Focusing on Mid-sized Office Buildings in the Tokyo Metropolitan Area

19th

Fiscal Period

SEMIANNUAL REPORTMay 1, 2014–October 31, 2014

KENEDIX-REIT
TSE 8972

Top Message

In the 19th Fiscal Period, we bounded forward
toward the next growth stage, approaching the
medium-term goal of 400 billion yen in asset size
based on acquisition price. After the public offeringin May 2014, we acquired seven properties during
the period, followed by another public offering at
the start of the 20th Fiscal Period and the acquisitionof five properties, boosting our portfolio size to 99
properties or 384.7 billion yen as of January 9, 2015.
With an eye on new growth opportunities, we arepoised to further strengthen our presence as theNo. 1 J-REIT for mid-sized office buildings.
Naokatsu Uchida
Executive Director
Kenedix Office Investment Corporation

Capturing
New Growth Opportunities
in the Mid-sized Office
Building Market

| 1

Kenedix Office Investment Corporation Semiannual Report(As of October 31, 2014)

Operating Revenues

Operating Income

12,928

5,028

million yen

million yen

12,928
10,212

9,867

9,819

15th Period

16th Period

17th Period

10,89518th Period

19th Period

5,028
4,516

4,401

4,240

4,283

15th Period

16th Period

17th Period

18th Period

19th Period(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)

Net Income

Distribution per Unit

3,569

3,569
3,009

3,002

15th Period

16th Period

10,060

million yen

2,831

2,885

17th Period

18th Period

19th Period

9,557

9,434

9,302

9,638

15th Period

16th Period

17th Period

18th Periodyen

10,06019th Period(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)

Total Assets

Net Assets Ratio / Unitholders’ Equity

388,169

46.6

million yen
388,169

%

49.0%

48.9%

47.6%

47.9%

46.6%

150,389

150,653

150,781

170,109180,844

million yen

million yen

million yen

million yen

million yen

15th Period

16th Period

17th Period

18th Period

19th Period

355,167
306,734

15th Period

308,172

16th Period

316,753

17th Period

18th Period

19th Period(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)

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

Occupancy Rate

48.4

95.6

%

45.8%

46.2%

47.5%

47.2%

48.4%

140,581

142,369

150,558

167,746

187,685

million yen

million yen

million yen

million yen

million yen

15th Period

16th Period

17th Period

18th Period

19th Period(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)

%

95.5%

93.9%

95.8%

96.0%

95.6%

15th Period

16th Period

17th Period

18th Period

19th Period(Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013) (Ended Apr. 30, 2014) (Ended Oct. 31, 2014)

2 |Kenedix Office Investment Corporation Semiannual Report

Consistently

Acquiring Properties to Sustain External Growth,
Continuous Improvement in Portfolio Quality Through Property ReshuffleDuring the 19th Fiscal Period (ended October 2014), Kenedix Office Investment
Corporation (KDO) acquired seven properties at a total acquisition price of 38.1
billion yen: KDX Toyosu Grand Square and two other properties in May 2014, followed by the Hiroshima Ekimae-dori Mark Building and Tosen Ikebukuro Building in
September, and the Senri Life Science Center Building and Urban Square Yokohama
in October.
All of these seven properties enjoy high tenancy demand and are highly competitive within their areas. We expect these acquisitions to contribute to long-term revenue as well as the overall profitability and stability of our portfolio.
We invest mainly in mid-sized office buildings in the Tokyo Metropolitan Area;
however, three of the seven properties acquired during the fiscal period under review
are located in other regional areas. This is consistent with our policy of investing in
carefully selected properties that offer excellent location and tenant mix in otherregional areas.
During the fiscal period under review, we also sold two properties, in the
Shin-Yokohama area and Honmachi area in Osaka, for a total selling price of 2.6 billion yen. By reshuffling our properties, we are improving the quality of the portfolio.

Maintain High Occupancy Rates,
Steadily Increasing Upward Rent Renewals

Vacancy rates are improving and rents are rising in the office building leasing
market. Buoyed by these favorable conditions, the Investment Corporation
maintained high occupancy rates: 95.9% for office buildings in Tokyo’s five central
wards and 95.4% across all its office buildings, as of October 31, 2014.
Furthermore, thanks to the recovery in the office leasing market, we were able totake a strong position when negotiating with tenants. As a result, we managed toincrease the proportion of upward rent revisions from that of the previous fiscal period (ended April 2014), both in terms of number of tenants and floor area leased.
We also place great importance on maintaining and improving property competitiveness by renovating and adding value. One such project undertaken during the
fiscal period under review is the KDX Takanawadai Building. By refurbishing thebuilding’s elevator hall, we were able to tap into hidden demand among existing tenants for greater floor space, and by refitting vacant office space on the first floor for
retail use, we succeeded in attracting new tenants. As a result of these initiatives, thebuilding’s occupancy rate stands at 100% as of October 31, 2014.

Reducing Financial Costs and Extending Debt Maturities,
Maintaining Stable Financial BaseOn the financial front, we steadily reduced financing costs and extended debt
maturities amid sustained favorable funding conditions. We are focused on
maintaining a high proportion of fixed-rate debt and optimizing the distribution of
repayment dates when procuring funds in order to maintain and improve ourfinancial stability.

Kenedix Office Investment Corporation Semiannual Report| 3

Going forward, we will continue efforts to reduce financing costs by seeking better interest rates when refinancing our comparatively high-interest debt, giving due
consideration to loan periods and other factors.

Capital Increases through Three Consecutive Public Offerings,
Now Approaching 400 Billion Yen in AssetsWe raised additional capital through a public offering in November 2014. This
capital increase served three purposes: to facilitate the improvement of theportfolio’s profitability and of unitholders’ value; to ensure greater stability in termsof revenue generation and enhance economies of scale by increasing the size of ourportfolio; and to lower the LTV ratio with the aim of strengthening our financial
foundation and enhancing our borrowing capacity for other property acquisitions.
The capital raised through this public offering was used to acquire five additional
mid-sized office buildings. As a result, the Investment Corporation’s portfolio stands
at 99 properties with a total value of 384.7 billion yen as of January 9, 2015, bringing us close to the medium-term goal of 400 billion yen in assets. We have now
conducted public offerings in three consecutive periods. I am confident that thesuccess of these offerings will help the Investment Corporation achieve even greater
growth and progress going forward.

Distribution Per Unit Reaches 10,000 Yen Level,
Increasing Unitholders’ Value by Boosting Net Asset Value*Distribution per unit for the fiscal period under review was 10,060 yen, up fromthe previous fiscal period (ended April 2014), and exceeding 10,000 yen for the
first time in four years. Positive factors behind this increase included income fromnewly acquired properties as well as dividends income from property-backed
preferred securities. Meanwhile, increased costs included costs related to property
acquisitions and a loss on sales of properties.
In the 20th Fiscal Period (ending April 2015), we expect both income and profit
to continue to rise. Distribution per unit is forecast at 11,000 yen, up 940 yen fromthe previous fiscal period, reflecting contributions to income from newly acquired
properties, dividends income from property-backed securities as well as reduced loss
on property sales. As an aside, assuming the full period contribution of newly
acquired properties, after taxes and other public dues, and excluding temporary
income and costs, the distribution level based on actual earnings of the portfolio is
expected to be between 10,200 and 10,300 yen.
Net asset value per unit after the public offering stood at 496,000 yen after the
public offering.* This was due to the sale of properties with unrealized losses, theacquisition of properties at prices below their respective appraisal values, increases in
end-of-period appraisal values of existing portfolio properties, and the public offering at a unit price exceeding net asset value per unit.
We will continue to increase unitholders’ value by acquiring new properties andreshuffling the portfolio.
* Net Asset Value (NAV) = Period-end net assets –Unappropriated retained earnings [including reversal of negative goodwill] +Period-end appraisal value –Tangible fixed assets

4 |Kenedix Office Investment Corporation Semiannual Report

Using Our Wealth of Knowledge as the No. 1 Owner of
Mid-Sized Office Buildings to Best Serve Investors

Japan’s Government Pension Investment Fund (GPIF) and the Bank of Japan recently announced that they will increase their investments in J-REITs. What’s more, inNovember 2014, the total market capitalization of all J-REITs surpassed 10 trillion yen
for the first time. The Tokyo Stock Exchange REIT Index has seen solid growth since2008. And, in light of the commencement of the Nippon Individual Savings Account(NISA) program, a tax-break scheme for small investments, J-REITs have been gaining
attention due to their appealing rates of return. These facts illustrate the strengthwith which the market is growing and promise continued development.
In looking at the office building market, we believe that, among buildings of agiven size, some properties are competitive and some are not. This is because thetype of tenants targeted varies by building size.
The supply of new office buildings in Japan peaked for small- and mid-sizedbuildings around 1990, with Japan’s economic bubble, and has been limited for the
past 20 years. In contrast, there has been a constant supply of new large-scale officebuildings. So, naturally, the factors influencing the competitiveness of large-scalebuildings and small- and mid-sized buildings are different.
The difference is clear when comparing the data for office space in the 23 wardsof Tokyo by size and year completed. Among small- and mid-sized buildings, thosethat were built more than 20 years ago make up 79% of total leasable floor space.
The same figure for large-scale buildings is just 46%.
It is important, then, to maximize customer satisfaction and attract SMEs to midsized buildings that are over 20 years old, where the main volume of the market is.
To that end, not only location is crucial, but so too are proper building management
and operation as well as upgrades and renovations of facilities.
Our portfolio now consists of more than 90 office buildings, most of which are
mid-sized. This is the most of any J-REIT. In addition to the benefits of accumulated
expertise in building management and operations, we are seeing increasing economies of scale, including reduced operating and construction costs.
Because the limited supply of new mid-sized office buildings creates a favorable
market environment, we expect to be able to maintain and increase the competitiveness of our buildings. We aim to increase rent revenues based not only on the overall
recovery of the office building market, but also on diligent building operation
focused on tenant satisfaction.
We will continue working to solidify our position as the No. 1 mid-sized officebuilding owner in order to meet the expectations of our unitholders and fulfill oursocial mission.

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

 Tetsushi Ichikawa
General Manager of Finance & Accounting Dept.

• 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 CEO and President of Kenedix Office Partners, Inc. on February 2, 2012
• CEO and President and COO, General Manager of Office REIT Division on October 1, 2013

• Worked for Sumitomo Mitsui Trust Bank for 15 years (Engaged in real estate finance, etc.)• Joined Kenedix after having engaged in real estate 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

 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

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 Growth

Approaching the 400 Billion Yen Mile
the Next Growth Stage
Our portfolio stands at

99 properties with a total acquisition price over 380 billion yen

The fiscal period under review started with a public offering, as
did the previous fiscal period, and the acquisition of three properties, which took place on May 30, 2014.
Then, towards the end of the period, Kenedix Office

Senri Life Science
Center Building

Investment Corporation acquired four properties: Hiroshima
Ekimae-dori Mark Building, Tosen Ikebukuro Building, Senri Life
Science Center Building (see column at right) and Urban Square
Meanwhile, the Investment Corporation sold two properties,
KDX Minami Semba Dai-1 Building and Nissou Dai-17 Building, on
accounts of their leasing histories and expected future cash flows.
At the end of the period, our portfolio comprised 94 properties with a total acquisition price of 369.9 billion yen.
The portfolio is still growing. At the start of the 20th Fiscal
Period (ending April 2015), the Investment Corporation decided

ColumnYokohama, at a total acquisition price of 23.4 billion yen.
Since April 26, 2012, we have invested in the property through the acquisition of preferred securities issued by its owner, Senri Property TMK. The
property is a multi-use office building comprising
offices, retail shops, a rental hall and rental conference rooms. We decided to acquire the wholeproperty on account of its location, building conditions and tenant diversity.

to undertake a public offering for a third consecutive fiscal period. The resulting capital increase was used to fund the acquisition of five properties, Yokohama Nishiguchi SIA Building,Shin-Yokohama 214 Building, KDX Minami-Honmachi Building,
BUREX Toranomon and KDX Sakura-dori Building, at a totalacquisition price of 14.8 billion yen. We have also managed to
expand the number of tenants to about 1,200 after the public
offering in November 2014, from 1,036 after the public offeringin May 2014, helping to secure a stable income base.
Although there are signs of overheating in real estate markets,
especially in the Tokyo Metropolitan Area, comparable to the situation in 2007, we still see portfolio expansion as a major growth
driver. Capitalizing on our information network and accumulatedtransaction know-how, we will take full advantage of the opportunities that can be found in the increasingly competitive acquisition environment.
Our portfolio stands at 99 properties or 384.7 billion yen as ofJanuary 9, 2015. As we approach the medium-term goal of 400
billion yen in asset size based on acquisition price, we are looking
toward the next growth stage.

Property Data

Total Leasable Area

17,220.91 m2*

Completion Date

June 30, 1992

Acquisition Price

13.0 billion yen* The figure does not include rental halls, rental conference rooms,
or parking.

Kenedix Office Investment Corporation Semiannual Report| 7

01
External Growthstone with an Eye toward Breakdown by Asset Type Breakdown of Office Buildings by Region

Residential 1.8%

Other 0.7%

Central urban
retail properties
5.7%

Other regional areas
21.0%

Office Bldg.

Office Bldg.
(mid-sized)
84.5%

Other Tokyo
Metropolitan Area
29.1%

91.6%

Tokyo
Metropolitan
Area

Central
Tokyo
49.7%

78.9%

Notes: 1. The percentage breakdowns are calculated based on the acquisition price after the 7th public offering in November 2014
(Figures are truncated to the first decimal place).
2. Central Tokyo represents Chiyoda, Chuo, Minato, Shibuya and Shinjuku wards.

 Portfolio Growth (Based on acquisition price) (Note 1)
 Office buildings  Central urban retail properties  Residential properties  Other (Notes 2 and 3)

Number of properties(Billion yen)

(Number of properties)

400
320

77

72

68

64

84

83
69

67

70

65

67

71

83

85

89

74

94
369.9

99

100

384.7

80
60

240
352.5
337.7

160

40

35

31

20

80
69.1

0

37.7
12.3
18.9

22.1
7.1
2.8

1st Period(2005/10)

5th Period(2007/10)

10th Period(2010/4)

15th Period(2012/10)

19th Period(2014/10)

Notes: 1. Figures are truncated to the nearest 100 million yen. The acquisition price and ratio are truncated to the nearest unit unless otherwise stated.
2. “Other” for 14th and 15th fiscal periods is Kanazawa Nikko Building.
3. “Other” for 18th Fiscal Period onwards is Shinjuku 6-chome Building (Land).
4. Breakdown of asset type based on acquisition price (truncated to the first decimal place).

22.1
7.1
2.8

0

After the 7th
public offeringin November
2014 Asset Size Growth (Note 1)(Billion yen)400

Net increase in asset size

369.9
336.1

300

33.8

384.7
14.8

292.5

304.8
12.3

31.3

Acquisition 1 property
Disposition 2 properties

Acquisition 3 properties
Disposition 1 property

Acquisition 8 properties
Disposition 3 properties

Acquisition 7 properties
Disposition 2 properties

Acquisition 5 properties

End of 16th Fiscal Period(2013/4)

End of 17th Fiscal Period(2013/10)

End of 18th Fiscal Period(2014/4)

End of 19th Fiscal Period(2014/10)

After the offering in Nov. 2014

200

100

0

Properties acquired in the 17th Fiscal Period

Properties acquired in the 18th Fiscal Period

Average appraisal NOI yield of properties
acquired (Note 2)

Central Tokyo 4.8%

Central Tokyo 5.2%

Properties acquired in and after the 19th Fiscal Period

Central Tokyo 5.0%

Tokyo Metropolitan Area (excl. Central Tokyo) 5.2%

Tokyo Metropolitan Area (excl. Central Tokyo) 5.7%

Average portfolio NOI yield (Note 3)

16th Fiscal Period (2013/4) 4.3%

17th Fiscal Period (2013/10) 4.2%

18th Fiscal Period (2014/4) 4.4%

Other regional areas 6.4%

Notes: 1. Increase/decrease in asset size is based on acquisition price.
2. Average appraisal NOI yield at the time of acquisition for anticipated/acquired properties is calculated by dividing total appraisal NOI by total acquisition price for eachregion for the properties acquired in relevant fiscal period or acquired after the 19th Fiscal Period. Figures are rounded to the first decimal place.
3. Average portfolio NOI yield for 16th/17th/18th fiscal periods is calculated by dividing annualized NOI of the properties owned during the period based on actual results(for the properties acquired during each fiscal period, NOI is adjusted by dividing it by ratio of operating days to the number of days in each fiscal period) by total acquisition price. Figures are rounded to the first decimal place. For properties sold during the period, NOI yield is calculated by dividing NOI (actual results until the dispositiondate) by acquisition price (acquisition price times operating days divided by 365 days).

8 |Kenedix Office Investment Corporation Semiannual Report

Internal Growth

Maintaining High Portfolio Occupa
Leasing Conditions
Office building occupancy rate of

95.4% at the end of the 19th Fiscal Period
Continuing from the 18th Fiscal Period, we are seeing

The fiscal period under review saw continued high occu-

more cases of upward rent revision through negotiation

pancy rates and improvement in leasing conditions.
The occupancy rate for our office buildings at the end ofwith tenants. Our rent gap is shrinking, down from a peak

the period stood at 95.4%, compared to 95.9% at the endof 21.7% at the end of the 13th Fiscal Period (2011/10) toof the previous fiscal period. The occupancy rate is expect-

5.8% at the end of the fiscal period under review. As rent-

ed to remain at this high level in the 20th Fiscal Period.

free periods expire, the gap is also shrinking between theoccupancy rate and the rent-based occupancy rate.

Looking at the tenant turnover of office buildings,
although move-outs outpaced move-ins for the fiscal period under review, an increasing proportion of move-outs
were for floor expansion purposes, reflecting improving
business sentiment among SMEs.

 Change in Rent Level at Time ofRent Revision (Based on monthly rent)(Note)(Thousand yen)0

Note : Difference in monthly rent levels before and after rent
revision , calculated separately for each tenant.
Numbers are rounded to the nearest thousand yen.

Increase in rent

Decrease in rent

5,000
1,597

907

1,867

2,101

898
-555

-5,000-3,789-10,000-8,916-7,441-15,000-20,000-15,733
15th Period(2012/10)

 Occupancy Rate Performance of
Office Buildings (By region)
Move-out of a major tenant in
KDX Nihonbashi Kabutocho Bldg.
(Occupancy rate: 0%)

(%)

100

96.2
95

94.5
93.5

95.2
90

17th Period(2013/10)

18th Period(2014/4)

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

96.2

96.2

95.6

95.9
95.8

94.0

93.2

92.6

16th Period(2013/4)

19th Period(2014/10)

Tokyo Metropolitan Area
Total office building
Other regional areas
96.1
95.4
95.2

Office properties
Average month-end
occupancy rate
20th Period (forecast)
95.2%

Average occupancy rate for all office buildings
85

16th Period
93.1%

17th Period
94.1%

18th Period
95.2%

19th Period
94.8%

80
15th Period(2012/10)

16th Period(2013/4)

17th Period(2013/10)

18th Period(2014/4)

19th Period(2014/10)

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 20th Fiscal Period (2015/4) is calculated based on the AssetManagement Company’s earnings forecast for the 20th Fiscal Period.

Kenedix Office Investment Corporation Semiannual Report| 902Internal Growth

ncy While Improving
For our environmental initiatives, we have been

We are proactively investing to renovate and upgrade theexisting properties, reflecting what tenants need asawarded the Green Star rating of the Global Real Estate

revealed by customer satisfaction surveys. We also refit

Sustainability Benchmark (GRESB) survey for a third con-underused spaces to accommodate the diverse range of

secutive year in 2014, ranking first among seven players in

our tenants’ needs. Combined with property management

Japan’s office building division for the second consecutive

services provided by Kenedix Property Management, Inc.

year. As for safety and disaster management, the latest(KPM), these kinds of improvements help us bolster tenant

probable maximum loss (PML) survey conducted to evalu-

satisfaction as well as find new tenants at favorable leasing

ate earthquake risks brought our portfolio PML down toterms. This translates into improved portfolio quality in

2.38%. We will continue our efforts to meet sustainability

terms of both occupancy and revenue (see column below).

needs, as is our responsibility as a J-REIT.

Adding Value to Our Properties
KDX Shinjuku Building

Successfully increased newly contracted rent level
Change in contracted rent level*

Measures

May 1, 2014

Dec. 1, 2014

Dec. 15, 2014

• Improvement in visibility byincreasing brightnessof building entrance

100.0%

105.6%

111.1%• Improvement in design andtexture* Index value with the newly contracted rent on May 31, 2014 given a value of 100

Upgrading value through change in floor use

KDX Sendai Building

Attracted a new tenant without any downtime period,
improving average rent per square meter

Measures• Implemented leasing activities
targeted at retail tenants that
can afford higher rent per
square meter for the first floor• Converted into retail spacefor storesOccupancyrate

At the time of previous
tenant's lease cancellation(As of Sep. 1, 2014)

At the time of current
tenant's moving-in(As of Sep. 12, 2014)

88.2%

94.4%

Average rent per square meter+ 9.2% (Note)

Note: Average rent per square meter growth rate is calculated by comparing a weighted average rent (weighted based on contracted rent, incl. common area charge) of
end-tenants in contract at each relevant data point. Numbers are truncated to the first decimal place.

ColumnUpgrading value through renewal work

10 |Kenedix Office Investment Corporation Semiannual Report

Financial Strategy

03

Financial Strateg
StrategygyFinancial Strategy

Making Timely Financial Decisions
to Seize Opportunities
LTV ratio improved to43.2%, providing 460 billion yen in investment capacity
 Fixed Interest Rate (2014/10)

At the start of the fiscal period under review, the Investment Corporation raised
10.3 billion yen through a public offering, which was completed on June 24, 2014.

Floating
interest rate
¥22.4 billion
11.9%

Then, on November 6, 2014, we decided to undertake a public offering for a third
consecutive fiscal period. This offering was completed on December 24, 2014 andresulted in a capital increase of 29.5 billion yen. The interest bearing debt ratio (LTV
ratio), which rose to 48.4% at the end of the 19th Fiscal Period, decreased to43.2% as of January 9, 2015. We will have an investment capacity of approximately

Fixed interest rate
¥165.3 billion
88.1%

46 billion yen if we allow the LTV ratio to rise to 49%.
Meanwhile, we are continuing our efforts to reduce financing costs. We managed
to reduce the average interest rate of our interest-bearing debt further, from 1.65%
at the end of the 18th Fiscal Period to 1.46%. We also managed to extend theaverage remaining term to maturity from 3.1 years to 3.6 years.

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).

The aforementioned capital increase was partially used to repay 12.7 billion yen of our 15.9 billion yen short-term borrowings ahead of maturity (21st Fiscal Period, ending October 2015). We are building a sound financial base which allows
us to make prompt decisions when opportunity arrives.
 Changes in the LTV Ratio

(%)

50.0
47.0

45.6

45.0

45.3 45.8

46.2

47.5

47.2

48.4

43.0

43.2

41.2 41.4 41.1 40.9 40.9
40.0

35.0

37.5

38.7

40.3

After the 7th public offering

13th Period(2011/10)

19th Period(2014/10)

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

 Average Remaining Period toMaturity and Interest Rate in EachFiscal Period(%)(Year)

2.00

5.0

1.60

1.96

1.88

(Note)

1.77

1.65

1.20

 Weighted average remaining period to

4.0

3.6

3.0

3.1
0.80

2.7

2.4

maturity (right axis)
Weighted average interest rate

1.46

2.0

2.3

0.40

1.0

(incl. up-front fees per year) (left axis)
0.00

0.0
End of 15th Period(2012/10)

End of 16th Period(2013/4)

End of 17th Period(2013/10)

End of 18th Period(2014/4)

End of 19th Period(2014/10)

Note: Average remaining period to maturity and interest rate are weighted averages based on outstanding debts at theend of each fiscal period (Average remaining period to maturities and interest rate are rounded to the second andfirst decimal places respectively).

Kenedix Office Investment Corporation Semiannual Report| 11

Corporate Governance
Investment and Management Decision-making System
As the asset management company, Kenedix Real Estate Fund Management (KFM) creates guidelines governing our asset management.
These Asset Management Guidelines (AMGs) define our investment policy, rules concerning transactions with related parties, distribution
policy and disclosure policy.
The structure of the decision-making process is outlined below.

KFM’s 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. 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 AMGs to the Compliance Officer.

selects properties for possible acquisition according to an agreed

After review, the Officer advances the revisions to the Compliance

upon process. The Investment Management Department first

Committee where they are deliberated and resolved. Lastly, theproposes property acquisitions to the Compliance Officer. When

Office REIT Division Asset Management Committee (OAMC)

the Officer concludes there are no conflicts or other issues, thedeliberates and reaches resolution on the revisions.

Officer then forwards the proposal to the OAMC for final review

The AMGs may be revised to reflect changes in investment
conditions and our investment policy, as well as other reasons

and resolution.
In the event that the Compliance Officer identifies such issues

such as changes in the legal or regulatory environment. Wheneveras related-party transactions, potential regulatory conflicts or

the AMGs are changed, the General Manager of Office REIT

other cases the Officer deems require closer scrutiny, the proposal

Division must report each revision to the Board of Directors.

must be submitted for review and resolution by the Compliance
Committee before proceeding to the OAMC for final review and2. Decision-making Process on Asset Management

resolution. After a related-party transaction is approved, the Asset Management Plans

Compliance Officer must report this transaction to the Board of

Relevant departments of Office REIT Division may propose property

Directors.

management plans to the Compliance Officer. After review by the

The Investment Management Department of Office REIT Division

Officer, the plans are deliberated and resolved in the Compliancealso proposes property sales or disposals to the Compliance Officer,

Committee. Following that OAMC deliberates and reaches resolu-

who reviews the proposal and, when necessary, forwards it to thetion on these plans.

Compliance Committee. In the absence of conflicts or other issues,

Each time a new property management plan is approved orrevised, the General Manager of Office REIT Division must report

the Compliance Officer may send the proposal directly to the
OAMC for final review and resolution.

this to the Board of Directors.

Environmental Initiatives
KFM undertakes investment management operations in accordance with the following
environmental policies:
1. Compliance with Environmental Laws and Regulations
2. Promotion of Energy Conservation Measures
3. Reduction of Environmental Burden
4. Disclosure of Environmental Information
5. Environmental Education
Thanks to continuous efforts, we have won a range of certifications, including Green Star
ratings from the Global Real Estate Sustainability Benchmark (GRESB) surveys.

12 |Kenedix Office Investment Corporation Semiannual Report

KENEDIX-REIT Portfolio (As of October 31, 2014)
The properties acquired during the 19th 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

95.2%

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

76.2%

A13

KDX Kojimachi Building

Chiyoda-ku, Tokyo

5,950

May 1994

100.0%A14

KDX Funabashi Building

Funabashi, Chiba

2,252

Apr. 1989

96.5%

A15

KDX Hamacho Building

Chuo-ku, Tokyo

2,300

Sep. 1993

88.7%

A16

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

94.1%

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

Minato-ku, Tokyo

3,728

Feb. 1992

100.0%A22

KDX Shin-Yokohama Building

Yokohama, Kanagawa

2,520

Sep. 1990

97.5%

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

86.8%

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%KDX Hachioji Building

Hachioji, Tokyo

1,155

Dec. 1985

72.7%

KDX Ochanomizu Building

Chiyoda-ku, Tokyo

6,400

Aug. 1982

100.0%A38

KDX Nishi-Shinjuku Building

Shinjuku-ku, Tokyo

1,500

Oct. 1992

77.8%

A39

KDX Toranomon Building

Minato-ku, Tokyo

4,400

Apr. 1988

100.0%

A40

Toranomon Toyo Building

Minato-ku, Tokyo

9,850

Aug. 1962

75.1%

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

87.4%

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%A50

KDX Ikejiri-Oohashi Building

Meguro-ku, Tokyo

2,400

Sep. 1988

63.6%

A51

KDX Hamacho Nakanohashi Building

Chuo-ku, Tokyo

2,310

Sep. 1988

88.3%

A52

KDX Kanda Misaki-cho Building

Chiyoda-ku, Tokyo

1,380

Oct. 1992

86.8%

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

90.7%

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

91.8%

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

86.6%

A72

KDX Higashi-Shinagawa Building

Shinagawa-ku, Tokyo

4,590

Jan. 1993

56.7%

A73

KDX Hakozaki Building

Chuo-ku, Tokyo

2,710

Nov. 1993

89.3%(Tokyo Metropolitan A35
Area)
A37

Kenedix Office Investment Corporation Semiannual Report

No.

Property Name

Location

Acquisition
Price (mn yen)
<Note 1>

Office(Other Regional
Areas)<Note 3>KDX Shin-Nihonbashi Building

Chuo-ku, Tokyo

2,300

Nov. 2002

100.0%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

98.0%

A88

Welship Higashi Shinjuku

Shinjuku-ku, Tokyo

1,900

Mar. 1990

100.0%A89

KDX Takanawadai Building

Minato-ku, Tokyo

5,250

Oct. 1985

100.0%A90

KDX Ikebukuro Building

Toshima-ku, Tokyo

3,900

Mar. 2009100.0%A91

KDX Mita Building

Minato-ku, Tokyo

3,180

Mar. 1993

95.6%

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

100.0%A95

KDX Toyosu Grand Square

Koto-ku, Tokyo

8,666

Apr. 2008

87.0%

A96

Grace Building Takadanobaba

Toshima-ku, Tokyo

3,650

Oct. 1988

100.0%

A99

Tosen Ikebukuro Building

Toshima-ku, Tokyo

1,934

Jul. 1988

100.0%
100.0%

A101

Urban Square Yokohama

Yokohama-shi, Kanagawa

7,210

Mar. 1994

A12

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

97.5%

A25

KDX Minami Semba Dai-2 Building

Osaka, Osaka

1,560

Sep. 1993

72.9%

A42

Karasuma Building

Kyoto, Kyoto

5,400

Oct. 1982

100.0%A44

KDX Sendai Building

Sendai, Miyagi

2,100

Feb. 1984

94.4%

A53

KDX Hakata-Minami Building

Fukuoka, Fukuoka

4,900

Jun. 1973

98.5%

A54

KDX Kitahama Building

Osaka, Osaka

2,220

Jul. 1994

92.8%

A58

KDX Nagoya Sakae Building

Nagoya, Aichi

7,550

Apr. 2009

99.3%

A69

KDX Kobayashi-Doshomachi Building

Osaka, Osaka

2,870

Jul. 2009

91.3%

A70

KDX Sapporo Building

Sapporo, Hokkaido

2,005

Oct. 1989

95.6%

A79

KDX Nagoya Ekimae Building

Nagoya, Aichi

7,327

Apr. 1986

99.0%

A80

Nagoya Nikko Shoken Building

Nagoya, Aichi

4,158

Aug. 1974

100.0%

A81

Sendai Nikko Building

Sendai, Miyagi

950

Mar. 1989

87.7%

A82

KDX Higashi Umeda Building

Osaka, Osaka

2,770

Jul. 2009100.0%A97

Fumix STM Building

Utsunomiya, Tochigi

2,350

Feb. 1999

97.0%

A98

Hiroshima Ekimae-dori Mark Building

Hiroshima, Hiroshima

1,300

Jan. 1990

73.3%

A100

Senri Life Science Center Building

Toyonaka-shi, Osaka

13,000Jun. 1992

99.3%

337,741

Avg. 22.7 years

95.4%

B18

Venus Hibarigaoka

Sapporo, Hokkaido

1,800

Mar. 1989

95.4%

B19

Residence Charmante Tsukishima

Chuo-ku, Tokyo

5,353

Jan. 2004

100.0%

7,153

Avg. 14.5 years

97.1%

9,900

Mar. 2005

93.6%

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. 9.4 years

97.4%

Central Urban Retail Subtotal (3 properties)

Other

Occupancy
Rate

A75

Residential Subtotal (2 properties)

Central Urban
Retail<Note 2>

A74

Office Subtotal (88 properties)

Residential

Year Built

| 13

D2

Shinjuku 6-chome Building (Land)

Shinjuku-ku, Tokyo

Other Subtotal (1 property)
Total (94 properties)

Investment Security

2,880

—

100.0%

2,880—

100.0%

369,954

Avg. 21.7 years

Toyonaka Property TMK Preferred Securities

Toyonaka, Osaka

1,583

Jun. 1992

G.K. KRF 43 Silent Partnership Equity Interest

Shinjuku-ku, Tokyo

1,107

Dec. 1979

95.6%

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 October 31, 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 October 31, 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.

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 15th–19th Fiscal Periods
PeriodUnit

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)

19th Period(as of Oct. 31, 2014)

Operating revenues

mn yen10,212

9,867

9,819

10,895

12,928(Rental revenues)

mn yen

9,617

9,306

9,501

10,33011,295

Operating expenses

mn yen

5,696

5,465

5,578

6,611

7,899

(Property-related expenses)

mn yen

4,822

4,740

4,845

5,047

5,557

Operating income

mn yen

4,516

4,401

4,240

4,283

5,028

Ordinary income

mn yen

3,011

3,003

2,832

2,887

3,570

Net income (a)mn yen

3,009

3,002

2,831

2,885

3,569

Total assets (b)mn yen306,734

308,172

316,753

355,167

388,169(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)(+1.1)(+0.5)(+2.8)(+12.1)(+9.3)

140,581

142,369

150,558

167,746

187,685(+2.3)(+1.3)(+5.8)(+11.4)(+11.9)150,389

150,653

150,781

170,109180,844(+0.2)(+0.2)(+0.1)(+12.8)(+6.3)

147,153

147,153

147,153

166,261

176,632

%

(0.0)

(0.0)

(0.0)

(+13.0)(+6.2)

unit

286,550

286,550

286,550

332,540

355,010509,407yen

524,828

525,747

526,195

511,546

mn yen

2,738

2,703

2,665

3,205

3,571

yen

9,557

9,434

9,302

9,638

10,060(Earnings distributed per unit)

yen

9,557

9,434

9,302

9,638

10,060(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

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

1.0 (2.0)

1.0 (2.0)

0.9 (1.8)

0.9 (1.7)

1.0 (1.9)

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

2.0 (4.0)

2.0 (4.0)

1.9 (3.7)

1.8 (3.6)

2.0 (4.0)

49.0

48.9

47.6

47.9

46.6

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

45.8

46.2

47.5

47.2

48.4

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)%%%(+0.5)(+0.4)(+1.3)(-0.3)(+1.1)

90.9

90.0

94.1

111.0

100.0

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy ratio at end of period

84

83

85

89

94

351,153.72

347,853.97

358,517.31

386,659.01

437,233.24

%

95.5

93.9

95.8

96.0

95.6

Depreciation expenses for the period

mn yen

1,621

1,662

1,696

1,826

2,022

Capital expenditures for the period

mn yen

904

772

894

711

550

Leasing NOI (Net Operating Income) (Note 5)

mn yen

6,416

6,228

6,352

7,109

7,760

FFO (Funds From Operation) (Note 6)

mn yen

4,187

4,202

4,293

5,031

7,116

yen

14,612

14,664

14,984

15,13020,045

FFO per unit (Note 7)

Notes: 1. Return on assets = Ordinary income/{(Total assets at beginning of period + Total assets at end of period)/2} × 100
2. Annualized values for the 15th Fiscal Period are calculated based on a period of 184 days, 181 days for the 16th Fiscal Period, 184 days for the 17th Fiscal Period,
181 days for the 18th Fiscal Period and 184 days for the 19th 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 October 31, 2014 and April 30, 2014
In thousands of yen
As of October 31, 2014

As of April 30, 2014ASSETS
Current assets:
Cash and bank deposits (Note 12)¥ 16,469,910¥ 18,055,433

Rental receivables

293,161

252,557

Consumption tax refundable

752,671

219,447

Other current assets (Note 7)

402,016

74,267

Total current assets

17,917,758

18,601,704

Land

257,050,371

238,469,273

Buildings and structures (Note 5)

128,517,097

112,658,980

Machinery and equipment

1,959,350

1,973,320

Tools, furniture and fixtures

507,707472,990—

1,785

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

Construction in progressLess-accumulated depreciation
Net property and equipment(22,554,292)(21,048,808)

365,480,233

332,527,540

Other assets:
Ground leasehold (Notes 11 and 13)
Investment securities (Note 12)354,783

355,557

2,679,139

2,006,886

Corporate bond issuance costs

44,63931,328

Unit issuance costs

164,421

107,995

Other assets (Notes 11 and 13)
Total assets

1,528,661

1,536,342¥388,169,634¥355,167,352¥¥

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

1,000,282
46,035,000

978,541
42,246,500

15,69529,071

1,868,868

1,792,248

133,808

164,039

49,053,653

45,210,399

Corporate bonds (Notes 4 and 12)8,300,000

6,300,000

Long-term debt (Notes 4 and 12)

133,350,000

119,200,000

Leasehold and security deposits received

16,621,220

14,347,418

207,324,873

185,057,817

176,632,550

166,261,746

Total current liabilities

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 355,010 and 332,540 units
as of October 31, 2014 and April 30, 2014, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total surplus

642,566

961,750

3,569,645

2,886,039

4,212,211

3,847,789

180,844,761

170,109,535

Total net assets (Note 8)

180,844,761

170,109,535

Total liabilities and net assets¥388,169,634¥355,167,352

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 May 1, 2014 to October 31, 2014 and November 1, 2013 to April 30, 2014
In thousands of yen

Operating revenues:
Rental revenues (Notes 10 and 11)
Gain on sale of real estate property (Note 10)
Dividends income
Total operating revenues
Operating expenses:
Property-related expenses (Notes 10 and 11)
Loss on sale of real estate property (Note 10)
Asset management fees
Administrative service and custodian fees
Other operating expenses
Total operating expenses
Operating income
Non-operating expenses:
Interest expense
Financing-related expenses
Amortization of unit issuance costs
Amortization of corporate bond issuance costs
Others, net
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 7)
Net income
Retained earnings at the beginning of period
Retained earnings at the end of period

From May 1, 2014 to October 31, 2014

From November 1, 2013 to April 30, 2014

¥11,295,407—
1,632,716
12,928,123¥10,330,338
497,482
67,467
10,895,287

5,557,660
1,524,518
643,21172,536
101,500
7,899,425
5,028,698

5,047,051
816,665
564,461
69,161
114,550
6,611,888
4,283,399

1,115,016
288,414
37,204
4,888
12,5191,458,041
3,570,657
3,570,657
1,215
3,569,442
203¥ 3,569,645

1,039,564
301,079
40,502
4,323
10,793
1,396,261
2,887,138
2,887,138
1,266
2,885,872
167¥ 2,886,039

See accompanying notes to the financial statements.

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

Balance as of October 31, 2013
Changes during the fiscal period
New unit issuance
Provision of reserve for reduction entry
Payments of dividends
Net income
Total changes during the fiscal period
Balance as of April 30, 2014
Changes during the fiscal period
New unit issuance
Reversal of reserve for reduction entry
Payments of dividends
Net income
Total changes during the fiscal period
Balance as of October 31, 2014
See accompanying notes to the financial statements.

Total
unitholders’equityUnitholders’capitalReserve for
reduction entry

Retainedearnings¥147,153,820¥795,928¥2,831,477¥3,627,405 ¥150,781,225 ¥150,781,225

19,107,926———
19,107,926¥166,261,746—
165,822——
165,822¥961,750—(165,822)(2,665,488)
2,885,872
54,562¥2,886,039—
19,107,926
19,107,926———(2,665,488)(2,665,488)(2,665,488)
2,885,872
2,885,872
2,885,872
220,384
19,328,310
19,328,310¥3,847,789 ¥170,109,535 ¥170,109,535

10,370,804———
10,370,804¥176,632,550—(319,184)——(319,184)¥642,566—
319,184(3,205,020)
3,569,442
683,606¥3,569,645—
10,370,804
10,370,804———(3,205,020)(3,205,020)(3,205,020)
3,569,442
3,569,442
3,569,442
364,422
10,735,226
10,735,226¥4,212,211 ¥180,844,761 ¥180,844,761

Total
surplus

Total

18 |

Kenedix Office Investment Corporation Semiannual Report

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

1.

ORGANIZATION AND BASIS OF PRESENTATIONORGANIZATION
Kenedix Office Investment Corporation (“the Investment Corporation”) was established on May 6, 2005 under the Act on Investment Trusts andInvestment 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 six public offerings and other means including global offerings. As a result, as of
October 31, 2014, the end of the nineteenth fiscal period, the number of investment units issued and outstanding totaled 355,010 units.
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 entrusts 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 October 31, 2014, the Investment Corporation acquired four office buildings (KDX Toyosu Grand Square: acquisition
price of ¥8,666 million, Grace Building Takadanobaba: acquisition price of ¥3,650 million, Tosen Ikebukuro Building: acquisition price of ¥1,934
million, Urban Square Yokohama: acquisition price of ¥7,210 million) located in the Tokyo Metropolitan Area, three office buildings (Fumix STM
Building: acquisition price of ¥2,350 million, Hiroshima Ekimae-dori Mark Building: acquisition price of ¥1,300 million, Senri Life Science Center
Building: acquisition price of ¥13,000 million) located in Other Regional Areas, preferred equity securities (Toyonaka Property TMK: investment of¥1,583 million) and sold KDX Minami Semba Dai-1 Building (initial acquisition price of ¥1,610 million) and Nissou Dai-17 Building (initial acquisition price of ¥2,710 million) (with a total disposition price of ¥2,600 million)). As of October 31, 2014, the Investment Corporation had total
unitholders’ capital of ¥176,633 million with 355,010 investment units outstanding. The balance of interest-bearing debt amounted to ¥187,685
million as of October 31, 2014, comprising ¥179,385 million in borrowings (¥163,485 million in long-term borrowings and ¥15,900 million in
short-term borrowings) and ¥8,300 million in investment corporation bonds. The Investment Corporation owned a portfolio of 94 properties witha total acquisition price of ¥369,954 million containing a total leasable area of 437,233.24m2 and 2 investment securities with a total acquisition
price of ¥2,690 million. The occupancy ratio was approximately 95.6%. The portfolio of 94 properties consists of 88 office buildings, 2 residential
properties, 3 central urban retail properties and 1 other property. 77 properties are located in the Tokyo Metropolitan Area and 17 properties arelocated 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 theaccompanying 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 period’s comparatives as supplemental information in the English translated financial statements although theJapanese audited financial statements only need to disclose the current period’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.

(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 May 1, 2014 to October 31, 2014

From November 1, 2013 to April 30, 2014

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

Kenedix Office Investment Corporation Semiannual Report| 19(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 asrevenues 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
the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property from the date of disposal to theend of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related
tax liabilities.
When the Investment Corporation purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchase date of each property through the end of the calendar year. The amounts of those allocated portions of the property-related
taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to ¥87,637 thousandand ¥84,126 thousand as of October 31, 2014 and April 30, 2014, 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.

(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.

20 |

3.

Kenedix Office Investment Corporation Semiannual Report

SCHEDULE OF PROPERTY AND EQUIPMENT
In millions of yen
As of October 31, 2014Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Total

4.

Acquisition
costs

Accumulated
depreciation¥257,050
128,517
1,959
508—¥388,034¥—
21,473820
261—¥22,554

As of April 30, 2014
Book
value

Acquisition
costs

Accumulated
depreciation¥257,050
107,0441,139
247—¥365,480¥238,469
112,6591,973
473
2¥353,576

¥

Book
value

—
20,012787
249—¥21,048¥238,469
92,6471,186
224
2¥332,528

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

The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of October 31, 2014:
Classification

Short-term debt

Subtotal
Current portion of long-term debt

SubtotalLong-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

May 30, 2014
July 31, 2014
October 15, 2014
October 29, 2014
October 29, 2014
October 29, 2014

May 29, 2015
July 31, 2015
October 15, 2015
October 29, 2015
October 29, 2015
October 29, 2015

0.55%
0.50%
0.55%
0.54%
0.54%
0.54%

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
February 28, 2011
March 30, 2012
April 27, 2012
April 28, 2011
December 26, 2011
December 26, 2011
December 26, 2011

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 2, 2015
April 30, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 31, 2015
October 31, 2015
October 31, 2015
October 31, 2015

2.17%
1.19%
2.19%
2.19%
2.19%
2.19%
0.96%
1.08%
1.29%
2.22%
1.01%
1.91%
1.21%
1.27%
1.86%
1.34%
1.32%
1.34%

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
March 31, 2011
March 31, 2011
April 28, 2011
December 26, 2011
December 26, 2011
December 26, 2011
January 10, 2012
March 28, 2012
March 28, 2012

April 30, 2016
November 12, 2015
November 12, 2015
November 12, 2017
November 12, 2015
November 12, 2015
November 12, 2017
January 29, 2016
January 29, 2016
January 29, 2016
March 31, 2016
January 29, 2016
October 31, 2016
October 31, 2016
October 31, 2016
January 29, 2016
March 28, 2017
March 28, 2019

2.73%
1.79%
1.79%
2.02%
1.41%
1.41%
2.21%
1.94%
1.95%
1.91%
1.26%
1.89%
1.44%
1.42%
1.44%
1.27%
1.36%
1.77%

Balance(In millions of yen)

¥

500
1,000
8,000
3,000
2,000
1,400
15,900
¥
960
1,500
1,725
1,275
750
375
1,500
1,000
2,500
1,550
2,500
3,000
2,000
1,000
1,500
2,500
2,500
2,000
30,135¥ 5,000
1,200
800
2,300
800
200
700
800
500
2,000
1,000
1,000
2,500
2,500
2,000
2,500
500
1,400

Kenedix Office Investment Corporation Semiannual Report

Classification

Long-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

March 28, 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
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

March 28, 2019
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
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

1.77%
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%
0.71%
0.61%
0.71%
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%
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%

| 21

Balance(In millions of yen)

¥

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
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

22 |

Kenedix Office Investment Corporation Semiannual Report

Drawdown date

Last
repayment date

Weighted-averageinterest rate

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

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

0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%

March 15, 2007
March 8, 2012
September 12, 2013
July 25, 2014

March 15, 2017
September 8, 2017
September 12, 2018
July 25, 2024

2.37%
2.00%
1.00%
1.18%

Classification

Long-term debt

Subtotal
Corporate bonds

Balance(In millions of yen)

¥

500
1,000
950
2,700
1,000
3,000
2,000
1,500
1,000
2,000
1,000
133,350¥ 3,000
1,500
1,800
2,000
8,300
¥187,685

Subtotal
Total

5.

REDUCTION ENTRY

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

Buildings and structures

6.

As of October 31, 2014

As of April 30, 2014

¥26,230¥26,230PER UNIT INFORMATION
Yen
From May 1, 2014 to October 31, 2014

From November 1, 2013 to April 30, 2014

Net asset value per unit

¥509,408¥511,546

Net income per unit

¥ 10,150¥

Weighted average number of units (units)351,672

8,767
329,164

The weighted average number of units outstanding of 351,672 and 329,164 as of October 31, 2014 and April 30, 2014 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 no residual investment units.

7.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 34%. 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 excess of
90% of its distributable profit in the form of cash distributions totaling ¥3,571 million (adding ¥2 million as the reversal of reserve for reduction
entry) and ¥3,205 million (adding ¥319 million as the reversal of reserve for reduction entry) for the periods ended October 31, 2014 and April 30,
2014, such distributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rate on the Investment
Corporation’s income was 0.03% and 0.04% for the periods ended October 31, 2014 and April 30, 2014. The following summarizes the significant difference between the statutory tax rate and the effective tax rate:
As of October 31, 2014

As of April 30, 2014

Statutory tax rate

34.16%

36.59%

Deductible cash distributions(34.17)(40.62)Others0.04

4.07

Effective tax rate

0.03%

0.04%

Kenedix Office Investment Corporation Semiannual Report| 23

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

As of April 30, 2014

Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold rights

30

¥

2,071

34
1,808

Subtotal deferred tax assets

2,101

1,842

Valuation allowance

2,071

1,808

Total deferred tax assets

¥

30

¥

34

Tax rate changes after the nineteenth fiscal period
With the Local Corporation Tax Act (Act No. 11 of 2014) and the Act for Partial Amendment to Local Tax Law, Etc. (Act No. 4 of 2014) promulgated on March 31, 2014, the local corporation tax has been established and part of the special local corporation tax has been restored to corporate enterprise tax, becoming effective fiscal years starting on October 1, 2014 and after. 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 October 1, 2014 and after will be changed to 34.15%. 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
¥254 million to Kenedix Real Estate Fund Management, Inc. The Investment Corporation had been entrusting all the Property Management
Services to Kenedix Property Management, Inc. since September 1, 2014 for all its owned properties, except KDX Toyosu Grand Square, forwhich Kenedix Property Management, Inc. already conducts the property management services, and the Shinjuku 6-chome Building (Land).

TRANSACTIONS WITH OTHER RELATED-PARTIES
Kenedix Property 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 Property Management, Inc. property management feesin accordance with the terms of its Property Management Agreements. For these services, the Investment Corporation paid ¥163 million to
Kenedix Property Management, Inc.
The Investment Corporation acquired trust beneficiary interests in real estate from GK KRF 50 and YK KDX 6 with the acquisition prices of¥8,667 million and ¥6,000 million, respectively. The acquisition prices were determined based on the related-parties’ transaction rules.

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 May 1,
2014 to October 31, 2014 and November 1, 2013 to April 30, 2014 consist of the following:
In thousands of yen
From May 1, 2014 to October 31, 2014

From November 1, 2013 to April 30, 2014

Rental and other operating revenues:
Rental revenues
Common area charges
Subtotal¥ 8,101,029¥ 7,380,878

1,698,433

1,695,193

9,799,462

9,076,071

350,221326,300

Others:Parking space rental revenues
Utility charge reimbursement

976,931804,404

Miscellaneous

168,793

123,563

Subtotal

1,495,945

1,254,267

Total rental and other operating revenues

11,295,407

10,330,338

24 |Kenedix Office Investment Corporation Semiannual Report

In thousands of yen
From May 1, 2014 to October 31, 2014

From November 1, 2013 to April 30, 2014

Property-related expenses:
Property management fees and facility management fees

¥ 1,074,236¥ 1,016,938

Depreciation

2,022,380

1,826,542

Utilities

1,103,867

916,744Taxes

916,289

847,466

Insurance

15,841

14,825

Repairs and maintenance

174,512

193,972

Trust fees

45,44545,142Others205,090

185,422

5,557,660

5,047,051

Revenue from sale of investment property—

2,929,105

Cost of investment property—

2,405,839

Other sales expenses—

25,784—497,482

Revenue from sale of investment property

2,600,000

630,000

Cost of investment property

4,037,459

1,427,549

Total property-related expenses
Gain on sale of real estate property:

Gain on sale of real estate property
Loss on sale of real estate property:

Other sales expenses

87,059Loss on sale of real estate property

11.

19,116¥ 1,524,518¥

816,665

PROPERTY INFORMATIONType

Office Buildings

Central Urban
Retail Properties

Residential Properties

OthersTokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

72

16

1

1

¥271,712¥66,030¥5,353¥1,800¥22,180¥2,88073.44%

17.85%

1.45%

0.48%

6.00%

0.78%

Net book value

270,303

64,239

4,757

1,709

21,854

2,973

Appraisal value

265,242

60,538

4,900

1,590

23,2402,960

73.99%

16.89%

1.37%

0.44%

6.48%

0.83%

Location

Number of properties

Tokyo
Tokyo
Metropolitan Area Metropolitan Area

3

1

Property information
Acquisition price
Percentage of total acquisition price

Percentage of total appraisal value(In millions of yen)

Financial results for the period from May 1, 2014 to October 31, 2014
Rental and other operating revenues(In thousands of yen)

¥8,150,479¥2,278,765¥149,482¥89,819¥558,853¥68,009

Rental revenues

7,128,160

1,894,974

132,064

78,353497,907

68,004

Other revenues

1,022,319

383,791

17,418

11,46660,946

52,437,863

872,036

36,726

36,666

151,773

216—

Property-related expenses
Property management fees

734,161

277,430

14,5798,096

39,970Taxes

660,580

197,491

10,004

7,617

40,596

1

Utilities

786,159

261,346

1,816

2,277

52,269—Repairs and maintenance109,017

44,345

6,117

10,096

4,937

—

9,869

5,024

276

297

375

—

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

138,077

86,400

3,934

8,283

13,626215

5,712,616

1,406,729

112,756

53,153407,080

67,793

Depreciation expenses

1,402,748

449,504

45,901

21,463

102,764—

Operating income from property leasing activities

4,309,868

957,225

66,85531,690304,316

67,793

Capital expenditures

450,192

53,957

911

5,764

39,631—

NCF (Net Cash Flow)¥5,262,424¥1,352,772¥111,845¥47,389¥367,449¥67,793

Kenedix Office Investment Corporation Semiannual Report| 25

A breakdown of property type as of October 31, 2014 was as follows:
Class of assets

Property type

Property and equipment

Office Buildings

Area

Tokyo Metropolitan Area
Other Regional Areas

Subtotal
Residential Properties

69.6%

64,23916.6%

334,542

86.2%

4,757

1.2%

Other Regional Areas

1,709

0.4%

6,466

1.6%

Tokyo Metropolitan Area

21,854

5.6%

21,854

5.6%

Subtotal
Other

Percentage of total assets¥270,303

Tokyo Metropolitan Area

Subtotal
Central Urban Retail Properties

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

Tokyo Metropolitan Area

Subtotal
Total

2,973

0.8%

2,973

0.8%

365,835

94.2%

Investment securities

2,679

0.7%

Bank deposits and other assets

19,656

5.1%

Total assets

388,170

100.0%

Total liabilities

207,325

53.4%

Net assets¥180,845

46.6%

12.

FINANCIAL INSTRUMENTS

Nineteenth Fiscal Period (May 1, 2014 to October 31, 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 ten years following the accounting date. Although a certain portion of said liabilities are subject to interest rate fluctuation risk, theInvestment 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 tohedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of the effectiveness of hedging activities,
please see 2. (K) Derivative Financial Instruments.

(3) RISK MANAGEMENT FOR FINANCIAL INSTRUMENTS(a) Monitoring of market risk (the risks arising from fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap transactions and interest-rate cap transactions in order to minimize risk arising from fluctuations in interest rates on funds procured. The Investment Corporation periodically reviews the value of the property and financial condition of 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 October 31, 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 value햲 Cash and bank deposits¥ 16,469,910

Subtotal

Estimated fair value

Difference¥ 16,469,910¥—

16,469,910

16,469,910—

햲 Short-term debt

15,900,000

15,900,000—

햳 Corporate bonds(including current portion of corporate bonds)

8,300,000

8,522,510

222,510

햴 Long-term debt(including current portion of long-term debt)
Subtotal

163,485,000

164,117,409

632,409¥187,685,000¥188,539,919¥854,919———

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

¥77,850,000

Special treatment ofinterest-rate cap

Interest-rate cap

Long-term debt

Total

Fair value(In thousands of yen)Calculation method for
applicable fair value¥71,850,000*—

3,000,000

3,000,000*—¥80,850,000¥74,850,000

Maturing after 1 year—(*) 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

Investment securities

Carrying value (In thousands of yen)

¥2,679,139

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¥16,469,910

Total¥16,469,910*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

¥15,900,000

¥

¥

¥

¥

Corporate bonds——

4,500,000

1,800,000—

2,000,000

Long-term debt

¥30,135,000¥30,800,000¥16,200,000¥16,750,000¥12,750,000¥56,850,000

13.

—

—

—

—

Due after
5 years¥—

INVESTMENT AND RENTAL PROPERTIES

Nineteenth Fiscal Period (May 1, 2014 to October 31, 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 April 30, 2014

Net change

As of October 31, 2014

Fair value as of October 31, 2014
(In thousands of yen)

¥332,883,295¥32,951,800¥365,835,095¥358,470,000

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 7 properties totaling ¥38,462,889 thousand, the sale of 2 properties totaling ¥4,037,459 thousand and depreciation amounting to¥2,022,380 thousand.

Income and loss in the fiscal period ended October 31, 2014 for real estate for rental purposes is listed in Note “10. BREAKDOWN OF RENTALAND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN AND LOSS ON SALE OF REAL ESTATE PROPERTY”.

14.

SUBSEQUENT EVENTSISSUANCE OF NEW INVESTMENT UNITSOn November 6, 2014 and November 19, 2014, the Board of Directors of the Investment Corporation resolved to issue new investment units asdetailed below. The payments were completed on November 27, 2014 through a public offering. As a result of the issuance of new investment
units, the Investment Corporation had total unitholders’ capital of ¥204,901,648,020 with 402,695 investment units outstanding as ofNovember 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 December 24, 2014 (planned).
(Issuance of New Investment Units through Public Offering)Issuance of New Investment Units:47,685 units (Domestic Offering 23,750 units, International Offering 23,935 units)
Issue Price (Offer Price):¥614,250 per unit
Aggregate Issue Price (Total Offer Price):¥29,290,511,250
Issue Amount (Paid-in Value):¥592,830 per unit
Total Issue Amount (Aggregate Paid-in Value):¥28,269,098,550
Payment Date
:November 27, 2014
(Issuance of New Investment Units through Third-Party Allotment)
Issuance of New Investment Units (Maximum):2,190 units
Issue Amount (Paid-in Value):¥592,830 per unit
Total Issue Amount (Aggregate Paid-in Value) (Maximum) :¥1,298,297,700
Payment Date
:December 24, 2014 (Planned)
Allottee:Nomura Securities Co., Ltd.
(Use of proceeds)
The funds from the abovementioned public offering are allocated as the funds for acquiring properties in the twentieth fiscal period and a
portion of the funds for the repayment of borrowings. Furthermore, the funds from the issuance of new investment units by third-party
allotment are allocated as proceeds for a portion of the funds for future acquisition of specified assets and the repayment of borrowings.

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

From November 1, 2013
to April 30, 2014

¥ 3,570,657¥ 2,887,138

2,340,487(650)
1,115,016

2,158,841(572)
1,039,564(40,604)(533,224)(24,357)
169,776
76,6204,037,460(614,600)
10,096,581
650(1,116,994)(810)
8,979,427

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

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(39,025,487)(1,592,392)
919,815
3,064,543(924,131)(1,834,660)
88,375—(39,303,937)(36,179,723)(1,109,906)
213,076
2,339,795(759,482)(94,114)80,657
180(35,509,517)

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
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

17,900,000(8,000,000)
28,650,000(20,611,500)
10,277,174
1,981,801(3,204,772)
26,992,703(3,331,807)
17,537,841¥ 14,206,034

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

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
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 October 31, 2014 and April 30, 2014:
In thousands of yen

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

As of October 31, 2014

As of April 30, 2014

¥16,469,910(2,263,876)¥14,206,034¥18,055,433(517,592)¥17,537,841

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 (19th and 20th Fiscal Periods)
Oct.
2014

Dec.
2014

Jan.
2015

Apr.
2015

Jun.
2015

Jul.
2015

End ofthe 19th Period

Performance forthe 19th Period
is announced

Distributions forthe 19th Period
are paid

End ofthe 20th Period

Performance forthe 20th Period
will be announced

Distributions forthe 20th Period
will be paid

General Breakdown of Unitholders
Foreign corporations
and individuals
End of the
19th Period
End of the
18th Period

Other domestic
corporations

Financial institutions(including securities companies)

41.2%

1.4%

52.1%

146,421 units

4,802 units

184,795 units

Individuals
and others
Total
355,010 units

5.3%

46.5%

1.5%

46.3%

154,538 units

5,004 units

153,837 units

18,992 units

Total
332,540 units

5.8%
19,161 units

Note: Figures are rounded to the first decimal place.

Top Ten Unitholders (As of October 31, 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. (Investment Trust Account)
The Bank of New York Mellon SA/NV 10
Nomura Bank (Luxembourg) S.A.
State Street Bank and Trust Company
Nomura Securities Co., Ltd.
MSIP CLIENT SECURITIESJP Morgan Chase & Co. 385174
Total<Note>

59,14041,25332,536
18,51812,91912,000
7,024
6,849
6,488
6,016
202,743

16.65%
11.62%
9.16%
5.21%
3.63%
3.38%
1.97%
1.92%
1.82%
1.69%
57.10%

Note: The percentage of shares are rounded down to the second decimal place.

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 s5,000 sOffer 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

s 900,000
s 800,000

Offer price of PO(¥274,510)
Jul. 20, 2011
(payment date)

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

6,000 s(Yen)

s !S OF .OVEMBER  (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 700,000
s 600,000
s 500,000
s 400,000

Offer price of PO s 300,000(¥614,250)
Nov. 27, 2014s 200,000(payment date)

2,000 s1,000 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.

Oct.

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.