Financial Statements（Fourth Fiscal Period:From November 1, 2006 to April 30,2007）
Report of Independent Auditors
Balance Sheets
Statements of Income and Retained Earnings
Statements of Changes in Unitholders’ Equity
Statements of Cash Flows
Notes to Financial Statements

Kenedix Realty Investment Corporation

Kenedix Realty Investment Corporation

BALANCE SHEETSAs of April 30, 2007 and October 31, 2006
In thousands of yen

As of April 30, 2007
AssetsCurrent assets:
Cash and bank deposits
Rental receivables
Consumption tax refundable
Other current assets
Total current assets
Property and equipment, at cost:
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Less-accumulated depreciation
Net property and equipment
Other assets:
Ground leasehold
Organization costs
Corporate bond Issuance costs
Unit Issuance costs
OthersTotal assets
Liabilities and Unitholders’ Equity
Liabilities
Current liabilities:
Trade and other payables
Short-term debt
Deposits received
Rents received in advance
Other current liabilities
Total current liabilities
Corporate bonds
Long-term debt
Leasehold and security deposits received
OthersTotal liabilities
Unitholders' equity
Unitholders' capital
Units Authorized: 2,000,000 units
Units Issued and outstanding:157,000 units
as of April 30, 2007 and October 31, 2006, respectively
Retained earnings
Unrealized gain from deferred hedge transactions
Total unitholders' equity
Total liabilities and unitholders' equity
See notes to financial statements

￥

￥

￥

￥

8,923,063
75,125302,041
32,956
9,333,185

As of October 31, 2006￥

9,488,708
83,375599,486
72,300
10,243,869

113,187,263
67,134,816
823,009602,585(3,230,846)
178,516,827

91,714,229
58,684,305
741,661
612,929(2,033,503)
149,719,621

285,145
30,53868,875
71,13994,969188,400,678−
35,628−88,923
226,301
160,314,342

413,751
20,000,000
26,743916,372
87,286
21,444,152
12,000,000
56,500,000
7,578,756−
97,522,908￥￥

406,892
15,000,000
1,748
767,536
28,287
16,204,463−
47,000,000
6,124,894
51,68869,381,045

88,729,652

88,729,652

2,148,118−
90,877,770
188,400,678

2,124,112
79,53390,933,297
160,314,342￥

Kenedix Realty Investment Corporation

STATEMENTS OF INCOME AND RETAINED EARNINGSFor the period from May 1, 2006 to October 31, 2006 and the period from November 1, 2006 to April 30, 2007
In thousands of yen

From November 1, 2006
to April 30, 2007
Operating Revenues:
Rental revenues
Profit on sale of trust beneficiary interests in real estate
Total operating revenues
Operating Expenses:
Property-related expenses
Asset management fees
Administrative service and custodian fees
Other operating expenses
Total operating expenses
Operating income￥

5,647,462
130,748
5,778,210

From May 1, 2006
to October 31, 2006￥

5,131,499
157,334
5,288,833

2,607,389
306,965
66,601
110,510
3,091,465
2,686,745

2,397,202
203,842
46,72875,8692,723,641
2,565,192

Non-Operating Expenses:
Interest expense
Financing related expense
Amortization of organization costs
Amortization of unit issuance costs
Amortization of corporate bond issuance costs
Others, net
Income before income taxes
Income taxes
Net income

479,926
20,595
5,090
17,785
1,501
12,9692,148,879
821
2,148,058

375,765
20,904
5,090
17,785−
20,5672,125,081
1,009
2,124,072

Retained earnings at the beginning of period

60

40

Retained earnings at the end of period
See notes to financial statements¥

2,148,118¥

2,124,112

Kenedix Realty Investment Corporation

Statement of Changes in Unitholders’ Equity
For the period from November 1, 2006 to April 30, 2007

(Thousands in Yen)
Unitholders’ Equity
Unrealized gain
Unitholders’

Retainedfrom deferred

capitalearnings

hedge

Total

transactions
Balance at the beginning of a period
Changes during the fiscal period
Payment of dividends￥

88,729,652￥

2,124,112￥

79,533￥ 90,933,297−(2,124,052)−(2,124,052)

Net income−

Interest-rate swap−

2,148,058−−(79,533)

2,148,058(79,533)−

Total changes during the fiscal period￥

Balance at the end of period

88,729,652

24,006￥

2,148,118(79,533)(55,527)−￥ 90,877,770￥

For the period from May 1, 2006 to October 31, 2006

(Thousands in Yen)
Unitholders’ Equity
Unrealized gain
Unitholders’

Retainedfrom deferred

capitalearnings

hedge

Total

transactions
Balance at the beginning of a period￥

Changes during the fiscal period
New unit issuance

44,285,003￥

1,102,013￥−￥ 45,387,016

44,444,649−−

44,444,649

Payment of dividends−(1,101,973)−(1,101,973)

Net income−

Interest-rate swap−

2,124,072−−
79,533

2,124,072
79,533

Total changes during the fiscal period
Balance at the end of period
See notes to financial statements

44,444,649￥

88,729,652

1,022,099￥

2,124,112￥

79,53345,546,281

79,533￥ 90,933,297

Kenedix Realty Investment Corporation

STATEMENTS OF CASH FLOWSFor the period from May 1, 2006 to October 31, 2006 and the period from November 1, 2006 to April 30, 2007
In thousands of yen

From October 1,2006
to April 30,2007

From May 1,2006
to October 31,2006

Cash Flows from Operating Activities:
Income before income taxes￥

2,148,879￥

2,125,081

Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization

1,288,871

1,169,328

479,926

375,765

8,250(35,671)

Consumption tax refundable

297,446(461,163)

Trade and other payables

3,328

214,623

Rents received in advance

148,836

237,642

1,433,571

1,763,670

37,018(136,387)

5,846,125

5,252,888(420,546)(363,960)(924)(1,015)5,424,655

4,887,913(31,759,821)(69,184,115)

Proceeds from leasehold and security deposits received

1,909,350

2,852,843

Payments of leasehold and security deposits received(455,487)(256,297)

Payments of restricted bank deposits(361,623)(750,424)

Proceeds from restricted bank deposits

355,864

225,670

6,555

(717)

(30,305,162)(67,113,040)

Proceeds from short-term debt

19,500,000

13,000,000

Payment of short-term debt

(14,500,000)(11,000,000)

Proceeds from long-term debt

9,500,000

18,000,000

Interest expense
Changes in assets and liabilities:
Rental receivables

Sale of trust beneficiary interests in real estate
Others, net
Subtotal
Cash payments of interest expense
Cash payments of income taxes
Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment

Others, net
Net cash used in investing activities
Cash Flows from Financing Activities:

Proceeds from issuance of units−

44,444,650

Proceeds from issuance of corporate bonds

12,000,000−

Payment of corporate bond issuance costs（70,376）−

Payment of dividends(2,120,522)(1,098,661)

Net cash provided by financing activities

24,309,102

63,345,989

Net change in cash and cash equivalents(571,405)

1,120,862

Cash and cash equivalents at the beginning of period

8,178,005

7,057,143

Cash and cash equivalents at the end of period
See notes to financial statements￥

7,606,600¥

8,178,005

Kenedix Realty Investment Corporation

Notes to Financial Statements
For the period from May 1, 2006 to October 31, 2006 and the period from November 1, 2006 to April 30, 2007

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Realty Investment Corporation (“the Investment Corporation”) is a real estate investment corporation whose units are listed on theTokyo Stock Exchange. The Investment Corporation is engaged in ownership and operation of selected office buildings, residential and retailproperties in Japan. The Investment Corporation was incorporated as an investment corporation under the Law Concerning Investment Trusts
and Investment Corporations of Japan, or the Investment Trust Law. Pursuant to this law, the Investment Corporation is externally managed by alicensed asset management company, Kenedix REIT Management, Inc.("Asset Management Company"), a wholly-owned subsidiary of Kenedix,
Inc.(“Kenedix”)
On May 6, 2005, the Investment Corporation was originally formed with ¥200 million of initial capital contributions from Kenedix, AssetManagement Company and their executives and employees. On July 20, 2005, the Investment Corporation raised ¥41,869 million of equity
capital through an initial public offering of 75,000 investment units and was listed on the J-REIT section of the Tokyo Stock Exchange on thefollowing day.
On August 1, 2005, 29 properties with an aggregate purchase price of ¥61,083 million were acquired with additional debt proceeds of ¥23,000
million and substantial operations of the Investment Corporation were commenced from that date.
On August 16, 2005, the Investment Corporation completed third-party allotment of 3,970 investment units, generating an additional ¥2,216
million. Subsequent to that, the Investment Corporation acquired 2 additional properties in September, 2005.

During the period ended April 30,

2006, the Investment Corporation acquired 4 additional properties by utilizing internal cash and bank borrowing.
On May 1, 2006, the Investment Corporation raised ¥42,172 million of equity capital through a public offering of 73,660 investment units and 26
properties with an aggregate purchase price of ¥58,033 million were acquired with additional debt proceeds of ¥16,000 million.
On May 26, 2006, the Investment Corporation completed third-party allotment of 3,970 investment units, generating an additional ¥2,273 million.
During the period ended October 31, 2006, the Investment Corporation sold 2 properties and acquired 5 properties.
During the period ended April 30,2007, the Investment Corporation acquired 10 additional prpperties by utilizing internal cash and bankborrowing,and sold 2 properties.
On March 15,2007, the Investment Corporation issued the investment corporation bonds. Their total amounts is ¥12,000 million and term are
five years and ten years.
At April 30, 2007, the Investment Corporation had total unitholders’ capital of ¥88,730 million with 157,000 investment units outstanding. The
Investment Corporation owned a portfolio of 72 properties with total acquisition costs of ¥175,090 million containing total leasable area of 223,323
m2. The occupancy ratio was approximately 95.9%.

A portfolio of 72 properties consists of 39 office buildings, 30 residential properties and 3

central urban retail properties. 58 properties are located in the Tokyo Metropolitan Area and 14 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 the Investment Trust Law of Japan,
the Japanese Corporation Law, the Securities 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 International 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 were prepared for Japanese
domestic purposes from the accounts and records maintained by the Investment Corporation and filed with the Kanto Local Finance Bureau of the
Ministry of Finance as required by the Securities and Exchange Law.

In preparing the accompanying financial statements, relevant notes havebeen added and certain reclassifications have been made from the financial statements issued domestically in order to present them in a form thatis more familiar to readers outside Japan. The Investment Corporation’s fiscal period is a six-month period which ends at the end of April andOctober of each year, respectively. The Investment Corporation does not prepare consolidated financial statements because it has no
subsidiaries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) 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.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimateduseful lives of the assets ranging as stated below:
From November 1, 2006
to April 30, 2007

From May 1, 2006
to October 31, 2006

Buildings and structures ......................................................................................................

2-46 years

2-46 years

Machinery and equipment ...................................................................................................

3-17 years

3-17 years

Tools, furniture and fixtures .................................................................................................

3-15 years

3-15 years(c) Impairment of Fixed Assets
The Investment Corporation adopted “Accounting Standard for Impairment of Fixed Assets” (“Opinion on Establishment of AccountingStandard for Impairment of Fixed Assets” issued by the Business Accounting Deliberation Council in Japan on August 9, 2002) and“Implementation Guidance for the Accounting Standards for Impairments of Fixed Assets” (“Financial Accounting Guidance No. 6” issued by the
Accounting Standards Board of Japan on October 31, 2003). The Investment Corporation has not recognized an impairment loss on any of theproperties during the fiscal periods ended April 30, 2007 and October 31, 2006.
(d) Organization Costs
Organization costs are amortized over a period of five years, comprised of ten fiscal periods, with an equal amount amortized in each fiscal
period.
(e) Unit Issuance Costs
Unit issuance costs are amortized over a period of three years under the straight-line method. Underwriters’ commissions in connection with
the issuance of unitholders’ equity are offset against proceeds raised since the “Spread Method” was used for the unit issuance. Under the
Spread Method, securities underwriters underwrite the units at the issue price and offer them to investors at the offer price, which is different fromthe issue price.

The difference between the offer price and the issue price represents the underwriting commission received by the securities

underwriters, eliminating the need for the issuer to pay underwriting commissions. If securities underwriters had underwritten the units at theissue price and offered the units to investors at an offer price equal to the issue price (known as the “Conventional Method”), a commission would
have been incurred and it would have been expensed as new unit issuance costs. Therefore, the Spread Method understated unit issuancecosts by ¥1,263 million on the balance sheet and decreased amortization of unit issuance costs by ¥253 million and increased income before
income taxes on the income statement by the same amount compared to the Conventional Method for the period from May 1, 2006 throughOctober 31, 2006.
(f)

Corporate Bond Issuance Costs
Investment corporation bonds isuuance costs are amortized over a loan period under the straight-line method.

(g) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan and throughwhich the Investment Corporation holds all of its real property, all assets and liabilities within trust are recorded in the relevant balance sheet
and income statement accounts.

(h) 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 revenue and expense during the fiscal period, respectively.
(i)

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. Under the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property from the date ofdisposal to the end of the calendar year in which the property 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 theproperty-related taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to¥101 million and ¥182 million as of April 30, 2007 and October 31, 2006.

In subsequent calendar years, such property-related taxes are charged

as operating expenses in the fiscal period in which the installments of such taxes are paid to the relevant tax authorities.
(j)

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.
(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 adopted special treatment for interest-swap agreements because its
interest-rate swap agreements met the criteria for hedging accounting under this treatment, the net amount to be paid or received under theinterest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was excuted.

(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 the accompanying financial statements.

Totals shown in theaccompanying financial statements do not necessarily agree with the sums of the individual amounts.

3. CHANGES IN ACCOUNTING POLICY(a) Beginning the fiscal period ended October 31, 2006, unit issuance costs have been capitalized and amortized over a period of 3 years,
although unit issuance costs were previously expensed in the period of payment. Due to a change in Accounting Rules for Investment Corporation
effective on May 1, 2006 and “Tentative Solution on Accounting for Deferred Assets” (Practical Solution No.19 issued by the Accounting Standards
Board of Japan on August 11, 2006) issued by the Accounting Standards Board of Japan, appropriate deferred charges such as new unit issuancecosts are allowed to be capitalized and being amortized over a 3 year period.
As a result of this change in accounting policy, non-operating expenses of the Investment Corporation during the current period decreasedby ¥89 million yen and income before income taxes increased by the same amount compared with the amounts which would have been recorded
under the previous accounting rule.
(b) Beginning the fiscal period ended October 31, 2006, the Investment Corporation adopted the new accounting standards,

AccountingStandard for Presentation of Net Assets in the Balance Sheet” (Statement No.5 issued by the Accounting Standards Board of Japan on December
9, 2005) and its implementation guidance (the Financial Accounting Standard Implementation Guidance No.8 issued by the Accounting Standards
Board of Japan on December 9, 2005).

(ｃ) Beginning the fiscal period ended April 30, 2007, the Investment Corporation changed the hedging accounting treatment from deferred hedge
to the special method on interest swap due to a change in amendments to the Investment Trust Law and the modification of the articles ofincorporation.
As a result, net asset decreased by ¥ 59 million compared with the previous accounting method.

4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following as of April 30, 2007 and October 31, 2006:
In thousands of yen

As of April 30, 2007
Cash and bank deposits ...................................................................................

As of October 31, 2006

¥ 8,923,063¥ 9,488,708

Restricted bank deposits held in trust ..............................................................

(1,316,463)(1,310,703)

Cash and cash equivalents ..............................................................................

¥ 7,606,600¥ 8,178,005

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

5. SCHEDULE OF PROPERTY
In millions of yen
As of April 30, 2007
Acquisition costsLand¥ 113,187

Accumulated
depreciation¥

As of October 31, 2006
Book value

Acquisition costs−¥ 113,187¥ 91,714

Accumulated
depreciation¥

Book value−¥ 91,714

Buildings andstructures

67,135

3,026

64,10958,684

1,897

56,787

Machinery andequipment

823

119

704

742

73

669

Tools, furnitureand fixtures

603

86

517

613

63

550

¥ 181,748¥ 3,231¥ 178,517¥ 151,753¥ 2,033¥ 149,720

Total

6. SHORT-TERM AND LONG-TERM DEBTS
The following summarizes short-term and long term debt outstanding as of April 30, 2007 :(As of April 30, 2007)
Classification

Drawdown Date
July 31, 2006

Unsecuredshort-term debt

Unsecured current potion of
long-term debt

Repayment Date

Weighted-averageinterest rate

July 31, 2007

0.73%

Balance(In millions of yen)¥

September 20, 2006

September 20, 2007

0.75%

4,000

October 31, 2006

October 31, 2007

0.75%

1,000

December 1, 2006

November 30, 2007

0.82%

500

January 19, 2007

January 18, 2008

0.84%

1,000

March 1, 2007

February 29, 2008

0.96%

3,500

April 2, 2007

October 2, 2007

0.95%

2,000

April 2, 2007

April 2, 2007

0.97%

1,500

April 2, 2007

April 2, 2007

1.02%

1,000

November 1, 2005

October 31, 2007

0.77%

1,500

Subtotal

Unsecured
long-term debt

4,000

20,000August 1, 2005

July 31, 2008

0.87%

9,500

August 1, 2005

July 31, 2010

1.29%

9,500

November 1, 2005

October 31, 2008

1.09%

3,500

December 8, 2005

December 7, 2008

1.10%

2,000

March 1, 2006

February 28, 2009

1.45%

2,000

March 16, 2006

March 16, 2009

1.48%

2,500

May 1, 2006

April 30, 2009

1.63%

6,500

May 1, 2006

April 30, 2011

2.20%

2,500

May 1, 2006

April 30, 2016

2.73%

5,000

July 14, 2006

July 13, 2011

2.15%

1,000

September 1, 2006

August 31, 2013

2.12%

3,000

December 1, 2006

November 30, 2011

1.96%

2,500

April 2, 2007

April 2, 2010

1.57%

2,000

April 2, 2007

April 2, 2012

1.88%

2,000

April 17, 2007

April 16, 2011

1.04%

3,000

Subtotal
Total

56,500¥76,500

7. UNSECURED LINE OF CREDIT
The Investment Corporation established a credit facility with a financial institution in March 2007 which provides access to an aggregate ¥ 2.5
billion on an unsecured basis, the company have drawn ¥ 1.0 billion from this credit facility.

8. PER UNIT INFORMATIONThe net asset value per unit as of April 30, 2007 and October 31, 2006 was ¥578,839 and ¥579,192. Net income per unit as of April 30, 2007
and October 31, 2006 was ¥13,681 and ¥13,575.
The weighted average number of units outstanding of 157,000 and 156,460 was used for the computation of the amount of net income per unit
as of April 30, 2007 and October 31, 2006.

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 Corporation must meet a number of tax requirements, including a requirement it
currently distribute in excess of 90% of its taxable 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. Since the Investment Corporation distributed approximately 100% of its distributable income in the form of cash distributions
totaling ¥2,148 million and ¥2,124 million for the periods ended April 30, 2007 and October 31, 2006.

Such distributions were treated as

deductible distributions for purposes of corporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.04% and0.05% for the periods ended April 30, 2007 and October 31, 2006.

The following summarizes the significant difference between the statutory tax

rate and the effective tax rate:
From November 1, 2006
to April 30,2007

From May 1, 2006
to October 31,2006

Statutory tax rate .....................................................................................................

39.39%

39.39%

Deductible cash distributions ...................................................................................

(39.38)(39.37)

Other ........................................................................................................................

0.03

0.03

Effective tax rate ......................................................................................................

0.04%

0.05%

10. UNITHOLDERS’ EQUITYThe Investment Corporation issues only non-par value units in accordance with the Investment Trust Law.
price of new units is designated as stated capital.

The entire amount of the issue

The Investment Corporation is required to maintain net assets of at least ¥50 million as

required by the Investment Trust Law.

11. RELATED-PARTY TRANSACTIONS(a) Transactions with Kenedix Advisors Co., Ltd. ("Kenedix Advisors")
Kenedix Advisors, a wholly-owned subsidiary of Kenedix, provides the Investment Corporation with property management services and related
services. For these services, the Investment Corporation pays Kenedix Advisors property management fees and other fees in accordance withthe terms of its Property Management Agreements. Transactions with Kenedix Advisors are as follows:
In thousands of yen

From November 1, 2006
to April 30, 2007

From May 1, 2006
to October 31, 2006

Property management fees ......................................................................................

¥ 202,279¥ 183,464

Management transfer fees .......................................................................................

21,20066,200Construction management fees ...............................................................................

37,432

24,537(b) Transactions with Y.K. KDX2 (“KDX2”)
KDX2 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 4 properties from KDX2 for ¥8,300
million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.

(c) Transactions with Y.K. Lump Sum Investment (“Lump Sum”)
Lump Sum is a wholly owned subsidiary of Kenedix.

On May 1, 2006 the Investment Corporation acquired 4 properties from Lump Sum for¥7,100 million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.
(d) Transactions with Y.K. KW Property10 (“KW Property10”)
KW Property10 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 2 properties from KW
Property10 for ¥4,426 million. The purchase price of these properties was determined based on an independently appraised value at the time ofacquisition.
(e) Transactions with Y.K. KW Property5 (“KW Property5”)
KW Property5 is a wholly owned subsidiary of Kenedix.
for ¥7,310 million.

On May 1, 2006 the Investment Corporation acquired 7 properties from KW Property5

The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.

(f) Transactions with Y.K. KDX3 (“KDX3”)
KDX3 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 1 property from KDX3 for ¥3,680 million.
The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.

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 November 1, 2006 to April 30, 2007 and from May 1,
2006 to October 31, 2006 consist of the following:
In thousands of yen

From November 1, 2006
to April 30, 2007

From May 1, 2006
to October 31, 2006

Rental and other operating revenues:
Rental revenues .................................................................................................

¥

4,234,864¥

3,908,749

Common area charges ......................................................................................

730,439

640,707

Subtotal ........................................................................................................

4,965,303

4,549,456

182,047

175,387

Utility charge reimbursement ..............................................................................

274,748314,355

Miscellaneous ....................................................................................................

225,364

92,301Others:Parking space rental revenues ...........................................................................

Subtotal ........................................................................................................

682,159

Total rental and other operating revenues ...............................................................

¥

Property management fees and facility management fees .....................................

¥

Depreciation ............................................................................................................

582,0435,647,462¥

571,266¥

5,131,499
529,334

1,243,900

1,135,559

Utilities .....................................................................................................................

275,900

296,833

Taxes .......................................................................................................................

206,872

179,543

Insurance .................................................................................................................

14,701

13,979Repairs and maintenance .......................................................................................

89,96462,666

Trust fees .................................................................................................................

46,396

43,761Others ......................................................................................................................

158,390

135,527

Total property-related expenses ..............................................................................

¥

2,607,389¥

2,397,202

13. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease 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 April 30, 2007 and October 31, 2006 are as follows:
In thousands of yen

Due within one year .................................................................................................

As of April 30, 2007

As of October 31, 2006¥

1,266,446¥

9,741,832

9,709,697¥

11,008,278¥ 10,976,113

Due after one year ...................................................................................................
Total ................................................................................................................

1,266,416

14. DERIVATIVES AND HEDGE ACCOUNTINGThe Investment Corporation has entered into interest-rate swap agreements with several Japanese financial institutions to hedge its variable
rate long-term debt obligations. The Investment Corporation utilizes interest-rate swap agreements, which are derivative financial instruments,
only for the purpose of mitigating future risks of fluctuations of interest rates, but does not enter into such transactions for speculative or trading
purposes. The Investment Corporation entered into such derivative transactions to hedge risk in accordance with its Articles of Incorporation andthe established risk management policies of the Asset Management Company.
The following summarizes the notional amounts of the interested-related positions outstanding as of April 30, 2007:(As of April 30, 2007)
Type
Interest-rate swap:
Fixed rate payable and floating rate receivable

Notional amount¥43,800 million

15. PROPERTY INFORMATION
Details of the property portfolio as of April 30, 2007 were as follows:
Type

Office Buildings
Tokyo
Metropolitan
Area

Location
Number of properties

Residential Properties

Central Urban Retail Properties

Other Regional Tokyo Metropolitan Other Regional
Areas
Area
Areas

34

Tokyo
Metropolitan
Area

Other Regional Areas
1

5

22

8

2

¥ 11,475¥ 33,481¥ 9,571¥ 12,379

Property information(In millions of yen)
Acquisition price¥ 104,504

Percentage of total acquisition costs¥ 3,680

59.7%

6.6%

19.1%

5.5%

7.1%

2.1%

Net book value

106,573

11,45734,15810,00812,918

3,688

Appraisal value at year end

115,507

11,68034,5709,898

14,290

3,760

60.9%

6.2%

18.2%

5.2%

7.5%

2.0%

Percentage of total appraisal value
Financial results for the period ended April 30, 2007
(In thousands of yen)
Rental and other operating revenues¥ 3,087,334¥ 549,071¥ 1,090,495¥ 379,854¥ 386,418¥ 108,000

Rental revenues

2,742,506

459,137

1,013,089

322,332

275,495

108,000

Other revenues

344,828

89,934

77,40657,522110,923−

Property-related expenses
Property management fees

758,438

207,552

175,945

128,684

72,4898,275

303,838

106,093

86,41337,266

29,687

4,239

Taxes

112,653

36,49917,785

15,905

19,546

2,725

Utilities

198,90238,528

11,851

7,126

19,006−

Repairs and maintenance

28,636

18,05014,58325,470256−

Insurance

6,418

3,313

2,770

1,525

465

111

Trust fees and other expenses

107,991

5,069

42,543

41,392

3,529

1,200

2,328,896

341,519914,550

251,170

313,92999,725

Depreciation expenses

603,001

181,014271,223

97,43869,6509,856Operating income from property leasing activities

1,725,895

160,505

643,327

153,732

244,279

89,869

NOI (Net Operating Income)Capital expenditures

727,217

34,231

14,18465,632289,794−

NCF (Net Cash Flow)

1,601,679

307,288

900,366

185,538

24,13599,725A breakdown of property-type as of April 30, 2007 was as follows:
Class of assets

Property type
Office Buildings

Area
Tokyo Metropolitan Area

Balance at the end of period(In millions of yen)¥

Other Regional Areas
Subtotal

Property and equipment

Residential Properties

Properties

106,28856.4

11,456

6.1

117,744

62.5

Tokyo Metropolitan Area

34,15818.2

Other Regional Areas

10,008

5.3

44,16623.5

12,918

6.8

Subtotal
Central Urban Retail

Percentage of
total assets

Tokyo Metropolitan Area
Other Regional Areas
Subtotal

3,689

2.0

16,607

8.8

Total

178,517

94.8

Bank deposits and other assets

9,884

5.2

Total assets

188,401

100.0

Total liabilities
Net assets¥

97,52351.8

90,87848.2

16. SUBSEQUENT EVENTSIssuance of New Investment UnitsOn April 26, 2007 and May 14, 2007, the Board of Directors of the Investment Corporation resolved to issue
new investment units as follows. The payments for new investment units through public offering were completed
on May 22, 2007. As a result of the issuance of additional investment units, the Investment Corporation had total
unitholders’ capital of ¥123,203,689,870 with 197,900 investment units outstanding as of May 22, 2007.
(1) Issuance of New Investment Units through Public Offering
Total number of newly issued units:
40,900units
Japanese Primary Offering:
26,710 units
International Offering:
14,190units
Offer price per unit:¥873,180
Total amount of offerings:¥35,713,062,000
Issue price per unit:¥842,886
Net proceeds:¥34,474,037,400
Payment date:
May 22, 2007
Delivery date of investment unit certificates:
May 23, 2007
Starting date of the computation for cash distribution: May 1, 2007
(2) Issuance of New Investment Units through Third-party Allotment
Total number of newly issued units:
up to 2,100 units
Offer price per unit:¥842,886
Net proceeds:¥1,770,060,600
Payment date:June 19, 2007
Delivery date of investment unit certificates:
June 20, 2007
Starting date of the computation for cash distribution:
May 1, 2007