Financial Section
Contents
Independent Auditor’s ReportF

Balance Sheets

G

Statements of Income and Retained Earnings

H

Statements of Changes in Net Assets

H

Notes to Financial Statements

I

Statements of Cash Flows (Unaudited)S

Financial Summary (Unaudited)
Historical Operating Trends
For the 12th–16th Fiscal Periods
PeriodUnit

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

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

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

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

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

Operating revenues

mn yen

8,136

9,044

9,090

10,212(Rental revenues)

mn yen

8,136

8,498

9,090

9,617

9,306

Operating expenses

mn yen

4,427

4,618

5,004

5,696

5,465

(Property-related expenses)

mn yen

3,767

3,961

4,284

4,822

4,740

Operating income

mn yen

3,709

4,425

4,086

4,516

4,401

Ordinary income

mn yen

2,346

3,040

2,551

3,011

3,003

Net income (a)mn yen

2,309

3,052

2,540

3,009

3,002

Total assets (b)mn yen261,928

274,973

303,284

306,734

308,172(+4.3)(+5.0)(+10.3)(+1.1)(+0.5)

112,715

110,914137,372

140,581

142,369(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)9,867(+9.9)(-1.6)(+23.9)(+2.3)(+1.3)

135,505150,272

150,063

150,389

150,653(-0.2)(+10.9)(-0.1)(+0.2)(+0.2)

133,129

147,153

147,153

147,153

147,153%(0.0)(+10.5)

(0.0)

(0.0)

(0.0)

unit

233,550

286,550

286,550

286,550

286,550
525,747yen

580,199

524,419

523,688524,828mn yen

2,310

2,749

2,683

2,738

2,703

yen

9,891

9,596

9,364

9,557

9,434

(Earnings distributed per unit)

yen

9,891

9,596

9,364

9,557

9,434

(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

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

0.9 (1.8)

1.1 (2.2)

0.9 (1.8)

1.0 (2.0)

1.0 (2.0)

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

1.7 (3.4)

2.1 (4.2)

1.7 (3.4)

2.0 (4.0)

2.0 (4.0)

51.7

54.6

49.5

49.0

48.9

(-2.3)(+2.9)(-5.2)(-0.5)(-0.1)

43.0

40.3

45.3

45.8

46.2

Total distribution (f)Distribution per unit (f)/(e)Net assets ratio at end of period (d)/(b)(Period-on-period change)

Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)

Payout ratio (Note 4) (f)/(a)%%%(+2.2)(-2.7)(+5.0)(+0.5)(+0.4)

100.0

90.0

105.6

90.9

90.0

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy at end of period

71

74

83

84

83

286,237.93

300,016.89

340,589.96

351,153.72

347,853.97

%

94.6

94.7

95.4

95.5

93.9

Depreciation expenses for the period

mn yen

1,406

1,442

1,578

1,621

1,662

Capital expenditures for the period

mn yen

574

674

918

904

772

Leasing NOI (Net Operating Income) (Note 5)

mn yen

5,776

5,980

6,384

6,416

6,228

FFO (Funds From Operation) (Note 6)

mn yen

3,716

3,950

4,119

4,187

4,202

yen

15,914

13,786

14,374

14,612

14,664

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 12th Fiscal Period are calculated based on a period of 181 days, 184 days for the 13th Fiscal Period, 182 days for the 14th Fiscal Period, 184
days for the 15th Fiscal Period and 181 days for the 16th 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.

14 |Kenedix Realty Investment Corporation Semiannual ReportOperating Revenues

Operating Income

4,401

9,867

million yen

million yen

10,212

9,044

9,090

13th Period

14th Period

4,425

9,867

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Net Income

3,052

3,009

3,002

13th Period

14th Period

15th Period

16th Period

Total Assets

15th Period

16th Period

yen

9,891

9,596

9,364

9,557

9,434

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Net Assets Ratio / Unitholders’ Equity

308,172
303,284

million yen

306,734

308,172

274,973

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

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

46.2
43.0%

14th Period

9,434

million yen(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

12th Period

13th Period

2,540

2,309

261,928

12th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Distribution per Unit

3,002
12th Period

4,401

3,709

8,136

12th Period

4,516

4,086

%

51.7%

54.6%

45.8%

46.2%

49.5%

49.0%

48.9%

135,505150,272

150,063

150,389

150,653

million yen

million yen

million yen

million yen

million yen

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Occupancy Ratio

93.9

%

45.3%

48.9

%

94.6%

94.7%

95.4%

95.5%

93.9%

12th Period

13th Period

14th Period

15th Period

16th Period

40.3%

112,715

110,914137,372

140,581

142,369

million yen

million yen

million yen

million yen

million yen

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Kenedix Realty Investment Corporation Semiannual Report

| 15

16 |

Kenedix Realty Investment Corporation Semiannual ReportBalance Sheets
Kenedix Realty Investment Corporation
As of April 30, 2013 and October 31, 2012
In thousands of yen
As of April 30, 2013

As of October 31, 2012ASSETS
Current assets:
Cash and bank deposits (Note 12)¥ 14,813,927¥ 11,513,930

Rental receivables

185,047

425,746

Other current assets (Note 7)

76,501

79,424

15,075,475

12,019,100

Land

205,702,745

205,933,483

Buildings and structures (Note 5)

100,488,908

100,188,719

Machinery and equipment

1,557,795

1,548,922

Tools, furniture and fixtures

446,748

433,305

Construction in progress

6,699

6,699

(17,966,695)(16,448,292)

290,236,200

291,662,836

Ground leasehold (Notes 11 and 13)

357,106

357,881

Investment securities (Note 12)896,655

896,655

Corporate bond issuance costs

26,04332,669Unit issuance costs

37,80656,709Total current assets
Property and equipment, at cost: (Notes 3, 11 and 13)

Less-accumulated depreciation
Net property and equipment
Other assets:

Other assets (Notes 11 and 13)
Total assets

1,542,881

1,708,798¥308,172,166¥306,734,648¥¥

LIABILITIES AND NET ASSETS
Liabilities
Current liabilities:
Trade and other payables

863,231

894,162

Current portion of corporate bonds (Notes 4 and 12)

1,500,000

1,500,000

Short-term debt and current portion of long-term debt (Notes 4 and 12)

30,000,000

19,700,000

Deposits received
Rents received in advance

16,967

18,964

1,686,455

1,482,863

Other current liabilities

366,030

328,146

34,432,683

23,924,135

Corporate bonds (Notes 4 and 12)

4,500,000

4,500,000

Long-term debt (Notes 4 and 12)

106,369,500

114,881,000

Leasehold and security deposits received

12,216,921

13,039,969

157,519,104

156,345,104

147,153,820

147,153,820

Total current liabilities

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 286,550 units
As of April 30, 2013 and October 31, 2012, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total surplus
Total unitholders’ equity

497,043

225,7963,002,199

3,009,928

3,499,242

3,235,724

150,653,062

150,389,544

Total net assets (Note 8)

150,653,062

150,389,544

Total liabilities and net assets¥308,172,166¥306,734,648

See accompanying notes to the financial statements.

Kenedix Realty Investment Corporation Semiannual Report| 17

Statements of Income and Retained Earnings
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
From November 1, 2012 to April 30, 2013 From May 1, 2012 to October 31, 2012

Operating revenues:
Rental revenues (Notes 10 and 11)¥9,306,087¥ 9,617,355

Gain on sale of real estate property (Note 10)462,044595,516

Dividends income

99,168—9,867,299

10,212,871

Property-related expenses (Notes 10 and 11)

4,740,084

4,822,166

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

151,823

553,018

548,085

Total operating revenues
Operating expenses:

Asset management fees
Administrative service and custodian fees

69,47468,539Other operating expenses

103,073

105,575

Total operating expenses
Operating income

5,465,649

5,696,188

4,401,650

4,516,683

Non-operating expenses:
Interest expense

1,046,727

1,093,771

Financing-related expenses

315,050

366,756

Amortization of unit issuance costs

18,90327,282

Amortization of corporate bond issuance costs

6,626

6,736

Others, net

10,93910,904

1,398,245

1,505,449

Ordinary income

Total non-operating expenses

3,003,405

3,011,234

Income before income taxes

3,003,405

3,011,234

Income taxes (Note 7)
Net income

1,329

1,439

3,002,076

3,009,795

Retained earnings at the beginning of period
Retained earnings at the end of period

123

133

¥3,002,199¥ 3,009,928

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
Unitholders’ Equity
Surplus
Voluntary retained
earnings
Unitholders’capitalReserve for
reduction entry

Retainedearnings

Total
surplusTotal
unitholders’equityTotal¥147,153,820¥ 368,796¥ 2,540,387¥ 2,909,183¥150,063,003¥150,063,003

Reversal of reserve for reduction entry—(143,000)

143,000———

Payments of dividends——(2,683,254)(2,683,254)(2,683,254)(2,683,254)

Net income——

3,009,795

3,009,795

3,009,795

3,009,795—(143,000)

469,541

326,541

326,541

326,541¥147,153,820¥ 225,796¥ 3,009,928¥ 3,235,724¥150,389,544¥150,389,544

Provision of reserve for reduction entry—

271,247(271,247)———

Payments of dividends——(2,738,558)(2,738,558)(2,738,558)(2,738,558)

Net income——

3,002,076

3,002,076

3,002,076

3,002,076—

271,247(7,729)263,518

263,518

263,518¥147,153,820¥ 497,043¥ 3,002,199¥ 3,499,242¥150,653,062¥150,653,062

Balance as of April 30, 2012
Changes during the fiscal period

Total changes during the fiscal period
Balance as of October 31, 2012
Changes during the fiscal period

Total changes during the fiscal period
Balance as of April 30, 2013
See accompanying notes to the financial statements.

18 |Kenedix Realty Investment Corporation Semiannual ReportNotes to Financial Statements
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012

1.

ORGANIZATION AND BASIS OF PRESENTATIONORGANIZATION
Kenedix Realty Investment Corporation (”the Investment Corporation”) was established on May 6, 2005 under the Act on Investment
Trusts and Investment Corporations of Japan (“the Investment Trust Act”). On July 21, 2005, the Investment Corporation was listed on
the Real Estate Investment Trust Market of the Tokyo Stock Exchange with a total of 75,400 investment units issued and outstanding(Securities Code: 8972). Subsequently, the Investment Corporation raised funds through four public offerings and other means including
global offerings. As a result, as of April 30, 2013, the end of the sixteenth fiscal period, the number of investment units issued andoutstanding totaled 286,550 units.
The Investment Corporation is externally managed by Kenedix Office Partners, Inc. (Note) (“the Asset Management Company”) as its
asset management company. In concert with the Asset Management Company, the Investment Corporation strives to maximize cash
distribution to investors by securing stable earnings and sustainable investment growth. To this end, the Investment Corporation adopts
a dynamic and flexible investment stance that accurately reflects its environment and market trends, and endeavors to ensure a timely
response to each and every opportunity. The Investment Corporation has partially changed the management guidelines contained in thecompany regulations of the Asset Management Company as of September 1, 2012, and raised the lower limit of the investment ratio of
office buildings along with changing the upper limits, etc. of the investment ratio of other types of properties.
During the period ended April 30, 2013, the Investment Corporation acquired one office building (Nomura Fudosan Omiya Kyodo
Building: acquisition price of ¥2,020 million) located in the Tokyo Metropolitan Area and sold KDX Yotsuya Building (initial acquisition
price of ¥1,950 million) and Kanazawa Nikko Building (initial acquisition price of ¥645 million). As of April 30, 2013, the Investment
Corporation had total unitholders’ capital of ¥147,154 million with 286,550 investment units outstanding. The balance of interest-bearing
debt amounted to ¥142,369 million as of April 30, 2013, comprising ¥136,369 million in borrowings (¥130,669 million in long-termborrowings and ¥5,700 million in short-term borrowings) and ¥6,000 million in investment corporation bonds. The Investment
Corporation owned a portfolio of 83 properties with a total acquisition price of ¥292,553 million containing a total leasable area of
347,853.97m2 and preferred equity securities with a total acquisition price of ¥891 million. The occupancy ratio was approximately
93.9%. A portfolio of 83 properties consists of 78 office buildings, 3 residential properties, 2 central urban retail properties. 67 propertiesare located in the Tokyo Metropolitan Area and 16 properties are located in Other Regional Areas.
BASIS OF PRESENTATIONThe Investment Corporation maintains its accounting records and prepares its financial statements in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards. The financial statements are prepared in accordance with the Investment Trust Act.
The financial statements are basically a translation of the Japanese audited financial statements of the Investment Corporation. In preparing the accompanying financial statements, certain reclassifications have been made to the financial statements issued domestically inorder to present them in a format which is familiar to readers outside Japan. Certain information in the business report and supplementaryschedule has been omitted. Additional information has been added to the Japanese audited financial statements for the convenience ofreaders outside Japan and this includes disclosing the prior year’s comparatives as supplemental information in the English translated
financial statements although the Japanese audited financial statements only need to disclose the current year’s information.

Kenedix Realty Investment Corporation Semiannual Report

| 19

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 averagemethod.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimateduseful lives of the assets ranging as stated below:
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Buildings and structures

2-49 years

2-49 years

Machinery and equipment

3-17 years

3-17 years

Tools, furniture and fixtures

3-20 years

3-20 years(C) UNIT ISSUANCE COSTS
Unit issuance costs are amortized over a period of 3 years under the straight-line method.
(D) CORPORATE BOND ISSUANCE COSTS
Corporate bond issuance costs are amortized over a loan 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) LEASEHOLD RIGHTS
Fixed term leasehold with special agreement on buildings sales, and the building are amortized over a contractual period of 48 years and9 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 recognizedon an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can bereasonably estimated. Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and suchamounts are recorded both as revenues and expenses during the fiscal period, respectively.
(H) TAXES ON PROPERTY AND EQUIPMENT
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding tosaid period. Under the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property fromthe date of disposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser
for these accrued property-related tax liabilities.
When the Investment Corporation purchases properties, it typically allocates the portion of the property-related taxes related to the period
following the purchase date of each property through the end of the calendar year. The amounts of those allocated portions of theproperty-related taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted
to ¥10,265 thousand and ¥23,009 thousand as of April 30, 2013 and October 31, 2012, respectively. In subsequent calendar years, suchproperty-related taxes are charged as operating expenses in the fiscal period to which the installments of such taxes correspond.
(I) INCOME TAXES
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets
and liabilities using the statutory tax rates.
(J) CONSUMPTION TAXES
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes
applicable to the acquisition of assets are included in the cost of acquisition for each asset.

20 |Kenedix Realty Investment Corporation Semiannual Report(K) DERIVATIVE FINANCIAL INSTRUMENTS
The Investment Corporation utilizes interest-rate swap agreements and interest-rate cap agreements as derivative financial instruments
only for the purpose of hedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains orlosses resulting from changes in fair value of interest-rate swap agreements and interest-rate cap agreements because its interest-rate
swap agreements and interest-rate cap agreements met the criteria for deferral hedging accounting. However, the Investment Corporation
adopted special treatment for interest-swap agreements and interest-rate cap agreements if its interest-rate swap agreements andinterest-rate cap agreements met the criteria for hedging accounting under this treatment, whereby the net amount to be paid or
received under the interest-rate swap contract and interest-rate cap contract is added to or deducted from the interest on the assets or
liabilities for which the swap and cap contract was executed. The hedge effectiveness for interest-rate swap contracts and interest-rate
cap contract 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 shownin the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

3.

SCHEDULE OF PROPERTY
In millions of yen
As of April 30, 2013
Acquisition
costs

Accumulated
depreciation

Land¥205,703¥

Buildings and structures

100,489

Machinery and equipment

1,558

Tools, furniture and fixtures
Construction in progress
Total

4.

As of October 31, 2012
Book
value

Acquisition
costs

Accumulated
depreciation

Book
value

—

¥205,703¥205,933¥—¥205,933

17,042

83,447100,189

15,58484,605

683

875

1,549

638

911

447

242

205

433

226

207

6

—

6

7

—

7

¥308,203¥17,967¥290,236¥308,111¥16,448¥291,663

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

The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of April 30, 2013:
Classification

Short-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

July 31, 2012

July 31, 2013

0.81%

October 31, 2012

October 31, 2013

0.76%

¥

3,000

January 31, 2013

January 31, 2014

0.74%

1,200

July 30, 2010

July 31, 2013

1.49%

Subtotal
Current portion of long-term debt

1,500

5,700
¥

500

September 1, 2006

August 31, 2013

2.12%

3,000

March 31, 2011

September 30, 2013

1.53%

2,000

September 30, 2011

September 30, 2013

1.15%

1,000

October 29, 2010

October 31, 2013

1.46%

500

November 12, 2010

November 12, 2013

1.58%

1,500

November 12, 2010

November 12, 2013

1.58%

800

November 12, 2010

November 12, 2013

1.58%

400

December 1, 2010

November 12, 2013

1.41%

500

December 1, 2010

November 12, 2013

1.41%

200

December 1, 2010

November 12, 2013

1.41%

100

July 30, 2010

January 31, 2014

1.66%

3,700

January 31, 2011

January 31, 2014

1.57%

1,300

March 12, 2012

March 12, 2014

1.02%

2,250

March 12, 2012

March 12, 2014

1.02%

1,800

March 12, 2012

March 12, 2014

1.02%

1,800

March 12, 2012

March 12, 2014

1.02%

450

September 30, 2011

March 31, 2014

1.16%

2,500

Subtotal

24,300Kenedix Realty Investment Corporation Semiannual Report| 21

Classification

Long-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

¥5,000

May 1, 2006

April 30, 2016

2.73%

January 29, 2010

January 30, 2015

2.17%

1,032

February 18, 2010

February 18, 2015

2.19%

1,898

February 18, 2010

February 18, 2015

2.19%

1,403

February 18, 2010

February 18, 2015

2.19%

825

February 18, 2010

February 18, 2015

2.19%

413

April 2, 2010

April 2, 2015

2.22%

1,700

July 30, 2010

July 31, 2014

1.73%

3,700

November 12, 2010

November 12, 2015

1.79%

1,200

November 12, 2010

November 12, 2015

1.79%

800

November 12, 2010

November 13, 2017

2.02%

2,300

December 1, 2010

November 12, 2015

1.51%

800

December 1, 2010

November 12, 2015

1.51%

200

December 1, 2010

November 12, 2017

2.21%

700

January 31, 2011

January 29, 2016

1.94%

800

February 28, 2011

August 31, 2015

1.91%

3,000

February 28, 2011

January 29, 2016

1.95%

500

March 22, 2011

September 22, 2014

1.63%

2,700

March 31, 2011

January 29, 2016

1.91%

2,000

March 31, 2011

March 31, 2016

1.37%

1,000

April 28, 2011

October 31, 2015

1.86%

1,500

April 28, 2011

January 29, 2016

1.89%

1,000

July 13, 2011

July 14, 2014

1.54%

1,000

July 29, 2011

July 31, 2014

1.11%

2,200

July 29, 2011

July 31, 2014

1.11%

1,000

July 29, 2011

July 31, 2014

1.40%

300

August 31, 2011

February 27, 2015

1.05%

1,500

September 1, 2011

August 29, 2014

1.15%

1,000

September 30, 2011

September 30, 2014

1.27%

1,000

September 30, 2011

March 31, 2015

1.29%

2,500

December 26, 2011

October 31, 2014

1.24%

2,500

December 26, 2011

October 31, 2014

1.26%

2,000

December 26, 2011

October 31, 2014

1.26%

2,000

December 26, 2011

October 31, 2014

1.26%

1,000

December 26, 2011

October 31, 2015

1.34%

2,500

December 26, 2011

October 31, 2015

1.32%

2,500

December 26, 2011

October 31, 2015

1.34%

2,000

December 26, 2011

October 31, 2016

1.44%

2,500

December 26, 2011

October 31, 2016

1.42%

2,500

December 26, 2011

October 31, 2016

1.44%

2,000

January 10, 2012

January 29, 2016

1.27%

2,500

January 31, 2012

January 30, 2015

1.19%

1,500

March 12, 2012

March 12, 2015

1.08%

1,000

March 28, 2012

March 28, 2017

1.36%

500

March 28, 2012

March 28, 2019

1.77%

1,400

March 28, 2012

March 28, 2019

1.77%

1,000

March 30, 2012

September 30, 2015

1.21%

2,000

April 27, 2012

October 30, 2015

1.27%

1,000

June 29, 2012

June 30, 2017

1.29%

1,500

September 21, 2012

September 21, 2017

1.16%

5,000

September 21, 2012

September 21, 2017

1.16%

1,000

September 21, 2012

September 21, 2017

1.16%

1,000

October 31, 2012

April 30, 2015

1.01%

2,500

October 31, 2012

October 31, 2016

1.06%

2,500

October 31, 2012

October 31, 2016

1.05%

1,500

October 31, 2012

October 31, 2017

1.10%

2,500

October 31, 2012

October 31, 2018

1.25%

2,500

December 10, 2012

December 12, 2016

0.98%

500

December 28, 2012

December 28, 2016

1.01%

2,000

December 28, 2012

December 28, 2017

1.09%

500

December 28, 2012

December 29, 2017

1.09%

500

22 |

Kenedix Realty Investment Corporation Semiannual Report

Classification

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

January 15, 2013

January 16, 2017

0.97%

1,000

February 18, 2013

February 18, 2016

0.84%

1,500

March 26, 2013

March 26, 2018

1.04%

1,000

March 26, 2013

March 26, 2018

1.04%

1,000

April 30, 2013

April 28, 2016

0.73%

1,000

Subtotal
Corporate bonds

106,370
March 15, 2007

March 15, 2017

2.37%

September 15, 2011

September 13, 2013

1.59%

¥

1,500

March 8, 2012

September 8, 2017

2.00%

1,500

Subtotal

6,000

Total

5.

3,000

¥136,670

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 April 30, 2013

As of October 31, 2012

¥26,230¥26,230PER UNIT INFORMATION
Yen
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Net asset value per unit

¥525,748¥524,828

Net income per unit

¥ 10,477¥ 10,504

Weighted average number of units (units)286,550

286,550

The weighted average number of units outstanding of 286,550 was used for the computation of the amount of net income per unit asof April 30, 2013 and October 31, 2012. Net income per unit after adjusting for residual units is not included because there were noresidual investment units.

7.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 40%. However, theInvestment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements are met
under the Special Taxation Measure Law of Japan. Under this law, the Investment Corporation must meet a number of tax requirements,
including a requirement that it currently distribute in excess of 90% of its net income for the fiscal period in order to be able to deduct
such amounts. If the Investment Corporation does not satisfy 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 income in the form of cash distributions totaling ¥2,703 million (deducting ¥299 million as the provision of reserve for reduction
entry) and ¥2,739 million (deducting ¥271 million as the provision of reserve for reduction entry) for the periods ended April 30, 2013
and October 31, 2012. Such distributions were treated as deductible distributions for purposes of corporate income taxes. The effective
tax rate on the Investment Corporation’s income was 0.04% and 0.05% for the periods ended April 30, 2013 and October 31, 2012.
The following summarizes the significant difference between the statutory tax rate and the effective tax rate:
As of April 30, 2013

As of October 31, 2012

Statutory tax rate

36.59%

36.59%

Deductible cash distributions(32.93)(33.28)Provision of reserve for reduction entry(3.64)(3.30)

Others0.03

0.04

Effective tax rate

0.04%

0.05%

Kenedix Realty Investment Corporation Semiannual Report| 23

The significant components of deferred tax assets and liabilities as of April 30, 2013 and October 31, 2012 were as follows:
In thousands of yen
As of April 30, 2013

As of October 31, 2012

Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold rights

36

¥

27

1,278

1,014

Subtotal deferred tax assets

1,314

1,041

Valuation allowance

1,278

Total deferred tax assets

8.

¥

1,014

36

¥

27

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

9.

RELATED-PARTY TRANSACTIONSTRANSACTIONS WITH KENEDIX OFFICE PARTNERS, INC.
Kenedix Office Partners, 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 Office Partners, Inc. property management feesin accordance with the terms of its Property Management Agreements. For these services, the Investment Corporation paid ¥350 million
to Kenedix Office Partners, Inc.

10.

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

Rental and other operating revenues, property-related expenses, gain on sale of real estate property and loss on sale of real estate property for the periods from November 1, 2012 to April 30, 2013 and May 1, 2012 to October 31, 2012 consist of the following:
In thousands of yen
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Rental revenues¥6,628,333¥6,664,510

Common area charges

1,589,549

1,559,549

8,217,882

8,224,059

Parking space rental revenues

292,402286,632

Utility charge reimbursement

681,272

769,331

Miscellaneous

114,531

337,333

Rental and other operating revenues:

Subtotal
Others:

1,088,205

1,393,296

Total rental and other operating revenues

Subtotal¥9,306,087¥9,617,355

Property management fees and facility management fees

¥ 951,905¥ 937,543

Depreciation

1,662,016

1,621,151

Utilities

753,048

790,093

Taxes

820,158

823,223

Insurance

14,837

14,673

Repairs and maintenance322,652

400,960

Trust fees

42,926

42,682

Loss on retirement of fixed assets

5,193

17,689OthersTotal property-related expenses

24 |167,349

174,152¥4,740,084¥4,822,166

Kenedix Realty Investment Corporation Semiannual ReportGain on sale of real estate property:
Revenue from sale of investment property¥3,180,000¥4,200,000

Cost of investment property

2,641,181

3,355,390

Other sales expenses
Gain on sale of real estate property

76,775

249,094¥ 462,044¥ 595,516¥

Loss on sale of real estate property:
Revenue from sale of investment property—¥ 860,000

Cost of investment property—

992,112

Other sales expenses—

19,711—¥ 151,823

Loss on sale of real estate property

11.

¥

PROPERTY INFORMATIONType

Office Buildings

Residential Properties

Central Urban
Retail Properties

OthersTokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other
Regional Areas

63

15

2

1

2

—

¥219,476¥52,295¥6,603¥1,800¥12,38075.02%

17.88%

2.26%

0.61%

4.23%

—

Net book value

219,586

50,961

6,049

1,767

12,231—

Appraisal value

201,898

44,510

5,573

1,560

11,150—76.28%

16.82%

2.10%

0.59%

4.21%

—

Location

Number of properties

Property information(In millions of yen)

Acquisition price
Percentage of total acquisition price

Percentage of total appraisal value

Financial results for the period from November 1, 2012 to April 30, 2013
Rental and other operating revenues¥—(In thousands of yen)

¥6,579,818¥2,111,248¥187,011¥92,433¥335,577

Rental revenues

5,842,021

1,820,672

167,125

82,393

305,671—

Other revenues

737,797

290,576

19,886

10,04029,906—918

Property-related expenses¥—

2,054,384

860,216

52,56937,293

72,688Property management fees

630,404

271,094

19,5508,148

22,716(7)

Taxes

577,776

200,730

12,938

7,617

20,276

821

Utilities

531,610

192,914

2,524

2,351

23,549100

Repairs and maintenance

185,501

118,176

6,261

9,556

3,158

—

8,828

5,109

374

325

200

1

120,265

72,193

10,922

9,296

2,789

3

4,525,434

1,251,032

134,442

55,140262,889(918)

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

1,106,779

406,519

57,417

22,111

67,987

1,203

Operating income from property leasing activities

3,418,655

844,51377,02533,029194,902(2,121)

Capital expenditures

479,908

289,152

1,116

546

1,755

—

NCF (Net Cash Flow)¥4,045,526¥ 961,880¥133,326¥54,594¥261,134¥ (918)A breakdown of property-type as of April 30, 2013 was as follows:
Class of assets

Property type

Area

Property and equipment

Office Buildings

Tokyo Metropolitan Area

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

71.3%

50,961

16.5%

270,547

87.8%

Other Regional Areas
Subtotal
Residential Properties

Tokyo Metropolitan Area

6,048

2.0%

Other Regional Areas

1,767

0.5%

7,816

2.5%

Tokyo Metropolitan Area

12,231

4.0%

Subtotal
Central Urban Retail Properties

Percentage of total assets¥219,586

Subtotal
Total
Investment securities

12,231

4.0%

290,594

94.3%

897

0.3%

Bank deposits and other assets

16,681

5.4%

Total assets

308,172

100.0%

Total liabilities

157,519

51.1%

Net assets¥150,653

48.9%

Kenedix Realty Investment Corporation Semiannual Report

| 25

12.

FINANCIAL INSTRUMENTS

Sixteenth Fiscal Period (November 1, 2012 to April 30, 2013)(A) OVERVIEW(1) POLICY FOR FINANCIAL INSTRUMENTS
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily throughbank loans and the issuance of corporate bonds and new investment units. The Investment Corporation uses derivatives for the purpose ofhedging its exposure to changes in interest rates and does not enter into derivatives for speculative or trading purposes. Management of
surplus funds is undertaken in a prudent 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 of TMK as set forth by the Act on Securitization of Assets and 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 dateof a maximum of seven years following the accounting date. Although a certain portion of said liabilities are subject to interest rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-rate swap transactions and interest-rate cap transaction) in order toreduce such risk.
Interest-rate swap transactions and interest-rate cap transaction are used as derivative financial instruments. Utilizing interest-rate swap
transactions and interest-rate cap transaction, the Investment Corporation fixes its interest expense for long-term debt bearing interest at
a variable rate. With regard to hedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of
the effectiveness of hedging activities, 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 transaction in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment Corporation periodically reviews the value of the property and financial
condition of the issuer 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 thebalance of cash reserves.
(4) SUPPLEMENTARY EXPLANATION OF THE ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available,
fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in a different fair value.
(B) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments on the balance sheet as of April 30, 2013 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 tonote 2 below).
In thousands of yen
Carrying value

Estimated fair value

Difference¥ 14,813,927¥ 14,813,927¥

Subtotal

14,813,927

14,813,927—

햲 Short-term debt

5,700,000

5,700,000—

햳 Corporate bonds(including current portion of corporate bonds)

6,000,000

5,974,800(25,200)

햲 Cash and bank deposits—

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

130,669,500

130,858,276

188,776

Subtotal¥142,369,500¥142,553,076¥163,576———

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.

26 |Kenedix Realty Investment Corporation Semiannual Reportnote 1: METHODS TO DETERMINE THE ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS AND OTHER MATTERS RELATEDTO 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 rate, which is subject to fixedinterest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present value of the total ofprincipal and interest, which is handled together with applicable interest-rate swaps, discounted by the interest rate to be applied if similarloans were entered into.
DERIVATIVE TRANSACTIONS(1) ITEMS THAT ARE NOT APPLIED TO HEDGE ACCOUNTING
Not applicable(2) ITEMS THAT ARE APPLIED TO HEDGE ACCOUNTING

Hedge accounting
methodContracted amount(In thousands of yen)Type of derivativetransactions

Hedged items

Maturing after 1 year

Fair value(In thousands of yen)Interest-rate swaps:
Special treatment ofReceive/floating andinterest-rate swaps
pay/fixed

Long-term debt

¥20,500,000¥20,500,000*

Special treatment ofInterest-rate capinterest-rate cap

Long-term debt

1,000,000

1,000,000*¥21,500,000¥21,500,000

Total

Calculation method for
applicable fair value* Special treatment of interest-rate swaps and interest-rate cap is reported at the fair value of applicable long-term debt. This is because such swaps and cap are
handled together with hedged long-term debt.

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

Carrying value (In thousands of yen)Preferred equity securities¥896,655

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.

note 3: REDEMPTION SCHEDULE FOR RECEIVABLES
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥14,813,927

Total¥14,813,927

note 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

¥ 5,700,000

¥

¥

¥

¥

Corporate bonds

1,500,000——

3,000,000

1,500,000—

Long-term debt

¥24,300,000¥36,669,500¥32,800,000¥15,000,000¥17,000,000¥4,900,000

—

—

—

Kenedix Realty Investment Corporation Semiannual Report

| 27

—

Due after
5 years

¥

—

13.

INVESTMENT AND RENTAL PROPERTIES

Sixteenth Fiscal Period (November 1, 2012 to April 30, 2013)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating
rental revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2012

Net change

As of April 30, 2013

Fair value as of April 30, 2013
(In thousands of yen)

¥292,021,269¥(1,427,529)¥290,593,741¥264,961,000

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.
The fair value of Ikebukuro Nikko Building is based on the sales price of ¥1,970,000 thousand under the sales and purchase agreement dated May 10, 2013.
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 1 properties totaling ¥2,108,384 thousand, the sale of 2 properties totaling ¥2,641,181 thousand and depreciation amounting to¥1,662,016 thousand.

Income and loss in the fiscal period ended April 30, 2013 for real estate for rental purposes is listed in the Note “10.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN ON SALE OF REAL ESTATEPROPERTY AND LOSS ON SALE OF REAL ESTATE PROPERTY”.

28 |Kenedix Realty Investment Corporation Semiannual ReportStatements of Cash Flows (Unaudited)
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
From November 1, 2012
to April 30, 2013

From May 1, 2012
to October 31, 2012

¥ 3,003,405¥ 3,011,234

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

1,981,289

1,965,534

Interest income

(558)

(857)

Interest expense

1,046,727

1,093,771

5,193

17,689240,699(249,271)

Loss on retirement of fixed assets
Changes in assets and liabilities:
Rental receivables
Consumption tax refundable—

220,729

Accrued consumption tax

68,323

122,971

Trade and other payables(102,818)

98,211

Rents received in advance

203,593(405,105)

2,641,181

4,349,377

Property and equipment due to sale
Others, net(129,157)(374,870)

Subtotal

8,957,877

9,849,413

Interest income received
Cash payments of interest expense

558

857

(1,076,960)(1,108,485)

Cash payments of income taxes
Net cash provided by operating activities(1,092)(1,829)7,880,383

8,739,956(2,860,168)(11,909,217)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchase of investment securities—(5,655)

Proceeds from leasehold and security deposits received

639,486

1,155,231

Payments of leasehold and security deposits received(1,409,380)(1,012,861)—(597,875)

Payments of restricted bank deposits
Proceeds from restricted bank deposits
Net cash provided by investing activities

569,851

86,628(3,060,211)(12,283,749)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt

1,200,000

4,500,000

Payments of short-term debt

(1,200,000)(13,500,000)

Proceeds from long-term debt

9,000,000

20,000,000

Payments of long-term debt

(7,211,500)(7,791,500)

Payment of dividends(2,738,824)(2,681,963)

Net cash provided by financing activities(950,324)

526,537

Net change in cash and cash equivalents

3,869,848(3,017,256)

Cash and cash equivalents at the beginning of period

10,501,755

13,519,011

Cash and cash equivalents at the end of period¥14,371,603¥ 10,501,755

See related notes.

Kenedix Realty Investment Corporation Semiannual Report| 29

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 dateof purchase.
CASH AND CASH EQUIVALENTS (UNAUDITED)Cash and cash equivalents consisted of the following as of April 30, 2013 and October 31, 2012:
In thousands of yen

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

As of April 30, 2013

As of October 31, 2012

¥14,813,927¥11,513,930(442,324)(1,012,175)¥14,371,603¥10,501,755

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

30 |Kenedix Realty Investment Corporation Semiannual Report