Kenedix : Corporate Governance Report

Corporate Governance Report

Kenedix, Inc.

Last Update: April 2, 2020

Kenedix, Inc.

Representative: Taisuke Miyajima, President & CEO

Contact: Akihiro Asano, Director

Securities Code: 4321

http://www.kenedix.com

The corporate governance of Kenedix, Inc. ("Kenedix" or the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

To ensure its sustainable growth and increased corporate value over the medium to long term by creating value from real estate, Kenedix has configured its corporate governance to strike an appropriate balance between independence and autonomy ("offensive" and "defensive" functions) and a strong sense of ethics. Kenedix accords one of its highest management priorities to employing an appropriate management system and a thorough internal control system, making positive and decisive management decisions based on appropriate processes, and ensuring their accountability.

Kenedix has established Corporate Governance Guidelines (the "Guidelines") in association with the basic views on corporate governance and posted these guidelines on its website (http://www.kenedix.com/eng/company/governance.html).

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company implements each principle of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code] Updated

[Principle 1.4 Cross-shareholdings]

Each year, the Board of Directors verifies the effects of holding cross-shareholdings and their economic rationale and considers whether to continue or reduce cross-shareholdings. With regard to the exercise of voting rights, the Company judges whether to vote in favor of each proposal after gathering sufficient information, including through dialogue with the investee company, and giving consideration to those proposals.

Please refer to Article 20 Policy on Cross-Shareholdings of the Guidelines for details.

[Principle 1.7 Related-Party Transactions]

The Company has formulated "Related-party Transaction Rules." Related-party transactions are deliberated for such aspects as appropriateness and fairness by the Business Compliance Committee, composed of outside committee members who have no conflicts of interest with items that are to be deliberated or resolved. In addition, each quarter the content of such transactions is reported to the Board of Directors, which ensures the appropriate operations. In particular, transactions with a specified degree of importance, such as transactions with directors, are deliberated by the Board of Directors and, as necessary, disclosed appropriately.

Please refer to Article 17 System for Managing Related-Party Transactions of the Guidelines for details.

[Principle 2.6 Roles of Corporate Pension Fund as Asset Owner] The Company does not manage corporate pension funds.

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[Principle 3.1 (i) Company Objectives (e.g., business principles), Business Strategies and Business Plans] Please refer to the Mission Statement, Corporate Mission, Long-term Vision, and Article 16 Status of Information Disclosure of the Guidelines. Please refer to the Medium-term Management Plan on the Kenedix's website (http://www.kenedix.com/eng/company/mission.html).

[Principle 3.1 (ii) Basic Stance and Basic Policy on Corporate Governance]

Please refer to Article 2 Basic Views on Corporate Governance and Article 3 The Company's Approach to the Corporate Governance System of the Guidelines.

[Principle 3.1 (iii) Policies and Procedures in Determining the Remuneration of the Senior Management and Directors by the Board of Directors]

The Nomination and Remuneration Advisory Committee, which has been established as an optional committee chaired by an outside director, deliberates remuneration and final decisions are made by the Board of Directors.

Please refer to Article 8 Nomination and Remuneration Advisory Committees and Article 11 Remuneration of Directors and Audit and Supervisory Board Members of the Guidelines for details.

[Principle 3.1 (iv) Policies and Procedures in Appointments/Dismissals of the Senior Management and Nominations of Candidates for Directors by the Board of Directors]

The Nomination and Remuneration Advisory Committee, which has been established as an optional committee chaired by an outside director, deliberates appointments and nominations, and final decisions are made by the Board of Directors.

Please refer to Article 8 Nomination and Remuneration Advisory Committees, Article 9 Qualification for Directors and Nomination/Dismissal Procedures, and Article 10 Qualification for Audit and Supervisory Board Members and Nomination/Dismissal Procedures of the Guidelines for details.

[Principle 3.1 (v) Explanations over Each Individual Appointment/Dismissal and Nomination with Respect to Appointments/Dismissals of Senior Management and Nominations of Candidates for Directors by the Board of Directors]

The reasons for the appointment/dismissal of each senior management and nomination of each candidate for director are explained in notices of the General Meeting of Shareholders.

[Supplementary Principle 4.1.1 Summary of Scope of Matters Delegated from the Board of Directors to the Management]

The Board of Directors endeavors to fulfill its responsibilities to stakeholders through decision-making on the execution of important operations and the exercise of appropriate monitoring functions and strives to ensure the Company's sustainable growth and increases in corporate value over the medium to long term. Please refer to Article 4 Roles and Responsibilities of the Board of Directors of the Guidelines for details.

[Principle 4.9 Independence Criteria for Independent Directors]

The primary standards used for judging independence are the requirements for outside directors prescribed by the Companies Act and the independence criteria set by the Tokyo Stock Exchange.

Please refer to Article 9 Qualification for Directors and Nomination/Dismissal Procedures and Article 10 Qualification for Audit and Supervisory Board Members and Nomination/Dismissal Procedures of the Guidelines for details.

[Supplementary Principle 4.11.1 Position Concerning Composition of the Board of Directors]

The Company's Board of Directors is composed in consideration of diversity and balance of personnel necessary to conduct appropriate and swift decision-making and highly effective monitoring.

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Please refer to Article 5 Board of Directors Composition, Article 8 Nomination and Remuneration Advisory Committees, and Article 9 Qualification for Directors and Nomination/Dismissal Procedures of the Guidelines for details.

[Supplementary Principle 4.11.2 Concurrent Posts Assumed by Directors and Audit and Supervisory Board Members]

Information about concurrent posts of Kenedix directors and Audit and Supervisory Board members is in notices of the General Meeting of Shareholders and securities reports.

[Supplementary Principle 4.11.3 Analysis and Evaluation of Effectiveness of the Board of Directors as a whole]

To ensure its sustainable growth and higher corporate value over the medium to long term, the Company analyzed and evaluated the effectiveness of the Board of Directors. The evaluation produced the following results and identified the following issues.

1. Method for evaluating effectiveness of the Board of Directors
   All directors and Audit and Supervisory Board members were asked to answer questions about the effectiveness of the Board of Directors (its composition, quality and quantity of deliberations, performance of the Board of Directors' management oversight duties, operations of voluntary committees, and other subjects) for the meetings held between March 2018 and March 2019 and to complete a questionnaire in which individuals provide comments and explanations. Questionnaire responses were then used by the directors, and Audit and Supervisory Board members for a discussion about the effectiveness of the Board of Directors. Information obtained was provided to the Board of Directors to evaluate its effectiveness.
2. Analysis and evaluation results
   We have confirmed that discussions at meetings of the Board of Directors use the knowledge and experience of the directors and Audit and Supervisory Board members. The evaluation also shows that the directors and Audit and Supervisory Board members are properly fulfilling their roles and responsibilities concerning deliberations and decisions for specific agenda items and for the oversight of execution of important operations.
   In addition, we have confirmed that the provision of supplementary materials prior to Board of Directors meetings in addition to the documents submitted at these meetings has resulted in more thorough discussions of agenda items and improved the board's effectiveness.
   We have reexamined the standard for agenda items submitted at the Board of Directors. For agenda items that have been reclassified from items requiring decisions to items that are only reported, we have confirmed that the reporting method must be improved in order to provide more tightly focused reports.
   Consequently, the conclusion of this evaluation is that the effectiveness of the Board of Directors has been ensured based on the judgement that the Board of Directors are properly and effectively performing its roles and functions.
3. Future issues concerning the Board of Directors
   The Kenedix Corporate Governance Guidelines were established in January 2016. Since then, the Corporate Governance Code has been revised and more than half of the members of the Board of Directors have changed. We will reexamine the roles and functions of the Board of Directors and take actions aimed at making the corporate governance system even stronger in order to maintain a sound base for sustainable growth and higher corporate value over the medium to long term.

[Supplementary Principle 4.14.2 Training Policy for Directors]

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The Company provides directors and Audit and Supervisory Board members in a timely manner with the necessary information, training and opportunities to acquire knowledge in order to fulfill their roles and responsibilities required at the Company.

Please refer to Article 13 Policies for Training Directors and Audit and Supervisory Board Members of the Guidelines for details.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

To promote dialogue with shareholders, the Company has a director in charge of IR and the Corporate Planning Department is designated as the department in charge of IR. The Company augments methods for dialogue by such means as holding briefings for institutional investors in Japan and overseas and for individual investors.

Please refer to Article 23 Policy for Constructive Dialogue with Shareholders of the Guidelines for details.

2. Capital Structure

	Foreign Shareholding Ratio	30% and over
[Status of Major Shareholders]
Updated
	Name / Company Name	Number of Shares Owned	Percentage (%)
	DBS Bank Ltd. 700152	42,671,800	19.34
	The Master Trust Bank of Japan, Ltd. (Trust Account)	12,420,700	5.63
	MSIP Client Securities	11,196,510	5.07
	Japan Trustee Services Bank, Ltd. (Trust Account)	8,657,400	3.92
	Daiwa CM Singapore Ltd. (Trust Account)	8,569,500	3.88
	Northern Trust Co. (AVFC) Re Fidelity Funds	5,020,300	2.27
	kabu.com Securities Co., Ltd.	4,742,959	2.15
	Japan Trustee Services Bank, Ltd. (Trust Account 5)	3,684,700	1.67
	SSBTC Client Omnibus Account	3,662,340	1.66
	JP Morgan Chase Bank 385151	3,522,696	1.59
	Controlling Shareholder (except for Parent Company)	-
	Parent Company	None

Supplementary Explanation Updated

1. A Large Shareholding Report (amended report) that became available for public inspection on November 15, 2019 stated that ARA Real Estate Investors XVIII Pte. Ltd. owned Kenedix stock as follows on November 15, 2019. This company is not included in this list of major shareholders because Kenedix was unable to confirm the number of shares effectively held by it as of December 31, 2019. The contents of the Large Shareholding Report are as follows.

Name:	ARA Real Estate Investors XVIII Pte. Ltd.
Address:	5 Temasek Boulevard, #12-01 Suntec Tower 5, Singapore
Number of Shares Owned: 47,983,700 shares
Percentage:	21.30%

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3. Corporate Attributes

Listed Stock Market and Market Section	Tokyo Stock Exchange First Section
Fiscal Year-End	December
Type of Business	Services
Number of Employees (consolidated) as of the End of	From 100 to less than 500
the Previous Fiscal Year
Sales (consolidated) as of the End of the Previous Fiscal	From ¥10 billion to less than ¥100 billion
Year
Number of Consolidated Subsidiaries as of the End of the	From 10 to less than 50
Previous Fiscal Year

1. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
   -
2. Other Special Circumstances which may have Material Impact on Corporate Governance

None

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1. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation

	Organization Form	Company with the Audit and Supervisory Board
[Directors]
	Maximum Number of Directors Stipulated in	Kenedix doesn't set a ceiling on the number of directors
	Articles of Incorporation
	Term of Office Stipulated in Articles of	1 year
	Incorporation
	Chairperson of the Board	President
	Number of Directors	9
	Election of Outside Directors	Yes
	Number of Outside Directors	4
	Number of Independent Directors	4

Outside Directors' Relationship with the Company (1)

Name

Attribute

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

Shuhei Shiozawa

Academic

Hiroki Yaze

From another company

△

△

Koji Kotaka

Attorney

Shinzo Hara

From another company

• Categories for "Relationship with the Company"
• "○" when the director presently falls or has recently fallen under the category; "△" when the director fell under the category in the past
• "●" when a close relative of the director presently falls or has recently fallen under the category; "▲"when a close relative of the director fell under the category in the past

1. Executive of the Company or its subsidiaries
2. Non-executivedirector or executive of a parent company of the Company
3. Executive of a fellow subsidiary company of the Company
4. A party whose major client or supplier is the Company or an executive thereof
5. Major client or supplier of the Company or an executive thereof
6. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/Audit and Supervisory Board member
7. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
8. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only)
9. Executive of a company, between which and the Company outside directors/Audit and Supervisory Board members are mutually appointed (the director himself/herself only)
10. Executive of a company or organization that receives a donation from the Company (the director himself/herself only)
11. Others
12. • 6 -

Outside Directors' Relationship with the Company (2) Updated

			Designation as		Supplementary Explanation
	Name		Independent				Reasons of Appointment
			of the Relationship
			Director
								Mr. Shiozawa was appointed to use
								his extensive knowledge and
								experience as an economist to
								provide advice and suggestions
								concerning management that
								emphasizes the interests of
								shareholders from the standpoint of
								overseeing the directors' execution
								of business operations.
	Shuhei Shiozawa	○	-
								Mr. Shiozawa is qualified to
								oversee the suitability and other
								aspects of the execution of business
								operations by Kenedix managers
								because he has no special interest
								with Kenedix managers or major
								clients. Therefore, a notice that he
								is an independent director was
								submitted.
					e: Mr. Yaze was an
					executive officer at		Mr. Yaze has extensive experience
					Sumitomo Mitsui Banking		in the finance industry at the
					Corporation, a major bank		working level and insight as a
					used by Kenedix, until June		manager. Based on this knowledge
					2008. Mr. Yaze is no longer		and experience, he has provided
					in a position to be		advice and suggestions concerning
					influenced by Sumitomo		management that emphasizes the
					Mitsui Banking Corporation		interests of shareholders from the
					because he left this bank		standpoint of overseeing the
	Hiroki Yaze	○		more than 10 years ago.		directors' execution of business
					operations.
					h: Mr. Yaze was an
					executive officer of		Mr. Yaze is qualified to oversee the
					GINSEN co.,ltd., an		suitability and other aspects of the
					insurance agency with		execution of business operations by
					which Kenedix does		Kenedix managers because he has
					business on a regular basis.		no special interest with Kenedix
					In 2019, transactions with		managers or major clients.
					GINSEN were equivalent to		Therefore, a notice that he is an
					less than 0.01% of the		independent director was submitted.
					revenue of Kenedix.

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			Designation as		Supplementary Explanation
	Name		Independent				Reasons of Appointment
			of the Relationship
			Director
									Mr. Kotaka has expertise as an
									attorney and extensive experience
									in the field of investment banking.
									Based on this knowledge and
									experience, he has provided advice
									and suggestions concerning
									management that emphasizes the
									interests of shareholders from the
									standpoint of overseeing the
	Koji Kotaka	○	-				directors' execution of business
				operations.
									Mr. Kotaka is qualified to oversee
									the suitability and other aspects of
									the execution of business operations
									by Kenedix managers because he
									has no special interest with Kenedix
									managers or major clients.
									Therefore, a notice that he is an
									independent director was submitted.
									Mr. Hara was appointed to use
									experience at administrative
									organizations and management
									experience at a hotel management
									company to provide advice and
									suggestions concerning
									management that emphasizes the
									interests of shareholders from the
									standpoint of overseeing the
	Shinzo Hara	○	-				directors' execution of business
				operations.
									Mr. Hara is qualified to oversee the
									suitability and other aspects of the
									execution of business operations by
									Kenedix managers because he has
									no special interest with Kenedix
									managers or major clients.
									Therefore, a notice that he is an
									independent director was submitted.
	Voluntary Establishment of Committee(s) Corresponding to	Established
	Nomination Committee or Remuneration Committee

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Committee's Name, Composition, and Attributes of Chairperson

			Committee Corresponding to	Committee Corresponding to
			Nomination Committee	Remuneration Committee
	Committee's Name		Nomination and Remuneration	Nomination and Remuneration
		Advisory Committees	Advisory Committees
	All Committee Members	5	5
	Full-time Members	0	0
	Inside Directors	1	1
	Outside Directors	4	4
	Outside Experts	0	0
	Other	0	0
	Chairperson	Outside Director	Outside Director

Supplementary Explanation

Nomination and Remuneration Advisory Committees

Please refer to Article 8 Nomination and Remuneration Advisory Committees of the Guidelines.

[Audit and Supervisory Board Members]

Establishment of Audit and Supervisory Board	Established
Maximum Number of Audit and Supervisory	Kenedix doesn't set a ceiling on the number of Audit and
Board Members Stipulated in Articles of
Supervisory Board members
Incorporation
Number of Audit and Supervisory Board	5
Members

Cooperation among Audit and Supervisory Board Members, Accounting Auditors and Internal Audit Departments

When an audit discovers a significant item, the basic policy is for the Audit and Supervisory Board members and accounting auditors to hold a discussion about the matter in a timely manner.

On a regular basis, information is exchanged about the status of audits by the accounting auditors each quarter for the purpose of examining the suitability of auditing methods, results and other items.

Audit and Supervisory Board members and accounting auditors audit subsidiaries, too. The basic policy is for Audit and Supervisory Board members to provide their opinions to accounting auditors when there is a matter that requires this action.

When the Internal Audit Department creates a proposal for a fiscal year internal audit plan, the opinions of the Audit and Supervisory Board members is obtained in advance and the status of these audits is then reported frequently.

The Internal Audit Department maintains relationships with internal control departments while exchanging opinions with the Audit and Supervisory Board, which includes outside Audit and Supervisory Board members, about the internal control system framework, the method used to perform audits and other subjects.

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Appointment of Outside Audit and Supervisory

Appointed

Board Members

Number of Outside Audit and Supervisory Board

3

Members

Number of Independent Audit and Supervisory

3

Board Members

Outside Audit and Supervisory Board Members' Relationship with the Company (1)

Updated

Name

Attribute

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

l

m

Haruo Funabashi

Other

○

Kazuo Matsumoto

From another company

△

△

Takako Okada

Certified Public Accountant

• Categories for "Relationship with the Company"
• "○" when the Audit and Supervisory Board member presently falls or has recently fallen under the category; "△" when the Audit and Supervisory Board member fell under the category in the past
• "●" when a close relative of the Audit and Supervisory Board member presently falls or has recently fallen under the category;
  "▲"when a close relative of the Audit and Supervisory Board member fell under the category in the past

1. Executive of the Company or its subsidiary
2. Non-executivedirector or accounting advisor of the Company or its subsidiaries
3. Non-executivedirector or executive of a parent company of the Company
4. Audit and Supervisory Board member of a parent company of the Company
5. Executive of a fellow subsidiary company of the Company
6. A party whose major client or supplier is the Company or an executive thereof
7. Major client or supplier of the Company or an executive thereof
8. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an Audit and Supervisory Board member
9. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity)
10. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (the Audit and Supervisory Board member himself/herself only)
11. Executive of a company, between which and the Company outside directors/Audit and Supervisory Board members are mutually appointed (the Audit and Supervisory Board member himself/herself only)
12. Executive of a company or organization that receives a donation from the Company (the Audit and Supervisory Board member himself/herself only)
13. Others

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Outside Audit and Supervisory Board Members' Relationship with the Company (2) Updated

			Designation as
	Name		Independent Audit		Supplementary Explanation			Reasons of Appointment
		and Supervisory		of the Relationship
			Board Member
								Mr. Funabashi was appointed because
								of his career at the Ministry of
								Finance and Ministry of Land,
								Infrastructure, Transport and Tourism
								that involved providing guidance to
								finance and real estate companies and
					j: Kenedix pays a		his research accomplishments at the
					membership fee for		Sirius Corporate Ethics Research
					participation in a Corporate		Seminar. Mr. Funabashi uses this
					Ethics Research Seminar		knowledge to ensure that audits are
	Haruo Funabashi	○		held by Sirius Institute Inc.		performed from the standpoint of
		In 2019, transactions with		proper corporate governance.
					Sirius Institute were
					equivalent to less than		Mr. Funabashi is qualified to oversee
					0.01% of the revenue of		the suitability and other aspects of the
					Kenedix.		execution of business operations by
								Kenedix managers because he has no
								special interest with Kenedix
								managers or major clients. Therefore,
								a notice that he is an independent
								Audit and Supervisory Board member
								was submitted.

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			Designation as
	Name		Independent Audit		Supplementary Explanation			Reasons of Appointment
		and Supervisory		of the Relationship
			Board Member
					g: Mr. Matsumoto was an		Mr. Matsumoto was appointed to use
					executive officer at		his extensive experience in the
					Sumitomo Mitsui Banking		financial industry at the working level
					Corporation, a major bank		and his management experience to
					used by Kenedix, until		appropriately fulfill the duties of an
					November 2006. Mr.		outside Audit and Supervisory Board
					Matsumoto is no longer in a		member in regard to the execution of
					position to be influenced by		business operations.
					Sumitomo Mitsui Banking
					Corporation because he left		Mr. Matsumoto is qualified to oversee
					this bank more than 10		the suitability and other aspects of the
					years ago.		execution of business operations by
								Kenedix managers because he has no
	Kazuo			J: Mr. Matsumoto was an		special interest with Kenedix
	○		executive officer at		managers or major clients. Therefore,
	Matsumoto
			Sumitomo Mitsui Finance		a notice that he is an independent
					and Leasing Co., Ltd, one		Audit and Supervisory Board member
					of the lenders used by		was submitted.
					Kenedix, until June 2016.
					The borrowing balance as
					of the end of 2019 is less
					than 1.0% of the
					consolidated total assets and
					therefore his position will
					not exert an influence on
					Mr. Matsumoto's
					independence as an outside
					Audit and Supervisory
					Board member.
								Ms. Okada was appointed to use her
								knowledge gained from performing
								corporate audits of financial and
								accounting matters as a CPA and an
								accountant in order to perform
								thorough audits of the execution of
								business operations.
	Takako Okada	○	-			Ms. Okada is qualified to oversee the
								suitability and other aspects of the
								execution of business operations by
								Kenedix managers because she has
								no special interest with Kenedix
								managers or major clients. Therefore,
								a notice that she is an independent
								Audit and Supervisory Board
								member was submitted.
				- 12 -

[Independent Directors/ Audit and Supervisory Board Members]

Number of Independent Directors/Audit and	7
Supervisory Board Members

Matters relating to Independent Directors/Audit and Supervisory Board Members

As stipulated in Articles 9 and 10 of the Kenedix Corporate Governance Guidelines, the selection of independent outside directors and Audit and Supervisory Board members is based on the requirements for outside directors and Audit and Supervisory Board members in the Companies Act and the independence criteria established by the Tokyo Stock Exchange. http://www.kenedix.com/eng/company/governance.html

[Incentives]

Incentive Policies for Directors	Updated		Performance-linked Remuneration
Supplementary Explanation	Updated

At the 12th General Meeting of Shareholders held on March 27, 2007, shareholders approved a resolution to establish a performance-linked remuneration program.

At the 20th General Meeting of Shareholders held on March 25, 2015, in accordance with rules for directors' stock compensation, shareholders approved a resolution to establish a performance-linked stock remuneration program for directors (except outside directors) in which Kenedix shares are distributed by a trust based on the achievement of performance goals and other factors.

Recipients of Stock Options

Supplementary Explanation

-

[Director Remuneration]

Disclosure of Individual Directors' Remuneration	Selected Directors
Supplementary Explanation	Updated

Remuneration of individual directors is disclosed only for directors who receive total remuneration on a consolidated basis of at least ¥100 million.

Taisuke Miyajima, President & CEO

Total amount of remunerations, etc.: ¥252 million (including base remuneration of ¥72 million, performance-linked remuneration of ¥105 million and share compensation of ¥75 million).

Note: Share compensation is the amount recognized as an expense in 2019. Individuals receive points based on achieving performance goals and other factors and a number of Kenedix shares based on those points is distributed to those individuals when they leave Kenedix.

Policy on Determining Remuneration Amounts and	Established
Calculation Methods	Updated

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Disclosure of Policy on Determining Remuneration and Calculation Methods

The total remuneration for the 11 directors who were in office in 2019 was ¥507 million.

(These 11 directors include two directors whose terms of office ended at the close of the 24th General Meeting of Shareholders on March 26, 2019.)

Kenedix considers ensuring the ongoing presence of excellent human resources who can contribute to sustainable growth and increasing corporate value to be an important management priority. From this perspective, Kenedix's basic policies regarding the remuneration of directors, etc. are to 1) reflect their level of contribution to sustainable growth and increasing corporate value, 2) appropriately reflect corporate and individual performance and 3) share with shareholders any share price fluctuation risk.

The frameworks of remuneration for directors and Audit and Supervisory Board members are as follows.

Kenedix positions the remuneration of directors (excluding outside directors) as a sound incentive for achieving its medium- to long-term vision. Accordingly, from the perspectives of fixed and variable compensation, the applicable performance period and cash and shares (common interest with shareholders), there are three types of compensation: 1) cash remuneration as base remuneration (fixed portion), 2) cash remuneration linked with short-term operating performance (variable portion) and 3) share compensation linked with medium-term operating performance (performance-linked share compensation). Kenedix will determine suitable levels of the fixed portion, variable portion and performance-linked share compensation as percentages of total remuneration.

Remuneration for outside directors consists only of a fixed amount of cash remuneration as base remuneration, from the perspective of their role and independence.

[Supporting System for Outside Directors and/or Audit and Supervisory Board Members]

Please refer to Article 12 Provision of Information to Independent Outside Directors and Independent Outside Audit and Supervisory Board Members of the Guidelines.

Kenedix has submitted notices that all outside directors and outside Audit and Supervisory Board members are independent.

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2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System)

Kenedix uses the "Company with an Audit and Supervisory Board" system as a corporation organization based on the Companies Act. The purpose is to combine the Board of Directors' decision-making and monitoring functions with respect to operational execution with the audit authority of the Audit and Supervisory Board. In addition to this organizational format, to augment the Board of Directors monitoring function and ensure governance with a high degree of transparency and fairness, Kenedix has established nomination and remuneration advisory committees as voluntary committees. The majority of these committees' members and their chairs are independent directors. Through these overlapping organizational formats, Kenedix has created a hybrid type of Board of Directors with the proper balance between decision- making and monitoring functions for operational execution and promotes sound corporate management that achieves both independence and autonomy.

The Board of Directors, which consists of nine directors including four independent directors, endeavors to fulfill its responsibilities to stakeholders through decision-making on the execution of important operations and the exercise of appropriate monitoring functions with the goals of ensuring Kenedix's sustainable growth and increasing corporate value.

The Audit and Supervisory Board, which consists of five Audit and Supervisory Board members including three independent outside Audit and Supervisory Board members, ensures corporate soundness and fulfills its responsibilities to stakeholders by conducting independent and highly objective audits of the execution of duties by directors and the status of the internal control systems of Kenedix and its subsidiaries. In addition, the Board supports Kenedix's sustainable growth and an increase in corporate value from the perspective of audits.

For roles and responsibilities of the Board of Directors, please refer to Article 4 of the Guidelines.

For roles and responsibilities of the Audit and Supervisory Board, please refer to Article 6 of the Guidelines. For nomination and remuneration advisory committees, please refer to Article 8 of the Guidelines.

3. Reasons for Adoption of Current Corporate Governance System

Please refer to Article 3 The Company's Approach to the Corporate Governance System of the Guidelines.

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III. Implementation of Measures for Shareholders and Other Stakeholders

1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights Supplementary Explanations

			Notices of general meetings of shareholders are sent about three weeks prior
	Early Notification of General		to the meeting.
		The shareholders' meeting notice is posted on the websites of Kenedix and
	Meeting of Shareholders
		the Tokyo Stock Exchange about one week before notices are sent to
			shareholders.
	Scheduling General Meetings	Kenedix exercises care to avoid days with large numbers of general meetings
	of Shareholders Avoiding the
	of shareholders so that many shareholders can attend the meeting.
	Peak Day
	Allowing Electronic Exercise	Shareholders are able to vote electronically. In addition, Kenedix
	of Voting Rights	participates in the Electronic Voting Platform.
			As explained above, Kenedix participates in the Electronic Voting Platform.
	Participation in Electronic		In addition, Kenedix holds information meetings and uses other activities to
		explain shareholder proposals and other items in meeting notices. This
	Voting Platform
		includes many visits and phone calls to institutional investors in Japan and
			other countries.
	Providing Convocation Notice	An English-language shareholders' meeting notice is posted on the websites
	in English	of the Electronic Voting Platform, the Tokyo Stock Exchange and Kenedix.
			Kenedix holds a business strategy briefing after the General Meeting of
	Other		Shareholders. The purpose is to give shareholders, chiefly individuals, an
			opportunity for a dialogue with senior management.

2. IR Activities

			Supplementary Explanations	Presentation by President
			[Basic Policy]
			Kenedix is firmly committed to the timely
			disclosure of information. This commitment
			reflects the spirit and intent of stock listing
			regulations as well as the Kenedix Corporate
			Governance Guidelines: To realize effective
			corporate governance, Kenedix disseminates
			high-value-added information by disclosing
			its mission statement, corporate mission, long-
	Preparation and Publication of		term vision, management plans, and other
	Disclosure Policy		financial and non-financial information in a
		fair and timely manner, providing it in a
			detailed yet easy-to-understand manner.
			[Highlights of the Kenedix Timely Disclosure
			System]
			The aim of timely disclosure is for publicly
			owned companies to supply important
			information to investors. Information is
			provided directly, broadly, and in a timely
			manner to investors by using the media and
			other channels as well as TDnet.
			- 16 -

			In addition, Kenedix has established separate
			voluntary disclosure standards. As a rule, even
			information that does not meet mandatory
			disclosure standards is disclosed if the
			information meets the voluntary standards.
			However, even information that meets the
			voluntary standards may not be disclosed due
			to considerations involving suppliers, clients
			and other aspects of business operations.
	Regular Investor Briefings for		Following the General Meeting of
		Shareholders, Kenedix holds a business	Yes
	Individual Investors
		strategy briefing.
	Regular Investor Briefings for	Information meetings are held when first half
	Analysts and Institutional	and full-year results of operations are	Yes
	Investors	announced.
	Regular Investor Briefings for		Kenedix holds many one-to-one meetings
		with overseas investors and conducts overseas	Yes
	Overseas Investors
		IR activities as needed.
			Kenedix posts major performance indicators,
			financial highlights, assets under
	Posting of IR Materials on		management, financial reports, securities
		reports, presentations, business reports and
	Website
		other information on its website. This website
			also has an explanation of results of
			operations by the president with audio.
	Establishment of Department	The Corporate Planning Department is
	and/or Manager in Charge of	responsible primarily for IR and has staff
	IR	members who perform IR activities.
			Kenedix has numerous IR activities. For
			example, as needed, there are meetings that
	Other		usually include the CEO & President at the
			offices of institutional investors in Japan and
			other countries.

3. Measures to Ensure Due Respect for Stakeholders Updated

				Supplementary Explanations
				The Compliance Manual and Corporate Ethics Policy state that Kenedix is
				dedicated to contributing to social progress as a responsible corporate
	Stipulation of Internal Rules			citizen as well as working for the benefit of investors with sincere actions
	for Respecting the Position of			concerning all customers and business partners.
	Stakeholders			Kenedix has established material issues, which are matters of the greatest
				importance, and positions these issues as one of the key themes for fulfilling
				responsibilities to stakeholders.
				The Corporate Communications Office was established in April 2018 as a
	Implementation of			department responsible solely for strengthening and implementing activities
			involving the environment, society and governance (ESG).
	Environmental Activities, CSR
	Activities etc.			In August 2018, Kenedix established material issues and Sustainability
				Policies. Kenedix has a commitment to finding solutions to these issues both
			- 17 -

	in business and society through activities that reflect the opportunities and
	risks associated with each material issue. Furthermore, Kenedix intends to
	contribute to achieving the sustainable development goals (SDGs) by
	carrying out measures for our material issues. Guided by the Sustainability
	Policies, the Kenedix Group will work together to take concrete actions
	involving the material issues.
	The Kenedix website was upgraded in February 2019 to include content on
	sustainability of the Kenedix Group. The website has extensive information
	about sustainability initiatives for achieving both sustained growth and
	social responsibility. Please visit the website to learn more about these
	activities.
	http://www.kenedix.com/sustainability.html
Development of Policies on	Kenedix has established a disclosure policy and uses this policy for its
Information Provision to
disclosure activities.
Stakeholders

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IV. Matters Related to the Internal Control System

1. Basic Views on Internal Control System and the Progress of System Development

This section explains decisions at Kenedix concerning systems prescribed by the Ordinance of the Ministry of Justice that are needed for ensuring that directors exercise their duties in accordance with laws and regulations and the Articles of Incorporation and for ensuring that other activities are performed properly.

1. System for ensuring that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation

1. Compliance is a key element of management at Kenedix. There are a number of compliance rules and guidelines, such as a Compliance Manual and Corporate Ethics Policy, which serves as a code of conduct that requires all executives and employees to comply with laws and regulations, the Articles of Incorporation, and social standards for behavior.
2. Under the supervision of a director in charge of compliance and compliance officers, there are frequent compliance training programs at all departments conducted by the Compliance Department and the department managers to make everyone aware of the importance of compliance.
3. The Internal Audit Department works with compliance officers to perform internal compliance audits. The results are reported to the Board of Directors and the Audit and Supervisory Board.
4. Kenedix has a whistleblowing system to provide a direct channel for executives and employees to report activities that may violate laws and regulations and submit other reports.

1. Systems for storing and managing information concerning the execution of duties by directors

1. In accordance with document management rules, information about the execution of duties by directors is stored by using documents or electronic media and properly stored and managed.
2. These documents and electronic media shall be constantly available for inspection of all directors and Audit and Supervisory Board members.

1. Rules and other systems for the management of the risk of losses for Kenedix

1. Kenedix has the Risk Management Rules and designates the General Administration and Human Resources Department as the unit that is responsible for risk management. Risk factors are defined as potential problems that could be detrimental to corporate value with respect to business processes or be an impediment to the ability to achieve sustained growth. Department managers are responsible for risk management in their respective business units and are given the authority needed to establish and operate risk management systems, submit reports, and perform other duties.
2. Kenedix has Crisis Management Rules and Disaster Response Rules for natural disasters, incidents, accidents and other problems that have a major impact on business activities or society overall and are detrimental to corporate value. The General Administration and Human Resources Department is responsible for crisis management and disaster response activities. This department establishes an emergency response headquarters and takes other actions in order to respond to a crisis and overcome the associated problems.
3. The Internal Audit Department performs audits to confirm that risk management activities of the General Administration and Human Resources Department comply with the Risk Management Rules.

1. System for ensuring that directors perform their duties efficiently

1. The Board of Directors approves a management plan, reviews this plan every year and establishes performance targets and budgets for each business unit. In addition, the directors receive monthly performance reports and verify progress with respect to budgets in order to manage business operations efficiently.
2. In accordance with organizational rules, there is a framework for the proper and efficient operational execution of duties by the directors. In addition, Kenedix will use the corporate officer system for the
3. • 19 -

purpose of strengthening the business execution function while speeding up decision-making involving management.

1. System for ensuring that Kenedix Group business operations are performed properly
   Kenedix has a compliance system and risk management system for the entire group. These systems reflect the business activities and scale of Kenedix and its subsidiaries and include the proper management of subsidiaries based on their characteristics as well as the importance of each subsidiary in relation to the entire Kenedix Group.

1. To prevent violations of laws and regulations, the Articles of Incorporation, and other guidelines, the Kenedix Group has a system of internal controls for compliance with the Financial Instruments and Exchange Act and other related laws and regulations.
2. The Kenedix director in charge of compliance is also the group compliance officer in order to clarify responsibility regarding the establishment of internal controls at Kenedix and its subsidiaries.
3. The Kenedix Internal Audit Department performs audits of Kenedix and its subsidiaries and submits audit reports to the appropriate managers of these companies and the department responsible for internal controls. The internal controls departments of subsidiaries then provide guidance and advice concerning internal control improvements as needed based on these reports.
4. As a rule, Kenedix sends one or more directors or Audit and Supervisory Board members, or both, to subsidiaries. Furthermore, related company management rules designate a department responsible for risk management and compliance and, to maintain close ties with the goals of Kenedix, require that the operations of subsidiaries reflect the goals of Kenedix. Additionally, Kenedix monitors the management of subsidiaries, including the execution of duties by directors, and the status of compliance and asks for documents and other information as required.
5. One or more subsidiaries may require special attention concerning its financial condition, including the risk of a loss, or other matters. In this case, the Corporate Planning Department is responsible for asking subsidiaries to perform risk management as well as for the comprehensive and centralized oversight of the Kenedix Group's overall risk exposure.
6. Kenedix respects the autonomy and independence of the management of subsidiaries. At the same time, to facilitate the proper and efficient management of the Kenedix Group, a department responsible for risk management and compliance oversees the operations of subsidiaries depending on the each company's business activities, scale and other aspects of operations. This oversight includes lines of command, the delegation of authority, decision-making processes and other organizational items. For example, Kenedix may recommend that a subsidiary establish or not establish a board of directors, may recommend individuals for election as directors and Audit and Supervisory Board members and may introduce management targets as needed.
7. Kenedix requires subsidiaries to establish a system to allocate an appropriate number of Audit and Supervisory Board members and compliance officers as well as a system that the Kenedix Internal Audit Department audits the execution of duties by the subsidiaries' directors, including the establishment and operation of a system of internal controls, depending on each company's business activities, scale and other aspects of operations.
8. Kenedix makes suitable and effective use of IT systems for the purposes of exchanging information with subsidiaries and performing business activities.

1. System for the assignment of employees to assist Audit and Supervisory Board members when requested, matters concerning independence of these employees from directors, and matters for ensuring the effectiveness of instructions to these employees from Audit and Supervisory Board members

1. The Audit and Supervisory Board members can submit orders to employees of the Internal Audit Department for necessary matters to perform auditing activities.
2. Employees who receive orders from an Audit and Supervisory Board member for necessary matters to perform auditing activities ("Audit and Supervisory Board member assistants") cannot receive instructions or orders from directors regarding the Audit and Supervisory Board member's orders.
3. • 20 -

1. For evaluation and transfers of Audit and Supervisory Board member assistants, the director in charge of human resources must submit a report to the full-time Audit and Supervisory Board members and receive that auditors' consent.
2. Kenedix makes all executives and employees aware that Audit and Supervisory Board member assistants follow the orders and instructions of Audit and Supervisory Board members.

1. System for reports by directors and employees to Audit and Supervisory Board members, system for reports to the Kenedix Audit and Supervisory Board members by individuals who have received reports from subsidiary executives, employees and others, system to ensure no negative consequences for individuals who have submitted a report to an Audit and Supervisory Board member, and system for ensuring effective audits

1. Directors and employees must promptly report to the Audit and Supervisory Board members the status of business operations each month as well as items which may have a significant effect on Kenedix or its subsidiaries performance, the results of internal audits, reports received through the whistleblowing system and other information.
2. Directors and employees must quickly and accurately respond to requests from the Audit and Supervisory Board members for reports concerning the operations of Kenedix and its subsidiaries.
3. The full-time Audit and Supervisory Board member and the Audit and Supervisory Board hold regular meetings with the president of Kenedix to exchange information for confirming the status of how business operations are performed and other items.
4. Executives and employees of subsidiaries must submit prompt and accurate reports when requested by a Kenedix Audit and Supervisory Board member for information about how business operations are performed. In addition, if there is a violation of a law or regulation or other event that may result in significant losses or other damage to Kenedix or its subsidiaries, this event must be reported immediately to the Kenedix department that oversees subsidiaries or to the Kenedix Internal Audit Department and Kenedix Audit and Supervisory Board members. The Kenedix whistleblowing system is also for the use of the executives and employees of subsidiaries. Results of investigations of information received through this whistleblowing system are reported to the Kenedix Board of Directors and Audit and Supervisory Board.
5. Kenedix prohibits any negative consequences for Kenedix Group executives and employees who have submitted a report to Audit and Supervisory Board members because the report was submitted. All group executives and employees are made aware of this rule.

1. Policy concerning prepayment or reimbursement procedure for expenses resulting from execution of duties by the Audit and Supervisory Board members and the treatment of other expenses or debt resulting from execution of duties by the Audit and Supervisory Board members
   When Kenedix receives a request from an Audit and Supervisory Board member for the prepayment of expenses or other form of expense payment involving the execution of that auditor's duties, the responsible department examine the request and promptly make the payment or process the debt. However, the request is rejected if the examination determines that the expense or debt was not required for that Audit and Supervisory Board member's duties. In addition, there are no budgetary limits on payments for expenses and other items resulting from the performance of duties by the Audit and Supervisory Board members.
2. Fundamental approach to eliminating anti-social forces and status of measures

1. The Kenedix Group refuses to have any relationship at all with anti-social forces that are detrimental to social order and sound business activities. There is an organizational response to the anti-social forces in a unified manner by all executives and employees.
2. The Compliance Department is responsible for activities to block anti-social forces. Kenedix has a manual and performs training concerning this matter. Kenedix also provides information to subsidiaries,
3. • 21 -

assists subsidiaries establish policies for dealing with anti-social forces and supports subsidiaries in other ways. The aim is to prevent any relationship with anti-social forces.

1. When an improper demand is received from an anti-social organization, the Kenedix individual responsible for preventing these requests takes the lead in working with the police, attorneys and other external parties for the purpose of firmly rejecting this demand.

2. Basic Views on Eliminating Anti-Social Forces

Please refer to 1. Basic Views on Internal Control System and the Progress of System Development, (9) Fundamental approach to eliminating anti-social forces and status of measures.

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V. Other

1. Adoption of Anti-Takeover Measures

Adoption of Anti-Takeover Measures	Not Adopted
Supplementary Explanation
Not applicable.

2. Other Matters Concerning Corporate Governance System

-

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