Financial Statements(13th Fiscal Period: From May 1, 2011 to October 31, 2011)
Report of Independent Auditors·······18
Balance Sheets·······19
Statements of Income and Retained Earnings·······20
Statements of Changes in Net Assets·······20
Notes to Financial Statements·······21
Statements of Cash Flows and Related Notes (Unaudited) ·······32

Financial Summary (Unaudited)
Historical Operating trends For the 9th - 13th Periods
9th Period(as of Oct. 31,
2009)

10th Period(as of Apr. 30,
2010)

11th Period(as of Oct. 31,
2010)

12th Period(as of Apr. 30,
2011)

13th Period(as of Oct. 31,
2011)

%

7,921
7,921
4,708
3,652
3,213
2,103
2,102
236,320(-1.0)
97,220(-1.5)
127,067(-0.3)
124,973(0.0)
200,000
635,335
2,102
10,511
10,5110.9 (1.8)
1.7 (3.3)
53.8(+0.4)
41.1(-0.2)
100.0

8,067
8,067
4,329
3,714
3,738
2,568
2,567
251,566(+6.5)
102,968(+5.9)
135,689(+6.8)
133,129(+6.5)
233,550
580,987
2,567
10,993
10,993
1.1 (2.1)
2.0 (3.9)
53.9(+0.2)
40.9(-0.2)
99.9

8,358
8,242
4,522
3,817
3,835
2,608
2,607
251,080(-0.2)
102,567(-0.4)
135,732(+0.0)
133,129(0.0)
233,550
581,170
2,541
10,881
10,8811.0 (2.1)
1.9 (3.8)
54.1(+0.1)
40.9(-0.1)
97.4

8,136
8,136
4,427
3,767
3,709
2,346
2,309
261,928(+4.3)
112,715(+9.9)
135,505(-0.2)
133,129(0.0)
233,550
580,199
2,310
9,891
9,891
0.9 (1.8)
1.7 (3.4)
51.7(-2.3)
43.0(+2.2)
100.0

9,044
8,498
4,618
3,961
4,425
3,040
3,052
274,973(+5.0)
110,914(-1.6)
150,272(+10.9)147,153(+10.5)286,550
524,419
2,749
9,596
9,596
1.1 (2.2)
2.1 (4.2)
54.6(+2.9)
40.3(-2.7)
90.0

propertiesm2%
mn yenmn yenmn yenmn yenyen

65
254,225.04
94.7
1,451
400
5,721
3,994
19,97370
271,260.81
94.4
1,477
330
5,830
4,044
17,31867
267,737.33
93.6
1,440
312
5,864
3,995
17,10671
286,237.93
94.6
1,406
574
5,776
3,716
15,91474
300,016.89
94.7
1,442
674
5,980
3,950
13,786

PeriodUnit

Operating revenues(Rental revenues)
Operating expenses(Property-related expenses)
Operating income
Ordinary income
Net income (a)Total assets (b)(Period-on-period change)
Interest-bearing debt (c)(Period-on-period change)
Unitholders' equity (d)(Period-on-period change)
Unitholders' capital(Period-on-period change)
Number of investment units issued and outstanding (e)Unitholders' equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(Earnings distributed per unit)(Distribution in excess of earnings per unit)
Return on assets (annualized) (Notes 1 and 2)
Return on net assets (annualized) (Notes 2 and 3)
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)Other reference
Number of properties
Total leasable floor area
Occupancy at end of period
Depreciation expenses for the period
Capital expenditures for the period
Leasing NOI (Net Operating Income) (Note 5)
FFO (Funds From Operation) (Note 6)
FFO per unit (Note 7)

mn yenmn yenmn yenmn yenmn yenmn yenmn yenmn yen%mn yen%mn yen%mn yen%unityen
mn yen
yen
yen
yen
%
%
%
%

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 9th Fiscal Period are calculated based on a period of 184 days, 181 days for the 10th Fiscal Period, 184 days for the 11th Period, 181 days for 12th Fiscal Period
and 184 days for the 13th 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 – Rental expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Profit on sale of trust beneficiary interests in real estate or real estate + Loss on sale of trust beneficiary interests in realestate or real estate
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)
8. Where applicable, figures are rounded down to the nearest million.

17

Report of Independent Auditors

18

Balance Sheets
As of October 31, 2011 and April 30, 2011

(In thousands of yen)
As of
October 31, 2011

AssetsCurrent assets:
Cash and bank deposits (Notes 6 and 15)
Rental receivables
Consumption tax refundable
Other current assets (Note 9)
Total current assets
Property and equipment, at cost:(Notes 4, 6, 14 and 16)
Land
Buildings and structures (Note 7)
Machinery and equipment
Tools, furniture and fixtures
Construction in progressLess-accumulated depreciation
Net property and equipment
Other assets:
Ground leasehold (Notes 14 and 16)
Corporate bond issuance costs
Unit issuance costs
Other assets (Notes 6, 14 and 16)
Total assets
Liabilities and Net Assets
Liabilities
Current liabilities:
Trade and other payables
Current portion of corporate bonds (Notes 5 and 15)
Short-term debt and current portion of long-term debt (Notes 5, 6 and 15)
Deposits received
Rents received in advance
Provision for loss due to disaster
Other current liabilities
Total current liabilities
Corporate bonds (Notes 5 and 15)
Long-term debt (Notes 5, 6 and 15)
Leasehold and security deposits received
Total liabilities
Net Assets
Unitholders' equity
Unitholders' capital
Units authorized: 2,000,000 units
Units issued and outstanding: 286,550 and 233,550 units
As of October 31, 2011 and April 30, 2011, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total Surplus
Total unitholders' equity
Total net assets (Note 10)
Total liabilities and net assets

¥

¥

¥

¥

18,338,535
173,773
77,564
18,589,872

As ofApril 30, 2011¥

13,794,963
186,413
310,485
60,39014,352,251

177,220,871
89,329,995
1,354,493
406,173
1,874(13,751,870)
254,561,536

171,111,081
85,658,330
1,308,858
401,538(12,653,540)
245,826,267

359,429
30,906111,272
1,320,426
274,973,441

360,204
22,20625,136
1,342,835
261,928,899

802,437
9,000,000
24,050,000
2,814
1,281,807
2,334
272,91335,412,305
4,500,000
73,364,000
11,424,682
124,700,987¥¥

617,497
9,000,000
36,160,000
16,243
1,872,708
30,932244,82247,942,202
3,000,000
64,555,500
10,925,583
126,423,285

147,153,820

133,129,755

65,796
3,052,838
3,118,634
150,272,454
150,272,454
274,973,441

65,7962,310,063
2,375,859
135,505,614
135,505,614
261,928,899¥

See accompanying notes to the financial statements.

19

Statements of Income and Retained Earnings
For the period from May 1, 2011 to October 31, 2011 and the period from November 1, 2010 to April 30, 2011
(In thousands of yen)
From May 1, 2011 to October 31, 2011

Operating revenues:
Rental revenues (Notes 12 and 14)
Profit on sale of real estate (Note 12)
Total operating revenues
Operating expenses:
Property-related expenses (Notes 12 and 14)
Asset management fees
Administrative service and custodian fees
Other operating expenses
Total operating expenses
Operating income¥

8,498,949
545,282
9,044,231

Non-operating expenses:
Interest expense
Financing-related expenses
Amortization of unit issuance costs
Amortization of corporate bond issuance costs
Others,net
Total non-operating expenses
Ordinary income
Extraordinary income
SubsidyGain on donation of noncurrent assets
Extraordinary losses
Loss on disaster
Loss on reduction of fixed assets
Income before income taxes
Income taxes (Note 9)
Net income
Retained earnings at the beginning of period
Retained earnings at the end of period¥

From November 1, 2010 to April 30, 2011¥

8,136,917
8,136,917

3,961,611
487,406
81,852
88,0394,618,908
4,425,323

3,767,178
448,106
79,591132,133
4,427,008
3,709,909

1,036,388
298,043
27,282
6,881
16,322
1,384,916
3,040,407

1,048,723
303,479
8,380
5,782(3,193)
1,363,170
2,346,739

13,97026,230-3,054,377
1,560
3,052,817
21
3,052,838

35,36026,2302,311,379
1,384
2,309,995
68
2,310,063¥

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
For the period from May 1, 2011 to October 31, 2011 and the period from November 1, 2010 to April 30, 2011

(In thousands of yen)

Valuation,
Transaction
Adjustments
and Others

Unitholders' Equity
Surplus
Unitholders'
capitalBalance as of October 31, 2010
Changes during the fiscal period
Provision for reserve for
reduction entry
Payments of dividends
Net income
Interest-rate swap
Total changes during the
fiscal period
Balance as of April 30, 2011
Changes during the fiscal period
New unit issuance
Payments of dividends
Net income
Total changes during the
fiscal period
Balance as of October 31, 2011

Voluntary
retainedearnings

Retained
Total
earnings
SurplusReserve for
reduction
entry¥ 133,129,755 ¥- ¥ 2,607,122 ¥ 2,607,122 ¥ 135,736,877 ¥Total(4,502) ¥ 135,732,375-

65,796(65,796)

-

-

-

-

-

-

(2,541,258)
2,309,995-(2,541,258)
2,309,995-(2,541,258)
2,309,995-

4,502(2,541,258)
2,309,995
4,502-

65,796(297,059)(231,263)(231,263)

4,502(226,761)

133,129,755

65,7962,310,063

2,375,859

135,505,614-

14,024,065--(2,310,042)
3,052,817(2,310,042)
3,052,817

14,024,065(2,310,042)
3,052,817-

135,505,614
14,024,065(2,310,042)
3,052,817

14,024,065-

742,775

742,775

14,766,840-

14,766,840¥ 147,153,820 ¥

65,796 ¥3,052,838 ¥

3,118,634 ¥ 150,272,454 ¥See accompanying notes to the financial statements.

20

Unrealized
Total
gain
unitholders' from deferred
equityhedgetransactions- ¥ 150,272,454

Notes to Financial Statements
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Realty Investment Corporation (”the Investment Corporation”) was established on May 6, 2005 under the Law
concerning Investment Trusts and Investment Corporations of Japan (“the Investment Trust Law”). On July 21, 2005, theInvestment 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 public offerings including three global offerings. Most recently, the Investment Corporation additionallyissued 51,400 investment units on July 20, 2011 through public offerings including global offerings, and 1,600 investment
units on August 8, 2011 by way of third-party allotment. As a result, as of October 31, 2011, the end of the thirteenth fiscal
period, the number of investment units issued and outstanding totaled 286,550 units. The Investment Corporation issued
the Third Series Unsecured Investment Corporation Bonds (totaling ¥1,500 million and maturing in two years) on
September 15, 2011. As a result, the outstanding investment corporation bonds as of the end of the fiscal period underreview (fiscal period ended October 31, 2011) totaled ¥13,500 million.
The Investment Corporation is externally managed by Kenedix REIT Management, Inc. (“the Asset Management
Company”) as its asset management company. 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. The
Investment Corporation endeavors to develop a diversified investment portfolio named “KENEDIX Selection,” adopting athree-point investment criteria based on property type, area and size.
During the period ended October 31, 2011, the Investment Corporation acquired 4 office buildings (total acquisition
price of ¥14,270 million) and sold 1 office building (initial acquisition price of ¥5,180 million) located in the Tokyo
Metropolitan Area (sales price: ¥5,800 million). As of October 31, 2011, the Investment Corporation had total unitholders’capital of ¥147,154 million with 286,550 investment units outstanding. The Investment Corporation owned a portfolio of 74
properties with a total acquisition price of ¥255,547 million containing a total leasable area of 300,016.89 m2. The
occupancy ratio was approximately 94.7%. A portfolio of 74 properties consists of 68 office buildings, 4 residential
properties and 2 central urban retail properties. 62 properties are located in the Tokyo metropolitan area and 12
properties are located in other regional areas.

Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan, the Japanese Corporation Law, the Financial Instruments and Exchange Law of Japanand 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 theInternational Financial Reporting Standards or accounting principles generally accepted in the United States of America.
The accompanying financial statements are a basically translation of the audited financial statements that wereprepared for Japanese domestic purposes from the accounts and records maintained by the Investment Corporation andfiled with the Kanto Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments andExchange Law. In preparing the accompanying financial statements, relevant notes have been added and certain
reclassifications have been made from 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 which
ends at the end of April and October of each year, respectively. The Investment Corporation does not prepare
consolidated financial statements because it has no subsidiaries.

21

Notes to Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis
over the estimated useful lives of the assets ranging as stated below:

Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

From May 1, 2011
to October 31, 2011

From November 1, 2010
to April 30, 20112-49 years
3-17 years
3-20 years

2-49 years
3-17 years
3-20 years(B) Unit Issuance Costs
Unit issuance costs are amortized over a period of three years under the straight-line method.

(C) Corporate Bond Issuance Costs
Corporate bond issuance costs are amortized over a loan period under the straight-line method.

(D) 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 inJapan, all assets and liabilities within trust are recorded in the relevant balance sheets and statements of income andretained earnings.

(E) Leasehold rights
Fixed term leasehold with special agreement on buildings sales, and the building are amortized over a contractual periodof forty-eight years and nine months under the straight-line method.

(F) Provision for loss due to disasterFor cost of repairs on impaired fixed assets due to the massive earthquake off the east coast of Japan, the amountreasonably estimable at the end of period is recognized as “provision for loss due to disaster” under current liability.

(G) Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating
revenues including utility charge reimbursements, 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 are recorded on a gross basis and such amounts are recorded both as revenues andexpenses during the fiscal period, respectively.

(H) Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on
properties on a calendar year basis. These taxes are generally charged to operating expenses for the period, for the
portion of such taxes corresponding to said period. Under the Japanese tax rule, the seller of the property at the time ofdisposal is liable for these taxes on the property from the date of disposal to the end of the calendar year in which theproperty is disposed. The seller, however, is 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 ¥44,439 thousand and ¥23,704 thousand as of October 31, 201122

and April 30, 2011, 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 and liabilities using the statutory tax rates.

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

(K) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap agreements as derivative financial instruments only for the
purpose of hedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains orlosses resulting from changes in fair value of interest-rate swap agreements because its interest-rate swap agreements
met the criteria for deferral hedging accounting. However, the Investment Corporation adopted special treatment forinterest-swap agreements if its interest-rate swap agreements met the criteria for hedging accounting under thistreatment, whereby the net amount to be paid or received under the interest-rate swap contract is added to or deductedfrom the interest on the assets or liabilities for which the swap contract was executed. The hedge effectiveness forinterest-rate swap contracts is assessed each fiscal period except for those that meet the criteria of special treatment.

(L) Rounding of Amounts Presented
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and
filed with regulatory authorities in Japan, whereas amounts have been rounded to the nearest million in theaccompanying financial statements. Totals shown in the accompanying financial statements do not necessarily agreewith the sums of the individual amounts.

3. ADDITIONAL INFORMATION
Accounting Standards for Accounting Changes and Error Corrections
The Investment Corporation has applied the "Accounting Standard for Accounting Changes and Error Corrections"(Accounting Standards Board of Japan (ASBJ) Statement No. 24; December 4, 2009) and the "Guidance on AccountingStandard for Accounting Changes and Error Corrections" (ASBJ Guidance No. 24); December 4, 2009), starting withaccounting changes and corrections of past errors to be conducted after the beginning of the fiscal period under review.

4. SCHEDULE OF PROPERTY
In millions of yen

Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Total

As of October 31, 2011
Acquisition
AccumulatedBook value
costs
depreciation¥177,221¥¥177,221
13,021
76,30989,330
1,354
540
814
406
190
216
2
2
¥268,313¥13,751¥254,562

Acquisition
costs¥171,111
85,6581,309
402¥258,480

As of April 30, 2011
Accumulated
depreciation¥11,983
497
174¥12,654

Book value¥171,111
73,675812
228¥245,826

23

Notes to Financial Statements
5. SHORT-TERM DEBT, LONG-TERM DEBT AND CORPORATE BONDS
The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of October 31, 2011:
Classification
Short-term debt

Current portion of long-term debt

SubtotalLong-term debt

Subtotal
Current portion of corporate bonds
Corporate bonds
Subtotal
Total

24

Drawdown Date

Last Repayment Date

January 31, 2011
April 18, 2011
July 29, 2011
October 31, 2011
December 1, 2006
January 10, 2008
February 27, 2009
April 2, 2007
April 30, 2009
June 30, 2008
February 27, 2009
October 29, 2010

January 31, 2012
November 30, 2011
July 31, 2012
October 31, 2012
November 30, 2011
January 10, 2012
February 29, 2012
April 2, 2012
April 27, 2012
June 30, 2012
August 31, 2012
October 31, 2012

Weighted-averageinterest rate
1.09%
1.38%
1.04%
0.99%
1.96%
1.50%
2.07%
1.88%
2.24%
2.15%
2.04%
1.45%

May 1, 2006
September 1, 2006
June 30, 2008
October 26, 2009
October 30, 2009
December 8, 2009
January 13, 2010
January 29, 2010
February 18, 2010
February 18, 2010
April 2, 2010
July 30, 2010
July 30, 2010
July 30, 2010
October 29, 2010
November 12, 2010
November 12, 2010
November 12, 2010
December 1, 2010
December 1, 2010
December 1, 2010
January 31, 2011
January 31, 2011
February 28, 2011
February 28, 2011
March 22, 2011
March 31, 2011
March 31, 2011
March 31, 2011
April 28, 2011
April 28, 2011
April 28, 2011
July 13, 2011
July 29, 2011
July 29, 2011
August 31, 2011
September 1, 2011
September 30, 2011
September 30, 2011
September 30, 2011
September 30, 2011

April 30, 2016
August 31, 2013
December 28, 2012
October 26, 2013
October 30, 2013
December 8, 2012
January 15, 2013
January 30, 2015
February 18, 2013
February 18, 2015
April 2, 2015
July 31, 2013
January 31, 2014
July 31, 2014
October 31, 2013
November 12, 2013
November 12, 2015
November 12, 2017
November 12, 2013
November 12, 2015
November 12, 2017
January 31, 2014
January 29, 2016
August 31, 2015
January 29, 2016
September 22, 2014
September 30, 2013
January 29, 2016
March 31, 2016
April 30, 2013
October 31, 2015
January 29, 2016
July 14, 2014
July 31, 2014
July 31, 2014
February 27, 2015
August 29, 2014
September 30, 2013
March 31, 2014
September 30, 2014
March 31, 2015

2.73%
2.12%
2.26%
2.42%
2.45%
1.67%
1.90%
2.17%
1.90%
2.19%
2.22%
1.49%
1.66%
1.73%
1.46%
1.58%
1.79%
2.02%
1.45%
1.55%
2.21%
1.57%
1.94%
1.91%
1.95%
1.63%
1.53%
1.91%
1.39%
1.50%
1.86%
1.89%
1.54%
1.14%
1.40%
1.09%
1.15%
1.15%
1.16%
1.27%
1.29%

March 15, 2007
March 15, 2007
September 15, 2011

March 15, 2012
March 15, 2017
September 13, 2013

1.74%
2.37%
1.59%

Balance(In millions of yen)
¥
2,700
1,500
1,500
4,500
2,500
2,500
450
2,000
1,500
1,500
900
2,500
24,050
5,000
3,000
3,000
920
1,840
500
1,000
1,104
1,500
4,950
1,850
500
3,700
3,700
500
2,700
2,000
2,300
800
1,000
700
1,300
800
3,000
500
2,700
2,000
2,000
1,000
1,000
1,500
1,000
1,000
3,200
300
1,500
1,000
1,000
2,500
1,000
2,500
73,364
9,000
3,000
1,500
13,500¥110,914

6. ASSETS PLEDGED AS COLLATERAL AND SECURED LOANS PAYABLE(As of April 30, 2011)
Assets pledged as collateral
Cash and bank deposits
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Other assets
Total
Secured loans payable:
Short-term debt
Long-term debt
Total

In thousands of yen¥5,090,463
127,680,740
54,309,842
507,811135,035
909
187,724,800
36,160,000
64,555,500¥100,715,500(As of October 31, 2011)

On July 20, 2011, the collateral pledges established for the Investment Corporations’ 47 properties as of the end of thetwelfth fiscal period (April 30, 2011) were released. As a result, all borrowings of the Investment Corporation became
unsecured and unguaranteed.

7. REDUCTION ENTRY
The amount of reduction entry of property and equipment acquired by government subsidy

Buildings and structures

In thousands of yen
As of October 31, 2011
As of April 30, 2011
¥26,230¥26,230

8. PER UNIT INFORMATIONyen

Net asset value per unit
Net income per unit
Weighted average number of units (units)

From May 1, 2011
to October 31, 2011
¥524,420¥11,593
263,341

From November 1, 2010
to April 30, 2011
¥580,200¥9,891
233,550

The weighted average number of units outstanding of 263,341 and 233,550 were used for the computation of the amount of
net income per unit as of October 31, 2011 and April 30, 2011. Net income per unit after adjusting for residual units is notincluded because there were no residual investment units.

9. INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 40%.
However, the Investment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided
the requirements are met under the Special Taxation Measure Law of Japan. Under this law, the Investment Corporationmust 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 to be able to deduct such amounts. If the Investment Corporation does not satisfy allof the requirements, the entire taxable income of the Investment Corporation will be subject to regular corporate income
taxes. Since the Investment Corporation distributed in excess of 90% of its distributable income in the form of cash
distributions totaling ¥2,750 million and ¥2,310 million for the periods ended October 31, 2011 and April 30, 2011. Such
distributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rate on
the Investment Corporation’s income was 0.05% and 0.06% for the periods ended October 31, 2011 and April 30, 2011. The
following summarizes the significant difference between the statutory tax rate and the effective tax rate:

25

Notes to Financial Statements

Statutory tax rate
Deductible cash distributions
Provision for reserve for reduction entry
Other
Effective tax rate

From May 1, 2011
to October 31, 2011

From November 1, 2010
to April 30, 201139.33%(35.41)(3.90)
0.03
0.05%

39.33%(39.31)
0.04
0.06%

The significant components of deferred tax assets and liabilities as of October 31, 2011 and April 30, 2011 were as follows:
In thousands of yen
As of October 31, 2011
As of April 30, 2011
Deferred tax assets:
Enterprise tax payable
Amortization of leasehold rights
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets

¥49
558
607
558
¥49

¥39
254
293
254
¥39

Tax rate changes after the settlement date
The Act to Revise the Income Tax Act, etc., in Order to Construct a Tax System Addressing Changes in the SocioEconomic Structure (Act No. 114 of 2011) and the Act on Special Measures for Securing Necessary Financial Resources
to Implement Measures to Rebuild Areas Devastated by the Great East Japan Earthquake (Act No. 117 of 2011) were
promulgated on December 2, 2011. In accordance with the promulgation, the effective statutory tax rate used to calculate
the deferred tax assets and deferred tax liabilities concerning the temporary differences, etc. expected to be reversed in
the accounting periods starting on April 1, 2012 and after will be changed to 36.59%, and the effective statutory tax rateused to calculate the deferred tax assets and deferred tax liabilities concerning the temporary differences, etc. expected
to be reversed in the accounting periods starting on April 1, 2015 and after will be changed to 34.16%, respectively. Thesechanges will have no impact on the settlement of the Investment Corporation.

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

11. RELATED-PARTY TRANSACTIONSTransactions with Kenedix REIT Management, Inc.
Kenedix REIT Management, Inc., a consolidated subsidiary of Kenedix, Inc., provides the Investment Corporation withproperty management services and related services. For these services, the Investment Corporation pays Kenedix REITManagement, Inc. property management fees in accordance with the terms of its Property Management Agreements. For
these services, the Investment Corporation paid ¥333 million to Kenedix REIT Management, Inc.

26

12. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES
Rental and other operating revenues and property-related expenses for the periods from May 1, 2011 to October
31, 2011 and from November 1, 2010 to April 30, 2011 consist of the following:
In thousands of yen
From May 1, 2011
From November 1, 2010
to October 31, 2011
to April 30, 2011
Rental and other operating revenues:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rental and other operating revenues¥Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
Loss on retirement of fixed assets
OthersTotal property-related expenses¥832,724
1,442,935
617,943
703,543
14,655
152,453
43,614
153,744¥
3,961,611¥811,787
1,406,895
561,061
643,179
16,209123,949
42,317
5,403
156,378¥
3,767,178

Profit on sale of real estate:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Profit on sale of real estate¥5,800,000
5,122,100
132,618¥545,282-¥6,121,318
1,353,952
7,475,270¥5,908,063
1,300,172
7,208,235

249,514
633,845
140,320
1,023,679
8,498,949

250,325
583,965
94,392
928,682
8,136,917¥

13. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance withlease term of generally two years for office buildings and residential properties and with lease term ranging from two to
ten years for retail properties. The future minimum rental revenues under existing non-cancelable operating leases as of
October 31, 2011 and April 30, 2011 are as follows:

Due within one year
Due after one year
Total

In thousands of yen
As of October 31, 2011
As of April 30, 2011
788,659¥
1,008,045¥
5,355,453
5,892,331¥
6,144,112¥
6,900,376

27

Notes to Financial Statements
14. PROPERTY INFORMATION
Details of the property portfolio as of October 31, 2011 were as follows:
Central Urban
Retail Properties
Tokyo
Tokyo
Tokyo
Other Regional
Other Regional
Location
Metropolitan
Metropolitan
Metropolitan
Areas
Areas
Area
Area
Area
Number of properties
57
11
3
1
2
Property information(In millions of yen)
Acquisition price¥196,636 ¥37,090 ¥7,641 ¥1,800 ¥12,380
Percentage of total acquisition costs
76.95%
14.51%
2.99%
0.70%
4.85%
Net book value
197,560
35,947
7,199
1,830
12,386
Appraisal value at year end
182,925
28,7296,403
1,470
11,190Percentage of total appraisal value
79.29%
12.45%
2.77%
0.64%
4.85%
Financial results for the period from May 1, 2011 to October 31, 2011
(In thousands of yen)
Rental and other operating revenues¥6,409,007 ¥1,448,503 ¥221,456 ¥93,778 ¥326,205
Rental revenues
5,682,652
1,209,438
201,615
83,660297,905
Other revenues
726,355
239,065
19,841
10,11828,300Property-related expenses
1,800,804
554,191
57,89433,676
72,111
Property management fees
582,629
197,315
22,165
8,319
22,296
Taxes
532,387
126,676
15,3698,294
20,817
Utilities
454,375
136,436
2,243
1,942
22,947
Repairs and maintenance
112,958
23,066
8,198
6,703
1,528
Insurance
8,842
4,694
498
386
235
Trust fees and other expenses
109,61366,004
9,421
8,032
4,288
NOI (Net Operating Income)
4,608,203
894,312
163,562
60,102254,094
Depreciation expenses
953,788
333,00266,784
23,116
66,245
Operating income from property leasing activities
3,654,415
561,310
96,77836,986
187,849
Capital expenditures
486,318
129,030
3,193
720
54,805
NCF (Net Cash Flow)¥4,121,885 ¥765,282 ¥160,369 ¥59,382 ¥199,289
Type

Office Buildings

Residential Properties

A breakdown of property-type as of October 31, 2011 was as follows:
Class of assets

Property type
Office Buildings

Area
Tokyo Metropolitan Area
Other Regional Areas

Subtotal
Property and equipment

Residential Properties
Subtotal
Central Urban Retail Properties

Total
Bank deposits and other assets
Total assets
Total liabilities
Net assets

Tokyo Metropolitan Area
Other Regional Areas
Tokyo Metropolitan Area

Balanceat the end of period(In millions of yen)¥197,560
35,947
233,507
7,199
1,830
9,029
12,386
254,922
20,051
274,973
124,701¥150,272

Percentage of
total assets
71.8%
13.1%
84.9%
2.6%
0.7%
3.3%
4.5%
92.7%
7.3%
100.0%
45.4%
54.6%

15. FINANCIAL INSTRUMENTS
Thirteenth Fiscal Period (May 1, 2011 to October 31, 2011)(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 corporate 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 mannerthat considers fully such factors as safety, liquidity, interest rate conditions and cash flows.

28

(2) Types of financial instruments and related risk
Debt and corporate bonds are used primarily for procuring funds necessary for the acquisition of properties and havea redemption date of a maximum of seven years 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 debt bearing interest at a variable rate. With
regard to hedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of theeffectiveness of hedging activities, please see 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 transactions in order to minimize risk arising from fluctuationsin interest rates on funds procured.
(b)	Monitoring of liquidity risk (the risk that the Investment Corporation may not be able to meet its obligations onscheduled due dates) associated with funds procurement
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 is reasonably estimated. Since various assumptions and factors are reflected inestimating the fair value, different assumptions and factors could result in a different fair value.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheets as of October 31, 2011 and estimated fair value areshown in the following table.

(In thousands of yen)

(1) Cash and bank deposits
Subtotal(1) Short-term debt
(2) Corporate bonds(including current portion of corporate bonds)(3) Long-term debt(including current portion of long-term debt)
Subtotal
Derivative Transactions (*)

Carrying value¥18,338,535
18,338,535
10,200,000
13,500,000
87,214,000¥110,914,000-

Estimated fair value
Difference¥¥18,338,535
18,338,535
10,200,000
13,324,050(175,950)
86,587,303(626,697)¥(802,647)¥110,111,353-(*) 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 and derivative 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 debt
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Corporate bonds
The fair value of corporate bonds is based on quoted market prices.
(3) Long-term debt
The fair value of long-term debt 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 debt bearing
interest at variable rate, which is subject to fixed interest 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 ishandled together with applicable interest-rate swaps, discounted by the interest rate to be applied if similar loans
were entered into.

29

Notes to Financial Statements
Derivative Transactions(1) Items that are not applied to hedge accounting
Not applicable(2) Items that are applied to hedge accounting
Hedge accounting method

Type of Derivative Transactions

Hedged items

Contracted amountCalculation
Fair value(In thousands of yen)method for(In thousands
applicable
Maturingof yen)fair value
after 1 year

Special treatment of interestrate swaps

Interest-rate swaps:
Receive/floating and pay/fixedLong-term debt

¥6,500,000¥2,000,000¥6,500,000¥2,000,000

Total

*

(*) Special treatment of interest-rate swaps is reported at the fair value of applicable long-term debt. This is because such swaps are handled together with hedged long-term debt.

*2: Redemption schedule for receivables
Due within 1 year or less
(In thousands of yen)
¥18,338,535¥18,338,535

Cash and bank deposits
Total*3: Redemption schedule for debt and corporate bonds

Short-term debt
Corporate bonds
Long-term debt

Due within 1 year
or less¥ 10,200,000
9,000,000
13,850,000

Due after 1 year
through 2 years¥
1,500,000
17,606,000

Due after 2 years
through 3 years¥
24,323,000

Due after 3 years
through 4 years¥
15,135,000

Due after 4 years
through 5 years¥
13,300,000

Due after 5 years¥

3,000,000
3,000,000

16. INVESTMENT AND RENTAL PROPERTIES
Thirteenth Fiscal Period (May 1, 2011 to October 31, 2011)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose ofgenerating rental revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
As of April 30, 2011
¥246,187,380

Carrying Value (In thousands of yen)
Net change¥8,734,375

As of October 31, 2011¥254,921,755

Fair value As of October 31, 2011
(In thousands of yen)¥230,717,000*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 increases were the acquisition of four properties totaling¥14,609,502 thousand, the sale of real estate trust beneficiary interests to one property amounting ¥5,122,100 thousand and depreciation amounting to ¥1,442,935 thousand.

Income and loss in the fiscal period ended October 31, 2011 for real estate for rental purposes is listed in the Note “12,BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES”

17. SUBSEQUENT EVENTS(1) Acquisition of Properties
On December 19, 2011, the Investment Corporation decided to acquire the eight properties described below (totalplanned acquisition price: ¥28,550 million) as of December 26, 2011, with funds procured through new borrowings
described in (2) below.
The following planned acquisition price does not include the acquisition costs, property tax, city-planning tax andconsumption tax, etc.
Details shared by the following acquisitions
Date of Contract
SellerScheduled Date of Acquisition

30

December 19, 2011
AIG Edison Life Insurance Company
December 26, 2011

Type

Type ofSpecified
Asset

Property Name

Kabutocho Nikko Building
Ikebukuro Nikko Building
Kabutocho Nikko Building II
Trust
Officebeneficiary Tachikawa Ekimae Building
Building
interest in Nagoya Ekimae Sakura-dori Building
real estate Nagoya Nikko Shoken Building
Sendai Nikko Building
Other
Kanazawa Nikko Building

PlannedAcquisitionPrice(In millions ofyen)
11,270
1,653
1,280
1,267
7,327
4,158
950
645

Location (Address)
6-5 Nihombashi Kabutocho, Chuo-ku, Tokyo
1-20-8 Minami Ikebukuro, Toshima-ku, Tokyo
8-1 Nihombashi Kabutocho, Chuo-ku, Tokyo
2-12-18 Akebonocho, Tachikawa-shi, Tokyo
3-26-8 Meieki, Nakamura-ku, Nagoya-shi, Aichi
3-2-3 Sakae, Naka-ku, Nagoya-shi, Aichi
3-2-21 Chuo, Aoba-ku, Sendai-shi, Miyagi
4-65 Minamicho, Kanazawa-shi, Ishikawa

NumberofYear Built
Stories
B1 F8
B1 F8
F8
B1 F8
B2 F15B3 F11B1 F8
B1 F7Nov. 1998
Mar. 1986
Oct. 2001
Feb. 1990
Apr. 1986
Aug. 1974
Mar. 1989
Mar. 1989(2) Debt Financing
As of December 19, 2011, the Investment Corporation concluded an agreement to borrow funds through syndicatedloans, with Sumitomo Mitsui Banking Corporation as the arranger and the agent and Development Bank of Japan Inc.
as the co-arranger, in order to finance the acquisition of the above eight properties.
Short-term debt (Term Loan 65-A)¥7,500 million
Aozora Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
The Chuo Mitsui Trust and Banking Co., Limited
Base rate (JPY TIBOR for 3-month in JBA) + 0.55% (*2)
October 31, 2012

Long-term debt (Term Loan 65-B)¥5,000 million (*1)
Sumitomo Mitsui Banking Corporation
Resona Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Base rate (JPY TIBOR for 3-month in JBA) + 0.65% (*2)
October 31, 2014

AmountLong-term debt (Term Loan 65-C)¥2,500 million

LenderDevelopment Bank of Japan Inc.

Long-term debt (Term Loan 65-D)¥4,500 million (*1)
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Base rate (JPY TIBOR for 3-month in JBA) + 0.70% (*2)
October 31, 2015

AmountLenderInterest Rate
Repayment Date

Interest Rate
Repayment Date

Fixed rate of interest
October 31, 2014

AmountLong-term debt (Term Loan 65-E)¥2,500 million

LenderDevelopment Bank of Japan Inc.

Interest Rate
Repayment Date

Fixed rate of interest
October 31, 2015

AmountLenderInterest Rate
Repayment Date

Long-term debt (Term Loan 65-G)¥2,500 million
Development Bank of Japan Inc.
Fixed rate of interest
October 31, 2016

Long-term debt (Term Loan 65-F)¥4,500 million (*1)
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Base rate (JPY TIBOR for 3-month in JBA) + 0.75% (*2)
October 31, 2016

Details shared by the abovementioned borrowings
Drawdown Date
Interest Payment Date
Repayment Method
Collateral

December 26, 2011
First interest payment on March 31, 2012, and at the end of every three months (on the lastbusiness day of each month, if the end of each month is a non-business day) and repayment date.
Each principal repayment in full on respective dates of maturity
Unsecured, unguaranteed*1. The Investment Corporation has decided to execute an interest-rate swap agreement as a hedge against possible increases in future interest rates for the long-term debt which has floating
rate of interest (Term Loan 65-B, 65-D and 65-F).
*2. The base rate for the period commencing December 26, 2011 through March 31, 2012 will be the Japanese Yen TIBOR for four months which Japanese Bankers Association (JBA) will releaseon December 21, 2011. Thereafter, the base rate shall be calculated based on Japanese Yen TIBOR for three months which JBA releases two business days before each interest payment
date. The base rate for the last period shall be calculated based on Japanese Yen TIBOR for one month.

31

Statements of Cash Flows and Related Notes (Unaudited)
For the period from May 1, 2011 to October 31, 2011 and the period from November 1, 2010 to April 30, 2011

(In thousands of yen)

From May 1, 2011 to October 31, 2011 From November 1, 2010 to April 30, 2011
Cash Flows from Operating Activities:
Income before income taxes
Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization
Interest expense
Loss on retirement of fixed assets
Loss on disaster
Subsidy
Loss on reduction of fixed assets
Gain on donation of noncurrent assets
Changes in assets and liabilities:
Rental receivables
Consumption tax refundable
Accrued consumption tax
Trade and other payables
Rents received in advance
Property and equipment due to sale
Others,net
Subtotal
Cash payments of interest expense
Payments for loss on disaster
Cash payments of income taxes
Net cash provided by operating activities¥

3,054,377¥

2,311,379

1,724,828
1,036,388(13,970)

1,634,424
1,048,723
5,403
35,360(26,230)
26,230-12,640310,485
28,956
74,415(590,901)
5,122,100(258,096)
10,501,222(1,037,432)(28,598)(1,171)
9,434,021

22,067(310,485)(230,841)(33,748)705,812(628,713)
4,559,381(1,011,751)(633)
3,546,997

Cash Flows from Investing Activities:
Purchases of property and equipment
Purchase of intangible assets
Proceeds from leasehold and security deposits received
Payments of leasehold and security deposits
Proceeds from collection of lease and guarantee deposits
Payments of leasehold and security deposits received
Payments of time deposits
Proceeds from withdrawal of time deposits
Payments of restricted bank deposits
Proceeds from restricted bank deposits
Net cash used in investing activities(15,230,474)
1,210,624
669(684,035)
464,000
100,404(14,138,812)(13,803,598)(75,499)
1,011,848(122,709)(615,156)(74,000)(134,900)
112,588(13,701,426)

Cash Flows from Financing Activities
Proceeds from short-term debt
Payment of short-term debt
Proceeds from long-term debt
Payment of long-term debt
Proceeds from issuance of investment units
Proceeds from issuance of investment corporation bonds
Payment of dividends
Net cash (used in) provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period

6,000,000(4,500,000)
14,000,000(18,801,500)
13,938,969
1,485,336(2,310,038)
9,812,767
5,107,976
12,820,027
17,928,003

6,200,000(3,800,000)
26,300,000(18,551,500)(2,541,094)
7,607,406(2,547,023)
15,367,050
12,820,027¥¥

See related notes

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (UNAUDITED)Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which arehighly liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of purchase.

CASH AND CASH EQUIVALENTS (UNAUDITED)Cash and cash equivalents consisted of the following as of October 31, 2011 and April 30, 2011:
Cash and bank deposits
Restricted bank deposits (Note 1)
More than 3-month fixed deposits(Note 2)
Cash and cash equivalents
Note 1: Restricted bank deposits are retained for repayment of tenant leasehold and security deposits.
Note 2: More than 3-month fixed deposits are fixed deposits which have deposit term of more than 3 months.

32

As of October 31, 2011
¥18,338,535(410,532)¥
17,928,003(In thousands of yen)
As of April 30, 2011
¥13,794,963(510,936)(464,000)¥
12,820,027