KENEDIX Realty Investment Corporation

Semiannual Report
Sixth Fiscal Period
From November 1, 2007 to April 30, 2008

Basic Investment Strategy

Our Basic Investment
and Management Policy
Focus investment on mid-sized officebuildings in the Tokyo metropolitan area.
Further raise proportion of office buildings.
Heighten portfolio quality by enhancing thevalue of assets and replacing portfolio
properties.

Mid-Sized Office Buildings:
Our Characteristics and Forte

Market Environment
and Kenedix Expertise

The mid-sized office real estate market in
Japan offers an overwhelming abundance ofproperties and therefore acquisition
opportunities compared with large-scale
office properties.

Steady, positive results generated byincreasing rents and lower vacancy rates dueto the favorable leasing market for officeproperties in the Tokyo metropolitan area.

An affordable range for selling prices and rent
levels enables high property liquidity.

Many years of experience and know-how
possessed by the Kenedix Group in midsized office buildings.

An expansive tenant stream fuels active
demand from small and mid-sized companies
as well as tenant diversity.

Our proven ability to spot highly competitive
properties and handle leasing andmanagement of these properties.

KRI is aiming for a total asset value of ¥400 billion to become theleading J-REIT specializing in mid-sized office buildings.

Contents
Investment Highlights .......................................1
To Our Unitholders /Interview with the Top Management ................2
Emphasis on Mid-sized Office Buildings inTokyo Metropolitan Area ..................................5
Leverage of Kenedix Group’s Management
Expertise to Maximum Extent...........................6

Financial Strategy .............................................7
Q&A...................................................................9
Properties Roster............................................12
Financial Summary .........................................14
Management Review & Policies .....................15
Financial Statements ......................................21
Management Report.......................................37

Investment Highlights
Cash Distribution for the Sixth Fiscal Period (November 1, 2007 to April 30, 2008): ¥16,711 per unit
Note: The sixth fiscal period commenced on November 1, 2007, and ended on April 30, 2008, a period of 182 days.

Increase in asset scale focused on office buildings
Offices

End of
1st period(2005/10)

12.3

End of
2nd period(2006/4)

12.3

End of
3rd period(2006/10)

16.0

End of
4th period(2007/4)

16.0

End of
5th period(2007/10)

16.0

End of
6th period(2008/4)

16.0

Central Urban Retails

Residentials

48.4

37.7
18.9

Acquisition of officebuildings worth about¥50B a year

67.6

48.2
20.7
44.4

51.8

86.2

43.0

72.4

115.9

43.0

137.9

188.4
12.7

0

50

100

200 (¥B)

150

Notes: 1. Amounts are rounded down to the nearest ¥100 million.
2. The figures at the end of the 6th period includes the acquisition price of building to be acquired of Sakae 4-chome Office Building (Tentative Name) (¥4,325M).

Operating Revenues

Net Income

(¥M)

(¥M)

10,000

4,000

8,582

3,342

7,208

8,000
5,288

6,000

2,792

3,000

5,778

2,124

2,148

3rd
period4th
period

2,000
4,000
2,000
0

2,871

1,101
1,000

1,196
1st
period242
2ndperiod3rd
period4th
period5th
period6th
periodDistribution per Unit0

1st
period2nd
period5th
period6th
period638,809641,5705th
period6th
periodUnitholders’ Equity per Unit(¥)

16,711

17,000(¥)
650,000

16,000600,000

15,00013,88414,00013,00013,52913,682

13,960571,840

579,192

578,839

3rd
period4th
period561,008
550,000

3,052

3,000
0

1st
period2nd
period3rd
period4th
period5th
period6th
period500,000

1st
period2nd
period1

To Our Unitholders /Interview with the Top Management
Kenedix Realty Investment Corporation (KRI) is dedicated to expanding the scale of its
assets through steady growth under the slogan of “¥400 billion in total asset value andbeing the leader among REITs focused on mid-sized office buildings.” CEO andPresident, Taisuke Miyajima spoke about the know-how behind KRI’s solid management capabilities and future investment strategies as he shared the operating results
for the sixth fiscal period.

Executive Director, Kenedix Realty Investment Corporation
CEO and President, Kenedix REIT Management, Inc.

Taisuke Miyajima

Investment Strategy Focused on
the Tokyo Metropolitan Area andMid-sized Office Buildings

Could you tell us about the distribution?
The distribution for the sixth fiscal period was¥16,711 per unit. This includes gains/losses on salesof residential properties; but if excluded, the distri-First of all, could you give us an overview of
KRI’s operating results for the sixth fiscal
period?

bution is approximately ¥14,100. We conduct man-

We further promoted investments centered on officemanagement is the stable growth of distributions.

buildings, which we have been implementing since

We believe that we can continue to realize stable

the third fiscal period, and made quite bold moves ingrowth, through a strong office building market,

acquiring office buildings and selling residential

internal growth such as rises in rents along with aproperties. Specifically, we acquired 14 office build-strong market, as well as property acquisitions

ings worth approximately ¥50 billion, while selling 23

backed by stable financial health.

agement based on distributions per unit that
exclude gains/losses on sales. The foundation of ourresidential properties worth approximately ¥30 billion. Our property management is shifting steadily to
one that is focused on mid-sized office buildings.
With these replacements, the proportion of residential properties in our portfolio has been lowered

Kenedix’s Strengths andOpportunities in a Mid-sized OfficeMarketto a level that is just under 6%, and our policy is torisks in residential properties, for which there is aConcentrated investment in mid-sized officebuildings: Why this investment segment andwhat are your targets?

sense of over-supply in the market. Speaking inActually, investment in the mid-sized office market

terms of investment area, the ratio of our current

segment is what the Kenedix Group has been spe-

investments in the Tokyo metropolitan area iscializing in for the past 10 years.

sell off all of our residential properties in the future.
This stance has been taken to eliminate investment

approximately 80%. We intend to focus our invest-

The target of our REIT is a total asset value of 400

ments on the Tokyo metropolitan area, and continue

billion yen, and 100 buildings at an average of 4 bil-

to invest in quality properties with good locations inlion yen per building. In terms of rent area, one floor

the government-designated cities of Osaka, Nagoya

of approximately 100 tsubo is Kenedix’s strongest

and Fukuoka, which all have good business areas.

realm. According to a Tokyo metropolitan government survey asking how many employees work in2

its office, 93% of the respondents answered that it

The third is know-how. This concerns judgment

was 29 persons or less. These are all mid-sized

regarding what type of money to use, for what pur-office building clients, not large-sized, and wherepose, and at what timing in order to enhance property

potential demand lies in which we can utilize ourvalue. For example, a current rent of ¥15,000 per

strengths.

tsubo could rise to ¥17,000 if we did A, but it could

In this very market, we have built up sufficient

rise to ¥20,000 if we did B: it is about judgment con-know-how, experience and track records in property

cerning what is the most effective way to realize

sourcing/investment, enhancing value, leasing andinvestment profits.

selling; and furthermore, we have capable humanresources.

Since we have focused on mid-sized office buildings, and not on residential properties, commercial

In addition, from a global standpoint, strategies

facilities or warehouses, we are now able to say thatthat are focused on a specific market match the flow

certain properties are a “buy.” We have managed toin which investors themselves engage in diversified

accumulate this much know-how during the three

investments in respective REITs that concentrate

years after our IPO.

investment in specific markets.

Three Key Points in Distinguishing
Value When Acquiring Properties
Could you tell us about the key points you
look for in acquiring properties?

Merits of Scale Born from
Concentrated Strategies
Could you share with us about the management of your properties?
We currently manage 60 office buildings. We would

There are three. First is prospects for the future.

have a hard time for cutting costs if we do renova-

Even if there are some properties that do not gener-

tions on each building individually, but by conduct-

ate cash flow, the overall portfolio can absorb this.

ing renovations on multiple buildings simultaneous-Moreover, we proactively purchase properties thatly, the scale of the renovations becomes bigger.

will have higher value in the future. The second isThus, the principle of competition naturally kicks in,potential. When we purchase a building with a lot of

enabling us to place orders to excellent contractors

vacancies, the ability to ascertain the potential andof higher quality. As a case in point, in the sixth fis-to check the profitability of the property is required.

cal period we were able to cut total renovation costs3from approximately ¥440 million to approximately

We believe that this influences rent negotiations,¥270 million through bulk auction for air conditioning

and in fact, about 40% of negotiated tenants agreed

renovations at five buildings. There are also many

to rent raises in the fifth fiscal period and over 50%

similar cases.

in the sixth fiscal period. In addition, we doAs a result, we are able to obtain competitivenessacknowledge that it is important for us to work onthat cannot even be compared to a party managing

not only the facilities (hardware) side but also on thejust one building. By having a portfolio that concen-

services (software) side of our buildings.

trates investment in mid-sized office buildings, we

Are we able to respond speedily when the fluores-

are now able to enjoy the merits of scale that could

cent lighting is about to burn out? Does the cleaning

only be realized in the large-scale office segment instaff greet tenants properly when entering the build-the past.

ing? The accumulation of such efforts will surely
appear in survey results. This will be a key point inraising rents while reducing vacancies.

Customer Satisfaction means
Strengthening Relations with
Tenants – Our Customers

Maintaining Expertise in Managing
Mid-sized Office Buildings

Could you tell us about the customer satisfaction survey that was conducted as a partof your CS strategy?

Please tell us about future endeavors andprospects.

Among our valuable customers, in addition to our

It has only been about three years since the Tokyo

investors, are the tenants that occupy our office

office market saw recovery in rent prices in 2005.

buildings. We have conducted CS surveys of ten-

Historically speaking, current rent levels are not thatants twice. Based on the first survey, we strived tohigh, and in addition, vacancies have remained low,strengthen the hardware side of our buildings, suchand office demand continues to be strong.

as heightened security and renewal of parts of build-

Financial institutions indicate proactive lending

ings in terms of the waterworks. In the second sur-stances to REITs that invest in quality office build-

vey, we were able to confirm that satisfaction rates

ings with solid location conditions. In other words,

were clearly improving.

we would be able to materialize expansion in investment activities by continuing the strategies I haveshared with you.
With a solid financial base, abundant know-how inreal estate management and the market on our side,
we wish to provide fruitful investment opportunities
to as many investors as possible.

4Emphasis on Mid-sized Office Buildings in Tokyo
Metropolitan Area
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. Reflecting the recent
office market trend, we will continue to focus investing in mid-sized office buildings in Tokyo metropolitan area.

Office portfolio (as of August 1, 2008)
59 properties, total acquisition price of ¥199.0B

Acquisition price(Tokyo metropolitan area)

Acquisition price(Other regional areas)

Office portfolio (based on acquisition price)
Other regional areas(10 properties)

17.7%

CentralTokyo(33 properties)

Tokyo metropolitan area
(excluding central Tokyo)(16 properties)

61.1%

Miyagi1 property ¥2.1B

21.1%
Niigata
1 property ¥1.3B
Central Tokyo1
33 properties¥121.7BAichi
1 property ¥8.3B
Greater Osaka area
5 properties ¥16.3B

Other 18 wards
8 properties¥18.3BChiba
1 property ¥2.2B
Hachioji, Tokyo
1 property ¥1.1B

Fukuoka
2 properties ¥7.2B

Kanagawa
6 properties ¥20.2B

Notes: 1. Central Tokyo: Chiyoda, Chuo, Minato, Shibuya and Shinjuku wards
2. The price ¥8.3B of Sakae 4-chome Office Building (Tentative Name) is the total of land acquired on Apr. 24, 2008 (¥4.0B) and the building to be acquired on July 1, 2009 (¥4.3B).
3. Acquisition price are rounded to the nearest ¥100M. Ratios (%) indicate the total acquisition price for properties in each area in proportion to the total acquisition price for allproperties combined and are rounded down to the first decimal place.

Market environment for office buildings
Potentially strong demand for mid-sized
office buildings by tenants
Breakdown of offices based on number of
employees per officeDistribution of office buildings by tsubo (Central Tokyo)
3,000 tsubo or more
5.0%

100 employees and above
1.6%
30-99 employees
5.0%
10-29 employees
15.7%

Broad based stock of mid-sized office buildings

Proportion of
offices with
1-29 employees:

500-3,000 tsubo

28.6%

93.4%

1-9 employees
77.7%

Source: KDRM, based on Tokyo office statistics report as of 2006
(MPHPT Statistics Bureau)

Less than 500 tsubo
66.4%
Source: Survey conducted by Ikoma Data Service System based on KRI’s requests(survey as of end of Mar. 2007) “Macro market survey of Tokyo’s central 5 wards”
Note: The above data covers rental office buildings located in Tokyo’s central 5
wards that were surveyed by Ikoma Data Service System. Please note thatthe above data may not include the data of all properties in the said 5 wards.

5

Leverage of Kenedix Group’s Management Expertise to
Maximum Extent
By increasing rents through enhancement of customer satisfaction and reducing renovation costs through utilizationof scale merit, we aim to expand earnings by fully utilizing the know-how of the Kenedix Group, which excels in“mid-sized office buildings.”
Breakdown of change rates for rents of newcontracts (6th period)

Breakdown of change rates for rents ofrenewed contracts (6th period)(based on leased area)-5 to -10%
0 to -5%

More than 30%
increase+20 to +30%

0 to +5%+10 to +20%

Unchanged+5 to +10%

48.5 %+5 to +10%

+10 to +20%
+20 to +30%
Average variances by area (simple average for all cases)
Central Tokyo:
35.5% (7 rent increases, no rent decreases)
Other Tokyo metropolitan area: 13.2% (5 rent increases and 1 rent decrease)
Other regional areas:
8.3% (9 rent increases and 4 rent decreases)

51.5 %

0 to +5%

Note: The above percentages represent the variances from the average rents for new
tenants of the relevant office buildings (offices on 2nd floor or above)

Market environment for office buildings
Changes in rent levels (market data)
Tokyo 23 wards: rent levels for large and mid-sized buildings (Jun. 1997 = 100)
(%)
110.0
Rents fluctuate less for
mid-sized buildings
than for large buildings

100.0

102.1%

Large buildings

96.5%

Mid-sized buildings

90.0
Note:

Large building: a building with a total
floor area of 3,000 tsubo or more
Mid-sized building: a building with a
total floor area of 1,000 to 3,000
tsubo
Source: Ikoma Data Service System (the latest
values as of Mar. 2008)

80.0

70.0
1997 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Cost reduction effect by the scale of portfolio
Reduction of construction costs by tendering the installation of air-conditioning facilities (6th period)

Total: ¥443M
Average
auction price (5 Co.)

139

103

101

74

26

-39.3 %
Construction
costs

70

50

79

58

12

¥174M reduction
Total: ¥269M
0

6

50

100

150

200

250

300

KDX Nakano-Sakaue Building

KDX Okachimachi Building

KDX Kayabacho Building

KDX Nogizaka Building

350

400

KDX Kiba Building

450
(¥M)

Financial Strategy
Diversify debt maturity

Debt-financing with an emphasis on diversifying repayments

Amount of debt maturing in each year

(as of the end of August 1, 2008)

(¥B)
16

Long-term borrowings

Investment corporation bonds

14

Short-term borrowings

Fixed borrowings (Over 5 years)
from DBJ

12

3.5
9.0

10
8

15.0

6

8.5

10.0
4
2
0

11.5
8.5

6.5

6.0

3.25
2008
1H

2008
2H

2009
1H

2009
2H

2010
1H

2010
2H

2011
1H

2011
2H

5.0

3.5

3.0

3.0

2012
1H

2012
2H

2013
1H

2013
2H

2014
1H

2014
2H

2015
1H

2015
2H

2016
1H

3.0
2016
2H

Notes:1. Shows the amounts of debt maturing in each Half
2. 1H is from Apr. 1 to Sep. 30, 2H is from Oct. 1 to Mar. 31 of the following year and not identical with the fiscal period of the Investment Corporation (e.g. 2008, 1H is from
Apr. 1, 2008 to Sep. 30, 2008)

Fixed debt interest rates
Conservative policy centered on debt
at an fixed interest rate

Changes in LTV
Conservative interest-bearing debt ratio(kept within the mid 30% to c. 50% range)

Proportion of debt at fixed interest rate* vs.
(as of the end of August 1, 2008)
floating interest rates

Total interest-bearing debt and LTV

Floating interest
rate debt ¥6.75B
6.8%

Fixed interest rate debt
¥92.5B 93.2%

(¥B)
150
120

(%)
50.0

47.0

45.6
38.7

37.5

38.9

40.0

89.75

30.0

35.3
88.5

90

75.5
62.0

60

20.0

42.0
30

Average interest rate
Short-term: 1.18%
Long-term: 1.74%

29.0

10.0

0

DurationLong-term: 2.9 years

0.0
End of
1st
periodNote: “Fixed interest rate debt” includes borrowings that were converted to fixedfrom floating through interest rate swap

End of
2nd
periodEnd of
3rd
periodEnd of4th
periodEnd of5th
periodEnd of6th
periodTotal interest-bearing debt

Investment corporation bonds

Short-term borrowings

LTV

Diversified financing methods through issuance of investment corporation bonds
Credit Rating
Credit Rating Agency
Moody’s Investors Service (Moody’s)
Japan Credit Rating Agency, Ltd. (JCR)(as of August 1, 2008)

Details of the Ratings

Acquired Date

Rating: A3 (Stable)
Senior Debts : A+ (Stable)

Feb. 28, 2006
Dec. 11, 2006

Investment Corporation Bonds

First Series Unsecured Investment Corporation Bonds
Second Series Unsecured Investment Corporation Bonds

Total Amount of Bonds

Interest Rate

Term

Issuance Date

¥9B
¥3B

1.74% / year
2.37% / year

5 years
10 yearsMar. 15, 2007
Mar. 15, 2007

7

A-40

Toranomon Toyo Building

A-37

KDX Ochanomizu Building

A-60

KDX Harumi Building

A-46

Hiei Kudan-Kita Building

A-2

KDX Hirakawacho Building

8

A-13

KDX Kojimachi Building

A-42

Karasuma Building

Questions & Answers“Questions & Answers” are based on an interview with Taisuke Miyajima, CEO and President ofKenedix REIT Management, Inc. (“the Asset Management Company”), the asset managementcompany for Kenedix Realty Investment Corporation (“the Investment Corporation”).

About Kendix REIT Management
Q. What are the special features of the Asset Management Company?
A. Kenedix REIT Management, Inc. is a wholly owned subsidiary of Kenedix, Inc., a company listed on the First Section of the Tokyo Stock
Exchange and a pioneer in the real estate investment management industry. The Asset Management Company receives the full support ofits parent company including personnel and information exchange.
Accordingly, the Asset Management Company boasts specialized knowledge of real estate and finance markets. In this manner, Kenedix
REIT Management, Inc. leverages the experience and know-how of Kenedix, Inc. and its group companies.
As an independent asset management company, Kenedix REIT Management, Inc. strives to deliver a full range of services based on investors’
perspectives. Consistent with the philosophy of the Kenedix Group, the Asset Management Company is comprised of individuals committed
to realizing this investor-oriented objective.

Growth Potential
Q. What target for asset scale have you set for the future?
A. The Investment Corporation will aim to build a strong portfolio focusing on mid-sized office buildings and has set ¥400 billion in asset size as a
mid- and long-term goal. Our goals, however, do not revolve entirely around increasing asset scale. The Investment Corporation seeks tocontinue improving the quality of its portfolio in such terms as location, size and type of properties, through various measures, including
replacement of assets based on the type and area of the assets.

Q. What is the Investment Corporation’s property acquisition strategy?
A. The Investment Corporation leverages a multi-pipeline of real estate and market information gathered through the original network of the AssetManagement Company and the support-line of the Kenedix Group. The Asset Management Company boasts experienced personnel
transferred from the Acquisition Department of Kenedix, Inc. with an extensive network comprising specialists in the finance, construction,
property development, investment fund, corporate, real estate intermediary, legal and accounting fields. This network is expected to provide
the platform for future external growth.
The Investment Corporation also receives information from its support-line with the Kenedix Group relating to brokerage properties, pension
funds, private-placement funds, development and real estate proposals. The Investment Corporation has executed a Memorandum ofUnderstanding with Kenedix, Inc. and Kenedix Advisors Co., Ltd. under which it maintains a preferential position regarding investment property
acquisition.
Another key role of the support-line is to facilitate property acquisition through the warehousing function.

Property Management
Q. What steps does the Investment Corporation take with regard to property management?
A. Rental revenues provide a major source of income for the Investment Corporation. Accordingly, every effort is made to maintain and enhance
rent level and occupancy ratios, which are the key components in the Investment Corporations’ leasing activities. While taking into
consideration economic and real estate market trends, the Investment Corporation adopts a tenant-oriented approach to its leasing activities
with the aim of ensuring a timely and flexible response as well as optimal tenant satisfaction.
Rental revenue aforementioned, the Asset Management Company undertakes property management activities as follows.
・Identify and enhance satisfaction through use of tenant surveys
・Maintain attractive properties based on KDX standards
・Leasing management based on CS Strategy
・Careful control of management and operating costs
The Investment Corporation has appointed Kenedix REIT Management, Inc. as its sole property management company.

9

Investment Properties
Q. Please elaborate on the unique characteristics of mid-sized office buildings.
A. Compared with large-sized office buildings, mid-sized office buildings provide greater liquidity. In addition to the larger number of buildings in
the market, the acquisition prices and rent level of mid-sized office buildings offer a wider scope of acquisition and leasing opportunities.
Under these circumstances, the Investment Corporation recognizes that mid-sized office buildings provide the Investment Corporation with thebest avenue to leverage its abilities in identifying properties with competitive advantage and its expertise and know-how in property leasing andmanagement. Furthermore, given tenant characteristics and the large pool of competing properties, the Investment Corporation recognizes
that mid-sized office buildings exhibit higher rates of tenant turnover with rent levels more finely attuned to economic trends, particularly intimes of recovery.

Q. Why does the Investment Corporation invest mainly in mid-sized office buildings?
A. As an asset manager, the Kenedix Group boasts a wealth of experience and know-how in mid-sized office buildings. Focusing on thissegment enables the Investment Corporation to leverage this considerable strength. In addition, the Asset Management Company isaccumulating know-how and building its track record in the investment and asset management of mid-sized office buildings through suchmeasures as conducting property management based on CS (tenant) surveys and minimizing costs stemming from portfolio size (reduce
construction expenses through bulk contracts, etc.). Furthermore, the Investment Corporation has been raising newly contracted rents andconsistently raising rents of existing leases, and believes it will be able to continue boosting the asset value and property competitiveness andincreasing the rent level for mid-sized office buildings in a consistent manner.
The Investment Corporation seeks to build its portfolio to ¥400 billion in asset size with mid-sized office buildings at the core. This translates
to an image of owning 100 office buildings worth an average of ¥4 billion. The Kenedix Group has its greatest strengths in mid-sized officebuildings that have approximately 100 to 150 tsubos of leased floor area per floor.
According to a Tokyo Metropolitan Government survey on how many employees work in a single office, “of the offices in Tokyo, about 94%
were offices for 29 employees or less.” The majority of these are clients for which mid-sized office buildings would be suitable.
Consequently, the Investment Corporation believes that there is high latent demand for mid-sized office buildings.
The Asset Management Company already has adequate know-how, experience and track record in relation to property sourcing, enhancing
value, leasing, selling and other areas of the mid-sized office building market, and is equipped with the human resources for such.
Moreover, Tokyo is Japan’s center of business and thus there is an extremely massive market. For these reasons, the Investment
Corporation will continue to concentrate investment in mid-sized office buildings in the Tokyo Metropolitan Area.

Q. Please elaborate on the purpose of the “reciprocal purchase and sale of residential properties and officebuildings” conducted on February 1, 2008.
A. The Investment Corporation revised its portfolio development policy in December 2006 and has since been striving to develop a portfolio
focused on mid-sized office buildings. The transaction made on February 1, 2008 concerning reciprocal purchase and sale is consistent withthis investment policy. Furthermore, the Investment Corporation is convinced that the reciprocal purchase and sale will reinforce thepotential for internal growth backed by the favorable office building leasing market, as it will contribute to a strengthened portfolio that consists
mainly of mid-sized office buildings and achieve to raise the investment ratio of office buildings.
In addition, the concentration on office buildings is viewed to enable the Asset Management Company to strengthen its expertise in asset
management.

Q. What are your plans for the remaining residential properties?
A. The policy of the Investment Corporation is to develop a “portfolio focused on mid-sized office buildings.” Based on this policy, the plan is tocontinue decreasing investment ratio of residential properties, which will involve replacing residential properties in the portfolio, while
continuing to make new investments in office buildings. No date has been set, however, on until when exactly the ongoing decrease in theinvestment ratio of residential properties.

Q. What are your expectations of the real estate markets?
A. Only three years has passed since the rents of Tokyo’s office market began recovering from the latter half of 2005. The rent level is also not
all that high relative to the past and the current office demand remains strong. The Investment Corporation also recognizes that real estatemarkets are subject to a variety of trends based on property type, area and size. While activity in one area may be robust, other areas may
experience stagnant conditions. Under these circumstances, the ability to accurately identify real estate trends by property type, area andsize will become more important.

10

Financial Strategy
Q. What benchmark have you established for interest-bearing debt ratio, and what are the Investment Corporation’s
debt policies?
A. The Investment Corporation is conscious of maintaining a conservative financial strategy together with an appropriate interest-bearing debt
ratio (a balance between total assets and interest-bearing debt). Currently, the target ratio is set between 35 to around 50%. The
Investment Corporation seeks to continue diversifying the debt maturity to decrease the refinance risk. In addition, the Investment
Corporation will aim to lengthen the average debt maturity by increasing the portion of its long-term borrowings and issuing the investment
corporation bonds.

Q. How do you see interest rate trends in the future? What measures do you have in place to avoid the risk of future
increase in interest rates?
A. The interest rates are expected to show a moderate rise. We believe the key factor in determining future market conditions will be the speedof interest rate increase. If the pace at which interest rates rise serves to promote economic growth, the impact on real estate markets isnaturally favorable. For example, in an environment where economic growth outpaces the increase of interest rates, rent levels can also be
expected to rise. With this in mind, the Investment Corporation invests mainly in mid-sized office buildings, characterized by relatively highrates of tenant turnover. Under these circumstances, we are able to maintain rent levels in line with market trends. In an effort to avoid therisk of future increase in interest rates, the Investment Corporation adopts a prudent fixed interest rate policy. In principle, we enter into
interest-rate swap agreements to fix cost levels on floating rate long-term debt. The Investment Corporation completed converting theinterest rates to fixed interest rates for 93.5% (¥84.0 billion) of the balance of interest-bearing debt (¥89.75 billion) as of the end of the sixth
fiscal period. Furthermore, the Investment Corporation acquired an A3 credit rating from Moody’s Investors Services, Inc. and A+ rating fromJapan Credit Rating Agency, Ltd. In addition, we have issued 5 year and 10 year investment corporation bonds (fixed interest rate) in March
2007.

11

Properties Roster
Properties as of the end of the 6th period (68 properties)
Type

Area

Name

Location

Toranomon Toyo Building(%) (Note 3)

9,850

Aug. 1962

99.1

Mar. 1988

100.0

KDX Ochanomizu Building

Chiyoda ward, Tokyo

6,400

Aug. 1982

100.0

KDX Shiba-Daimon Building

Minato ward, Tokyo

6,090

Jul. 1986

100.0

KDX Kojimachi Building

Chiyoda ward, Tokyo

5,950

May. 1994

98.2

KDX Nihonbashi 313 Building

Chuo ward, Tokyo

5,940

Apr. 1974

100.0

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

100.0

KDX Hirakawacho Building

Chiyoda ward, Tokyo

5,180

Mar. 1988

100.0

Yokohama, Kanagawa

4,700Mar. 1988

94.6

Shibuya ward, Tokyo

4,640

Jan. 1992

100.0

Higashi-Kayabacho Yuraku Building

Chuo ward, Tokyo

4,450

Jan. 1987

100.0

KDX Toranomon Building

Minato ward, Tokyo

4,400

Apr. 1988

100.0

●

KDX Nishi-Gotanda Building

Shinagawa ward, Tokyo

4,200

Nov. 1992

100.0

Kawasaki, Kanagawa

3,760

Feb. 1985

100.0

KDX Hatchobori Building

Chuo ward, Tokyo

3,680

Jun. 1993

100.0

KDX Omori Building

Ota ward, Tokyo

3,500

Oct. 1990

100.0

Minato ward, Tokyo

3,460

Sep. 1999

100.0

Minato ward, Tokyo

3,300

Apr. 1989

80.4

KDX Kawasaki-Ekimae Hon-cho Building●

KDX Hamamatsucho Building
KDX Roppongi 228 Building●

KDX Higashi-Shinjuku Building

Shinjuku ward, Tokyo

2,950

Jan. 1990

82.2

KDX Kayabacho Building

Chuo ward, Tokyo

2,780

Oct. 1987

100.0

KDX Jimbocho Building●

Chiyoda ward, Tokyo

2,760

May 1994

0.0

Nissou Dai-17 Building●

Yokohama, Kanagawa

2,710

Jul. 1991

100.0

KDX Shinbashi Building

Minato ward, Tokyo

2,690

Feb. 1992

100.0

KDX Nakano-Sakaue Building

Nakano ward, Tokyo

2,533

Aug. 1992

100.0

KDX Shin-Yokohama Building

Yokohama, Kanagawa

2,520

Sep. 1990

100.0

Harajuku F.F. Building

Shibuya ward, Tokyo

2,450

Nov. 1985

100.0

Meguro ward, Tokyo

2,400

Sep. 1988

91.3

Chiyoda ward, Tokyo

2,350

Mar. 1990

100.0

Ikejiri-Oohashi Building●

KDX Kajicho Building
KDX Hamacho Nakanohashi Building (Note 4)

Chuo ward, Tokyo

2,310

Sep. 1988

100.0

KDX Hamacho Building

Chuo ward, Tokyo

2,300

Sep. 1993

100.0

KDX Shinjuku 286 Building

Shinjuku ward, Tokyo

2,300

Aug. 1989

100.0

FIK Minami Aoyama Building

Minato ward, Tokyo

2,270

Nov. 1988

100.0

●

KDX Funabashi Building
Shin-toshin Maruzen Building

Funabashi, Chiba

2,252

Apr. 1989

100.0

●

Shinjuku ward, Tokyo

2,110

Jul. 1990

100.0

Taito ward, Tokyo

2,000

Jun. 1988

89.7●

Chiyoda ward, Tokyo

1,951

Aug. 2000

100.0

KDX Okachimachi Building
KDX Gobancho Building
Kanda Kihara Building

Chiyoda ward, Tokyo

1,950

May. 1993

100.0

KDX Yotsuya Building

Shinjuku ward, Tokyo

1,950

Oct. 1989

100.0

KDX Shinjuku-Gyoen Building

Shinjuku ward, Tokyo

1,610

Jun. 1992

100.0

KDX Kiba Building

Koto ward, Tokyo

1,580

Oct. 1992

88.0

KDX Nishi-Shinjuku Building

Shinjuku ward, Tokyo

1,500

Oct. 1992

100.0

KDX Monzen-Nakacho Building

Koto ward, Tokyo

1,400

Sep. 1986

100.0

KDX Kanda MIsaki-cho Building

12

Occupancy Ratio

7,600

●

Ebisu East 438 Building

Metropolitan Area

Completion
Date (Note2)

Minato ward, TokyoKDX Shin-Yokohama 381 Building

Tokyo

Acquisition
Price(¥M) (Note1)

Chiyoda ward, Tokyo

Hiei Kudan-Kita Building

Office●Acquired during the 6th Period

Chiyoda ward, Tokyo

1,380

Oct. 1992

86.9

KDX Hon-Atsugi Building

Atsugi, Kanagawa

1,305May. 1995

100.0

KDX Hachioji Buidling

Hachioji, Tokyo

1,155

Dec. 1985

85.6

KDX Nogizaka Building

Minato ward, Tokyo

1,065

May. 1991

100.0

KDX Koishikawa Building

Bunkyo, Tokyo

704

Oct. 1992

100.0

●

Type

Acquisition

Completion

Occupancy Ratio

Price(¥M) (Note1)

Date (Note2)(%) (Note 3)

Nagoya, Aichi

8,325

Jun. 2009−

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

100.0

Karasuma Building

Kyoto, Kyoto

5,400

Oct. 1982

98.6

Fukuoka, Fukuoka

4,900

Jun. 1973

95.4

Fukuoka, Fukuoka

2,350

Jul. 1982

100.0

Area

Name

Location

Sakae 4-chome Office Building (Tentative Name)(Note 5)KDX Hakata Minami Building
Other Regional Areas

Office●●KDX Hakata Building
KDX Kitahama Building

Osaka, Osaka

2,220

Jul. 1994

88.1

KDX Sendai Building

Sendai, Miyagi

2,100

Feb. 1984

93.7

KDX Minami Semba Dai-1 Building

Osaka, Osaka

1,610

Mar. 1993

87.2

KDX Minami Semba Dai-2 Building

Osaka, Osaka

1,560

Sep. 1993

94.1

Hakata Ekimae Dai-2 Building

Fukuoka, Fukuoka

1,430

Sep. 1984

99.3

KDX Niigata Building

Niigata, Niigata

1,305

Jul. 1983

61.0●

Office (Total 58 properties) Sub Total
CentralUrban

188,405

Avg. 21.0 yrs

95.8

Tokyo Metropolitan

Frame Jinnan-zaka

Shibuya ward, Tokyo

9,900

Mar. 2005

97.9

Area

KDX Yoyogi Building

Shibuya ward, Tokyo

2,479

Aug. 1991

100.0

3,680

Nov. 2005

100.0

16,059Avg. 4.9 yrs

98.7

Other Regional Areas ZARA Tenjin Nishi-dori

RetailFukuoka, Fukuoka

Central Urban Retail (Total 3 properties) Sub Total

Tokyo
Metropolitan Area

Residential

Residence Charmante Tsukishima

Chuo ward, Tokyo

5,353

Jan. 2004

100.0

Court Mejiro

Shinjuku ward, Tokyo

1,250

Mar. 1997

95.1

Apartments Motoazabu

Minato ward, Tokyo

1,210

Jan. 2004

90.5

Apartments Wakamatsu Kawada

Shinjuku ward, Tokyo

1,180

Feb. 2004

92.0

Gradito Kawaguchi

Kawagushi, Saitama

1,038

Feb. 2006

100.0

Court Shin-Okachimachi

Taito ward, Tokyo

878

Oct. 2005

95.4

1,800

Mar. 1989

93.0

12,709Avg.6.6 yrs

95.4

217,173 Avg.18.9 yrs

95.9

Other Regional Areas Venus Hibarigaoka

Sapporo, Hokkaido

Residential (Total 7 properties) Sub Total
Total of 68 properties

Properties acquired during the 7th period (2 properties)
Tokyo Metropolitan
Area

OfficeKDX Harumi Building

Chuo ward, Tokyo

10,250Feb. 2008−

KDX Iwamoto-cho Building

Chiyoda ward, Tokyo

1,864

Mar. 2008−

Office (Total 2 properties) Sub Total

12,114

Properties sold during the 6th period (23 residential properties)
Name
Regalo Ochanomizu I･II

Acquisition Price(¥M) Sales Price (¥M)
3,600

Name

3,670 S-court Yokohama Kannai

Acquisition Price(¥M) Sales Price (¥M)
945

Name

1,020 Ashiya Royal Homes

Acquisition Price(¥M) Sales Price (¥M)
2,330

2,420

Storia Sirokane

3,150

3,370 Regalo Komazawa-kouen

912

943 Regalo Ibaraki I･II

1,600

1,620

Tre di Casa Minami Aoyama

2,460

2,680 Court Motoasakusa

880

943 Collection Higashi-Sakura

1,264

1,150

Regalo Shiba-kouen

2,260

2,280 Bloom Omotesando

875

962 Renaissance 21 Hirao Jousui-machi

900

964

Chigasaki Socie Ni-bankan

1,160

1,140 Human Heim Okachimachi

830

905 Montore Nishikouen Bay Court

826

831

Court Nihonbashi-Hakozaki

1,130

1,220 Primo Regalo Kagurazaka

762

770 Abreast Hara

444

494

Court Nishi-Shinjuku

1,130

1,160 Primo Regalo Youga

730

737 Abreast Hirabari

407

457

Side Denenchofu

1,110

1,110 Cout Shimouma

638

644 Residential (Total 23 properties)

30,34331,490Notes:
1. Figures in the “Acquisition Price” column represent the real estate or trust beneficiary interest sales price (excluding consumption tax, rounded down to the nearest million yen) for each property acquired, indentified in relevant Real Estateor Trust Beneficiary Interest Purchase and Sales Agreement.
2. The “Completion Date” column refers to the date on which construction was first completed.

Each average age subtotal and total for the investment portfolio is shown as the weighted-average portfolio age based upon acquisition prices

with a base date of April 30, 2008, and is rounded down to the first decimal place. Sakae 4-chome Office Building (Tentative Name) is not included in the weighted-average portfolio age.
3. “Occupancy Ratio” is the leased floor area divided by total leasable floor area for each property as a percentage to the nearest first decimal place.

Ratios for the 67 properties (excluding Sakae 4-chome Office Building (Tentative Name))

held as of the end of sixth fiscal period, are calculated as of April 30, 2008.
4. The current name of the "KDX Hamacho Nakanohashi Building" is the "Hamacho Nakanohashi Building." Following the acquisition, the Investment Corporation intends to carry out procedures to change the name of the building.
5. The total of the land acquired on April 25, 2008 (¥4,000 million) and the building planned to be acquired on July 1, 2009 (¥4,325 million) are shown.

In addition, the completion date in the construction contract agreement is shown.

13

Financial Summary
Trends in Operating Conditions

PeriodOperating revenues¥M

Second Fiscal

Third Fiscal

Fourth Fiscal

Fifth Fiscal

Sixth Fiscal

PeriodPeriodPeriodPeriodPeriod(As of Apr. 30,(As of Oct. 31,(As of Apr. 30,(As of Oct. 31,(As of Apr. 30,

2006)

2006)

2007)

2007)

2008)

2,871

5,288

5,778

7,208

8,582

（Rental revenues）

¥M

2,871

5,131

5,647

7,208

7,630

Operating expenses

¥M

1,527

2,723

3,091

3,737

4,517

(Property-related expenses）

¥M

1,265

2,397

2,607

3,205

3,447

Operating income

¥M

1,343

2,565

2,686

3,470

4,065

¥M

1,103

2,125

2,148

2,793

3,343

Net income

(a)

¥M

1,101

2,124

2,148

2,792

3,342

Total assets

(b)

¥M

92,053

160,314

188,400

213,763

230,520

Interest-bearing debt

(c)

¥M

42,00062,00088,50075,50089,750Unitholders’ equity

(d)

¥M

45,38790,93390,877

127,761

128,314¥M

44,28588,72988,729124,973

124,973(e)

Per Unit

79,370157,000

157,000

200,000

200,000

Ordinary income

Unitholders’ capital
Number of investment units issued and outstanding(d)／(e)Yen

571,840

579,192

578,839

638,809641,570

Total distribution

(f)

¥M

1,101

2,124

2,148

2,792

3,342

Distribution per unit(f)／(e)Yen

13,884

13,52913,682

13,96016,711（Earnings distributed per unit）

Yen

13,884

13,52913,682

13,96016,711（Distribution in excess of earnings per unit）

Yen

−

−

−

−

−

Unitholders’ equity per unit

Return on assets（annualized）(Note 1,2)％

1.3 （2.6）

1.7 （3.3）

1.2 （2.5）

1.4 (2.8)

1.5 (3.0)

Return on unitholders’ equity (annualized)(Note 2,3)％

2.5 （4.9）

3.1 （6.2）

2.4 （4.8）

2.6 (5.1)

2.6 (5.2)

Unitholders’ equity ratio at the end of period(d)／(b)

％

49.3

56.7

48.2

59.8

55.7

Interest-bearing debt ratio at the end of period(c)／(b)

％

45.6

38.7

47.0

35.3

38.9

Payout ratio (Note 4)(f)／(a)

％

99.9

99.9

100.0

99.9

99.9

Number of properties

Properties

35

64

72

77

68

Total leasable floor area㎡

104,868.65

192,085.34

223,322.77

248,653.07

248,625.52

Occupancy ratio at the end of period

％

94.9

95.3

95.9

96.9

95.9

Depreciation expenses for the period

¥M

650

1,135

1,243

1,392

1,430

Capital expenditures for the period

¥M

510

655

1,132

1,238

1,152

[Other reference]

Leasing NOI (net operating income)(Note 5)

¥M

2,256

3,869

4,283

5,394

5,612

FFO (funds from operation)(Note 6)

¥M

1,752

3,102

3,261

4,184

4,259

FFO per unit

(Note 7)

Yen

22,076

19,75920,772

20,92021,297

Notes:
1. Return on assets = Ordinary income / (Total assets at the beginning of period + Total assets at the end of period) / 2 x 100
2. Annualized values for the second fiscal period are calculated based upon a period of 181 days, 184 days for the third fiscal period, 181 days for the fourthfiscal period, 184 days for the fifth fiscal period and 182 days for the sixth fiscal period.
3. Return on unitholders’ equity = Net income / (Total unitholders’ equity at the beginning of period + Total unitholders’ equity at the end of period) / 2 x 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 ‐ Profit on sale of trust beneficiary interests in real estate or real estate
7. FFO per unit = FFO / number of investment units issued and outstanding (figures below ¥1 rounded down)

14

Management Review & Policies
Operating Conditions for the Sixth Fiscal Period(1) The Investment Corporation
The Investment Corporation was established on May 6, 2005 in accordance with the Investment Trust and Investment Corporation Law (“theInvestment Trust Law”). On July 21, 2005, the Investment Corporation was listed on the Real Estate Investment Trust Market of the Tokyo Stock
Exchange. (Securities Code: 8972). Subsequently, the Investment Corporation has conducted a global offering in May 2006. In addition, theInvestment Corporation has conducted the second global offering in May 2007. Consequently, as of April 30, 2008, the end of the sixth fiscal
period, the number of investment units issued and outstanding totaled 200,000 units.
The Investment Corporation appointed Kenedix REIT Management, Inc. as its asset management company. In concert 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 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
endeavors to develop a diversified investment portfolio named “KENEDIX Selection,” adopting a three-point investment criteria based on property
type, area and size.

(2) Investment Environment and Management Performancea. Investment environment
During the fiscal period under review, the Japanese economy shifted from a recovery trend to a stagnant state. Corporate earnings, which
had been continuing to recover, weakened and capital expenditures, which had been on an upward trend, have generally leveled off.
As for the real estate market, according to the official announcement of land prices as of January 1, 2008, average land prices in Japan forthe one year period from January 2007 increased by 3.8% for commercial land and 1.3% for residential land. This marked the second
consecutive year-on-year increase. In Tokyo, the average increase was 15.8% for commercial land and 9.1% for residential land, the third
consecutive year that prices for both categories increased. In the three major cities, average land price increases expanded, but points emerged
where reductions in increases were seen, mainly in the inner-city areas.
b. Management performance
In the fiscal period under review, the Investment Corporation sold 23 residential properties (initial total acquisition price of ¥30,343 million) toa wholly owned subsidiary of Kenedix, Inc. and acquired 9 office buildings (total acquisition price of ¥31,980 million) from wholly owned
subsidiaries of Kenedix, Inc. on February 1, 2008. In addition, the Investment Corporation acquired 5 office buildings (total acquisition price of¥14,121 million). As a result, the number of properties owned as of April 30, 2008 stood at 68, with a total acquisition price of ¥212,848 million.
Looking at the portfolio as a whole, 86.4% was comprised of office buildings, 7.5% of central urban retail properties and 5.9% of residential
properties on an acquisition price basis. The occupancy ratio as of the end of the sixth fiscal period was 95.9%, reflecting stable investment andasset management.
＜External Growth Performance after IPO＞
Second Fiscal Period(as of April 30, 2006)

Office Buildings
Type of Use

Central Urban Retail
Properties

Third Fiscal Period(as of October 31, 2006)

Fourth Fiscal Period(as of April 30, 2007)

Fifth Fiscal Period(as of October 31, 2007)

Sixth Fiscal Period(as of April 30, 2008)

Total
Acquisition Price(Millions of Yen)

Ratio
(%)

Total
Acquisition Price(Millions of Yen)

Ratio
(%)

Total
Acquisition Price(Millions of Yen)

Ratio
(%)

Total
Acquisition Price(Millions of Yen)

Ratio
(%)

Total
Acquisition Price(Millions of Yen)

Ratio
(%)

48,26959.2

86,224

58.7

115,979

66.2

137,97970.0

184,080

86.4

12,37915.2

16,05910.9

16,0599.1

16,0598.1

16,059

7.5

Area

Residential Properties

20,78625.5

44,45930.2

43,052

24.5

43,05221.8

12,7095.9

Total

81,434100.0

146,742100.0

175,090100.0

197,090

100.0

212,848

100.0

Tokyo Metropolitan Area

71,783

88.1

123,32184.0

150,36485.8

162,51482.4

174,923

82.1

Other Regional Areas

9,651

11.8

23,421

15.9

24,726

14.1

34,576

17.5

37,925

17.8

Total

81,434100.0

146,742100.0

175,090100.0

197,090

100.0

212,848

100.0

Notes: Total acquisition price is the total of acquisition price for each property classified by type and area.
Total acquisition price is rounded down to the nearest million yen. Percentages are rounded down to the nearest first decimal place.

15

Operation and Management of Existing Properties
Kenedix REIT Management, Inc. is appointed as a property management company for entire portfolio of the Investment Corporation. The
Investment Corporation has changed its property management company for the properties held as of February 1, 2008 to Kenedix REITManagement, Inc. from Kenedix Advisors Co., Ltd. In establishing a single point of contact for all matters relating to property management
activities, the Investment Corporation strives to secure consistent policies, specifications and procedures along with ensuring swift and quality
service. As of April 30, 2008, the investment portfolio maintains a high occupancy ratio. The Investment Corporation is satisfied with the qualityof property management.
The Investment Corporation leverages scale merits and the communication and negotiation skills of the Kenedix Group in an effort to reduce
operating costs, and have succeeded reductions in building maintenance costs.
Change of Property Management Structure(1) Reasons of the Changes
The Investment Corporation had been entrusting Kenedix Advisors Co., Ltd., a subsidiary of the Asset Management Company’ssponsor company, Kenedix, Inc. as its sole property management company for the entire portfolio. However, in view of the following
matters, the structure was shifted to which Kenedix REIT Management, Inc. will independently conduct the property management duties.
・A structure which Kenedix REIT Management, Inc. independently conducts property management in a consistent manner by conducting
prompt and unified management of multiple investment properties and advancing activities in close relation to properties and tenants isviewed to be a more ideal structure.
・Kenedix Advisors Co., Ltd. revised its business details internally in effect of enactment of the Financial Instruments and Exchange Law.
Furthermore, in correlation with the above change, the master lease undertaken by Kenedix Advisors Co., Ltd. (pass-through type oflease for all of its properties) was shifted to a structure under which the Investment Corporation will independently undertake the master
lease.
With these changes, the Asset Management Company has changed its organization. Details are provided in “(2) Change of theOrganization”. Fees related to the property management are at the same level as the fees set in the property management agreement
executed with Kenedix Advisors Co., Ltd.
(2) Change of the Organization
The Asset Management Company’s organization has changed as follows to enable the Asset Management Company to conduct theproperty management business (operational management business) on its own for properties owned by the Investment Corporation.
・The “Property Management Division” was established as a dedicated department to conduct the operation and management for properties
owned by the Investment Corporation. In addition, the “Property Management Group” and the “Engineering Group” was establishedunder the “Property Management Division.”・The “Real Estate Investment Group” under the “Investment Management Division” has changed its name to the “Asset Investment Group.”This was done from the perspective of creating uniformity among group names under each division.
A majority of the members of the dedicated division at Kenedix Advisors Co., Ltd. (REIT Management Division) that has been handlingthe operation and management of properties in the Investment Corporation’s portfolio were assigned to the Property Management Division.

(3) Capital Acquisition
The Investment Corporation undertook borrowings of ¥15.0 billion to support the acquisition of additional assets and refinanced ¥1.5 billion
during the sixth fiscal period to total of ¥16.5 billion in borrowings (¥15.0 billion in long-term borrowings and ¥1.5 billion in short-term borrowings(Note 1)).
As a result, the balance of interest-bearing debt stood at ¥89.75 billion as of April 30, 2008, comprising ¥77.75 billion in borrowings (¥72.0
billion in long-term borrowings and ¥5.75 billion in short-term borrowings) and ¥12.0 billion in investment corporation bonds.
As of April 30, 2008, the Investment Corporation had ¥72.0 billion in long-term borrowings, of which ¥45.3 billion had floating interest rates
effectively fixed by utilizing interest-swap agreements. In addition, the long-term debt ratio (Note 2) was 93.5% and the long-term fixed interest
debt ratio (Note 3) was 93.5%.
Since its public listing through to the end of the sixth fiscal period, the Investment Corporation has undertaken flexible debt funding on bothan unsecured and unguaranteed basis. This is the result of the high standing in which the Investment Corporation, its investment policies, asset
quality as well as the personnel and expertise of the Asset Management Company are held among financial institutions. In addition, theInvestment Corporation strives to diversify repayment dates for its debt financing in an effort to reduce refinancing risk. The Investment
Corporation also strives to extend average repayment periods by placing added emphasis on long-term debt.

16

Notes:
1. Short-term borrowings refers to borrowings with a period of less than or equal to one year from the drawdown date to the repayment date.
Long-term borrowings refers to borrowings with a period of more than one year from the drawdown date to the repayment date.
2. Long-term debt ratio＝（Balance of long-term borrowings＋Balance of investment corporation bonds）÷（Total borrowings＋Balance ofinvestment corporation bonds） Long-term debt ratio is rounded down to the nearest first decimal place.
3. Long-term fixed interest debt ratio＝（Balance of long-term fixed interest rate borrowings＋Balance of investment corporation bonds）÷（Total
borrowings＋Balance of investment corporation bonds） Long-term fixed interest debt ratio is rounded down to the nearest first decimal place.
The balance of long-term fixed interest rate borrowings includes borrowings with floating interest rates effectively fixed by utilizing interest-rate
swap agreements.
The Investment Corporation acquired a credit rating of A+ (Outlook: Stable) from Japan Credit Rating Agency, Ltd. in December 2006.
This was the second credit rating acquired following the A3 (Outlook: Stable) from Moody’s Investors Services, Inc. in February 2006. Details of
the credit ratings as of April 30, 2008 are as follows.
Credit Rating Agency
Moody’s Investors Service
Japan Credit Rating Agency, Ltd.

Details of the Ratings
Rating：A3
Outlook：Stable
Senior Debts：A+
Outlook: Stable

The Investment Corporation filed a debt shelf registration statement in February 2007, and filed an equity shelf registration statement to
conduct equity financing in April 2007. Details are as follows.

Investment Corporation Bonds

Investment Unit Certificate

Planned Issue Amount¥100,000,000,000 (Note)¥100,000,000,000

Planned Issuance Period

February 15, 2007 to February 14, 2009

May 7, 2007 to May 6, 2009

Use of Funds

Acquisition funds for specified assets, repayment
Acquisition funds for specified assets, repaymentof borrowings, repayment of investment corporation of borrowings, repayment of investment corporation
bonds, refund of lease and guarantee deposits,
bonds, refund of lease and guarantee deposits,
funds to pay for repairs and maintenance, working funds to pay for repairs and maintenance, working
capital, etc.
capital, etc.

Note: First Series Unsecured Investment Corporation Bonds of ¥9,000,000,000 and Second Series Unsecured Investment Corporation
Bonds of ¥3,000,000,000 has been issued in March 2007 based on the debt shelf registration.
The Investment Corporation established a credit commitment line with Citibank Japan, Ltd. in January 2008, allowing it to borrow up to¥2.5 billion on an unsecured basis. In addition, the Investment Corporation once again established a credit commitment line with The Bank ofTokyo-Mitsubishi UFJ, Ltd. in March 2008, allowing it to borrow up to ¥2.5 billion on an unsecured basis.

(4) Operating Results and Cash Distribution
As a result of the aforementioned management performance, the Investment Corporation reported operating revenues of ¥8,582 million,
operating income of ¥4,065 million, ordinary income of ¥3,343 million and net income of ¥3,342 million for its sixth fiscal period.
In accordance with Article 67.15 of the Special Taxation Measures Law, the Investment Corporation distributes the total amount of its
unappropriated retained earnings for each period. Cash distribution for the sixth fiscal period was ¥16,711 per unit.

17

Future Management Policies(1) Investment Environment
Looking ahead, the Japanese economy is forecast to continue its mild path to recovery, with exports remaining on an upward trend. On theother hand, corporate earnings are weakening for the time being, and capital investment has generally leveled off. Improvements in employment
conditions have also come to a standstill and personal consumption has generally leveled off.
As for the real estate market, posted land prices for March 2008 confirmed continued land price appreciation in the three major cities of Tokyo,
Osaka and Nagoya. However, it is necessary to keep close tabs on the impact of economic/interest rate trends, supply-demand balance trends,
domestic and overseas investors’ trends, etc. for future outlook in land price trends.

(2) Management Policies
a. Existing property management strategy (Internal Growth Strategies)
Taking into consideration economic and real estate market trends, the Investment Corporation adopts a tenant-oriented approach to its
leasing activities with aims of ensuring a timely and flexible responses as well as optimal tenant satisfaction. Accordingly, the Investment
Corporation will aim to increase of the cash flow by offering office environment with high tenant satisfaction. Based on the aforementioned, theAsset Management Company undertakes property management activities as follows:・Identify and enhance satisfaction through use of tenant surveys
・Maintain attractive properties based on KDX standards
・Leasing management based on CS Strategy
・Careful control of management and operating costs
The Investment Corporation has appointed Kenedix REIT Management, Inc. as its Property Management Company for its entire portfolio.
Identify and enhance tenant satisfaction through use of tenant surveys
The Investment Corporation recognizes each tenant as a key customer and strives to enhance customer satisfaction and raise thecompetitiveness of its properties as the means to maintain and increase earnings.
The Investment Corporation conducted a customer satisfaction survey through J.D. Power Asia Pacific, Inc., an internationally recognizedcompany that engages in customer satisfaction evaluation, to better understand the needs of its tenants and take steps to respond to theirpreferences. As a part of this survey the administration officers of each tenant and tenant employees were asked to respond to many questions
concerning buildings and facilities as well as operating and management services. The Investment Corporation conducted the first CS survey,
which covered 20 of its properties, during the second fiscal period, and the second CS survey, which covered 44 of its properties, during the fifth
fiscal period.
In addition, concerning properties where construction was conducted to address customer satisfaction based on the results of the firstsurvey, and for the second survey, the effects of such construction (improvements in the level of satisfaction) were studied. The results confirmedthat the effects of maintenance and renovations of the “external façade and entrance” and “toilets” were high. The Investment Corporation will
use this as reference for determining the priority of maintenance and renovations in the future.
Through these means, the Investment Corporation is working efficiently to generate improvements in rent levels and asset values, increase
earnings and promote sustained internal growth.
Maintain attractive properties based on KDX standards
The Investment Corporation aims to provide attractive mid-sized office buildings in order to enhance portfolio value and rental revenues.
We believe that the quality of mid-sized office buildings in Japan vary considerably depending on the nature of the owner. For example, abuilding owned by an individual or small company that owns only one or a few buildings may not have the resources to provide high-quality
maintenance. Furthermore, when a building is owned by a large company, property management is often dictated by that company’s priorities
and does not necessarily correspond to tenant needs or satisfaction.
The Investment Corporation aims to differentiate itself by efficiently providing certain uniform standards, termed “KDX” standards, as well as
attractive office environments.
Examples of KDX standards include the followings:
・Installation of security cameras for elevators and entrance halls
・Installation of emergency devices for elevators
・Installation of modern restrooms that include western-style toilets with hot-water self-cleaning functions
・Creation and distribution of security and evacuation maps
・Creation and distribution of detailed building rules
In addition, the Investment Corporation enhances its brand awareness by renaming its office buildings so that “KDX” is included in the new
name.

18

Leasing management based on CS Strategy
The Investment Corporation aims to provide flexible and focused leasing activities that take into account economic and market trends, andthat are based on utilizing the results of tenant surveys and implanting renovation work for lease-up in view of potential tenants to enhance tenantsatisfaction.
In addition, the Investment Corporation believes that tenants at mid-sized office buildings generally tend to have high turnover ratios, and it isfocused on obtaining higher rent levels when entering new lease contracts. The Investment Corporation also negotiates with tenants that pay
lower rent levels than the market price in order to raise rents under existing leases.
Careful control of management and operating costs
The Investment Corporation utilizes the scale merits of owning many properties and the negotiating strength of the Kenedix Group (theKenedix Group refers to Kenedix, Inc., Kenedix Advisors and other related companies, the same applies below) to reduce building management
costs. Accordingly, the Investment Corporation reduces property management expenses, electricity costs and property taxes. The Investment
Corporation will continue to carefully control management and operating costs by periodically reviewing its property management standards toensure that they remain relevant and appropriate for each property, and by maintaining an appropriate balance between initiatives that aim tosustain or increase revenues with its efforts to control operating costs.
b. New Property Investment Strategy (External Growth Strategy)
The Investment Corporation will continue to concentrate on mid-sized office buildings with an emphasis on the Tokyo metropolitan area while
also investing in central urban retail property located in highly flourishing districts as an alternative to investment in office buildings. In addition,
the Investment Corporation will make no new investment in residential properties.
We will take consideration the market environment and asset size in making decisions regarding the disposal of residential properties.
Furthermore, the Investment Corporation will consider replacement of assets to increase the weight of investment in the Tokyo metropolitan area
and to increase the asset size of the portfolio. To facilitate the implementation of the aforementioned investment policy, the Investment
Corporation will leverage the “Multi-Pipeline” provided by the support of the Kenedix Group, in addition to the original network of the AssetManagement Company.
Through the Multi-Pipeline, the Asset Management Company is positioned to secure real estate information related to properties for which
the Kenedix Group acts as intermediary, properties under development, properties that it owns, and pension funds (Note). Based on thisinformation, the Investment Corporation has first preferential negotiating rights for an acquisition. Against the backdrop of a competitive market,
the role of the support-line is increasingly significant for the Asset Management Company’s acquisition of quality properties.
Note: Pension Funds refer to real estate investment funds for pension plans that are managed by Kenedix Advisors Co., Ltd.
Another key role of the support-line is to facilitate property acquisition through the warehousing function. Under the warehousing function,members of the Kenedix Group may acquire or temporarily hold an investment property in the event that the Investment Corporation is not itself in
an immediate position to acquire the property, or the property fails to fully comply with the Investment Corporation’s investment criteria at thatspecific time.
The Investment Corporation seeks to continue improving the quality of its portfolio in terms of location, size and type of properties, throughvarious measures including replacement of assets. In addition, the Investment Corporation will continue to steadily grow by acquiring properties
and aims accelerate this growth by utilizing its leverage relationship with the Kenedix Group and the Asset Management Company’s original
network for sourcing properties, as well as make diversified acquisitions, as discussed below.
Leverage Relationship with the Kenedix GroupAs the sponsor company, Kenedix, Inc. has provided property information and support staff to the Investment Corporation and the AssetManagement Company. At the same time, the Investment Corporation believes that the role of J-REITs in the Kenedix Group has increased inimportance.
In April 2007, the Investment Corporation revised the Memorandum of Understanding between it, Kenedix, Inc., Kenedix Advisors Co., Ltd.
and the Asset Management Company, which was originally conducted at the time of the Investment Corporation’s IPO. The Investment
Corporation revised the Memorandum because it had been expanding the number of acquired properties and strengthening its property acquisition
capacity even more was deemed necessary as J-REITs were increasing in importance for the Kenedix Group.
Also as a result of the revisions, the Pipeline relationship between the Kenedix Group and the Investment Corporation was significantly
strengthened, allowing the Investment Corporation preferential rights to properties developed by the Kenedix Group. Looking ahead, theInvestment Corporation and the sponsor company plans to closely cooperate to achieve further external growth in such investments asGroup-wide joint investments and property developments.
Utilize the Asset Management Company’s Original Network for Sourcing Properties
The Asset Management Company’s employees have diverse experience in the real estate and financial markets in Japan. A part of theInvestment Corporation’s growth strategy involves acquiring information about potential acquisition opportunities through the Asset Management
Company’s network. The Investment Corporation plans to continue to utilize the Asset Management Company’s knowledge, experience andnetwork of contacts in the real estate market to help locate and acquire properties that match its investment strategy.

19

Make Diversified Acquisitions
As of April 30, 2008, the Investment Corporation owned 68 properties for a total acquisition price of approximately ¥212.8 billion with a 95.9%
occupancy ratio. Supported by this asset base along with the management know-how of mid-sized office building accumulated by the AssetManagement Company, the Investment Corporation plans to continue acquiring properties based on its diversified property acquisition strategy.
The Investment Corporation has also expanded the asset size of the portfolio based on a diverse range of property acquisition strategies.
Exemplary cases include how lease-up and asset value are enhanced in a short period of time for properties that were acquired with a low
occupancy ratio by launching leasing activities only after appropriate renovation work is conducted following acquisition (KDX Nishi-Gotanda
Building and KDX Toranomon Building) and how properties are acquired at the stage when construction of the building is yet to be completed inorder to secure superior properties early (Sakae 4-chome Office Building (Tentative Name)).
Furthermore, while implementing various property acquisition strategies such as those described above, the Investment Corporation believes
that increasingly proactive investment property acquisitions are possible by centering the portfolio on mid-sized office buildings that have arelatively advantageous return than large-sized office buildings in consideration of the weighted average cost of capital based on the level of returnon distributions calculated from investment unit price and distributions per unit, as well as the debt procurement costs and interest-bearing debt
ratio.
Change in Management Guidelines concerning Development Properties
The Asset Management Company has resolved to change the management guidelines contained in its company regulations in March 2008.
Before the Change in Management Guideline

After the Change in Management Guideline

Article 24 (Development Properties)

Article 24 (Development Properties)

1. As a rule, investment in properties already producing stable rental
revenues or similar revenues, or properties projected to produce
such revenue may be considered.

1. As a rule, investment in properties already producing stable rental
revenues or similar revenues, or properties projected to produce
such revenue may be considered.

2. Notwithstanding the preceding paragraph, regarding properties
being developed or constructed by a third party, investment prior
to completion of construction may be considered if, based on thelease market, lease reservation agreements, etc., there issufficient possibility of securing tenants after construction andminimal risk of the completion and transfer.

2. Notwithstanding the preceding paragraph, regarding land andbuildings that are yet to be constructed or are being constructed,
investment prior to completion of construction may be considered(i) If risks associated with building permit and approval and risks
associated with completion of construction have been reduced;(ii) If, based on lease market conditions, existence of leasereservation agreements, etc., there is sufficient possibility of
securing tenants after construction; and (iii) If the investment will
not materially impact the overall portfolio. In the event of such,
the Investment Corporation may also be the party placing theorder in the agreement on building construction contract work.

3. The Investment Corporation may not acquire land and invest in
projects in which it would develop or build.

3. The Investment Corporation may not engage in transactions inwhich the Investment Corporation itself prepares building lots or
carries out the construction for constructing the building.

(3) Financial Strategy
The Investment Corporation will continue to pursue debt financing on an unsecured and unguaranteed basis and as well as makearrangements to ensure fixed interest rate debt in line with interest rate trends and other considerations.
In addition, the Investment Corporation will seek to diversify its debt repayment period to reduce refinancing risk, maintain long-term debt
ratios at or above prudent levels and issue investment corporate bonds with the aim of extending the average repayment period of its liabilities.
The Investment Corporation will maintain the ratio of interest-bearing debt to total assets at a prudent level and implement leveraged
management in an effort to ensure stable financial management.

(4) Information Disclosure
Consistent with its basic information disclosure policy, the Investment Corporation proactively engages in IR activities with the aim of promptly
providing a wide range of relevant information to investors. In specific terms, the Investment Corporation provides information through the Timely
Disclosure Network System (TDnet), which is a system operated by the Tokyo Stock Exchange, as well as press releases and its Web site (URL:
http://www.kdx-reit.com/eng/ ).

20

Financial Statements（Sixth Fiscal Period:From November 1, 2007 to April 30, 2008）
22 Report of Independent Auditors
23 Balance Sheets
24 Statements of Income and Retained Earnings
25 Statements of Changes of Unitholders’ Equity
26 Statements of Cash Flows
27 Notes to Financial Statements

21

Kenedix Realty Investment Corporation

22

Kenedix Realty Investment Corporation

BALANCE SHEETSAs of April 30, 2008 and October 31, 2007
In thousands of yen
As of April 30, 2008

As of October 31, 2007

AssetsCurrent assets:
Cash and bank deposits
Rental receivables
Consumption tax refundable
Other current assets
Total current assets
Property and equipment, at cost:
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Less-accumulated depreciation¥

Net property and equipment
Other assets:
Ground leasehold
Organization costs
Corporate bond Issuance costs
Unit Issuance costs
Other assets
Total assets
Liabilities and Unitholders' Equity
Liabilities
Current liabilities:
Trade and other payables
Short-term debt
Deposits received
Rents received in advance
Other current liabilities
Total current liabilities
Corporate bonds
Long-term debt
Leasehold and security deposits received
Other liabilities¥

12,323,340
141,91047,552
58,16912,570,971

150,671,196
69,663,667
787,653
314,867(4,953,431)

131,547,185
72,108,105
861,811670,095(4,622,859)

216,483,952

200,564,337

285,350
20,35957,184130,306
146,065

285,350
25,44862,997
171,775
83,112¥

230,520,243¥

213,763,990¥

793,006
31,750,000
4,504
1,172,675
305,962
34,026,147
12,000,000
46,000,000
10,176,842
3,092

¥

526,994
19,500,000
1,985
1,141,333
75,60021,245,912
12,000,000
44,000,000
8,749,709
6,434

Total liabilities
Unitholders'equity
Unitholders'capital
Units Authorized:2,000,000units
Units Issued and outstanding:200,000units
as of April 30, 2008 and October 31, 2007,respectively
Retained earnings
Unrealized gain from deferred hedge transactions
Total unitholders' equity
Total liabilities and unitholders' equity

13,192,761
159,004
45,262
13,397,027¥

102,206,081

86,002,055

124,973,750

124,973,750

3,342,285(1,873)2,792,084(3,899)128,314,162

127,761,935

230,520,243¥

213,763,990

See notes to financial statements

23

Kenedix Realty Investment Corporation

STATEMENTS OF INCOME AND RETAINED EARNINGSFor the period from May 1, 2007 to October 31, 2007, and the period from November 1, 2007 to April 30, 2008
In thousands of yen
From November 1, 2007

From May 1, 2007

to April 30, 2008

to October 31, 2007

Operating Revenues:
Rental revenues¥

Profit on sale of real estate

7,630,465¥

7,208,246

952,230-

8,582,695

7,208,246

Property-related expenses

3,447,634

3,205,728

Loss on sale of real estate

439,333-

Asset management fees

424,142

369,009

Administrative service and custodian fees

75,14872,565

Other operating expenses

130,783

90,0184,517,040

3,737,320

4,065,655

3,470,926

Interest expense

618,126

595,160

Financing related expense

28,471

24,339Total operating revenues
Operating Expenses:

Total operating expenses
Operating income
Non-Operating Expenses:

Amortization of organization costs

5,090

5,090

Amortization of unit issuance costs

41,46941,469Amortization of corporate bond issuance costs

5,814

5,878

Others, net

22,9285,925

3,343,757

2,793,065

1,556

1,024

3,342,201

2,792,041

84

43

Income before income taxes
Income taxes
Net income
Retained earnings at the beginning of period
Retained earnings at the end of period
See notes to financial statements

24¥

3,342,285¥

2,792,084

Kenedix Realty Investment Corporation

Statements of Changes in Unitholders’ Equity
For the period from May 1, 2007 to October 31, 2007 and the period from November 1, 2007 to April 30, 2008
(Thousands in Yen)
Unitholders' Equity
Unrealized gainfrom deferred

Balance as of May 1, 2007¥

Unitholders'

Retained

hedge

capitalearnings

transactions

88,729,652¥

2,148,118

¥

-

Total
¥

90,877,770

Changes during the fiscal period
New unit issuance

36,244,098

36,244,098

Payment of dividends-(2,148,074)-(2,148,074)

Net income-

2,792,040-

2,792,040

Interest-rate swap--

(3,899)(3,899)36,244,098

643,966(3,899)36,884,165

Total changes during the fiscal period
Balance as of October 31, 2007¥

124,973,750¥

2,792,084¥(3,899)¥127,761,935

Changes during the fiscal period
New unit issuance

-

-

-

Payment of dividends-(2,792,000)-(2,792,000)

Net income-

3,342,201-

3,342,201

Interest-rate swap

-

-

2,026

2,026

-

550,2012,026

552,227

Total changes during the fiscal period
Balance as of April 30, 2008¥

124,973,750¥

3,342,285¥(1,873)¥

128,314,162

See notes to financial statements

25

Kenedix Realty Investment Corporation

STATEMENTS OF CASH FLOWSFor the period from May 1, 2007 to October 31, 2007 and the period from November 1, 2007 to April 30, 2008
In thousands of yen
From November 1, 2007

From May 1, 2007

to April 30, 2008

to October 31, 2007

Cash Flows from Operating Activities:
Income before income taxes¥

3,343,757¥

2,793,065

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

1,509,898

1,465,288

618,126

595,160(17,093)(66,786)

Consumption tax refundable

47,552

254,489

Accrued consumption tax

215,992-

Trade and other payables

263,920

103,499

Rents received in advance

31,342

224,961Interest expense
Changes in assets and liabilities:
Rental receivables

30,755,698-

Loss on retirement of fixed assets

Sale of trust beneficiary interests in real estate

45,289-Others, net(66,119)(56,018)

36,748,362

5,313,658(603,866)(606,962)

(659)

(543)

36,143,837

4,706,153(48,150,727)(23,439,729)

2,132,300

1,779,663

Subtotal
Cash payments of interest expense
Cash payments of income taxes
Net cash provided by operating activities
Cash Flow from Investing Activities:
Purchases of property and equipment
Proceeds from leasehold and security deposits received
Payments of leasehold and security deposits received(705,167)(599,597)(1,130,321)(111,083)

Proceeds from restricted bank deposits

71,434

435,530

Others, net(10,915)(762)(47,793,396)(21,935,978)

Payments of restricted bank deposits

Net cash used in investing activities
Cash Flows from Financing Activities:
Proceeds from short-term debt

1,500,000

5,250,000

Payment of short-term debt

(2,250,000)(17,250,000)

Proceeds from long-term debt

15,000,000

2,000,000-(3,000,000)

Payment of long-term debt-

36,101,994

Payment of dividends

Proceeds from issuance of units(2,789,908)(2,147,444)

Net cash provided by financing activities

11,460,092

20,954,550

Net change in cash and cash equivalents(189,467)

3,724,725

Cash and cash equivalents at the beginning of period

11,331,325

7,606,600

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

26¥

11,141,858¥

11,331,325

Kenedix Realty Investment Corporation

Notes to Financial Statements
For the period from May 1, 2007 to October 31, 2007, and the period from November 1, 2007 to April 30 ,2008

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Realty Investment Corporation (“the Investment Corporation”) is a real estate investment corporation whose units are listed on theTokyo Stock Exchange. The Investment Corporation is engaged in ownership and operation of selected office buildings, residential and retailproperties in Japan. The Investment Corporation was incorporated as an investment corporation under the Law Concerning Investment Trusts
and Investment Corporations of Japan, or the Investment Trust Law. Pursuant to this law, the Investment Corporation is externally managed by aregistered asset management company, Kenedix REIT Management, Inc.("the Asset Management Company"), a wholly-owned subsidiary of
Kenedix, Inc.(“Kenedix”)
On May 6, 2005, the Investment Corporation was originally formed with ¥200 million of initial capital contributions from Kenedix, the AssetManagement Company and their executives and employees. On July 20, 2005, the Investment Corporation raised ¥41,869 million of equity
capital through an initial public offering of 75,000 investment units and was listed on the J-REIT section of the Tokyo Stock Exchange on thefollowing day.
On August 1, 2005, 29 properties with an aggregate purchase price of ¥61,083 million were acquired with additional debt proceeds of ¥23,000
million and substantial operations of the Investment Corporation were commenced from that date.
On August 16, 2005, the Investment Corporation completed third-party allotment of 3,970 investment units, generating an additional ¥2,216
million. Subsequent to that, the Investment Corporation acquired 2 additional properties in September, 2005. During the period ended April 30,
2006, the Investment Corporation acquired 4 additional properties by utilizing internal cash and bank borrowing.
On May 1, 2006, the Investment Corporation raised ¥42,172 million of equity capital through a public offering of 73,660 investment units and 26
properties with an aggregate purchase price of ¥58,033 million were acquired with additional debt proceeds of ¥16,000 million.
On May 26, 2006, the Investment Corporation completed third-party allotment of 3,970 investment units, generating an additional ¥2,273 million.
During the period ended October 31, 2006, the Investment Corporation sold 2 properties and acquired 5 properties.
On March 15, 2007, the Investment Corporation issued the investment corporation bonds. Their total amounts is ¥12,000 million and term are
five years and ten years.
During the period ended April 30, 2008, the Investment Corporation sold 23 residential properties (initial total acquisition price of ¥30,343
million) to a wholly owned subsidiary of Kenedix, Inc. and acquired 9 office buildings (total acquisition price of ¥31,980 million) from a wholly owned
subsidiary of Kenedix, Inc. on February 1, 2008. In addition, the Investment Corporation acquired 5 office buildings (total acquisition price of¥14,121 million).
At April 30, 2008, the Investment Corporation had total unitholders’ capital of ¥124,974 million with 200,000 investment units outstanding. The
Investment Corporation owned a portfolio of 68 properties with total acquisition price of ¥212,849 million containing total leasable area of 248,625
m2. The occupancy ratio was approximately 95.9%. A portfolio of 68 properties consists of 58 office buildings, 7 residential properties and 3
central urban retail properties. 55 properties are located in the Tokyo metropolitan area and 13 properties are located in other regional areas.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust Law of Japan,
the Japanese Corporation Law, the Financial Instruments and Exchange Law of Japan and related regulations, and in conformity with accounting
principles and practices generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States ofAmerica.
The accompanying financial statements are a basically translation of the audited financial statements that were prepared for Japanese domestic
purposes from the accounts and records maintained by the Investment Corporation and filed with the Kanto Local Finance Bureau of the Ministryof Finance as required by the Financial Instruments and Exchange Law. In preparing the accompanying financial statements, relevant notes
have been added and certain reclassifications have been made from the financial statements issued domestically in order to present them in aform that is more familiar to readers outside Japan. The Investment Corporation’s fiscal period is a six-month period which ends at the end of April
and October of each year, respectively. The Investment Corporation does not prepare consolidated financial statements because it has no
subsidiaries.

27

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which are highly liquid, readily
convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of purchase.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimateduseful lives of the assets ranging as stated below:
From November 1, 2007
From May 1, 2007
to April 30, 2008
to October 31, 2007
Buildings and structures ......................................................................................................

2-46 years

2-46 years

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

3-17 years

3-17 years

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

3-20years

3-15 years(c) Organization Costs
Organization costs are amortized over a period of five years, comprised of ten fiscal periods, with an equal amount amortized in each fiscal
period.
(d) Unit Issuance Costs
Unit issuance costs are amortized over a period of three years under the straight-line method.
(e) Corporate Bond Issuance Costs
Investment corporation bonds issuance costs are amortized over a loan period under the straight-line method.
(f)Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan and throughwhich the Investment Corporation holds all of its real property, all assets and liabilities within trust are recorded in the relevant balance sheet
and income statement accounts.

(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 onan 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 revenue and expense 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. Under the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property from thedate of disposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser forthese 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 ¥174 million and ¥82 million as of April 30, 2008 and October 31, 2007. In subsequent calendar years, such property-related taxes arecharged as operating expenses in the fiscal period in which the installments of such taxes are paid to the relevant tax authorities.

28

(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)Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap agreements as derivative financial instruments only for the purpose of hedging its
exposure to changes in interest rates. The Investment Corporation deferred recognition of gains or losses resulting from changes in fair valueof interest-rate swap agreements because its interest-rate swap agreements met the criteria for deferral hedging accounting. But, theInvestment Corporation adopted special treatment for interest-swap agreements if its interest-rate swap agreements met the criteria forhedging accounting under this treatment, the net amount to be paid or received under the interest rate swap contract is added to or deductedfrom the interest on the assets or liabilities for which the swap contract was excuted.

(k) 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
the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following as of April 30, 2008 and October 31, 2007:
In thousands of yen

As of April 30, 2008

As of October 31, 2007

Cash and bank deposits ...................................................................................

¥ 13,192,761¥ 12,323,340

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

（2,050,903）(992,015)

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

¥ 11,141,858¥ 11,331,325

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

4. SCHEDULE OF PROPERTY
In millions of yen
As of April 30, 2008
Acquisition costs

Accumulated
depreciation

As of October 31, 2007
Book value

Acquisition costs

Accumulated
depreciation

Book value

Land
Buildings andstructures
Machinery andequipment
Tools, furnitureand fixtures¥ 150,671−¥ 150,671¥ 131,547−¥ 131,547

69,664¥ 4,678

64,986

72,108¥ 4,335

67,773

788

198

589

862

169

693

315

77

237

670

119

551

Total

¥ 221,437¥ 4,953¥216,484¥ 205,187¥ 4,623¥ 200,56429

5. SHORT-TERM AND LONG-TERM DEBTS
The following summarizes short-term and long-term debt outstanding as of April 30, 2008:
Classification

Drawdown Date
July 31, 2007

Repayment Date

(As of April 30, 2008)
Weighted-average

Balanceinterest rate

(In millions of yen)

July 31, 2008

1.13%

¥

September 20, 2007

September 20, 2008

1.13%

1,250

October 31, 2007

October 31, 2008

1.10%

1,000

January 10, 2008

January 10, 2009

1.15%

1,000

February 29, 2008

February 28, 2009

1.20%

500

August 1, 2005

July 31, 2008

0.87%

9,500

November 1, 2005

October 31, 2008

1.09%

3,500

Unsecured current potion of

December 8, 2005

December 7, 2008

1.10%

2,000

long-term debt

March 1, 2006

February 28, 2009

1.45%

2,000

March 16, 2006

March 16, 2009

1.48%

2,500

May 1, 2006

April 30, 2009

1.63%

6,500

Unsecuredshort-term debt

SubtotalAugust 1, 2005

July 31, 2010

31,750
1.29%

9,500

May 1, 2006

April 30, 2011

2.20%

2,500

May 1, 2006

April 30,2016

2.73%

5,000

July 14, 2006

July 13, 2011

2.15%

1,000

September 1, 2006

August 31, 2013

2.12%

3,000

December 1, 2006

November 30, 2011

1.96%

2,500

April 2, 2007

April 2, 2010

1.57%

2,000

Unsecured

April 2, 2007

April 2, 2012

1.88%

2,000

long-term debt

April 17, 2007

April 16, 2011

1.65%

1,500

October 31, 2007

October 31, 2009

1.34%

2,000

January 10, 2008

January 10, 2012

1.50%

2,500

February 29, 2008

February 28, 2009

1.37%

2,000

February 29, 2008

August 31, 2011

1.43%

1,500

March 31, 2008

September 30, 2011

1.61%

3,000

March 31, 2008

September 30, 2011

1.56%

2,000

April 25, 2008

October 25, 2009

1.56%

1,000

April 25, 2008

October 25, 2009

1.46%

3,000

Subtotal
Corporate bonds

March 15, 2007

March 15, 2012

March 15, 2007

March 15, 2017

46,000
1.74%

9,000

2.37%

3,000

Subtotal
Total

30

2,000

12,000¥89,7506. UNSECURED LINE OF CREDIT
The Investment Corporation established a credit commitment line with two lenders.

The total borrowings available under the commitment line

agreements are ¥5 billion. Currently, the Investment Corporation has a balance of ¥0.5 billion based on the concered agreements. The unusedborrowings under the commitment line agreement are ¥4.5 billion.

7. PER UNIT INFORMATIONThe net asset value per unit as of April 30, 2008 and October 31, 2007 was ¥641,571 and ¥638,810. Net income per unit as of April 30, 2008
and October 31, 2007 was ¥16,711 and ¥14,334.
The weighted average number of units outstanding of 200,000 and 194,772 was used for the computation of the amount of net income per unit
as of April 30, 2008 and October 31, 2007.

8. INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 40%. However, the Investment
Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements are met under the Special
Taxation Measure Law of Japan. Under this law, the Investment Corporation must meet a number of tax requirements, including a requirement it
currently distribute in excess of 90% of its taxable income for the fiscal period in order to be able to deduct such amounts.

If the Investment

Corporation does not satisfy all of the requirements, the entire taxable income of the Investment Corporation will be subject to regular corporate
income taxes. Since the Investment Corporation distributed approximately 100% of its distributable income in the form of cash distributions
totaling 3,342 million and ¥2,792 million for the periods ended April 30, 2008 and October 31, 2007.

Such distributions were treated as

deductible distributions for purposes of corporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.05% and0.03% for the periods ended April 30, 2008 and October 31, 2007. The following summarizes the significant difference between the statutory tax
rate and the effective tax rate:
From November 1, 2007
to April 30, 2008

From May 1, 2007
to October 31, 2007

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

39.39%

39.39%

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

(39.37)(39.37)

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

0.03

0.01

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

0.05%

0.03%

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

The entire amount of the issue

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

required by the Investment Trust Law.

10. RELATED-PARTY TRANSACTIONS(a) Transactions with Kenedix
Kenedix provides the Investment Corporation with intermediate services. For these services, The Investment Corporation will pay ¥120 million of
brokerage fee to Kenedix. This includes the book value of the fixed assets.

31

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

From November 1, 2007
to April 30, 2008

From May 1, 2007
to October 31, 2007

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

¥ 183,364¥ 256,842

Management transfer fees (note 1) ..........................................................................

65,40010,800Construction management fees (note 2) ....................................................................

3,600

40,197

Notes:
1. Management transfer fees include ¥28,353 thousands that were capitalized as costs of the real estate at the time of acquisition.
2. Construction management fees include ¥37,588 thousands that were capitalized as costs of the real estate.
(c) Transactions with Y.K. KRF11
Y.K. KRF11 is a wholly owned subsidiary of Kenedix.
¥17,260 million.

On February 1, 2008 the Investment Corporation acquired 6 properties from KRF11 for

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

(d) Transactions with Y.K. KWO Fourth
Y.K. KWO4 is a wholly owned subsidiary of Kenedix.
for ¥7,600 million.

On February 1, 2008 the Investment Corporation acquired 1 property from KWO Fourth

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

(e) Transactions with Y.K. Cistern Capital
Y.K. Cistern Capital is a wholly owned subsidiary of Kenedix. On February 1, 2008 the Investment Corporation acquired 1 property from
Cistern Capital for ¥4,900 million.

The purchase price of these properties was determined based on an independently appraised value at thetime of acquisition.
(f) Transactions with Y.K. KRF1
Y.K. KRF1 is a wholly owned subsidiary of Kenedix.

On February 1, 2008 the Investment Corporation acquired 1 property from KRF1 for¥2,220 million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.
(g) Transactions with G.K. KRF20
G.K. KRF20 is a wholly owned subsidiary of Kenedix.

On February 1, 2008 the Investment Corporation sold 23 properties to KRF20 ¥ 31,490

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

32

11. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES
Rental and other operating revenues and property-related expenses for the periods from November 1, 2007 to April 30, 2008 and from May 1,
2007 to October 31, 2007 consist of the following:
In thousands of yen

From November 1, 2007

From Ｍａｙ 1, 2007

to April 30, 2008

to October 31, 2007

Rental and other operating revenues:
Rental revenues ………………………………………………………………

¥5,626,515¥ 5,336,255

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

1,144,196

998,453

Subtotal ………………………………………………………………………..

6,770,711

6,334,708

Parking space rental revenues …………………………………………..

240,631

222,255

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

458,128

476,613

Miscellaneous ……………………………………………………………..

160,995

174,670

Subtotal …………………………………………………………………….

859,754873,538

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

¥7,630,465¥ 7,208,246

Property management fees and facility management fees

¥750,333¥ 704,418

Depreciation …………………………………………………………………

1,430,126

1,392,013

Utilities ………………………………………………………………………….

450,237

454,313

Taxes ……………………………………………………………………………

395,277

329,928

Others:Insurance ……………………………………………………………………..

16,806

17,219Repairs and maintenance ……………………………………………………..

149,231

119,710

Trust fees ……………………………………………………………………..

57,312

55,386

Others …………………………………………………………………………

149,083

132,741

Loss on retirement of fixed assets…………………………………………….

49,229-Total property-related expenses ……………………………………………...

¥3,447,634¥ 3,205,728

Profit on sale of real estate:
Revenue from sale of investment properties …………………………

18,788,000

Cost of investment properties ……………………………………………

17,705,426

Other sales expenses …………………………………………………….

130,344

Profit on sale of real estate ……………………………………………….

952,230−

Loss on sale of real estate
Revenue from sale of investment properties ……………………………

12,702,000

Cost of investment properties …………………………………………….

13,050,272

Other sales expenses ……………………………………………………..

91,061

Loss on sale of real estate ………………………………………………..

439,333−

33

12. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease term of generally two
years for office buildings and residential properties and with lease term ranging from two to ten years for retail properties.

The future minimum

rental revenues under existing non-cancelable operating leases as of April 30, 2008 and October 31, 2007 are as follows:
In thousands of yen

As of April 30, 2008
Due within one year .................................................................................................

As of October 31, 2007

¥ 1,689,845

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

9,711,097

Total ................................................................................................................

¥ 11,400,942¥

1,561,805¥

12,078,054

10,516,248

13. DERIVATIVES AND HEDGE ACCOUNTINGThe Investment Corporation has entered into interest-rate swap agreements with several Japanese financial institutions to hedge its variable
rate long-term debt obligations. The Investment Corporation utilizes interest-rate swap agreements, which are derivative financial instruments,
only for the purpose of mitigating future risks of fluctuations of interest rates, but does not enter into such transactions for speculative or trading
purposes. The Investment Corporation entered into such derivative transactions to hedge risk in accordance with its Articles of Incorporation andthe established risk management policies of the Asset Management Company.
The following summarizes the notional principal amounts and the estimated unrealized loss from interest rate swap contracts as of April 30,
2008:
The estimated unrealized loss does not include the interest rate swap contracts that met the criteria for the special treatment.
(As of April 30, 2008)
Type
Interest-rate swap:
Fixed rate payable and floating rate receivable

34

Notional amount¥45,300 million

Unrealized loss¥(3 million)

14. PROPERTY INFORMATION
Details of the property portfolio as of April 30, 2008 were as follows:
Type

Office Buildings

Central Urban Retail Properties

Residential Properties

Tokyo

Other

Tokyo

Other

Tokyo

Other

Metropolitan

Regional

Metropolitan

Regional

Metropolitan

Regional

Location

Area

Areas

Area

Areas

Area

Areas

Number of properties

47

11

6

1

2

1

¥151,635¥32,445¥10,909¥1,800¥12,380¥3,68071.24%

15.24%

5.13%

0.85%

5.82%

1.73%

Net book value

154,851

32,643

10,9391,921

12,746

3,669

Appraisal value at year end

172,31133,45011,0781,700

14,4703,810

72.76%

14.12%

4.68%

0.72%

6.11%

1.61%

4,988,545

1,188,511

354,844

94,118370,185

108,000

Property information(In millions of yen)
Acquisition price
Percentage of total acquisition costs

Percentage of total appraisal value
Financial results for the period ended April 30,2008(In thousands of yen)
Rental and other operating revenues
Rental revenues

4,466,949

990,690317,341

83,083334,715

108,000

Other revenues

521,596

197,82137,503

11,03535,470-Property-related expenses

1,226,318

407,959

59,56440,865

121,055

13,741

Property management fees

456,620

184,386

31,086

9,315

24,881

4,128

Taxes

236,618

73,482

9,070

8,632

19,4098,160

Utilities

320,633

88,627

3,567

2,206

22,683-

Repairs and maintenance

74,92933,504

5,536

10,835911-

Insurance

8,795

4,876

913

523

382

103

128,723

23,084

9,392

9,354

52,7891,350

NOI (Net Operating Income)

Trust fees and other expenses

3,762,227

780,552

295,280

53,253249,130

94,259Depreciation expenses

793,033

264,549

94,391

22,97375,712

9,856

Operating income from property leasing activities

2,969,194

516,003200,889

30,280173,418

84,403

Capital expenditures

919,625

222,469

-

803

2,469

-

NCF (Net Cash Flow)

2,842,602

558,083

295,280

52,450246,661

94,259A breakdown of property-type as of April 30, 2008 was as follows:
Balance at the end of
Property typeArea
Tokyo Metropolitan Area

Office Buildings

Other Regional Areas
Subtotal
Tokyo Metropolitan Area

Residential Properties

Other Regional Areas

Subtotal

Percentage of(In millions of yen)

total assets¥154,851

67.2

32,643

14.2

187,494

81.3

10,939

4.8

1,921

0.8

12,860

5.6

Tokyo Metropolitan Area

12,746

5.5

Other Regional Areas

3,669

1.6

Subtotal
Central Urban Retail Properties

period16,415

7.1

Total

216,769

94.0

Bank deposits and other assets

13,751

6.0

Total assets

230,520

100.0

Total liabilities

102,206

44.3

Net assets¥128,31455.7

35

15. SUBSEQUENT EVENTS
Acquisition of Property
On May 15, 2008, the Board of Directors of the Asset Management Company resolved to acquire KDX Harumi Building (office building, withtotal floor area of 12,694.32 ㎡) from Y.K.KW Property 11 on June 30, 2008, for ¥10,250 million (excluding the acquisition costs, property tax,
city-planning tax and consumption tax, etc).

36Management Report
38 Structure of Investment Corporation
38 Board of Directors
39 Outline of the Asset Management Company
40 The Kenedix Group40 Memorandum of Understanding with Kenedix and Kenedix Advisors
42 Policies with Respect to Certain Activities
44 Our Investment Objective and Strategy
45 Distributions
46 Movements in Investment Units Issued and Outstanding
46 Trends of Investment Unit Certificate Price on the Tokyo Stock Exchange
47 The Main Investors of the Investment Corporation
48 Borrowings
49 Investment Corporation Bonds
50 Portfolios Outline
52 Capital Expenditure
54 Expenses and Liabilities
54 Details of Related-Party Transactions

37

Structure of Investment Corporation

Investment Corporation
Information and Property Providers(Support-Line Companies)
Kenedix, Inc.
Kenedix Advisors Co., Ltd.

General Meeting of Unitholders⑤

Asset Management Company
Administrative Agent for Directors’ Meeting③

Mizuho Trust & Banking Co., Ltd.

④

Transfer Agent

Board of Directors①

Executive Director: Taisuke Miyajima
Supervisory Director: Kimio Kodama
Supervisory Director: Shiro Toba
Accounting Auditor

Kenedix REIT Management, Inc.

Property Mangement Company

Administrative Agent
Asset Custodian

Kenedix Realty Investment Corporation②

The Chuo Mitsui Trust and Banking Co., Limited

Ernst & Young ShinNihon LLC

Kenedix REIT Management, Inc.

①
②
③
④
⑤

Asset Management Agreement / Operating Agency Agreement
Property Management Agreement
Administrative Agency Agreement / Asset Custodian Agreement
Transfer Agency Agreement
Memorandum of Understanding with Kenedix, Inc. and Kenedix Advisors Co., Ltd.

Board of Directors
The members of our board of directors are as follows:

Taisuke Miyajima
Taisuke Miyajima has been our executive director since May 2005. In 1985, he joined Mitsubishi UFJ Trust and Banking Corporation (formerly The Mitsubishi Trustand Banking Corporation) where he gained about a decade of business experience in a number of positions within the company, including its Capital Markets
Department. He joined Kenedix (formerly Kennedy-Wilson Japan Co., Ltd.) in 1998, and was seconded to the Asset Management Company in 2004 where hebecame chief executive officer and president. Prior to serving as our executive director, he transferred his employment to the Asset Management Company in 2005,
continuing to serve in the same position. He has obtained approval from the Commissioner of the Finance Services Agency for holding concurrent positions with us
and the Asset Management Company pursuant to Article 13 of the Investment Trust Law, as of April 18, 2005. Taisuke Miyajima holds 20 of our units.

Kimio Kodama
Kimio Kodama has been a supervisory director since May 2005. He was admitted to the Japanese bar in 1963 and is a general practitioner of Japanese law. He
established Hanzomon Sogo Law Office (formerly Towa Law Office) in 1966. He has been a director of Kyoritsu Women’s Educational Institution since 1997 andserved as a director for The Housing Loan Guarantee Corporation since 1998. In July 2008, he has been selected as a member of Tokyo Metropolitan Pubic Safety
Commission.

Shiro Toba
Shiro Toba has been a supervisory director since May 2005. He joined Misuzu Audit Corporation (formerly Chuo Shinko Audit Corporation) in 1989 and became aJapanese certified public accountant in 1993. Prior to being certified as a tax accountant in 2002, he established Toba Public Accounting Office in 1997. He has
been serving as a representative director of Minori Accounting Co., Ltd. since January 2005 and as a director of BTK Solution Co., Ltd. since March 2005.

38

Outline of the Asset Management Company
Name:
Kenedix REIT Management, Inc.
Capital: ¥200 million
History: November 28, 2003 KW REIT Management was established
July 2, 2004
Building Lots and Buildings Transaction Business License, License No. (1) 83303, issued by the Governor of Tokyo
November 9, 2004
Renamed to Kenedix REIT Management, Inc.
February 28, 2005
Discretionary Transaction Agent License, License No. 33, issued by the Governor of Tokyo
April 18, 2005
Investment Corporation/Asset Management License, License No. 44, granted by the Prime Minister of Japan
April 26, 2005
Obtained approval to be Operating Agent for the Investment Corporation
September 30, 2007 Registered as Financial Products Transaction Operator (Investment Management Operator), Financial Instruments
Registration No. 323, issued by the Director-General of the Kanto Local Finance Bureau

March 1, 2008

Established Property Management Division to conduct property management business

Organization Chart (As of the end of sixth fiscal period):
Shareholders’ Meeting
Auditors
Board of Directors

Compliance Officer

Asset Management Committee

Compliance Committee

CEO and President

Investment Management

Property Management

Financial Planning

Division

Division

Division

Business
Administration
Division

Asset

Asset

Property

EngineeringIR

Finance andBusiness

Investment

Management

Management

Group

Group

Accounting

Administration

Group

Group

Group

Group

Group

Principal Shareholder:

Name
Kenedix, Inc.

Location
2-2-9, Shimbashi, Minato-ku, Tokyo

Number of Stocks Owned
6,450 units

Ratio (Note)
100.00%(Note) Ratio represents the number of stocks owned in proportion to the total number of outstanding stocks.

39

The Kenedix GroupThe Kenedix Group is made up of Kenedix, Inc. (“Kenedix”), as well as its subsidiaries and affiliates, including leading providers of real estateadvisory services, real estate asset and property management services and real estate investment management services in Japan. Kenedix
owned 3.92% of our units as of April 30, 2008. Since our formation, which was promoted by Kenedix, we have received significant support fromthe Kenedix Group in our business and activities, particularly from Kenedix, Kenedix REIT Management Co., Ltd. (“Asset Management Company”)
and Kenedix Advisors Co., Ltd. (“Kenedix Advisors”). We expect to continue to rely on these companies and believe that our relationship withthem provides us with competitive advantages.
• Kenedix, Inc. Kenedix was originally founded in April 1995 under the name of Kennedy-Wilson Japan and renamed to Kenedix, Inc. in
May 2005. Kenedix commenced property fund management in February 1999. Kenedix commenced managing property funds for major
Japanese insurance companies in July 2001 and is listed on the First Section of the Tokyo Stock Exchange. The core businesses of Kenedix
include real estate advisory, asset management and collateralized debt investment management services, including on behalf of international
investors, pension funds and other institutional investors. Kenedix targets investment in office buildings, in addition to residential, retail, logistics
and other facilities, while actively engaging in real estate development for investment. Kenedix has also diversified its investment into areas suchas hotels, nursing homes and other properties for which income depends heavily on active property management, and responded to global
movements of funds by making more investments overseas. We believe we benefit from the experience and resources of Kenedix and thecompetitive advantages of our relationship with Kenedix as an independent real estate management company.
• Kenedix REIT Management, Inc. The Asset Management Company is broadly responsible for the formulation and execution of ourinvestment strategy and our other activities including property mangement. The Asset Management Company’s employees have diverse
experience in the real estate and financial markets in Japan, including experience in real estate appraisal and securities analysis. We seek totake advantage of the knowledge and experience of the Asset Management Company and its employees in the real estate market to help us locate
and acquire properties that fit our investment strategy.
• Kenedix Advisors Co., Inc. Kenedix Advisors was incorporated in November 2003 as a real estate fund management company,
particularly for pension funds. Kenedix Advisors was renamed from KW Pension Fund Advisors Co., Ltd. in May 2005 and is a 100% subsidiaryof Kenedix.
We and the Asset Management Company are parties to a memorandum of understanding dated May 31, 2005 with Kenedix and Kenedix
Advisors, which was revised in April 2007. The memorandum of understanding provides us with certain assurances from Kenedix and Kenedix
Advisors with respect to information, negotiation rights and other support for the acquisition of properties.

Memorandum of Understanding with Kenedix and Kenedix Advisors
We entered into a memorandum of understanding on May 31, 2005 with Kenedix, Kenedix Advisors and the Asset Management Company, which
was subsequently revised on April 9, 2007 to provide us with increased preferential rights. We believe that revised memorandum of
understanding reflects the strengthened relationship between the Kenedix Group and us. The revised memorandum of understanding has a termof one year, which is automatically renewed for successive one-year periods unless any of the parties notifies the other parties of its intent toterminate the memorandum of understanding at least 30 days prior to the expiration of the term.

Support from Kenedix
Pursuant to the revised memorandum of understanding, Kenedix has agreed to provide support to us in the following areas:• First Preference to Property Information Acquired by Kenedix.
When Kenedix receives information regarding any available property owned by a third party that, in the reasonable opinion of Kenedix, meets ourinvestment criteria, including properties under development, Kenedix, has agreed to preferentially provide information on such property to the
Asset Management Company, unless prohibited by laws or regulations or contracts to which it is a party. Until Kenedix becomes capable ofreasonably determining that it is difficult to sell such property to us, Kenedix has agreed not to provide such information to any person other thanthe Asset Management Company or to acquire the property for itself. Prior to the revision on April 9, 2007, the Asset Management Company had
a second-preference right to information, with the first-preference right reserved for real estate investment funds in which the major investors are
pension funds for which Kenedix Advisors served as asset management company.

40• First-Preference Negotiating Rights for Properties Owned by Kenedix.
In the event that Kenedix disposes of a property owned by Kenedix, an entity wholly owned by Kenedix, or a fund fully financed by Kenedix orwholly owned entity, such as silent partnership fund (a “Kenedix Property”) that, in the reasonable opinion of Kenedix, meets our investment
criteria, Kenedix has agreed to grant the Asset Management Company first-preferential negotiating rights for such property, unless prohibited bylaw or regulation or contracts to which it is a party. In the event that Kenedix and the Asset Management Company do not reach an agreement
for the sale and purchase of such property during the negotiation period, Kenedix may offer such property to any person other than the AssetManagement Company after giving notice to the Asset Management Company. Prior to the revision on April 9, 2007, Kenedix granted the AssetManagement Company second-preference negotiating rights for a Kenedix Property that no pension fund for which Kenedix Advisors served asasset management company had agreed to purchase during its first-preference negotiation period on that in the reasonable option of Kenedix, met
our investment criteria but did not meet the investment criteria of any such pension fund.
• Information on Property Owned by Kenedix Private Placement Funds.
In the event that Kenedix disposes of a property that is owned by a real estate investment fund for which it serves as asset management company(excluding any fund referred to in the immediately preceding paragraph) and, in the reasonable opinion of Kenedix, that meets our investment
criteria, Kenedix has agreed to provide information on such property to the Asset Management Company no later than such time as Kenedix
provides such information to any person other than the Asset Management Company, unless otherwise prohibited by law or regulation or contracts
to which it is a party.
• Property Pre-Acquisition Support.
The Asset Management Company may request Kenedix to purchase and hold a property owned or managed by a third party with a view toreselling it to us. In the event that Kenedix accepts such a request and purchases the property directly or indirectly through a wholly owned entity,
we are granted the first option to purchase such property for one year following the acquisition, and Kenedix may not offer such property to any
party other than the Asset Management Company during such period.

Support from Kenedix Advisors
Pursuant to the revised memorandum of understanding, Kenedix Advisors has agreed to provide support to us in the following area:• First-Preference to Properties Owned by Pension Funds.
In the event that Kenedix Advisors disposes of a property that is owned by a pension fund, and if Kenedix Advisors reasonably determines thatsuch property meets our investment criteria Kenedix Advisors has agreed to preferentially offer to sell such property to the Asset Management
Company, unless otherwise prohibited by law or regulation or contracts to which it is a party. Kenedix Advisors has agreed not to offer to sellsuch property to other parties than the Asset Management Company during the negotiation period. In the event that Kenedix Advisors and theAsset Management Company do not reach an agreement for the sale and purchase of the property during the negotiation period, Kenedix
Advisors may offer such property to a third party after giving notice to the Asset Management Company.

41

Policies with Respect to Certain Activities
Basic Policies
We seek to achieve our investment objective within the framework of the following basic policies, which are reflected in our articles ofincorporation as follows:• We will invest, directly or indirectly, primarily in office, residential and retail properties located in the Tokyo metropolitan area including
major cities in Tokyo, Kanagawa, Saitama and Chiba prefectures and other major cities throughout Japan, including
government-designated cities (or seirei shitei toshi; cities designated by government ordinance and authorized to perform many of thefunctions normally performed by prefectures), through specified assets.
• We will conduct an investigation and a comprehensive review of all relevant information regarding any prospective acquisition target,
such as anticipated future revenues from such property, potential of the area in which such property is located, construction specifications,equipment, estimated earthquake resistance, state of maintenance, environmental and geological features, and related rights attached tosuch property.
• We will maintain the percentage of the value of our specified real estate assets relative to the value of our specified assets at 75% ormore at any time. Specified real estate assets refers to real estate, real estate leasing rights, surface rights, and beneficiary interests intrusts which hold real estate, land leasing rights or surface rights.

Other Policies
We and the Asset Management Company have developed additional policies with respect to our activities. These policies, to the extent
that they are not addressed in our articles of incorporation, may be amended or revised from time to time without a vote of our unitholders. For
example, in December 2006 we revised our portfolio goals to concentrate more on office properties, as described below. These policies are notbinding and are intended to guide the implementation of our investment objective and management of our operations. The Asset Management
Company has broad discretion to develop our business strategies and to manage our operations. At any given time, our business operations or
the characteristics of our property portfolio may not be fully consistent with these policies.

Portfolio Management Policies
We have portfolio management policies focusing on developing and maintaining a portfolio that seeks to achieve stable revenues anddistributions.
Types of Properties. We divide property acquisition targets into one of three functional types of properties: office properties, focusing on
mid-sized office properties, central urban retail properties and residential properties. In light of the favorable market conditions and outlook foroffice buildings, in December 2006, we revised our portfolio goals to concentrate more on office properties and have decided to make no newinvestments in residential properties for the foreseeable future.
Geographic Diversification. Our geographic investment focus is on properties located in the Tokyo metropolitan area, including major
cities in Tokyo, Kanagawa, Saitama, and Chiba prefectures, with an emphasis on central Tokyo consisting of the Chiyoda, Chuo, Minato, Shibuya
and Shinjuku wards. A portion of our investment portfolio is also located in other major cities (primarily government-designated cities or major
regional hub cities) with the aim of ensuring portfolio diversification and minimizing risks associated with changes in economic and real estatemarket conditions, earthquakes, typhoons and other natural disasters, and uneven population distribution among regions.
Size and Value of Property. Our general policy for the value of investment properties is to purchase office and central urban retailproperties with a minimum value of ¥1 billion with a total investment value of a single property not to exceed 30% of the total investment portfolio.
In addition, we may purchase residential properties with a minimum value of ¥0.5 billion. The total floor space at an office or a central urban retailbuilding should be more than 1,000 m2. Our investment targets in residential properties are single-type, compact-type, family-type andprestige-type residential properties.
Tenant Characteristics. We make investment decisions based on a tenant’s attributes, credibility, line of business, purpose of use, leaseterms and conditions, and possible turnover.
Other Portfolio Goals. Based on our focus on properties in the Tokyo metropolitan area as described above, the Asset Management
Company decides on specific portfolio goals with respect to our investments. The policy takes into account general economic conditions, realestate market conditions, interest rate trends, population shifts, and other factors, with the aim of realizing our basic investment objective. In theevent of a significant change in economic, real estate market or other conditions, however, this portfolio management policy is reviewed andamended as and when considered appropriate by the Asset Management Company.

42

The Asset Management Company has set non-binding portfolio composition boundaries as general aspirations with respect to our investment
activities. These may change from time to time. Pursuant to the revisions in investment guidelines in December 2006, the Asset Management
Company has set a broad framework for a portfolio consisting of 50%-100% office properties, less than 20% central urban retail properties andless than 30% residential properties and other properties. In terms of location, the policy calls for 70% or more of our properties to be located in
the Tokyo metropolitan area with the remainder in other major cities. However, at any given time, our actual property portfolio may not reflect
these given goals.

Compliance with Certain Japanese Tax Law Matters
We intend to manage our investments in such a manner as to qualify for lower property registration and acquisition taxes and for deductibilityof distributions to our unitholders under Japanese tax laws applicable to J-REITs.

Other Investments
We may, through the Asset Management Company, make investments other than as previously described, although we do not currently
intend to do so. We are permitted to make certain investments other than real estate-related investments within the restrictions imposed by the
Tokyo Stock Exchange’s J-REIT listing rules and the Investment Trusts Association’s J-REIT rules and our articles of incorporation. For example,
we are permitted to invest in securities issued in connection with real estate securitizations under Japanese law.
Our articles of incorporation prohibit us from investing in foreign real estate, assets or securities backed by foreign real estate and assets
denominated in foreign currency.
Our Investment Guidelines set forth that in principle, investment properties are acquired from a medium- and long-term prospective, andassets are not acquired for short-term buying and selling. Short-term herein means a period of less than a year, medium-term means a period of
more than a year to less than 5 years, and long-term means a period of more than 5 years.

Cash Management
Although our articles of incorporation allow us to invest surplus funds in low-risk negotiable securities and monetary claims, we do not intend
to make investments in securities and monetary claims for the purpose of cash management. Surplus funds may be used for acquisition of
investment properties and capital expenditures, working capital, distribution payment, and payment of obligations including repayment of tenantleasehold and security deposits and borrowings as well as redemption of bonds.

Financial Policy
We borrow only from qualified institutions as defined in the Securities and Exchange Law of Japan (assuming that our tenant leasehold andsecurity deposits are not loans for such purposes). All of our current borrowings are unsecured, provided that we maintain certain financial ratios.
We currently do not have any outstanding guarantees. By financing our property acquisitions only after we identify specific properties forpotential purchase, we seek to limit the amount of our cash and cash equivalents for which we have no immediate use.
In general, we seek to keep the aggregate amount of our borrowings (excluding tenant leasehold and security deposits) at 60% or less of thetotal value of our total assets. We may, however, exceed that percentage from time to time, for example, as a result of financing acquisitions ofadditional properties through borrowings instead of equity.
We seek to limit our borrowings and issuances of investment corporation bonds to ¥1 trillion in the aggregate.
We have recently been seeking to raise long-term debt capital in longer terms, including debt with maturities over 5 years, in order to extend
our average maturity and lower refinancing risk by spreading principal repayments over fiscal periods. In this manner, we seek to create a
relatively stable debt financing program.
Depending on market conditions, our financing needs for particular acquisitions or our general liquidity requirements, we may make various
types of bank borrowings—fixed or variable interest, short- or long-term—and also obtain bank lines of credit. We may also issue debt in thecapital markets. We may enter into interest hedging transactions, such as interest options and swaps, in order to minimize market and interest
rate risks with respect to our borrowings.
We may, by resolution of our board of directors and without unitholder approval, issue additional units in any manner and on such terms as
we deem appropriate, subject to the provisions of the Investment Trust Law. Existing unitholders have no preemptive right to purchase units
issued in any offering, and any such offering would cause dilution of a unitholder’s investment in us.

43Our Investment Objective and Strategy
Our investment objective is to secure, in the medium to long term, relatively stable distributions for our unitholders through real estate
investment. We seek to achieve our investment objective through the following strategies:

External Growth Strategies
Seek Stable Portfolio Growth through Diversified Property Investments
We have continued to expand our property portfolio. We started with an initial portfolio that had an aggregate acquisition price of ¥61.1
billion shortly after our initial public offering in July 2005 and set a target of achieving a portfolio with an aggregate acquisition price of ¥200 billion
by the end of 2008. In 2006, we moved this target forward to the end of 2007. In June 2007, we achieved a portfolio with an aggregateacquisition price of ¥197.1 billion, thus substantially achieving our target six months early. As of June 2008, our portfolio has an aggregateacquisition price of ¥212.8 billion. We intend to continue increasing our total portfolio size and have set a target of achieving a portfolio with anaggregate acquisition price of ¥400 billion in the mid-to-long term. In light of the favorable market conditions and outlook for office buildings, werevised our portfolio goals in December 2006 to concentrate more on office properties and have decided to make no new investments in residential
properties for the foreseeable future. In particular, we are targeting mid-sized office properties, with an emphasis on the Tokyo metropolitan area,
especially central Tokyo. We believe that improved conditions in office property markets in major urban areas, including rising property values,
occupancy ratios and rents, create a favorable environment for expanding our portfolio. We seek to continue improving the quality of our portfolio,
such as the location, size and type of properties, through various measures, including replacement of assets.
Leverage Relationship with the Kenedix GroupWe believe that we have an increasingly strong relationship with the Kenedix Group, which has broad expertise and experience in real
property investment and management in Japan. In April 2007, we revised our memorandum of understanding with Kenedix, Kenedix Advisors
and the Asset Management Company, pursuant to which the Asset Management Company has first preference to informational and negotiatingrights from Kenedix and Kenedix Advisors about properties meeting our specified investment criteria. We intend to continue to draw on theexpertise and experience of the Kenedix Group and its employees to help us locate and acquire attractive properties and increase their value
through active property management. We refer to our portfolio in our marketing activities as “Kenedix Selection” to emphasize the importance ofthe Kenedix Group in the selection and management of our properties.
Utilize the Asset Manager’s Original Network for Sourcing Properties
The Asset Management Company’s employees have diverse experience in the real estate and financial markets in Japan. A part of our
growth strategy involves acquiring information about potential acquisition opportunities through the Asset Management Company’s network. We
plan to continue to utilize the Asset Management Company’s knowledge, experience and network of contacts in the real estate market to help us
locate and acquire properties that match our investment strategy.
Make Diversified Acquisitions
We plan to continue making diversified acquisitions of mid-sized office properties, including properties that we subsequently renovate with aview to enhancing their property values and rental revenues. For example, from time to time we acquire properties with high vacancy rates andmake substantial renovations to make them more attractive to potential tenants. In March 2008, we have changed our management guidelines
concerning development properties to acquire properties at the stage when construction of the building is yet to be completed in order to securesuperior properties early.

Internal Growth Strategies
Increase Cash Flow and the Value of Properties that We Acquire through Active Property Management
A key part of our strategy is to increase unitholder value through focused and proactive management of our properties. Key components ofour property management strategies include conducting tenant surveys and making appropriate improvements, maintaining attractive properties
with uniform standards, engaging in flexible and focused leasing activities geared towards tenant needs and market trends, and exercising careful
control of management and operating costs. As a result of our property management strategies and favorable conditions in the office property
market, rents for units in our office properties tended to increase when we entered into new lease agreements in the fiscal period ended April 30,
2008.

44

Achieve Efficient Property Management Centralized under Kenedix REIT Management
We seek to implement efficient property management by engaging Kenedix REIT Management, Inc. as the property management company
for each of our properties. By centralizing property management, we believe we can take advantage of the size of our portfolio to delegate
property-related tasks in an efficient and cost-effective manner to on-site property managers and facility managers.

Distributions
In order to maintain our favorable tax treatment, which is available to J-REITs under the Special Taxation Measures Law of Japan, we must
distribute in excess of 90% of our distributable income as defined in the Special Taxation Measures Law, which differs slightly from retained
earnings under Japanese GAAP. Our articles of incorporation require that we make cash distributions of at least this amount. If our retained
earnings are less than 90% of our distributable income, or if we determine it is appropriate to do so, our articles of incorporation permit us to
distribute cash to our unitholders in excess of retained earnings up to the maximum amount calculated in accordance with the standards set by theInvestment Trusts Association of Japan. These standards set forth that a closed-end J-REIT, such as us, may distribute up to 60% of its
depreciation expense in excess of net income as a return of capital. If such maximum amount is still below 90% of our distributable income as
defined in the Special Taxation Measures Law, our articles of incorporation further permit us to make distributions in the amount we determine
necessary to satisfy the requirements to maintain our favorable tax treatment under the Special Taxation Measures Law.
However, any distribution in excess of retained earnings is likely to create complex Japanese tax issues, especially for individual Japanese
resident unitholders. Accordingly, we do not intend to distribute any such excess amounts in the absence of appropriate changes in Japanese
tax law that address these Japanese tax issues.
Distribution Performance
Fiscal Period
Duration of Period

Second Fiscal Period
November 1, 2005
to April 30, 2006

Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period
May 1, 2006 to
November 1, 2006
May 1, 2007 to
October 31, 2006
to April 30, 2007
October 31, 2007

Sixth Fiscal Period
November 1, 2007
to April 30, 2008

Unappropriated Retained Earnings¥1,102,013,492¥2,124,112,014¥2,148,117,194¥2,792,084,129¥3,342,285,404

Retained Earnings for the next fiscal period
Cash Distributions(Distribution per unit)
Earnings Distributed(Earnings Distributed per unit)
Payments for capital participations(Payments for capital participations per unit)¥40,412¥1,101,973,080（¥13,884）¥1,101,973,080（¥13,884）−（ − ）¥59,014¥2,124,053,000（¥13,529）¥2,124,053,000（¥13,529）−（ − ）¥43,194¥2,148,074,000（¥13,682）¥2,148,074,000（¥13,682）−（ − ）¥84,129¥2,792,000,000（¥13,960）¥2,792,000,000（¥13,960）−（ − ）¥85,404¥3,342,200,000（¥16,711）¥3,342,200,000（¥16,711）
−
（ − ）

45

Movements in Investment Units Issued and Outstanding
Movements in unitholders’ capital and the number of investment units issued and outstanding until the end of the sixth fiscal period aresummarized in the following table.
Investment Units Issued andUnitholders’ Capital
Outstanding (Units)(Millions of Yen)
Settlement Date
Particulars
Remarks
Increase
Increase
Balance
Balance(Decrease)(Decrease)
May 6, 2005
Private placement
400
400
200
200
(Note 1)
July 20, 2005
Public offering
75,00075,40041,86842,068(Note 2)
August 16, 2005
Third-party allocation
3,970
79,3702,216
44,285(Note 3)
May 1, 2006
Public offering
73,660153,030
42,17186,456(Note 4)
May 26, 2006
Third-party allocation
3,970
157,000
2,272
88,729(Note 5)
May 22, 2007
Public offering
40,900
197,900
34,474
123,203(Note 6)
June 19, 2007
Third-party allocation
2,100
200,000
1,770
124,973(Note 7)
Notes:
1. The Investment Corporation was established with an offer price of ¥500,000 per unit.
2. The Investment Corporation undertook an additional issue of new investment units (public offering) with the aim of procuring funds for the acquisition of
investment properties. The offer price was ¥580,000 per unit with an underwritten price of ¥558,250 per unit.
3. The Investment Corporation undertook an additional issue of new investment units by way of third-party allotment with the aim of procuring funds for theacquisition of investment properties. The issue price was ¥558,250 per unit.
4. The Investment Corporation undertook an additional issue of new investment units (public offering) with the aim of procuring funds for the acquisition of
investment properties. The offer price was ¥593,096 per unit with an issue price of ¥572,519 per unit.
5. The Investment Corporation undertook an additional issue of new investment units by way of third-party allotment with the aim of procuring funds for theacquisition of investment properties. The issue price was ¥572,519 per unit.
6. The Investment Corporation undertook an additional issue of new investment units (public offering) with the aim of procuring funds for the acquisition of
investment properties and repayment of borrowings. The offer price was ¥873,180 per unit with an issue price of ¥842,886 per unit.
7. The Investment Corporation undertook an additional issue of new investment units by way of third-party allotment with the aim of procuring funds for theacquisition of investment properties and repayment of borrowings. The issue price was ¥842,886 per unit

Trends of Investment Unit Certificate Price on the Tokyo Stock ExchangeHigh and low trading prices for the Investment Corporation’s investment units for each fiscal period as traded on the REIT market of theTokyo Stock Exchange were as follows:
PeriodEnd of Fiscal PeriodHigh Price
Low Price

46

Second Fiscal Period
April 30,2006¥670,000¥574,000

Third Fiscal Period
October 31,2006¥636,000¥564,000

Fourth Fiscal Period
April 30,2007¥918,000¥607,000

Fifth Fiscal Period
October 31,2007¥988,000¥659,000

Sixth Fiscal Period
April 30,2008¥835,000¥460,000

The Main Investors of the Investment Corporation

The main investors of the Investment Corporation as of April 30, 2008 are as follows.
NameJapan Trustee Services Bank, Ltd.
(Trust Account)
Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)
Nikko Cititrust and Banking Co.
(Investment Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
The Nomura Trust and Banking Co., Ltd.
(Investment Trust Account)

Number ofInvestment Units
owned

Address

Ratio (%)

1-8-11, Harumi, Chuo-ku, Tokyo

17,0698.53

1-8-12, Harumi, Chuo-ku, Tokyo

15,2247.16

2-3-14, Higashi-Shinagawa, Shinagawa-ku, Tokyo

14,797

7.39

2-11-3, Hamamatsucho, Minato-ku, Tokyo

14,4507.22

2-2-2, Otemachi, Chiyoda-ku, Tokyo

10,694

5.34

State Street Bank and Trust Company

6-7, Kabutocho, Nihonbashi Chuo-ku, Tokyo

9,094

4.54

Kenedix, Inc.

2-2-9, Shimbashi, Minato-ku, Tokyo

7,850

3.92

Goldman Sachs International

6-10-1, Roppongi, Minato-ku, Tokyo

7,040

3.52

The Bank of New York,
Treaty JASDEC Account2-7-1, Marunouchi, Chiyoda-ku, Tokyo

5,619

2.80

UBS AG London Asia Equities

1-5-1, Otemachi, Chiyoda-ku, Tokyo

3,406

1.70

JPMC Goldman Sachs Trust JASDEC
lending Account2-7-1, Marunouchi, Chiyoda-ku, Tokyo

3,406

1.70

108,649

54.32

Total
Note: Figures for ratio of investment units owned have been rounded down to the second decimal place.

47

Borrowings
Borrowings on a financial institution basis as of April 30, 2008 are as follows.
Classification

LenderSumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Aozora Bank, Ltd.
Short-Term Borrowings

The Bank of Tokyo-Mitsubishi UFJ,Ltd.
The Chuo Mitsui Trust and Banking
Co., Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
The Chuo Mitsui Trust and Banking
Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ,Ltd.

Drawdown
Date

March 1,
2007
July 31,2007
September
20, 2007
October
31, 2007
January
10, 2008
February29, 2008

Balance at theEnd of current
Period(Millions of Yen)

2,000

1.131

1,000

-

1.100

1,250

1,250

1.131

1,000

1,000

1.101

-

1,000

1.149

-

500

1.202

2,700

2,700

The Norinchukin Bank

2,500

2,500

The Chiba Bank, Ltd.

1,200

1,200

1,000

1,000

Sumitomo Mitsui Banking Corporation

1,000

1,000

The Bank of Tokyo-Mitsubishi UFJ,
Ltd.

800

800

Resona Bank, Ltd.

300

300

November
1, 2005

3,000

3,000

500

500

December
8, 2005

1,500

1,500

500

500

800

800

500

500

700

700

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

1,000

1,000

1,000

1,000

26,00026,000Current Potion of Long-Term Borrowings

Aozora Bank, Ltd. (Note 3)
Resona Bank, Ltd. (Note 3)
The Chiba Bank, Ltd. (Note 3)
Aozora Bank, Ltd. (Note 3)
Mitsui Sumitomo Insurance Co., Ltd.
(Note 3)
The Bank of Tokyo-Mitsubishi UFJ,
Ltd. (Note 3)

March 1,
2006
March 16,
2006

Aozora Bank, Ltd. (Note 3)
The Chuo Mitsui Trust and Banking
Co., Ltd. (Note 3)
The Bank of Tokyo-Mitsubishi UFJ,
Ltd. (Note 3)
Mitsubishi UFJ Trust and Banking
Corporation (Note 3)
Resona Bank, Ltd. (Note 3)
Sub Total

May 1,
2006

February29, 2008

2,000

5,750

Resona Bank, Ltd.

1.154

-

6,500

The Norinchukin Bank

Repayment
Date

750

Sub Total

August 1,
2005

Interest
Rate(Note 1)500

Mitsubishi UFJ Trust and Banking
Corporation

The Chuo Mitsui Trust and Banking
Co., Ltd.

48

Balance at theEnd of Previous
Period(Millions of Yen)

Payment
MethodUsage

Remarks

July 31,2008
September
20, 2008
October
31, 2008
January
10, 2009
February28, 2009

0.869

July 31,
2008

1.090

October
31, 2008

1.098

December
7, 2008

1.449

February28, 2009

1.476

March 16,
2009

1.629

April 30,2009

Full on
Unsecured/（Note 2)maturity
Unguaranteed

Full onmaturity(Note 2)

Unsecured/
UnguaranteedClassification

Balance at theEnd of Previous
Period(Millions of Yen)

Balance at theEnd of current
Period(Millions of Yen)

The Chuo Mitsui Trust and Banking
Co., Ltd.

3,750

3,750

Sumitomo Mitsui Banking Corporation

3,750

3,750

Mitsubishi UFJ Trust and Banking
Corporation

1,500

1,500

500

500

Aozora Bank, Ltd.

1,500

1,500

Mitsui Sumitomo Insurance Co., Ltd.

1,000

1,000

Development Bank of Japan

5,000

5,000

2.731

1,000

1,000

2.149

3,000

3,000

2.124

2,500

2,500

1.964

2,000

2,000

1.574

2,000

2,000

1.875

1,500

1,500

1.646

2,000

2,000

1.339

-

2,500

1.503

-

2,000

1.366

-

1,500

1.429

-

3,000

1.609

-

2,000

1.559
1.563

Drawdown
Date

LenderAugust 1,
2005

Resona Bank, Ltd.

Mitsubishi UFJ Trust and Banking
Corporation

July 14,2006
September
1, 2006
December
1, 2006

Development Bank of JapanThe Norinchukin Bank
Long-Term Borrowings

Sumitomo Mitsui Banking Corporation
The Chuo Mitsui Trust and Banking
Co., Ltd.
The Norinchukin Bank
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation
Aozora Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ,
Ltd.
Sumitomo Mitsui Banking Corporation
The Chuo Mitsui Trust and Banking
Co., Ltd.

April 2,
2007
April 17,2007
October
31, 2007
January
10, 2008
February29, 2008
March 31,2008

Sumitomo Mitsui Banking Corporation

-

1,000

-

1,500

-

1,500

Sub Total

31,00046,000Total

63,50077,750Aozora Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ,Ltd.

April 25,
2008

Interest
Rate(Note 1)

Repayment
Date

1.288

July 31,
2010

2.199

April 30,
2011

1.463

April 30,
2016
July 13,2011
August 31,
2013
November 30,
2011
April 2,
2010
April 2,2012
April 16,2011
October
31, 2009
January
10, 2009
February28, 2011
August 31,
2011

Payment
MethodUsage

Remarks

Full onmaturity(Note 2)

Unsecured/
Unguaranteed

September
30, 2011

October25, 2009

Notes:
1.

The average interest rate is the weighted-average interest rate for the fiscal period. The Investment Corporation entered into interest-rate swap
transactions with the aim of minimizing the risk of future increase in interest rates. The effect of interest-rate swap transactions has been incorporated
into calculations for the weighted-average interest rate.

2.

Funds procured through borrowings were used to acquire real estate or trust beneficiary interests in real estate and to repay borrowings.

3.

Borrowings listed in the current potion of long-term borrowings were listed in long-term borrowings in the previous fiscal period.

Investment Corporation Bonds
The status of the investment corporation bonds as of April 30, 2008 are as follows.
( Millions of Yen)First Series Bonds
Second Series Bonds
Total

Issuance
Date

Balance at the End

Balance at the End

of Previous Periodof current Period

March15, 2007

9,000
3,000
12,000Interest
Rate(%)

Redemption
Date

9,000

1.74

March 15, 2012

Full on

3,000
12,0002.37

March 15, 2017

maturity

Payment
MethodUsage

Remarks(Note1)(Note2)

Notes:
1. Ranking pari passu among the Specified Investment Corporation Bonds.
2. Funds procured through issuance of investment corporation bonds were used repay borrowings.

49

Portfolios Outline
Composition of Portfolio Assets

Type ofSpecified Asset

Fifth Fiscal Period(As of October 31, 2007)
Type

Area

Tokyo Metropolitan Area

Office Buildings

Other Regional Areas

Real Estate

Total for Office Buildings
Central Urban RetailTokyo Metropolitan Area
Properties
Total for Real EstateTokyo Metropolitan Area

Office Buildings

Other Regional Areas

Total for Office Buildings
Trust BeneficiaryInterest in Real Estate

Residential Properties

Tokyo Metropolitan Area
Other Regional Areas

Total for Residential Properties
Central Urban RetailTokyo Metropolitan Area
Properties
Other Regional Areas
Total for Central Urban Retail Properties
Total of Trust Beneficiary Interests in Real Estate
Bank Deposits and Other Assets
Total Assets

Sixth Fiscal Period(As of April 30, 2008)

Total Amount Held
(Millions of Yen)
(Note 1)

Ratio(%) (Note 2)

Total Amount Held
(Millions of Yen)
(Note 1)

Ratio(%) (Note 2)

13,052

6.1

26,628

11.6

-

-

9,105

4.0

13,052

6.1

35,734

15.5

47

0.0

-

-

13,100106,035
21,323
127,358
33,8989,997
43,896
12,815
3,678
16,493
187,749
12,914
213,763

6.1
49.6
10.0
59.6
15.9
4.7
20.5
6.0
1.7
7.7
87.8
6.0
100.0

35,734
128,221
23,537
151,758
10,9391,921
12,86012,746
3,668
16,415
181,034
13,750230,520

15.5
55.6
10.2
65.8
4.7
0.8
5.6
5.5
1.6
7.1
78.5
6.0
100.0

Notes:
1.

“Total Amount Held” is the amount allocated in the balance sheets at the end of the period (figures are on a net book value basis after deducting

2.

“Ratio” is the ratio of the amount allocated in the balance sheets to the total assets rounded to the first decimal place.

depreciation).

50

Purchase and Sales during the Fiscal Period Under Review
Status of Real Estate and Securities Backed by Real Estate Purchase and Sales
Purchase

Sales
CapitalBook
Sales
Value Gain (Loss)
Price(Millions (Millions of(Millionsof Yen)Yen)of Yen)Property Name

Date of
Acquisition

A-45

KDX Roppongi 228 Building

Jan. 10, 2008

3,300

−

−

−

−

A-46

Hiei Kudan-kita Building

Feb. 1, 2008

7,600

−

−

−

−

A-47

KDX Shin-Yokohama 381 Building

Feb. 1, 2008

4,700

−

−

−

−

A-48

KDX Kawasaki-Ekimae Hon-cho Building

Feb. 1, 2008

3,760

−

−

−

−

Tokyo

A-49

Nissou Dai-17 Building

Feb. 1, 2008

2,710

−

−

−

−

Metropolitan

A-50

Ikejiri-Oohashi Building

Feb. 1, 2008

2,400

−

−

−

−

A-51

KDX Hamacho Nakanohashi Building

Feb. 1, 2008

2,310

−

−

−

−

A-52

KDX Kanda Misaki-cho Building

Feb. 1, 2008

1,380

−

−

−

−

A-55

Shin-toshin Maruzen Building

Feb. 29, 2008

2,110

−

−

−

−

A-56

KDX Jimbocho Building

Mar. 31, 2008

2,760

−

−

−

−

A-57

KDX Gobancho Building

Mar. 31, 2008

1,951

−

−

−

−

A-53

KDX Hakata-Minami Building

Feb. 1, 2008

4,900

−

−

−

−

Regional

A-54

KDX Kitahama Building

Feb. 1, 2008

2,220

−

−

−

−

Areas

A-58

Apr. 25, 2008

4,000

−

−

−

−

Type

No.

Acquisition
Price(Millions ofYen) (Note 1)

Area

Areas
OfficeOther

Sakae 4-chome Office Building(Tentative Name) (Note 2)

Date of Sales

B-1

Storia Sirokane−−

Feb. 1, 2008

3,370

3,149

200

B-2

Tre di Casa Minami Aoyama−−

Feb. 1, 2008

2,680

2,468

195

B-6

Court Nihonbashi-Hakozaki−−

Feb. 1, 2008

1,220

1,119

91

B-7

Side Denenchofu−−

Feb. 1, 2008

1,110

1,137

△36

B-8

S-court Yokohama-Kannai II−−

Feb. 1, 2008

1,020

931

80

B-9

Court Motoasakusa−−

Feb. 1, 2008

943

883

52

B-11

Bloom Omotesando−−

Feb. 1, 2008

962

883

70

B-13

Human Heim Okachimachi−−

Feb. 1, 2008

905

835

61

B-20

Regalo Ochanomizu I･II−−

Feb. 1, 2008

3,670

3,615

33

B-21

Regalo Shiba-Kouen−−

Feb. 1, 2008

2,280

2,271

△5

B-22

Chigasaki Socie Ni-bankan−−

Feb. 1, 2008

1,140

1,232

△100

B-23

Court Nishi-Shinjuku−−

Feb. 1, 2008

1,160

1,141

10

B-24

Regalo Komazawa-Kouen−−

Feb. 1, 2008

943

919

16

B-26

Primo Regalo Kagurazaka−−

Feb. 1, 2008

770

774

△10

B-27

Primo Regalo Youga−−

Feb. 1, 2008

737

739

△8

B-28

Court Shimouma−−Feb. 1, 2008

644

647

△9

B-16

Abreast Hara−−

Feb. 1, 2008

494

435

53

B-17

Abreast Hirabari−−Feb. 1, 2008

457

406

45

Other

B-29

Ashiya Royal Homes−−

Feb. 1, 2008

2,420

2,471

△66

Regional

B-30

Regalo Ibaraki I･II−−

Feb. 1, 2008

1,620

1,622

△14

Areas

B-31

Collection Higashi-Sakura−−

Feb. 1, 2008

1,150

1,317

△176

B-32

Renaissance 21 Hirao Jousui-machi−−

Feb. 1, 2008

964

916

40

B-33

Montore Nishikouen Bay Court−−

Feb. 1, 2008

831

835

△11

-

31,49030,755512

Tokyo
Metropolitan
Areas

Residential

Total

46,101

Notes:
1.

Acquisition prices are the sales amounts recorded in trust beneficiary interest agreements exclusive of associated costs such as brokerage fees and taxes.

2.

Acquisition price for land is shown for the Sakae 4-chome Office Building (Tentative Name) since the building is still under construction as of August 1, 2008.

51

Capital Expenditure
Planned capital expenditures
Major capital expenditure plans for renovation of properties in which the Investment Corporation holds a trust beneficiary interest for theseventh fiscal period (May 1, 2008 to October 31, 2008) are as follows. Planned capital expenditure includes portions classified into expenses
for accounting purposes.

Property Name
(Location)

52

PurposeKarasuma Building(Kyoto-shi, Kyoto)

Renovation for office portion, other

KDX Hamacho Nakanohashi Building(Chuo-ku, Tokyo)

Schedule

Planned Amount of Capital Expenditure(Millions of Yen)
Total AmountPaid in the
Total
Previously
Fiscal Period
Paid
Under Review

May 2008 to
October 2008

131

−

−

Upgrade of individual air conditioning
system, other

As above89−−

KDX Jimbocho Building(Chiyoda-ku, Tokyo)

Renovation for the entire building, other

As above

89−−

Ikejiri Oohashi Building(Meguro-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above85−−

KDX Ochanomizu Building(Chiyoda-ku, Tokyo)

Renovation for restrooms, other

As above72−−

KDX Kiba Building(Koto-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above68−−

KDX Sendai Building(Sendai-shi, Miyagi)

Renovation for elevators, other

As above59−−

KDX Kayabacho Building(Chuo-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above52−−

KDX Niigata Building(Niigata-shi, Niigata)Renovation for the basement floor other

As above51−−

KDX Funabashi Building(Funabashi-shi, Chiba)

Upgrade of individual air conditioning
system, other

As above50−−Capital Expenditures During the Sixth Fiscal Period
The Investment Corporation undertook the following major capital expenditures as follows. In the sixth fiscal period, the Investment
Corporation completed work across its entire portfolio totaling ¥1,302 million. This total comprised of ¥1,152 million in capital expenditures and¥149 million for repairs, maintenance and renovation expenses.
Property Name
(Location)

Schedule

Amount of Capital Expenditures(Millions of Yen)

November 2007 to
April 2008

174

PurposeKDX Higashi-Shinjuku Building(Shinjuku-ku, Tokyo)

Upgrade of individual air conditioning
system, other

KDX Shiba-Daimon Building(Minato-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above151

KDX Hirakawacho Building(Chiyoda-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above109

KDX Hachioji Building(Hachioji-shi, Tokyo)

Upgrade of individual air conditioning
system, other

As above100

KDX Sendai Building(Sendai-shi, Miyagi)

Valu-up renovation for restrooms, other

As above

77

KDX Hakata Building(Fukuoka-shi, Fukuoka)

Value-up renovation for restrooms, other

As above69

KDX Okachimachi Building(Taito-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above62

KDX Omori Building(Ota-ku, Chiba)

Renovation for external wall, other

As above53

KDX Nakano-Sakaue Building(Nakano-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above48

KDX Niigata Building(Niigata-shi, Niigata)

Renewal work for central monitoring
devices, other

As above27

KDX Funabashi Building(Funabashi-shi, Chiba)

Value-up renovation for restrooms, other

As above24

KDX Kiba Building(Koto-ku, Tokyo)

Renovation for external wall, other

As above

16

KDX Nogizaka Building(Minato-ku, Tokyo)

Upgrade of individual air conditioning
system, other

As above

12

Others224

Portfolio Total

1,152

Note: The price of capital expenditure is rounded down to the nearest million yen.

Long-Term Repairs, Maintenance, and Renovation Plans
The Investment Corporation formulates long-term repairs, maintenance, and renovation plans on an individual investment property basis andallocates a portion of its cash flows generated during the period to a reserve for repairs, maintenance, and renovation to meet large-scalerenovation over the medium to long terms. The following amount has been transferred to the reserve from period cash flows.
( Millions of Yen)
Second Fiscal
PeriodThird Fiscal
PeriodFourth Fiscal
PeriodFifth Fiscal
PeriodReserve for the end of the previous period

92

165

288

406

Reserve for the fiscal period under review

130

148

118

370

14

Reversal of reserve for the fiscal period under review

57

26

0

−

359

Reserve bring to the next period

165

288

406

777

432

Fiscal period

Sixth Fiscal
Period777

53

Expenses and Liabilities
Details for Expenses

(a)
(b)
(c)
(d)
(e)
(f)

Item
Asset management fees
Custodian fees
Administrative service fees
Directors’ compensation
Audit fees
Other operating expenses

Fifth Fiscal Period
369,009
20,45652,1085,400
7,800
76,818

Total

531,592( Thousands of Yen)
Sixth Fiscal Period
424,141
22,463
52,6845,400
9,300
116,083
630,073

Note : In addition to the asset management fees indicated in the above table, a total of ¥55,000 thousand for the fifth fiscal period and ¥150,555 thousand forthe sixth fiscal period, representing property acquisition management fees, was included in the book values of individual real estate assets.

Details of Related-Party Transactions(1) Details
Purchase and Sales Amounts
Amount of Purchase (Thousands of Yen)
Amount of Sales (Thousands of Yen)
Total

46,101,000
Amount of Purchase from Related -Parties

31,490,000
Amount of Sale to Related -Parties

31,980,000 (69.4%)

31,490,000 (100%)

Y.K. KRF 11

17,260,000 (54.0%)− (−%)

Y.K. KWO Fourth

7,600,000 (23.8%)− (−%)

Y.K. Cistern Capital

4,900,000 (15.3%)− (−%)

Y.K. KRF 1

2,220,000 (6.9 %)− (−%)

G.K. KRF 20− (− %)

31,490,000 (100%)

31,980,000 (100%)

31,490,000 (100%)

Details of related-party transactions

Total(2) Fees

Details of fees and other payments to related parties
Classification

Total Fees (A)(Thousands of Yen)

Ratio

and main shareholders (Note 1)
Payment Recipient

Amount of Fee (B)(B /A)%(Thousands of Yen)

Brokerage fees (Note 2)

365,450

Kenedix, Inc.

120,000

32.8

Property management fees

269,220

Kenedix Advisors Co., Ltd.

183,36468.1

Management transfer fees (Note 3)

72,553As above

65,40090.1

Construction management fees (Note 4)

40,346As above

3,600

8.9

Notes:
1.

Main shareholders in the above table are the main shareholders for the Asset Management Company, which are defined under Article 29.4-2 of the
Financial Instruments and Exchange Law, and related parties are the related parties for the Asset Management Company, which are defined under
Implementation Ordinance No. 123 of the Investment Trust Law.

54

2.

Brokerage fees refer to the fees that were capitalized as costs at the time of the acquisition of the real estate.

3.

Management transfer fees include ¥28,353 thousands that were capitalized as costs of the real estate at the time of acquisition.

4.

Construction management fees include ¥37,588 thousands that were capitalized as costs of the real estate.

Trends in Investment Unit Prices
The Investment Corporation’s investment unit certificates were first listed on the Tokyo Stock Exchange on July 21, 2005. Trends ininvestment unit price and trading turnover from the date of public listing to the close of its sixth fiscal period, April 30, 2008, areprovided in the following chart.
KRI Closing Price
VolumeAggregate Market Value as of April 30, 2008: ¥123,000mn
Highest Trading Price: ¥988,000 (May 31, 2007)
Lowest Trading Price: ¥460,000 (March 17, 2008)

Volume (Unit)KRI Closing Price (Yen)
1,100,000

11,000Offer Price at PO¥873,180

6,000

1,000,000
900,000

5,000
4,000

Offer Price at IPO¥580,000

3,000

800,000

Offer Price at PO¥593,096

700,000

2,000

600,000

1,000

500,000
400,000

0Jul. 21, 05

Oct. 31, 05

Apr. 30, 06

Oct. 31, 06

Apr. 30, 07

Oct. 31, 07

Apr. 30, 08

Notes: 1. Investment unit prices are shown based upon closing prices.
2. References to “KRI” are to Kenedix Realty Investment Corporation.

Details of the Unitholders
End of 5th fiscal period(200,000 units)

End of 6th fiscal period(200,000 units)

Financial Institutions(incl. securities companies)
96,845 units (48.42%)

Other Domestic
Corporation
10,189 units (5.09%)

98,863 units (49.43%)

9,968 units (4.98%)

Foreign Corporation andIndividuals
81,602 units (40.80%)

80,314 units (40.15%)

Individuals andOthers11,364 units (5.68%)

10,855 units (5.42%)

Note: Comparative ratios are rounded down to the second decimal place.

Information Provided on the Investment Corporation’s Website
The Investment Corporation will make every effort to disclose relevant and accurate information on its website in a timely fashion.

We have renewed our English website in May 2008.
URL

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

This semiannual report includes translation of certain documents originally filed and made available in Japan in accordance with the Securities and Exchange Law ofJapan. This English language semiannual report was prepared solely for the convenience of readers outside Japan and is not intended to constitute a document for
an offer to sell, or seeking an offer to buy, any securities of Kenedix Realty Investment Corporation.
English terms for Japanese legal, accounting, tax and business concepts used herein may not to 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 Realty Investment Corporation, Kenedix REIT Management, Inc. or any of their respective directors, officers, employees, partners, unitholders,
agents, affiliates or their advisors will 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 Realty Investment Corporation 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 in 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 Realty Investment Corporation or Kenedix REIT 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 notguarantees 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 Tokyo Stock Exchange, announce publicly any revisions to any of the forward-looking statements
contained in this documents.

KENEDIX Realty Investment Corporation(As of August 1, 2008)
Corporate Office
KDX Shinbashi Building 6F
2-2-9, Shimbashi, Minato-ku,
Tokyo 105-0004, Japan
Tel +81-3-3519-3491
Fax +81-3-3519-3555
Date of Incorporation
May 6, 2005
Capital¥124,964,750,470
200,000 units
Stock Listing
REIT market of the Tokyo Stock Exchange
Security Code8972
Transfer Agent
The Chuo Mitsui Trust & Banking Co., Ltd.
3-33-1 Shiba, Minato-ku, Tokyo 105-8574, Japan
Independent Auditor
Ernst & Young ShinNihon LLC
Kasumigaseki Bldg.
3-2-5, Kasumigaseki, Chiyoda-ku,
Tokyo 100-6028, Japan
Investor Relations
For further information, please contact our Asset Management
Company:
Kenedix REIT Management, Inc.
Financial Planning Division, Director / General Manager
Masahiko Tajima
KDX Shinbashi Building 6F
2-2-9, Shimbashi, Minato-ku,
Tokyo 105-0004, Japan
Tel +81-3-3519-3491
Fax +81-3-3519-3555

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

Semiannua Report Sixth Fiscal Period

Kenedix Realty Investment Corporation
Corporate Data