Kenedix : 25th Term Full Year Report

25th Business Report

January 1, 2019-December 31, 2019

2019 Consolidated Financial Highlights

AUM	Profitability	Shareholder
Distribution

Assets under management	Return on Equity		¥16
(AUM)	(ROE)	Annual dividend
¥ 2,392.2billion	11.2%	per share
ratio	56.5%
(+ ¥293.8 billion YoY)	Total return

Revenue		¥70,326 million	Operating income			¥15,931million	Profit attributable to		¥10,673million
	Ordinary income			¥15,841million	owners of parent
							Operating income		Ordinary income	15,841
				70,326				14,516		15,931			12,335
			63,372		12,285	13,663			10,516	10,673
					11,455
26,349
2017	2018	2019		2017	2018	2019			2017	2018		2019

Net assets	¥99,669million

101,523 96,619 99,669

ROE	11.2%
ROA	5.9%
		ROE		ROA

11.7	13.4	11.2
5.7	6.5	5.9

Annual dividend		¥16.0
per share
	Interim	Year-end	16.0
		7.0	8.5
6.0
			7.5

2017

2018

2019

2017

2018

2019

2017	2018	2019*
*Kenedix started paying an interim dividend in 2019.

01

2019

2016

2018

2017

810.0

951.8

895.6

1,008.2

362.5

477.6

521.7

768.9

1,703.0

83.8

446.6

2,003.3

92.9

537.2

2,098.3

81.3

543.3

2,392.2

62.2

552.8

Consolidated Real Estate REITs (sub sponsor)

Private funds

REITs (main sponsor)

Our priorities are achieving the medium-termmanagement plan goals and making more progress concerning the Long-termKenedix Vision 2025

Tetsuo Inoue, President of Spring Capital Co., Ltd., spoke with Taisuke Miyajima about Kenedix's 2019 performance and goals for 2020 and afterward.

Tetsuo Inoue,

Interviewer

Growth of AUM (Billions of Yen)

Management Interview

Taisuke Miyajima,

President & CEO

Q Please explain the main reasons for the growth in AUM.

A In 2019, we achieved record-high growth in our base AUM.

AUM in the Asset Management Business increased ¥293.8 billion during 2019 from ¥2,098.3 billion at the end of 2018 to ¥2,392.2 billion at the end of 2019. Base AUM, which is AUM in REITs where we are the main sponsor and in private funds, increased ¥303.5 billion to ¥1,777.1 billion. This is a new record for annual growth in base AUM.

In base AUM, main-sponsor REIT AUM increased ¥56.3 billion and surpassed ¥1,000 billion for the first time by climbing to ¥1,008.2 billion. There was a big

increase of ¥247.1 billion in private fund AUM to ¥768.9 billion.

Our private fund AUM have increased for the second consecutive year. There are two main reasons for the significant growth of our private fund AUM in 2019. First

is the difficulty of earning adequate returns in today's climate of global monetary easing. There is constant demand among institutional investors in Japan and other

countries for long-term investments in Japan's real estate market. Second is the steady improvement in our reputation due to a consistent track record that demonstrates our ability to establish and manage private funds.

There were many activities involving core funds. For example, we established a residential property fund for overseas institutional investors

02

Management Interview

and an office building fund for Japanese institutional investors. These funds have a long time frame and own quality properties selected with emphasis on income. I expect more growth in the demand for these types of funds.

In 2018, we established Kenedix Investment Partners, Inc. as one step to enlarge our business domains with a focus on real estate asset management, which is one of the goals of our current medium-term management plan. This new company specializes in the management of private funds. Adding a company with a full line of private fund asset management capabilities enhances our expertise, flexibility and creativity regarding these funds and contributed to the growth of assets in these funds. I believe we launched this new company with excellent timing.

Equity is an important element of our real estate investments too. During 2019, we made ¥39.8 billion of new investments and there were proceeds of ¥38.4 billion from these investments. Our existing and planned equity investment exposure is ¥72.2 billion. We conduct thorough examinations before participating in high-quality development projects and purchasing land for future projects. Furthermore, we exercise care to ensure that we can recover these investments within a few years in order to maintain a sound cycle of new investments and proceeds from prior investments.

1. What are the highlights of your revenue and earnings in 2019?

1. The consistent growth of stable earnings and Base Earnings continued as AUM increased.

Revenue increased ¥6,954 million, or 11.0%, to ¥70,326 million. This was our highest revenue since 2010, surpassing the previous post-2010 high in 2018. Operating income increased ¥1,415 million, or 9.7%, to ¥15,931 million. Ordinary income was up ¥2,178 million, or 15.9%, to ¥15,841 million. Operating income was the highest in 11 years and ordinary income the highest in 12 years. Profit attributable to owners of parent was down ¥1,662 million, or 13.5%, to ¥10,673 million because 2018 bottom-line earnings benefited from two one-time events as was initially anticipated. One was a gain on the sale of real estate and the other was a one-time reduction in the tax rate. In fact, the 2019 profit attributable to owners of parent was ¥573 million higher than our initial plan of ¥10,100 million. Therefore, I believe our 2019 performance demonstrates that we succeeded in increasing earnings linked to the growth of asset management fees and property management fees.

Stable earnings are the sum of asset management fees and real estate

Revenue (Millions of Yen)

Spot fees (acquisition, disposition and other fees)
Stable earnings (AM fees, PM and ML)
Gain (loss) on real estate investments
SG&A expenses					3,700
	6,069			3,725
	11,781
12,000		3,377	9,609
				9,600
		8,119	9,584	10,300
	7,065
7,000
4,926
2,000
0	2017	2018	2019	2020
-2,000					(Forecast)
-7,000	-6,907	-7,498
	-7,458	-7,800
-12,000

03

Management Interview

revenue such as property management fees and master lease revenue. In 2019, stable earnings increased ¥1,464 million, or 18.0%, to ¥9,584 million. This growth rate exceeded the average of 16.0% for stable earnings during the past three years.

Base Earnings are another key performance indicator of Kenedix. This number is stable earnings plus Asset Management Business revenue other than asset management fees and minus SG&A expenses. In 2019, Base Earnings totaled ¥6,102 million, far above our initial expectation of about ¥5,000 million. This performance was the result of higher stable earnings and our ability to hold SG&A expenses level with 2018. In prior years, we made substantial investments in people, IT systems and other items in order to build a powerful infrastructure. We have now reached the point where this infrastructure is largely complete from the standpoint of the current size of our business operations.

1. Please explain your progress with digital securitization, which is a business sector where Kenedix is moving quickly.

1. Digital securitization has the potential to become a new core business of Kenedix.

Our crowdfunding business started in 2018 following the establishment of the necessary legal and regulatory frameworks in Japan. We have already established seven funds in this business, which has generated a strong response as a means of giving chiefly individuals a broad range of attractive investment opportunities. Launching these funds has enabled us to gain an accurate understanding of investors' needs, the risk and return characteristics they seek, and other aspects of crowdfunding.

We have recently established a Digital Securitization Office in order to launch a real estate investment platform business that uses security tokens, which are an electronically registered transferrable right. By using blockchain technology for real estate ownership rights, real estate security tokens can become a business for a new type of liquidity that allows individuals to buy and sell tokens among themselves. We want to use this scheme to transform the ownership of large, high-quality properties into a real estate financial product that can be bought and sold in small amounts. I believe that crowdfunding and security tokens will enable us to serve an even broader spectrum of investors. Liquidity and transaction efficiency will increase as well. As a result, I am even more confident than in the previous year about the prospects for crowdfunding and security tokens to become a third core business alongside REITs and private funds.

Interviewer: Tetsuo Inoue

A graduate of Sophia University, Mr. Inoue first worked in the asset management section of a Japanese insurance company and then became chief strategist and head of the equity asset management section of UAM Japan Inc. Subsequently, he served as a strategist at Praude Investment Advisors, QUICK Corp. and MCP Securities. Mr. Inoue has been the president of Spring Capital since March 2014.

Characteristics of real estate security tokens

For individual investors

Real estate security token

Expected benefits of converting real estate to security tokens

Higher trading liquidity as an investment product

Lower cost of individual investment units

Efficient and automated transactions

A sound legal framework in accordance with the amended Financial Instruments and Exchange Act

Crowdfunding

J-REIT

Small-amount real estate financial products

04

Management Interview

	The Kenedix Model	Q	What is Kenedix doing regarding the environment, social responsibility
			and governance (ESG)?

Subsequent plans

Use the Kenedix Model to continue growing and accomplish the goals of the long-term vision

2018 to 2020

Partners in Growth,

Next 2020

Take the Kenedix Model to a higher level

2015 to 2017

Partners in Growth 2017

Firmly establish the Kenedix Model

1. Kenedix provides extensive ESG information in its sustainability report and has signed the Principles for Responsible Investment (PRI).

In 2018, we stepped up our ESG activities following the establishment of the Corporate Communications Office as a unit solely for overseeing these activities. Our website has information about our ESG activities. In addition, we issued a sustainability report in May 2019 that includes an explanation of the material issues of the Kenedix Group and our sustainability policy.

Due to these activities, Kenedix is in the MSCI Japan ESG Select Leaders Index and the S&P/JPX Carbon Efficient Index, both of which are used as guidelines by Japan's Government Pension Investment Fund (GPIF). In addition, to demonstrate our awareness and commitment regarding ESG issues, we are a signatory of the PRI and the Principles for Financial Action for the 21st Century (PFA21).

Q	What is your message to investors as Kenedix begins the final year of Partners		Shareholder Distributions
	in Growth, Next 2020?
A	I am confident about prospects for accomplishing our goals and continuing			2019
to make progress afterward.			Annual dividend		¥16
2020 is the final year of the current medium-term management plan. The goal of Partners in			per share
Growth 2017, the previous medium-term management plan, was to firmly establish the Kenedix			Total return ratio	56.5 %
Model. Following up on this goal, the central theme of Partners in Growth, Next 2020 is to take
the Kenedix Model to a higher level.
		2020
	The current plan has four central goals. As I have just explained, Kenedix has made steady				¥17
progress concerning all four goals. Furthermore, I believe we are well within reach of achieving			Dividend forecast is
the numerical targets of an average ROE of at least 10% and average total return ratio of at

least 50% during the plan's three years. Most important of all is ending this plan with a strong foundation for achieving the goals of Kenedix Vision 2025, which has the theme of delivering

growth via the Kenedix Model. Specifically, we are aiming for AUM of ¥4 trillion, an aggregate Kenedix Group market capitalization of ¥2 trillion, and an ROE of 15%. This is why I regard 2020 as a key period when we continue moving forward with new businesses and determine our strategic direction for the next several years.

I am confident that the Kenedix Group is taking effective actions for sustained growth in order to meet the expectations and earn the support of our shareholders.

05

Initiatives for Sustainability

Environment / Social / Governance

For achieving both sustained growth and social responsibility, the entire Group will increase its activities for more progress concerning sustainability.

Progress with Strengthening

Upgraded ESG content

Preparation of

ESG Activities

Established

on the Kenedix website

sustainability report

material

issues and

sustainability

Established the Corporate

policy

Communications Office

for ESG activities

2018

April

August

2019

February

May

Five Key ESG Themes

Contribution

Commitment to

Stakeholder

Attractive working

Responsible

to sustainable

a diverse society

engagement

environment

organization

environment

Inclusion in ESG Indices

Kenedix is included in the MSCI Japan ESG Select Leaders Index and the S&P/JPX Carbon Efficient Index among the ESG indices selected by the Government Pension Investment Fund (GPIF).

Commitment to responsible investments

Signatory of the Principles for Responsible Investment (PRI)

The PRI have the goal of incorporating ESG (environment, social responsibility, governance) perspectives in the investment decision-making process for the purposes of improving long-term investment performance and reinforcing a company's ability to fulfill its fiduciary responsibilities.

Signatory of the Principles for Financial Action for the 21st Century (PFA21)

The PFA21 are action guidelines for financial institutions with a commitment regarding their responsibilities and roles in order to create a sustainable society. Financial institutions that sign the PFA21 take actions based on these principles as much as possible.

For more information, please visit the sustainability section of the Kenedix website. http://www.kenedix.com/eng/sustainability/

06

Stock Information (As of December 31, 2019)

Shares Issued and Shareholders

Distribution of Shares in Terms of Category of Holders

Total number of authorized shares		350,000,000
Total number of shares outstanding		220,581,200
Number of shareholders		18,492
Major Shareholders (Top 5)
Name of shareholders	Shares held	Shareholding (%)

Other domestic companies 7,290,101 shares (3.30%)

Securities companies

12,365,101 shares

(5.61%)

Individuals/others 37,530,977 shares (17.01%)

Foreign individuals 108,900 shares (0.05%)

Foreign companies 122,461,221 shares (55.52%)

Financial institutions 40,824,900 shares (18.51%)

DBS BANK LTD. 700152	42,671,800	19.34
The Master Trust Bank of Japan, Ltd. (Trust Account)	12,420,700	5.63
MSIP CLIENT SECURITIES	11,196,510	5.07
Japan Trustee Services Bank, Ltd. (Trust Account)	8,657,400	3.92
DAIWA CM SINGAPORE LTD (TRUST A/C)	8,569,500	3.88

Company Profile (As of December 31, 2019)

IR Calendar

February Announcement of full year results

March Ordinary General Meeting of Shareholders

May Announcement of 1Q results

August Announcement of 2Q results

November Announcement of 3Q results

Company Information

Company name	Kenedix, Inc.
Founded	April 17, 1995
Head office	Hibiya Parkfront, 2-1-6 Uchisaiwaicho, Chiyoda-ku,
	Tokyo 100-0011, Japan
Capital	¥40,320,937,036
Employees	67 (339 on a consolidated basis)

Management Team (As of March 25, 2020)
President & CEO	Taisuke Miyajima	Director	Koji Kotaka
Managing Director	Soushi Ikeda	Director	Shinzo Hara
Director	Koju Komatsu	Corporate Auditor	Masayuki Kobayashi
Director	Marie Kitsuda	Corporate Auditor	Keizo Katayama
Director	Akihiro Asano	Corporate Auditor	Haruo Funabashi
Director	Shuhei Shiozawa	Corporate Auditor	Kazuo Matsumoto
Director	Hiroki Yaze	Corporate Auditor	Takako Okada

Kenedix Group Companies

Kenedix Real Estate Fund Management, Inc.	Kenedix Investment Partners, Inc.
Kenedix Property Management, Inc.	Kenedix Engineering, Inc.
Space Design, Inc.	Bit Realty, Inc.
Kenedix Asia Pte. Ltd.	Kenedix Westwood, LLC.

Memorandum for Shareholders

Business year	January 1 to December 31
Ordinary General Meeting of Shareholders
	Held in March every year
Record date	December 31 every year
Transfer agent	Sumitomo Mitsui Trust Bank, Limited 1-4-1, Marunouchi,
	Chiyoda-ku, Tokyo
Mailing address	Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Division
	2-8-4, Izumi, Suginami-ku, Tokyo, 168-0063
Telephone inquiries	0120-782-031 (toll- free in Japan)
Public announcements	Notices will be posted in electronic format on our internet web page
	(http://www.kenedix.com). However, notices will be published in
	theNihon Keizai Shimbun when it is impossible to make electronic
	notification for unavoidable reasons.

07

Information about the activities and goals of Kenedix

The Kenedix website has a variety of information to give people a better understanding of the Company, such as a corporate profile video and a video with information about Kenedix Group properties. The Investor Relations section of the website contains earnings reports and other useful information for investors.

Kenedix		Search

http://www.kenedix.com/eng/

Head office: Hibiya Parkfront, 2-1-6 Uchisaiwaicho, Chiyoda-ku,

Tokyo 100-0011, Japan