Financial Statements（Third Fiscal Period:From May 1, 2006 to October 31,2006）

Report of Independent Auditors
Balance Sheets
Statements of Income and Retained Earnings
Statements of Changes of Unitholders’ Equity
Statements of Cash Flows
Notes to Financial Statements

Kenedix Realty Investment Corporation

BALANCE SHEETSAs of October 31, 2006 and April 30, 2006
In thousands of yen

As of October 31, 2006
AssetsCurrent assets:
Cash and bank deposits
Rental receivables
Consumption tax refundable
Other current assets￥

9,488,708
83,375599,486
72,300

As of April 30, 2006￥

7,843,092
47,704
138,323
90,170Total current assets
Property and equipment, at cost:
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

10,243,869

8,119,289

91,714,229
58,684,305
741,661
612,929

52,329,667
30,980,765
442,540
600,118

Less-accumulated depreciation
Net property and equipment
Other assets:
Organization costs
Unit Issuance costs(2,033,503)
149,719,621(918,354)
83,434,736

35,62888,923
226,301

40,717−458,296

OthersTotal assets￥

160,314,342￥

92,053,038￥

406,892
15,000,000
1,748
767,536
28,287￥

188,956
11,500,000
4,463
529,895
16,574

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
Long-term debt
Leasehold and security deposits received
Others

16,204,463
47,000,000
6,124,894
51,688

12,239,888
30,500,000
3,528,348
397,786

Total liabilities

69,381,045

46,666,022

Unitholders' capital
Units Authorized: 2,000,000 units
Units Issued and outstanding:157,000 and 79,370units
as of October 31, 2006 and April 30, 2006, respectively

88,729,652

44,285,003

Retained earnings

2,124,112

1,102,013

79,533−90,933,297
160,314,342

45,387,016
92,053,038

Unitholders' equity

Unrealized gain from deferred hedge transactions
Total unitholders' equity
Total liabilities and unitholders' equity￥￥

Kenedix Realty Investment Corporation

STATEMENTS OF INCOME AND RETAINED EARNINGSFor the period from November 1, 2005 to April 30, 2006 and the period from May 1, 2006 to October 31, 2006
In thousands of yen

From May 1, 2006
to October 31, 2006

From November 1, 2005
to April 30, 2006

Operating Revenues:
Rental revenues￥

Profit on sale of trust beneficiary interests in real estate

5,131,499￥

2,871,789

157,334

Total operating revenues

5,288,833

2,871,789

Property-related expenses

2,397,202

1,265,552

Asset management fees

203,842

150,114Administrative service and custodian fees

46,72837,777

Other operating expenses

75,86974,363

2,723,641

1,527,806

2,565,192

1,343,983

Interest expense

375,765

164,607

Financing related expense

20,904

11,743

Amortization of organization costs

5,090

5,090

Amortization of unit issuance costs

17,785

55,119Others, net

20,5674,410

2,125,081

1,103,014

1,009

1,015

2,124,072

1,101,999

40

14Operating Expenses:

Total operating expenses
Operating income
Non-Operating Expenses:

Income before income taxes
Income taxes
Net income
Retained earnings at the beginning of period
Retained earnings at the end of period¥

2,124,112¥

1,102,013

Kenedix Realty Investment Corporation

Statement of Changes in Unitholders’ Equity
For the period from May 1, 2006 to October 31, 2006

(Thousands in Yen)
Unitholders’ Equity
Unrealized gain
Unitholders’

Retainedfrom deferred

capitalearnings

hedge

Total

transactions
Balance at the beginning of a period￥

Changes during the fiscal period
New unit issuance

44,285,003￥

1,102,013￥−￥ 45,387,016

44,444,649−−

44,444,649

Payment of dividends−△1,101,973−△1,101,973

Net income−

Interest-rate swap−

2,124,072−−
79,533

2,124,072
79,53344,444,649

1,022,099

79,53345,546,281

79,533￥ 90,933,297

Total changes during the fiscal period
Balance at the end of period￥

88,729,652￥

2,124,112￥(Note: The statement of changes in unitholders’ equity is required to disclose from this fiscal period.)

Kenedix Realty Investment Corporation

STATEMENTS OF CASH FLOWSFor the period from November 1, 2005 to April 30, 2006 and the period from May 1, 2006 to October 31, 2006
In thousands of yen

From May 1,2006
to October 31,2006

From November 1,2005
to April 30,2006

Cash Flows from Operating Activities:
Income before income taxes￥

2,125,081￥

1,103,014

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

1,169,328

661,924

375,765

164,607

Rental receivables(35,671)

46,728Consumption tax refundable(461,163)

771,868

Trade and other payables

214,623(73,711)

Rents received in advance

237,642

149,650

Sale of trust beneficiary interests in real estate

1,763,670−

Others, net(136,387)(137,274)

5,252,888

2,686,806

Cash payments of interest expense(363,960)(149,708)

Cash payments of income taxes(1,015)(855)

4,887,913

2,536,243(69,184,115)(13,173,409)

Proceeds from leasehold and security deposits received

2,852,843

772,228

Payments of leasehold and security deposits received(256,297)(220,261)

Payments of restricted bank deposits(750,424)(82,013)

Proceeds from restricted bank deposits

225,670

181,004(717)(7,489)(67,113,040)(12,529,940)

Proceeds from short-term debt

13,000,000

1,500,000

Payment of dividends(11,000,000)

Proceeds from long-term debt

18,000,000

Proceeds from issuance of units

44,444,650-

Payment of dividends(1,098,661)(239,970)

Net cash provided by financing activities

63,345,989

12,760,030

Net change in cash and cash equivalents

1,120,862

2,766,333

Cash and cash equivalents at the beginning of period

7,057,143

4,290,810

Interest expense
Changes in assets and liabilities:

Subtotal

Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment

Others, net
Net cash used in investing activities
Cash Flows from Financing Activities:

11,500,000

Cash and cash equivalents at the end of period￥

8,178,005\

7,057,143

Kenedix Realty Investment Corporation

Notes to Financial Statements
For the period from November 1, 2005 to April 30, 2006 and the period from May 1, 2006 to October 31, 2006

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 alicensed asset management company, Kenedix REIT Management, Inc.("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, 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.
At October 31, 2006, the Investment Corporation had total unitholders’ capital of ¥88,730 million with 157,000 investment units outstanding.
The Investment Corporation owned a portfolio of 64 properties with total acquisition costs of ¥146,742 million containing total leasable area of
192,085 m2. The occupancy ratio was approximately 95.3%. A portfolio of 64 properties consists of 29 office buildings, 32 residential
properties and 3 retail properties.

51 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 Securities 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 and disclosure
requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America.
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
Ministry of Finance as required by the Securities 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 a form thatis more familiar to readers outside Japan.

The Investment Corporation’s first fiscal period began on May 6, 2005 and ended on October 31, 2005.

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.

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 May 1, 2006
to October 31, 2006

From November 1, 2005
to April 30, 2006

Buildings and structures ......................................................................................................

2-46 years

2-46 years

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

3-17 years

3-17 years

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

3-15 years

3-15 years(c) Impairment of Fixed Assets
Beginning the fiscal period ended October 31, 2005, the Investment Corporation adopted “Accounting Standard for Impairment of Fixed
Assets” (“Opinion on Establishment of Accounting Standard for Impairment of Fixed Assets” issued by the Business Accounting Deliberation
Council in Japan on August 9, 2002) and “Implementation Guidance for the Accounting Standards for Impairments of Fixed Assets” (“Financial
Accounting Guidance No. 6” issued by the Accounting Standards Board of Japan on October 31, 2003).

The new accounting standard wasapplicable for all reporting periods beginning after April 1, 2005. The Investment Corporation has not recognized an impairment loss on any ofthe properties during the fiscal periods ended October 31, 2006 and April 30, 2006.
(d) 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.
(e) Unit Issuance Costs
Unit issuance costs are amortized over a period of three years under the straight-line method. Underwriters’ commissions in connection with
the issuance of unitholders’ equity are offset against proceeds raised since the “Spread Method” was used for the unit issuance. Under the
Spread Method, securities underwriters underwrite the units at the issue price and offer them to investors at the offer price, which is different fromthe issue price.

The difference between the offer price and the issue price represents the underwriting commission received by the securities

underwriters, eliminating the need for the issuer to pay underwriting commissions. If securities underwriters had underwritten the units at theissue price and offered the units to investors at an offer price equal to the issue price (known as the “Conventional Method”), a commission would
have been incurred and it would have been expensed as new unit issuance costs. Therefore, the Spread Method understated unit issuancecosts by ¥1,263 million on the balance sheet and decreased amortization of unit issuance costs by ¥253 million and increased income before
income taxes on the income statement by the same amount compared to the Conventional Method for the period from May 1, 2006 throughOctober 31, 2006.

(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 on an
accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can be reasonably
estimated. Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and such amounts are recorded
both as 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 the date ofdisposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser for these accrued
property-related tax liabilities.
When the Investment Corporation purchases properties, it typically allocates the portion of the property-related taxes related to the period
following the purchase date of each property through the end of the calendar year.

The amounts of those allocated portions of theproperty-related taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to¥182 million and ¥32 million as of October 31, 2006 and April 30, 2006.

In subsequent calendar years, such property-related taxes are charged

as operating expenses in the fiscal period in which the installments of such taxes are paid to the relevant tax authorities.
(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 value ofinterest-rate swap agreements because its interest-rate swap agreements met the criteria for deferral hedging accounting.
(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 theaccompanying financial statements do not necessarily agree with the sums of the individual amounts.

3. Changes in Accounting Policy(a) Beginning the fiscal period ended October 31, 2006, unit issuance costs have been capitalized and amortized over a period of 3 years,
although unit issuance costs were previously expensed in the period of payment. Due to a change in Accounting Rules for Investment Corporation
effective on May 1, 2006 and “Tentative Solution on Accounting for Deferred Assets” (Practical Solution No.19 issued by the Accounting Standards
Board of Japan on August 11, 2006) issued by the Accounting Standards Board of Japan, appropriate deferred charges such as new unit issuancecosts are allowed to be capitalized and being amortized over a 3 year period.
As a result of this change in accounting policy, non-operating expenses of the Investment Corporation during the current period decreasedby ¥89 million yen and income before income taxes increased by the same amount compared with the amounts which would have been recorded
under the previous accounting rule.

(b) Beginning the fiscal period ended October 31, 2006, the Investment Corporation adopted the new accounting standards, “AccountingStandard for Presentation of Net Assets in the Balance Sheet” (Statement No.5 issued by the Accounting Standards Board of Japan on December
9, 2005) and its implementation guidance (the Financial Accounting Standard Implementation Guidance No.8 issued by the Accounting Standards
Board of Japan on December 9, 2005).

4. Cash and Cash Equivalents
Cash and cash equivalents consisted of the following as of October 31, 2006 and April 30, 2006:
In thousands of yen

As of October 31, 2006

As of April 30, 2006

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

¥ 9,488,708¥ 7,843,092

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

(1,310,703)(785,949)

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

¥ 8,178,005¥ 7,057,143

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

5. SCHEDULE OF PROPERTY
In millions of yen
As of October 31, 2006
Acquisition costs
Land

Accumulated
depreciation¥ 91,714¥

As of April 30, 2006
Book value

Acquisition costs−¥ 91,714¥ 52,330

Accumulated
depreciation¥

Book value−¥ 52,330

Buildings andstructures

58,684

1,897

56,78730,981847

30,134

Machinery andequipment

742

73

669

442

32

410

Tools, furnitureand fixtures

613

63

550

600

39

561

¥ 151,753¥ 2,033¥ 149,720¥ 84,353¥ 918¥ 83,435

Total

6. SHORT-TERM AND LONG-TERM DEBTS
The following summarizes short-term and long term debt outstanding as of October 31, 2006 and April 30, 2006:(As of October 31, 2006)
Classification

Unsecuredshort-term debt

Unsecured current potion of
long-term debt

Drawdown Date

Repayment Date

Weighted-averageinterest rate

Balance(In millions of yen)March 1, 2006

February 28, 2007

0.69%

¥

May 1, 2006

April 30, 2007

0.68%

2,000

July 31, 2006

July 31, 2007

0.68%

4,000

September 20, 2006

September 20, 2007

0.70%

6,000

October 31, 2006

October 31, 2007

0.70%

1,000

November 1, 2005

October 31, 2007

0.77%

1,500

Subtotal

Unsecured
long-term debt

500

15,000August 1, 2005

July 31, 2008

0.87%

9,500

August 1, 2005

July 31, 2010

1.29%

9,500

November 1, 2005

October 31, 2008

1.09%

3,500

December 8, 2005

December 7, 2008

1.10%

2,000

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

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

Subtotal
Total

47,000¥62,0007. PER UNIT INFORMATIONThe net asset value per unit as of October 31, 2006 and April 30, 2006 was ¥579,192 and ¥571,840. Net income per unit as of October 31,
2006 and April 30, 2006 was ¥13,575 and ¥13,884.
The weighted average number of units outstanding of 156,460 and 79,370 was used for the computation of the amount of net income per unit
as of October 31, 2006 and April 30, 2006.

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 ¥2,124 million and ¥1,102 million for the periods ended October 31, 2006 and April 30, 2006.

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% and0.09% for the periods ended October 31, 2006 and April 30, 2006. The following summarizes the significant difference between the statutory tax
rate and the effective tax rate:
From May 1, 2006
to October 31,2006

From November 1, 2005
to April 30,2006

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

39.39%

39.39%

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

(39.37)(39.35)

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

0.03

0.05

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

0.05%

0.09%

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 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 May 1, 2006
to October 31, 2006

From November 1, 2005
to April 30, 2006

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

183,464¥ 104,453

Management transfer fees .......................................................................................

¥

66,2008,400

Construction management fees ...............................................................................

24,537

16,306(b) Transactions with Y.K. KDX1 (“KDX1”)
KDX1 is a wholly owned subsidiary of Kenedix. On November 1, 2005, the Investment Corporation acquired additional property from KDX1 for¥5,950 million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.
(c) Transactions with Y.K. KDX2 (“KDX2”)
KDX2 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 4 properties from KDX2 for ¥8,300
million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.
(d) Transactions with Y.K. Lump Sum Investment (“Lump Sum”)
Lump Sum is a wholly owned subsidiary of Kenedix.

On May 1, 2006 the Investment Corporation acquired 4 properties from Lump Sum for¥7,100 million. The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.
(e) Transactions with Y.K. KW Property10 (“KW Property10”)
KW Property10 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 2 properties from KW
Property10 for ¥4,426 million. The purchase price of these properties was determined based on an independently appraised value at the time ofacquisition.
(f) Transactions with Y.K. KW Property5 (“KW Property5”)
KW Property5 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 7 properties from KW Property5for ¥7,310 million.

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

(g) Transactions with Y.K. KDX3 (“KDX3”)
KDX3 is a wholly owned subsidiary of Kenedix. On May 1, 2006 the Investment Corporation acquired 1 property from KDX3 for ¥3,680 million.
The purchase price of these properties was determined based on an independently appraised value at the time of acquisition.

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 May 1, 2006 to October 31, 2006 and from November
1, 2005 to April 30, 2006 consist of the following:
In thousands of yen

From May 1, 2006
to October 31, 2006

From November 1, 2005
to April 30, 2006

Rental and other operating revenues:
Rental revenues .................................................................................................

¥

3,908,749¥

2,220,814

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

640,707353,853

Subtotal .........................................................................................................

4,549,456

2,574,667

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

175,387

86,129

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

314,355

152,653

Others:Miscellaneous ....................................................................................................

92,301

58,340Subtotal .........................................................................................................

582,043

297,122

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

¥

Property management fees and facility management fees .....................................

¥

5,131,499¥

2,871,789

529,334¥

322,416

Depreciation ............................................................................................................

1,135,559

650,193

Utilities .....................................................................................................................

296,833

146,890

Taxes .......................................................................................................................

179,543

9,328

Insurance .................................................................................................................

13,9798,621

Repairs and maintenance .......................................................................................

62,66655,117

Trust fees .................................................................................................................

43,761

21,337

Others ......................................................................................................................

135,527

51,650Total property-related expenses ..............................................................................

¥

2,397,202¥

1,265,552

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 October 31, 2006 and April 30, 2006 are as follows:
In thousands of yen

Due within one year .................................................................................................

As of October 31, 2006

As of April 30, 2006¥¥

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

1,266,416
9,709,697¥

10,976,113

811,080
3,273,632¥

4,084,712

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 amounts and the estimated fair value of the interested-related positions outstanding as of October 31,
2006:(As of October 31, 2006)
Type
Interest-rate swap:
Fixed rate payable and floating rate receivable

Notional amount¥37,300 million

Fair value¥131 million

14. PROPERTY INFORMATION
Details of the property portfolio as of October 31, 2006 were as follows:
Type

Office Buildings
Tokyo
Metropolitan
Area

Location
Number of properties

Residential Properties

Other Regional
Tokyo
Areas
Metropolitan Area

25

4

Retail Properties

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

24

8

2

1

Property information(In millions of yen)
Acquisition price¥ 76,054¥ 10,170¥ 34,888¥ 9,571¥ 12,379¥ 3,680

51.8%

6.9%

23.8%

6.5%

8.4%

2.5%

Net book value

77,200

10,22535,85910,04012,698

3,698

Appraisal value at year end

81,777

10,38035,764

9,772

13,860

3,760

52.7%

6.7%

23.0%

6.3%

8.9%

2.4%

Percentage of total acquisition costs

Percentage of total appraisal value
Financial results for the period ended October 31, 2006
(In thousands of yen)
Rental and other operating revenues¥ 2,743,043¥ 533,037¥ 1,072,316¥ 312,697¥ 362,406¥ 108,000

Rental revenues

2,398,817

434,607

1,004,999

272,643

330,391

108,000

Other revenues

344,226

98,43067,31740,05432,015−

Property-related expenses

663,594

195,170

207,365

108,647

81,251

5,616

Property management fees

272,674

104,71186,48534,81026,361

4,294

Taxes

101,026

28,595

20,124

10,367

19,535−

Utilities

209,547

44,86812,5396,892

22,987−

Repairs and maintenance

25,913

7,804

16,125

11,292

1,533−

Insurance

5,686

3,346

2,755

1,623

447

122

48,7485,846

69,33743,663

10,3881,200

NOI (Net Operating Income)

Trust fees and other expenses

2,079,449

337,867

864,951

204,050

281,155

102,384

Depreciation expenses

504,629

176,661

282,575

94,01867,8209,856Operating income from property leasing activities

1,574,820

161,206

582,376

110,032

213,335

92,528

Capital expenditures

431,691

63,87872,17677,9909,803−

NCF (Net Cash Flow)

1,647,758

273,989

792,775

126,060

271,352

102,384

Balance at the end of period

Percentage of
total assets

A breakdown of property-type as of October 31, 2006 was as follows:
Class of assets

Property type
Office Buildings

Area
Tokyo Metropolitan Area

77,20048.2

10,225

6.4

87,425

54.6

Tokyo Metropolitan Area

35,85922.4

Other Regional Areas

10,0406.3

45,899

28.7

Tokyo Metropolitan Area

12,698

7.9

Other Regional Areas

3,698

2.3

Other Regional Areas
Subtotal

Property and equipment

Residential Properties

Subtotal
Retail Properties(In millions of yen)

Subtotal¥

16,396

10.2

Total

149,720

93.4

Bank deposits and other assets

10,594

6.6

Total assets

160,314100.0

Total liabilities

69,381

43.3

Net assets¥

90,93356.7