Principles for Customer-Oriented Business Conduct

• Principles for Customer-Oriented Business Conduct
• Status of Engagement Based on Principles for Customer-Oriented Business Conduct

Principles for Customer-Oriented Business Conduct

Principle 1: Formulation and Announcement of our Principles of Fiduciary Duty

As a member of the Kenedix Group, our company will, in line with the following Mission Statement and the Corporate Mission formulated by Kenedix, Inc., endeavor to maximize the profits of our customers through adaptable and prompt investment management, after careful consideration as an asset management company.

I． Mission Statement

Kenedix is dedicated to realizing the full potential of real estate.

II． Corporate Mission

1. Business Objective: “For What?”
   • We contribute to society by making the best use of investment capital and creating value from real estate.
2. Business Field: “For Whom?”
   • We offer the best investment opportunities to our clients by committing to multiple roles globally as a real estate asset manager.
3. Business Principle: “How?”
   • We confront new business challenges through our management speed and flexibility while emphasizing stability and fairness.
     We also actively discuss and promote our commitment to sustainability and ESG (Environment, Society and Governance) management.

Principle 2: Pursuit of Best Interests of Customers

1. Our company will, concurrently with our close observation of real estate investment and management environment, always seek to pursue the best interests of our customers and to implement the necessary measures with speed and adaptability. On the basis of this overarching principle, we have established the specific policies set forth in Principle 3 through Principle 7 below.
2. We will manage the portfolio of the REITs that have entrusted the management of their assets to our company with an emphasis on the realization of stable and long-term dividends, based on the investment policies of such REITs as stipulated in their respective articles of incorporation.
3. As regulatory compliance is closely connected with our pursuit of the best interests of our customers, strict compliance constitutes one of the most important subjects for the management of our company and guides the conduct of our day-to-day operations.

Principle 3: Appropriate Management of Conflicts of Interests

1. REITs that entrust their asset management functions to our company may engage in the trading of investment properties with Kenedix, Inc. or with the funds that entrust their asset management function to Kenedix, Inc.
   When transactions are entered into between a REIT and a related party, such as transactions through the support of our sponsor (referred to above), our Compliance Officer, with a view to preventing unreasonable damage to the interests of our customers, will conduct an inspection to determine whether such transactions give rise to any issue under our internal rules on related party transactions. Thereafter our Compliance Committee (which includes outside independent members) will consider the appropriateness of the transactions. Passing the inspection by the Compliance Officer and obtaining approval of such transactions by the Compliance Committee are among the conditions to be met in executing the relevant transactional agreements.
2. As we have been entrusted with the asset management functions of more than one REIT, we follow the rule of “Priority of Consideration,” according to which priority will be granted to investment properties based on type or scale, in order to prevent conflicts of interests that result from conflicts between investment opportunities sought by REITs.

Principle 4: Clarification of Fees

1. We provide clear information on the types of fees concerning listed REIT and how such fees are calculated in the annual securities reports and asset management reports of the REIT.
2. We provide clear information on the types of fees concerning private REIT in the relevant private placement memorandums and asset management reports.

Principle 5: Transparent Disclosure of Important Information

In addition to our disclosure of the information required by the rules of the Tokyo Stock Exchange and other laws and regulations, we voluntarily disclose information that we consider helpful for the investment decisions of our customers.
Each REIT discloses information on its website in a way that is readily accessible for our customers.
Besides disclosing information through press releases, the listed REIT also upload video streams that provide briefings on its financial results.

Principle 6: Providing Applicable Services to Customers

We improve our ability to meet the needs of our customers, and help our customers to gain a deeper understanding of our management policy, by engaging our customers in wide-ranging and productive interactions that are not restricted to unilateral communication from an asset manager to customers. Furthermore, it is our goal, through the prompt and flexible improvement of our management as necessary, to maintain sustained growth and a stable investment management that would contribute to the long-term profits of our customers.

Principle 7: Programs to Encourage Compliance by Our Employees

Through establishment of an annual compliance program and the continued conduct of regular compliance training for all of our employees and officers, we endeavor to ensure adherence to regulatory compliance and to maintain and improve our governance system as an asset management company. By carrying out these measures, we continue to promote the policies expressed in Principle 2 through Principle 6 above.

Status of Engagement Based on Principles for Customer-Oriented Business Conduct

We are engaged in the following activities as an asset management company entrusted with the management of KDX Realty Investment Corporation (hereinafter referred to as “KDXR”) and Kenedix Private Investment Corporation (hereinafter referred to as “KPI”) in relation to the Principles for Customer-Oriented Business Conduct.

Principle 1: Formulation and Announcement of Our Principles of Fiduciary Duty

As a member of the Kenedix Group, we continue to strive to maximize the interests of our customers through flexible and prompt investment management. We are also actively promoting initiatives on sustainability and ESG.
For more information on each REIT’s initiatives on sustainability and ESG, please refer to the following REIT websites.
Please note that KPI’s website is only available in Japanese (hereinafter the same).

Principle 2: Pursuit of Best Interests of Customers

In accordance with the investment policies of each REIT, we aim to maximize the profits of unitholders by securing stable earnings and achieving sustainable growth in investment assets, specifically as follows.

KDXR
Through the merger of 3 listed REITs, we aim to maximize our unitholder value by expanding investment universe to new growth opportunities, enhancing profitability through asset reshuffling in line with environmental changes and implement active management to acquire upside revenues.

KPI
We have four characteristics: “stable portfolio,” “growth strategy leveraging group companies,” “flexible and dynamic management” and “transparent management structure.” While carefully monitoring the investment environment, we aim to maximize the interest of unitholders in order to achieve our goal, “long-term investment and stable distributions.”

For more information on the specific activities of each REIT, please refer to the following websites of each REIT.
Please note that KPI investors are required to login to KPI’s website using a dedicated ID and password (hereinafter the same).

Investment Principles, Portfolio Strategies

Historical Performance of Distributions

Efforts to Ensure Compliance

Principle 3: Appropriate Management of Conflicts of Interests

In managing the assets of each REIT, we have established Related-Party Transaction Rules for each division in charge of asset management for each REIT in relation to transactions with related parties or with us, and managed the assets in accordance with these rules.
In addition, since we are entrusted with the management of several REITs, there is the possibility of cases of conflicts among REITs on investment opportunities.
Accordingly, we have established Priority of Consideration rules based on the types and sizes of properties, and are working to implement appropriate measures against conflicts of interest, such as preventing arbitrary distribution of real estate sales information and preventing conflicts of interest between REITs that entrust their management to us.
For more information on the specific activities of each REIT, please refer to the following websites of each REIT.

Principle 4: Clarification of Fees

Investment corporations that entrust the asset management to us adopt performance-linked asset management fees, such as fees linked to distributions per unit and investment unit performance. These management fee structures are designed to enhance the linkage between unitholders’ and our interests.
The types, calculation methods and amounts of asset management fees we receive from each REIT can be found on the following websites of each REIT.

Principle 5: Transparent Disclosure of Important Information

We hold briefing sessions for institutional investors and analysts for each fiscal period of  listed REIT (KDXR). The presentation materials are posted on KDXR’s website. KDXR also actively participate in briefings and events for retail investors.
We disclose information in accordance with laws and regulations as well as information that is deemed necessary and appropriate for investment decisions of unitholders in a timely manner.
Although KPI is a private REIT, KPI has established disclosure policies and standards equivalent to listed REITs by reference to the Securities Listing Regulations, based on its proactive IR stance toward unitholders. In addition, KPI actively uses its website to promptly deliver useful information for unitholders.
For more information on the specific activities of each REIT, please refer to the following websites of each REIT.

Press Releases

IR Library

Principle 6: Providing Applicable Services to Customers

As outlined in Principle 2, Pursuit of Best Interests of Customers, we aim to maximize the profits of unitholders by securing stable earnings and sustained growth of investment assets in accordance with the investment policies of each REIT.
To maximize unitholder profits, we consider what services are appropriate for our customers and act accordingly.
For more information on the specific activities of each REIT, please refer to the following websites of each REIT.

KDXR

Based on the stability of our diversified portfolio with the largest number of properties among all J-REITs, we aim to maintain sustainable growth and stable investment management that contributes to mid- to long-term profit of our unitholders by expanding investment universe to acquire new growth opportunities, enhancing profitability through asset reshuffling, and implement active management to acquire upside revenues.

KPI

We provide opportunities providing long-term and stable income, investment opportunities, and information according to the characteristics of our private REIT and the requirement of our investors. In addition, we have established an “Advisory Committee” in our management structure, and aim to tap into the opinions of investors in asset management.

Principle 7: Programs to Encourage Compliance by Our Employees

We adopt programs for developing employees’ capabilities and enhancing their professional skills. Please refer to the following website.

• Principles for Customer-Oriented Business Conduct
• Status of Engagement Based on Principles for Customer-Oriented Business Conduct