assets¥(4,328) ¥212,555,395————(4,335,103)
4,601,756

3,350
3,350
3,350
270,002¥(977) ¥212,825,397——(4,601,518)
4,750,521

11,85911,85911,859160,863¥10,882 ¥212,986,261

See accompanying notes to the financial statements.

27

Statements of Cash Flows
Kenedix Office Investment Corporation
For the period from November 1, 2016 to April 30, 2017 and the period from May 1, 2016 to October 31, 2016
In thousands of yen
From November 1, 2016
to April 30, 2017

From May 1, 2016
to October 31, 2016

¥ 4,751,770¥ 4,603,119

2,479,628

2,508,463

Cash Flows from Operating Activities:
Income before income taxes	Adjustments to reconcile income before income taxes
to net cash provided by (used in) operating activities:
		 Depreciation and amortization
		Interest income
		Interest expenses

(35)

(38)

885,690

941,102

Changes in assets and liabilities:
		 Decrease (increase) in operating accounts receivable

1,346

11,011		 Decrease (increase) in consumption taxes receivable—

53,578

		 Increase (decrease) in accrued consumption taxes

254,234

343,665

		 Increase (decrease) in operating accounts and other payables(278,398)

287,690

24,26429,973

		 Increase (decrease) in advances received
		 Decrease in property and equipment due to sale

19,474,995—

		Others, net

75,620(351,949)

			Subtotal

27,669,115

8,426,615

35

38(885,563)(953,601)Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

(843)

(805)

26,782,743

7,472,246(15,667,977)(6,173,576)

Cash Flows from Investing Activities:
Purchases of property, plant and equipment
Purchase of intangible assets(293,196)—

Proceeds from tenant leasehold and security deposits

1,350,759

1,065,383

Payments of tenant leasehold and security deposits(949,034)(918,051)

Payments of restricted bank deposits in trust(289,809)——

552,921(15,849,258)(5,473,322)

Proceeds from restricted bank deposits in trust
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Increase in short-term loans payable

4,000,000—

Decrease in short-term loans payable(1,500,000)(1,000,000)

Proceeds from long-term loans payable

6,200,000

16,500,000

Repayments of long-term loans payable(9,200,000)(12,500,000)

Redemption of investment corporation bonds(3,000,000)——(4,010)

Dividends paid

(4,601,179)(4,334,422)

Net cash provided by (used in) financing activities(8,101,179)(1,338,432)

Net increase (decrease) in cash and cash equivalents

2,832,305

660,491

Cash and cash equivalents at the beginning of period

19,836,034

19,175,542

Cash and cash equivalents at the end of period (Note 3)¥22,668,339¥19,836,034

Payments of investment corporation bond issuance costs

See accompanying notes to the financial statements.

28

Notes to Financial Statements
Kenedix Office Investment Corporation
For the period from November 1, 2016 to April 30, 2017 and the period from May 1, 2016 to October 31, 2016

1.

ORGANIZATION AND BASIS OF PRESENTATION

Organization

Kenedix Office Investment Corporation (“the Investment Corporation”) is a real estate investment corporation whose units are listed on the Tokyo
Stock Exchange. The Investment Corporation is engaged in ownership and operation of selected office buildings, residential and retail properties inJapan, with a focus on mid-sized office buildings in the Tokyo Metropolitan Area. The Investment Corporation was incorporated on May 6, 2005 as
an investment corporation under the Law Concerning Investment Trusts and Investment Corporations of 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 seven public
offerings and other means including global offerings. Pursuant to the Investment Trust Law, the Investment Corporation is externally managed by aregistered 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, 2016, the Investment Corporation acquired two office buildings (KDX Shin-Nihonbashi Ekimae Building:acquisition price of ¥3,829 million, KDX Edo-dori Building: acquisition price of ¥1,350 million) located in the Tokyo Metropolitan Area.
During the period ended April 30, 2017, the Investment Corporation acquired three office buildings (ARK Mori Building: acquisition price of¥4,169 million, Nishi-Shinbashi TS Building: acquisition price of ¥8,400 million, BR Gotanda: acquisition price of ¥2,200 million) and sold five
office buildings (BUREX Toranomon: initial acquisition price of ¥1,750 million, KDX Nihonbashi Kabutocho Building: initial acquisition price of¥11,270 million, KDX Roppongi 228 Building: initial acquisition price of ¥3,300 million, KDX Kanda Misaki-cho Building: initial acquisition price of¥1,380 million, and KDX Gobancho Building: initial acquisition price of ¥1,951 million (with a total disposition price of ¥19,910 million)). At the endof the twenty-third and twenty-fourth fiscal periods, the Investment Corporation had total unitholders’ capital of ¥206,200 million with 404,885
investment units outstanding, respectively. The Investment Corporation owned a portfolio of 99 properties (consisting of 94 office buildings, one
residential property, three central urban retail properties and one other property), 97 properties (consisting of 92 office buildings, one residential
property, three central urban retail properties and one other property) with total acquisition prices of ¥398,350 million and ¥393,468 million at theend of the twenty-third and twenty-fourth fiscal periods, respectively. The occupancy ratios were approximately 96.9% and 97.9% at the end of thetwenty-third and twenty-fourth 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 of Japan, theFinancial 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 and disclosure requirements of the International
Financial Reporting Standards or accounting principles generally accepted in the United States 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 Ministryof Finance as required by the Financial Instruments and Exchange Law. In preparing the accompanying financial statements, relevant notes havebeen added and certain reclassifications have been made to the financial statements issued domestically in order to present them in a form that ismore 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 not prepare consolidated financial statements because it has no subsidiaries.

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 of equity equivalent to the portion that
corresponds to the net gain or loss of the TK is adopted.

(B) Property, plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line basis over theestimated useful lives of the assets ranging as stated below:
From November 1, 2016 to April 30, 2017

From May 1, 2016 to October 31, 2016

Buildings and structures

2-49 years

2-49 years

Machinery and equipment

3-17 years

3-17 years

Tools, furniture and fixtures

3-20 years

3-20 years

29(C) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of three years under the straight-line method.

(D) Investment corporation bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.

(E) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan, all assets and liabilities
in trust are recorded in the relevant balance sheets and statements of income and retained earnings.

(F) Leasehold Right
Fixed term leaseholds on the building and special agreements on building sales are amortized over a contractual period of 48 years and 9 months
under the straight-line method.

(G) Revenue Recognition
Operating revenues consist of rental revenues including base rents, common area charges, and other operating revenues, which include utility
charge reimbursements, parking space rental revenues and other miscellaneous revenues. Rental revenues are generally recognized on an accrualbasis 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 are recorded on a gross basis and such amounts are recorded both asrevenues and expenses during the fiscal period.

(H) Taxes on Property, plant and equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar year basis.
These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to 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 inwhich the property is disposed. The seller, however, is generally 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 to the period
following the purchase date of each property through the end of the calendar year. The amounts of those allocated portions of the property-related
taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to ¥32,698 thousand and¥13,334 thousand as of April 30, 2017 and October 31, 2016, respectively. 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.

(I) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets andliabilities using the statutory tax rates.

(J) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes applicableto the acquisition of assets are included in the cost of acquisition for each asset.

(K) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap and interest-rate cap 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 fairvalue of interest-rate swap and interest-rate cap contracts because these contracts met the criteria for deferral hedging accounting. However, theInvestment Corporation adopted special treatment for interest-swap and interest-rate cap contracts if they met the criteria for hedging accounting
under this treatment, whereby the net amount to be paid or received under the interest-rate swap and interest-rate cap contract is added to or
deducted from the interest on the assets or liabilities for which the swap and cap contract was executed. The hedge effectiveness for the interestrate swap and interest-rate cap contract is assessed each fiscal period except for those that meet the criteria of special treatment.

(L) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which are highly liquid, readily
convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of purchase.

(M) Rounding of Amounts Presented
Amounts of less than one thousand yen have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP
and filed with regulatory authorities in Japan. Unless otherwise noted, amounts of twenty-fourth fiscal and twenty-third fiscal period are rounded
down respectively, and ratios are rounded off in the accompanying financial statements.
Totals shown in the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

30

3.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consisted of the following as of As of April 30, 2017 and October 31, 2016
In thousands of yen

Cash and bank deposits
Restricted bank deposits in trust (Note)
Cash and cash equivalents in trust

As of April 30, 2017

As of October 31, 2016

¥23,832,680¥20,710,565(1,164,340)(874,531)¥22,668,339¥19,836,034

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

4.

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
In millions of yen
As of April 30, 2017

Buildings and structures

As of October 31, 2016

Acquisition
costs

Accumulated
depreciation

Book
value

Acquisition
costs

Accumulated
depreciation

Book
value

¥136,208¥29,506¥106,701¥138,160¥28,327¥109,833

Machinery and equipment

2,078

992

1,085

2,091

956

1,134

Tools, furniture and fixtures

535

293

242

524

284

239

274,731—274,731277,637—

277,637

Land
Construction in progress
Total

5.

2

—

2

—

—

—

¥413,555¥30,793¥382,762¥418,414¥29,568¥388,845

SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENT CORPORATION BONDS

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of April 30, 2017:Classification

Short-term loans payable

Current portion of long-term loans payable

SubtotalLong-term loans payable

Drawdown date

Last repayment date

Weighted-averageinterest rate

November 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
June 29, 2012
July 29, 2016
August 2, 2016
August 2, 2016
September 21, 2012
September 21, 2012
September 21, 2012
October 31, 2012
November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013

November 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
June 30, 2017
July 31, 2017
August 31, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017
November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018

0.33%
0.33%
0.33%
0.33%
1.29%
0.38%
0.38%
0.23%
1.16%
1.16%
1.16%
1.10%
2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%

March 28, 2012
March 28, 2012
October 31, 2012
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013

March 28, 2019
March 28, 2019
October 31, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018

1.77%
1.77%
1.25%
0.56%
0.95%
0.95%
0.95%
0.97%
0.95%
1.08%
1.08%
1.08%

Balance(In millions of yen)

¥

2,000
500
500
1,000
1,500
1,000
1,000
1,000
5,000
1,000
1,000
2,500
2,300
700
500
500
500
2,250
1,000
1,000
26,750¥ 1,400
1,000
2,500
500
1,000
1,000
500
500
500
700
500
300

31

Classification

Long-term loans payable

32

Drawdown date

Last repayment date

Weighted-averageinterest rate

August 30, 2013
September 30, 2013
September 30, 2013
October 31, 2013
November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015

August 31, 2020
September 30, 2019
September 30, 2019
October 31, 2018
November 12, 2018
November 12, 2020
November 12, 2020
November 30, 2018
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025

1.42%
1.06%
1.06%
0.89%
0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%

Balance(In millions of yen)

¥

1,500
1,800
900
500
1,000
2,000
500
200
1,000
900
1,300
3,700
2,300
450
1,800
1,800
3,000
4,000
3,000
2,000
2,500
2,900
500
2,000
500
1,000
1,000
2,700
300
2,200
1,000
800
500
1,000
950
2,700
1,000
3,000
2,000
1,500
1,000
2,000
1,000
1,500
1,500
1,250
350
1,700
1,250
2,100
1,000
2,500
2,300
500
500
500
500
500
500
2,000
1,000
2,500

Classification

Long-term loans payable

Subtotal
Current portion of investment corporation bonds
Subtotal
Investment corporation bonds

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017

October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2018
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027

1.12%
1.11%
1.11%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.33%
0.67%
0.73%
0.88%
0.83%
0.76%
0.98%
0.95%
0.86%
0.85%
0.85%

March 8, 2012

September 8, 2017

2.00%

September 12, 2013
July 25, 2014
April 28, 2016

September 12, 2018
July 25, 2024
April 28, 2028

1.00%
1.18%
0.90%

Subtotal
			Total

Balance(In millions of yen)

¥

2,500
2,000
1,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
1,000
4,000
2,500
1,500
1,000
500
1,500
500
700
500
141,550¥ 1,500
1,500¥ 1,800
2,000
1,000
4,800
¥174,600

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of October 31, 2016:
Classification

Short-term loans payable
Current portion of long-term loans payable

SubtotalLong-term loans payable

Drawdown date

Last repayment date

Weighted-averageinterest rate

March 31, 2016
November 12, 2015
December 10, 2012
December 28, 2012
January 15, 2013
January 31, 2014
March 28, 2012
June 29, 2012
July 29, 2016
August 2, 2016
August 2, 2016
September 21, 2012
September 21, 2012
September 21, 2012
October 31, 2012

March 31, 2017
November 30, 2016
December 12, 2016
December 28, 2016
January 15, 2017
January 31, 2017
March 28, 2017
June 30, 2017
July 31, 2017
August 31, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

0.41%
0.41%
0.98%
1.01%
0.97%
0.67%
1.36%
1.29%
0.38%
0.38%
0.23%
1.16%
1.16%
1.16%
1.10%

November 12, 2010
December 1, 2010
March 28, 2012
March 28, 2012
October 31, 2012
December 28, 2012
December 28, 2012

November 12, 2017
November 12, 2017
March 28, 2019
March 28, 2019
October 31, 2018
December 28, 2017
December 29, 2017

2.02%
2.21%
1.77%
1.77%
1.25%
1.09%
1.09%

Balance(In millions of yen)

¥

1,500
2,000
500
2,000
1,000
1,200
500
1,500
1,000
1,000
1,000
5,000
1,000
1,000
2,500
22,700¥ 2,300
700
1,400
1,000
2,500
500
500

33

Classification

Long-term loans payable

34

Drawdown date

Last repayment date

Weighted-averageinterest rate

March 26, 2013
March 26, 2013
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
August 30, 2013
September 30, 2013
September 30, 2013
October 31, 2013
November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015

March 26, 2018
March 26, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
August 31, 2020
September 30, 2019
September 30, 2019
October 31, 2018
November 12, 2018
November 12, 2020
November 12, 2020
November 30, 2018
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 12, 2018
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025

1.04%
1.04%
0.56%
0.95%
0.95%
0.95%
0.97%
0.95%
1.08%
1.08%
1.08%
1.42%
1.06%
1.06%
0.89%
0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.75%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%

Balance(In millions of yen)

¥

1,000
1,000
500
1,000
1,000
500
500
500
700
500
300
1,500
1,800
900
500
1,000
2,000
500
200
1,000
900
1,300
3,700
2,300
2,250
450
1,800
1,800
3,000
4,000
3,000
2,000
2,500
2,900
500
2,000
500
1,000
1,000
2,700
300
2,200
1,000
800
500
1,000
950
2,700
1,000
3,000
2,000
1,500
1,000
2,000
1,000
1,500
1,500
1,250
350
1,700
1,250
2,100

Classification

Long-term loans payable

Subtotal
Current portion of investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
			Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016

February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2018
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026

1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.12%
1.11%
1.11%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.33%
0.67%
0.73%
0.88%
0.83%
0.76%

March 15, 2007
March 8, 2012

March 15, 2017
September 8, 2017

2.37%
2.00%

September 12, 2013
July 25, 2014
April 28, 2016

September 12, 2018
July 25, 2024
April 28, 2028

1.00%
1.18%
0.90%

Balance(In millions of yen)

¥

1,000
2,500
2,300
500
500
500
500
500
500
2,000
1,000
2,500
2,500
2,000
1,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
1,000
4,000
2,500
1,500
1,000
146,100¥ 3,000
1,500
4,500¥ 1,800
2,000
1,000
4,800
¥178,10035

6.

REDUCTION ENTRY

The amount of reduction entry of property, plant and equipment acquired by government subsidy
In thousands of yen

Buildings and structures

7.

As of April 30, 2017

As of October 31, 2016

¥26,230¥26,230PER UNIT INFORMATION
Yen
From November 1, 2016
to April 30, 2017

From May 1, 2016
to October 31, 2016

Net asset value per unit

¥526,041¥525,644

Net income per unit

¥ 11,733¥ 11,365

Weighted average number of units (units)404,885

404,885

The weighted average number of units outstanding of 404,885 as of April 30, 2017 and October 31, 2016, respectively was used for thecomputation of the amount of net income per unit. Net income per unit after adjusting for residual units is not included because there were noresidual investment units.

8.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 32%. However, the Investment
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 requirementthat it currently distribute in excess of 90% of its net income for the fiscal period in order to be 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¥4,750 million and ¥4,601 million for the periods ended April 30, 2017, and October 31, 2016. Therefore such distributions were treated as
deductible distributions for purposes of corporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.03% for the
fiscal periods ended April 30, 2017 and October 31, 2016. The following table summarizes the significant differences between the statutory tax rate
and the effective tax rate:
From November 1, 2016
to April 30, 2017

From May 1, 2016
to October 31, 2016

Statutory tax rate

31.74%

31.74%

Deductible cash distributions(31.73)(31.73)

Others0.02

0.02

Effective tax rate

0.03%

0.03%

The significant components of deferred tax assets and liabilities as of April 30, 2017 and October 31, 2016 are as follows:
In thousands of yen
As of April 30, 2017

As of October 31, 2016

Deferred tax assets:
Enterprise tax payable¥

Deferred gains or losses on hedges
Amortization of leasehold rights
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets

9.

¥

30

¥

39

—

310

3,154

2,908

3,185

3,257

(3,154)(3,218)30¥

39

NET ASSETSThe Investment Corporation issues only non-par value units in accordance with the Investment Trust Act. The entire amount of the issue 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 theInvestment Trust Act.

36

10.

RELATED-PARTY TRANSACTIONS(1) Parent company, major corporate unitholders’ and otherTwenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017) and Twenty-third Fiscal Period (May 1, 2016 to October 31, 2016):
Not applicable(2) Affiliated companies and otherTwenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017) and Twenty-third Fiscal Period (May 1, 2016 to October 31, 2016):
Not applicable(3) Fellow subsidiary companies and otherTwenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017) and Twenty-third Fiscal Period (May 1, 2016 to October 31, 2016):
Not applicable(4) Directors, major individual unitholders’ and otherTwenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017) and Twenty-third Fiscal Period (May 1, 2016 to October 31, 2016):
Not applicable11.

	BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN AND
LOSS ON SALE OF REAL ESTATE PROPERTY

Rent revenue - real estate, expenses related to rent business, gain and loss on sale of real estate property for the periods from November 1, 2016 toApril 30, 2017 and from May 1, 2016 to October 31, 2016 consist of the following:
In thousands of yen
From November 1, 2016
to April 30, 2017

From May 1, 2016
to October 31, 2016

¥ 9,701,842¥ 9,450,736

Rental and other operating revenues:
Rent revenue - real estate:
		 Rental revenues
		 Common area charges

1,870,827

1,911,609

			Subtotal

11,572,669

11,362,345

Others:		 Parking space rental revenues

499,611490,492

		 Utility charge reimbursement

978,129

1,136,867

		Miscellaneous			Subtotal
			 Total rent revenue - real estate

277,195

440,067

1,754,936

2,067,427¥13,327,605¥13,429,773

Property-related expenses:
Expenses related to rent business:
		 Property management fees and facility management fees

¥ 1,315,879¥ 1,280,694

		Depreciation

2,288,632

2,274,750

		Utilities

1,006,582

1,110,302

		Taxes

1,122,460

1,111,203

		Insurance

18,20218,018

		 Repairs and maintenance436,606

582,716

		 Trust fees

32,832

32,348		Others

306,493344,639¥ 6,527,688¥ 6,754,675

		 Revenue from sale of investment property¥14,840,000—

		 Cost of investment property

12,839,023—

338,188—¥ 1,662,787—

			 Total expenses related to rent business
Gain on sale of real estate property:

		 Other sales expenses
			 Gain on sale of real estate property
Loss on sale of real estate property:
		 Revenue from sale of investment property
		 Cost of investment property
		 Other sales expenses
			 Loss on sale of real estate property¥ 5,070,000—

6,635,971—

91,189—¥ 1,657,160

—

37

12.

LEASES

The Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms of generally two
years for office buildings and residential properties and with lease terms ranging from two to ten years for retail properties. The future minimum rental
revenues under existing non-cancelable operating leases as of April 30, 2017 and October 31, 2016 are as follows:
In thousands of yen
As of April 30, 2017

As of October 31, 2016

Due within one year

¥ 1,679,760¥ 1,444,094

Due after one year

9,345,602

9,350,987¥11,025,363¥10,795,081

			Total

13.

FINANCIAL INSTRUMENTS

Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(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 ofhedging 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 offluctuation 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 aredemption date of a maximum of approximately 11 years following the accounting date. Although a certain portion of said liabilities are subject tointerest rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-rate swap and interest-rate cap transactions) in order to reducesuch risk.
Interest-rate swap and interest-rate cap transactions are used as derivative financial instruments. Utilizing interest-rate swap and interest-rate
cap transaction, the Investment Corporation fixes its interest expense for long-term loans payable bearing interest at a variable rate. With regard tohedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of the effectiveness of hedging activities,
please see Note 2(K) “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 and interest-rate cap 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 toinvestment 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
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could resultin a different fair value.

38

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2017 and estimated fair value are shown in the following table. The
following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen
Carrying value

Estimated fair value

Difference¥ 23,832,680¥ 23,832,680¥

23,832,680

23,832,680—(1) Short-term loans payable

4,000,000

4,000,000—(2) Current portion of investment corporation bonds

1,500,000

1,508,940

8,940(3) Current portion of long-term loans payable

22,750,000

22,791,356

41,356(4) Investment corporation bonds

4,800,000

4,874,082

74,082

141,550,000

142,700,464

1,150,464¥174,600,000¥175,874,843¥1,274,843

10,882

10,882—(1) Cash and bank deposits
Subtotal(5) Long-term loans payable
Subtotal
Derivative transactions (*)—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

*1: Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.

Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) 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 fixedinterest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present 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 wereentered into.

Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS”.

*2: Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,087,688

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in thepreceding table.

*3: Redemption schedule for receivables
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥23,832,680

			Total¥23,832,680*4: Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable

Due within 1 year
or less

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

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

¥

¥

¥

¥

—

—

—

—

Due after
5 years¥—

1,500,000

1,800,000———

3,000,000¥22,750,000¥17,050,000¥14,700,000¥19,600,000¥21,700,000¥68,500,000

39Twenty-third Fiscal Period (from May 1, 2016 to October 31, 2016)(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 ofhedging 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 offluctuation 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 aredemption date of a maximum of approximately 11 years and 6 months 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 and interest-rate cap transactions) inorder to reduce such risk.
Interest-rate swap and interest-rate cap transactions are used as derivative financial instruments. Utilizing interest-rate swap and interest-rate
cap transaction, the Investment Corporation fixes its interest expense for long-term loans payable bearing interest at a variable rate. With regard tohedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of the effectiveness of hedging activities,
please see Note 2(K) “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 and interest-rate cap 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 toinvestment 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
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could resultin a different fair value.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2016 and estimated fair value are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen
Carrying value

Estimated fair value

Difference¥ 20,710,565¥ 20,710,565¥

20,710,565

20,710,565(1) Short-term loans payable

1,500,000

1,500,000—(2) Current portion of investment corporation bonds

4,500,000

4,543,560

43,560(3) Current portion of long-term loans payable

21,200,000

21,253,983

53,983(4) Investment corporation bonds

4,800,000

4,905,396

105,396(1) Cash and bank deposits
Subtotal(5) Long-term loans payable
Subtotal
Derivative transactions(*)——

146,100,000

148,414,755

2,314,755¥178,100,000¥180,617,694¥2,517,694

(977)

(977)

—

(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

40*1:	Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.

Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) 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 fixedinterest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present 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 wereentered into.

Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS”.

*2: Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,093,584

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in thepreceding table.

*3: Redemption schedule for receivables
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥20,710,565

			Total¥20,710,565*4: Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable

Due within 1 year
or less

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years¥ 1,500,000

¥

¥

¥

¥

—

—

—

—

Due after
5 years¥—

4,500,000

1,800,000———

3,000,000¥21,200,000¥17,750,000¥13,750,000¥18,600,000¥21,300,000¥74,700,000

41

14.

DERIVATIVE TRANSACTIONS

The following summarizes the contracted amount and the fair value of interest-rate swap and the interest-rate cap contracts as of April 30, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Hedge accounting
methodType of derivativetransactions

Contracted amount(In thousands of yen)

Hedged items

Maturing after 1 year

Fair value(In thousands of yen)Calculation method for
applicable fair value

Based on theamount provided
by counterparty
financial institutions

Principle method

Interest-rate swaps:
Long-term loans
Receive/floating andpayablepay/fixed¥ 3,700,000¥ 3,700,000¥10,882

Special treatment ofinterest-rate swaps

Interest-rate swaps:
Long-term loans
Receive/floating andpayablepay/fixed

102,150,000

97,400,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

500,000

500,000*¥106,350,000¥101,600,000

Long-term loans
payableTotal¥10,882(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item.
As a result, 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 and the interest-rate cap contracts as of October 31, 2016:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Hedge accounting
methodType of derivativetransactions

Contracted amount(In thousands of yen)

Hedged items

Fair value(In thousands of yen)Calculation method for
applicable fair value

2,500,000¥(977)

Based on theamount provided
by counterparty
financial institutions

Maturing after 1 year

Principle method

Interest-rate swaps:
Long-term loans
Receive/floating andpayablepay/fixed¥

Special treatment ofinterest-rate swaps

Interest-rate swaps:
Long-term loans
Receive/floating andpayablepay/fixed

103,350,000

99,650,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

500,000

500,000*¥106,350,000¥102,650,000

Long-term loans
payableTotal

2,500,000¥¥(977)(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item.
As a result, their fair value is included in the fair value of the hedged long-term loans payable.

15.

INVESTMENT AND RENTAL PROPERTIES

Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)
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, 2016

Net change

As of April 30, 2017

Fair value As of April 30, 2017
(In thousands of yen)

¥389,197,020¥(5,795,370)¥383,401,649¥416,550,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: The fair value is the appraisal value or the survey 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 acquisition of 3 properties totaling ¥14,942,506 thousand, the sales of 5 properties totaling ¥19,474,995 thousand and depreciation amounting in¥2,288,632 thousand.

Income and loss in the fiscal period ended April 30, 2017 for real estate for rental purposes is listed in Note 11. “BREAKDOWN OF RENTAL AND
OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN AND LOSS ON SALE OF REAL ESTATE PROPERTY”.
Twenty-third Fiscal Period (from May 1, 2016 to October 31, 2016)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating rental revenues.

42

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, 2016

Net change

As of October 31, 2016

Fair value As of October 31, 2016
(In thousands of yen)

¥385,085,254¥4,111,765¥389,197,020¥414,605,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: The fair value is the appraisal value or the survey value determined by outside appraisers. The fair value of KDX Nihonbashi Kabutocho Building and BUREX
Toranomon are calculated based on the sales price of ¥12,400,000 thousand under the sales and purchase agreement dated November 1, 2016 and thesales price of ¥2,440,000 thousand under the sales and purchase agreement dated December 1, 2016, respectively.
*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 acquisition of 3 properties totaling ¥14,942,506 thousand, the sales of 5 properties totaling ¥19,474,995 thousand and depreciation amounting in¥2,288,632 thousand.

Income and loss in the fiscal period ended October 31, 2016 for real estate for rental purposes is listed in Note 11. “BREAKDOWN OF RENTAL AND
OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN AND LOSS ON SALE OF REAL ESTATE PROPERTY”.

16.

SEGMENT AND RELATED INFORMATION

Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no reportable segment
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 the operating revenue
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 revenue on the statement of 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 of property, plantand 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 revenue on the statement ofincome and retained earnings.
Twenty-third Fiscal Period (from May 1, 2016 to October 31, 2016)(A) Segment Information
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating revenue
on the statement of income and retained earnings.

(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating revenue
on the 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 revenue on the statement of 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 of property, plantand 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 revenue on the statement ofincome and retained earnings.

17.

SIGNIFICANT SUBSEQUENT EVENTS

Not applicable43