ESG Disclosure

March 2021

Ⅰ. Contents
Ⅰ. Contents .................................................................................................................................. 2
Ⅱ. Message from Executive Director ................................................................................................ 3
Ⅲ. Basic Policies and Promotion System on Sustainability, etc. ............................................................ 4（ⅰ）Sustainability Policies .......................................................................................................... 4（ⅱ）Environmental Policies ........................................................................................................ 5（ⅲ）Promotion System of Sustainability, etc................................................................................. 6（Ⅳ）Material issues of the Kenedix Group .................................................................................... 9
Ⅳ.【Environment】Environmental Initiatives .......................................................................................10（ⅰ）Acquisition of Environmental Certification .............................................................................10（ⅱ）Characteristics and Strength of KDO ....................................................................................13（ⅲ）Reduction of Energy Consumption, CO2 Emissions and Water Consumption (Initiatives for Climate
Change, etc.) ....................................................................................................................16
Ⅴ.【Environment】Stakeholder Engagement to Improve Property Performance ..........................................19
Ⅵ.【Social】Improving Resilience for Disaster, etc. ..............................................................................21
Ⅶ.【Social】Improving Tenant Satisfaction .........................................................................................23
Ⅷ.【Social】Contribution to Local Communities ...................................................................................24
Ⅸ.【Social】Affordable Real Estate Leasing .........................................................................................26
Ⅹ.【Social】Human Capital Development ...........................................................................................27（ⅰ）Attracting and Retaining Talents, and Developing Their Careers ..............................................27（ⅱ）Health and Wellbeing of Employees .....................................................................................29（ⅲ）Diversity and Equal Opportunities ........................................................................................32
Ⅺ.【Governance】Governance ..........................................................................................................34（ⅰ）Board of Directors .............................................................................................................34（ⅱ）Decision-making Flow for Investment Management ...............................................................35（ⅲ）Rules Concerning Conflicts of Interests Among REITs ............................................................35（ⅳ）Measures to Pursue Mutual Interests with Investors ..............................................................35（ⅴ）Efforts to Ensure Compliance ..............................................................................................362

Ⅱ. Message from Executive Director

Ⅱ. Message from Executive Director
Kenedix Office Investment Corporation (KDO) and Kenedix Real Estate
Fund Management, Inc. (KFM), the asset management company for KDO,
have recognized the importance of ESG (Environmental, Social andGovernance) considerations in real estate management and identified theenhancement of sustainability as one of the material topics for ourbusiness to realize a sustainable society as a corporate responsibility andestablished the sustainability and environmental policies aiming to reduce
environmental burden and cooperate with stakeholders.

KDO has been proactively promoting green building by obtaining various
external evaluations such as GRESB (Global Real Estate Sustainability
Benchmark) Real Estate Assessment, in which KDO early participated asa J-REIT and achieved “Green Star” for 9 consecutive years.

The mid-sized office buildings, the main investment focus of KDO, have more abundant tenant pool, so KDO canprovide stable and attractive investment opportunities to unitholders. KDO is striving for real estate management that
contributes to mid to long term profit for unitholders by conducting a regular customer satisfaction survey to improvetenant satisfaction.

Cordially,

Jiro Takeda
Executive Director
Kenedix Office Investment Corporation

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Ⅲ. Basic Policies and Promotion System on Sustainability, etc.

Ⅲ. Basic Policies and Promotion System on Sustainability, etc.
KDO and KFM have positioned initiatives on ESG (Environmental, Social and Governance) awareness as animportant business management issue and KFM has established the following Sustainability Policies to promote
initiatives on ESG.
Under Sustainability Policies, KDO and KFM are aiming to contribute to sustainable environment through the businessactivities. We environmentally make positive contribution to sustainability by reducing the negative impact to theenvironment through continuously reducing energy and water consumption, CO2 emission and waste; and byeliminating and managing of hazardous materials to carry out the social mission of improving the environmental
performance of properties we manage.
KDO and KFM have established the following environmental policies and had environment-friendly investment
management operations in accordance with the policies.
In addition, Kenedix, Inc., the parent company of KFM, became a signatory to the “Principles for Responsible
Investment (PRI)” supported by the United Nations. KDO and KFM share Kenedix Groupʼs philosophy, promotesustainability initiatives and aim for compatibility between sustainable growth and social responsibility under thecommitment to responsible investment.

（ⅰ）Sustainability Policies
1. Contribution to sustainable environment
We make positive contribution to sustainability by reducing the negative impact to the environment throughcontinuously reducing energy and water consumption, CO2 emission and waste; and by eliminating andmanaging of hazardous materials to carry out the social mission of improving the environmental performance ofproperties we manage.

2. Commitment to diverse society
We contribute to realize the diverse society, considering the social impact of our properties. We endeavor todeliver built environment where safety, health and wellbeing and diversity of tenants and local community are
secured.

3. Stakeholder engagement
We manage our properties as a responsible real estate asset management company by stressing theimportance of engagement with our stakeholders such as investors, tenants, business partners, local
communities and property management companies.

4. Attractive working environment
We aim to deliver attractive working environment by implementing measures to promote employees' health &wellbeing and diversity & equal opportunities. We develop capabilities of employees to help them achieve thebest performance by providing various educational opportunities such as trainings.

5. Responsible organization
We ensure compliance and sound risk management in our entire business activities. We are committed toresponsible property investment by a responsible organization by aligning with global ESG initiatives andproactively disclosing ESG information.

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Ⅲ. Basic Policies and Promotion System on Sustainability, etc.

（ⅱ）Environmental Policies
1. Compliance with Environmental Laws and Regulations
KFM will promote environment-friendly investment management operations by adhering to environmental laws
and regulations.

2. Promotion of Energy Conservation Measures
KFM will systematically advance energy conservation measures at its managed properties, maintaining astrong awareness of the importance of natural and energy resources.

3. Reduction of Environmental Burden
KFM will undertake initiatives to reduce CO2 and waste emissions as well as promote recycling at its managed
properties, underscoring its commitment to alleviating its environmental burden. In addition, KFM will takesufficient care when handling harmful substances and environmental pollutants.

4. Disclosure of Environmental Information
KFM will work to disclose necessary information to a variety of concerned parties, including investors, tenants
and business partners, in such areas as its environmental policies and measures.

5. Environmental Education
KFM will take steps to improve the environmental consciousness of its officers and employees through internal
education.

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Ⅲ. Basic Policies and Promotion System on Sustainability, etc.

（ⅲ）Promotion System of Sustainability, etc.
Sustainability Committee
The initiatives for sustainability are promoted under the leadership of the Sustainability Committee established in KFM.
The committee meets in principle, every 3 months, and minor issues are taken care by the subcommittee. Topics
including policies, targets, and approaches on sustainability issues and monitoring of the progress are discussed andreported to the Asset Management Committee with an independent external member at KFM, and the proposals are
executed upon approval of the management and the results are also reported to KDO's Board of Directors withindependent supervisory directors. All of the Sustainability Committee Members attend the Asset Management
Committee and KDO's Board of Directors in principle.
The Committee is comprised by the Head of Office REIT Department as the chairperson of the Committee, and as
members, the Heads of Asset Investment Division that handles asset acquisition, Asset Management Division that
handles asset management, Planning Division that handles fund-raise through direct finance and disclosure, andFinance & Accounting Department, the Head of Business Administration Department and the Compliance Officer. The
subcommittee is consisted of the Head of Asset Management Division as the chairperson and the Head of Planning
Division as the subcommittee member.

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Ⅳ.【Environment】Environmental Initiatives

Energy Conservation Measures Committee
Energy Conservation Measures Committee considers policies, targets, approaches on energy conservation andmonitoring of the progress, and especially takes care of initiatives to reduce energy consumption among sustainability
issues. It is held regularly and is comprised by the Head of Asset Management Division, Office REIT Department as
the chairperson of the Committee, and as members, the Director & COO, Head of Office REIT Department, the Headof Asset Investment Division, the Head of Planning Division, the Head of Finance & Accounting Department, the Headof Business Administration Department and the Compliance Officer. Additionally, a third party expert attends theCommittee as an observer to advise and cooperate in promoting measures.

7Ⅳ.【Environment】Environmental Initiatives

Signing on to the Principles for Responsible Investment (PRI) by the Sponsor
Kenedix, Inc., the parent company of KFM, became a signatory to the
Principles for Responsible Investment (“PRI”) supported by the United Nations.
PRI is a set of principles established for the financial industry in 2006 under theleadership of the United Nations Secretary-General of the time, Kofi Annan. PRI
encourages the incorporation of ESG issues (Environment, Social andGovernance) into investment decision-making processes, with the aim to help
companies enhance long-term investment performance and better fulfill theirfiduciary duty. Kenedix Group promote sustainability initiatives together and aim
for reinforcing its management base toward compatibility between sustainablegrowth and social responsibility under the commitment to responsible investment.

Signing on to the Principles for Financial Action for the 21st Century
by the Asset Management Company
Kenedix Real Estate Fund Management, Inc., the asset management company
for the Investment Corporation (“the Asset Management Company”) became asignatory to the Principles for Financial Action towards a Sustainable Society(Principles for Financial Action for the 21st Century (“the PFA21”)). The PFA21
has been established by drafting committee with participation of various
financial institutions in October 2011 as the action guidelines of financial
institutions who seek to fulfill their responsibilities and roles required for theformation of a sustainable society. Signing financial institutions will implement
initiatives based on the seven principles below as much as possible based on
their own businesses. It has been positioned as a starting point to collaborate
without being restricted by business categories, scale or region. The AssetManagement Company is ambitious to become a real estate asset
management company that commits to responsible investment management
through the practice of the PFA21.

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Ⅳ.【Environment】Environmental Initiatives（Ⅳ）Material issues of the Kenedix Group
Kenedix, Inc., the parent company of KFM has established material issues in order to identify subjects that are
critical for achieving sustained growth of the Kenedix Group along with stakeholders and society. We will makecommitment to find solutions to these issues both in business and society by making the initiatives associated witheach issue. Furthermore, we intend to contribute to achieving the SDGs by carrying measures for our materiality.

9Ⅳ.【Environment】Environmental Initiatives

Ⅳ.【Environment】Environmental Initiatives
Engaging the social mission that is to improve the environmental performance of the properties we manage, we will
lower the environmental impact by constantly reducing the negative environmental impact of these properties such asenergy consumption, CO2 emissions, water consumption and the generation of waste materials and having activities
for the proper management of hazardous substances and reduction in their use, and make contribution toenvironmental sustainability with the following environmental initiatives in a proactive manner for increasing mid-longterm profit.

（ⅰ）Acquisition of Environmental Certification
As a pioneer in J-REIT focusing on mid-sized office buildings, KDO will continue to advance environmental andenergy conservation measures as well as efficient energy use for its own office buildings with the support of outside
consultants and proactively acquire the following external certification and assessment to promote initiatives forsustainability.

GRESB Real Estate Assessment
GRESB (Global Real Estate Sustainability Benchmark) is an annual benchmark
assessment established primarily by major European pension fund groups in2009 that measures sustainability performances in the real estate sector.
GRESB attracts a lot of attention because leading institutional investors havejoined the high-visibility survey and used GRESB to select and dialogue withinvestment targets. Therefore, there are many real estate companies, REITs
and private funds worldwide that annually participate in the GRESB Real Estate
Assessment.
Among many environmental certifications for individual real estate, GRESB isthe only assessment that evaluates companies or funds, and GRESB Ratings
assigned for participants, which is relative performance ranking (5 Stars are thehighest).
KDO earned a "Green Star" designation for the ninth consecutive year byachieving high performance both in “Management Component” that evaluates
policies and organizational structure for ESG promotion, and “Performance
Component” that assesses environmental performance and tenant engagementof properties owned .
And acquired the highest “A” Level for Public Disclosure on ESG.

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Ⅳ.【Environment】Environmental Initiatives

Number of and Total Floor Area Ratio of Green Certified Properties
The number of

Floor area（m2）properties

Ratio（%）(Note 2)

Green Certified Building (Note 1)

42406,918.37

56.8

DBJ Green Building Certification

25

314,807.04

44.0

Certification for CASBEE for Real Estate

21

137,027.90

19.1

BELS Certification

4

42,466.91

5.9

As of January 31, 2021
Note 1: A property that has multiple environmental certifications is counted as one.
Note 2: The ratios are percentages of each floor area to the gross floor area of properties owned by KDO (716,226.83m2, calculated on a
pro-rata basis of ownership ratio for compartmentalized ownership, etc.).

Changes in Number of and Total Floor Area of Green Certified Properties
As a result of actively acquiring certifications, the number of certified properties and the total floor area have steadily
increased to 42 properties and 406,918.37 m2 from 2011 to January 2021.
Overall ratio of the number of green certified buildings is 43.8% in the portfolio and the green certified space is 56.8%.
(Note)
Note: As of January 31, 2021. Shinjuku 6chome Building (Land) is excluded from the calculation.

Note 1: The numbers in above graphs are calculated for KDO portfolio as of January 31, 2021.
Note 2: The property that has multiple certification and Assessment is counted as 1 property for each certification without name-based
aggregation.
Note 3: The property that has multiple certification and Assessment is calculated based on total floor area of 1 property.

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Ⅳ.【Environment】Environmental Initiatives

DBJ Green Building Certification
DBJ Green Building Certification Program was launched by Development Bank of Japan
Inc. (DBJ) for the purpose of supporting the properties which give proper care toenvironment and society (Green Building).
The program evaluates, certifies and supports properties which are required by society andeconomy. It makes comprehensive assessment of properties, while evaluating various
factors which range from properties' environmental features to their communication withstakeholders, such as disaster prevention and proper care for surrounding communities.
Furthermore, there are 5 levels, "five stars", "four stars", "three stars","two stars", "one star" as the certification ranks.

Certification for CASBEE for Real Estate
CASBEE is an evaluation system for rating the environmental performance of buildings,
developed under the auspices of the Ministry of Land, Infrastructure, Transport andTourism. The system rates the overall environmental performance of buildings from two
perspectives; the evaluation of the environmental quality and performance of buildings
themselves and the external environmental impact of buildings.

BELS Certification
BELS (Building-Housing Energy-efficiency Labeling System) is the third-party certification
system to rate houses and buildings in accordance with duty to make effort to label
energy saving performance in the Act on Improving Energy Consumption Performance forArchitectural Structures. Houses and buildings are evaluated based on the value of BEI(Building Energy Index) derived from the primary energy consumption based on thebuilding energy consumption performance standard set by the government. The numberof star shows an evaluation result ranging 1 to 5.

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Ⅳ.【Environment】Environmental Initiatives（ⅱ）Characteristics and Strength of KDO
KDO aims to maximize unitholder profits, obtain stable earnings and achieve sustainable growth in investment assets
by mainly investing in and operating mid-sized office buildings in the Tokyo Metropolitan Area (Tokyo and its threeneighboring prefectures: Kanagawa, Saitama and Chiba). For this reason,89 properties or 92% of KDO portfolio is
mid-sized office buildings (approx. 84% by acquisition price) and average age is approx. 24 years as of October 31,
2020.
In general, large-sized office buildings are regarded as efficient and easy to achieve certifications, however KDO andKFM have achieved new acquisition and improvement with the level of environmental certifications at mid-sizedbuildings through refurbishment and environmental measures to improve energy efficiency with over 15 years ofexperience and knowledge in real estate asset management.

Refurbishment Case Studies: Certified as Green Building Standard or Improve
Level of Green Certification
KDX Iidabashi Square
Fully renovated following the move-out of the tenant that had occupied thewhole building (completed in April 2016)⚫ Review of floor plan for multi-tenants⚫ Upgrading of common/private area
⚫ Introduction of grid ceiling in private area
⚫ HVAC renewal to enhance energy efficiency⚫ Installation of LED lightings in common/private area
⚫ Renewal of sanitation facilities to more water-efficient equipment and others⚫ Achieved “two stars” in DBJ Green Building Certification in Oct. 2016
The rank improved to "three stars" in Nov. 2018
⚫ BELS Certification “3 Stars”⚫ Occupancy rate reached approx. 50% about one month after the renovation andfull about six months after. The building successfully filled vacancies at anexcellent pace13

Ⅳ.【Environment】Environmental Initiatives

KDX Yokohama Building⚫

Conducted a large-scale renovation as countermeasures against
aging deterioration of the building and obsolescence of thedesign to raise competitiveness (completed in Oct. 2016)⚫

Upgrading of common area⚫

Full renovation of rental conference rooms, community space,etc.

⚫

HVAC renewal to enhance energy-efficiency⚫

Installation of LED lightings in common area, etc.

⚫

Achieved “one star” in DBJ Green Building Certification in Oct.
2016. The rank improved to “two stars” in Nov. 2018⚫

Increased newly contracted rents by 15% after the renovation⚫

Restroom renovation was implemented for measures against

KDX Shinjuku Building

aged deterioration and water-saving and all Toilets were renewed
to high efficiency model to reduce water use from 16ℓ upon final
completion per flush to 4.8ℓ after the renovation, resulted in water
efficiency performance considerably improved than former
equipment⚫

The rank of Certification for CASBEE for Real Estate has
improved from initially acquired “A” to “S”

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Ⅳ.【Environment】Environmental Initiatives
For the following properties, the rank of green certification has improved by implementing both software and hardware
measures to enhance energy and water efficiency through LED introduction for lighting facilities and restroom
renovation and improve customer satisfaction such as placing an emergency kit box in elevators and organizing
tenant engagement activities for energy conservation.

KDX Iidabashi Square

KDX Yokohama Building

DBJ Green Building

DBJ Green Building

Certification

Certification

2 stars

3 stars

KDX Shinjuku Building

1 star

2 stars

KDX Karasuma Building

Certification for CASBEE forReal Estate
A RANKS RANK

Certification for CASBEE forReal Estate
A RANKS RANKKDO considers it important to seek to identify and improve the environmental performance of non-certified properties.
Accordingly, KDO collects data on its whole portfolio (Note) and implements measures to improve efficiency.
Note: The scope for above are buildings, where KDO has the authority to introduce and implement policies on operations onenergy.

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Ⅳ.【Environment】Environmental Initiatives（ⅲ）Reduction of Energy Consumption, CO2 Emissions and Water
Consumption (Initiatives for Climate Change, etc.)
Global warming, as the main factor for a climate change, has been the primal topic at international meetings so far
and in 2015 Paris agreement has adopted a new framework in 18 years since Kyoto protocol in 1997. In thisagreement, one of the goals is to keep the increase in global average temperature to well below 2°C above preindustrial levels. Also, water scarcity derived from climate change and increase in human population is recognized asa serious issue globally.
Considering the recent increase of extreme weather condition, which we expect to have significant impact on
operations of real estate asset management company and its properties, KDO and KFM have identified "reduction ofenergy consumption, CO2 emissions and water consumption" as the material topic and committed to makecontributions to sustainability of environment through continually reducing energy, CO2 emissions and water
consumption.

Process to Promote Energy Efficiency／PDCA Cycle

KDO has set reduction targets of energy consumption, etc. (medium- to long-term targets) as follows:
Reduction targets for energy consumption (medium- to long-term targets)➢

Reduce the energy intensity by an annual average rate of 1% or more in five years in accordancewith the Act on Rationalizing Energy Use (the Energy Saving Act)➢Set individual targets for properties subject to local regulations on measures to cope with global
warming

KDO has established PDCA process as above to achieve the medium- to long-term target on reduction in energy
consumption, and been monitoring and assessing performance on energy consumption at the “Sustainability
Committee” held on regular basis and the “Energy Conservation Measures Committee” where an external consultant
also attends.

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Ⅳ.【Environment】Environmental Initiatives

Year on Year Comparison of Performance Data
The total floor area of the portfolio has increased from 664,402.77 m2 as of April 30, 2016 to 719,444.07 m2 as of April
30, 2020. The intensities for energy, CO2 and water are all decreased for 2019, compared to those for 2016.

Reporting period: From April to March for each fiscal year
Scope: Buidings that KDO has the authority to introduce and implement policies on operations on energy
Intensity: Calculated by dividing the total consumption/emission amount by the total occupied floor area for each fiscal year17

Ⅳ.【Environment】Environmental Initiatives

Measures to Improve Energy and Water Efficiency
Installation of LED lightings⚫

⚫

Converting lighting in common area, tenant area, etc. and emergency lights(including emergency guide lights) to LED to actively promote reduction ofelectricity expenses
We will continue to convert lightings in tenant area by promoting Green
Lease based on discussions with tenants in a planned way as well as incommon area

The ratio ofconverting lighting incommon area (Note)

Note: The ratio is calculated for 92 buildings that completed the LED replacement (including those partially implemented
and excluding Shinjuku 6chome Building (Land)) for common area as of the end of January 2021.

Proactive introduction of water-saving equipment⚫

⚫

Upon renovation of KDX Iidabashi Square, toilets at all the floors of wererenewed to high efficiency model to reduce water use from 13ℓ to 4.8ℓ
Some of KDO's properties have introduced smart irrigation to facilitate
watering plant and save water

The reduction ratio ofwater consumption(Note)

Note: The ratio is calculated based on the estimated reduction amount at time ofdesign and not the actual consumption amount.

Status of Achievement Against Reduction Targets of Energy Consumption Intensity
We will reduce the energy intensity (Note) by an annual average rate of 1% or morein most recent five years in accordance with the Act on Rationalizing Energy Use(the Energy Saving Act) and set individual targets for properties subject to local
regulations on measures to cope with global warming.
Average change in intensity over 5 years from FY2015 to FY2019 is 98.1% or
1.9% reduced from the target and we achieved the reduction target.
Note: Energy intensity is calculated by dividing total energy use equivalent to crude oil(kl/year) by total occupied floor area (m2/year).

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The reduction ratio of energy
intensity to the reduction
target of 1% on 5-year
average intensity (Note)Ⅴ.【Environment】Stakeholder Engagement to Improve Property Performance

Ⅴ.【Environment】Stakeholder Engagement to Improve Property Performance
As KDO and KFM are continuously making effort to realize sustainable environment, we think it is crucial to cooperatewith our tenants who constantly use the properties. KDO and KFM are aiming to cooperate by taking initiatives to raiseawareness and promoting green lease that allow both owner and tenant to share economic merit to achievesustainable environment.
KDO and KFM have identified “tenant engagement to improve environmental performance “as material topic and been
making contribution through promoting tenant cooperation and cooperating with other stakeholders such as property
management companies who actually manage the building and employees in asset management companies who
manages the properties.

Issuance of Green Bonds
KDO has positioned sustainability improvement initiatives aimed at realizing a sustainable society as an importantbusiness management issue to fulfill its corporate social responsibility, and hope to contribute to development of thedomestic green bond market by offering opportunities to the universe of investors who take active stance towards
ESG investment with further strengthening our efforts to improve sustainability by issuing green bonds.

What is Green Bonds?
A bond issued by companies, local governments, or other organizations to raise funds for domestic andoverseas green projects, which is a project contributing to environmental solution, is called green bond.
As main characteristics of green bond, proceeds are allocated exclusively to green projects, and aretracked and managed in a reliable manner, ensuring transparency by reporting after the issuance of thebond.

New installation of fund-raising vending machines
Installed fund-raising vending machines in April 2020 in which a portion of theproceeds from the sales of the vending machines is used to support tree-planting
activities through a public-interest foundation
KDO will continue to expand these new initiatives and deepen our active
involvement to broaden the scope of our support in the future

Activities to Raise Tenant AwarenessWe have prepared letters to tenants asking for reducing energy consumption,
distributing manuals for office users and putting posters at each floor to raiseawareness on energy efficiency.
※Eco-friendly paper including limestone materials are used for theposters .

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Ⅴ.【Environment】Stakeholder Engagement to Improve Property Performance

Green Lease
KDO conducted LED lighting installation works for apart of a tenant office space at the expense of KDO
based on the Agreement. A certain ratio of the highly

The number of properties
having introduced
Green Lease contract

The ratio ofGreen Lease contract(Note)

reduced amount of electricity charges andmaintenance costs (costs for exchanging fluorescentbulbs) has been paid from the tenants in return asGreen Lease fee.
Note: The ratio of Green Lease contract is calculated by dividing total area of Green Lease contract by total leased area of properties having
introduced Green Lease contract as of January 31, 2021.

What is Green Lease?
It is an agreement specifying that building owners and tenants shall cooperate with each other to reduce
environmental burden. The agreement contains provisions to facilitate renovation toward moreenvironmentally-friendly office buildings by reducing building owners' investment burden throughsharing the economic merits generated as a result of energy-saving renovation works among building
owners and tenants. It also contains an agreement to streamline operations for energy saving, watersaving and enhancing indoor conditions.

Introducing Lease Agreement with Clause for Environmental Cooperation
KDO has promoted including clause to cooperate to improve environmental performance of the property, comfort andproductivity of office tenant into its base contract.

Cooperation with Property Managers
KDO and KFM are engaging with property management companies to share our vision, policies of sustainability andwhen making contract with a new tenant, property managers explain these ideas to tenants to achieve theircooperation.

Education to Employees on Green Building
KFM provides annual sustainability training by external specialist to improve awareness and knowledge on green
building for its employees. Also, it is encouraged its employees to acquire qualifications related to green building andthere are three employees who are CASBEE Accredited Professionals for Real Estate as of March 31, 2021.

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Ⅵ.【Social】Improving Resilience for Disaster, etc.

Ⅵ.【Social】Improving Resilience for Disaster, etc.
KDO and KFM have identified “Improving resilience (adaptability for disasters, etc.)” as material topic and been
making various initiatives to be prepared for emergency situations in KDO’s own properties for the safety and securityof tenants’ employees, visitors and local communities.

Emergency Kit Box in Elevator
KDO has been placing boxes of emergency kit in the elevators in case of disaster and machine
trouble (94.8% of its buildings have the boxes as of January 31, 2021).

Distribution of Emergency Action Manual Handbook
We published a pocket-sized, portable emergency action manual handbook and distributed
to tenants for emergencies including major earthquakes.
The handbook contains various helpful information in an emergency across 17 pages, suchas response to major earthquakes, emergency relief activities and how to use AED, etc.

Free Access to Wi-Fi
Focusing on business continuity, "Hikari Station" Wi-Fi routers are installed at KDO’s own
properties for the purpose of improving the internet environments to make them more disasterresistant.
Free access to the internet via a wireless network is provided in case of an emergency tosupport tenants for business continuity. At ordinary times, tenants and visitors can access thewireless internet via Wi-Fi for a certain time for free.

Installation of AEDs
AEDs are installed approx. 99% of KDO’s own properties (as of January 31, 2021). They areavailable not only for the tenants but for neighboring communities as well, which is displayed on the
AED stickers and registered in the administrative map. For jointly owned properties with third
parties, they will be gradually introduced.

Cooperation with Property Management Companies
Regular meeting is held with property management companies to share the status and points to improve for each
property regarding BCP measures. In case of emergency, KFM and PM companies are to communicate closely toidentify the damage and decide actions to be taken.
In addition, KFM conducts regular performance evaluation of PM companies and communicate the result and points tobe improved for their intense management.

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Ⅵ.【Social】Improving Resilience for Disaster, etc.

Debt Financing Based on the DBJ Disaster Preparedness Rating
The DBJ Disaster Preparedness Rating is a financing scheme in which companies areassessed and screened for excellence in their initiatives to hedge against disaster andsecure business continuity based on the proprietary assessment system developed by theDevelopment Bank of Japan (DBJ), financing conditions for them are then determined inaccordance with the assessment.
KDO has undertaken debt financing from the DBJ based on the DBJ Disaster Preparedness
Rating in 2011, as the first J-REIT.

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Ⅶ.【Social】Improving Tenant Satisfaction

Ⅶ.【Social】Improving Tenant Satisfaction
KDO and KFM have identified “Improving tenant satisfaction “as material topic and tries to enhance customer
satisfaction through managing its properties. To improve the quality of the properties and management performance,
we work in cooperation with property management companies and building management companies.

Tenant Satisfaction Survey
Satisfaction survey for tenants in office buildings, i.e. the persons in charge of general affairs and employees, aboutbuilding facilities and operational services, which is undertaken by a third party is conducted in every two years.
Consecutive survey enables us to capture the tenant needs and quickly respond by renewal of facilities or implement
refurbishment and receive strong intention to stay in the same building from tenants.
Intention for continuous occupancy

Renovation Work According to Tenant's Needs
Based on the outcome of the survey, appropriate replacement of equipment or renewal of facilities are undertaken,
which increases tenant satisfaction. The action varies from entire renewal to partial replacement such as just for theentrance hall or the toilet and contribute to the improvement of tenant image and their convenience.

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Ⅷ.【Social】Contribution to Local Communities

Ⅷ.【Social】Contribution to Local Communities
KDO, KFM and Kenedix, Inc., the parent company of KFM, have identified “Community engagement “as material topic
and taking various unique initiatives to make positive contribution to the local communities.

Cooperating with Communities in Bicycle Sharing
KDO has agreed to provide municipalities and its vendors with a part of land within sitearea of our office building and operated it as a port for bicycle sharing based onagreements. It is expected to make many positive impacts such as enhancement of
attractiveness of city with improved convenience of movement, vitalization ofcommunity/tourism, measure to reduce left bicycles, reduction of CO2 emissions withshift from automobile to bicycle, improvement of environmental awareness, promotionof health. We continuously monitor monthly operation status and use frequency.

Support for the Activities of Japan for UNHCR
KDO has been supporting Japan for UNHCR, which is the official support contact point in Japanon behalf of UNHCR, a refugee support organization of United Nations, by providing common
areas of our properties as locations for fund-raising activities to support refugees, showing theiradvertising video on the digital signages of our properties both for free. The letter of appreciation
was given by Japan for UNHCR to KDO.

KDO and KFM will continue to support
efforts to achieve the SDGs (Sustainable
Development Goals) by supporting the activities
of Japan for UNHCR.

Showing video
to help refugees
on digital signage

Awarding the letterof appreciation

Infection prevention measures
Raise awareness about safety measures and put antiseptic solution at all properties toprevent the spread of COVID-19 through tenant employees and visitors within thebuilding.

KFM distributed anti-bacterial “mask spray” at its expense to the tenants occupying theproperties entirely owned by KDO to encourage to wear masks and strengthen therelationship with the tenants.

24

Ⅷ.【Social】Contribution to Local Communities

Support from the Asset Management Company for infectious disease control
In May 2020, in response to concerns about the spread of COVID-19 among the elderly andthe increasing severity of symptoms, the Asset Management Company distributed a total of
16,500 masks for free to residents and others at 24 healthcare-related facilities owned by
Kenedix Residential Next Investment Corporation, which is managed by the AssetManagement Company
Received many words of appreciation for this initiative at a time of widespread anxiety of the
spread of COVID-19

Donation to Mindanao Children's Library
Support supplies are collected in KFM and Kenedix, Inc. andprovided regularly to the Mindanao Children's Library. By
providing shoes, clothing, and stationery that are no longer
needed by each employee, we provide support throughrecycling. Each year, local children who have received support
supplies send us warm messages.

Donation Through Matching Gift Program
KFM and Kenedix, Inc. have conducted "matching donation", the initiative that the companies add
up the donation on the donation from employees of us for the 2016 Kumamoto earthquake, rainfall
in July 2018, etc.

Recycling Calendars
Unused calendars are collected in KFM and Kenedix, Inc. to be distributed to elderly homes andsocial houses via social welfare corporations.

Social Contribution Initiatives by Kenedix, Inc.
High school student work experience
Kenedix, Inc. provided work experience opportunities for high school students. In addition
to the tour of Kenedix, Inc.`s office, they learned about the structure of real estate, realestate funds, and the current status of women’s empowerment.

Sponsorship of Hibiya Music Festival
The Hibiya Music Festival is a “borderless music festival that anyone can join for free,” held at
Hibiya Park where is a central park in Tokyo. Kenedix, Inc. co-sponsors the Hibiya Music
Festival, which is held in the Hibiya Park next to our office.

25

Ⅸ.【Social】Affordable Real Estate Leasing

Donation and Support to Sports Organizations / Donation to orphanage
Activities for the support of sports include donations to the Japan Rowing Association and sponsoring the All Japan
Ice Hockey Championships, we donate to children’s homes.

Ⅸ.【Social】Affordable Real Estate Leasing
KDO is mainly investing in and operating mid-sized office buildings in the Tokyo Metropolitan Area (Tokyo and its
three neighboring prefectures: Kanagawa, Saitama and Chiba). 89 buildings, about 92% of KDO portfolio is mid-sized
offices (approx. 84% by acquisition price) and among them, the tenants who leased less than 200 tsubo (about 660
m2 as 1tsubo=3.3 m2) that KDO has been recognizing them as small and medium-sized enterprises, account for
86.6%. KDO and KFM are aiming to contribute through providing better working environment for those small to midsized companies that are the base of Japanese economy. (The ratios are as of October 31, 2020)

Note: Based on the number of tenants in each office building. Tenants leasing more than one property are counted
as 1 tenant for each building without aggregating by name-base
Source: Compiled by KFM based on "2014 Economic Census for Business Frame Tokyo (revised results) (as ofMarch 27, 2017)"

26

Ⅹ.【Social】Human Capital Development

Ⅹ.【Social】Human Capital Development
KDO is not allowed to hire employees under the provisions of the Act on Investment Trusts and Investment
Corporations, and KFM's employees substantially manage its assets.
KFM is operated by employees who are sent from the sponsor company, Kenedix, Inc. KDO and KFM have identified“Attracting and retaining talents, and developing their careers “as material topic and been providing various
development programs and benefits to all of its employees to attract talents and organize a system where they canshine for a long term under the policy that human resources are crucial for sophisticated investment management.

（ⅰ）Attracting and Retaining Talents, and Developing Their
Careers
As Kenedix group, including KFM, is promoting initiatives to develop capabilities of employees by providing trainings
and educational programs to maximize individual productivity, employees receive the opportunities to discuss whether
they are satisfied with their job or not and their career planning twice a year, that is used to improve the efficiency ofthe operation and distribution of personnel at the most desirable place.

Diverse Human Capital and Stable Employment
In the real estate asset management industry, where mid-careers with a variety of expertise are mainly hired, Kenedix
group, including KFM, has been hiring new graduates since 2005. By securing various human resources, Kenedix,
Inc. promotes sustainability management as a real estate asset management company.
Kenedix group have never conducted lay-offs or other employment adjustment since their establishment in 1995, evenin recession period after bankruptcy of Lehman Brothers when many real estate developers or managers went oncrisis.

Training Programs to Encourage Employee’s Career Development
At Kenedix, Inc. where employees to be transferred to KFM are originally hired as new graduates, they are assigned
to one-month entry training and then rotate several times in 5 year to make them grow up to human resources thathave broad insight. Furthermore, to continuously improve the operational skills of employees, the company provides
required training according to the level of position such as managers, mid-careers or new graduates by external
specialist.

English training
For those who applied, the company provides the English training by teachers from educational institutions in which
the trainees participate in discussion every week to improve their ability. Also online-speaking program is available so
employees can flexibly utilize the opportunity.

Self-development program
The company offers to pay for seminars and trainings applied by employees to acquire specialist knowledge or ability
necessary to accomplish their jobs.

27

Ⅹ.【Social】Human Capital Development

Training program provided by Professor
For those who applied, the company provides the opportunities to participate in
the training program provided by Professor Chihiro Shimizu who is specialized
in big data analysis and real estate economics at Nihon University. Also, thecompany invites the professor for regular teach-ins for employees on realestate.

Study abroad program
The company provides opportunities to obtain broad range of knowledge, personal connection and international
viewpoint for a short term by sending employees to study in oversea graduate school in order to develop management
leader in next generation for future business development.

Encouraging to Obtain Professional Certifications
To keep the status of leading company with professionals that provide high quality services, it is encouraged for its
employees to obtain recommended or supporting certifications to develop capability and career and improveorganizational power by subsidizing the cost at Kenedix group.

Number of employees with certifications（As of December 31, 2020）

Real estate notaries

164

Tax accountants

5

ARES (real estate securitization) certified
masters

78

Chartered members of the Securities
Analysts Association of Japan

15

Certified real estate consulting masters

23

Administrative scriveners

2

Certified building administrators

28

Judicial scriveners

1

Licensed senior architects

13

Administrative managers

12Real estate appraisers

9

Condominium property managers

9

Certified public accountants (Japan)

6

Loan operations managers

14

Certified public accountants (USCPA)

2

Attorneys2Note: Calculated from group employees that directly hired by Kenedix, Inc.

Internal Job Announcement
Kenedix group has internal job application program to provide its employees with the opportunity to demonstrate thebest of their ability and to exploit human resource within the company. Employees are allowed to apply for the jobs
they wish and design their own career.

28

Ⅹ.【Social】Human Capital Development

Evaluation System to Encourage Employee’s Career Development
Employees make their goal setting and performance evaluation in the middle of the year and at the fiscal year end.
Managers hold interviews with each employee to discuss his/her performance and career opportunities.
At the fiscal year end, all employees undergo an evaluation of achievement of contribution responsibility. The
supervisor evaluates the performance of each employee in terms of their contribution responsibilities and the degree
to which they have achieved them, and the results are fed back to the employee after reflecting the assessment
results of the Personnel Evaluation Committee.
Furthermore, we also conduct employee satisfaction surveys.

Whistle-blowing System
KFM has established a whistle-blowing system applicable to all employees and its operation. It is aimed at preventing
and detecting early contravention to laws and regulations and scandals through misconduct or harassment of any
kind, enhancing the company's self-cleaning process, controlling reputational risks and securing its social credibility.
Employees are obliged to notify, declare to or consult with any of the contacts established in the company, the parent
company or outside attorneys. Those who have proactively cooperated with the notification or investigation are subject
to protection.

（ⅱ）Health and Wellbeing of Employees
KFM and Kenedix, Inc. have identified “Health and wellbeing of employees “as material topic and been promoting
initiatives to maintain work/life balance, provide working environment that is pleasant and advantageous in soft andhard to maximize employee’s ability. In addition, the company has prepared the supporting programs to cover various
needs of employees.

Work Style Reform
Kenedix, Inc. has been improving its working environment by encouraging employees to take paid holiday, reducing
overtime work and introducing various internal rules to allow flex work style.

Promoting to take paid holiday
Ratio of the used portion of employees' annual paid holiday in Kenedix group for 2020 was about 59%. On top ofannual paid leave, there are an established system which promote employees to take consecutive holidays during
summer, from Jul. to Sep. Managers in each department take the initiative in encouraging their subordinates to takelong-term holiday and promoting an increase in the ratio.

Hourly paid leave
We have an hourly paid leave system that allows employees to choose a flexible working style. Annual paid leave,sick/injured childcare leave and elderly parent care extended leave can all be taken in one-hour increments.

Staggered working hours rule
We have adopted flexible start of working hours. Employees are allowed to choose the time they start working from 8
to 10 am by day to work according to their convenience.

29

Ⅹ.【Social】Human Capital Development

Initiatives to reduce overtime work
Managers in each department are monitoring working hours in their team and adjusting workload for employees tominimize overtime. If an employee was found to have worked more than certain hours, a check-up by doctor shall bearranged upon employee’s request, reported to the Health Committee.

COVID-19 infection prevention measures
Business operation during the COVID-19 related crisis
In response to the spread of the new coronavirus infection from the beginning of 2020, wequickly expand a staggered working hours system and implemented teleworking system,
which enabled us to smoothly transition to a company-wide teleworking system and build acontinuous business operation system when the state of emergency was declared in April
2020.
After the emergency declaration is lifted in May 2020, we have continued the shift work style, such as introducing theuse of shared offices on a trial basis and improving the office environment and infrastructure.

Health and Wellbeing
Kenedix group has been endorsing health management to support health of employees and preparing comfortableworking environment through establishing rules as follows.

Health committee
Kenedix, Inc. has established health committee and organized monthly meeting to discuss and take measures topromote health and prevent disorder for its employees. Also the committee sends email every month to all employees
on relevant topics to enlighten them on health and wellbeing.

Annual physical health checkup
All employees are to receive annual physical health checkup by doctor on company cost.

Mental Health care
All employees have access to counseling service provided by the company where employees are allowed to reportany personal issues or issues regarding the company to external counselors, in order to raise their mental literacy.
Newsletter with relevant topics on mental health is sent every month to notify of this service. In addition, the company
provides annual stress check to all employees to prevent illness of which result are provided to each employee and, if
necessary, checkup by doctor is arranged.

Positive Working Environment for Workers
KDO and KFM are located at “Hibiya Parkfront”, the building Kenedix, Inc. participated in its development. The
transportation of the building is excellent since it is directly connected to 2 metro stations, Kasumigaseki andUchisaiwaicho, through the neighboring building. Taking advantage of its rare location near Hibiya Park, abundant
trees are planted inside and outside the building under the concept of an "office in the park". In addition, by providing
services and facilities to support office workers, the building has become an ideal office where "people can feel nature
and work comfortably".

30

Ⅹ.【Social】Human Capital Development＜Harmonization with the nature of Hibiya Park＞
In order to harmonize with Hibiya Park, the landscape was developed for greening
with over 100 plants and trees. Trees and plants are also placed inside the building
to achieve park-like comfortable space in the building.
＜Hibiya Centrium unified with landscape in Hibiya Park＞

Escalator from entrance on the groundfloor to the office lobby on the 2nd floor

To protect biodiversity, over 100 kinds of trees and plants were selected after
thorough examination of landscape in Hibiya Park. The area has become the oasis
for tenants and workers from the nearby office.
Hibiya Centrium

Communication Room
Right next to the working space, Communication Room is placed where employees
are allowed to use freely for taking break, a small meeting or any other purpose,being the hub for communication among employees.

Communication RoomUse of workcations
We started the operation of PerkUP Karuizawa as a base for team building and otheractivities in a scenic area of Japan far from big cities.

PerkUP Karuizawa

Off-site Meeting

Every December, off-site meeting has been held in which all employees are invited to listen to presentation by
management executive or lecture by outside specialist. This occasion is used to give awards to the projects andpromote communication among employees.

Support for Group Activities Outside of Work
The company subsidizes for group activities such as futsal or golf, which help employees make personal connection
beyond his/her job scope.

Internal exchange during the COVID-19 related crisis
As the spread of the new coronavirus infection has made it difficult to hold off-site meetings and other opportunities forinteraction, we have used online tools to conduct a variety of internal exchanges. In addition to distributing messages
from the presidents and videos of project commendations, we solicited a wide range of proposals from employees
regarding matters inside and outside the Group’s business with a view after the COVID-19 related business andlaunched projects to realize them.

31

Ⅹ.【Social】Human Capital Development（ⅲ）Diversity and Equal Opportunities
KFM and Kenedix, Inc. have identified “Diversity and equal opportunities “as material topic and been promoting
initiatives to create working environment that all employees appreciate diversity such as respect for race, religion, sex,age, sexual preference, disabilities or nationality and respect for human right to maximize their productivity.

Respect for Human Right, prevention of all forms of discrimination and harassment
We have stipulated respect for human rights and prohibition on discrimination and harassment on its “Compliance
Manual” and provided compliance trainings to raise awareness. In addition, training on dealing with harassment isprovided for managers.

Encouraging Female and Elderly Employees
The female participation in Kenedix group has been increasing year by year as ratio of female employees in 2017
reached 30% and the first female board member was assigned in March 2018. To activate the company and be
prepared for limited working capital in Japan, we provides support for female worker to enable them to maximize theirperformance by preparing rules and systems their having children. Also we have adopted the system to rehire
employees who officially retired until them reaching 65, expecting them to transfer the knowledge and know-hows toyounger generation in the company.

MSCI Japan Empowering Women Index (WIN)
Kenedix, Inc., the parent company of KFM, was selected for membership in the“MSCI Japan Empowering Women Index (WIN)”.
WIN is an index developed by MSCI Inc. (United States, “MSCI”), the industry
leader in ESG research, who offers various tools to support the investment
decisions of major investors around the world.
MSCI selects industry leading companies in terms of attracting, retaining andpromoting women, as well as advancing gender diversity. The selection is basedon data regarding female employment disclosed according to the Act on
Promotion of Womenʼs Participation and Advancement in the Workplace as wellas information publicly disclosed by companies such as company policy on
gender diversity. Kenedix Group further promotes initiatives for diversity so that allof its employees can realize their full potential in the workplaces.

32

Ⅹ.【Social】Human Capital Development

Support for Employees Through Their Life Event
We have prepared various programs to support employees to work through their life event such as having children or
nursing elderly.

Childbirth and childcare
We have a number of programs for women during a pregnancy, such as time off for medical check-ups, working hours
that avoid times when trains are most crowded, and days off for good health. At childbirth and afterward, we provide
time off for women and their husbands.
Employees can receive time off for the care of a baby or when a preschool age child is sick or requires other care. We
also offer flexible working time so employees can care for family members. For example, employees can limit overtimeand late-night assignments, reduce working hours, or use staggered hours. There is also a subsidy for expenses forchild-related transportation needs before and after work and a discounted babysitter service. As a result, return rate offemale employees from maternity leave has been 100% since 2015 for three consecutive years.

Nursing elderly
Employees taking care of an elderly parent or other relative can use extra days off or extended leave. We also limit
overtime and late-night assignments, reduce working hours, or use staggered hours so that an individual can fulfill
family responsibilities. Support for nursing care goes beyond requirements by providing more than the legally
mandated time off and special days off to care for an elderly parent or other relative.

33

Ⅺ.【Governance】Governance

Ⅺ.【Governance】Governance（ⅰ）Board of Directors
Position

Name

Executive

Jiro

Director

TakedaSupervisory

Shiro

Director

Toba

Supervisory

Yoshihiro

DirectorMorishima

Brief Personal History (Corporate names, etc. stated at that time.)
Head of Fund Management Team 1, Fund Management Department, Kenedix,

2014

May

2017

March

2018

April

Director and COO, Head of Office REIT Department, Kenedix Real Estate FundManagement, Inc. (current position)

2018

April

Executive Director of Kenedix Office Investment Corporation (current position)

1989

OctoberJoined Chuo Shinko Audit Corporation

1993

March

Registered as a Japanese certified public accountant

1997

January

Established Toba Public Accounting Office (current position)

2002

May

Registered as a Japanese certified tax accountant

2004

April

Assigned as a Director of Majestec Corporation (current position)

2005

January

2005

May

2019

June

2020

Septtember

Assigned as an External Director of FUJIKYU Corporation(current position)

1985

March

Registered as a real estate appraiser

2006

April

Adviser of Tokyo Association of Real Estate Appraisers (current position)

2011

April

Officer of Morishima Consulting Office of Real Estate

2012

March

2014

February

Assigned as President of Y.K. Island Forest (current position)

2014

June

Assigned as an External Auditor of Dreamvisor Holdings, Inc. (current position)

2016

September

2016

October

Officer of Morishima Consulting Office of Real Estate (current position)

2019

April

Adviser of Yonden Business Co.,Inc. (current position)

1997

April

Registered as a member of Tokyo Bar Association

Inc.
Head of Planning Division, Office REIT Department, Kenedix Real Estate FundManagement, Inc.

Assigned as a Representative Director of Minori Accounting Co., Ltd. (current
position)
Assigned as a Supervisory Director of Kenedix Realty Investment Corporation(currently Kenedix Office Investment Corporation) (current position)
Assigned as an External Director of Chilled & Frozen Logistics Holdings Co.,Ltd.
(current position)

Assigned as a Supervisory Director of Kenedix Realty Investment Corporation(currently Kenedix Office Investment Corporation) (current position)

Adviser of Housing Improvement & Development Corporation Foundation (current
position)

Supervisory

Takahiro

2002

February

Assigned as Associate, Miyakezaka Sogo Law Offices

Director

Seki

2002

June

Assigned as Partner (current position)

2014

February

Assigned as a Supervisory Director of Kenedix Office Investment Corporation(current position)
As of January 28, 2021

34

Ⅺ.【Governance】Governance（ⅱ）Decision-making Flow for Investment Management
As an asset management company entrusted with asset management by KDO, KFM creates management guidelinesof the Office REIT Department ("the Management Guidelines"), and sets forth basic investment management
guidelines, including investment policy, related party transaction rules, distribution policy and disclosure policy,
regarding the asset management of KDO.
Furthermore, as set forth in the Management Guidelines, KFM creates asset management plans, etc. (including
medium-term business plans and annual business plans other than asset management plans). It also selects
investment properties and makes decisions to acquire them, according to investment policy set forth in theManagement Guidelines and related party transaction rules.
The decision-making flow for establishing and revising the Management Guidelines and asset management plans, etc.
are shown below. Also, the decision-making flow pertaining to acquisition and sale of assets are shown below.
Through pursuing highly transparent decision-making flow of the investment management pursuant to these policies
and rules, KFM is striving to assist in the appropriate functioning of KDO’s check-and-balance system over KFM.

Decision-making flow of KFM（ⅲ）Rules Concerning Conflicts of Interests Among REITs
Since KFM manages multiple REITs, it has established a pipeline committee and adopted internal guidelines in orderto prevent the improper allocation of acquisition opportunities as well as prohibition of concurrent serve as several
general managers of REIT management departments, and thus, managing conflicts of interests among the REITs.

（ⅳ）Measures to Pursue Mutual Interests with Investors
KFM has been pursuing to align its interests with the interests of unitholders.
For this context, KDO has adopted the fee system that is to link part of the asset management fee to the amount of
distribution per unit.

35

Ⅺ.【Governance】Governance
Asset management fee structure of KFM

Note 1: When there is a loss carried forward, obtained by dividing the amount calculated by subtracting loss carried forward fromincome before income taxes before Asset Management Fees II and III by the number of outstanding investment units as ofthe end of relevant fiscal period.
Note 2: Obtained by subtracting simple average of DPU for the most recent 4 fiscal periods from DPU. If the amount subtracted
does not exceed zero, Asset Management Fee III shall be zero.

（ⅴ）Efforts to Ensure Compliance
Promotion System for Compliance
KFM considers that one of the most important challenges in management is to ensure that compliance duties are
fulfilled. With this in mind, KFM is improving a system whereby compliance is promoted under the leadership of theboard of directors, the compliance officer and the compliance committee. The board of directors determines basic
policies and other fundamental matters in conjunction with the company-wide promotion of compliance, and has theauthority to request, if necessary, that the compliance officer and compliance committee report on progress in the
promotion of compliance.
The board of directors also discusses and decides on the appointment of outside members of the compliancecommittee, outside members of asset management committees of the respective departments, and a complianceofficer.

Role of Compliance Officer
The compliance officer works on the establishment of compliance system in KFM and the creation of a corporate
culture that abides by laws and regulations, as well as rules.
The compliance officer also ensures that the necessary relevant documents are prepared in conjunction with thepresentation of such an agenda as the establishment/change of operation guidelines and asset management plans forthe respective departments and the acquisition of individual assets, and conducts preliminary appraisals regardingwhether there are any serious problems in terms of compliance, such as the violation of laws and regulations.
The compliance officer also administers matters regarding compliance in KFM as a chairperson of the compliancecommittee. Specifically, the compliance officer is tasked with duties such as the drafting and improvement ofcompliance manuals and compliance programs, as well as the periodical provisioning of instructions/training to
executives and employees and the verification of compliance with laws and regulations, based on complianceprograms. The formulation and revision of compliance manuals and compliance programs, which are drafted by acompliance officer, are put into practice subject to the decision of the board of directors after being discussed and36

Ⅺ.【Governance】Governanceresolved at the compliance committee's meetings. Compliance programs are formulated every business year, inprinciple, and the progress is reported promptly to the board of directors by the compliance officer.

Important Matters Concerning Compliance
Important matters concerning compliance are discussed/decided at the compliance committee’s meetings andreported to the board of directors. The compliance department, as a supporter of the compliance officer, shall provide
every possible support for the duties of the compliance officer according to the instructions by the compliance officer.

Auditing System
The Head of the Internal Audit Department, in the capacity of a person in charge of internal audits, carries out aninternal audit once a year pursuant to the internal audit regulations, and produces an internal audit report that
accurately reflects the issues found and raised in the internal audit. The person in charge of internal audits shall sharesuch an internal audit report with the president and representative director and the board of directors without delay.
The audited departments shall develop and implement remedial programs for issues raised in the internal audit report
without delay, factoring in the significance of such issues. The person in charge of internal audits shall administer the
progress of corrective measures taken by the audited departments regarding the issues, confirm the achievement ofsuch measures, and ensure that the result is reflected in subsequent internal audit plans.
The board of directors or a person in charge of internal audits shall have outside experts conduct an external audit if
such an audit is considered necessary to verify appropriateness of the business operations of KFM, or for any otherreasons.

Counter-measures Against Bribery and Corruption
We have stipulated in our employment regulations and the compliance manual that we shall not engage in any
misconduct such as bribery, embezzlement and money laundering. Any individual who has committed such
misconduct shall be subject to stringent actions.

Whistle-blowing System
KFM has established a whistle-blowing system applicable to all employees and its operation. It is aimed at preventing
and detecting early contravention to laws and regulations and scandals through misconduct or harassment of any
kind, enhancing the company's self-cleaning process, controlling reputational risks and securing its social credibility.
Employees are obliged to notify, declare to or consult with any of the contacts established in the company, the parent
company or outside attorneys. Those who have proactively cooperated with the notification or investigation are subject
to protection.

37