18th

Fiscal Period

SEMIANNUAL REPORT

November 1, 2013–April 30, 2014

KENEDIX-REIT
Focusing on Mid-sized Office Buildings in the Tokyo Metropolitan Area
TSE 8972

Top Message

Accelerating Growth with a Greater Focus on
Mid-sized Office Buildings

The 18th Fiscal Period saw a major step forward as we
pursue our strategy of focusing on mid-sized officebuildings in the Tokyo Metropolitan Area.
We started the period by raising 19.1 billion yen incapital and, toward the period end, announced another public offering, which took place in May 2014 andresulted in a 10.3 billion yen capital increase.
Backed by a sound financial basis, our portfolio
grew to 92 properties, with a total acquisition priceof over 350 billion yen. It has also achieved a greater
focus on mid-sized office buildings in the Tokyo
Metropolitan Area, further solidifying our position as
the No. 1 J-REIT for mid-sized office buildings.
Naokatsu Uchida
Executive Director
Kenedix Office Investment Corporation

| 1

Kenedix Office Investment Corporation Semiannual Report

Operating Revenues

Operating Income

10,89514th Period

10,895

10,212

9,867

9,819

15th Period

16th Period

17th Period

9,090

4,283

million yen

4,516

4,401

4,240

4,283

15th Period

16th Period

17th Period

18th Period

4,086

18th Period

14th Period

million yen(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)

Net Income

Distribution per Unit

2,885
3,009

3,002

15th Period

16th Period

9,638

million yen

2,831

2,885

17th Period

18th Period

yen

9,364

9,557

9,434

9,302

9,638

14th Period

15th Period

16th Period

17th Period

18th Period

2,540

14th Period(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)

Total Assets

Net Assets Ratio / Unitholders’ Equity

355,167

355,167
303,284

14th Period

306,734

15th Period

308,172

16th Period

47.9

million yen

%

49.5%

49.0%

48.9%

47.6%

47.9%

150,063

150,389

150,653

150,781

170,109

million yen

million yen

million yen

million yen

million yen

14th Period

15th Period

16th Period

17th Period

18th Period

316,753

17th Period

18th Period(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)

Interest-Bearing Debt Ratio (LTV Ratio) / Interest-Bearing Debt

Occupancy Rate

47.2

96.0

%

45.3%

45.8%

46.2%

47.5%

47.2%

137,372

140,581

142,369

150,558

167,746

million yen

million yen

million yen

million yen

million yen

14th Period

15th Period

16th Period

17th Period

18th Period(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)

%

95.4%

95.5%

93.9%

95.8%

96.0%

14th Period

15th Period

16th Period

17th Period

18th Period(Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014)

2 |Kenedix Office Investment Corporation Semiannual Report

The following article is based on the interview conducted in May 2014.

Q.1
A.

Could you please begin with an overview of the 18th Fiscal
Period (ended April 2014)?

Kenedix Office Investment Corporation (KDO) continued to aggressively
pursue external growth even as the real estate market began heating up
and the market tightened for acquiring properties. KDO started the fiscal
period by raising 19.1 billion yen in capital through a public offering and acquiring five
office buildings* at a total acquisition price of 15.9 billion yen. Using loans and cashon hand, we then acquired the Aplus Tokyo Building, a mid-sized office building withexcellent accessibility, located just five minutes on foot from
Iidabashi station; the KDX Musashi-Kosugi Building, a highspec office building located in the rapidly developing areasurrounding Musashi-Kosugi Station; and land with leaseholdof the Shinjuku 6-chome Building, a mid-sized office building
located in Tokyo’s Shinjuku Ward, for a total acquisition cost of
19.2 billion yen. Furthermore, with a 1.1 billion yen investment, KDO acquired a 27% equity interest in a silent partnership that co-owns 59% of the Shinjuku Sanei Building inWest Shinjuku.
While acquiring additional mid-sized office buildings, we also
worked to reshuffle the property portfolio to maintain andimprove its quality. During the fiscal period under review we soldthe KDX Niigata Building, an office building in other regional
area; the Kabutocho Nikko Building II, a relatively small office building in the portfolio;
and Court Mejiro, a residential property.
In the ten years we have been operating the Investment Corporation, we havebuilt a strong track record in acquiring mid-sized office buildings and built a rich store
of expertise in managing these properties. We have nurtured our capabilities to gather
information using the support line from our sponsor, the Kenedix Group, and theAsset Management Company’s original network, as well as our problem solving andnegotiation capabilities based on the information gathered. I believe that these abilities are the foundation of our competitiveness, and enabled KDO to continue making
property acquisitions during the fiscal period despite the difficult environment.
In terms of internal growth, the occupancy rate of our office buildings at the endof the 18th Fiscal Period stood at 95.9%, an improvement of 0.3 percentage points
from the end of the previous fiscal period. The rate is improving even if we exclude
leases in rent-free periods, looking just at KDO’s office buildings that are yielding leasing revenue. In terms of revising rents, the proportion of properties where rent is falling is decreasing, and there are also signs of bottoming out in rental income fromexisting properties, including cases in which negotiations with tenants led to partial
rent increases.
Tenants of mid-sized office buildings tend to change location more frequently thantenants in large-scale office buildings. This provides more opportunities to revise leasing rates, making it easier to track changes in market rates.
KDO also conducts ongoing investment to renovate and upgrade its properties inways that maintain and improve their competitiveness. Furthermore, we work toenhance customer satisfaction by responding to tenant needs property by property

Kenedix Office Investment Corporation Semiannual Reportbased on the results of regular customer satisfaction surveys. I believe that these initiatives will help KDO achieve internal growth.
On the financial front, our focus remained on stable financial management, which
we achieved by diversifying debt maturities and reducing interest costs amid sustained
favorable funding conditions. We still hold some high-interest debt, and will continue
to reduce financing costs by seeking better terms at the time of refinancing.
Furthermore, the risk remains that interest rates may rise in the future. We willthus continue our policy of maintaining a high proportion of fixed-rate debt and diversifying maturity dates.
* Includes additional portion in the KDX Shinbashi Building. For details, please see the 17th Fiscal Period Semiannual Report.

Q.2
A.

What was the intention behind the capital increase at the
beginning of the 19th Fiscal Period?

Q.3

Please tell us about the distribution during the 18th Fiscal
Period (ended April 2014) and plans for the 19th Fiscal Period,
ending October 2014.

The public offering in May raised 10.3 billion yen in capital. We used thesefunds, together with new loans and cash on hand, to acquire three officebuildings at a total acquisition price of about 14.6
billion yen. These were the KDX Toyosu Grand Square
Building (25% co-ownership interest), a high-spec, large-scalebuilding located in the Toyosu area, which is growing commercially and in population; the Grace Building
Takadanobaba, a mid-sized building located near
Takadanobaba Station, with excellent access to major urban
hub stations; and the Fumix STM Building, a high-spec building located next to Utsunomiya Station.
The public offering and the property acquisitions enabledby the capital increase served three purposes. First, they
helped to increase our portfolio’s profitability and support
unitholders’ value. Second, the larger portfolio size ensures
greater stability in terms of revenue generation and enhances
economies of scale. And third, by lowering the LTV ratio, we
strengthened our financial foundation and enhanced our borrowing capacity for otherproperty acquisitions.
As a result of these three acquisitions, the portfolio of the Investment Corporation
as of the end of May 2014 comprises 92 properties, with a total acquisition price ofover 350 billion yen, further solidifying our position as the No. 1 J-REIT for mid-sized
office buildings.

A.

Distribution per unit for the fiscal period under review was 9,638 yen, up
336 yen from the previous fiscal period. Positive factors behind this increase
included the full period contribution of properties acquired in the 17th
Fiscal Period, income from properties acquired during the 18th Fiscal Period and progress in the leasing of existing properties. On the other hand, a net loss on the sales ofthree properties led to a reversal of reserve for reduction entry of 319 million yen.

| 3

4 |

Kenedix Office Investment Corporation Semiannual Report

The distribution per unit for the 19th Fiscal Period is expected to be 9,810 yen,reflecting the full period contributions of properties acquired during the fiscal period
under review and income from the three properties acquired by means of the capitalincrease through public offering. We are enhancing our business with an eye toincreasing the distribution beyond the 10,000 yen threshold in the near future.

Q.4
A.

Please tell us more about the outlook for both the J-REIT
market and Kenedix Office Investment Corporation.

Buoyed by a favorable funding environment, the J-REIT market is expanding steadily. Both initial public offerings and additional public offerings byexisting REITs are continuing. There is a sense that more individual investors
are entering the J-REIT market indirectly via funds, such as index funds and ETFs, thatinvest in J-REITs. The commencement of the Nippon Individual Savings Account (NISA)
program, a tax-break scheme for small investments launched inJapan, also provides a good opportunity for J-REITs. With theirappealing rates of return, J-REITs look set to attract the attention of individual investors. Furthermore, the news that theGovernment Pension Investment Fund (GPIF) began investing in
J-REITs is also expected to encourage more investors into J-REITs
and to further the development of the market.
In the office building market, we are seeing increasing polarization of buildings in each size category into those that arecompetitive and those that are not.
Rental income from existing properties is bottoming out,
and we are now beginning to shift into a stage fueled by internal growth. Mid-sized office buildings are often thought to be
slow to recover, but this is not necessarily the case. Indeed, weare seeing that competitive mid-sized buildings can recover faster than lackluster
large-scale office buildings, such as those that are aging and losing competitiveness.
We will continue our aggressive efforts to solidify KDO’s position as the No. 1 midsized office building owner, maximizing unitholders’ value and fulfilling our social mission as a J-REIT.

Naokatsu UchidaDirector and COO, General Manager of Office REIT Division,
Kenedix Real Estate Fund Management, Inc.

Kenedix Office Investment Corporation Semiannual Report| 5Management Team

 Naokatsu UchidaDirector and COO, General Manager of Office REIT Division

 Fumihiko Shimodomae
General Manager of Property Management Dept., Office REIT Division• Worked for Mitsubishi UFJ Trust and Banking Corporation for approximately 17 years (Real
Estate Division, Real Estate Project Origination Division)• After working for Joint Asset Management Co., Ltd. as its Representative Director, joined
Kenedix Office Partners, Inc. and was a member of the Financial Planning Division for
approximately two years• Appointed Representative Director of Kenedix Office Partners, Inc. on February 2, 2012
• Appointed Director and COO, General Manager of Office REIT Division on October 1, 2013

• Worked for Mitsui Fudosan Building Management for 12 years• Joined Kenedix Office Partners, Inc. in January 2011 after having worked as a director for theasset management companies of Pacific Management and Nippon Commercial Investment
Corporation• Appointed General Manager of Property Management Division on July 1, 2012 after working as PM Manager of Property Management Division• Appointed General Manager of Property Management Department, Office REIT Division on
October 1, 2013

 Keisuke Sato

 Hikaru Teramoto

General Manager of Investment Management Dept., Office REIT Division• Worked for Tokyu Land Corporation for approximately nine years (Urban Business Division)• Joined Kenedix, Inc. after having worked for JPMorgan Securities Japan Co. Ltd., Prudential
Real Estate Investors (Japan) K.K.
• Property appraiser• Appointed General Manager of Investment Management Division, Kenedix Office Partners,
Inc. on August 1, 2012
• Appointed General Manager of Investment Management Department, Office REIT Division
on October 1, 2013

 Tetsushi Ichikawa
General Manager of Finance & Accounting Dept.
• Worked for Sumitomo Mitsui Trust Bank for 15 years (Engaged in real estate finance, etc.)• Joined Kenedix after having engaged in investment banking and having served as director
responsible for asset management business at Touchstone Capital Securities• Appointed General Manager of Finance & Accounting Dept. on October 1, 2013 after serving as General Manager of Finance Group for Kenedix Residential Partners

General Manager of Planning Dept., Office REIT Division• After working for Sakura Bank for six years, worked at Sakura Securities, Daiwa Securities
SMBC, and Goldman Sachs in investment banking business for ten years• Joined Kenedix Office Partners, Inc. after having worked for Goldman Sachs Realty Japan• Appointed General Manager of Financial Planning Division, Kenedix Office Partners, Inc. on
August 1, 2012
• Appointed General Manager of Planning Department, Office REIT Division on October 1,
2013

6 |

Kenedix Office Investment Corporation Semiannual Report

External Growth01
Accelerating Growth with a Greater Focus on
Mid-sized Office Buildings,
Backed by Advantageous Financing
Portfolio expanded to 92 properties
with a total acquisition price over 350 billion yen
The fiscal period under review started with a capital increase of
19.1 billion yen through public offering and acquisition of five
office buildings* at a total acquisition price of 15.9 billion yen.
* Includes additional portion in the KDX Shinbashi Building. For details, please see the 17th Fiscal
Period Semiannual Report.

 Distribution by Property Type
Residential 2.0%
Central urban
retail properties
6.3%

Office Bldg. (other)
4.0%

With its reinforced financial foundation, Kenedix Office
Other 0.8%

Investment Corporation (KDO or the “Investment Corporation”)
then moved on to acquire three properties: the Aplus Tokyo Building,the KDX Musashi-Kosugi Building and land with leasehold of the

Office Bldg.
(mid-sized)
86.7%

Office Bldg.

90.8%

Shinjuku 6-chome Building at a total acquisition price of 19.2 billion
yen. Furthermore, 1.1 billion yen was invested to acquire a 27%
equity interest in a silent partnership of the Shinjuku Sanei Building.

Note: Based on acquisition price. The percentage breakdown by property
type based on the acquisition price after the 6th public offering (As of
May 30, 2014) (Figures are rounded down to the first decimal place).

As the portfolio expanded in size, the ratio of mid-sized officebuildings in the Tokyo Metropolitan Area has also increased. In tandem with property acquisitions, we worked to improve the portfolio quality through reshuffling. During the fiscal period underreview, the Investment Corporation sold the KDX Niigata Building,an office building outside the Tokyo Metropolitan Area; the Distribution of Office Buildings by Region

Kabutocho Nikko Building II, a relatively small office building; andOther regional areas
16.7%

Court Mejiro, a residential property.

Other Tokyo
Metropolitan Area
28.7%

Central
Tokyo
54.5%

Tokyo
Metropolitan
Area

83.2%

As of April 30, 2014, KDO’s portfolio comprised 89 properties
with a total acquisition price of 336.1 billion yen.
The portfolio will continue to grow in the 19th Fiscal Period(ending October 2014). At the start of the period, the Investment
Corporation raised 10.3 billion yen through another public offer-

Notes:
1. Based on acquisition price after the 6th public offering (As of May 30,2014) (Figures are rounded down to the first decimal place).
2. Central Tokyo represents Chiyoda, Chuo, Minato, Shibuya andShinjuku wards.

ing, which was used to fund the acquisition of three properties, the
KDX Toyosu Grand Square (25% co-ownership interest), the Grace
Building Takadanobaba and the Fumix STM Building, at a totalacquisition price of 14.6 billion yen.
With its portfolio standing at 92 properties and 350.8 billion yen
as of May 30, 2014, KDO is accelerating growth backed by a favorable financing environment.

Note: Figures are rounded down to the nearest ¥100 million.

Kenedix Office Investment Corporation Semiannual Report| 7 Number of Properties by Property Type

Proportion of office buildings
86.4% (April 30, 2008)

After the 6th public offering

End of 18th Period (2014/4)(As of May 30, 2014)

Office83

Central urban retail

3

86
3

Residential

2

2

Other

1

1

Total

89

92

90.8% (May 30, 2014)

 Portfolio Growth (Based on acquisition price) Office buildings  Central urban retail properties

 Residential properties

Number of properties(Billion yen)

(Number of properties)

400
77

320

89

85

84

100
80

70
304.8

240
160

92

336.1

350.8
60
40

31

20

80

0

0
1st Period(2005/10)

5th Period(2007/10)

10th Period(2010/4)

15th Period(2012/10)

17th Period 18th Period(2013/10) (2014/4)

After the 6th
public offering(As of May 30,2014)

 Change in Asset Size
(Billion yen)

Acquisition:
5 properties

Sale:
2 properties

Acquisition:
4 properties

Acquisition: 4 properties
Sale: 1 property(+9.1)

Acquisition:
9 properties

Acquisition: 3 properties Acquisition: 1 property Acquisition: 3 properties
Sale: 2 properties
Sale: 2 properties
Sale: 1 property(+6.3)(-0.5)(+12.3)Acquisition:
8 properties
Sale: 3 Properties(+32.4)35.1

31.3
31,30015.6

13.1

14,200

14.2-2.4
11th Period(2010/10)

13th Period(2011/10)

14th Period(2012/4)

15th Period(2012/10)

2,000

-2.5

-1.6

16th Period(2013/4)

17th Period(2013/10)

-4.5

-5.1
12th Period(2011/4)

14.6

13.9

10.8
2.0

10th Period(2010/4)

Acquisition:
3 properties-3.8
18th Period(2014/4)

After the 6th public offering(As of May 30, 2014)

Note: Change in asset size is calculated based on acquisition price and is truncated to the nearest 100 million yen.

 Track Record of Property Acquisitions and Dispositions (Note 1)
14th Period (2012/4)

15th Period (2012/10)

16th Period (2013/4)

17th Period (2013/10)

18th Period (2014/4)

After the 6th public offering
Acquisition: 3 properties
Total acquisition price:¥14.6 billion (Note 2)

Acquisition: 9 properties
Total acquisition price:¥31.3 billion

Acquisition: 3 properties
Total acquisition price:¥10.8 billion

Acquisition: 1 property
Total acquisition price:¥2.0 billion

Acquisition: 3 properties
Total acquisition price:¥13.9 billion

Acquisition: 8 properties
Total acquisition price:¥35.1 billion

No saleSale: 2 properties
Total sale price: ¥5.0 billion

Sale: 2 properties
Total sale price: ¥3.1 billion

Sale: 1 property
Sale price: ¥1.9 billion

Sale: 3 properties
Sale price: ¥3.8 billion(Gain on sale: ¥0.4 billion)(Gain on sale: ¥0.4 billion)(Gain on sale: ¥0.2 billion)(Loss on sale: ¥0.2 billion)

Change in asset size+¥6.3 billion

Change in asset size-¥0.5 billion

Change in asset size+¥12.3 billion

Change in asset size+¥31.3 billion

Notes: 1. Figures are truncated to the nearest 100 million yen.

2. As of May 30, 2014

Change in asset size+¥46.0 billion

3. Change in asset size is calculated based on acquisition price.

8 |Kenedix Office Investment Corporation Semiannual Report

Internal Growth02
Improving Profitability through Enhanced
Property Management and Customer Satisfaction
The fiscal period under review saw continued improvements in the occupancy rates and the leasing conditions.

Office building occupancy rate
at 95.9% at the end of the

The occupancy rate of our office buildings at the end of the 18th Fiscal
Period stood at 95.9%, up 0.3 percentage points from the end of the previous fiscal period.
Looking at the tenant turnover trend of office buildings, “move-ins” out-

18th Fiscal Period

paced “move-outs” for two consecutive periods both in terms of cases andnet leased area*. Tenants are increasingly moving in/out for floor expansion* The number of tenants and leasable floor area are calculated based on floors. For example, an end-tenant
vacating a floor and leasing another floor at any of ourproperties is counted as one each for incoming andoutgoing.

purposes, reflecting improving business sentiment among SMEs.
Moreover, the status of rent revision, tenants with reduced rental rates are
decreasing in proportion. Also, the total amount of rent increase exceededthat of rent reduction (see the bar graph below).
Furthermore, with expiring of rent-free periods, we saw a 0.6% improvement in rental revenue of 71 office properties owned as of the beginning of
the 15th Fiscal Period (ended October 2012), excluding properties sold,compared to the 17th Fiscal Period.

 Change in Rent Level at Time ofRent Revision**(Thousand yen)

Increase in rent0** The figures are the monthly rent level difference before
and after the rent revision and are calculated separately
for each tenant, rounded to the nearest ¥1,000.

866

96.6

96.2

90

91.4

-15,733-19,368
14th Period(2012/4)

15th Period(2012/10)

16th Period(2013/4)

17th Period(2013/10)

18th Period(2014/4)

Other regional areas
Move-out of a major tenant in
KDX Nihonbashi Kabutocho Bldg.
(Occupancy rate: 0%)

95

95.1

-7,441-8,916-10,000

 Occupancy Rate Performance of
Office Buildings (By region)

100

898

-5,000-20,000

Tokyo Metropolitan Area
Total office building

1,867

1,597

907

-555

-15,000(%)

Decrease in rent

5,000

95.2

94.5
93.5

92.6

93.2

96.2
95.9
95.8

96.2
95.6
94.0

19th Period (forecast)
95.3%

Improvement in occupancy
rate of KDX Nihonbashi
Kabutocho Bldg.
(Occupancy rate: 99.8%)

85

Office properties
Average month-end
occupancy rate

Average occupancy rate for all office buildings
80

15th Period
94.3%

16th Period
93.1%

17th Period
94.1%

18th Period
95.2%

75
14th Period(2012/4)

15th Period(2012/10)

16th Period(2013/4)

17th Period(2013/10)

18th Period(2014/4)

Note: Occupancy rate is calculated by dividing leased area by leasable area and is rounded to the first decimal place. Average month-end occupancy rate of office properties is a
simple average of monthly-end occupancy rates for each period. The forecast occupancy rate for the 19th Fiscal Period (2014/10) is calculated based on the AssetManagement Company’s earnings forecast for the 19th Fiscal Period.

| 9

Kenedix Office Investment Corporation Semiannual Report

In tandem with ongoing investment to renovate and upgrade theexisting properties, we conduct regular customer satisfaction surveys,
 Motivation for Continuous Occupancy

which are extremely helpful in understanding exactly what tenants
need at each property. Based on the results of these surveys, we are

Unknown 1.9%
Do not want to stay
0.1%

conducting renovations to upgrade or replace such important fea-

Rather not to stay
4.0%

rity systems, while improving property management-related services.

Want to stay
32.2%

tures as toilets, air-conditioning, elevators, lighting systems and secuThese kinds of improvement are also one of the key factors to

Definitely
want to stay
61.8%

finding new tenants at favorable leasing terms. A case in point is the
KDX Shinbashi Building, where the occupancy rate was 29.4% when
we acquired the entire property. With renovated entrance and com-

94.0% of tenants showshigh motivation forcontinuous occupancy

mon areas on each floor and an updated security system, the building’s occupancy rate rose to 86.8% at the end of the 18th Fiscal
Period. Moreover, the contracted unit rent increased 18.9% compared to August 1, 2012.
Over many years we have been operating the Investment Corporation, we have built a rich store of expertise in managing mid-sized
office buildings. Leveraging this knowhow, we stand poised to further
improve the profitability of our portfolio and increase unitholders’ value.

 Effects of Value-upgrading Measures for KDX Shinbashi Bldg.
Additional
acquisition

Renewalworks

Increase in occupancy rate

Acquired additional portion of KDX Shinbashi
Building (6-8 floors) at the acquisition price of
1,038 million yen on December 2, 2013,providing KDO with the ownership of the entire
building

s !T TIME OF ACQUISITION WHOLE PROPERTY  

s %ND OF TH &ISCAL 0ERIOD 

Renovated entrance and common area on each floor and updated
security system, etc. (Total cost: 92 million yen)

Before

Increase in contracted rent per unit (Note)

+18.9

After



130

쎲 Elevator hall(standard floor)

86.8

120
118.9
110

113.5

118.9

108.1

100

쎲 Restroom oneach floor

118.9

113.5

100
90

Aug. 1, Dec. 1, Dec. 26, Jan. 6, &EB  Apr. 1, Apr. 30,
2012
2013
2013
  

Improvement of unrealized gain

Leasing
activities+305

Invited tenants at high rent per unit leveraging the property's locational
advantages: close proximity with major business areas including
Toranomon/Kasumigaseki and access to a multiple subway lines
Looked for tenants with floor expansion needs(mn yen)mn yen2013/10/31

2014/4/30

DifferenceBook value

2,676

3,811

+1,135

Appraisal value

2,380

3,820

+1,440

Unrealized gain

-296

+9

+305

Note : The chart shows the actual rent (including common area charge) of the tenants whose lease began in the relevant period, with the actual rent (including common area
charge) of the tenant whose lease began on August 2012 given a value of 100.

10 |Kenedix Office Investment Corporation Semiannual Report

Financial Strategy

03
Proactive Capital Increases to Support Property
Acquisitions and Stable Financial Management
Capital increases of 19.1 billion yen in the 18th Fiscal Period
and 10.3 billion yen in the 19th Fiscal Period
At the start of the fiscal period under review, we raised 19.1 billion yen throughthe issuance of new investment units. This was followed by another capitalincrease of 10.3 billion yen through public offering at the start of the 19th Fiscal
 Fixed Interest Rate (2014/4)
Floating
interest rate
¥15.7 billion
9.4%

Period. Thanks to these moves, the interest bearing debt ratio (LTV ratio) stands at
46.2% as of June 30, 2014, compared to 47.2% at the end of the 18th Fiscal
Period, in spite of high-paced property acquisitions.
Maintaining a conservation LTV ratio helps us swiftly procure funds when theopportunity arises to acquire new properties. We are thus continuing our policy of
keeping our LTV ratio at the level below 50%.

Fixed interest rate¥152.1 billion
90.6%
Note: Fixed rate includes borrowings that are fixed
through interest rate swap but excludes thosethat are hedged by interest rate cap (numbers
are rounded to the first decimal place).

Meanwhile, we are continuing our efforts to reduce debt costs through refinancing. During the fiscal period under review, we managed to reduce the averageinterest rate of our interest-bearing debt from 1.77% at the end of the previous
fiscal period to 1.65%. We also managed to extend the average remaining term tomaturity from 2.3 years to 3.1 years. These achievements, combined with oureffort to diversify debt maturities, help us maintain a stable financial base.
Thus shielding ourselves from the risk of rising interest rates, we are building up
a competitive advantage in a market where prompt access to funds is the key tomaintaining competitiveness.

 Changes in the LTV Ratio

(%)

55.0
47.5

47.0

45.6

50.0

47.2

45.3
45.8 46.2

46.2

45.0
43.0

41.2 41.4 41.1 40.9 40.9

40.0
37.5

38.7

35.0

40.3

After the 6th public offering

13th Period(2011/10)

18th Period(2014/4)(As of June 30, 2014)

38.9
35.3

30.0
1st Period(2005/10)

5th Period(2007/10)

9th Period(2009/10)

Note: LTV = Interest-bearing debt / Total assets

 Diversification of Debt Maturities
as of the End of the 18th Period(2014/4)(Billion yen)

 Corporate bonds20

 Borrowings

15

30
25

1.50

10

1.80
3.00

5
0

26.61 15.64 14.50 18.30 12.50 5.20 11.00 8.25
19th Period(2014/10)

21st Period(2015/10)

23rd Period(2016/10)

25th Period(2017/10)

8.50

6.55

27th Period(2018/10)

2.70

8.50

29th Period(2019/10)

4.40

8.00

31st Period(2020/10)

4.00

3.00

33rd Period(2021/10)

3.80
36th Period(2023/4)

Note: The chart illustrates total debt amounts that reach maturity in each period, including repayment of a part ofprinciple based on the contracts (rounded to the first decimal place).

Kenedix Office Investment Corporation Semiannual Report| 11

Corporate Governance
Investment and Management Decision-making System
of Kenedix Real Estate Fund Management

Kenedix Real Estate Fund Management may also propose
property management plans in accordance with the AssetManagement Guidelines, identify properties for possible invest-

As the asset management company of KDO, Kenedix Real Estate

ment and decide whether to support particular acquisitions.
The structure of the decision-making process outlined below

Fund Management creates guidelines governing KDO’s asset
management. These Asset Management Guidelines define KDO’s

illustrates the creation and revision of individual Assetfundamental philosophy including its investment policy, rules con-Management Guidelines, as well as property management plans

cerning transactions with related parties, distribution policy andfor the acquisition and sale of properties.

its disclosure policy.

Decision-making Process
Proposal

Each Department(each REIT Div.)

Preview

Deliberation and
Resolution

Compliance Officer(common)Compliance
Committee(common)Deliberation and
Resolution

ReportAsset Management
Committee(each REIT Div.)

Board of Directors(common)

1. Decision-making Process on Asset Management
Investment Policy Acquisition and Sale of Properties

The Investment Management Department of Office REIT Division

The Investment Management Department of Office REIT Division

proposes any revision of the Asset Management Guidelines toselects properties for possible acquisition according to an agreed

the Compliance Officer. After review by the Officer, the revisions

upon process. The Investment Management Department firstare advanced to the Compliance Committee where they areproposes property acquisitions to the Compliance Officer. Whendeliberated and resolved. Lastly, the Office REIT Division Assetthe Officer concludes there are no conflicts or other issues, theManagement Committee deliberates and reaches resolution on

Officer then forwards the proposal to the Office REIT Division

the revisions.

Asset Management Committee for review and ultimate resolution.

The Asset Management Guidelines may be revised to reflect

In the event that the Compliance Officer identifies such issues

changes in investment conditions and KDO’s investment policy, as

as related-party transactions, potential regulatory conflicts orwell as other reasons such as changes in the legal or regulatory

other cases the Officer deems require closer scrutiny, the proposal

environment. Whenever the Management Guidelines are changed,

must be submitted for review and resolution by the Compliance

the General Manager of Office REIT Division is responsible forCommittee before proceeding to the Office REIT Division Assetreporting each revision to the Board of Directors.

Management Committee for final review and resolution. The
Compliance Committee is free to solicit opinions from outside

2. Decision-making Process on Asset Management

experts and forward these to the said Asset Management

 Property Management Plans

Committee for reference in reaching a resolution.

Relevant departments of Office REIT Division may propose property

The Investment Management Department of Office REIT Division

management plans to the Compliance Officer. After review by thealso proposes property sales or disposals to the Compliance Officer.

Officer, the plans are deliberated and resolved in the Compliance

In a similar manner, the Officer reviews it and, when necessary, for-Committee. Following that, the Office REIT Division Asset Manage-

wards the proposal to the Compliance Committee, which can thenment Committee deliberates and reaches resolution on these plans.

advance the matter to the Office REIT Division Asset Management

Each time a new property management plan is approved orCommittee. In the absence of conflicts or other issues, therevised, the General Manager of Office REIT Division is charged

Compliance Officer may send the proposal directly to the said

with reporting this to the Board of Directors.

Asset Management Committee for ultimate review and resolution.

12 |Kenedix Office Investment Corporation Semiannual Report

KENEDIX-REIT Portfolio (As of April 30, 2014)
The properties acquired during the 18th Fiscal Period are marked with red boxes.
No.

Property Name

Location

Acquisition
Price (mn yen)
<Note 1>

OfficeYear Built<Note 2>

Occupancy
Rate<Note 3>A1

KDX Nihonbashi 313 Building

Chuo-ku, Tokyo

5,940

Apr. 1974

100.0%

A3

Higashi-Kayabacho Yuraku Building

Chuo-ku, Tokyo

4,450

Jan. 1987

100.0%A4

KDX Hatchobori Building

Chuo-ku, Tokyo

3,680

Jun. 1993

100.0%A5

KDX Nakano-Sakaue Building

Nakano-ku, Tokyo

2,533

Aug. 1992

100.0%

A6

Harajuku F.F. Building

Shibuya-ku, Tokyo

2,450

Nov. 1985

100.0%A7

FIK Minami Aoyama

Minato-ku, Tokyo

2,270

Nov. 1988

100.0%

A8

Kanda Kihara Building

Chiyoda-ku, Tokyo

1,950

May 1993

88.0%

A13

KDX Kojimachi Building

Chiyoda-ku, Tokyo

5,950

May 1994

100.0%A14

KDX Funabashi Building

Funabashi, Chiba

2,252

Apr. 1989

100.0%A15

KDX Hamacho Building

Chuo-ku, Tokyo

2,300

Sep. 1993

100.0%

A16

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

94.4%

A17

KDX Ebisu Building

Shibuya-ku, Tokyo

4,640

Jan. 1992

100.0%A19

KDX Hamamatsucho Building

Minato-ku, Tokyo

3,460

Sep. 1999

100.0%A20

KDX Kayabacho Building

Chuo-ku, Tokyo

2,780

Oct. 1987

84.9%

A21

KDX Shinbashi Building (Note 4)

Minato-ku, Tokyo

3,728

Feb. 1992

86.8%

A22

KDX Shin-Yokohama Building

Yokohama, Kanagawa

2,520

Sep. 1990

94.1%

A26

KDX Kiba Building

Koto-ku, Tokyo

1,580

Oct. 1992

88.1%

A27

KDX Kajicho Building

Chiyoda-ku, Tokyo

2,350

Mar. 1990

100.0%A28

KDX Nogizaka Building

Minato-ku, Tokyo

1,065

May 1991

100.0%A29

KDX Higashi-Shinjuku Building

Shinjuku-ku, Tokyo

2,950

Jan. 1990

100.0%A30

KDX Nishi-Gotanda Building

Shinagawa-ku, Tokyo

4,200

Nov. 1992

100.0%A31

KDX Monzen-Nakacho Building

Koto-ku, Tokyo

1,400

Sep. 1986

100.0%A32

KDX Shiba-Daimon Building

Minato-ku, Tokyo

6,090

Jul. 1986

100.0%A33

KDX Okachimachi Building

Taito-ku, Tokyo

2,000

Jun. 1988

100.0%A34

KDX Hon-Atsugi Building

Atsugi, Kanagawa

1,305

May 1995

100.0%A35

KDX Hachioji Building

Hachioji, Tokyo

1,155

Dec. 1985

100.0%KDX Ochanomizu Building

Chiyoda-ku, Tokyo

6,400

Aug. 1982

100.0%A38

KDX Nishi-Shinjuku Building

Shinjuku-ku, Tokyo

1,500

Oct. 1992

100.0%A39

KDX Toranomon Building

Minato-ku, Tokyo

4,400

Apr. 1988

100.0%

A40

Toranomon Toyo Building

Minato-ku, Tokyo

9,850

Aug. 1962

96.9%

A41

KDX Shinjuku 286 Building

Shinjuku-ku, Tokyo

2,300

Aug. 1989

100.0%A45

KDX Roppongi 228 Building

Minato-ku, Tokyo

3,300

Apr. 1989

73.8%

A46

Hiei Kudan-Kita Building

Chiyoda-ku, Tokyo

7,600

Mar. 1988

100.0%A47

KDX Shin-Yokohama 381 Building

Yokohama, Kanagawa

5,800

Mar. 1988

100.0%A48

KDX Kawasaki-Ekimae Hon-cho Building

Kawasaki, Kanagawa

3,760

Feb. 1985

100.0%

A49

Nissou Dai-17 Building

Yokohama, Kanagawa

2,710

Jul. 1991

100.0%A50

KDX Ikejiri-Oohashi Building

Meguro-ku, Tokyo

2,400

Sep. 1988

91.3%

A51

KDX Hamacho Nakanohashi Building

Chuo-ku, Tokyo

2,310

Sep. 1988

100.0%A52

KDX Kanda Misaki-cho Building

Chiyoda-ku, Tokyo

1,380

Oct. 1992

60.8%

A55

Shin-toshin Maruzen Building

Shinjuku-ku, Tokyo

2,110

Jul. 1990

100.0%A56

KDX Jimbocho Building

Chiyoda-ku, Tokyo

2,760

May 1994

100.0%A57

KDX Gobancho Building

Chiyoda-ku, Tokyo

1,951

Aug. 2000

100.0%A59

KDX Iwamoto-cho Building

Chiyoda-ku, Tokyo

1,864

Mar. 2008

100.0%A60

KDX Harumi Building

Chuo-ku, Tokyo

10,250Feb. 2008

72.2%

A61

KDX Hamamatsucho Dai-2 Building

Minato-ku, Tokyo

2,200

Apr. 1992

100.0%

A62

Koishikawa TG Building

Bunkyo-ku, Tokyo

3,080

Nov. 1989

100.0%

A63

Gotanda TG Building

Shinagawa-ku, Tokyo

2,620

Apr. 1988

100.0%A64

KDX Nihonbashi 216 Building

Chuo-ku, Tokyo

2,010

Oct. 2006

100.0%A66

KDX Shinjuku Building

Shinjuku-ku, Tokyo

6,800

May 1993

88.4%

A67

KDX Ginza 1chome Building

Chuo-ku, Tokyo

4,300

Nov. 1991

100.0%A68

KDX Nihonbashi Honcho Building

Chuo-ku, Tokyo

4,000

Jan. 1984

100.0%A71

KDX Iidabashi Building

Shinjuku-ku, Tokyo

4,670

Mar. 1990

100.0%(Tokyo Metropolitan
A37
Area)

Kenedix Office Investment Corporation Semiannual Report

No.

Property Name

Location

Acquisition
Price (mn yen)
<Note 1>

Year Built<Note 2>

| 13

Occupancy
Rate<Note 3>A72

KDX Higashi-Shinagawa Building

Shinagawa-ku, Tokyo

4,590

Jan. 1993

A73

KDX Hakozaki Building

Chuo-ku, Tokyo

2,710

Nov. 1993

78.6%

A74

KDX Shin-Nihonbashi Building

Chuo-ku, Tokyo

2,300

Nov. 2002

100.0%A75

KDX Nihonbashi Kabutocho Building

Chuo-ku, Tokyo

11,270Nov. 1998

100.0%A78

KDX Tachikawa Ekimae Building

Tachikawa, Tokyo

1,267

Feb. 1990

100.0%A83

KDX Fuchu Building

Fuchu, Tokyo

6,120

Mar. 1996

97.6%

A84

KDX Kasuga Building

Bunkyo-ku, Tokyo

2,800

Jun. 1992

100.0%A85

KDX Nakameguro Building

Meguro-ku, Tokyo

1,880

Oct. 1985

100.0%A86

KDX Omiya Building

Saitama, Saitama

2,020

Apr. 1993

100.0%

A87

Itopia Nihonbashi SA Building

Chuo-ku, Tokyo

2,200

Jul. 1995

81.1%

A88

Welship Higashi Shinjuku

Shinjuku-ku, Tokyo

1,900

Mar. 1990

100.0%A89

KDX Takanawadai Building

Minato-ku, Tokyo

5,250

Oct. 1985

95.7%

A90

KDX Ikebukuro Building

Toshima-ku, Tokyo

3,900

Mar. 2009100.0%A91

KDX Mita Building

Minato-ku, Tokyo

3,180

Mar. 1993

88.4%

A92

KDX Akihabara Building

Chiyoda-ku, Tokyo

2,600

Dec. 1973

100.0%

A93

Aplus Tokyo Building

Shinjuku-ku, Tokyo

4,350

Jan. 1994

100.0%A94

KDX Musashi-Kosugi Building

Kawasaki, Kanagawa

12,000

May 2013

95.9%

A12

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

96.5%

A24

KDX Minami Semba Dai-1 Building

Osaka, Osaka

1,610

Mar. 1993

91.2%

A25

KDX Minami Semba Dai-2 Building

Osaka, Osaka

1,560

Sep. 1993

70.6%

A42

Karasuma Building

Kyoto, Kyoto

5,400

Oct. 1982

100.0%A44

KDX Sendai Building

Sendai, Miyagi

2,100

Feb. 1984

91.9%

A53

KDX Hakata-Minami Building

Fukuoka, Fukuoka

4,900

Jun. 1973

95.8%

OfficeA54

KDX Kitahama Building

Osaka, Osaka

2,220

Jul. 1994

92.8%(Other Regional
Areas)A58

KDX Nagoya Sakae Building

Nagoya, Aichi

7,550

Apr. 2009100.0%A69

KDX Kobayashi-Doshomachi Building

Osaka, Osaka

2,870

Jul. 2009100.0%A70

KDX Sapporo Building

Sapporo, Hokkaido

2,005

Oct. 1989

97.8%

A79

KDX Nagoya Ekimae Building

Nagoya, Aichi

7,327

Apr. 1986

100.0%

A80

Nagoya Nikko Shoken Building

Nagoya, Aichi

4,158

Aug. 1974

95.5%

A81

Sendai Nikko Building

Sendai, Miyagi

950

Mar. 1989

87.7%

A82

KDX Higashi Umeda Building

Osaka, Osaka

100.0%

Office Subtotal (83 properties)

Residential

Jul. 2009
Avg. 22.7 years

95.9%

Mar. 1989

93.7%
100.0%

Venus Hibarigaoka

Sapporo, Hokkaido

1,800

B19

Residence Charmante Tsukishima

Chuo-ku, Tokyo

5,353

Jan. 2004

7,153

Avg. 14.0 years

96.1%

9,900

Mar. 2005

96.3%

C1

Frame Jinnan-zaka

Shibuya-ku, TokyoC2

KDX Yoyogi Building

Shibuya-ku, Tokyo

2,479

Aug. 1991

100.0%

C4

Ginza 4chome Tower

Chuo-ku, Tokyo

9,800

Nov. 2008

100.0%

22,179Avg. 8.9 years

Central Urban Retail Subtotal (3 properties)

Other

2,770
303,951

B18

Residential Subtotal (2 properties)

Central Urban
Retail

76.7%

D2

Shinjuku 6chome Building (Land)

Shinjuku-ku, Tokyo

Other Subtotal (1 property)

2,880

Total (89 properties)

Investment Security

2,880

336,16398.5%—

100.0%—

100.0%

Avg. 21.6 years

Senri Property TMK Preferred Securities

Toyonaka, Osaka

891

Jun. 1992

G.K. KRF 43 Silent Partnership Equity Interest

Shinjuku-ku, Tokyo

1,107

Dec. 1979

96.0%

Notes: 1. Acquisition price is the purchase price of the trust beneficiary interests etc. acquired by KDO.
2. Year built shows the completion date recorded in land register book. The average value shown in subtotal section is a weighted average number calculated based on
acquisition prices with a base date of April 30, 2014, and is rounded down to the first decimal place.
3. Occupancy rate is calculated by dividing leased floor area by leasable floor area as of April 30, 2014 and is rounded to the first decimal place. Occupancy rate subtotals
and total are each calculated by dividing the sum of leased floor area by the sum of leasable floor area of the relevant category. The figure for Shinjuku 6-chome Building(Land) is calculated based on the total leasable area indicated in the land lease agreement.
4. Additional portion of the KDX Shinbashi Building was acquired on December 2, 2013 (acquisition price 1,038 million yen). The existent portion and additional portion are
together counted as one property.

14 |Kenedix Office Investment Corporation Semiannual Report

Financial Section
Contents
Independent Auditor’s ReportE

Balance Sheets

F

Statements of Income and Retained Earnings

G

Statements of Changes in Net Assets

G

Notes to Financial Statements

H

Statements of Cash Flows (Unaudited)R

Financial Summary (Unaudited)
Historical Operating Trends
For the 14th–18th Fiscal Periods
Unit

14th Period(as of Apr. 30, 2012)

Operating revenues

mn yen

9,090

10,212

9,867

9,819

10,895(Rental revenues)

mn yen

9,090

9,617

9,306

9,501

10,330Operating expenses

mn yen

5,004

5,696

5,465

5,578

6,611

(Property-related expenses)

mn yen

4,284

4,822

4,740

4,845

5,047

Operating income

mn yen

4,086

4,516

4,401

4,240

4,283

Ordinary income

mn yen

2,551

3,011

3,003

2,832

2,887

Net income (a)mn yen

2,540

3,009

3,002

2,831

2,885

Total assets (b)mn yen303,284

306,734

308,172

316,753

355,167(+10.3)(+1.1)(+0.5)(+2.8)(+12.1)

137,372

140,581

142,369

150,558

167,746

Period(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)15th Period(as of Oct. 31, 2012)

16th Period(as of Apr. 30, 2013)

17th Period(as of Oct. 31, 2013)

18th Period(as of Apr. 30, 2014)(+23.9)(+2.3)(+1.3)(+5.8)(+11.4)150,063

150,389

150,653

150,781

170,109(-0.1)(+0.2)(+0.2)(+0.1)(+12.8)147,153

147,153

147,153

147,153

166,261

%

(0.0)

(0.0)

(0.0)

(0.0)

(+13.0)

unit

286,550

286,550

286,550

286,550

332,540
511,546yen

523,688524,828

525,747

526,195

mn yen

2,683

2,738

2,703

2,665

3,205

yen

9,364

9,557

9,434

9,302

9,638

(Earnings distributed per unit)

yen

9,364

9,557

9,434

9,302

9,638

(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

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

0.9 (1.8)

1.0 (2.0)

1.0 (2.0)

0.9 (1.8)

0.9 (1.7)

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

1.7 (3.4)

2.0 (4.0)

2.0 (4.0)

1.9 (3.7)

1.8 (3.6)

49.5

49.0

48.9

47.6

47.9

(-5.2)(-0.5)(-0.1)(-1.3)(+0.3)

45.3

45.8

46.2

47.5

47.2

Total distribution (f)Distribution per unit (f)/(e)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)%%%(+5.0)(+0.5)(+0.4)(+1.3)(-0.3)

105.6

90.9

90.0

94.1

111.0

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy ratio at end of period

83

84

83

85

89

340,589.96

351,153.72

347,853.97

358,517.31

386,659.01

%

95.4

95.5

93.9

95.8

96.0

Depreciation expenses for the period

mn yen

1,578

1,621

1,662

1,696

1,826

Capital expenditures for the period

mn yen

918

904

772

894

711

Leasing NOI (Net Operating Income) (Note 5)

mn yen

6,384

6,416

6,228

6,352

7,109

FFO (Funds From Operation) (Note 6)

mn yen

4,119

4,187

4,202

4,293

5,031

yen

14,374

14,612

14,664

14,984

15,130FFO 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 14th Fiscal Period are calculated based on a period of 182 days, 184 days for the 15th Fiscal Period, 181 days for the 16th Fiscal Period,
184 days for the 17th Fiscal Period and 181 days for the 18th 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 – 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)
8. Where applicable, figures are rounded down to the nearest million.

Kenedix Office Investment Corporation Semiannual Report

| 15

16 |

Kenedix Office Investment Corporation Semiannual Report

Balance Sheets
Kenedix Office Investment Corporation
As of April 30, 2014 and October 31, 2013
In thousands of yen
As of April 30, 2014

As of October 31, 2013ASSETS
Current assets:
Cash and bank deposits (Note 12)¥ 18,055,433¥ 11,452,986

Rental receivables

252,557

254,059

Consumption tax refundable

219,447

100,159

Other current assets (Note 7)

74,267

228,433

18,601,704

12,035,637

Land

238,469,273

215,346,646

Buildings and structures (Note 5)

112,658,980

103,827,730

Machinery and equipment

1,973,320

1,766,278

Tools, furniture and fixtures

472,990455,837

Construction in progress

1,785

4,914

Total current assets
Property and equipment, at cost: (Notes 3, 11 and 13)

Less-accumulated depreciation
Net property and equipment(21,048,808)(19,630,791)

332,527,540

301,770,614

Other assets:
Ground leasehold (Notes 11 and 13)
Investment securities (Note 12)355,557

356,332

2,006,886

1,106,339

Corporate bond issuance costs

31,32835,651

Unit issuance costs

107,995

18,903

Other assets (Notes 11 and 13)
Total assets

1,536,342

1,429,698¥355,167,352¥316,753,174¥¥

LIABILITIES AND NET ASSETS
Liabilities
Current liabilities:
Trade and other payables
Short-term debt and current portion of long-term debt (Notes 4 and 12)
Deposits received
Rents received in advance
Other current liabilities

978,541
42,246,500

810,169
46,800,000

29,071

6,162

1,792,248

1,506,618

164,039

202,575

45,210,399

49,325,524

Corporate bonds (Notes 4 and 12)

6,300,000

6,300,000

Long-term debt (Notes 4 and 12)

119,200,000

97,458,000

Leasehold and security deposits received

14,347,418

12,888,425

185,057,817

165,971,949

166,261,746

147,153,820

Total current liabilities

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 332,540 and 286,550 units
As of April 30, 2014 and October 31, 2013, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total surplus

961,750

795,928

2,886,039

2,831,477

3,847,789

3,627,405

170,109,535

150,781,225

Total net assets (Note 8)

170,109,535

150,781,225

Total liabilities and net assets¥355,167,352¥316,753,174

Total unitholders’ equity

See accompanying notes to the financial statements.

Kenedix Office Investment Corporation Semiannual Report| 17

Statements of Income and Retained Earnings
Kenedix Office Investment Corporation
For the six months period from November 1, 2013 to April 30, 2014 and May 1, 2013 to October 31, 2013
In thousands of yen
From November 1, 2013 to April 30, 2014 From May 1, 2013 to October 31, 2013

Operating revenues:
Rental revenues (Notes 10 and 11)¥10,330,338¥9,501,700

Gain on sale of real estate property (Note 10)497,482

234,506

Dividends income

67,467

82,984

10,895,287

9,819,190

Property-related expenses (Notes 10 and 11)

5,047,051

4,845,827

Loss on sale of real estate property (Note 10)816,665—

Asset management fees

564,461

549,899

Total operating revenues
Operating expenses:

Administrative service and custodian fees

69,161

69,226

Other operating expenses

114,550

113,451

Total operating expenses
Operating income

6,611,888

5,578,403

4,283,399

4,240,787

Non-operating expenses:
Interest expense

1,039,564

1,050,678

Financing-related expenses

301,079

321,587

Amortization of unit issuance costs

40,502

18,903

Amortization of corporate bond issuance costs

4,323

6,143

Others, net

10,793

10,495

1,396,261

1,407,806

Ordinary income

Total non-operating expenses

2,887,138

2,832,981

Income before income taxes

2,887,138

2,832,981

Income taxes (Note 7)
Net income

1,266

1,504

2,885,872

2,831,477

Retained earnings at the beginning of period
Retained earnings at the end of period167—¥ 2,886,039¥2,831,477

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Office Investment Corporation
For the six months period from November 1, 2013 to April 30, 2014 and May 1, 2013 to October 31, 2013
In thousands of yen
Unitholders’ equity
Surplus
Voluntary retained
earnings

Total
unitholders’equityUnitholders’capitalReserve for
reduction entry

Retainedearnings¥147,153,820¥497,043¥3,002,199

Provision of reserve for reduction entry—

298,885(298,885)———

Payments of dividends——(2,703,314)(2,703,314)(2,703,314)(2,703,314)

Net income——

2,831,477

2,831,477

2,831,477

2,831,477—

298,885(170,722)

128,163

128,163

128,163¥147,153,820¥795,928¥2,831,477

19,107,926——

Provision of reserve for reduction entry—

165,822(165,822)———

Payments of dividends——(2,665,488)(2,665,488)(2,665,488)(2,665,488)

Balance as of April 30, 2013

Total
surplusTotal¥3,499,242 ¥150,653,062 ¥150,653,062

Changes during the fiscal period

Total changes during the fiscal period
Balance as of October 31, 2013

¥3,627,405 ¥150,781,225 ¥150,781,225

Changes during the fiscal period
New unit issuance

Net income
Total changes during the fiscal period
Balance as of April 30, 2014
See accompanying notes to the financial statements.

—

19,107,926

19,107,926——

2,885,872

2,885,872

2,885,872

2,885,872

19,107,926

165,82254,562

220,384

19,328,310

19,328,310¥166,261,746¥961,750¥2,886,039¥3,847,789 ¥170,109,535 ¥170,109,535

18 |Kenedix Office Investment Corporation Semiannual Report

Notes to Financial Statements
Kenedix Office Investment Corporation
For the six months period from November 1, 2013 to April 30, 2014 and May 1, 2013 to October 31, 2013

1.

ORGANIZATION AND BASIS OF PRESENTATIONORGANIZATION
Kenedix Office Investment Corporation (Note) (“the Investment Corporation”) was established on May 6, 2005 under the Act on Investment
Trusts and Investment Corporations of Japan (“the Investment Trust Act”). 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 five public offerings and other means including global offerings. As aresult, as of April 30, 2014, the end of the eighteenth fiscal period, the number of investment units issued and outstanding totaled 332,540
units. (Note: On effective from February 3, 2014, the Investment Corporation was renamed Kenedix Office Investment Corporation from Kenedix
Realty Investment Corporation.)
The Investment Corporation is externally managed by Kenedix Real Estate Fund Management, Inc. (“the Asset Management Company”) as its
asset management company. The Investment Corporation entrust the Asset management Company and in collaboration with the AssetManagement 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 the basic policy of conducting dynamic and flexible investment stance thatseeks to respond to its environment and market trends, and endeavors to ensure a timely response to opportunities.
During the period ended April 30, 2014, the Investment Corporation acquired seven office buildings (KDX Shinbashi Building (additional acquisition): acquisition price of ¥1,038 million, KDX Takanawadai Building: acquisition price of ¥5,250 million, KDX Ikebukuro Building: acquisition
price of ¥3,900 million, KDX Mita Building: acquisition price of ¥3,180 million, KDX Akihabara Building: acquisition price of ¥2,600 million, Aplus
Tokyo Building: acquisition price of ¥4,350 million, KDX Musashi-Kosugi Building: acquisition price of ¥12,000 million) located in the Tokyo
Metropolitan Area, one other property (Shinjuku 6-chome Building (Land): acquisition price of ¥2,880 million), an equity interest in a Japanesesilent partnership (tokumei kumiai, “TK”) for a trust beneficiary interest in Shinjuku Sanei Building (acquisition price of ¥1,107 million) and soldKDX Niigata Building (initial acquisition price of ¥1,305 million, Kabutocho Nikko Building II (initial acquisition price of ¥1,280 million) and Court
Mejiro (initial acquisition price of ¥1,250 million) (with a total disposition price of ¥3,559 million)). As of April 30, 2014, the Investment
Corporation had total unitholders’ capital of ¥166,262 million with 332,540 investment units outstanding. The balance of interest-bearing debt
amounted to ¥167,747 million as of April 30, 2014, comprising ¥161,447 million in borrowings (¥155,447 million in long-term borrowings and¥6,000 million in short-term borrowings) and ¥6,300 million in investment corporation bonds. The Investment Corporation owned a portfolio of
89 properties with a total acquisition price of ¥336,164 million containing a total leasable area of 386,659.01m2 and 2 investment securities witha total acquisition price of ¥1,998 million. The occupancy ratio was approximately 96.0%. A portfolio of 89 properties consists of 83 office buildings, 2 residential properties, 3 central urban retail properties and 1 other property. 74 properties are located in the Tokyo Metropolitan Area and15 properties are located in Other Regional Areas.

BASIS OF PRESENTATIONThe Investment Corporation maintains its accounting records and prepares its financial statements in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards. The financial statements are prepared in accordance with the Investment Trust Act.
The financial statements are basically a translation of the Japanese audited financial statements of the Investment Corporation. In preparing
the accompanying financial statements, certain reclassifications have been made to the financial statements issued domestically in order to present them in a format which is familiar to readers outside Japan. Certain information in the business report and supplementary schedule has been
omitted. Additional information has been added to the Japanese audited financial statements for the convenience of readers outside Japan andthis includes disclosing the prior year’s comparatives as supplemental information in the English translated financial statements although theJapanese audited financial statements only need to disclose the current year’s information.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) SECURITIESNon-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 TK is adopted.

Kenedix Office Investment Corporation Semiannual Report| 19(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 estimated useful
lives of the assets ranging as stated below:
From November 1, 2013 to April 30, 2014

From May 1, 2013 to October 31, 2013

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(C) UNIT ISSUANCE COSTS
Unit issuance costs are amortized over a period of 3 years under the straight-line method.

(D) CORPORATE BOND ISSUANCE COSTS
Corporate 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 within trust are recorded in the relevant balance sheets and statements of income and retained earnings.

(F) GROUND LEASEHOLD
Fixed term leasehold on a building and the special agreement on building sales, and the building 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 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 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 as revenues and expenses 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 theJapanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property from the date of disposal to the end of thecalendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax liabilities.
When 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 ¥84,126 thousandand ¥26,946 thousand as of April 30, 2014 and October 31, 2013, respectively. In subsequent calendar years, such property-related taxes arecharged 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 infair value of interest-rate swap and interest-rate cap contracts because these contracts met the criteria for deferral hedging accounting. However,the Investment Corporation adopted the 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 or interest-rate cap contract is
added to or deducted from the interest on the assets or liabilities for which the swap or cap contract was executed. The hedge effectiveness forinterest-rate swap and interest-rate cap contracts is assessed each fiscal period except for those that meet the criteria of special treatment.

20 |Kenedix Office Investment Corporation Semiannual Report(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.

SCHEDULE OF PROPERTY AND EQUIPMENT
In millions of yen
As of April 30, 2014
Acquisition
costs

Accumulated
depreciation

Land¥238,469¥

Buildings and structures

112,659

Machinery and equipment

1,973

Tools, furniture and fixtures
Construction in progress
Total

4.

As of October 31, 2013
Book
value

Acquisition
costs

Accumulated
depreciation

Book
value

—

¥238,469¥215,346¥—¥215,346

20,012

92,647

103,828

18,63885,190

787

1,186

1,766

732

1,034

473

249

224

456

260

196

2

—

2

5

—

5

¥353,576¥21,048¥332,528¥321,401¥19,630¥301,771

SHORT-TERM DEBT, LONG-TERM DEBT AND CORPORATE BONDS

The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of April 30, 2014:
Classification

Short-term debt
Subtotal
Current portion of long-term debt

SubtotalLong-term debt

Drawdown date

Last
Repayment date

Weighted-averageinterest rate

October 31, 2013
January 10, 2014

October 31, 2014
July 10, 2014

0.55%
0.58%

July 13, 2011
July 30, 2010
July 29, 2011
July 29, 2011
July 29, 2011
September 1, 2011
March 22, 2011
September 30, 2011
December 26, 2011
December 26, 2011
December 26, 2011
December 26, 2011
January 29, 2010
January 31, 2012
February 18, 2010
February 18, 2010
February 18, 2010
February 18, 2010
August 31, 2011
March 12, 2012
September 30, 2011
April 2, 2010
October 31, 2012

July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 22, 2014
September 30, 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 17, 2015
March 12, 2015
March 31, 2015
April 2, 2015
April 30, 2015

1.54%
1.73%
1.02%
1.02%
1.40%
1.15%
1.63%
1.27%
1.24%
1.26%
1.26%
1.26%
2.17%
1.19%
2.19%
2.19%
2.19%
2.19%
0.97%
1.08%
1.29%
2.22%
1.01%

May 1, 2006
November 12, 2010
November 12, 2010
November 12, 2010
December 1, 2010
December 1, 2010
December 1, 2010
January 31, 2011
February 28, 2011
February 28, 2011

April 30, 2016
November 12, 2015
November 12, 2015
November 12, 2017
November 12, 2015
November 12, 2015
November 12, 2017
January 29, 2016
August 31, 2015
January 29, 2016

2.73%
1.79%
1.79%
2.02%
1.42%
1.42%
2.21%
1.94%
1.91%
1.95%

Balance(In millions of yen)

¥

3,000
3,000
6,000
¥ 1,000
3,700
2,200
1,000
300
1,000
2,700
1,000
2,500
2,000
2,000
1,000
984
1,500
1,783
1,318
775
388
1,500
1,000
2,500
1,600
2,500
36,247¥ 5,000
1,200
800
2,300
800
200
700
800
3,000
500

Kenedix Office Investment Corporation Semiannual Report

Classification

Long-term debt

Drawdown date

Last
Repayment date

Weighted-averageinterest rate

March 31, 2011
March 31, 2011
April 28, 2011
April 28, 2011
December 26, 2011
December 26, 2011
December 26, 2011
December 26, 2011
December 26, 2011
December 26, 2011
January 10, 2012
March 28, 2012
March 28, 2012
March 28, 2012
March 30, 2012
April 27, 2012
June 29, 2012
September 21, 2012
September 21, 2012
September 21, 2012
October 31, 2012
October 31, 2012
October 31, 2012
October 31, 2012
December 10, 2012
December 28, 2012
December 28, 2012
December 28, 2012
January 15, 2013
February 18, 2013
March 26, 2013
March 26, 2013
April 30, 2013
July 31, 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
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014

January 29, 2016
March 31, 2016
October 31, 2015
January 29, 2016
October 31, 2015
October 31, 2015
October 31, 2015
October 31, 2016
October 31, 2016
October 31, 2016
January 29, 2016
March 28, 2017
March 28, 2019
March 28, 2019
September 30, 2015
October 30, 2015
June 30, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2016
October 31, 2016
October 31, 2017
October 31, 2018
December 12, 2016
December 28, 2016
December 28, 2017
December 29, 2017
January 15, 2017
February 18, 2016
March 26, 2018
March 26, 2018
April 30, 2016
July 29, 2016
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, 2017
January 31, 2020
January 31, 2021
March 12, 2018
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020

1.91%
1.27%
1.86%
1.89%
1.34%
1.32%
1.34%
1.44%
1.42%
1.44%
1.27%
1.36%
1.77%
1.77%
1.21%
1.27%
1.29%
1.16%
1.16%
1.16%
1.06%
1.05%
1.10%
1.25%
0.98%
1.01%
1.09%
1.09%
0.97%
0.84%
1.04%
1.04%
0.72%
0.62%
0.72%
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%
0.67%
0.93%
1.13%
0.75%
0.78%
0.92%
1.36%
0.91%

| 21

Balance(In millions of yen)

¥

2,000
1,000
1,500
1,000
2,500
2,500
2,000
2,500
2,500
2,000
2,500
500
1,400
1,000
2,000
1,000
1,500
5,000
1,000
1,000
2,500
1,500
2,500
2,500
500
2,000
500
500
1,000
1,500
1,000
1,000
1,000
1,500
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
1,200
3,700
2,300
2,250
450
1,800
1,800
3,000

22 |

Kenedix Office Investment Corporation Semiannual Report

Last
Repayment date

Weighted-averageinterest rate

March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014

September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020

1.01%
1.20%
1.35%
0.76%
0.95%

March 15, 2007
March 8, 2012
September 12, 2013

March 15, 2017
September 8, 2017
September 12, 2018

2.37%
2.00%
1.00%

Classification

Drawdown dateLong-term debt

Subtotal
Corporate bonds

Balance(In millions of yen)

¥

4,000
3,000
2,000
2,500
2,900
119,200¥ 3,000
1,500
1,800
6,300
¥167,747

Subtotal
Total

5.

REDUCTION ENTRY

The amount of reduction entry of property and equipment acquired by government subsidy
In thousands of yen
As of April 30, 2014

As of October 31, 2013

¥26,230¥26,230

Buildings and structures

6.

PER UNIT INFORMATION
Yen
From November 1, 2013 to April 30, 2014

From May 1, 2013 to October 31, 2013

Net asset value per unit

¥511,546¥526,195

Net income per unit¥¥

Weighted average number of units (units)

8,767
329,164

9,881
286,550

The weighted average number of units outstanding of 329,164 and 286,550 as of April 30, 2014 and October 31, 2013 was used for the computation 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.

7.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 37%. 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 distributes in excess of 90% of its distributable profits as defined in the Special Taxation Measures Law of Japan 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 in excessof 90% of its distributable profit in the form of cash distributions totaling ¥3,205 million (adding ¥319 million as the reversal of reserve for
reduction entry) and ¥2,665 million (deducting ¥166 million as the provision of reserve for reduction entry) for the periods ended April 30, 2014
and October 31, 2013. Such distributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rateon the Investment Corporation’s income was 0.04% and 0.05% for the periods ended April 30, 2014 and October 31, 2013. The following summarizes the significant difference between the statutory tax rate and the effective tax rate:
As of April 30, 2014

As of October 31, 2013

Statutory tax rate

36.59%

36.59%

Deductible cash distributions(40.62)(34.43)

Provision of reserve for reduction entry—(2.14)

Others4.07

0.03

Effective tax rate

0.04%

0.05%

Kenedix Office Investment Corporation Semiannual Report| 23

The significant components of deferred tax assets and liabilities as of April 30, 2014 and October 31, 2013 were as follows:
In thousands of yen
As of April 30, 2014

As of October 31, 2013

Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold rights

34

¥

1,808

47
1,543

Subtotal deferred tax assets

1,842

1,590

Valuation allowance

1,808

1,543

Total deferred tax assets

¥

34

¥

47

Tax rate changes after the eighteenth fiscal period
With the Act on Partial Revision of the Income Tax Act (Act No.10, 2014) which was promulgated on March 31, 2014, 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, 2011) was partially amended to set the taxation period of special corporation tax for reconstruction through March 31, 2014.
Accordingly, the effective statutory tax rate used to calculate deferred tax assets and deferred tax liabilities concerning temporary differences, etc.
expected to be resolved in accounting periods starting on April 1, 2014 and after will be changed to 34.16%. The effect of the announced tax
rate changes is immaterial.

8.

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.

9.

RELATED-PARTY TRANSACTIONSTRANSACTIONS WITH KENEDIX REAL ESTATE FUND MANAGEMENT, INC.
Kenedix Real Estate Fund Management, Inc., a consolidated subsidiary of Kenedix, Inc., provides the Investment Corporation with property management services and related services. For these services, the Investment Corporation pays Kenedix Real Estate Fund Management, Inc. property
management fees in accordance with the terms of its Property Management Agreements. For these services, the Investment Corporation paid
¥399 million to Kenedix Real Estate Fund Management, Inc.

TRANSACTIONS WITH OTHER RELATED-PARTIES.
The Investment Corporation acquired trust beneficiary interests in real estate from GK KRF 41 and GK KRF 35 with the acquisition price of¥12,000 million and ¥3,900 million, respectively. The acquisition prices were determined based on the related-parties’ transaction rule.

10.

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

Rental and other operating revenues, property-related expenses, gain and loss on sale of real estate property for the six months periods from
November 1, 2013 to April 30, 2014 and May 1, 2013 to October 31, 2013 consist of the following:
In thousands of yen
From November 1, 2013 to April 30, 2014

From May 1, 2013 to October 31, 2013

Rental and other operating revenues:
Rental revenues¥ 7,380,878

Common area charges¥6,649,670

1,695,193

1,587,331

9,076,071

8,237,001

Parking space rental revenues

326,300

299,884

Utility charge reimbursement

804,404

851,381

Miscellaneous

123,563

113,434

1,254,267

1,264,699

10,330,338

9,501,700

Subtotal
Others:Subtotal
Total rental and other operating revenues
Property-related expenses:
Property management fees and facility management fees

1,016,938

951,025

Depreciation

1,826,542

1,696,849

916,744¥ 928,822

Utilities

¥

24 |

Kenedix Office Investment Corporation Semiannual Report

Taxes

¥

847,466¥ 851,090

Insurance

14,825

14,372

Repairs and maintenance

193,972

173,604

Trust fees

45,142

42,377

Loss on retirement of fixed assets
OthersTotal property-related expenses—

10,114

185,422

177,574

5,047,051

4,845,827

Gain on sale of real estate property:
Revenue from sale of investment property

2,929,105

1,970,000

Cost of investment property

2,405,839

1,672,153

Other sales expenses
Gain on sale of real estate property

25,784

63,341

497,482

234,506

630,000—

1,427,549—

Loss on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses

19,116

Loss on sale of real estate property

11.

¥

—

816,665¥—

PROPERTY INFORMATIONType

Office Buildings

Location

Number of properties

Central Urban
Retail Properties

Residential Properties

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

69

14

1

1

¥252,961¥50,990¥5,353¥1,8003

1

Property information
Acquisition price
Percentage of total acquisition price

OthersTokyo
Tokyo
Metropolitan Area Metropolitan Area

(In millions of yen)

¥22,180¥2,88075.25%

15.17%

1.59%

0.53%

6.60%

0.86%

Net book value

252,185

49,282

4,802

1,724

21,917

2,973

Appraisal value

240,871

43,811

4,710

1,570

22,5802,90076.12%

13.84%

1.49%

0.50%

7.13%

0.92%

Percentage of total appraisal value

Financial results for the period from November 1, 2013 to April 30, 2014
Rental and other operating revenues(In thousands of yen)

¥7,345,894¥2,093,844¥181,462¥90,039¥614,187¥4,912

Rental revenues

6,490,264

1,791,962

161,62179,304

548,008

4,912

Other revenues

855,630

301,882

19,841

10,73566,17902,187,302

810,391

50,08941,881130,8451

Property management fees

680,879

264,072

21,013

7,957

43,017—

Taxes

599,548

205,910

14,385

7,621

20,001

1

Utilities

649,805

209,603

2,613

2,647

52,076—

Repairs and maintenance

112,283

55,693

2,993

13,602

9,401

—

8,977

4,825

351

296

376

—

Property-related expenses

Insurance
Trust fees and other expenses
NOI (Net Operating Income)

135,81070,288

8,734

9,758

5,974

—

5,158,592

1,283,453

131,373

48,158483,342

4,911

Depreciation expenses

1,233,410

416,820

52,24021,452

102,620—

Operating income from property leasing activities

3,925,182

866,633

79,133

26,706

380,722

4,911

Capital expenditures

498,253

209,992

1,463

519

810

—

NCF (Net Cash Flow)¥4,660,339¥1,073,461¥129,910¥47,639¥482,532¥4,911

Kenedix Office Investment Corporation Semiannual Report| 25

A breakdown of property-type as of April 30, 2014 was as follows:
Class of assets

Property type

Property and equipment

Office Buildings

Area

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

Tokyo Metropolitan Area
Other Regional Areas

Subtotal
Residential Properties

13.9%

301,467

84.9%

4,802

1.4%

Other Regional Areas

1,724

0.5%

6,526

1.8%

Tokyo Metropolitan Area

21,917

6.2%

21,917

6.2%

Subtotal
Other

71.0%

49,282

Tokyo Metropolitan Area

Subtotal
Central Urban Retail Properties

Percentage of total assets¥252,185

Tokyo Metropolitan Area

Subtotal
Total

2,973

0.8%

2,973

0.8%

332,883

93.7%

Investment securities

2,007

0.6%

Bank deposits and other assets

20,277

5.7%

Total assets

355,167

100.0%

Total liabilities

185,058

52.1%

Net assets¥170,110

47.9%

12.

FINANCIAL INSTRUMENTS

Eighteenth Fiscal Period (November 1, 2013 to April 30, 2014)(A) OVERVIEW(1) POLICY FOR FINANCIAL INSTRUMENTS
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily through bankloans 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 isundertaken 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 are preferred equity securities issued by a special purpose entity (tokutei mokuteki kaisha, “TMK”) as set forth by the Act on
Securitization of Assets and Japanese silent partnership (tokumei kumiai, “TK”) interests are exposed to credit risk of the issuer and risk of fluctuation of value of its property.
Debt and corporate bonds are used primarily for procuring funds necessary for the acquisition of properties and have a redemption date of a
maximum of approximately nine 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 and interest-rate cap transactions) in order 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 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 the effectiveness of hedging activities, pleasesee 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 and interest-rate cap transaction 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 theissuer with regard to investment securities.
(b) Monitoring of liquidity risk (the risk that the Investment Corporation may not be able to meet its obligations on scheduled due
dates) associated with 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, fairvalue is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors
could result in a different fair value.

26 |Kenedix Office Investment Corporation Semiannual Report(B) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments on the balance sheet as of April 30, 2014 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¥ 18,055,433¥ 18,055,433¥

18,055,433

18,055,433—

햲 Short-term debt

6,000,000

6,000,000—

햳 Corporate bonds(including current portion of corporate bonds)

6,300,000

6,483,690

183,690

햲 Cash and bank deposits
Subtotal햴 Long-term debt(including current portion of long-term debt)
Subtotal—

155,446,500

155,707,337

260,837¥167,746,500¥168,191,027¥444,527———

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 AND DERIVATIVE TRANSACTIONSASSETS햲 Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.

LIABILITIES햲 Short-term debt
Since these items are settled in a short period of time, their carrying value approximates fair value.
햳 Corporate bonds
The fair value of corporate bonds is based on quoted market prices.
햴 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 rates, 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 is handled together with the applicable interest-rate swaps, discounted by the interest rate to be applied if similar loans were entered into.

DERIVATIVE TRANSACTIONS햲 Hedge accounting not applied
Not applicable햳 Hedge accounting applied
Hedge accounting
methodContracted amount(In thousands of yen)Type of derivativetransactions

Hedged items

Special treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term debt

¥57,700,000

Special treatment ofinterest-rate cap

Interest-rate cap

Long-term debt

Fair value(In thousands of yen)Calculation method for
applicable fair value¥50,200,000*—

3,000,000

3,000,000*—¥60,700,000¥53,200,000

Maturing after 1 year

Total

—

(*) 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, theirfair value is included in the fair value of the hedged long-term debt.

*2: FINANCIAL INSTRUMENTS FOR WHICH IT IS EXTREMELY DIFFICULT TO DETERMINE THE FAIR VALUEClassification

Carrying value (In thousands of yen)

Investment securities¥2,006,886

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above preferred equity securities of TMK
and TK interests are not included in the preceding table.

| 27

Kenedix Office Investment Corporation Semiannual Report*3: REDEMPTION SCHEDULE FOR RECEIVABLES
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥18,055,433

Total¥18,055,433*4: REDEMPTION SCHEDULE FOR DEBT AND CORPORATE BONDS
In thousands of yen
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

Short-term debt

¥ 6,000,000

¥

¥

¥

¥

Corporate bonds——

3,000,000

1,500,000

1,800,000—

Long-term debt

¥36,246,500¥32,800,000¥17,700,000¥19,250,000¥15,050,000¥34,400,000

13.

—

—

—

—

Due after
5 years¥—

INVESTMENT AND RENTAL PROPERTIES

Eighteenth Fiscal Period (November 1, 2013 to April 30, 2014)
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, 2013

Net change

As of April 30, 2014

Fair value as of April 30, 2014
(In thousands of yen)

¥302,127,261¥30,756,034¥332,883,295¥316,442,000

notes: 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 and decreases were
the acquisition of 8 properties totaling ¥35,708,056 thousand, the sale of 3 properties totaling ¥3,833,388 thousand and depreciation amounting to¥1,826,542 thousand.

Income and loss in the fiscal period ended April 30, 2014 for real estate for rental purposes is listed in Note “10. BREAKDOWN OF RENTAL AND
OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN AND LOSS ON SALE OF REAL ESTATE PROPERTY”.

14.

SUBSEQUENT EVENTSISSUANCE OF THE NEW INVESTMENT UNITSOn May 8 and May 20, 2014, the Board of Directors of the Investment Corporation resolved to issue new investment units as detailed below. The
payments were completed on May 27, 2014 through issuance of public offering. As a result of the issuance of new investment units, theInvestment Corporation had total unitholders’ capital of ¥176,138,701,670 with 353,940 investment units outstanding as of May 27, 2014.
Furthermore, when new investment units are issued through a third-party allotment with Nomura Securities Co. Ltd. as the allottee in connection with the secondary offering, the payment date will be June 24, 2014 (planned).
(Issuance of New Investment Units through Public Offering)Issuance of New Investment Units:21,400 units (Domestic Offering 10,700 units, International Offering 10,700 units)

Issue Price (Offer Price):¥478,725 per unit

Aggregate Issue Price (Total Offer Price):¥10,244,715,000

Issue Amount (Paid-in Value):¥461,540 per unit

Total Issue Amount (Aggregate Paid-in Value):¥9,876,956,000

Payment Date

:May 27, 2014

(Issuance of New Investment Units through Third-Party Allotment)
Issuance of New Investment Units (Maximum):1,070 units

Issue Amount (Paid-in Value):¥461,540 per unit

Total Issue Amount (Aggregate Paid-in Value) (Maximum) :¥493,847,800
Payment Date

:June 24, 2014 (Planned)

Allottee:Nomura Securities Co., Ltd.

(Use of proceeds)
The funds from the Domestic Offering and International Offering allocated as a portion of the funds for the acquired properties in the nineteenth fiscal period. Furthermore, the funds from the issuance of new investment units by third-party allotment are allocated to as proceeds
to a portion of fund for future acquisition of specified assets and repayment of borrowings.

28 |Kenedix Office Investment Corporation Semiannual ReportStatements of Cash Flows (Unaudited)
Kenedix Office Investment Corporation
For the six months period from November 1, 2013 to April 30, 2014 and May 1, 2013 to October 31, 2013
In thousands of yen
From November 1, 2013
to April 30, 2014

From May 1, 2013
to October 31, 2013

¥ 2,887,138¥ 2,832,981

2,158,841(572)
1,039,564—

2,023,561(565)
1,050,678
10,114

1,501(119,288)(24,903)(40,304)
285,630
3,833,388(375,523)
9,645,472
572(1,049,144)(946)
8,595,954(69,012)(100,159)(155,406)
109,022(179,837)
1,672,153(212,763)
6,980,767
565(1,056,258)(890)
5,924,184

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchases of investment securities
Proceeds from investment securities
Proceeds from leasehold and security deposits received
Payments of leasehold and security deposits received
Payments of restricted bank deposits
Proceeds from restricted bank deposits
Others, net
Net cash used in investing activities(36,179,723)(1,109,906)
213,076
2,339,795(759,482)(94,114)80,657
180(35,509,517)(15,090,275)(202,400)—
1,161,189(623,098)(94,092)
32,279(292)(14,816,689)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt
Payments of short-term debt
Proceeds from long-term debt
Payments of long-term debt
Proceeds from issuance of investment units
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Payment of dividends
Net cash 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

3,000,000(6,100,000)
37,800,000(17,511,500)
18,978,331——(2,664,276)
33,502,555
6,588,992
10,948,849¥ 17,537,841

7,900,000(4,500,000)
11,700,000(7,211,500)—
1,784,250(1,500,000)(2,702,999)
5,469,751(3,422,754)
14,371,603¥ 10,948,849

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 income
Interest expense
Loss on retirement of fixed 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
SubtotalInterest income received
Cash payments of interest expense
Cash payments of income taxes
Net cash provided by operating activities

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 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.

CASH AND CASH EQUIVALENTS (UNAUDITED)Cash and cash equivalents consisted of the following as of April 30, 2014 and October 31, 2013:
In thousands of yen

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

As of April 30, 2014

As of October 31, 2013

¥18,055,433(517,592)¥17,537,841¥11,452,986(504,137)¥10,948,849

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

Kenedix Office Investment Corporation Semiannual Report| 29

Unitholders’ Information
Kenedix Office Investment Corporation
Fiscal Periods:
Stock Listing:Transfer Agent:
Auditor:Six months ending April 30 and October 31
Real Estate Investment Trust Market of the Tokyo Stock Exchange (Security Code: 8972)
Sumitomo Mitsui Trust Bank, Limited
Ernst & Young ShinNihon LLC

IR Schedule (18th and 19th Fiscal Periods)
Apr.
2014

Jun.
2014

Jul.
2014

Oct.
2014

Dec.
2014

Jan.
2015

End ofthe 18th Period

Performance forthe 18th Period
is announced

Distributions forthe 18th Period
are paid

End ofthe 19th Period

Performance forthe 19th Period
will be announced

Distributions forthe 19th Period
will be paid

General Breakdown of Unitholders
Foreign corporations
and individuals
End of the
18th Period
End of the
17th Period

Other domestic
corporations

Financial institutions(including securities companies)

46.5%

1.5%

46.3%

154,538 units

5,004 units

153,837 units

48.5%

1.5%

138,897 units

4,342 units

Individuals
and others
5.8%
19,161 units

41.8%

8.2%

119,684 units

23,627 units

Total
332,540 units
Total
286,550 units

Note: Figures are rounded to the first decimal place.

Top Ten Unitholders (As of April 30, 2014)
Name

Share of Outstanding Units

Units Held

Japan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Nomura Trust and Banking Co., Ltd. (Trust Account)
The Bank of New York, Non-Treaty JASDEC AccountState Street Bank and Trust Company 505223
State Street Bank and Trust Company (Note 2)
The Bank of New York Mellon SA/NV 10
State Street Bank and Trust Company (Note 3)
JP Morgan Chase Bank 385174
Total<Note 1>60,56828,217
27,153
20,606
15,358
9,066
7,251
6,396
6,313
6,072
187,000

18.21%
8.48%
8.16%
6.19%
4.61%
2.72%
2.18%
1.92%
1.89%
1.82%
56.23%

Notes: 1. The percentage of shares are rounded down to the second decimal place.
2. The standing proxy is Settlement & Clearing Services Division, Mizuho Bank, Ltd.
3. The standing proxy is Custody department of The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch.

Unit Price and Trading Volume(Units)Closing Price

Trading Volume

11,000 s

Offer price of PO(¥873,180)
May 22, 2007
(payment date)

Offer price of IPO(¥580,000)
Jul. 20, 2005
(payment date)

8,000 s7,000 sOffer price of PO(¥274,510)
Jul. 20, 2011
(payment date)

Offer price of PO(¥252,200)
Nov. 16, 2009
(payment date)

Offer price of PO(¥593,096)
May 1, 2006
(payment date)

4,000 s3,000 ss 1,000,000

s !VERAGE TRADING VOLUME DURING THE TH 0ERIOD     UNITS

6,000 s5,000 s(Yen)

s !S OF *UNE  (IGHEST PRICE TRADING PRICE  c  -AY  ,OWEST PRICE TRADING PRICE  c  /CTOBER  20,000 s

Offer price of PO(¥430,950)
Nov. 13, 2013
(payment date)

Offer price of PO(¥478,725)
May 27, 2014
(payment date)

s 900,000
s 800,000
s 700,000
s 600,000
s 500,000
s 400,000
s 300,000

2,000 ss 200,000

1,000 ss 100,000

0s

s0
July

Oct.

2005

Apr.

Oct.

2006

Apr.

Oct.

2007

Apr.

Oct.

2008

Apr.

Oct.

2009

Apr.

Oct.

2010

Apr.

Oct.

2011

Apr.

Oct.

2012

Apr.

Oct.

2013

Apr.

2014

http://www.kdx-reit.com/eng/

Disclaimer: This semiannual report includes translations of certain documents originally filed and made available in Japan in accordance with the Securities and Exchange Law
of Japan. The English language semiannual report was prepared solely for the convenience of readers outside Japan and is not intended to constitute a prospectus.
This semiannual report should not be construed as an offer or solicitation to buy or sell any securities of KENEDIX Office Investment Corporation (KENEDIX-REIT).
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japaneseterms. With respect to any and all terms herein, including without limitation, financial statements, if there exist any discrepancies in the meaning or interpretation
thereof between the original Japanese documents and English translation contained herein, the original Japanese documents will always govern the meaning andinterpretation.
None of KENEDIX-REIT, KENEDIX Real Estate Fund Management, Inc. nor any of their respective directors, officers, employees, partners, unitholders, agents,
affiliates nor their advisors shall be responsible or liable for the completeness, appropriateness, or accuracy of English translations or the selection of the portion(s)of any document(s) translated into English.
The financial statements of KENEDIX-REIT have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP), which
may materially differ in certain respects from generally accepted accounting principles of other jurisdictions.
This semiannual report contains forward-looking statements. These statements appear in a number of places in this semiannual report and include statements
regarding the intent, belief, or current and future expectations of KENEDIX-REIT or KENEDIX Real Estate Fund Management, Inc. with respect to its business, financial condition and results of operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,”“plan,” “anticipate,” “believe,” ”estimate,” “predict,” “potential,” or the negative of these terms or other similar terminology. These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance or achievements, or those of the industries in which we
operate, may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition, theseforward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known and unknown
risks and uncertainties. Accordingly, readers of this document should not interpret the forward-looking statements included herein as predictions or representationsof future events or circumstances.
Potential risks and uncertainties also include those identified and discussed in this document. Given these risks and uncertainties, readers of this document are
cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We disclaim any obligation
to update or, except in the limited circumstances required by the Tokyo Stock Exchange, announce publicly any revisions to any of the forward-looking statements
contained in these documents.