Board of Directors
Candidates for directors are elected by resolution at the General Meeting of Unitholders provided there are no causes for disqualification as stipulated in the Act on Investment Trust and Investment Corporations (the “ITA”) and other laws and regulations (Articles 98 and 100 of the ITA and Article 164 of the Ordinance for Enforcement of the ITA).
| Title |
Name |
M/F |
Tenure |
Attendance at Board of Directors meetings |
Reasons for appointment |
Executive
Director |
Tetsu Kawashima |
M |
1 year and 5 months |
100%
(18/18) |
Sufficient knowledge and experiece of real estate funds and J-REIT |
Supervisory
Director |
Osamu Chiba |
M |
11 years and 5 months |
100%
(18/18) |
Sufficient knowledge and experiece as a lawyer; no conflicts of interest with KDR and the Asset Manager |
Supervisory
Director |
Satoshi Ogawa |
M |
11 years and 5 months |
100%
(18/18) |
Sufficient knowledge and experiece as a certified public accountant; no conflicts of interest with KDR and theAsset Manager |
Supervisory
Director |
Osamu Utsunomiya |
M |
1 year and 5 months |
89%
(16/18) |
Sufficient knowledge and experience as a doctor; no conflicts of interst with KDR and the Asset Manager |
(Note) Tenure is as of April 1, 2023. Attendance at Board of Directors meetings is for 2022.
The Independent Auditor communicates appropriately and conducts appropriate audits through discussions with KDR and the Asset Manager and accounting audit reporting, which are conducted each fiscal year.
Remuneration of Board of Directors
The criteria and timing of payments of remuneration to KDR’s directors are as follows.
(1) KDR shall pay monthly remuneration to executive directors at an amount decided by the Board of Directors, up to an amount equivalent to 800,000 yen per month for each executive director, no later than the last day of the relevant month.
(2) KDR shall pay monthly remuneration to supervisory directors at an amount decided by the Board of Directors, up to an amount equivalent to 500,000 yen per month for each supervisory director, no later than the last day of the relevant month.
The actual amount of remuneration is as follows.
| Title |
Name |
Total amount of remuneration
(February 2022 to January 2023) |
| Executive Director |
Tetsu Kawashima (1) |
0 million yen |
| Supervisory Director |
Osamu Chiba |
3 million yen |
| Supervisory Director |
Satoshi Ogawa |
3 million yen |
| Supervisory Director |
Osamu Utsunomiya (1) |
3 million yen |
(Note1) Assumption of office effective November 1, 2021.
Remuneration of Independent Auditor
KDR shall pay remuneration to Independent Auditor at an amount decided by the Board of Directors, up to an amount equivalent to 15 million yen for each accounting period subject to the audit, no later than the last day of the month following the month in which all audit reports required under the ITA and other laws and regulations for the relevant accounting period are received.
The actual amount of remuneration is as follows.
| Title |
Name |
Total amount of remuneration
(February 2022 to January 2023) |
| Independent Auditor |
EY Ernst & Young ShinNihon LLC |
32.5 million yen |
(Note1) Remuneration of Independent Auditor includes comfort letter writing services.
Operational structure
KDR has entrusted the management of its assets to Kenedix Real Estate Fund Management, Inc. (“KFM”), in accordance with the provisions of the Investment Trust Act. KFM manages KDR’s assets under an asset management contract with KDR.
The organizational chart of KFM is as follows.
■Organization Chart
Asset management fee
The management fee paid by KDR to the Asset Manager is based on the following calculations as stipulated in KDR’s Articles of Incorporation. KDR aims to align the interests of unitholders and the Asset Manager by introducing an asset management fee structure linked to the amount of distributions per unit and unit performance.
|
Method for calculating |
| |
Subject of calculation |
Rate |
Asset management fee
|
Ⅰ |
Total assets |
0.27% (annual rate) |
| Ⅱ |
Distributable amount×EPU |
0.00145% |
| Ⅲ |
Vs. TSE REIT Index Performance×Total Market Capitalization |
0.15% |
| Acquisition fee |
Acquisition price |
1.0% |
| Disposition fee |
Disposition price |
0.5% |
| Merger fee |
Appraisal value of assets to be succeeded |
1.0% (maximum) |
(Note) The table above shows an outline of KDR's management fee structures. For details, please refer to the articles of incorporation of KDR.
Kenedix Group’s investment in KDR (same boat investment)
Kenedix, Inc. holds 36,640 units in KDR as of December 23, 2022 (3.42% of the total units issued and outstanding). This aligns Kenedix Group’s interest with KDR’s unitholders’ interests.
Compliance
Compliance is one of the highest management priorities of Kenedix Real Estate Fund Management, Inc. (“the Asset Manager”), which is the asset management company of KDR. The Asset Manager has a framework whereby compliance activities are promoted under the leadership of the Board of Directors, Compliance Officer and Compliance Committee. As an asset manager for multiple REITs, we have a social obligation to use our business to produce value. Constant and extensive compliance activities are essential for increasing the value of our business in terms of both quality and quantity.
Board of Directors (KFM)
The Board of Directors determines the basic policy for compliance activities as well as other basic items concerning compliance. The Board of Directors can ask the Compliance Officer and Compliance Committee to submit reports as needed concerning the status of compliance activities.
The Compliance Officer submits proposals for the establishment of a compliance manual and a compliance program, as well as revisions. These proposals are first examined and approved by the Compliance Committee. The proposals then go to the Board of Directors for final approval. As a rule, a compliance program is established for every fiscal year and the Compliance Officer promptly submits progress reports to the Board of Directors. In addition, the Compliance Officer submits internal audit reports and clerical accident reports in a timely manner or periodically.
The Board of Directors makes decisions on appointments of the following important positions regarding the management of REIT assets by the Asset Manager. Individuals who are selected must have outstanding character and knowledge along with the skills needed to perform the assigned duties. In addition, the outside members of the asset management committees of each department must be certified real estate appraisers and the outside member of the Compliance Committee must be either an attorney or a certified public accountant.
(1) Outside member of the Compliance Committee
(2) Outside members of the asset management committees of each department
(3) Compliance Officer
Compliance Officer
The Compliance Officer works on the establishment of compliance system in the Asset Manager and the creation of a corporate culture that abides by laws and regulations, as well as rules.
The Compliance Officer ensures that the necessary relevant documents are prepared in conjunction with the presentation of such an agenda as the establishment/change of management guidelines and asset management plans for the respective departments and the acquisition of individual assets, and conducts preliminary examinations regarding whether 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 the Asset Manager as a chairperson of the Compliance Committee. Specifically, the Compliance Officer is assigned with duties such as drafting and improvement of compliance manuals and compliance programs, as well as periodical instructions and trainings to executives and employees and the inspection of compliance with laws and regulations, based on compliance programs.
Compliance Committee
The Compliance Committee, which is chaired by the Compliance Officer, examines and reaches decisions about matters involving all aspects of compliance activities.
As chairperson of this committee, the Compliance Officer supervises all items concerning compliance at the Asset Manager.
The Compliance Committee examines all other important matters involving compliance and reaches decisions, which are reported to the Board of Directors.
The compliance manual and compliance program proposals submitted by the Compliance Officer are examined and approved by the Compliance Committee. The proposals then go to the Board of Directors for final approval. As a rule, a compliance program is established for every fiscal year and the Compliance Officer promptly submits progress reports to the Board of Directors.
The decision-making process
The Asset Manager manages the assets of KDR under a discretionary asset management contract with KDR. In this role, the Asset Manager establishes asset management guidelines, investment policies, related party transaction rules, distribution policies, disclosure policies and other basic policies regarding the asset management of KDR.
For the asset management of KDR, the Asset Manager prepares an asset management plan and other documents (in addition to the asset management plan, medium-term and annual business plans) in accordance with the asset management guidelines. Based on the investment policy stipulated in the asset management guidelines and the related party transaction rules, properties to be acquired or sold are selected and the transactions are subsequently executed.
The decision-making flow for establishment / revision of 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, the Asset Management Company is striving to assist in the appropriate functioning of KDR’s check-and-balance system over the Asset Management Company.
■Decision-making process
(Note 1) (1)Related party transaction (acquisition and disposition), (2) Establishment/revision of the medium-term business plan or the annual business plans, (3) Establishment/revision of the management guidelines, (4)Any transactions that deemed necessary by the Compliance Officer and non-standard transactions set forth in the mangement guidelines are discussed and resolved at the compliance Committee prior to the discussion/resolution at the Asset Management Committee in Residential REIT Department.
(Note 2) (1)Related party transaction (acquisition and disposition), (2) Establishment/revision of the medium-term business plan or the annual business plans are discussed and resolved at the Board of Directors meeting of KDR after the discussion/ resolution at the Asset Management Committee. However, in the case of the related party trasaction within the scope of insignificance meeting of KDR and the consent of the Executive officer.
(Note 3) (3) Establishment/revision of the management guidelines, (4) Any transactions that deemed necessary by the Compliance Officer and non-standard transactions set forth in htemanagement guidelines are reported to the Board of Directors meeting of KDR as well.
Responding to anti-social forces
The Asset Manager has prepared a Manual for Responding to Anti-social Forces and the Prevention of Transfers of Criminal Proceeds. To reject relationships of any kind with anti-social forces, the Asset Manager has a resolute stance for refusing to deal with criminal and other anti-social forces.
The Asset Manager confirms that buyers and sellers of properties, tenants, business partners, and other transaction counterparties are not anti-social forces. In addition, the Asset Manager requires all contracts to include provisions for refusing to deal with anti-social forces and performing confirmations in accordance with the Act on Prevention of Transfer of Criminal Proceeds when conducting transactions. Consequently, the Asset Manager is taking concrete actions for the purpose of preventing relationships with anti-social forces.
Measures against money laundering and terrorist financing
The Asset Manager has prepared a Manual for Responding to Anti-social Forces and the Prevention of Transfers of Criminal Proceeds and properly performs confirmations in accordance with the Act on Prevention of Transfer of Criminal Proceeds when conducting transactions. These activities are used to confirm the identities of transaction counterparties as well as their attributes, business activities and purpose of the transaction. Risk identification, evaluation and reduction measures are implemented from the perspective of the risk-based approach specified in the Guidelines Concerning Money Laundering and Financing of Terrorism of the Financial Services Agency.
Ethics and anti-corruption measures
The Employment Regulations and Compliance Manual of the Asset Manager state that the Asset Manager will not tolerate money laundering, embezzling, fraud, theft or other criminal activity. In addition, the Asset Manager strictly prohibits the acceptance of bribes or other improper activities, directly or involving a third party, by the staff of the Asset Manager in connection with their duties. If any activity of this type is discovered, disciplinary action will be taken based on the Employment Regulations.
Furthermore, the Asset Manager has established rules concerning entertainment outside the company, whether an employee received or provides this hospitality, for the purpose of preventing hospitality that goes beyond normal social standards. To prevent improper activities, employees are required to receive approval before providing meals or other hospitality to others. The implementation of these guidelines is subject to internal audits. The most recent internal audit concerning entertainment and other hospitality took place in fiscal 2020.
Whistle-blowing system
Kenedix Real Estate Fund Management, Inc. as Kenedix group, has a whistleblowing system for the prevention and rapid discovery of incidents caused by violations of laws and regulations and other improper conduct, the improvement of self-cleansing processes, the control of reputational risk exposure, and the retention of public trust. Our whistle-blowing policy applies to employees including directors, full-time employee, elderly employee, contact employee, part-time employee, assigned / temporary employee from the other company, and former employee left within 1 year of the termination date.
Reporting, Investigation and Disciplinary processes
If violation of law (including internal company policies) occurs or could occur and If the matter has not been satisfactorily resolved by ordinary procedures, you may choose to report your concerns through internal and external channels such as phone, email or meeting.
The person in charge of handling whistleblowing shall conduct fair and impartial investigation. The respondent will be provided with the opportunity to present a defense and the fair hearing is held with relevant persons in compliance with the obligation of confidentiality.
The person in charge of handling whistleblowing reports all results from investigations to CEO. The head of the department to which the accused belongs take appropriate action such as immediate order to stop action in violation of law. Based on the report, disciplinary action and all the other appropriate measures to correct such as criminal prosecution, claims for damages or measures to prevent recurrence shall be taken.
Prohibition of unfair treatment
Employees who lodge or cooperate with a case in good faith or who file a whistleblowing in good faith shall be protected and not be treated unfairly or intimidated.
Internal audit
The Head of the Internal Audit Department of the Asset Manager prepares an internal audit plan, which complies with the Internal Audit Rules, as a person in charge of internal audits. After the plan is approved by the Board of Directors, audits are performed in accordance with the plan. Internal audit reports accurately reflecting issues found and raised during audits are prepared. The person in charge of internal audits shares such an internal audit report with the President & CEO and the Board of Directors without delay. Departments that were audited establish a plan for making improvements without delay, factoring in the significance of issues raised, and take the necessary actions. The person in charge of internal audits appropriately oversees progress with improvements at departments that were audited, confirms that improvements have been completed and reflects these activities in the subsequent internal audit plan. To confirm the suitability of the business processes of the Asset Manager or for some other reason as needed, the Board of Directors or the person in charge of internal audits can, at their discretion, ask for an external audit by outside experts.
Compliance training
To ensure that everyone is aware of the importance of compliance, the Asset Manager provides compliance training for new employees when they first join the company as well as for all executives and employees, including temporary employees.
Compliance training held in 2022
| Training content |
Date of training |
Attemdance rate |
| Prevention of Conflicts of Interest between Investment Corporations |
Apr. 2022 |
96.7% |
| Management of information related to the management of investment corporations |
Jul. 2022 |
96.0% |
| Fiduciary Duty as an Asset Management Company (Input) |
Aug. 2022 |
98.4% |
| Fiduciary Duty as an Asset Management Company (Case Study) |
Oct. 2022 |
98.5% |
| Prevention of insider trading |
Dec. 2022 |
97.2% |
Policy for Customer-Oriented Business Conduct
The Asset Manager is firmly committed to the asset management of each REIT with the objective of maximizing value for investors. As part of these activities, the Asset Manager has adopted the Principles for Customer-Oriented Business Conduct announced on March 30, 2017 by the Financial Services Agency and has established policies for activities that comply with these principles.
For details, please visit the following website:
https://kenedix-fm.com/en/kokyaku.html
Risk Management
■ Basic views
Risk management is one of our material issues. There are many activities for the proper oversight and control of risk factors.
■ Risk management system
The Asset Manager stipulates risk management policies, risk management divisions, risk management methods, etc. in its "Risk Management Rules" for the purpose of ensuring sound management and appropriate risk management as an investment management company. The main risks are defined as investment management risk, real estate management risk, financial risk, legal compliance risk, administrative risk, system risk, and business continuity risk, and a separate management department is designated for each risk. Each risk management department continuously monitors the status of each risk and, in the event that a significant risk has materialized or is likely to materialize, promptly submits a proposal to the Board of Directors
regarding the nature of the risk and the policy for dealing with it. Each risk management department reviews the items, contents, and response policies of each risk approximately once every two years. The Board of Directors, fully aware of the location and nature of these risks, will oversee the formulation of risk management policies and the development of an appropriate risk management system
considering the strategic objectives. The Board of Directors shall fully recognize the importance of the risk management department and shall take appropriate measures to ensure that the risk management policy is well known within the Asset Management Company. The Board of Directors will also hold discussions on the risk management system as necessary. The Compliance Officer will oversee the practical management of each risk and support the role of the Board of Directors.
■ Information security
The Asset Management Company has established "Information Protection Rules" and strives for proper information management and protection of information in the Asset Management Company by stipulating management methods, management systems, etc. for information handled on business. For information security management, the Compliance Officer is designated as the "Chief Information Officer" to oversee the Asset Management Company's information. In addition, the information manager in each department is the head of the department, who is responsible for the management of information in each department and ensures that directors and employees of the department in charge are informed of and comply with the information management system.
Protection of personal information
The Compliance Manual contains specific standards for the handling of personal information and other internal information. The Asset Management Company also conducts compliance and other training programs for employees to be certain that everyone has a strong commitment to protecting personal information. In addition, each Investment Corporation and the Asset Management Company have established “Personal Information Protection Policy,” “Personal Information Protection Rules,” “Basic Policy on the Management of Specific Personal Information,” etc. to protect and properly manage personal information.