Financial Section

25
Independent Auditor’s Report
26
Balance Sheets
27
Statements of Income and Retained Earnings
27
Statements of Changes in Net Assets
28
Statements of Cash Flows
29
Notes to Financial Statements

Financial Summary (Unaudited)
Historical Operating Trends
For the 21st–25th Fiscal Periods

PeriodOperating revenues(Rental revenues)
Operating expenses(Property-related expenses)
Operating income
Ordinary income
Net income (a)Total assets (b)(Period-on-period change)
Interest-bearing debt (c)(Period-on-period change)
Unitholders’ equity (d)(Period-on-period change)
Unitholders’ capital(Period-on-period change)
Number of investment units issued and outstanding (e)Unitholders’ equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(Earnings distributed per unit)(Distribution in excess of earnings per unit)
Return on assets (annualized) (Notes 1 and 2)
Return on net assets (annualized) (Notes 2 and 3)
Net assets ratio at end of period (d)/(b)(Period-on-period change)
Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)
Payout ratio (Note 4) (f)/(a)Other references
Number of properties
Total leasable floor area
Occupancy ratio at end of period
Depreciation expenses for the period
Capital expenditures for the period
Leasing NOI (Net Operating Income) (Note 5)
FFO (Funds From Operation) (Note 6)
FFO per unit (Note 7)

Unit

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

properties
m2%
millions of yen
millions of yen
millions of yen
millions of yen
yen

25th Period
24th Period
23rd Period
22nd Period
21st Period(as of(as of(as of(as of(as ofOct. 31, 2015) Apr. 30, 2016) Oct. 31, 2016) Apr. 30, 2017) Oct. 31, 2017)

13,74013,226
7,800
6,668
5,940
4,565
4,564
407,217(–0.1)
174,100(–0.3)
211,914(–0.0)
206,199(0.0)
404,885
523,394
4,170
10,30010,30014,362
12,812
8,260
6,533
6,102
4,816
4,815
408,813(+0.4)
175,100(+0.6)
212,555(+0.3)
206,199(0.0)
404,885
524,977
4,335
10,707
10,707

13,491
13,429
7,703
6,754
5,788
4,603
4,601
413,031(+1.0)
178,100(+1.7)
212,825(+0.1)
206,199(0.0)
404,885525,6444,601
11,365
11,36515,03913,327
9,137
6,527
5,901
4,751
4,750
410,166(–0.7)
174,600(–2.0)
212,986(+0.1)
206,199(0.0)
404,885
526,041
4,750
11,733
11,733

13,901
13,840
8,244
6,720
5,657
4,590
4,588
414,933(+1.2)
179,600(+2.9)
212,851(–0.1)
206,199(0.0)
404,885525,708
5,061
12,50012,5001.1 (2.2)
2.2 (4.3)
52.0(+0.1)
42.8(–0.1)
91.3

1.2 (2.4)
2.3 (4.6)
52.0(-0.0)
42.8(+0.1)
90.0

1.1 (2.2)
2.2 (4.3)
51.5(-0.5)
43.1(+0.3)
99.9

1.2 (2.3)
2.2 (4.5)
51.9(+0.4)
42.6(–0.6)
99.9

1.1 (2.2)
2.2 (4.3)
51.3(–0.6)
43.3(+0.7)
110.2

97453,681.06
94.9
2,218
469
8,775
6,487
16,023

97457,774.90
96.9
2,230
1,120
8,509
6,302
15,565

99
462,533.92
96.9
2,274
1,165
8,949
6,877
16,985

97459,567.57
97.9
2,288
1,018
9,088
7,034
17,37398
456,932.16
99.1
2,293
953
9,413
7,451
18,404

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 21st Fiscal Period are calculated based on a period of 184 days, 182 days for the 22nd Fiscal Period, 184 days for the 23rd Fiscal
Period, 181 days for the 24th Fiscal Period, 184 days for the 25th Fiscal Period.
3. Return on net assets = Net income/{(Total net assets at beginning of period + Total net assets at end of period)/2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Property-related expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate property + Loss on sale of real estate property
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)

24 Kenedix Office Investment Corporation

Kenedix Office Investment Corporation 25

Balance Sheets
Kenedix Office Investment Corporation
As of October 31, 2017 and April 30, 2017

In thousands of yen

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

26 Kenedix Office Investment Corporation

As of October 31, 2017

As of April 30, 2017

¥ 29,725,877
314,766
90,895
126,323
30,257,862¥ 23,832,680
329,429—
85,51324,247,623

134,818,107
2,155,302
546,868(32,209,258)
276,130,664
1,142
381,442,828

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

638,330
1,096,423
48,526—
1,449,691
3,232,972¥414,933,663

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

1,519,529

1,414,407

24,250,000
1,800,000
31,6472,240,535
221,446
30,063,159

26,750,000
1,500,000
69,9242,170,062
673,815
32,578,209

6,000,000
147,550,000
18,469,097
172,019,097
202,082,256

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

206,199,945

206,199,945

2,024,673
4,589,238
6,613,911
212,813,857

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

37,54937,549212,851,406¥414,933,663

10,882
10,882212,986,261¥410,166,386

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

In thousands of yen

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

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017¥13,840,486—
61,007
13,901,494¥13,327,605
1,662,787
48,643
15,039,036

6,720,726
568,160
757,285
77,465
120,457
8,244,096
5,657,398

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

870,409
152,051
19,277
5,072
20,4601,067,272
4,590,125
4,590,125
1,131
4,588,993
244¥ 4,589,238

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

See accompanying notes to the financial statements.

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

In thousands of yen

Valuationandtranslation
adjustments

Unitholders’ equity

Balance as of October 31, 2016
Changes during the fiscal period
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of April 30, 2017
Changes during the fiscal period
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of October 31, 2017

Unitholders’capitalSurplus
Voluntary
retainedearnings
UnappropriatedReserve forretained
reduction entry
earnings

Total
surplusTotal
unitholders’equityDeferred
gains orlosses onhedges¥206,199,945 ¥2,024,673¥4,601,756¥6,626,429 ¥212,826,375

—
—

—
—

(4,601,518)
4,750,521(4,601,518)
4,750,521(4,601,518)
4,750,521——(4,601,518)
4,750,521

—

—

—

—

—

11,85911,859——¥206,199,945 ¥2,024,673

149,003¥4,750,760

149,003
149,003¥6,775,433 ¥212,975,379

11,859¥10,882

160,863¥212,986,261

—
—

—
—

(4,750,515)
4,588,993(4,750,515)
4,588,993(4,750,515)
4,588,993——(4,750,515)
4,588,993

—

—

—

—

—

26,667

26,667(161,521)(161,521)(161,521)
26,667¥4,589,238 ¥6,613,911 ¥212,813,857 ¥37,549(134,854)¥212,851,406——¥206,199,945 ¥2,024,673

¥

Total
net assets(977) ¥212,825,397

See accompanying notes to the financial statements.
Kenedix Office Investment Corporation 27

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

In thousands of yen

Cash Flows from Operating Activities:
Income before income taxes
Adjustments to reconcile income before income taxes
to net cash provided by (used in) operating activities:
Depreciation and amortization
Interest income
Interest expenses
Changes in assets and liabilities:
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Increase (decrease) in accrued consumption taxes
Increase (decrease) in operating accounts and other payables
Increase (decrease) in advances received
Decrease in property and equipment due to sale
Others, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from tenant leasehold and security deposits
Payments of tenant leasehold and security deposits
Payments of restricted bank deposits in trust
Proceeds from restricted bank deposits in trust
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 3)
See accompanying notes to the financial statements.

28 Kenedix Office Investment Corporation

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017

¥ 4,590,125¥ 4,751,770

2,467,053(35)
870,4092,479,628(35)
885,690

14,663(90,895)(444,631)
269,626
70,473
5,398,413(281,444)
12,863,759
35(877,086)(799)
11,985,908

1,346—
254,234(278,398)
24,264
19,474,995
75,62027,669,115
35(885,563)(843)
26,782,743(6,327,541)—
784,232(776,876)—
73,936(6,246,248)(15,667,977)(293,196)
1,350,759(949,034)(289,809)—(15,849,258)

2,000,000—
15,500,000(14,000,000)
2,977,416(1,500,000)(4,749,942)
227,473
5,967,133
22,668,339¥ 28,635,473

4,000,000(1,500,000)
6,200,000(9,200,000)—(3,000,000)(4,601,179)(8,101,179)
2,832,305
19,836,034¥ 22,668,339

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

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Office Investment Corporation (“the Investment­Corporation”) is a real estate investment corporation whose units
are listed on the Tokyo Stock Exchange. The Investment­Corporation is engaged in ownership and operation of selected
office buildings, residential and retail properties in Japan, with afocus on mid-sized office buildings in the Tokyo Metropolitan Area.
The Investment Corporation was incorporated on May 6, 2005 as
an investment corporation under the Law Concerning Investment
Trusts and Investment Corporations of Japan, or the Investment
Trust Law. On July 21, 2005, the Investment Corporation was
listed on the Real Estate Investment Trust Market of the Tokyo
Stock Exchange with a total of 75,400 investment units issued andoutstanding (Securities Code: 8972). Subsequently, the Investment
Corporation raised funds through seven public offerings and othermeans including global offerings. Pursuant to the Investment Trust
Law, the Investment Corporation is externally managed by a registered asset management company, Kenedix Real Estate FundManagement, Inc. (“the Asset Management Company”), a sub­sidiary of Kenedix, Inc. (“Kenedix”). In concert with the Asset­Management Company, the Investment Corporation strives tomaximize cash distribution to investors by securing stable earnings
and sustainable investment growth. To this end, the Investment
Corporation adopts a dynamic and flexible investment stance that
accurately reflects its environment and market trends, and­endeavors to ensure a timely response to each and every
opportunity.
During the period ended April 30, 2017, the Investment­Corporation acquired three office buildings (ARK Mori Building:acquisition price of ¥4,169 million, Nishi-Shinbashi TS Building:acquisition price of ¥8,400 million, and BR Gotanda: acquisition
price of ¥2,200 million) and sold five office buildings (BUREX­Toranomon: initial acquisition price of ¥1,750 million, KDX­Nihonbashi Kabutocho Building: initial acquisition price of ¥11,270
million, KDX Roppongi 228 Building: initial acquisition price of¥3,300 million, KDX Kanda Misaki-cho Building: initial acquisition
price of ¥1,380 million, and KDX Gobancho Building: initial acquisition price of ¥1,951 million (with a total disposition price of¥19,910 million)).
During the period ended October 31, 2017, the Investment
Corporation acquired two office buildings (Takeyama White­Building: acquisition price of ¥1,800 million, and Shibuya 1717

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Non-marketable securities classified as other securities are carriedat cost. Cost of securities sold is determined by the moving
average method. Concerning silent partnership (tokumei kumiai,­ uilding: acquisition price of ¥3,500 million) and sold one officeBbuilding (KDX Shin-Yokohama 381 Building: initial acquisition priceof ¥5,800 million(with a disposition price of ¥4,900 million)). At theend of the twenty-fourth and twenty-fifth fiscal periods, theInvestment Corporation had total unitholders’ capital of ¥206,199
million with 404,885 investment units outstanding, respectively.
The Investment Corporation owned a portfolio of 97 properties(consisting of 92 office buildings, one residential property, three
central urban retail properties and one other property), and 98
properties (consisting of 93 office buildings, one residential property, three central urban retail properties and one other property)
with total acquisition prices of ¥393,468 million and ¥392,968­million at the end of the twenty-fourth and twenty-fifth fiscal periods, respectively. The occupancy ratios were approximately 97.9%
and 99.1% at the end of the twenty-fourth and twenty-fifth fiscal
periods, respectively.
Basis of Presentation
The accompanying financial statements have been prepared inaccordance with the provisions set forth in the Investment Trust
Act of Japan, the Financial Instruments and Exchange Law ofJapan and related regulations, and in conformity with accounting
principles and practices generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the application and disclosure requirements of the International Financial
Reporting Standards or accounting principles generally acceptedin the United States of America.
The accompanying financial statements are basically a translation of the audited financial statements that were prepared for­Japanese domestic purposes from the accounts and records
maintained by the Investment Corporation and filed with the Kanto
Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Law. In preparing the accompanying financial statements, relevant notes have been added andcertain reclassifications have been made to the financial statements issued domestically in order to present them in a form thatis more familiar to readers outside Japan. The Investment
Corporation’s fiscal period is a six-month period that ends at theend of April and the end of October each year. The Investment
Corporation does not prepare consolidated financial statements
because it has no subsidiaries.

“TK”) interests, the method of incorporating the amount of equity
equivalent to the portion that corresponds to the net gain or lossof the TK is adopted.

(B) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line basis overthe estimated useful lives of the assets ranging as stated below:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

From May 1, 2017 to October 31, 2017

2-49 years
3-17 years
3-20 years

From November 1, 2016 to April 30, 2017

2-49 years
3-17 years
3-20 years

Kenedix Office Investment Corporation 29

(C) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of
three years under the straight-line method.
(D) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over amaturity period under the straight-line method.
(E)	Accounting Treatment of Trust Beneficiary Interests inReal Estate
For trust beneficiary interests in real estate, which are commonly
utilized in the ownership of commercial properties in Japan, allassets and liabilities in trust are recorded in the relevant balance
sheets and statements of income and retained earnings.
(F) Leasehold Right
Fixed-term leaseholds on the building and special agreements onbuilding sales are amortized over a contractual period of 48 years
and 9 months under the straight-line method.
(G) Revenue Recognition
Operating revenues consist of rental revenues including baserents, common area charges, and other operating revenues, which
include utility charge reimbursements, parking space rental­revenues and other miscellaneous revenues. Rental revenues are
generally recognized on an accrual basis over the life of eachlease. Utility charge reimbursements are recognized when earned
and their amounts can be reasonably estimated. Reimbursementsfrom tenants including utility charge reimbursements are recorded
on a gross basis and such amounts are recorded both as­revenues and expenses during the fiscal period.
(H) Taxes on Property, Plant and Equipment
Property-related taxes including property taxes, city planning taxes
and depreciable property taxes are imposed on properties on acalendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to the said period. Under Japanese tax rules, the sellerof property at the time of disposal is liable for these taxes on theproperty from the date of disposal to the end of the calendar year
in which the property is disposed. The seller, however, is generally
reimbursed by the purchaser for these accrued property-related
tax liabilities.
When the Investment Corporation purchases properties, it­typically allocates the portion of the property-related taxes related
to the period following the purchase date of each property throughthe end of the calendar year. The amounts of those allocatedportions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-­
related taxes amounted to ¥26,264 thousand and ¥32,698 thousand as of October 31, 2017 and April 30, 2017, 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.

30 Kenedix Office Investment Corporation(I) Income Taxes
Deferred tax assets and liabilities are computed based on the
difference between the financial statements and income tax basesof assets and liabilities using the statutory tax rates.
(J) Consumption Taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable to the acquisition of assets are includedin the cost of acquisition for each asset.
(K) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap and­interest-rate cap contracts as derivative financial instruments only
for the purpose of hedging its exposure to changes in interest
rates. The Investment Corporation deferred recognition of gains orlosses resulting from changes in fair value of interest-rate swap
and interest-rate cap contracts because these contracts met thecriteria for deferral hedging accounting. However, the Investment
Corporation adopted special treatment for interest-swap andinterest-rate cap contracts if they met the criteria for hedging
accounting under this treatment, whereby the net amount to be
paid or received under the interest-rate swap and interest-rate cap
contract is added to or deducted from the interest on the assets or
liabilities for which the swap and cap contract was executed. The
hedge effectiveness for the interest-rate swap and interest-rate
cap contract is assessed each fiscal period except for those thatmeet the criteria of special treatment.
(L) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits
placed with banks and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk ofmarket value fluctuation, with maturities of three months or lessfrom the date of purchase.
(M) Rounding of Amounts Presented
Amounts of less than one thousand yen have been truncated in
the Japanese financial statements prepared in accordance withJapanese GAAP and filed with regulatory authorities in Japan.
Unless otherwise noted, amounts of the twenty-fifth fiscal andtwenty- fourth fiscal period are rounded down, respectively, andratios are rounded off in the accompanying financial statements.
Totals shown in the accompanying financial statements do notnecessarily agree with the sums of the individual amounts.

3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following as of October 31, 2017 and April 30, 2017.
In thousands of yen

As of April 30, 2017

As of October 31, 2017

Cash and bank deposits
Restricted bank deposits in trust (Note)
Cash and cash equivalents in trust¥23,832,680(1,164,340)¥22,668,339¥29,725,877(1,090,403)¥28,635,473

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

4. SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

In millions of yen

As of April 30, 2017

As of October 31, 2017

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

Acquisition costs

Accumulated
depreciation

Book value¥134,818
2,155
546
276,1301¥413,652¥30,842
1,055
311
—
—
¥32,209¥103,975
1,099
235
276,1301¥381,442

Acquisition costs¥136,208
2,078
535
274,7312¥413,555

Accumulated
depreciation¥29,506
992
293——¥30,793

Book value¥106,701
1,085
242
274,7312¥382,762

5. SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENT CORPORATION BONDS
The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of
October 31, 2017:Classification

Short-term loans payable

Current portion of long-term loans payable

SubtotalLong-term loans payable

November 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
July 31, 2017
August 31, 2017
November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
October 31, 2012
October 31, 2013
October 31, 2016

Last repayment dateNovember 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
July 31, 2018
August 31, 2018
November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018
October 31, 2018
October 31, 2018

Weighted-averageinterest rate

March 28, 2012
March 28, 2012
August 30, 2013
September 30, 2013
September 30, 2013

March 28, 2019
March 28, 2019
August 31, 2020
September 30, 2019
September 30, 2019

1.77%
1.77%
1.42%
1.06%
1.06%

Drawdown date

0.33%
0.33%
0.33%
0.33%
0.33%
0.28%
2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%
0.56%
0.95%
0.95%
0.95%
0.95%
0.97%
1.08%
1.08%
1.08%
1.25%
0.89%
0.33%

Balance(In millions of yen)

¥

2,000
500
500
1,000
1,000
1,000
2,300
700
500
500
500
2,250
1,000
1,000
500
1,000
1,000
500
500
500
700
500
300
2,500
500
1,000
24,250¥ 1,400
1,000
1,500
1,800
900

Kenedix Office Investment Corporation 31

Classification

Long-term loans payable

32 Kenedix Office Investment Corporation

Drawdown date

Last repayment date

Weighted-averageinterest rate

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

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

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

Balance(In millions of yen)

¥

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

Classification

Long-term loans payable

Subtotal
Current portion of Investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027

1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%
0.83%
0.98%
0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%

September 12, 2013

September 12, 2018

1.00%

July 25, 2014
April 28, 2016
July 19, 2017
July 19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In millions of yen)

¥

2,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
2,500
1,000
4,000
1,500
500
1,500
500
700
500
1,500
3,500
1,000
1,000
1,500
1,000
1,000
2,500
2,500
147,550¥ 1,800
1,800¥ 2,000
1,000
1,000
2,000
6,000
¥179,600

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

Short-term loans payable

Current portion of long-term loans payable

Drawdown dateNovember 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
June 29, 2012
July 29, 2016
August 2, 2016
August 2, 2016
September 21, 2012
September 21, 2012
September 21, 2012
October 31, 2012

Last repayment dateNovember 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
June 30, 2017
July 31, 2017
August 31, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

Weighted-averageinterest rate

0.33%
0.33%
0.33%
0.33%
1.29%
0.38%
0.38%
0.23%
1.16%
1.16%
1.16%
1.10%

Balance(In millions of yen)

¥

2,000
500
500
1,000
1,500
1,000
1,000
1,000
5,000
1,000
1,000
2,500

Kenedix Office Investment Corporation 33

Classification

Current portion of long-term loans payable

SubtotalLong-term loans payable

34 Kenedix Office Investment Corporation

Drawdown date

Last repayment date

Weighted-averageinterest rate

November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013

November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018

2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%

March 28, 2012
March 28, 2012
October 31, 2012
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
August 30, 2013
September 30, 2013
September 30, 2013
October 31, 2013
November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014

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

1.77%
1.77%
1.25%
0.56%
0.95%
0.95%
0.95%
0.97%
0.95%
1.08%
1.08%
1.08%
1.42%
1.06%
1.06%
0.89%
0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%

Balance(In millions of yen)

¥

2,300
700
500
500
500
2,250
1,000
1,000
26,750¥ 1,400
1,000
2,500
500
1,000
1,000
500
500
500
700
500
300
1,500
1,800
900
500
1,000
2,000
500
200
1,000
900
1,300
3,700
2,300
450
1,800
1,800
3,000
4,000
3,000
2,000
2,500
2,900
500
2,000
500
1,000
1,000
2,700
300
2,200
1,000
800
500
1,000
950
2,700
1,000
3,000
2,000

Classification

Long-term loans payable

Subtotal
Current portion of Investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017

October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2018
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027

1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.12%
1.11%
1.11%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.33%
0.67%
0.73%
0.88%
0.83%
0.76%
0.98%
0.95%
0.86%
0.85%
0.85%

March 8, 2012

September 8, 2017

2.00%

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

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

1.00%
1.18%
0.90%

Balance(In millions of yen)

¥

1,500
1,000
2,000
1,000
1,500
1,500
1,250
350
1,700
1,250
2,100
1,000
2,500
2,300
500
500
500
500
500
500
2,000
1,000
2,500
2,500
2,000
1,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
1,000
4,000
2,500
1,500
1,000
500
1,500
500
700
500
141,550¥ 1,500
1,500¥ 1,800
2,000
1,000
4,800
¥174,600

Kenedix Office Investment Corporation 35

6. REDUCTION ENTRY
The amount of reduction entry of property, plant and equipment acquired by government subsidy is as follows:
In thousands of yen

Buildings and structures¥26,230¥26,230

7. PER UNIT INFORMATION

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

As of April 30, 2017

As of October 31, 2017

Yen

From May 1, 2017
to October 31, 2017

¥525,708¥ 11,334
404,885

From November 1, 2016
to April 30, 2017

¥526,041¥ 11,733
404,885

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

8. INCOME TAXESThe Investment Corporation is subject to corporate income taxes
at a regular statutory rate of approximately 32%. However, theInvestment Corporation may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements
are met under the Special Taxation Measures Law of Japan. Under
this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distributein excess of 90% of its net income for the fiscal period in order tobe able to deduct such amounts. If the Investment Corporation
does not satisfy all of the requirements, the entire taxable incomeof the Investment Corporation will be subject to regular corporate

Statutory tax rate
Deductible cash distributions
Reversal of reserve for reduction entry
Others
Effective tax rateincome taxes. The Investment Corporation distributed in excessof 90% of its distributable income in the form of cash distributions
totaling ¥5,061 million and ¥4,750 million for the periods ended
October 31, 2017 and April 30, 2017, respectively. Therefore, such
distributions were treated as deductible distributions for purposesof corporate income taxes. The effective tax rate on the Investment
Corporation’s income was 0.02% and 0.03% for the fiscal periods
ended October 31, 2017 and April 30, 2017, respectively. The
following table summarizes the significant differences between thestatutory tax rate and the effective tax rate.

From May 1, 2017
to October 31, 201731.74%(35.00)
3.26
0.02
0.02%

From November 1, 2016
to April 30, 201731.74%(31.73)
—
0.02
0.03%

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

Deferred tax assets:
Enterprise tax payable
Amortization of leasehold rights
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets

As of October 31, 2017

As of April 30, 2017

¥

¥

25
3,383
3,409
(3,383)
¥
25

30
3,154
3,185
(3,154)¥30

9. 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 the Investment Trust Act.

36 Kenedix Office Investment Corporation

10. RELATED-PARTY TRANSACTIONS(A) Parent Company, Major Corporate Unitholders’ and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(B) Affiliated Companies and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(C) Fellow Subsidiary Companies and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(D) Directors, Major Individual Unitholders’ and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable

11. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSSON SALE OF REAL ESTATE PROPERTY
Rent revenue - real estate, expenses related to rent business, and gain and loss on sale of real estate property for the periods from May 1,2017 to October 31, 2017 and from November 1, 2016 to April 30, 2017 consist of the following:
In thousands of yen

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017

¥ 9,997,791
1,847,673
11,845,464¥ 9,701,842
1,870,827
11,572,669

520,035
1,176,012
298,973
1,995,021¥13,840,486

499,611
978,129
277,195
1,754,936¥13,327,605¥ 1,325,156
2,293,789
1,176,914
1,141,603
18,785451,239
33,580279,656¥ 6,720,726¥ 1,315,879
2,288,632
1,006,582
1,122,460
18,202436,606
32,832306,493¥ 6,527,688

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

—
—
—
—

¥14,840,000
12,839,023
338,188¥ 1,662,787

Loss on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Loss on sale of real estate property¥ 4,900,000
5,419,438
48,722¥ 568,160¥ 5,070,000
6,635,971
91,189¥ 1,657,160

Rental and other operating revenues:
Rent revenue - real estate:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rent revenue - real estate
Property-related expenses:
Expenses related to rent business:
Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
OthersTotal expenses related to rent business

Kenedix Office Investment Corporation 37

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

As of October 31, 2017

Due within one year
Due after one year
Total

¥ 1,794,970
9,036,969¥10,831,939

As of April 30, 2017

¥ 1,679,760
9,345,602¥11,025,363

13. FINANCIAL INSTRUMENTS
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges 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, which are Japanese silent partnership(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition ofproperties and have a redemption date of a maximum of approximately 10 years and 6 months following the accounting date.
Although a certain portion of said liabilities are subject to interest
rate fluctuation risk, the Investment Corporation utilizes derivatives(interest-rate swap and interest-rate cap transactions) in order toreduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (K)“Derivative Financial Instruments.”(3) Risk management for financial instruments(a)	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and interest-rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.
(b)	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk, theInvestment 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 as­regularly checking the balance of cash reserves.
(4)	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2017 and estimated fair value are shown in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and bank deposits
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value

Estimated fair value¥ 29,725,877
29,725,877
6,000,000
1,800,000
18,250,000
6,000,000
147,550,000¥179,600,000
37,549¥ 29,725,877
29,725,877
6,000,000
1,810,728
18,283,972
6,048,100
148,148,063¥180,290,864
37,549Difference

¥

—
—
—
10,72833,972
48,100598,063¥690,864—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

38 Kenedix Office Investment Corporation

*1:	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”*2: Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,096,423

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3: Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and bank deposits
Total¥29,725,877¥29,725,877*4: Redemption schedule for loans payable and investment corporation bonds

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

Due within 1 year
or less¥ 6,000,000
1,800,000
18,250,000¥26,050,000

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

¥

¥

¥

¥

—
—
13,750,000¥13,750,000

Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges 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, which are Japanese silent partnership­(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.

——
18,600,000¥18,600,000——
21,300,000¥21,300,000—
1,000,000
17,050,000¥18,050,000

Due after
5 years¥—
5,000,000
76,850,000¥81,850,000

Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition of properties and have a redemption date of a maximum of approximately
11 years following the accounting date. Although a certain portionof said liabilities are subject to interest rate fluctuation risk, theInvestment Corporation utilizes derivatives (interest-rate swap andinterest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (K)“Derivative Financial Instruments.”

Kenedix Office Investment Corporation 39

(3) Risk management for financial instruments(a) 	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.

(4) 	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(b) 	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk, theInvestment Corporation reduces such risk by spreading out­payment due dates and by using diversified fund procurement
methods. Liquidity risk is also managed by such means as­regularly checking the balance of cash reserves.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2017 and estimated fair value are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and bank deposits
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value¥ 23,832,680
23,832,680
4,000,000
1,500,000
22,750,000
4,800,000
141,550,000¥174,600,000
10,882Estimated fair value¥ 23,832,680
23,832,680
4,000,000
1,508,940
22,791,356
4,874,082
142,700,464¥175,874,843
10,882Difference

¥

—
—
—
8,940
41,35674,082
1,150,464¥1,274,843—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

*1: 	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”

40 Kenedix Office Investment Corporation

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

Carrying value (In thousands of yen)

Investment securities¥1,087,688

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3: Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and bank deposits
Total¥23,832,680¥23,832,680*4: Redemption schedule for loans payable and investment corporation bonds

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

Due within 1 year
or less¥ 4,000,000
1,500,000
22,750,000¥28,250,000

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

¥

¥

¥

¥

—
1,800,000
17,050,000¥18,850,000——
14,700,000¥14,700,000——
19,600,000¥19,600,000——
21,700,000¥21,700,000

Due after
5 years¥—
3,000,000
68,500,000¥71,500,000

14. DERIVATIVE TRANSACTIONS
The following summarizes the contracted amount and the fair value of interest-rate swap and the interest-rate cap contracts as of
October 31, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearFair value(In thousands of yen)Calculation method for
applicable fair value¥37,549

Based on theamount provided
by counterparty
financial institutions

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payable99,650,000

93,900,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

Long-term loans
payable500,000

—

*

Total

¥ 12,200,000 ¥ 12,200,000¥112,350,000 ¥106,100,000¥37,549(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

Kenedix Office Investment Corporation 41

The following summarizes the contracted amount and the fair value of interest-rate swap and the interest-rate cap contracts as ofApril 30, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearInterest-rate caps
transaction

Long-term loans
payable*Special treatment ofinterest-rate caps

500,000

Long-term loans
payable500,000

Interest-rate swaps:
Receive/floating andpay/fixed*

Special treatment ofinterest-rate swaps

97,400,000¥

102,150,000

Long-term loans
payableBased on theamount provided
by counterparty
financial institutions

Interest-rate swaps:
Receive/floating andpay/fixed¥10,882

Principle method

3,700,000

Hedged items

Calculation method for
applicable fair value

Type of derivative transactions

Fair value(In thousands of yen)

Hedge accounting method

Total

3,700,000 ¥¥106,350,000 ¥101,600,000¥10,882(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

15. INVESTMENT AND RENTAL PROPERTIES
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying Value (In thousands of yen)
As of April 30, 2017

¥383,401,649

Net change¥(1,320,490)

As of October 31, 2017

¥382,081,158

Fair value
As of October 31, 2017
(In thousands of yen)

¥424,323,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of Residence
Charmante Tsukishima that was sold on December 1, 2017 is calculated based on the sale price (¥4,900 million) in the transaction agreement on October 30, 2017.
Those of KDX Ikejiri-Oohashi Building and KDX Shin-Yokohama 214 Building that were sold on December 28, 2017 are calculated based on the anticipated sale price(KDX Ikejiri-Oohashi Building: ¥2,400 million; and KDX Shin-Yokohama 214 Building: ¥2,430 million) in the transaction agreements on December 14, 2017.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of 2 properties totaling ¥5,405,572 thousand, the sales of 1 property totaling ¥5,419,438 thousand and depreciation amounting to ¥2,293,789 thousand.

Income and loss in the fiscal period ended October 31, 2017 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OFRENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY”.
Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying Value (In thousands of yen)
As of October 31, 2016

¥389,197,020

Net change¥(5,795,370)

As of April 30, 2017

¥383,401,649

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

¥416,550,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: The fair value is the appraisal value or the survey value determined by outside appraisers.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of 3 properties totaling ¥14,942,506 thousand, the sales of 5 properties totaling ¥19,474,995 thousand and depreciation amounting to ¥2,288,632
thousand.

Income and loss in the fiscal period ended April 30, 2017 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OF RENTALAND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”

42 Kenedix Office Investment Corporation

16. SEGMENT AND RELATED INFORMATION
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenue on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenue on the statementof income and retained earnings.
Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenue on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenue on the statementof income and retained earnings.

17. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable

Kenedix Office Investment Corporation 43