Hulic Co., Ltd.
TEL +81-3-5623-8101 FAX +81-3-5623-8125
https://www.hulic.co.jp/en
7-3 Nihonbashi Odenmacho, Chuo-ku, Tokyo, Japan 103-0011

CSR REPORT

2019

Hulic Co., Ltd.

Integrated Report on
Sustainability

CONTENTS

Editorial Policy

Corporate Philosophy and Basic Stance

Corporate
Philosophy

Hulic publishes various forms of communication tools to help investors and other stakeholders gain anunderstanding of and objectively view its initiatives that seamlessly fuse business strategies with CSR.
Information that could not be included in this publication, such as the GRI content index, can be foundon our corporate website.

Total commitment to our customers and the community.
Creating productive environments. Creating amenity.
Promoting peace of mind.

Reporting Boundary
The boundary of this report is the Hulic Group. Figures for "power consumption," "gas consumption,""CO2 emissions" and "water consumption" are those for the following 58 buildings, and a figure for"waste disposal" is that for buildings in which the head office of Hulic Group companies reside.

Overview of Our Businesses

3

Message from the Management

5

Financial and Non-financial Highlights

7

Hulic's Vision and Strategy

9Creating Shared Value

11

Material CSR Issues

13

Initiatives for Material Issues- Targets and Performance

15

Special Feature

Initiatives for Fire-resistant Wooden
Buildings

17

CSR Promotion Systems

19

Environmental Initiatives

20

Ideal Company: We aim to be a company that grows each day by utilizing stable corporate infrastructures.
Corporate Culture: We always conduct business from a new viewpoint in an effort to increase our corporate value.

Basic
StanceStance to Customers: We are committed to providing optimal products and services to customers, placing customer satisfaction as
our top priority.
Ideal Employees: Each of Hulic's employees strives to provide high quality value as a professional.

CSR Vision
By putting our corporate philosophy into practice we're contributing to the betterment of society.
We take an honest approach to all our stakeholders. To this end:

1

We take compliance seriously,
respect human rights, andtransparently conduct businessactivities based on high ethicalstandards.

2

3

We strive to protect the local
environment while contributing
to local revitalization through ourbusinesses.

By providing high value-added
products and services, we are giving
our customers security and laying
the foundation for the future.

Environmental Performance Data/ Boundary (Total floor area: m2)
Hulic Shinkawasaki Building
Hulic Osaka Building
Yamato Haneda Building
Hulic Kudan Building
Hulic Asakusabashi Building
Akasaka Star Gate Plaza
Hulic Kobunacho Building
Hulic Ginza Wall Building
Hulic Shinsaibashi Building
Hulic Sapporo Building
Hulic Shinbashi Building
Hulic Fukuoka Building
Hulic Ginza Sukiyabashi Building
Hulic Sapporo NORTH33 Building
Hulic Head Office Building
Hulic Shinjuku Building
Marutaka Building
Hulic Nanba Building
Hulic Kojimachi Building
Hulic Aoyama Building
Hulic Ginza Building
Hulic Kobe Building
Hulic Kaminarimon Building
Hulic Minamiaoyama Building
Hulic Ryogoku Building
Hulic Asakusabashi Edo-dori
Hulic Kabutocho Building
Hulic Kyobashi Building
Hulic Gotanda Building

49,86330,35329,22626,027
19,636
17,947
17,172
16,95016,65914,254
13,983
12,646
11,57011,017
10,472
9,781
9,770
9,147
8,926
8,790
8,579
8,354
7,779
7,483
7,442
6,851
6,579
6,323
6,245

Hulic Mita Building
Hulic Kawasaki Building
Hulic Torigoe Building
Hulic Hamamatsu Building
Hulic Nishikicho Building
Hulic Ginza 3-chome Building
Hulic Nishi Ginza Building
Hulic Hachioji Building
Hulic Shibuya Building
Hulic Aoyama No.2 Building
Hulic Ginza 1 Chome Building
Hulic Kyobashi East Building
Asakusa Park Hall Building
Hulic Kamata Building
Hulic Ueno Building
Hulic Koishikawa Building
Hulic Nakano Building
Hulic Fuchu Building
Hulic Nakaokachimachi Building
WeWork Shimbashi
MASU no SQUARE
Hulic Hatchobori Building
Hulic Tamachi Building
Hulic Hirakawacho Building
Hulic Sakurashinmachi Building
Hulic Yaesu No.2 Building
Daiwa Yoyogi No.2 Building
Shinbashi Yamaguchi Building
Hulic Edobashi Building

6,228
6,004
5,954
5,538
5,451
5,356
5,172
5,152
5,090
4,946
4,771
4,765
4,598
4,446
4,419
4,408
4,319
3,906
3,704
3,687
3,511
3,506
3,445
3,421
3,321
3,184
3,166
3,127
3,032

- Environmental Basic Policy- Climate Change Countermeasures- Building a Resource-recycling Society- Biodiversity/Encouraging Greening

Social Initiatives

30- Initiatives for Our Customers- Initiatives for Our Business Partners- Initiatives for Our Employees- Initiatives in the Local Community- Initiatives for Our Shareholders and Investors

Reporting Media
Financial information

Non-financial information

Reporting Period

Reference Guidelines

Fiscal year 2018(from January 1, 2018 to December 31, 2018)
Regarding a portion of the priority items, the activity report
before and after the 2018 fiscal year is included.

The Japanese Ministry of the Environment"The Environmental Reporting Guidelines (2012)"
GRI (Global Reporting Initiative)"The GRI Standards"

Time of Issuance September 2019 (Previous issue: August 2018, Next issue: August 2020 (scheduled))WEB

IR information

Initiatives for CSR

https://www.hulic.co.jp/en/ir/

https://www.hulic.co.jp/en/csr/

Head Office
Hulic Co., Ltd.

AnnualReportFinancial statements
Fact book

CSR ReportJapanese/ English

Corporate
Governance Report• Headquarters: 7-3 Nihonbashi Odenmacho, Chuo-ku, Tokyo,
103-0011• Established: March 1957
• Business Outline: Real estate holding, leasing, sales andbrokerage• Paid-in Capital: ¥62.718 billion (as of December 31, 2018)

Others1

Annual reports “For our stakeholders”
Summary and note on financial statements

News release• Memberships: Japan Business Federation, The Real Estate
Companies Association of Japan, The Association for Real
Estate Securitization, Japan Building Owners and Managers
Association, Japanese Association of Real Estate Appraisal,
Japan Council of Shopping Centers

Corporate Governance

42-Corporate Governance-Risk Management-Compliance

Major Group Companies (As of December 2018)
Hulic Build Co., Ltd.
Hulic Building Management Co., Ltd.
Hulic Insurance Service Co., Ltd.
Hulic Hotel Management Co., Ltd.
Hulic Office Service Co., Ltd.
Hulic Reit Management Co., Ltd.
Hulic Proserve Co., Ltd.
Hulic Private Reit Management Co., Ltd.
Hulic Property Solution Co., Ltd.
Smart Life Management Co., Ltd.
Avanti Staff Corporation
HULIC FUFU Co., Ltd.
HULIC Agri Co., Ltd.
Porte Kanazawa. Co., Ltd.
MOS CO., LTD.

Consolidated Financial Statements

47

External Evaluation

50

Inquiries :Hulic Co., Ltd.
Business Planning andManagement Department
TEL:+81-3-5623-8101 FAX:+81-3-5623-8125

2

Overview of Our Businesses

Hulic's strength - A stable leasing businessAs a corporation with a social presence, we aim topractice management that is linked to our businessstrategy and ESG* initiatives, and to contribute to therealization of a sustainable society.

Approximately 90%
in the Tokyo metropolitan area (as of the end of Dec. 2018)

Distribution of distance fromthe nearest station (as of the end of Dec. 2018)

Hulic currently owns 248 buildings. Around 90% of these properties areconcentrated in the Tokyo metropolitan area and Tokyo's 23 wards, which
experience demand for buildings.

Good accessibility is an importantstrength of Hulic's properties. Of
all the offices and commercial
buildings owned by theCompany, about 80% are within
a walking distance of 5 minutes
from the nearest station.

* Excluding real estate for resale andresidential properties, etc.

Distribution of regionsthat office buildings
are located inTokyo
metropolitan
area

14%

Tokyo’s 23
wards

72%

5 mins walking
distance fromthe nearest station

Vacancy rate (as of the end of Dec. 2018)

Leasing Business
Hulic owns a large number of properties, including high-security office buildings and condominium buildings with the latest earthquake
resistant structures to obtain absorbing or damping at prime and accessible locations close to stations mainly in Tokyo's 23 wards.
The leasing business is our core business.

The vacancy rate of Hulic's officebuildings and commercial buildingsin Tokyo's 23 wards is below 1%,
ensuring a stable income for theCompany.

19%

Within 1 min

36%

4-5 mins

16%* Based on no. of properties,
excluding residential properties, etc.

* ESG stands for Environment, Social and Governance

Hulic's Real Estate BusinessOver 5 mins

29%
2-3 mins

81%

Safe and secure buildings

Marketaveragevacancy rate*1

Hulicvacancyrate*2

1.8% 0.5%*1 Source: Miki Shoji's Office Data by Region(Boundary: Office buildings with standard
floor area of 100 tsubo or above, in theTokyo business district)*2 Hulic vacancy rate is calculated using data
for Hulic's office and commercial buildingsin Tokyo's 23 wards.

We are accelerating the efforts
to make our properties resistantto earthquake by introducing
the latest technologies ofearthquake-absorbing,earthquake-damping andearthquake-resistance into newbuildings based on theirlocations, and by ensuring
implementation of aseismic
retrofits that exceed the newearthquake-resistance standards
for all of our existing buildings.

General building

Earthquakeabsorbing structure

Shakingviolently

Slow and parallel
shaking

Deforming laminated rubber

Reconstruction and Development Businesses
Our portfolio of assets includes many properties with unexploited floor area capacity. We actively work on the systematic reconstruction of
those properties because we believe maximizing the use of floor space by recreating properties as more spacious and convenient facilities
that are appropriate for individual locations will serve as a major growth driver of business. We also promote the development business,drawing on our expertise accumulated in the reconstruction business, and engage in public-private partnership (PPP)*1 projects andcorporate real estate (CRE)*2 projects to maximize asset values.
*1 PPP: In public-private partnership (PPP) projects, the public and private sectors join forces and cooperate with the aim of efficiently utilizing and operating real estate owned by central
and local governments (public assets).
*2 CRE: Corporate real estate (CRE) projects are designed to support strategies for increasing corporate value utilizing real estate owned by private-sector enterprises and specified
corporations (educational corporations and medical corporations, etc.).

Hulic's growth strategy — Initiatives in the leasing business aimed at fulfilling the needs of society
Selection and concentration

Promoting reconstruction (as of the end of December 2018)

We are continuously achieving significant growth by predicting futurechanges, and selecting and concentrating on our management resources.

We increase the leasing area by actively reconstructing our properties,
thereby improving income. 39% of our properties are relatively newproperties built within 10 years.

Medium-scale office buildings
Little competition targeted
at a wide range of tenantsCenter of Tokyo
Population influx into
the Tokyo metropolitan area

Unusedfloor area

Value-added Real Estate BusinessWe carry out renovations and improve the compliance, etc. of our portfolio properties and newly acquired and invested real estate tomaximize the value of properties, in order to create added value for properties, with the aim of facilitating the recycling of real estate.
We aim to grow the value-added real estate business as a business that supports our sustainable growth strategy.

Investment BusinessWe proactively undertake investments in the operation and development of real estate assets to strengthen our asset portfolio concentrated
in central districts of the Tokyo metropolitan area. Our investment targets are office buildings, as well as hotels and commercial buildings.

Low vacancy risk

High demand

BeforeIncreasein leasing area

VALUE
UP!!

Rise in rent
due to building
renewalReconstruction

After

Expectation ofsignificant
profit increase simply
from rebuilding costs

Environmentally friendly buildings

3K businesses

We promote installation of photovoltaic panels, greening and introduction ofnatural lighting systems and natural ventilation technologies developed jointlywith Massachusetts Institute of Technology (MIT). We are also moving ahead
with our 100 Year Office Plan (creation of longer life buildings), which willlead to waste reduction.

We are exploring and strengthening new business domains in our 3K
businesses (Koreisha (seniors), Kanko (tourism), and Kankyo (environment)),
with the aim of responding to various changes in the environment, such as anaging population, increase in foreign tourists visiting Japan, and escalation ofenvironmental issues.

Koreisha (Seniors)

Sonare Shakujii

3

After
reconstruction

Old
properties

Kanko (Tourism)

Kankyo (Environment)

FUFU Kawaguchiko JAPAN4

Message from the Management

The origin of Hulic's CSR Management is "Total
commitment to our customers and the community.
Creating productive environments. Creating amenity.
Creating peace of mind."
For more than half a century, Hulic has been operating a real estate leasing business focusing on a portfolio
of office buildings in central Tokyo. Our strength of owning a solid business foundation, based on the prime
locations of properties, has allowed us to maintain continued growth of profits and dividends without being
affected by market conditions even in the face of adversity, including difficulties associated with the Lehman
Brothers' bankruptcy and the Great East Japan Earthquake. Hulic's sustainable growth is supported by CSR
management, which incorporates Environment, Social, and Governance (ESG) factors into decision making.
In our corporate philosophy, we uphold the following values: “Total commitment to our customers andthe community. Creating productive environments. Creating amenity. Creating peace of mind.” As part ofour management strategy, we consider that taking initiatives to address social issues will create business
opportunities. We will strive to remain a mission driven company with a strong social responsibility byimplementing CSR management.

5

Our Performance in 2018Material CSR Issues and Our Progress

In the fiscal year ended December 2018, Hulic achieved record highs
in every stage of income on a consolidated basis with operating
income of 75.5 billion yen, ordinary income of 72.5 billion yen,and profit attributable to owners of parent of 49.5 billion yen.
We got off to a good start in the first year of the medium-term
management plan (2018–2020), which was launched in 2018. Thiswas primarily a result of steady progress on sales of real estate forsale against a backdrop of increased real estate investment demandin Tokyo etc. and an increase in rent revenue through reconstruction,
development, and acquisition. In the reconstruction and development
business in 2018, we completed construction of a total of 11
properties, including HULIC SQUARE TOKYO (a hotel and commercial
facility) in the Yurakucho and Ginza area, one of our focus areas, andHulic Itabashi and Hulic Fuchu Building, which had previously been
undergoing reconstruction. We also continued to work on the three
future growth businesses (3K businesses), i.e., koreisha (seniors),
kanko (tourism), and kankyo (environment). In the tourism business,
we opened THE GATE HOTEL TOKYO by HULIC , our flagship locationin our GATE HOTEL brand, as well as FUFU Kawaguchiko, a luxury
hot spring inn. In the seniors business, we completed construction ofsenior residences, including Charm Premier Den-en-Chofu and Grand
Inamuragasaki Kamakura Aoitei. Additionally, in the environment
business, we began designing Japan’s first 12-story fire-resistantwooden building in the Ginza area using timber that requires lessenergy for manufacturing and processing. We are actively working
to further reduce CO2 emissions during building construction. In
the public-private partnership (PPP) business, we were selected
as a proposed contractor for Osaka City Waterworks Bureau’sdeveloper recruitment proposal for the sale of the former Ogimachi
government building site and the lot to the south of the building. We
aim to make this a business that contributes to greater appeal of the
Ogimachi area through development of a complex that serves as abase for international medicine, cultural creation, and promotion of
exchange. Hulic is committed to achieving the sustainable growth ofcorporate value by promoting new businesses, while focusing on theexisting real estate leasing business as its core business.

Following the adoption of the Sustainable Development Goals(SDGs) by the UN General Assembly in 2015, Hulic has considered
what it can do as a real estate company toward realizing asustainable society. We have identified our material CSR issues
and are carrying out various initiatives to address those issues.
We consider that reducing CO2 emissions, waste, and water
consumption at many buildings owned by Hulic, mainly in central
Tokyo, will reduce environmental impacts, and have set their
reduction targets from the standpoint of promoting environmentallyconscious management. In particular, we have established thelong-term target of reducing CO2 emissions by 45%, relative tothe 2013 level, by 2030. With the aim of achieving the target,
we have introduced natural lighting systems, natural ventilation
systems, and high-efficiency lighting and air-conditioning systems
in new buildings. Moreover, in accordance with our long-term
environmental vision, under which “low-carbon society” and“recycling society” are designated as our ideal forms of society
by 2050, we will work to continually achieve various targets, suchas the number of capital investments for renewable energy andthe number of greening projects for new buildings. We have also
been promoting health management initiatives in accordancewith the “Hulic Health Management Declaration” in the aim ofcreating comfortable workplaces. As a result of those initiatives, wewere recognized under the 2019 Certified Health & Productivity
Management Outstanding Organizations Recognition Programin the small and medium-sized enterprises category. Moreover,
we have poured efforts into training environmental personnel,
and we received the Outstanding Performance Award at the 2018
Environmental Human Resources Development Corporate Awards
organized by the Ministry of the Environment and others. With thefocus on strengthening corporate governance, we have worked
continuously to enhance the functions of “risk management,”“compliance,” and “internal controls.” Hulic will continue totake various initiatives to meet the needs of society and realize asustainable society.

Medium-term Management Plan and
CSR Strategy
In fiscal year 2018, Hulic launched current medium-term
management plan (2018-2020), which represents the final phaseof the current long-term management plan, aiming to reach the
plan's goal of achieving ordinary income of 85.0 billion yen (in2023) three years ahead of schedule. While maintaining Hulic's
distinctive business model, the Group will endeavor to sustain its
steady growth through evolution by responding to changing times
and changes in the environment. In addition to making efforts to
expand and improve the quality of the portfolio of assets undermanagement in the leasing business, the Group aims to evolveits business model into one designed to expand stable earnings
by strengthening the development business and the value-added
real estate business, and through the asset management business,
etc. We will also continue to promote ESG-conscious business
operations and create value as a company that is a member of asustainable society.

To Our Stakeholders
In the future, our employees and officers will remain united in ourefforts to continue contributing to society as a progressive businessenterprise that cultivates good relations with all stakeholder groups.
In these activities, we look forward to enjoying the continued
support of our shareholders and other stakeholders.

Saburo Nishiura
Chairman, Representative Director

Manabu Yoshidome
President, Representative Director

6Financial and Non-financial Highlights
Main Financial Indicators

Main Non-Financial Indicators

Operating Revenue (Net Sales)

Operating Income

Ordinary Income(¥100 milion)(¥100 milion)(¥100 milion)

2,896

3,000

2,875

755

800
700

2,500

2,157

2,127

2,000

1,699

1,000
500
0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

514

500

420

425

400

300

300

200

200

100

100

0

0

FY
12/14

FY
12/15

FY
12/16

FY
12/18

FY
12/17

Items marked with "★" have been assured by an independent assurance provider. * Gas consumption in the fiscal year ended December 2017 was revised from 727,497m3 after a careful review of the gas agreements subject to aggregation.

618

600

360

400

725

700

533

500

1,500

800

642

600

Since 2015, amounts of power/gas consumption, CO2 emissions intensity and waste disposal have substantially differed from the results until 2014 due to asignificantly different number of target properties. With regard to the detailed boundary of these indicators, please refer to page 15, “Initiatives for Material Issues.”

Power Consumption

Gas Consumption*

CO2 Emissions Intensity

(MWh)

(m )

(kg-CO2/m2)

31,000,000

100,000

343

80,525 80,800★

80,000

FY
12/14

FY
12/15

FY
12/16

60,000

FY
12/18

FY
12/17

65,973

66,326

51
blds

51
blds

55
blds

100.0

800,00058
blds

762,55251
blds

600,000

80.0

731,360
51
blds

Profit attributable to shareholdersof parent company
495(¥100 milion)

500

EBITDA* /EBITDA Ratio*2(Milion Yen)

100,000

424
400

336

Shareholders' Equity/
Return on Equity (ROE)*3

EBITDAEBITDA ratio

80,000348

300(Times)(Milion Yen)

25.0

500,000

20.0

400,000

400,000

40,000

77.6

77.7

FY
12/14

FY
12/15

FY
12/16

80.7

80.8★

FY
12/17

FY
12/18

662,71955
blds 544,919★

60.0

58
blds

453,012
1

74.7

20
blds

40.0

22,060(%)

EquityReturn on Equity

20,00025.0
20.0

60,00015.0

300,000

15.0

40,00010.0

200,000

10.0

0200,000

20
blds

FY
12/14

FY
12/15

FY
12/16

FY
12/17

0

FY
12/18

20.0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

0

FY
12/18

223
200

20,000100

100,000

5.0

5.0

Waste Disposal

Usage Rate of Paid Leave

(ton)

(%)

1,500

78.3

80.0
70.9

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

0

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

0

Vacancy Rate*4 / Average Rent

1,200

(Yen)

(Average rent: Yen/Tsubo)

30

25.5

25

900

8.0

25,000

7.0

20
15.5

20,000

17.0

15

6.0
5.0

15,000

4.0

10.5
10

10,000

5

5,000

0

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

3.0
2.0
1.0
FY
12/14

FY
12/15

Changes in Real Estate Business-Related Index
5

Target: Real estate owned by Hulic*Vacancy Rate *4
Average Rent

Number of Properties

Rentable Area

0

FY
12/18

FY
12/16

FY
12/17

Unit

FY12/14

7.36
Non-consolidated
basis

6.16
6.30

5.74★

40.0
Hulic's office and commercial
buildings in the five wards ofdowntown Tokyo

600(For reference) The market average forTokyo's business districts

300

Hulic's office and commercial
buildings in Tokyo's 23 wards

0(For reference) The market average forTokyo's business districts

525

524

7
blds

7
blds

4.00

8
blds

FY12/16

FY12/17

FY12/18

Office and commercial buildings owned by Hulic in Tokyo's 23 wards

%

0.7

1.5

0.4

0.7

0.5

(Yen)

20,75920,451

20,07320,077

20,183

Office and commercial buildings in Tokyo central 5 wards *6(Yen)

25,147

24,51024,97025,242

25,628

Tokyo metropolitan area

(Building)

148

182

190

206

213

Other

(Building)

19

20

22

30

35

Total

(Building)

167

202

212

236

248

Tokyo metropolitan aream2

633,918

771,049

894,179

912,249

973,488

Other

m2

140,696

160,179

135,517

162,789

224,529

Total

2774,615

931,229

1,029,696

1,075,037

1,198,017

Hulic has been achieving earnings growth every year since going public in 2008. In the fiscal year ended December 2018, we achieved record highs in operating
income, ordinary income, and profit attributable to owners of parent against a backdrop of steady progress on sales of real estate for sale and increased rent revenue
through new real estate development and acquisition. In addition, we carried out expeditious capital increases (in 2012 and 2015) and have steadily accumulated
profits, which have allowed us to maintain a robust financial base. As a result, our dividend per share was the highest ever at 25.5 yen. Most of Hulic's properties arein prime locations close to train stations in Tokyo. Accordingly, the vacancy rate of Hulic's properties has been significantly lower than the market average vacancy rate
and the average rent of Hulic's properties has been above the market average rent.

2.46

20.0
2.00

FY
12/14

FY
12/15

FY
12/16

FY
12/17

20.0

0

FY
12/18

Ratio of Female Managers*Market average: Miki Shoji's
Office Data by Region*1 EBITDA=Ordinary Income - Equity in Earnings (Losses) of Affiliates + Interest Expenses + Depreciation and amortization *2 Interest-Bearing Debt to EBITDA Ratio=Interest-Bearing Debt/EBITDA *3 ROE=Net Income/Average Equity *4 Excluding the unsigned floor space which was reserved due to the tenant's demands and reconstruction *5 Excluding real estate held for sale *6 Calculated by dividing rent revenue in the accountclosing month by rented area at the end of the period

7

8.00

611

All the office and commercial buildings owned by Hulic *6

m

8.56

6.00

(%)

FY12/15

10.00

71.6

16
blds

9.0

21.0

(%)

60.0

9
blds

(Vacancy rate: %)30,000

71.4

77.0★

1,166★
1,027

Dividend per Share

Employment Ratio of the Disabled

18.5

FY
12/14

FY
12/15

FY
12/16

FY
12/17

0

FY
12/18

2.31

2.11

Consolidated
basis

2.21

FY
12/14

FY
12/16

FY
12/15

FY
12/17

Rate of Voluntary Job Turnover

Number of Social Contribution
Activities as a Company(%)(Activities)

10.00

25

8.00

20

6.00

15

4.00

10

2.41★

FY
12/18

21
15.0

15.6

10.4
10.0

12.3

13

8.5

2.00

12
9

2.34

5.0

16

1.81

1.72

1.28

5

1.34
0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

0

FY
12/14

FY
12/15

FY
12/16

FY
12/17

FY
12/18

Hulic works to reduce CO2 emissions from electricity and gas, as well as reduce waste from the standpoint of environment-conscious management, and we set
reduction targets and identify the status of progress. In 2018, we continued to work on improving the work-life balance and kept usage rates of paid leave at a highlevel (77.0%). We have continued to take initiatives to promote diversity, which resulted record-high in the ratio of female managers. In addition, we have steadily
expanded the areas of social contribution activities.

8

Hulic’s Vision and Strategy

Develop and evolve Hulic's distinctive business model with the aim offurther enhancing sustainable corporate value
The Hulic Group newly formulated the current medium-term management plan for 2018 through 2020 as the final phase in the vision set out under
the long-term plan titled “Hulic 10 Years from Now (2014–2023).”
We will continue to thoroughly focus on reform and speed in 2019, which is the second year of the medium-term management plan, working tofurther strengthen the real estate leasing business and enhancing new business undertakings to maintain and develop a business foundation thatis not susceptible to market trends.

Medium-Term Management Plan: 2018-2020

TargetProfileWhile maintaining the Hulic business model, the Group will continue to achieve steady growth through evolution by responding tochanges in the environment.

Basic Strategy

Long-term Plan “Hulic 10 Years from Now (2014-2023)”

1. Bolstering and enhancing the quality of the lease portfolio(Billions of yen)

• Expand asset portfolios that reflect the needs of the times by incorporating office buildings, as well as commercial buildings and 3K businesses-related
facilities (hotels and senior facilities, etc.) in a well-balanced manner

Ordinary Income

100

85.0

90

85.0

• Strengthen asset management functions to increase the asset value of individual properties

72.5

2. Strengthening the development business80• Systematically promote long-term development projects which are limited to properties in prime locations and reconstruction of Hulic's properties.

61.8

70
60

• Actively develop the “&New” series of medium-sized urban commercial facilities• Firmly establish a recycling business model for the Group's assets, including assets owned by REIT companies

+10.7

50

34.3

40

3. Expansion of the value-added real estate business+10.4• Achieve value added in both building software and hardware by leveraging the Group's technological expertise and leasing capabilities
Medium-Term Plan

+8.9

• Diversify exit strategies using various sourcing channels and networks to get the value-added real estate business on a growth track

+8.2

30

4. Cultivation of new business domains and enhancement of overall the Group strengths• Strengthen efforts in new business areas to cultivate new profit-making businesses

20• Strengthen earning capabilities of the Group's individual companies and leverage collaboration within the Group to capture earning opportunities

Long-Term Plan

10
0

2008

Basic
Policy

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

• Actively enter into merger and acquisition and alliance deals as means to get new businesses off the ground and increase the Group's overall strengths
at an early stage
2020

2021

2022

2023 (Year)

While retaining leasing as our main business focus, the Group will further strengthen the development business, the value-added
real estate business, asset management and other businesses.

5. Balanced business management and Risk management• Practice balanced management whereby “growth,” “safety,” "profitability," and “productivity (efficiency)” are achieved at a high level and in a wellbalanced manner• Maintain a robust financial base and ensure diverse forms of financing• Strengthen risk management in response to the diversification of business and ensure balance sheet control in times of market changes

6. Promote management by placing importance on sustainability based on our CSR Vision
Numerical
Target• Operate businesses and create value by taking ESG into account in a bid as a company that is a member of a sustainable society

We will aim to reach ordinary income of 85 billion yen by 2023.

Balanced management
Initiatives for ESG(Billions of yen)

Profit plan

Environment(E)

Social(S)•ImproveHulic'spresenceasanenvironmentallyconscious
company by developing new technologies and introducing
those technologies to our properties•Utilizediversehumanresourcesandfurtherincrease
opportunities for promoting women's careers with the focus
on diversity management•Takeinitiativesforhealthmanagementandwork-stylereforms, etc. to improve labor productivity and secure anddevelop excellent human resources

Governance(G)

9

FY 2020 Target

Operating income

75.5

88.0

Ordinary income

72.5

85.0

Profit attributable to owners of parent

49.5

55.0

EBITDA

89.5

105.0

Interest-bearing debt to EBITDA ratio

10.0

12* times or less

Net D/E ratio

1.9

3.0* times or less

12.7%

10% or more

33.9%

Approx. 1/3

Financial restraints

Environment-friendly
business development

E (Environment)
Enhancedstakeholder relations

S(Social)Shareholders/
Investors

Environmentfriendly
businessdevelopment

Suppliers

Environment

Enhanced
relationsCustomers

RobustgovernancesystemValuecreation

Capital efficiency
ROE•Continuouslymonitorthecorporategovernancesystem
whereby risk management, compliance, and internal
controls function effectively in accordance with thecorporate governance code

FY 2018

Shareholder return
Dividend payout ratio* 50% (75 billion yen) of hybrid finance issued in 2018 (150 billion yen) is calculated as equity.

Robust governancesystemLocal
communities

Employees

G (Governance)

10Creating Shared Value

Realizing a Society Filled with Peace of Mind and Trust
The Hulic Group provides buildings with excellent safety, environmental performance, and convenience that match the needs ofsociety today (opportunities and risks) through a fusion of management and CSR, creating new added value in the process.

Social Issues Requiring Solutions

Corporate
Philosophy

Contributing towardrealizing a society with total
peace of mind and trust

Hulic's Contributions to Solutionsfor Social Issues

Group's
Motto

Creating amenity.
Promoting peaceof mindCreating shared values
with society andsustainably developing

Creating Shared Value with Society

Value for Society
Prevention of global
warming

Measures to prepare
for natural disasters

Improve the conditions of global environment

Measures to address
aging in Japan

Realize a society where seniors live in peace
Promote environmentally friendly businesses

Proactively expand businesses targeting seniors

Use of natural ventilation and natural lighting systems, and standardization of
longer life buildings

Development and investment in senior, nursing care and medical facilities

Provide disaster resistant buildings

Contribute to disaster reconstruction

Received the real estate industry's first highest rating of DBJ BCM

Investment in mega solar projects in Fukushima

Help achieve safe and comfortable lifestyles
Help revitalize disaster-hit economies, etc.

Reconstruction fromthe Great East
Japan Earthquake

Opportunities and Risks in Social Issues

Business Opportunities

Value for the Hulic Group

Responding to Opportunities and Risks- Demands from society for eco-friendly buildings- Rising demand for renewable energy- Growing market for seniors following advancements in aging
societies- Boost demand for safe and secure buildings- Spurring on the real estate market through the 2020 Tokyo
Summer Olympics, the increase in the number of tourists to Japan,
and urban revitalization

Business Risks- Market changes caused by changes in social structure- Risk of earthquake occurring in Tokyo where our portfolio isconcentrated- Risk of deteriorating real estate market conditions due to a
prolonged downturn in Japanese economy- Risk of rising financing costs caused by turbulent financial markets

11

Initiatives for Opportunities(Business Development)- Standardize longer life building designs- Upgrade equipment at existing buildings to highly energy
efficient equipment- Adopt environmentally friendly technologies- Make efforts in developing senior housing in step with thegrowing senior population- Develop, hold and invest in hospitals and long-term carefacilities- Proactively adopt seismically-isolated structures andearthquake-damping structures- Introduce the latest technologies and equipment at newly
constructed buildings- Increase earnings of existing properties through rebuild projects- Launch publicly offered J-REITs and improve asset managementbusiness- Engage in tourism business centered on hotels

Preparations for Risks(Infrastructure Reinforcements)- Prioritizing business dzomains based on changes in social
structure- Establishing a business continuity plan (BCP) and conducting
BCP drills- Establishing BCP based on collaborative structures with outsideorganizations and developing and commercializing building andfacility earthquake resistance services- Improving the earthquake resistance of companyownedbuildings- Rebuilding with a focus on seismically-isolated andearthquake-damping structures- Liquefaction countermeasures and measures against flood
damage- Real estate portfolio focused on central of Tokyo- Promoting long-term lease agreements with tenants- Primarily long-term, fixed rate financing

Enhance earnings power
Fortify financial soundness
Capture market share
Enhance brand value
Enhance building technologies
Secure stable profits
Enhance expertise of personnel
Secure talented human resources
Co-exist with local communities
Achieve business continuity, etc.

12Material CSR Issues

Hulic identifies material CSR issues upon which we should continue to focus, in order to meet the needs and expectations of our stakeholders, andcontribute to society while achieving sustainable growth. In fiscal year 2016, we examined the direction in which we should steer our businesses
based on the Sustainable Development Goals (SDGs) adopted by the UN summit, with the aim of further deepening our business activities that willlead to resolving social issues.
Amidst diversifying social issues and matters concerning stakeholders, we will continue to focus our efforts on such priority issues and ensure theeffective promotion of CSR activities by considering opportunities and risks in Hulic's businesses.

Communication with our stakeholders
The Hulic Group is committed to realizing a sustainable society by delivering environmental, social and economic value through interactive
communication with all its stakeholders..
Employees

Customers

Examples of Dialogues

Suppliers

We value teamwork and work to make our workplaces open
and employee-friendly.

We strive to provide services tomeet the detailed needs ofcustomers and deliver buildingsthat are secure, safe, comfortable
and highly convenient in order toimprove the level of customer
satisfaction.

Conducted surveys on
customer satisfactionlevels, implemented
disaster prevention drills,
and established a customer
contact center, etc.

We build relationships thatmutually enhance the corporate value of both parties
assuming long-lasting business transactions throughclose, mutual communication.

Examples of Dialogues
Conducted the president’s questionnaire for employees,
conducted interviews between employees and theirsupervisors, held cross departmental discussions on
work-life balance and diversity, etc.

Identified Material CSR Issues
High

Environment
Materiality for our stakeholders

We identify the material issues in order to continue achieving
sustainable growth.

- Emissions into theatmosphere (GHG)- Advanced technology/research anddevelopment- Products and services(environment)- Compliance (society)- Renewable energy- Business partnership/collaboration

Governance- Risk evaluation/Riskmanagement- Anti-competitive practices- Corruption prevention- Local communities- Provision of safe and secure products
and services- Labor-management environmentHigh- Diversity and equal opportunities, etc.

Material Issues | 2

Material Issues | 3

Material Issues | 4

Strengthening the 3K
businesses toward resolvingsocial issues

Diversity andwork-life balanceStrengthening corporate
governance andrisk management

Materiality for Hulic

Material Issues Identified
Material Issues | 1
Environmental measures
P.20

P.30

P.34

P.42

Relevant SDGs
Government

We are committed to a broad range of mutual communication
with shareholders, through timely and appropriate disclosures aswell as participation in earnings briefings and various investor
relations (IR) fairs.

We are working on promoting Public Private Partnerships(PPP) that meet the needs of local governments.

Examples of Dialogues

Examples of Dialogues

Participation in various investor relations (IR) fairs andevents, held financial results briefing, and implemented
timely and appropriate information disclosure on the
Company’s website, etc.

Promoted Public Private Partnership (PPP) projects,
consulted with various contact centers of government
agencies, appropriately paid taxes, etc.

Global Environment

Examples of Dialogues

Local Communities

Examples of Dialogues

We are mindful of the environment andactively work to utilize natural energy andconserve biodiversity.

Held the Environmental Advisory
Council and participated in satoyama
conservation activities, etc.

We emphasize communication
with local communities andconstantly work to build positive
relationships with them.

Hosted summer festivals for local communities,
conducted cleaning activities and voluntary activities
for flowerbed maintenance, participated proactively inevents organized by neighborhood associations, etc.

Issue identification

Based on international CSR guidelines including the GRI's (Global
Reporting Initiative) G4 Sustainability Reporting Guidelines and ISO26000,
60 CSR issues that should be reviewed were identified.

Evaluation of materiality from Hulic's
perspective

The materiality of the issues identified in Step 1 was evaluated from theperspective of their impact on Hulic's management. In conducting theevaluation, scores were allocated based on factors such as the businessstrategy, significant risks and management issues, and strengths identified
and set forth in the new 3-year medium-term management plan.

Based on the identified material issues, Hulic formulated the Medium-term CSR Vision (goals for 2020)
with the aim of clarifying its medium- and long-term CSR promotion activities.
Medium-term CSR Vision
Environmental
measures

Process to Identify Material Issues

STEP3- Marketing communication- Overall environment

Shareholders, Investors

STEP1- Energy- Compliance (environment)

Examples of Dialogues
Held property management status reporting meeting withmanagement companies, facilitated close and mutualcommunication and maintained long-standing good business
relationships with general contractors, etc.

Society

STEP2

Evaluation of materiality fromthe perspective of our stakeholders

The materiality of the issues identified in Step 1 was evaluated separately for Hulic's sevenstakeholders. In conducting the evaluation, scores were allocated based on feedback fromexternal experts, obtained through sources such as the behavioral guidelines of our major
customers, OECD Guidelines for Multinational Enterprises, ESG surveys from institutional
investors and NGOs, various survey reports, press reports, the Environmental Advisory
Council, and third-party opinions in the CSR Report.

STEP4

Combining the evaluation of materiality fromthe two perspectives and finalizing the material issues

Issues with a high level of materiality for both our stakeholders and Hulic's management
were identified, and organized into four candidate material issues. After interviews andcoordination with the relevant internal departments, and approval from the directors incharge of CSR, these four material issues were finalized.

• Carry out initiatives to reduce CO2
emissions and waste, and use limited
resources such as energy and water
efficiently• Use renewable energy proactively• Give consideration to biodiversity
and promote greening• Carry out environmentally conscious
management based on awareness ofvalue chains

Strengthening the 3K
businesses toward resolvingsocial issues• Promote the provision of seniorcitizen facilities in accordancewith the aging population and theprovision of accommodations in
response to an increasing numberof tourists, with the aim of resolvingsocial issues.

Diversity andwork-life balance• While respecting fundamental
human rights, work toward creating
an environment where each
employee can play an active role in
the workplace, regardless of gender,
age, or disabilities.
• Improve work-life balance andimplement measures to encourage
the use of paid leave and to prevent
long working hours, in order to foster
a workplace in which employees stayhealthy and can make the best useof their abilities.

Strengthening corporate
governance and risk
management• Implement timely and appropriate
risk evaluation/management withthe aim of complying with laws andregulations, and respond to various
risks in our businesses.
• Work to prevent violations ofantitrust laws, bribery, and corruption,and conduct corporate activities witha strong sense of ethics.
• Proactively adopt structures withhigh seismic capacity to provide
buildings that are secure, safe, andcomfortable.

• Encourage employees to obtain
qualifications and participate intraining with the aim of enhancing
their professional skills.

Going forward, we will continue to review, as necessary, the material CSR issues that have been identified, and ensure the effective promotion of CSR activities.

13

14

Initiatives for Material Issues - Targets and Performance

We have established key performance indicators (KPI) and targets foreach issue for the effective promotion of CSR management.
Material issues

Medium-Term CSR Vision(Goals for 2020)

KPIs/Targets*11

Items

Boundaries

Power consumption(MWh)4

Measures for global warming across theentire value chain of Hulic's buildings- Carry out initiatives to reduce
CO2 emissions and waste and use
limited resources such as energy
and water efficiently

Environmental
measures- Use renewable energy proactively- Give consideration to biodiversity
and promote greening- Carry out environmentallyconscious management based on
an awareness of value chains

Strengthening
the 3K businesses
toward resolvingsocial issues- Promote the provision of seniorfacilities in accordance with an
aging population and the provisionof accommodations in response toincreasing number of tourists, withthe aim of resolving social issues.

- With respect of fundamental
human rights, work toward creating
an environment where each
employee can play an active role in
the workplace regardless of gender,
age, or disabilities.

Diversity andwork-life balance- Improve a work-life balance andimplement measures to encourage
the use of paid leave and toprevent long working hours inorder to foster a workplace inwhich employees stay healthy andcan make the best use of theirabilities.
- Encourage employees to obtain
qualifications and participate intrainings with the aim of enhancing
their professional skills.

Strengthening
corporate
governance andrisk management- Implement timely and appropriate
risk evaluation/management withthe aim of complying with laws andregulations, and respond to various
risks in our businesses.
- Work to prevent violationsof antitrust laws, bribery, andcorruption, and conduct corporate
activities with a strong sense of
ethics.
- Proactively adopt structures withhigh seismic capacity to provide
buildings that are secure, safe, andcomfortable.

Other Initiatives- We will place emphasis on
dialogues with stakeholders andaim to become a company that istrusted by society.

Using renewable energy and developing
new technology

Gas consumption(m³)* *Reduction in CO2 emissions intensity (kg-CO2/m2) by 17% during theperiod from 2017 through 2020, relative to 2013 level (per unit floorarea) *1 *2 *Number of capital investments for renewable energy: 3 investments ormore per fiscal year

58 existing primary buildings *3

Results
FY 2014

FY 2015

FY 2016

FY 2017

FY 2018★

22,06065,973

66,32680,52580,800453,012762,552

731,360

662,719544,919★
★

80.8

Major Achievements in FY2018

Evaluation

Reference- Environmental consideration for new buildings (adoption of natural lighting/natural ventilation system,
highly efficient lighting equipment, and highly efficient air conditioning system)- Renovation works on existing buildings for energy saving- Initiatives toward reduction of energy consumption in collaboration with management companies andtenants (adjusting temperature setting of air conditioners, decreasing the number of lights on, adjustingbrightness)-

P.23-26

74.7

77.6

77.7

80.7

All Hulic’s buildings

6

6

3

4

6

- Installed photovoltaic generation systems in new buildings.
- Worked toward achieving offsite ZEB using photovoltaic generation systems.

◎

P.24

- Implemented greening of walls and rooftops to new buildings in consideration of biodiversity

◎

P.29

- Promoted 3R (Recycle, Reuse, Reduce) activities

-

P.28

- Used rain water and installed various water-saving devices

-

P.27

- Proactively adopted long-life structure specifications for new buildings

◎

P.28

Promotion of greening

Number of greening projects* : 1 project or more per fiscal year

All Hulic’s buildings

5

9

1

5

9★

Reduction of waste at Hulic’s buildings

Reduction in the average amount of waste (ton) by 15% during theperiod from 2017 to 2019 compared with average during period from2005 through 2007. (per unit floor area)

9 buildings occupied by thehead offices of Hulic's Group
companies*6

1,027

525

524

611

1,166★

Reduction in water consumption at
Hulic’s buildings

Reduction in average water consumption (m³) by 26% during the period
from 2017 through 2019 compared to the average during the period
from 2005 through 2007. (per unit floor area)

58 existing primary buildings *3

127,745

381,553401,272

436,882

420,076★

Reduction of waste in new buildings

Number of technological measures (Precast Concrete (PC) construction
method/extension of life span) implemented to reduce the amount ofwaste in reconstruction business: 1 case or more per fiscal year

All Hulic’s buildings

7

8

4

6

11

Tourism business projects

Accommodation facilities (number of properties owned): No target(follow-up item)

All Hulic’s buildings(As of the end of December 2018)

-

8blds

11blds11blds15blds- The number of properties owned as of December 31, 2018
- We opened the Gate Hotel Tokyo by Hulic and FUFU Kawaguchiko JAPAN in 2018.

-

P.32

Senior business projects

Senior facilities (number of properties owned): No target (follow-up item)

All Hulic’s buildings(As of the end of December 2018)-16blds20blds21blds26blds- The number of properties owned as of December 31, 2018
- We completed construction of Charm Premier Den-en-Chofu, Grand Inamuragasaki Kamakura Aoitei,
and Sonare Shakujii in 2018.

-

P.32

Ratio of female managers: 20% by 2020

Hulic

8.5%

10.4%

12.3%

15.6%

18.5%

Improvement of systems to develop
women’s careers

Promoting employment of the disabled

Promoting the use of the next generation
nurturing support system

Promoting the planned use of paid leaves

5

Number of seminars organized by the women's career promotion project
team: Once a year

Employment ratio of the disabled: Maintaining the statutory employment
rate of 2.2% or more (The statutory employment rate by 2017 was 2.0%)

Usage rate of childcare leaves/Number of people: 70% of eligible female
employees or more on average / 1 male employee or more per fiscal year

Hulic

-

1

1

1

1

Hulic Group(As of June 1, 2018) *9

2.46%

2.31%

2.21%

2.11%

2.41%★

(Reference) Hulic(As of June 1, 2018)

8.56%

7.36％

6.30%

6.16%

5.74%★

Hulic (Women)

100％

100％

100%

100%

100%

Hulic (Men)Ratio of employees who returned to work after childcare leaves: 100%

Hulic

Usage rate of paid leaves*7: 70% or higher per fiscal year

Hulic

- 66 male managers, 15 female managers

-

P.34

- In addition to meetings of the women's career promotion project team, we held seminars andconferences for exchanging opinions for all female employees.

◎

P.35

- Partnerships with Group companies went smoothly.

◎

P.34

- Continued operation of daycare nursery inside Hulic's head office building.

◎

P.36

1

2

6

0

1

100%

100%

100%

100%

100%

70.9％

71.4％

71.6%

78.3%

77.0%★

- Promoted the use of the My Friday system, plus-one paid leave, and consecutive paid leaves

◎

P.36

- Provided thorough medical checkups and stress check tests

◎

P.36

Promoting health and productivity
management

Percentage of employees who took medical checkup: 100%

Hulic*

100％

100％

100%

100%

100%★

Human resource development

Number of newly obtained qualifications*10: No target (follow-up item)

Hulic

-

-

10

32

21

- Obtained qualifications of registered real estate broker, ARES Certified Master, Certified Building
Administrator, etc.

-

P.36

Number of compliance seminars attended: No target (follow-up item)

Hulic

-

5

5

5

5

- We carried out training on the Building Lots and Buildings Transaction Business Act, insider trading
regulations, etc.

-

P.46

Number of internal audits conducted: No target (follow-up item)

Hulic

-

8

9

11

9

- Internal audits implemented for Hulic and Hulic's group companies as planned

-

P.43

Corporate GovernanceParticipation rate in the Board of Directors' Meeting: No target (follow-up
item)

Hulic

-

98%

96%

97%

98%

- 17 Board of Directors' meetings were convened in fiscal year 2018. Participation rate covers all Directors
and Auditors.

-

P.42-44

Earthquake countermeasures for Hulic’s
buildings

Percentage of buildings that conform to new earthquake resistancestandards: 100%

All new office buildings
completed100%(1 buildings)

100%(9 buildings)

100%(2 buildings)

100%(6 buildings)

100%(11 buildings)- Adopted building structures that conform to new earthquake resistance standards in all new buildings

◎

P.31

Business Continuity Plan (BCP)

Number of inspections for BCP drills, stockpiled food and goods: Once ormore per fiscal year

Hulic Group

1

1

1

1

1

- Conducted disaster training, training on evacuating properties managed by Hulic in the event of adisaster, and first-aid training, etc.

◎

P.45

Improvement in customer satisfaction

Number of surveys on customer satisfaction: Once or more per fiscal year

Hulic Group

1

1

1

1

1

- A survey on the customer satisfaction of tenants was conducted through Hulic Building Management
acting as the contact point.

◎

P.30,32

Corporate social contribution

Number of social action programs: 4 programs or more per fiscal year

Hulic Group

9

12

13

16

21

- Supports for Japan Shogi Association and Japan Para-Badminton Federation, Held students' idea
competition, hosted summer festivals, donated to NPO organizations, donated to Ashinaga Scholarship
Society, opened the Company's daycare nurseries to the local community, etc.

◎

P.38-40

Supporting employees to conduct social
contribution activities

Number of social contribution activities by employees: 3 activities or more
per fiscal year

Hulic Group

6

6

6

6

6

- Participated in satoyama conservation activities, cleaning activities in local communities, flowerbed
maintenance activities, participated in gift-matching program, donated to the Ashinaga Scholarship
Society, and conducted activities to support disaster-hit areas, etc.

◎

P.37

8

Compliance*1 The unit calorific value and CO2 emissions factor for city gas are based on values from the “the greenhouse gas emissions accounting and reporting manual” issued by the Ministry of the Environment and the Ministryof Economy, Trade and Industry, while the CO2 emissions factor for power is based on the actual emissions factor of electric utility companies used by the target building. *2 CO2 emissions intensity is the sum obtained
through calculations that take the total floor area of the offices that use power and city gas, respectively as the denominator for each emission volume. *3 Since 2015, we have targeted the properties for office buildings
with floor area of 3,000m² or above and hotels managed by the Company, and excluded buildings in which a bank branch is the sole tenant, real estate for sale, and condominium ownership/shared ownership. The numberof target properties in 2015 and 2016 was 51, in 2017 was 55, and that in 2018 was 58. *4 Since 2016, we have aggregated city gas consumption of the companies with direct contracts with our group companies.
*5 The number of buildings for which construction was completed between January and December 2018, and which are the targets of greening projects. (excludes real estate for sale) *6 Data for 2012-2014 covers 16
primary office buildings; since 2015, however, seven buildings occupied by the head offices of Hulic’s Group companies, which are actively implementing measures to reduce the volume of waste, are covered in the data.

15

In order to improve while objectively assessing CSR activities, we have established key performance indicators (KPI) and target for each material CSR issue. For non-priority issues, we have adopted
an assessment indicator that helps us monitor the results of the implementation of initiatives. Figures marked with “★” are those that have been assured by an independent assurance provider.
This year, we received assurance from an independent assurance provider concerning the following eight items: power and gas consumption, CO2 emissions (Scope1, Scope2) and CO2 emissions
intensity, number of greening projects, waste disposal, water usage, employment ratio of the disabled, usage rate of paid leave, and percentage of employees who received medical checkups.
We will make efforts for constant improvement using the PDCA Cycle, while disclosing data on the progress of our CSR activities to the stakeholders.

Since 2017, the number of buildings occupied by the head offices of Hulic’s Group companies and covered in the data has increased by one to eight buildings. In 2018, it targeted nine buildings according to same reason.
*7 Usage rate of paid leave is calculated by dividing the "number of days of paid leave used" by the "number of days granted excluding leave carried over." *8 Of the executive directors, employees (including temporarilytransferred staff) and full-time contract staff, with the exclusion of employees on leave, those who belonged to the Company both as of the point of registration for medical checkups and as of December 31 are included in
the calculation. *9 The target subsidiaries are companies that have been certified as affiliated subsidiary companies under the Act on Employment Promotion etc. of Persons with Disabilities. *10 The target qualifications arethose which the Company recommends employees to acquire. *11 Targets for 2019 are now being developed. *Gas consumption in the fiscal year ended December 2017 was revised from 727,497m3 after a careful reviewof the gas agreements subject to aggregation.

16

SPECIAL FEATURE

Initiatives for
Fire-ResistantWooden Buildings
Since 2018, in response to the Forestry Agency’s promotionof expanded use of wood, one of our initiatives to reduce
CO2 emissions, we have been developing fire-resistantwooden buildings using timber that requires less energy for
manufacturing and processing.

Backgroundbehind our workon woodenbuildings

Reasons for ourwork on woodenbuildings

Case Study

1

Global trends: Paris Agreement; sustainable development goals (SDGs); environment,social, and governance (ESG) investment; etc.

2

Domestic trends: Promotion of expanded use of wood, forest conservation, etc. byForestry Agency

Ginza 8-chome Plan (Fire-Resistant Wooden Commercial Building)
We are developing Japan’s first 12-story fire-resistant wooden commercial building in Ginza, one of our focus areas, andconstruction will be completed around autumn 2021.

We established a plan to reduce CO2 emissions by 45% (compared with 2013) by 2030.
This initiative was started to help curb global warming by reducing CO2 emissions during
construction. Trees grow by taking in CO2 from the air and capturing carbon, so having anabundance of trees leads to increased CO2 absorption. The carbon captured by wood remains
inside even after it is used in buildings. We will contribute to the forest cycle by working on
wooden buildings and increasing our use of timber.

Advantage of using wood: Reduction of CO2 emissions via the forest cycle
By using trees that have grown into timber, we are able to plant new trees, which promotes the forest cycle.
This results in a fixed number of young trees in the forest, which absorb more CO2, leading to a reduction of CO2 emissions.
Image (exterior)

Plant

Grow

CO2

Featuresabsorption

New technology•Japan’sfirst12-storyfire-resistantwoodencommercialbuilding
There have been shorter ones, but this is the first wooden rental building of 11
stories or more.

Forest Cycle

Environmental friendliness

Timber use
helps keep forests
healthy

Use

Image (exterior)•Timberisalsousedfortheexterior
We will contribute to the forest cycle by increasing our use of timber.

Business continuity plan

Cut
(Thinning/final cutting)•Anelevatedwatertankandaholdingtankwillbeinstalled,soeveninthe
event of a disaster, tenants will have enough water for drinking and flushing
toilets for 72 hours.
•Anemergencygeneratorwillbeinstalledtoprovide72hours’worthofelectricity.
•ConsideringthelocationinGinza,equipmentwillbeinstalledonupperfloors
whenever possible to address the risk of high water, and one-meter highvertical damp-proof barriers will be installed.

It is necessary toincrease wood
use to promote
the forest cycle
Image (interior)

17

18

CSR Promotion Systems

FUNDAMENTAL
APPROACH

Hulic contributes to achieving a sustainable society by promoting
environmentally friendly management and proactively addressing global
environmental issues.

Hulic develops the CSR promotion system that functions effectively to promote CSR
management.
Results in
FY2018Social Background Surrounding Hulic

Held the CSR Committee and the CSR Supporter meetings

Environmental
Initiatives

Establishment of the CSR Committee
Hulic has established a CSR Committee in order to combine andalign its CSR-related initiatives with its business activities. It isessential for management personnel to be involved in boosting thelevel of CSR initiatives in the medium and long-term while striking
a balance between CSR-related measures and business activities.
Therefore, the CSR Committee is chaired by the President, consistsof Senior Executive Managing Officers, the General Manager ofthe Business Planning and Management Department, the General
Manager of the Real Estate Planning Department and the General
Manager of the Property Development Department. The Committee
is held annually in principle, and as needed. Company-wide

CSR activities are performed in accordance with the basic policy
decided by the CSR Committee. To be more specific, the Committee
formulates various kinds of policies concerning Company-wide CSR
activities and an annual CSR schedule, sets concrete numericaltargets, and considers and deliberates diverse proposals made byemployees, etc. Like this, in the Committee as a place to practically
implement CSR management, there are a lot of active discussions.
Activities of the CSR Committee are reported to the Board of
Directors on a regular basis.

In 2015, the 21st session of the Conference of the Parties to the United Nations Framework
Convention on Climate Change (COP21) was held and the Paris Agreement was adopted as a newinternational framework for reducing greenhouse gas emissions during the period after 2020. In
Japan, the government formulated the “Plan for Global Warming Countermeasures” amid increasingsocial needs for solutions to environmental issues.

Initiatives for Solving Social Issues› Initiatives for fire-resistant wooden buildings› Formulation of the long-term vision for the environment for 2050
› Formulation and implementation of the CO2 emissions reduction plan with 2030 as the target year
› Effective use of renewable energy› Waste reductions through proactive adoption of longer life building designs› Development and introduction of energy saving technologies› Initiatives for conserving biodiversity and greening

Summary of CSR Committee Meeting

Environmental Management

The 12th Meeting (September 2018) - Fiscal year 2017
performance/CSR plan for 2018/Areas of improvement
The CSR Committee discussed the change in CO2 emissions intensity, andinitiatives for reduction of waste, etc. Based on the discussions, the committee
decided the CSR Plan for 2018.
Flowerbed maintenance activities carried out by CSR supporters

FUNDAMENTAL
APPROACH

CSR Promotion Systems
Board of Directors

Results in
FY2018Initiatives for fire-resistant wooden buildings

Making a decision on allocation of resources(personnel, materials, money)
after receiving a report

Report to the Board of Directors

Proposal on measures to improve
KPI-related status reports

Hulic will implement environmentally friendly management based on the Hulic Environmental
Policy and contribute to conserving the global environment.

CSR Committee

Environmental Policy

Chairperson: President Members: Senior Executive Managing Officers, General Manager of the Business Planning andManagement Department, General Manager of the Real Estate Planning Department and General Managerof the Property Development Department

We have formulated an environmental policy that embodies our CSR vision, and practice management that gives consideration to the environment.

Business Planning and Management Department

Hulic Environmental Policy

CSR Supporter
Environment TeamInternal Environmental Improvement TeamSocial Contribution Team

Concerned material issues/KPI

Concerned material issues/KPI

Concerned material issues/KPI• Measures against global warming• Conservation of resources and reduction ofwaste at existing buildings• Reduction of waste in new construction andreconstruction works• Earthquake countermeasures for Hulic's buildings• Extending the life span of Hulic's buildings• Using renewable energy and developing new technologies• Greening buildings to prevent warming• Promoting use of supportive systems toraise children while working• Work-life balance• Promoting employment of the disabled person• Preventing crushing labor• Survey of customer satisfaction• Mental health• Activating the reemployment program• Reduction in power and paper consumption in office• Matching gifts

Real Estate Business Division

Matching Gift Council• Volunteer activities• Collecting stamps and used books, etc.
• Taking into account communities inreal estate development• Contributions

2

19

Employees

Customers

4

With environmental targets set, we make continuous
efforts for improving them while contributing to theconservation of the global environment.

Recycling Society
We contribute to the creation of a recycling society, promoting 3R,“Reduce, Reuse, Recycle,” through a life cycle of building.

Environmental Awareness and Education for Employees

5

We work on environmental education and awareness activities
in order to enable each employee to voluntarily act toward theimprovement of environmental performance.

Communication

Environmental Performance

Stakeholders
Shareholders,
Investors

We strive to create a sustainable society while
conforming to environmental laws and regulations.

Environmental Management System

Social Contribution Review Committee

Information disclosure

1

Environmental ComplianceBusiness Partners

Government andPublic Administration

Local Communities

Global Environment3

We reduce as much of our environmental load as
possible by introducing eco-friendly design from theplanning stage of development in order to increase
environmental efficiency.

Environmental Communication

6

We widely disclose information on Hulic's environmental
contribution activities, and communicate with stakeholders
including local communities in order to expand the circle of global
environmental conservation.

20

Environmental Management

Long-term vision for the environment
With the aim of contributing to the formation of a sustainable society by achieving the reduction of greenhouse gas emissions andthe improvement of energy saving through our business activities, and achieving sustainable growth by mitigating or avoiding theeffect of climate change, we have formulated a long-term vision for the environment with 2050 as the target year.

Road Map for Realization of Vision
2050
2030
Present

Long-term Vision for the Environment
Hulic promotes environmentally friendly management to realize a low-carbon society and a recycling society in 2050,
which Hulic considers to be ideal.

Formulation of a plan and goal for
reduction of amount of CO2 emissions,waste and water consumption
Control of progress for achieving goals

Current Recognition of Climate Change
We consider that climate change, including global warming, will provide our business with the following risks and opportunities in the short andlong term.
Short term (until 2030)

Risks•RiskofimplementingCO2 emissions trading system** If the amount of CO2 emissions exceeds the amount required to be reduced, building
owners are required to purchase emission rights.

•Anincreaseindemandforenergysavingproductsandservices

Opportunities•Anincreaseindemandforrenewableenergyandproceedsof
sale of electric power under the feed-in tariff scheme

Medium and long term (2030 and thereafter)

Introduction of environmental
technologies to buildings owned
Application of "Guideline forLonger Life Service" forreconstructed buildings

CO2 emissions reduction plan
By 2030, we will reduce CO2 emissions by
45% (compared with CO2 emissions in2013)

Promotion of energy
savings and utilization ofrenewable energy
Continuous promotion of development of
new technologies and introduction thereof
to owned buildings•Damagetobuildingsduetonaturaldisasterssuchaslargescale typhoons, tornadoes and heavy snow arising from climatechange•Procurementriskduetoenvironmentalchanges

Realization ofa sustainable society

Low-carbon society&
Recycling society

Combination of business activities and environmental initiatives
Promotion of ZEB•Developmentofnewtechnologiesforefficientutilizationof
natural energy•Anincreaseofopportunitiesforcooperativeprojectswiththe
government, local governments or private organizations, etc. torealize a low-carbon society

We hold up a “low-carbon society” and a “recycling society” as an ideal society based on our belief that effect of the risks listed above canbe mitigated or avoided by promoting efforts such as promotion of energy savings and utilization of renewable energy, and the reutilization of
resources.
In light of opportunities that have been brought due to climate change, we have worked on the reduction of energy use and the improvement ofefficiency in business activities in advance of other companies. In order to more effectively work on these issues, we will promote environmentallyconscious management while keeping up on trends of the industry over all through activities such as participating in meetings of the environmental
committee of the Real Estate Companies Association of Japan.

21

Setting of reduction goals ofenvironmental index andunderstanding of the progressSociety that Hulic
considers to be ideal

Example of Specific Initiatives for Achieving Vision
Natural ventilation and natural lighting systems developed
through cooperative research with MIT

Installation of photovoltaic
panels on rooftop and exterior
walls

Introduction of LED lighting,high-efficiency lighting andillumination control devices

Rooftop solar chimney(Hulic Head Office Building)

Photovoltaic panels(Hospitalment Itabashi Tokiwadai)Space with LED lighting system(Hulic Asakusabashi Building)Natural lighting louvers(Hulic Head Office Building)22

Climate Change Countermeasures

FUNDAMENTAL
APPROACH

Hulic implements climate change countermeasures to achieve its CO2 emissions reduction plandeveloped in 2017 (target year: 2030).
Results in
FY2018CO2 emissions intensity:

80.8kg-CO /m Number of capital investments for renewable energy: 6 investments
22

CO2 Emissions Reduction Plan for 2030
By 2030, we aim to reduce CO2 emissions by 45%•WeaimtoreducetotalCO2 emissions, in principle,
from fiscal year 2013.
•AlongwithtotalCO2 emissions, we will identify CO2emissions from individual buildings with the aimof verifying the CO2 reduction effects from a single
building.

Actions on Climate Change
The 21st session of the Conference of the Parties to the United
Nations Framework Convention on Climate Change (COP21),
held in December 2015 in Paris, adopted the Paris Agreement
as a new international framework for reducing greenhouse gas
emissions after 2020. In Japan, discussions on specific measures
to address climate change are picking up momentum with theformulation by the government of the “Plan for Global WarmingCountermeasures,” which sets the target for reducing greenhousegas emissions of 26% by FY2030 from the level in FY2013. In
addition, companies in the “commercial and other sectors” arerequired to reduce emissions by 40%.
In accordance with these changes in the external environment,
Hulic reviewed the existing plan to reduce CO2 emissions with theyear 2020 as the target year, and formulated a new CO2 emissions
reduction plan in 2017 with the year 2030 as the target year.
Regarding the current progress of the existing CO2 emissions
reduction plan (target year: 2020), we have achieved the target on
the basis of our consumption of primary energy.

Adoption of Energy-saving Technologies, etc.
1. Buildings: Improve building envelope performance (improvewindow specifications and enhance heat insulation capacity, etc.),
introduce natural ventilation/lighting systems, and adopt greeningof rooftops/walls, etc.
2. High-efficiency devices/systems: Work to reduce the outdoor
air load by adopting LED lighting, high-efficiency devices, totalheat exchangers, motion detectors/light control sensors, and CO2
sensors, and use cogeneration/fuel cells, untapped energy, andheat interchange systems, etc.
3. Others: Work to introduce renewable energy, promote onsite/
offsite photovoltaic power generation, and visualize energy
consumption, etc.

Road Map for 2030

45%
reduction

2030

CO2 emissions : 149,113 t-CO2 (estimate)
Various measures for energy-saving andreduction of CO2 emissions intensity of
power sources

Improve the performance of energy-saving technologies anddevelop new technologies, while promoting the adoption ofrenewable energy, etc.

2013

CO2 emissions: 259,330 t-CO2 (estimate)

Basic Plan to Achieve the Goal
Properties for reconstruction
Reduce energy consumption by an average of 25% by implementing
various energy-saving measures.
Properties requiring maintenance/renovation properties to be
newly purchased
Reduce energy consumption by an average of 5% by implementing
facility renovation (increasing value), and the use and operationalarrangement of green leasing*.
All buildings
Endeavor to reduce energy consumption with cooperationfrom tenants by taking measures such as visualizing the energy
consumption of each building.
*Under green leasing, building owners collaborate with tenants and make voluntary arrangementson reducing environmental impacts through energy-saving measures for real estate and improving
the work environment by specifying in a contract or memorandum of understanding, etc., andimplement the agreements.

23(environment)), and has set the target for the number of capital
investments on renewable energy at three investments or more ineach year.

Photovoltaic Generation System

Adoption of Energy Saving Technologies

We have been making every effort to reduce CO2 emissions throughphotovoltaic power generation by installing a photovoltaic cell
module on the rooftop of buildings. On the rooftop of Sonare
Shakujii, completed in 2018, a 3.3 kW photovoltaic generation
system with a capacity togenerate upwards of 3,400
kWh of electricity every
year has been installed.

Hulic has actively promoted energy savings, use of renewableenergy, and greening promotion, etc. as measures for climatechange in engaging in new development and managing existingbuildings owned by Hulic. Specifically, we use high-efficiency
equipment, air conditioning systems, total heat exchangers, andcogeneration systems/storage batteries depending on the featuresof properties. In addition, we will proactively introduce new energy
saving technologies and improvements of existing performance. In
addition, Hulic will conduct research and development on energy
saving technologies.

Photovoltaic panels installed on therooftop of Sonare Shakujii

Initiatives for Achieving ZEB through Mega
Solar Power ProjectWith environmental issues becoming more serious, inNovember 2014, Hulic decided to invest and become involvedin a mega solar power plant project located in Hirono Town,
Futaba District, Fukushima Prefecture, in order to address
society's needs to strengthen our efforts toward environmental
management. We expanded the initiative to Ogoyama Town in
Kasama City, Ibaraki Prefecture in 2015, and to Yokoshibahikari
Town in Sanbu District, Chiba Prefecture in 2016. Using thesolar power plants at these three locations, we are working
toward achieving offsite ZEB at the Hulic Head Office Building.
ZEB is an acronym for zero energy building. ZEB means thata building uses zero net primary energy annually thanks to
improvements made in the energy efficiency of the building
and its facilities as well as the use of renewable energy. As
the Hulic Head Office Building is a building with high energysaving performance which has been introduced energy saving
technologies such as natural lighting and natural ventilation
systems, it has been able to reduce the amount of energy
consumption by about 40% compared to the amount of energy
consumption in other general buildings. The remaining 60% is
sourced from renewable energy. Therefore, the Hulic Head Office
Building is close to being a ZEB.
Effect 1

Initiative for achieving offsite ZEB through the use of renewable energy

Effect 2

Electricity sales income, etc. (Hulic Building Management Co., Ltd.)

Effect 3

Contribution to Great East Japan Earthquake recovery efforts through theoperation of the solar business in Fukushima Prefecture

General
Building

Initiatives for Utilizing Renewable Energy
The Hulic Group promotes the eco-business as one aspect of our
3K businesses (Koreisha (seniors), Kanko (tourism), and Kankyo

Primaryenergyusage

Renewableenergy
usage

100%
60%

Improvement of energy efficiency• Improve building envelope performance• Use natural lighting• Use natural ventilation• High efficiency air conditioning• High efficiency lighting

Utilization of renewable energy

60%

Activities to Promote Energy Saving
Cooperation with Building Management
Companies
We have created an energy management standard, which weshare with property management companies in charge of ourproperties, in order to rigorously manage the progress of energy
conservation. activities. The energy management standard
was created to promote more efficient energy saving activities
at buildings, and it serves as a guideline for management,
measurement, recording, maintenance, and inspections related to
the rationalization of energy use based on building type and size.
This standard applies to all forms of energy, including electricity,gas, and water (water and sewerage).

Introduction of Energy Saving Measures in
Cooperation with Tenants
We have introduced an energy use visualization system on a trial
basis to examine measures for saving energy at tenants and for
reducing the electricity consumption of an entire building. We havestarted by monitoring electricity use in one building for a year ona trial basis, and will expand the target buildings for which energy
savings can be achieved.
Based on the building's electricity consumption for one year,
adjustments will be made with each tenant, then we examine
equipment settings and propose utility cost reduction measuresthrough more efficient operations, and implement small-scalerenovations as needed.

Use of Systems that Make it Easier for
Tenants to Conserve Energy

Hulic Head Office
Building

40%

Effective Use of Renewable Energy

Promotion of Energy Saving• Utilize renewable energy to reduce thenet use of primary energy to as close
to zero as possible

The Hulic Group has begun rolling out a visualization systemthat freely controls air conditioning use in order to provide a
better understanding of a building's use of energy. This systemenables tenants to set the optimal
working environment temperature
for their business and makes it easier
to implement energy conservation
measures.
Visualization system (Hulic Asakusabashi Building)24

Climate Change Countermeasures

Environmental Management System(EMS)

Situation of Greenhouse Gas Emissions
Energy Consumption and CO2 Emissions at
Hulic's Buildings

Promoting Initiatives Across the Entire
Value Chain

In tandem with our business expansion, we increased the numberof properties to be included in this report since 2015. With theincreasing target properties, we aim to further promote energysaving activities. We will work proactively toward our goal of
reducing CO2 emissions by 45% from 2013 by 2030.

The Hulic Group promotes environmentally friendly processes acrossthe entire value chain which covers from acquisition, development,
reconstruction, and leasing to management and maintenance ofproperties.
In addition, the Hulic Group calculates not only its own emissions(Scope 1 and Scope 2), but also indirect emissions related to its
business activities (Scope 3) to broadly understand and lower
greenhouse gas emissions across the entire value chain.

Energy Consumption/Intensity*
Energy Consumption(GJ)

2.5

28,710800,000

33,021

31,684

657,751

652,433

794,502
1.6

1.5

1.4

Category

2.0

797,938

1.7

1.5

1.0

400,000

19,712

0

20
blds

51
blds

51
blds

55
blds

58
blds

2014

2015

2016

2017

2018

Gas consumption (GJ)

Power consumption (GJ)

Note 1: As the target buildings for calculation increased from 2015, energy consumption is on the rise.
Note 2: 0.00997 GJ/kWh and 0.00928 GJ/kWh are used as the unit calorific value for day-time power
and night-time power, respectively, and 44.8 GJ/thousand N m3 for city gas.

CO2 Emissions/Intensity*
CO2 emissions(t-CO2)

CO2 emissions intensity(kg-CO2/m2)
100.0

50,00074.7

30,000

77.6

77.7

1,648

1,581

33,84833,64780.7
1,433
39,76280.8★
1,178★

60.0

40.0

12,221

20.0

20
blds

51
blds

51
blds

55
blds

58
blds

2014

2015

2016

2017

2018

CO2 emissions intensity

Scope 1 emissions (gas)

0
(FY)

2018

Purchased goods and services

351.0

385.1

371.9

Fuel- and energy-related activities (notincluded in scope 1 or scope 2)

Electricity use (58 key buildings)

2,348.02,850.6

2,860.3

Upstream transportation and distribution

Shipping parcels and letters (Hulic
Co., Ltd.)

30.8

32.3

31.4

Waste generated from operations

Waste generated from 9 key
buildings

42.7

46.9

67.9

Business travel

Travel by train, bus or airplane,
etc. (Hulic Co., Ltd.)

58.4

71.3

98.7

Employee commuting

Employee commuting by train orbus, etc. (Hulic Co., Ltd.)

40.8

45.3

44.6

2,871.7

3,431.5

3,474.8

Note: We have calculated greenhouse gas emissions, including those from the entire value chain,based on the Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout theSupply Chain Ver. 2.3 published by the Ministry of the Environment.

Green Procurement Initiatives
In order to work on the reduction of environmental impacts throughour entire operation, we ask our business partners such as suppliers
to cooperate in the following green procurement policy:
1. To engage in energy-saving activities and reduce GHG emissions;
2. To reduce the amount of water consumption as much as possible;
3. To carry out a biodiversity-friendly business;
4. To fully prevent environmental pollution; and5. To make efforts to save resources and reduce the amount of waste.
TOPICS

Ranked 1st in the Real Estate/ Warehouse Industry
for the Ninth Consecutive Year in the “Environmental
Management Survey”
The "Environmental Management Survey," which is a survey that has
been annually conducted by Nikkei Inc. since 1997, announces rankings ofcompanies excellent in their approach to environmental management basedon each company's answers to a questionnaire.
Hulic has ranked first in the category of warehouse, real estate and others
for nine consecutive years since the 14th Environmental Management Survey
in 2010. Given that we were able to achieve another high score, we willcontinuously promote environmentally-conscious management and be committed
to combining global environmental conservation with corporate growth.

Scope 2 emissions (power)

Note 1: Figures marked with “★” have been assured by an independent assurance provider.
Note 2: As the target buildings for calculation increased from 2015, CO2 emissions are on the rise.
Note 3: CO2 emissions intensity is the sum obtained through calculations that take the total floor areaof the offices that use power and city gas, respectively as the denominator for each emission
volume.
Note 4: 0.0136tC/GJ is used as the emissions factor for city gas.

25

2017

80.0

983

0

2016

38,799★

20,00010,000Main target for calculation
Consumables, office goods (Hulic
Co., Ltd.), water and sewerage (58key buildings)

0
(FY)

WEB

President

Unit : t-CO2

Scope 3 total emissions

0.5

219,943

Intensity of energy consumption

40,000

Scope 3 Emissions

23,6071.2

200,000

Environmental Management System

Intensity of energy consumption (GJ/m2)

1,000,000

600,000

Hulic Group is smoothly executing the PDCA Cycle with its unique
Environment Management System (EMS) built based on the “Hulic
Environmental Policy." This system is operated cooperatively withGroup Companies, according to targets set by the ESG project teamheaded directly by the President.
To monitor the progress of environmental activities of Hulic Group,
we adopt evaluations by the “Board of Directors” for internalmatters and by the “Environmental Advisory Council” for externalmatters. The results are reported to the CSR Committee and the ESG
Project Team, and are reflected when reviewing the environmental
promotion system and setting targets.

Climate Change Countermeasures
https://www.hulic.co.jp/en/csr/ecology/warming/* Energy consumption from gas use in 2017 was revised from 31,516GJ, and Scope 1 emissions (gas)were revised from 1,573t-CO2 after a careful review of the gas agreements subject to aggregation.

ESG (Environment, Social,
and Corporate Governance)
Project Team
PLAN

Business Planning andManagement Department

DO

Technology andEnvironment Development
Department Real Estate
Planning Department

CHECK

Board of Directors

Hulic Build Co., Ltd.
Hulic Building
Management
Co., Ltd.

ReportCHECK

External assessment
Environmental
Advisory Council

ReportACTCSR Committee

Environmental Advisory Council
We have an Environmental Advisory Council in place to assess
Hulic's environmental activities, including response to climatechange to receive advice and opinions from external experts.
External experts and the Chairman, President, Senior Executive
Managing Officers, General Managers of real estate, andenvironment-related departments attend Environmental Advisory
Councils. The results of the councils are reported at meetings of theBoard of Directors presided over by the President, Representative
Director of Hulic on a regular basis.
At the 10th Environmental Advisory Council, the progress of theCO2 emissions reduction plan formulated in 2016 was reported,
and we received advice from the council members on methods toreduce CO2 emissions. In addition, the council discussed initiatives
for fire-resistant wooden buildings.

Consideration for Sustainability in Real
Estate Development and Investment
Hulic is committed not only to sustainable real estate investment
in accordance with the “Basic Principles of Corporate Conduct”
and “Our Code of Conduct”, but has also formulated separate
regulations on managing real estate purchases and development.
When conducting an investigation of the acquisition of real estate,
Hulic always carries out statutory investigations and conduct
studies on natural environment, specified hazardous substances,and the presence of underground obstacles. In negotiations with
communities, we provide explanations to those who live nearby
after conducting sufficient investigations and simulations on theimpact on the surrounding living environment so that we can gain
their understanding.
When outsourcing design and project management or ordering
construction work, we generally hire companies with the solid
technologies, credibility, and track records. In addition, whenreconstructing and developing real estate, we issue instructions
on environmentally friendly designs and check whether
environmentally friendly designs are adopted at the basic designingstage, implemental designing stage, and completion stage.

Environmental ComplianceWith the aim of thoroughly complying with laws and regulations
related to the environment, including waste and soil pollution, theHulic Group conveys to all employees information on the latest
trends in environmental laws and regulations and legal systems
through the intranet, and provides environmental compliancetraining as needed.
We use opinions raised during the compliance training in thesubsequent formulation of environmental policies.
There were no violations of environmental laws and environmental
accidents in fiscal year 2018.

Environmental Education
The Hulic Group participates every year in the Tokyo Greenship
Action, organized by the Bureau of Environment of the Tokyo
Metropolitan Government, to raise environmental awareness, andengages in volunteer activities such as rice harvesting and trimming
weeds and shrubs at the foots of mountains. These activities, withparticipation by many employees every year, provide them good
opportunities to learn about biodiversity.
The Technology and Environment Development Department, which
promotes the environmental businesses of the Group, provides
training on energy saving designs and biodiversity, etc. for new
employees yearly.

WEB

Environmental Management
https://www.hulic.co.jp/en/csr/ecology/management/

26

Building a Resource-recycling Society

FUNDAMENTAL
APPROACH

We are proactively working to reduce waste and water consumption in cooperation withtenants and building management companies toward the realization of recycling society. For
reconstructing buildings, we endeavor to reduce environmental impacts by promoting the 3R(reduce, reuse, and reycle) through the adoption of Longer Life Building designs that enable toreduce waste significantly and effectively utilizing resources.
Results in
FY2018Hulic's Longer Life Buildings completed based on the standards established in the “Hulic Guideline for Longer Life Service”:

11 buildings

Prevention of Pollution and Preservation of Water
Prevention of Pollution

Efforts toward Recycling of Water

The Company considers that the minimization of environmental
pollution due to business activities is indispensable to realizea recycling society. Thus, we have worked on the reductionof emission of pollutants, including CFCs and PCBs with thecooperation of design companies and construction companies, aswell as endeavoring to adopt construction methods that reduce
pollutant discharge as much as possible.
In addition, we have collected data of SOx, NOx, VOC and toxic
waste generated from reconstruction activities in the past andidentified the amount of those substances generated.

We are engaged in not only the reduction of water consumption,
but also the recycling of water in buildings owned by Hulic. In Hulic
Setagaya, completed in 2014, we made efforts toward effective
utilization of limited water resources by reutilizing rain water for
sprinkling and washing for toilets.

Resource-saving and Reduction ofWaste in Buildings Owned by Hulic andReconstruction of Buildings
As a result of our steady efforts to realize a recycling society, we
have reduced the amount of waste by 12% (the reduction rate
calculated based on the total floor area in comparison with theaverage amount during the period from 2013 to 2016 and theaverage amount during the period from 2005 to 2007). From theviewpoint of a business operator, we have also adopted the PC
method,* which can substantially reduce the amount of resources
used and waste at the time of construction of buildings, includingreconstruction. We have reduced impact on limited resources bothfrom input and output perspectives. In recent years, we adopted the
PC method to construct Hulic Residence Chofu Shibasaki.
* PC (precast concrete) method: The method of assembling precast wall panels, which are
manufactured at a factory under consistent quality control, after carrying them to a construction site.

Waste Disposal

2017

1,200

2018

62

42

0.05

418

281

-

VOC emissions (kg)

-

51

151

0

525
7
blds

We received the Outstanding Performance Award for our efforts to train
environmental personnel at the 2018 Environmental Human Resources
Development Corporate Awards (organized by the Ministry of the Environment
and the Environmental Consortium for Leadership Development). This award ispresented to companies that train human resources that recognize the necessityof environmentally-conscious corporate management and take voluntary action
to make that a reality.

Rain water reutilization equipment at Hulic Setagaya

In order to reduce the amount of water consumption in buildings
owned by Hulic, we have taken the initiative of putting watersaving devices on water taps installed in the plumbing of existingbuildings owned by Hulic. Installing a water-saving device can saveabout 40% per tap. In addition, we are introducing water-saving
toilet bowls and sinks into the existing buildings owned by Hulic as
the standard type.

2016

Standard
proposal

Water Consumption(m3)

500,000
436,882
381,553

400,00051
blds

401,272
51
blds

55
blds

420,076★
58
blds

2017

2018 (FY)

Longer life
building
proposal

0

2017
8blds
296
29
325
218
68
286
611

2018
9blds
348
80
428
629
109
738
1,166★

Steel materials purchase volume (ton)

2016

2017

2018

688

2,315

5,956

2015

2016

2017

2018

* Since fiscal year 2015, we have been targeting key buildings with total floor area of 3,000 m2 or
more. In 2018, the number of target properties was 58.

60

80

100

(kg/m2 per year)

New
construction

12

Reconstruction

Longer life
building
proposal

5

0

2

4

Amount of Waste
Generated Reduced by

6

8

10

LCCO2 (Life-Cycle CO2)LCCO2Reduced byStandard
proposal

56

Renovation

%

12

6

%

14

263

Demolition(kg/m2 per year)

New
construction
Reconstruction
RepairRenovation

Longer life
building
proposal

247

Maintenance
Energy

0

50

100

150

200

250

300 (kg-CO /m per year)22Standard proposal : The case of reconstruction twice every 40 years
Longer life building proposal : The comparison of a longer life building
which can be renovated without the need to move tenants out
As 3/4 of LCCO2 or more is CO2 that accompanies energy
consumption, the effect of a reduction in CO2 emissions from extending
service life is underestimated. However, the amounts of resources
injected and waste generated are reduced 50% or more.
* Calculated with the LCA tool of the Architectural Institute of Japan(FY)

Figures marked with “★” have been assured by an independent assurance provider.

40

Renovation%

Standard
proposal

Effects* Figures are only for reconstructed buildings completed in each year and for which data werecollected.

2014

20

52

Amount of Waste Generated

Target forcomparison

Raw Materials Purchase Volume

20
blds

Reconstruction

Repair(ton)* Since fiscal year 2015, we have been targeting buildings owned by Hulic. These buildings include
Hulic Group companies' head offices as tenants which are proactively working to reduce waste
generation. The 2018 result is higher, because Porte Kanazawa, which has been subject toaggregation since FY2018, is a large building.

127,745
100,000

2016
7blds
240
28
268
195
61
256
524

Amount of resources
input reduced by

41

0

Figures marked with “★” have been assured by an independent assurance provider.

300,000

New
construction

85

RepairWaste that Can and Cannot Be Recycled
カテゴリー
Number of target buildings
Paper
Waste that can be
Bottles, cans, plastic bottles
recycled
Total
Other general waste
Waste that cannot be
Industrial waste
recycled
Total
Total of waste that can be recycled and waste that cannot be recycled

200,000

Effective Utilization of Water in Buildings
Owned by Hulic

2015

524
7
blds

Amount of Resources Input

611
8
blds

* Since fiscal year 2015, we have been targeting buildings owned by Hulic. These buildings include
Hulic Group companies' head offices as tenants which are proactively working to reduce waste
generation. The 2018 result is higher, because Porte Kanazawa, which has been subject toaggregation since FY2018, is a large building.

TOPICS

27

16
blds

2014

Environmental Advantages of Longer Life Buildings

1,166★
9blds

Figures marked with “★” have been assured by an independent assurance provider.

* Figures are only for reconstructed buildings completed in each year and for which data werecollected.

Outstanding Performance Award at 2018
Environmental Human Resources Development
Corporate Awards

2 Smoother updating and renovation
3 Advanced maintenance

1,027

300

NOx emissions (kg)1 High earthquake resistance and high durability

Longer life buildings

600

SOx emissions (kg)

Hulic Guideline for Longer Life Service

1,500

Amount of emission of SOx, NOx and VOC
in the past three years
2016"Hulic Guideline for Longer Life Service" is composed of threeideas, 1) high earthquake resistance and high durability; 2)smoother updating and renewal; and 3) advanced maintenance.
High-grade building frames are ensured so as to continue to be
used for over 100 years in safety, and on the other hand we havecreated the possibility to reform a building's exterior to be up-todate through a flexibly modified layout.
Longer life buildings that can be used for over 100 years can reduce
waste generation and resources used for reconstruction by 50% ormore compared to the cases in which buildings are reconstructed
every 40 years as before (standard plans). We have adopted longer
life designs for all reconstructed buildings completed in 2018 or forwhich the construction was started in 2018.

(t)

900

カテゴリー

Creating a New Standard of Buildings that
Last 100 Years

Efforts for Resource-saving andReduction of Waste

Batten cleats purchased volume (m3)Plywood purchased volume (m3)
Lumber purchased volume (m3)

2016

2017

2018

33
60
93

91
91
182

87
233
320

WEB

Waste Countermeasures
https://www.hulic.co.jp/en/csr/ecology/waste/* Figures are only for reconstructed buildings completed in each year and for which data werecollected.

28

Biodiversity/Encouraging Greening

FUNDAMENTAL
APPROACH

Hulic places emphasis on dialogues with our stakeholders and aims toachieve a society where people live safely, securely, and comfortably.

Hulic is carrying out initiatives that increase biodiversity in order to create urban spaces thatare in harmony with the environment.
Results in
FY2018

Number of greening projects:

9 projects (Target: properties completed in 2018)

Biodiversity Guideline

Greening Initiatives

Hulic is carrying out initiatives that increase biodiversity in orderto create urban spaces that are in harmony with the environment.
Hulic recognizes the importance of biodiversity's impact for theliving environment, and in order to contribute to biodiversity, we
have created the Declaration of Biodiversity Conservation andmade this known to all of our organizations.

We have put emphasis on greening which can effectively ease
the heat-island phenomenon as a part of our measures against
global warming. Proactively planting trees and plants on premises,
we provide places where people living in the town can relax.
Our greening projects aim to create lush green urban spaces
and to harmonize with nature while considering biodiversity. In
addition, we have jointly developed with other companies andcommercialized thin-layered wall greening system that can be easily
introduced to the existing buildings.

Biodiversity Guideline
Strongly recognizing the rapidly vanishingbiodiversity worldwide, Hulic strives to conserve biodiversity
through activities in harmony with business activities
with the goal of handing overa rich nature to future generations.

Approaches to JHEP Certification
Hulic carries out efforts to conserve and restore local vegetation aspart of its reconstruction projects for company-owned properties
from the standpoint of safeguarding biodiversity.
Our approach to biodiversity and many projects have received
high praise within the JHEP certification program operated by the
Ecosystem Conservation Society - Japan.

Primary Certified Properties
Rank ofCertification

Date of Certification

Aristage Kyodo

A

January 2017
(Initial certification: January 2012)

Hulic Residence Tsudanuma andHulic Garden Tsudanuma

AA

December 2016
(Initial certification: December 2011)

Hulic Residence Senriyama

A

Hulic Court Yukigaya

AGranda Omori Sannou

A

Construction of Hulic Setagaya

A

Name of ProjectDecember 2016
(Initial certification: December 2011)
October 2016
(Initial certification: October 2011)
October 2016
(Initial certification: October 2011)
November 2014

Greening on Rooftops and Premises/
Greening on Walls
It is possible to achieve energy-saving effects by reducing air
conditioning loads and improving heat insulation performance byblocking sunlight with roof greening to prevent heat accumulationin concrete. As for greening of office buildings, we take theimprovement of scenery, the condition of the location, ease of
repairs, and vegetation that can withstand strong winds as our
main considerations when selecting a plant.
Covering a building exterior with plants, wall greening can bea countermeasure against theheat-island effect by utilizing thetranspiration effect.
In addition, as it improves theamenities of the building, soothing
effects for people walking on thestreet are also expected.

Case Study

HULIC Residence Shin-Ochanomizu(Completed in December 2018)

Located about one-minute by foot from Shin-Ochanomizu Stationon the Tokyo Metro Chiyoda Line, this property is an urban
residential complex that offers great convenience.
Facing Hongo-dori, the property is an expression of the everchanging Surugadai of the future featuring a sharp, futuristic
exterior design. At the same time, the textured materials, including
green walls and naturalstone, provide a gentle
welcome to tenants.
We also constructeda rooftop greening
terrace where tenants
can enjoy seasonal
plants and form acommunity.
Rooftop greening terrace at HULIC Residence Shin-Ochanomizu

WEB

Biodiversity/Encouraging Greening
https://www.hulic.co.jp/en/csr/ecology/communication/communication.html

Social Background Surrounding Hulic
In 2015, the UN summit adopted the Sustainable Development Goals (SDGs), setting goals suchas securing health for all and eliminating gender discrimination, which indicates that interests inaddressing social issues have been gathering momentum.
In Japan, society's needs are growing in response to various social issues, such as measures toprepare for natural disasters, measures for an aging population, and initiatives for work-stylereforms including the reduction of long working hours.

SocialInitiatives

Initiatives for Solving Social Issues› Proactively adopt earthquake-absorbing and earthquake-damping structures, and conductdisaster training› Promote women's active participation and advancement in the workplace and employment of
persons with disabilities› Promote the use of paid leave and implement measures to prevent long working hours› Cooperation/collaboration with NPOs and local governments, etc.

Initiatives for Our Customers

FUNDAMENTAL
APPROACH

We are constantly working to generate new added value by offering properties that are superior
in terms of safety, environmental performance, and convenience. In addition, we have establishedvarious emergency and disaster scenarios, for which we have created measures to improve thestructural performance of our buildings, as well as operational and management aspects of buildings.
Results in
FY2018Customer satisfaction:

93.7% * See “Customer Satisfaction Survey” on page 32.

Efforts toward the Improvement inCustomer Satisfaction
As office buildings, stores, and residences owned by Hulic serveas the infrastructure for customer's social activities, we are aiming
to constantly improve their quality under the philosophy ofproviding customers security and convenience. In order to satisfy
all customers using buildings including tenants and visitors to thebuildings, we thoroughly stick to meticulous quality control, careful
maintenance, and security to protect assets.

Maintenance and Improvement of Quality andEnsuring Uniformity in Quality of Hulic's Buildings
Holding regular management status reporting meetings withproperty management companies
Hulic regularly holds property management status reporting
meetings with property management companies to check theimplementation status of management work, including complying
with laws and regulations, and receive reports on various problems
related to buildings, including the results of measures to fix defects
that have occurred in buildings. In this way, we are promoting themaintenance and improvement of quality, as well as unifying thequality of overall property management and operation services.
Quality evaluation for management companies
Each year, Hulic evaluates the implementation status ofmanagement work and provides property management companies
with feedback to improve and unify the quality of their work.

We use the results of evaluations as information to decide whether
to continue to entrust management work with the current property
management companies in accordance with the rules for realestate outsourcing management.
Specific primary evaluation items- Confirm to check if maintenance work for buildings and facilities,
including complying with legal requirements applicable tobuildings, has been performed systematically and thoroughly
without omissions as stipulated in the contract.
- Confirm the status of legal compliance, including the status of
renewing the verification due date of measuring instruments, etc.
and submission of mandatory inspection results reports to thecompetent regulatory authorities.
- Confirm that defects occurring unexpectedly, including those pointedout during the legal inspection, have been fixed without delay.

Continuous Provision of a Safe, Secure, andComfortable Work Environment
Systematic implementation of preventive maintenance ofbuildings and facilities
We systematically renovate and upgrade buildings and facilities every
year, including statutory improvements to buildings and facilities,
proactive renovations to ensure energy-saving/up-to-date facilities, andimplementing extensive preventative
maintenance work before defects occur
in buildings and facilities, with the aim ofproviding a safe, secure, and confortable
work environment for tenants.
Property management status reporting
meeting with management companies

29

30

Initiatives for Our Customers
Thorough Implementation of an Earthquake
Resistance Diagnosis and Seismic
Reinforcement

Proactive Adoption of Earthquakeabsorbing and Earthquake-damping
Structures

As Japan is one of the countries where earthquakes mostfrequently occur, Hulic, a real estate business operator, regards
countermeasures for earthquake as one of the top priorities. We
believe it is our responsibility to strive to ensure earth quakeproof building safety, in order to enable tenants to conduct social
activities with ease.
Earthquake resistance diagnosis, reinforcement works, andconfirmation of validity of structural calculation
We diagnosed the earthquake resistance of all Hulic's properties
that were built before the new earthquake resistance standards
were established*1, and all buildings that did not meet theearthquake resistance standards underwent seismic reinforcement.
In relation to the office buildings which were determined to requirereconfirmation*2 although constructed after the new earthquake
resistance standards, we also rechecked their structural calculations
to confirm the validity of their structural design.

In order to protect human life and facility functions from large
scale earthquakes, we have imposed high seismic capacity on
newly constructed buildings. With the aim of protecting customers'
lives and contributing to business continuity, we have proactively
adopted an earthquake-absorbing or earthquake-damping structure
which is effective at ensuring a high seismic capacity, in addition toother methods to improve the seismic capacity.
Earthquake-absorbing structures
By isolating the building from the ground with a mechanism called
an isolator, seismic energy is absorbed to reduce the intensity ofshaking to 10%-50% compared to other general earthquakeresistant structures. Another feature of this structure is that how abuilding shakes during an earthquake does not differ significantly
between upper floors and lower floors of the building. Sendai First
Tower, a jointly developed building completed in Sendai where
earthquakes occur frequently, is one of the few buildings with thisearthquake-absorbing structure. Our stance toward ensuring safety
is highly evaluated.

*1 Excludes buildings with box frame type concrete construction and buildings that will bedemolished.
*2 Includes office buildings for which appropriate structural calculations could not be reconfirmed.
For example, if the architectural firm that implemented the structural calculation had alreadydiscontinued its business.

General Building

Earthquake-absorbing Structure

Shaking violently

Slow and parallel shaking

Customer Satisfaction Survey*
We conduct a customer satisfaction survey once a year to ensure
tenants of Hulic's properties (corporate tenants) are able to use
the buildings comfortably. Survey items include matters concerningbuilding hardware and software, and things customers have noticed
while using our buildings on a daily basis. We check the responsesof customers, and then take steps to identify latent customer needs
and make improvements accordingly.
In the survey conducted in 2018, we consistently received highratings. This mainly reflects our planned facility reinforcement andquick response to the matters requested by customers. In addition,
responsible staff individually explained matters requested bycustomers in relation to the survey items or responded to them.

Responsible Marketing

Deforming
laminated rubber

Liquefaction Countermeasures
After the Great East Japan Earthquake, extensive regions including
coastal areas suffered from the occurrence of liquefaction
phenomena which caused leaning and sinking of buildings.
According to the liquefaction map, it was found that 11 buildings
owned by Hulic are located on the ground with a possibility ofliquefaction. When designing those buildings, we carefully checked
the possibility of liquefaction, and implemented endurance tests
as needed. As they were also constructed on a pile foundation
resistant to liquefaction, it can be considered that Hulic's buildings
would not be influenced by liquefaction.

Measures against Water Damage
When electric facilities, etc. are damaged by flood in a basement,
the supply of power which is essential for the use of buildings may
stop. We investigate the status of buildings with power receiving
and transforming facilities and private power generators installed in
the basement, and implement necessary flood control measures, in
preparation for unexpected tsunamis.
In addition, as measures to deal with recently increasing torrential
downpour, etc., a rainwater storage tank has been installed in Hulic
Fukasawa completed in 2017.

31

Earthquake-damping structures
With earthquake-damping materials (earthquake damper) installedinside the building, internal seismic energy is absorbed to reducethe intensity of shaking from half to one thirds compared with othergeneral earthquake-resistant structures. In addition to the case ofincreasing the safety further by combining this with a earthquakeabsorbing structure, we preferentially employ the earthquakedamping structure in the case that the earthquake-absorbing
structure is physically unavailable due to constraints including land
contours. Hulic has incorporated this method in many properties.
General Building

Building with Earthquakedamping Structure

Shaking violently

Light shaking

WEB

Initiatives for Our Customers
https://www.hulic.co.jp/en/csr/customers/

Hulic has set out the principle of “treating customers faithfully
and kindly, listening to their requests with sincerity and providing

Promoting 3 Future Growth Businesses (3K Businesses) for Resolving Social Issues

Initiatives for Tourism-related BusinessInitiatives for the Senior Citizen-related Business

The number of accommodation facilities
owned by Hulic as of December 31, 2018: 15

The number of Senior Citizen Housing Facilities owned
by Hulic as of December 31, 2018: 26

Case study

Earthquake-absorbing equipment

sophisticated, efficient and high-quality services” in the Basic
Principles of Corporate Conduct and endeavors to build positive
relationships with customers. In addition, we obtain the necessary
permits and licenses for conducting business operations and comply
with matters stipulated by various business laws and regulations.
With regard to important company information, we aim to disclose
information with accuracy based on the facts, and in a way thatis easy to understand in accordance with the rules for disclosure
control. Furthermore, we disseminate information through various
media by creating a company website, publishing press releases ina timely manner, and setting up signboards at train stations, withthe aim of fostering a feeling of familiarity with our company widely
among the public.

1

Developing
THE GATE HOTEL brand

THE GATE HOTEL KAMINARIMON by HULIC, which opened in2012 and is directly operated by the Hulic Group, has been
awarded one star in the Michelin Guide for six consecutive
years since 2013, and thus stable operation has been secured.
In addition to THE GATE HOTEL TOKYO
which opened in December 2018 in the
Ginza/Yurakucho district, we are currently
promoting development projects of THE
GATE HOTEL, the redevelopment of thesite of the former Rissei Elementary
School in Kyoto City and Ryogoku River
Center Development Project by Tokyo
Metropolitan Government and Sumida
THE GATE HOTEL TOKYO by HULIC
Ward.
Case study

2

Developing Japanese styleluxury hotels “Fufu Series”

Hulic is striving to respond to an aging population by
developing and making investments in Senior Citizen Housing
Facilities centering on senior residences, and expanding ourbusiness to hospital development for warehousing and the
medical sector through CRE. In 2018, we completed
construction of senior residences Charm Premier Den-en-Chofu,
Sonare Shakujii, and Granda Inamuragasaki Kamakura Aoitei.
Additionally, in March 2019, we completed construction ofsenior residence Hospitalment Bunkyo Yayoi. We are also
currently developing three more residences of this type.

Sonare Shakujii

Amid growing demand for personal travel, Hulic is promoting
the acquisition and development of luxury hot spring hotels.
We acquired Hakone Suishoen, Atami Fufu, and ATAMI
Kai-Ho-Rou in 2015. In October 2018, FUFU KawaguchikoJAPAN opened. We plan
to develop around ten
hotels of the Fufu Seriesin Nikko, Kyoto, Gora andNara, etc. in the future.
FUFU Kawaguchiko JAPANHospitalment Bunkyo Yayoi

32

Initiatives for Our Business Partners

FUNDAMENTAL
APPROACH

Initiatives for Our Employees

We aim for close mutual communication with our business partners, and build relationshipsthat mutually enhance the corporate value of both parties. Additionally, Hulic strives to createshared value with stakeholders by resolving various social issues through PPP businesses.
Results in
FY2018

Evaluated the status of work implementation by outsourced property management companies

CSR Procurement Policy

Fair Trades with Outsourced Contractors

Hulic actively engages in CSR activities as a company involvedin the real estate industry. We have formulated a policy on
procurement and purchasing to further develop our CSR initiatives.
In addition, we promote CSR activities across the entire value chain
by asking business partners to cooperate with this policy.

Considering long-term business relationships with outsourced
contractors, we work to ensure fair trade with them as a partner onan equal footing. Regarding outsourcing by the real estate businessdivision, we ensure fair trade based on the “rules for real estateoutsourcing management,” respecting related laws and regulations
as well as guidances from administrative organizations. We selectan outsourcing contractor that is most appropriate for each projectby checking track records and abilities to execute operations.

CSR Procurement Policy
1. We will comply with laws, regulations and social norms, andundertake business activities based on a set of corporate ethics.
2. We will respect the fundamental human rights of all people.
① Prohibition of discrimination
We prohibit any discrimination against any person on the ground of his or
her belief, religion, age, sex, sexual orientation, race, nationality, origin,physical or mental disability, etc.
② Prohibition of harassment
We prohibit any act, including sexual harassment or abuse of authority, toinflict emotional distress on any person by language or behavior thatdamages his or her character or dignity.
③ Prohibition of child labor
We prohibit any child labor.
④ Prohibition of forced labor
We prohibit any forced labor carried out through violent acts or
intimidation.
⑤ Respect for the right of freedom of association and right ofcollective bargaining
In line with international labor standards, we respect the right of freedomof association and right of collective bargaining.
⑥ Reduction of excessive working hours
In addition to ensuring compliance with labor-management agreements,
including the 36 Agreement and laws and regulations of relevant countries
and regions, we adopt basic policies to reduce overtime work and limit
excessive work.
⑦ Securing of health and safety of workers
In accordance with laws and regulations of relevant countries and regions,
including the Labor Standards Act, we endeavor to offer a workplace where
workers can work healthily and safely.
⑧ Payment of wages over minimum wage
We pay wages over minimum wages prescribed in various local laws andregulations as well as the Minimum Wage Act.
3. We will take consideration of environmental conservation andwill strive to promote green procurement.
We will endeavor to conduct procurement in accordance with the Hulic
Green Procurement Policy in order to realize a sustainable society.
4. We will build an information management system and manage
information appropriately.
5. We will carry out fair and equitable business transactions andbuild a trust relationship with business partners.
6. We will strive to maintain peace of mind, safety and high quality.

Public Private Partnerships
PPP (Public Private Partnership) projects intend to efficiently utilize
and operate real estate owned by national or local governments(public real estate) through collaboration and cooperation between
the public and private sectors. We are actively engaged in PPP
projects by utilizing abundant development results and a stablebusiness base as one of the leading companies of PPP projects.
Taking into account the issues and needs of administrative agencies
and communities through exchanges of information with them, we
aim to contribute to the regional economy by settling the issuesof the communities and realizing business to improve the value of
public real estate through collaboration between the public andprivate sectors.
TOPICS

33

Results in
FY2018

Ratio of female managers:

18.5%
Employment of Diverse Human Resources

Promoting Human Rights
and Diversity

Participating in the joint declaration on the charter of corporate
ethics concerning employment issued by Keidanren (Japan Business
Federation), we proactively employ new graduates in accordancewith the purpose of the charter. When performing pre-employment
screening, we respect the basic human rights of applicants and makeefforts to secure diverse human resources based on their aptitudes
and abilities, regardless of backgrounds and gender. The total numberof employees newly hired in 2018 (the total of the number of new
graduates and experienced individuals) is 20 (male: 12, female: 8);
the proportion of women is 40.0%. The ratio of female managers
has increased as a result of active efforts to promote the active
participation and advancement of female employees in the workplace,with an enhanced system to support the development of the next
generation. Hulic aims to become a company where female employees
can thrive professionally with the target of increasing the ratio of
female managers to 20% by the year 2020.

Respect for Human Rights
The Company has established the Hulic Human Rights Policy,
which proclaims respect for human rights so that all employees
can maximize their abilities and contribute to the realization ofa “society full of peace of mind and trust.” In our Human Rights
Policy, we declare that we prohibit any acts of discrimination andharassment, as well as any discrimination against any person on the
ground of his or her beliefs, religion, age, sex, sexual orientation,
race, nationality, origin, physical or mental disorder, etc. We also
prohibit any act, including sexual harassment or abuse of authority,
to inflict emotional distress on any person through language or
behavior that damages his or her character or dignity. Respect forhuman rights encompasses all fundamental human rights found in
the Constitution, Labor Standards Act, and Universal Declarationof Human Rights, as well as human rights related to equal
employment, prohibition of forced labor and child labor, freedomof association, and collective bargaining stipulated in the ILO's
international labor standards.
In 2018, Hulic posted on its intranet regarding the themes of “LGBT”
and “Sexual harassment,” etc.
In addition, we held a seminar on changes in work style as part ofcompliance training for our directors and general managers.

Promoting Employment of the Disabled
The Hulic Suginami Office marked its 11th anniversary, and as ofJune 2018, Hulic's employment rate of persons with disabilities was
2.41%★ on a consolidated basis and 5.74%★ on a non-consolidated
basis. Currently, seven employees with disabilities, instructors withexperience in coaching, and a chief administrator are working at the
Hulic Suginami Office, where they carry out operations, such as thedispatch of direct mail. A monthly meeting with the human resources
team of the Head Office is held to ensure that operations integrated
with the head office are being put into practice. In recognition of ouractivities to play a leading role in employing
persons with disabilities and proactively
develop their abilities, Hulic has been certified
as an excellent corporation in employing thedisabled in Tokyo since September 2010. We
will make efforts to improve the workplace sothat people with disabilities can feel a sense of
The certification logo forworth in their work.
excellent corporation in

PPP Projects
Ogimachi Iseikai Hospital Development Project inOsaka City
In August 2018, we were selected as a proposed contractor and we are currently
engaged in the development. Our aim is to create a business that contributes
to the greater appeal of the Ogimachi area. As a complex facility that serves asa base for revitalization of the town, the hospital will consist of three facilities.
On the lower levels there will be a cultural creation facility centered on a theater
where new culture and communities can be created and disseminated, alongwith an exchange promotion facility with a café, convenience store, children's
English education center, and other facilities. On the upper levels, there will be aninternational medical treatment facility operated by Iseikai with around 560 beds
for advanced acute medical care. The hospital will also support medical tourism.

* LGBT is a collective acronym for lesbian, gay, bisexual, and transgender.

Personnel Performance Data
Number of employees (person) (non-consolidated)

Cooperation with Building Management
Companies
In accordance with the rules for real estate outsourcing
management, Hulic Building Management Co., Ltd. personnel incharge of buildings visit management companies and buildings
randomly selected once a year to inspect the management
conditions and evaluate management companies. (Please refer topage 30, “Maintenance and Improvement of Quality and Ensuring
Uniformity in Quality of Hulic's Buildings.”)

FUNDAMENTAL
APPROACH

We respect human rights and proactively take advantage of diversity in our business. We aim tofoster a workplace in which all employees can make the best use of their abilities.

Artist rendering of Ogimachi Iseikai Hospital Development Project in Osaka City

WEB

Initiatives for Our Business Partners
https://www.hulic.co.jp/en/csr/dealings/

employing the disabled in Tokyo

Men/Women
Total

Number of employees (person) (consolidated)
Average annual salary (ten thousand yen)
Number of voluntarily resigned employees (person)
Ratio of voluntarily resigned employees (%)
Number of employees in managerial positions (person) (excluding executive officers)
Men/Women
Employment ratio of the disabled (%) (non-consolidated)
Employment ratio of the disabled (%) (consolidated)
Number of employees who took childbirth leave (person)
Number of employees who took childcare leave (person)
Men/Women
Ratio of employees who returned to work after childcare leave (%)
Number of employees with shorter working hours (person)
Number of employees who took day off for family care (person)
Number of employees who took family care leave (person)
Number of employees who took day off for nursing care (day) (absorbed previous nursing care leave)
Number of users of the subsidy system for daycare nursery fees (person)
Number of employees who took leave to take part in volunteer activities (person)

2014
85/31
116
753
1,268
2
1.72
43/4
8.56
2.46
3
1/3
100
3
0
0
31
11
18

2015
93/35
128
784
1,295
3
2.34
43/5
7.36
2.31
6
2/3
100
5
3
0
34
14
14

2016
109/40
149
836
1,418
2
1.34
57/8
6.30
2.21
0
6/3
100
7
1
0
60
22
18

2017
112/44
156
862
1,530
2
1.28
65/12
6.16
2.11
2
0/2
100
6
1
0
114
31
13

2018
114/52
166
936
1,636
3
1.81
66/15
5.74★
2.41★
6
1/5
100
3
5
0
86
31
12

* Figures marked with “★” are those that have been assured by an independent assurance provider.
* Data covers Hulic Co., Ltd. only (excluding the number of employees (consolidated) and the employment ratio of the disabled (consolidated))* Excludes employees who have been transferred within the group. Includes loan employees in the number of employees who took childbirth leave, the number of employees who took childcare leave, and the number of
employees who took day off for nursing care.

34

Initiatives for Our Employees
Promoting Female Empowerment

Initiatives for Salaries

Hulic's basic approach is for the work of individual relations
employees to be aligned with their abilities, aptitudes, andpersonalities, enabling individual employees to make the mostof their abilities and the Company to operate a high valueadded business with less manpower. For this reason we see it as
essential to provide opportunities to all employees irrespective ofgender and, in particular, we are strengthening initiatives for the
career development of women. The women's career promotion
project team has been conducting activities regularly since 2010
with themes such as improving work-life balance and careerdevelopment. In 2016, we received the highest certification as
an “Eruboshi” company under the Act on Promotion of Women's
Participation and Advancement in the Workplace, and were selected
as a “Nadeshiko” Brand. In 2017, we received the Minister of State
for Gender Equality Award of the “Commendation for Leading
Companies Where Women Shine” hosted by the Cabinet Office.
In 2018, we also engaged in activities with a focus on organizing
the “Science and Engineering Challenge (Riko-challe)” eventsin cooperation with the Cabinet Office, Keidanren and theMinistry of Education, Culture, Sports, Science and Technology.
In October 2018, we organized an in-house seminar on the
topic of career paths for woman, and held round-table talk on
the topic of personnel evaluation system and career paths for
woman. Furthermore, an annual meeting between the women's
participation promotion project team and President as the manager
is being held to create opportunities for female employees to share
their thoughts and concerns with the President of the Company.

The Hulic Human Rights Policy prescribes that we pay wages overminimum wage prescribed in various local laws and regulations aswell as the Minimum Wage Act.

Hulic's “Our Code of Conduct” and Hulic Human Rights Policy
stipulate respect for human rights in association with equal
employment opportunities, freedom of association, and collective
bargaining.In addition, we conduct interviews between employees
and their supervisors when necessary and carry out the “President
Questionnaire Survey,” through which employees can share theirviews and opinions directly with the President, in an effort toestablish good labor management relations.
Various opinions and requests were received from employees in
response to the President Questionnaire Survey and, in fact, work
is being carried out based on those responses to create a more
comfortable workplace, including the construction of a bicycle
parking lot at the head office.

Results in
FY2018

Usage rate of paid leave:

77.0%

Providing Internship Program

We endeavor to prevent the violation of laws related to labor andthe occurrence of accidents. Although risks of child labor and forcedlabor are low at Hulic as we have developed a highly specializedbusiness mainly in Tokyo, We have a policy in place that prohibits
all forms of child labor and forced labor. In order to prevent suchlabor, we regularly audit compliance with laws in employment
management and also provide compliance education, including
regarding the prevention of child labor and forced labor, toemployees.

In promoting the creation of comfortable workplaces, we give firstpriority to securing safety and health and we endeavor to secure
employees' health and safety by engaging in various activities.
While we have not obtained certifications such as OHSAS18001,
we secure occupational safety under our own system by regularly
conducting risk assessment and improving issues. The numberof accidents that occurred in 2018 was zero (zero in 2017) andno accidents that required time off from work or fatal accidents
occurred in the past three years (rate of occurrence was 0%).
We will continuously promote the improvement of the level ofoccupational safety and health in the workplace.

Work-life Balance
The falling birthrate, aging population, and women's social
advancement are important issues for Japan's economy. With regard
to support for the next generation, Hulic aims to achieve a higher
level than the legal standard and has established various systems
in this regard. In addition, we are working to create employeefriendly environments where all employees can make the most of
their abilities. Accordingly, we have established an action plan inaccordance with the Act on Advancement of Measures to Support
Raising Next-Generation Children, set targets for the development
and thorough notification, etc. of the work-life balance support
system, and are conducting activities to these ends.

Establishment of Hulic's Onsite Childcare
Nursery Facility
In 2014, we opened the Odenma Fureai Childcare Nursery inside
the Hulic Head Office Building to promote a more employee-friendly
work environment in which our employees can raise children
while working. In addition, to make this childcare nursery moreaccessible, employees using this service are allowed to drive theircars to work and park them in the Head Office Building's parking
lot free of charge. This childcare nursery is not only available for theemployees but also for certain children*of neighboring residents, with theintention of contributing to reducing thenumber of children on nursery waiting
lists in the local community.

Health and Productivity Management
Based on the idea that employees' good health is essential for
improving productivity and growth of the company and that
promoting health and productivity management contributes to our
corporate philosophy "Total commitment to our customers and thecommunity. Creating productive environments. Creating amenity.
Creating peace of mind," Hulic is promoting various initiatives.
For instance, we provide employees with a full health checkup, holdmeetings of the Health Committee to discuss the status of use of
paid leave and work hours of employees and implement mental
health care to perform stress check tests.

Planned Use of Leave and Reduction ofOvertime Work
We promote work-style reforms to boost the usage rate of paid
leave by employees and reduce long working hours. The key
initiatives are as follows.
• Promoting the use of ”Plus-one” paid leave and consecutive paid leave• Implementation of No Overtime Day• Implementation of “My Friday”• Improving the efficiency of business processes and promoting outsourcing
100
80

70.9

60
40

34.6

71.4

71.6

36.6

37.6

77.0★ 40

36.8

37.4

0

10
2014

2015

Usage rates of paid leave* Conditions for use applied to neighboring children differ from those applied to employees.

30
20

20
2016

2017

2018 (FY)0

Average of discretionary and overtime
work hours in a month per person* Figures marked with “★” are those that have been assured by an independent assurance provider.

TOPICS2019 Certified Health &Productivity Management
Outstanding Organizations:
Small and Medium-sizedEnterprises Category
We were certified as a Health & Productivity Management Outstanding
Organization in 2019 in the category of small and medium-sized enterprises
in recognition of our health management initiatives. The Certified Health &Productivity Management Outstanding Organizations Recognition Program isa program for recognizing corporations, both large and small, that engage inoutstanding health management based on the community’s health-themed
initiatives and Nippon Kenko Kaigi’s health promotion initiatives. We willcontinue to further enhance our health management initiatives in the aim ofcreating a more comfortable workplace.

Stance on Human Resource Development
Hulic's ordinary income per employee is over 400 million yen. Thisis the highest level among listed companies. We assume that thisfigure has been accomplished because we are a small group ofelite professionals. Currently, many of our employees are licensed
professionals such as lawyers, certified public accountants, real estateappraisers, and first-class registered architects. Furthermore, with theaim of enhancing their professional skills, employees are recommended
to obtain two or more qualifications by the time they reach the ageof 30. In 2017, we clarified a road map to obtain qualifications sothat employees can obtain the same more systematically. The costs for
obtaining qualifications are fully covered by the Company.

WEB

35

50

78.3

Average of discretionary and overtime
work hours in a month per person

Management of Risks regarding Labor andHuman Rights Issues

Work-life Balance/
Human Resource Development

Usage rates of paid leave (%)

We provide an internship program intended for understanding of
the industry and work for undergraduate and graduate students
at the Hulic Head Office Building. We offer a program where theparticipants can learn about the real estate business and Hulic's
identity through acquiring knowledge of real estate developer’s
affairs and verifying projects. In fiscal year 2018, 60 students
participated.

Occupational Safety and Health

Establishing Good Labor-Management
Relations

FUNDAMENTAL
APPROACH

In order for employees to be healthy and fully exercise their abilities, we will promote a work-lifebalance and take measures to promote acquisition of paid holidays and to prevent long work hours.

Initiatives for our employees
https://www.hulic.co.jp/en/csr/employee/

36Initiatives in the Local Community

FUNDAMENTAL
APPROACH

To fulfill our social responsibilities, we work to resolve social problems, leading to the sustained
development of the entire society. Further, we proactively support each employee to participate insocial contribution activities.
Results in
FY2018Social contribution by the company:

21 items Social contribution by employees: 6 items

Activity Guidelines

As a good corporate citizen, Hulic proactively andwidely pushes ahead with social contribution activities
both inside and outside of our business fields. We
contribute to the sustained development of the entire
society through each activity.

• Actively work in the three main fields of “local environmental protection,” “co-existence with local
communities,” and “responses to social needs.”• Actively support social contribution activities conducted by each employee.
• Place an emphasis on securing transparency in implementing activities and promote dialogue andcooperation with society.

Supporting Employees to Conduct Social Contribution Activities
Matching Gift Program
Launching the matching gift program in June 2008, Hulic
established the “Hulic Fureai Fund,” which deducts 100 yen every
month from the salary of employees who want to take part in the
program (300 yen for directors), and donates the collected money
to organizations selected by majority vote of all employees. Hulic,
Hulic Insurance Service, Hulic Building Management, Hulic Reit
Management, Hulic Proserve and Hulic Private Reit Management
have worked together on this activity.
We will continue the donation activities, providing opportunities
of social contribution to employees who cannot take the first step
despite being interested.

Activities conducted in 2018
In 2018, we donated a total of 1.4 million yen to The Organization
for Industrial, Spiritual and Cultural Advancement (OISCA, nonprofit incorporated association). OISCA is an organization engaged
in rural development and environmental conservation activities,
primarily in the Asia-Pacific region. In Japan, it is engaged in
educational activities through such means as holding handson agriculture and forestry seminars as well as environmental
conservation activities that include
planting trees and maintaining
forests. This time, we chose to makea donation to the Coastal Forest
Regeneration Project from among
their many activities.

In December 2018, Hulic established a new championship to
support female professional shogi players and further promote
their prosperity. It had been eight years since a new female
championship had been established (the last time was 2011), andthis brought the number of championships to seven, further closing
the gap with men’s championships, of which there are eight. The
preliminaries were set up on a system of six wins, with two losses
to be out. Because players got to stay in until they lost two games,
it created more matches. The preliminaries for the first Hulic Cup
Seirei Championships began in January 2019. From August to
September, five rounds will be held to determine the first champion.

Art and
CultureSpecial Sponsorship of Minister of
Education, Culture, Sports, Science andTechnology Cup Elementary and JuniorHigh School Shogi Team Competition

Since 2017, Hulic has been a special sponsor of the Minister of
Education, Culture, Sports, Science and Technology Cup Elementary
and Junior High School Shogi Team Competition (organized by
the Japan Shogi Association and Sankei Shimbun Co., Ltd.). This
competition is for teams of three students belonging to the sameelementary or junior high school, and the trophy and letter ofcommendation presented to the winning team by the Ministerof Education, Culture, Sports, Science and Technology give thecompetition significant prestige.

Press conference for the first Hulic Cup Seirei Championships

Art and
CultureSpecial Sponsorship of the Hulic
Cup Kisei Championships

Since April 2018, Hulic has been a special sponsor of the Kisei
Championships (organized by the Japan Shogi Association andSankei Shimbun Co., Ltd.) from the standpoint of corporate
patronage of the arts and culture as part of our social contribution
activities. The Kisei Championship is an official championship with ahistory, established in 1962. Players compete for the title of “kisei.”
On June 16, 2018, the second game of the 89th Hulic Cup Kisei
Championships five-game matches was held at Grand Nikko Tokyo
Daiba. We will continue our special sponsorship of the 90th Hulic
Cup Kisei Championships in 2019.

Art and
CultureSupport for Kishikai Christmas
Festival

We sponsor the Kishikai Christmas Festival to spread the popularityof shogi and contribute to the growth of Japanese culture. In 2018,
it was held at our Asakusabashi Hulic Hall, and around 250 people
participated.

2018 Christmas Festival

1 Satoyama conservation activities

1 Organizing of the Hulic Cup Seirei Championships

8 University

2 Society2 Special Sponsorship of the Hulic Cup Kisei Championships

9 Training of Welfare Caretakers

3 Matching gift program

Special Sponsorship of Minister of Education, Culture, Sports, Science and3 Technology Cup Elementary and Junior High School Shogi Team Competition
Support for Kishikai Shogi Festival (Great East Japan Earthquake
4 Reconstruction Support Event)

10 Held students' idea competition

17 Donation to Akai Hane

11 Hosted summer festivals

18 Donation to Ashinaga Scholarship Society
Opened the company daycare nursery to local
19 community members

Monthly community cleanup

37

The Hulic Group has established paid leave for employees involvedin volunteer activities, in order to support and nurture their efforts togive back to the community and help to foster an attitude of wanting
to address issues facing society. The volunteer paid leave program isdesigned to support employees who participate in social contribution
activities. Employees are eligible to take up to 20 consecutive days of
special paid leave (employees who take part in volunteer activities indisaster-hit areas can take paid leave more than once within 20 days)
under the volunteer paid leave program to take part in philanthropic
activities that give back to society. To encourage employees to use
the volunteer paid leave program, we provide not only information
on social contribution activities, but also raise awareness about suchactivities among employees by disseminating the volunteer experiencesof employees with the entire Company through our intranet system. In
2018 we continued satoyama conservation activities, which we haveconducted annually since 2009 as a participatory volunteer activity
involving our employees, and a total of 22 employees from Hulic, Hulic
Insurance Service, Hulic Building Management, Hulic Reit Managementand Hulic Proserve have participated in this activity.

Social Contribution as a Company

4 activities

Organizing the Hulic Cup Seirei
Championships* Japanese chess played on a board of 81 squares with 40 pieces to the set

Paid Leave for Employees Involved in
Volunteer Activities

Social Contribution by
Employees
Donation to Ashinaga Scholarship

Support for Shogi* Culture
Art and
CulturePolicy for Social Contribution Activities
Basic Philosophy

Social Contribution as a Company

Support for orphans of cancer and childhood

Donation to a scholarship program of Kyoto

15 cancer patients and their families

Establishment of Hulic Scholarship Program for

16 Donation to the Red Cross

5 Flowerbed maintenance activities

5 Support for Kishikai Christmas Festival

12 Donation of used postal stamps

Assistance for support activities in
6 disaster-struck areas

6 Support for Japan Para-Badminton Federation

13 Fukushima relief efforts

20 Sponsorship of the Kyoto Kenchiku Center

7 Assistance for Environmental Studies at Kyoto University

14 Donation to OISCA

21 Support for Nezu Foundation

Sponsorship to support Mainichi Shimbun in

Reconstruction
SupportSecond game of five of the 89th Hulic Cup Kisei Championships

Support for Kishikai Shogi Festival(Great East Japan Earthquake Reconstruction Support Event)

We sponsor the Kishikai Shogi Festival as part of our support forreconstruction efforts related to the Great East Japan Earthquakeand shogi culture.
In 2018, we sponsored the Kishikai Fukushima Shogi Festival in
Kitakata and the Kishikai Fukushima Shogi Festival in Tamagawa.

38

Initiatives in the Local Community

Social Contribution as a Company

SocialwelfareEstablishment of Hulic Scholarship
Program for Training of Welfare
Caretakers

For the purpose of supporting students aiming to be welfare
caretakers, developing human resources engaging in nursing
care and contributing to resolution of social issues related to theadvancement of an aging society, we have established the Hulic
Scholarship Program for Training of Welfare Caretakers in 2017,
under which we provide non-repayable scholarships. We aim toprovide support to address the current status of labor shortages at
nursing care sites for the senior citizen-related business which we
promote as one of our focused
3 future growth businesses(3K businesses) (Koreisha(seniors), Kanko (tourism), andKankyo(environment)) from the
CSR point of view.
Practical training

VOICE

Hulic Scholarship Program forTraining of Welfare Caretakers

Among the students at our college aremany from abroad, and together with
their Japanese counterparts, they devote
themselves to their studies on a daily basis
to earn their qualifications. However, inmany cases, part-time jobs take priority
for economic reasons. It becomes difficult
to balance work and studies, and many
students end up dropping out. I haveheard from many students that have taken
advantage of your company’s scholarshipprogram, saying that they were able to focus
on their studies with peace of mind. This
program gives a boost to students who are
passionate about pursuing qualifications. I
am very grateful for how you are helping topromote the education of human resourcesthat will support the aging society of Japan.

SocialwelfareSocialwelfareSupport for Orphans of Cancer
and Childhood Cancer Patientsand Their Families

Hulic Insurance Service is a member of the Aflac National
Association of Agencies, which is a network of medical and life
insurance agencies. We donate to the Aflac Scholarship Fund forChildhood Cancer Survivors and Children of Cancer Victims andAflac Parents Houses initiatives promoted by the association.

Aflac Scholarship Fund for Childhood Cancer
Survivors and Children of Cancer Victims
This scholarship program is for high school students whose
opportunities for pursuing a higher education have narrowed due tolosing their household’s main provider to cancer. Up to now, morethan 2,600 students have received scholarships, and the total amountawarded exceeds 1.6 billion yen (as of June 30, 2018).

Aflac Parents Houses

Health,medical,sportsExpansion of Support for Japan
Para-Badminton Federation

As part of our social contribution activities, we have concluded an
Official Gold Partner Agreement with the Japan Para-Badminton
Federation and have provided support for para-badminton since2016. For the purpose of supporting the stable operations of
the federation, since September 2017, we have lent the gym of
Nishi Kasai Center Building owned by Hulic (Hulic NishikasaiGym) to the federation at no charge as a practice gym dedicatedfor players from the Japan Para-Badminton Federation. We haveconducted improvement work such as installation of slopes andplumbing so that the players can use the gym more comfortably.
We also participated in HULIC-DAIHATSU JAPAN Para-BadmintonInternational 2018 as a special sponsor for the second year in arow. We will further expand support for handicapped people andsupport the success of para-badminton players as well as respecting
human rights and promoting diversity management in which we
actively practice diversity.

Academic
research

These general support centers help reduce the economic andemotional burden of pediatric patients and their families as theytake on childhood cancer and other serious diseases with long-term
hospitalization or outpatient care at specialist hospitals in urban areas.

Community
activity

Hideyuki Urashima
Full-Time Teacher, Nursing Care andPublic Welfare Services Department
Japan Welfare Education College
Keishin Gakuen

Donation of Used Postal
Stamps for Support Activities in
Developing Countries

Holding the Sixth Hulic Student
Ideas Competition on the Themeof “HULIC & GINZA６”

We planned this competition as a real estate company with theaim of providing students with opportunities to propose urban
development and construction ideas. For this year's sixth Student
Ideas Competition, we solicited free and unconventional ideas
as proposals of the buildings which has everlasting brilliance at
the Ginza, a largest commercial district in Japan and the targetof our extensive development. We
received 121 entries. At the open
second screening, students presented
their ideas, followed by a question
and answer session with judges. Afterconsultations among judges, one winnerof the grand prize, three winners of
the excellence award, and six winnersof the honorable mention award wereselected.
Advertisement for inviting entries

Reconstruction
supportThe Hulic Group generates a large volume of used postal stamps
and has set up stamp collection boxes at Group company locations.
We donate these stamps every year. In February 2019, we donatedaround 1,800 grams of used stamps that we collected during theyear to the Japanese Organization for International Cooperation in
Family Planning (JOICFP). Every year, we collect a large volume ofused stamps, and we sort them with the cooperation of our CSR
supporters. It takes almost two hours. After converting the stamps
into money, JOICFP applies it to activities that they promote indeveloping countries to protect the life and health of pregnant
women and women in general.

39

Initiatives of Group Companies

Hosting Summer Festivals andDonating of a Portable Shrine

In October 2012, the head office of Hulic was moved to
Nihonbashiodenma-cho. As part of our efforts to introduce
ourselves to the community, we held the Hulic Odenma Summer
Festival at our head office building in July 2013. The event wasvery well-received, so we decided to continue it and held it for thesixth time in July 2018. The Odenma-cho Ninobu Neighborhood
Association cooperated with us on the day of the event, and many
people came, from children living in the area to office workers fromnearby buildings. We hope that activities such as this will lead todeeper bonds between local residents. The 150,900 yen raised at
the festival was added to the 10th matching gift program, and thegift money was provided to a volunteer organization. Moreover, as
part of our community contribution activities, we donated a portableshrine to the Odenma-cho Ninobu Neighborhood Association towhich we belong in May 2017. We hope that carrying this portableshrine at the festival will lead to further revitalization and prosperityin the area.

Announcement of the opening of Hulic Nishikasai Gym in August 2017

Socialeducation

Assistance for Research at Kyoto
University and Support for
Scholarship Program of Kyoto
University

Sponsorship to Support Mainichi
Shimbun in Fukushima Relief
Efforts

In March 2019, we sponsored the fourth Ganbappe, Fukushima!
event organized by The Mainichi Newspapers Co., Ltd. and Mushu
Co., Ltd. and held at Belle Salle Tokyo Nihonbashi as an activity
to support reconstruction efforts in Fukushima, which was struckby the Great East Japan Earthquake. On the day of the event,around 650 people from supporting companies pledged to ensure
Fukushima’s reconstruction.

We provided assistance for Environmental Studies at Kyoto
University and made a donation to a scholarship program forstudents.
We support development of the next generation through the
donation to a scholarship program for students of Kyoto University
as well as supporting environmental protection through assisting
research at Kyoto University.

Photograph courtesy of the Mainichi Newspapers

WEB
The site observation
conducted as part ofassistance for researchin February 2018

Initiatives in the Local Community
https://www.hulic.co.jp/en/csr/social/

40

Initiatives for Our Shareholders and Investors

FUNDAMENTAL
APPROACH

We strive to ensure the appropriate disclosure of information whenever necessary, and actively
conduct briefing sessions on financial results as well as company information sessions for individual
investors. These represent our efforts to achieve diverse forms of mutual communication.
Results in
FY2018

Number of information sessions for personal investors held:

8 times(including sessions for sales personnel of securities companies, IR fairs, and events)

Information Disclosure Policy

Dividend Policy

On the basis of the disclosure policy, we are aiming at fair, timely
and accurate information disclosure benefiting shareholders andinvestors to make a decision on investment. In compliance with
relevant laws and regulations, we proactively disclose management
strategies and financial data, etc. in order to have them understandour business activities. Information, to which the rules of timely
disclosure and relevant laws and regulations, etc. are inapplicable,
but which are considered helpful for investment decisions, isdisclosed promptly through the Company's website, etc.

We regard returning profits appropriately to our shareholders as amanagement issues and adopt a basic policy to continue providing
the stable payment of dividends as based on the trends of ourbusiness performance. The dividends have continued to increase
every fiscal year so far.

Enhancement of Various IR Tools
In addition to correspondences to shareholders issued semiannually,
we transmit the latest topics through the IR page on our website
in a timely manner. E-mails are also sent to allow shareholders toreceive more timely information. Every time news about Hulic isreleased, we inform registrants by E-mail. (Registration is available
on our website.) In the financial results briefing session, we
make efforts for easy-tounderstand explanations
by using image materials
produced with PowerPoint.
On the website, materials
for briefing sessions (inJapanese and English) andvideos are available.

Hulic's website discloses timely and detailed information on our
various activities. In 2018, our website was selected as the “excellent
website in overall ranking” in Nikko IR's All Listed Company Website
Ranking 2018. In addition, our website won the bronze prize in
Gómez IR's Site Ranking, and won the Commendation Award inInternet IR Award 2018 by Daiwa Investor Relations Co., Ltd.

Social Background Surrounding Hulic

Corporate
Governance

The Corporate Governance Code was introduced in June 2015. It requires companies to work
toward achieving sustainable growth based on sound corporate governance.

Initiatives for Solving Social Issues› Establishing and implementing the corporate governance guidelines› Selecting external directors and external auditors with high levels of expertise› Establishing a business continuity plan (BCP) and conducting BCP training› Conducting risk evaluation/risk management by the Risk Management Committee

Shareholder Incentives
To thank our shareholders for their continued support, we annuallypresent a gift of gourmet catalog equivalent to 3,000 yen to
shareholders with 300 shares or more. Furthermore, we have been
sending out catalogs gifts (worth 6,000 yen in all, 2 items choiceable) to shareholders holding more than 300 shares for more than
three consecutive years.

Briefing Session for Indivisual Investors
We are proactively working on IR activities to make ourselves better
understood by individual investors.
We participate in seminars and fairs, etc. for individual investors tocreate opportunities for more individual investors to learn about us.
We will promote IR activities that provide us with opportunities tocommunicate directly with individual investors.

Corporate Governance

The Hulic Group recognizes that it is an important business issue to build a corporate governancesystem with fully functioning “risk management,” “compliance,” and “internal control.” We intend
to sincerely execute business, fulfilling accountability to stakeholders.

FUNDAMENTAL
APPROACH

Results in
FY2018

Number of internal audits conducted:

9 times Participation rate in the Board of Directors' Meeting: 98 %Corporate Governance System
reported as independent auditors as specified above (as of July2019). Directors determine important matters concerning Hulic's
business activities, including CSR, and supervise the execution ofduties. In March 2012, Hulic appointed its first female external
director, and since then we have been promoting multifacetedbusiness management based on diversity.

The Board of Directors meets once a month in principle, and holds
further meetings as needed. The Board of Directors is comprisedof 10 directors, of which four are independent External Directors
designated and reported as independent directors based on the
stipulations of the Tokyo Stock Exchange (as of July 2019). Threeout of five Audit & Supervisory Board Members are independent
External Audit & Supervisory Board Members designated andCorporate Governance System Chart (As of June 2019)

Outside Evaluation of IR Activities

Corporate Governance

Brief Sessions for Institutional Investors
and Analysts
Briefing sessions on financial results (at the end of the 2nd
quarter and fiscal year) are held semiannually by Hulic's top
management mainly for institutional investors. We also conduct
many “One on One Meetings” in Japan, through which wevisit individual institutional investors to explain Hulic's businessactivities. Furthermore, we have proactively rolled out IR activities
overseas, visiting institutional investors in Europe, the U.S., andAsia, etc. Through these activities, we endeavor to foster a deep
understanding of Hulic among institutional investors.
WEB

41

Hulic works to strengthen corporate governance with the aim of improving
the transparency and efficiency of management and continue to be trusted
by society.

Initiatives for Our Shareholders and Investors

Audit & Supervisory
Board
Audit

GeneralMeeting of
Shareholders

Accounting
AuditorBoard ofDirectors

Scope of Internal Control

Audit & Supervisory
Board Department

Compliance

Compliance Committee

CSR Committee

President

Corporate Audit
Department

Internal Control
Functions of
Head Officeand AffiliatedCompanies

Risk
Management

Internal
ControlFund ALM Committee
Operations
Management

Disclosure
Control

Basic
Rules, etc.

Planning and
Administration
Division

Business Management
Internal Control
Related to
Financial Reporting

Recommendation/Advice

Management Advisory Committee/Nominating Committee/
Remuneration Committee

Risk Management Committee

Real EstateBusiness
Division

Business
Process Control
Documents

AffiliatedCompanies

Disclosure Working Grouphttps://www.hulic.co.jp/en/csr/investors/

42

Corporate GovernanceInternal Audit StructureInternal audits are carried out independently from other businesslines by the Corporate Audit Department, which is placed under
the direct control of the President. The internal audit basic planis finalized by the Board of Directors based on Corporate Audit
Regulations and the internal audit is systematically carried out by
the Corporate Audit Department. The results of the internal audit
will be reported to the President and feedback to departments
subject to the audit will also be provided. Internal audits arecarried out by four employees (as of March 2019). In 2018, we
implemented internal audits nine times. Regarding matters forwhich significant risk management deficiencies were identified, we
have provided feedback and appropriately confirmed the statusof improvements. Meanwhile, the results of an external quality
evaluation of the internal audits showed that Hulic's internal audit
functions generally conform (GC) to the international standards forinternal auditing defined by the Institute of Internal Auditors (IIA).
Based on the evaluation results, we will continue to strive to further
improve the quality of our internal audit functions.

Policy for the Selection of External Directors
and External Auditors
The Company has four External Directors and three External
Auditors. The External Directors and External Auditors comment
appropriately at the meetings of the Board of Directors from a
position that is independent from that of the business and affairs of
the corporation and fulfill the functions of monitoring and checks
on the management.
External Directors and External Auditors are selected based on theguidelines on the independence of independent executive officer(s)set forth in Article 436-2 of the Securities Listing Regulationsof the Tokyo Stock Exchange and the “Criteria for assessing theindependence of independent external directors/auditors” set forthin Hulic's Corporate Governance Guidelines. These are considered
to be appropriate in light of the important roles that the External
Directors and External Auditors fulfill within Hulic's corporate
governance system
Expertise of External Directors and External Audit & Supervisory
Board Members
We appointed the independent External Directors and independent
External Audit & Supervisory Board Members, who have fulfilled
Hulic's criteria for assessing the independence of independent
external directors/auditors (disclosed in the company's Corporate
Governance Guidelines) in accordance with the Securities Listing
Regulations of the Tokyo Stock Exchange. The expertise andreasons for selection of the External Directors and External Audit &Supervisory Board Members are as follows.
External Directors
NameProfession/Affiliation, etc.

Reasons for selection

Tsukasa Miyajima

Professor Emeritus of Keio University, lawyer,
Professor of Asahi University

Highly discerning and insightful as a personwith relevant knowledge and experience

Hideo Yamada

Lawyer of Yamada Ozaki Law OfficeHighly discerning and insightful as a lawyer

Journalist, management council member ofHighly discerning and insightful as ajournalist
Highly discerning and insightful as abusiness operator

Atsuko Fukushima Shimane University
Kaoru Takahashi

Advisor, Sompo Holdings, Inc.

External Audit & Supervisory Board Members
NameProfession/Affiliation, etc.

Chairman Emeritus, Tobu Department Store Co., Ltd.
Chairman and Curator of Nezu Museum
President, Kobayashi Certified Public
Nobuyuki Kobayashi Accountants OfficeSpecial Advisor, Meiji Yasuda Life Insurance
Kenichi Sekiguchi Company

Koichi Nezu

43

Reasons for selection
Highly discerning and insightful as abusiness operator
Highly discerning and insightful as anaccounting specialist
Highly discerning and insightful as abusiness operator

Directors (as of July 2019)

Policy for Determining Director
Compensation
Compensation of directors consists of basic fixed compensation,
which is based on job position and the weight of duties, andperformance-based compensation, which is based on corporate
performance and contribution to corporate performance.
A portion of performance-based compensation is allocated toa share-based payment scheme designed to give incentives for
performing duties, in order to achieve the sustainable growth of theCompany and to enhance corporate value from the perspective ofshareholders.
Amounts of compensation are determined through discussions by
the Remuneration Committee, the majority of which is comprisedof independent External Directors and is chaired by an independent
External Director, within the limit approved at a general meeting ofshareholders.
Compensation of Audit & Supervisory Board members isdetermined through discussions by the Audit & Supervisory Board
within the limit determined at a general meeting of shareholders.
Compensation of External Directors and Audit & Supervisory Board
members solely consists of basic compensation (fixed amount) in
the light of their roles and responsibilities.

Amount of remuneration, etc. by classification of
Directors/Auditors(2018)
Total
Total amount by the type of remuneration (million yen)
Number ofamount ofClassification of Directors/ remuneration,
directors/
Auditors
auditors
Basic
Stockbased
Stock
etc.
Bonuses(No. of people)
options(million yen) remuneration rewards

Directors(excluding External Directors)

Auditors(excluding External Auditors)

External Directors/
Auditors

734

414

159

—

159

6

72

72

—

—

—

2

126

126

—

—

—

7

⑧

⑩
⑥

④

⑬

⑦

⑨

⑭

⑪
②

⑮

⑫
①

③

⑤

Nominating Committee and Remuneration
Committee
The following new “discretionary committees” were establishedwith the enactment of the Corporate Governance Code, enforcedon June 1, 2015. Each committee is chaired by an independent
External Director, with the majority composed of independent
External Directors.
Nominating Committee
The Nominating Committee serves the function of reporting to theBoard of Directors on the nomination of executive officers, anddeliberates on the following matters:
1. Selection of Director and Auditor candidates and personnel
changes of Directors (promotion, etc.), dismissals of Directors
2. Other items concerning succession plans and theabovementioned items, as deemed necessary by the Board of
Directors.
Remuneration Committee
The Remuneration Committee is appointed by the Board of
Directors, and deliberates on the following matters:
1. Remuneration standards and other matters pertaining to the
remuneration of Directors
2. Matters concerning the remuneration of Directors, as deemednecessary by the Board of Directors
WEB

Corporate Governancehttps://www.hulic.co.jp/en/csr/governance/governance.html

Board of Directors

Audit & Supervisory Board Members⑦ Director (External Director)① Chairman, Representative Director

Saburo Nishiura

Tsukasa Miyajima
Professor Emeritus of Keio University
Professor of School of Law and Graduate
School of Law of Asahi University② President, Representative Director

Manabu Yoshidome③ Representative Director (Senior Executive Managing Officer)

Hidehiro Shiga⑧ Director (External Director)

Hideo Yamada

Lawyer of Yamada Ozaki Law Office④ Director (Senior Executive Managing Officer)

Shinji Furuichi⑤ Director (Senior Executive Managing Officer)

Hajime Kobayashi

General Manager of the Corporate Planning Department⑥ Director (Executive Managing Officer)

Takaya Maeda⑨ Director (External Director)

Atsuko Fukushima
Journalist
Management Council Member of Shimane University⑩ Director (External Director)

Kaoru Takahashi
Advisor, Sompo Holdings, Inc.

⑪ Full-time Auditor

Shigeo Nakane⑫ Full-time Auditor

Takuya Asai

⑬ External Auditor

Nobuyuki Kobayashi
Director of Kobayashi Certified Public⑭ External Auditor

Koichi Nezu
Chairman Emeritus of Tobu Department Store Co., Ltd.
Board Chairman and Curator of Nezu Museum⑮ External Auditor

Kenichi Sekiguchi
Special Advisor of Meiji Yasuda Life Insurance Company

General Manager of Real Estate Development Department 1*For details of the profiles of Directors, please see the “Directors” page on the Company's website (https://www.hulic.co.jp/en/corporate/officer.html).

44

Risk Management

FUNDAMENTAL
APPROACH

CompliancePursuant to basic rules of risk management, we manage various risks related to the Hulic Group'sbusinesses, which include operational risk, market risk, liquidity risk, and credit risk, among others.
Results in
FY2018

Number of total disaster training and first-aid training conducted:

Risk Management Structure
We hold regular meetings of committees related to risk
management, such as the Risk Management Committee and Fund
ALM Committee, and control risks by grasping changes in risk bycollecting and analyzing monitoring indices. Through this PDCA
cycle, we carry out risk management continuously to stabilize ourbusiness operations. In addition, internal audits are carried out on all
departments and operations, in order to verify the appropriatenessof risk management practices. With regard to real estate, thegreatest asset of Hulic, we obtain regular appraisals to comprehend
the market risk of real estate, and we have also formulated abusiness continuity basic plan to prepare for large-scale disasters,
under which we are working hard to reinforce our risk management
structure by implementing company-wide training drills andother measures. Based on experiences from the Great East Japan
Earthquake, we have also checked seismic performance, liquefaction
countermeasures, and flood control measures at each building.

Business Continuity Initiatives for Disasters
Hulic is a real estate company that engages in the development,
reconstruction, and operation of office buildings and condominiums
primarily in Tokyo's 23 wards.
We are constantly working to generate new added value by offering
properties that are superior in terms of safety, environmental
performance, and convenience. We have established various
emergency and disaster scenarios for which we have createdmeasures to improve the structural performance of our buildings aswell as operational and management aspects.

1 timeWe are proactively carrying out measures to strengthen the business
continuity capabilities of our core head office functions during an
emergency. The following measures have been taken at the Hulic Head
Office Building.
- Adopts quake-absorbing and quake-damping structures thatenable building functions to operate even during an earthquakewith a seismic intensity of seven- Features emergency generators that can operate continuously for
up to six days
- Secures food and drinking water to last more than seven days
- Uses wireless equipment for communications between the
management offices of other company-owned properties, etc.
Regarding buildings for which Hulic undertakes reconstruction
projects, we also stockpile water resources and establish a drainage
system and install emergency back-up generators that can generate
power continuously three days.

Maintaining Functions during a Disaster(Hulic Head Office Building)
Photovoltaic panels
8F: Server Room,Operations Rooms, andrestrooms have backup power,
lighting and air conditioning

Naturalventilation
Naturallighting

Immediate Confirmation of Damages Emergency Notification
system using wireless communications (agreement with three companies)(Company A)

HULIC

Real estate management company(Company B)

Real estate management company(Company C)

1F: Central Control
Room, MDF Roomand restrooms
have backup
power, lighting andair conditioning

Response Aimed at Recovery of Operations Emergency
repair agreements (22 companies)

HULIC

Companies that constructed each building(general contractors)

Verticaldamp-proof
barrier H=1m
Telecommunications
entrance facility:
2 routes
Seismic isolation pit
Emergency shutoff valve

WEB
Employees undergoing disaster training

45

Results in
FY2018

Facilities and Stockpiles for Sustaining
Business Operations

Collaborative and Cooperative Structurewith Business Partners

Real estate management company

FUNDAMENTAL
APPROACH

Each and every employee will strive to fulfill the trust of every stakeholder and fulfill Hulic's
corporate social responsibilities by fully complying with laws and company rules as well as engaging
in business activities based on a high standard of ethics.

RF: Electricity receiving andtransformer equipment/air
conditioner

Lightning strike

1 elevator inoperation
2F: Disaster Response
Room and restrooms
have backup power,
lighting and air
conditioning

Compliance seminars for all employees and directors No. of seminars conducted:

Compliance Promotion System
In accordance with the compliance rules, we have built a companywide system composed of the Board of Directors at the top, theCompliance Committee, executive managing directors in chargeof legal affairs and compliance, and compliance officers of eachdepartment. The status of activities based on the complianceprogram is regularly reported to the Board of Directors through theCompliance Committee.
The Compliance Manual requires that employees immediately
report compliance issues or possible issues to a compliance officer,
who will then investigate the matter as necessary, identify thecause, and implement the necessary measures to prevent future reoccurrences.
In 2018, Hulic had no compliance violations.

Initiatives for Preventing Corruption
Hulic prohibits any act or suspicious act that leads to corruption
with business partners, including public agencies such as thegovernment and local government. We also strictly prohibit any
bribery and clearly define prohibited activities specifically that leadto corruption and bribery in the section “Business Entertainment/
Gift Giving and Prohibition of Bribery” of the Compliance Manual.
In addition, we conduct compliance seminars for all employees asappropriate to build their awareness on prohibited activities suchas giving gifts to public officials and excessive entertainment aswell as disseminating Hulic's policy on prohibition of corruption
and bribery through the Compliance Manual. Moreover, twice ayear, our Legal & Compliance Department checks whether eachdepartment is appropriately managing the issues related to businessentertainment of interested parties and the acceptance or offeringof gifts and bribery, and identifies and assesses risks. Furthermore,
employees of Hulic and our business partners are encouraged toreport any matters involving compliance issues, including suspected
corruption, directly to the Compliance Hotline on an anonymousbasis. We made no political contributions in 2018.

Initiatives for Fair Competition
B1F: Water pump andoil tank operations,and disaster
preparedness storage

Telecommunications
entrance facility:
2 routes
Electricalentrance facility:
2 lines

Risk Management
https://www.hulic.co.jp/en/csr/governance/risk_management.html

Hulic's Compliance Manual sets out our principles of “Compliancewith the Antitrust Laws and Other Relevant Laws and Regulations.”
In addition, we introduce necessary trainings at complianceseminars to communicate the principles to employees.

Compliance Hotline
Our employees are encouraged to report directly to the internalor external Compliance Hotline when they consider it unlikelythat appropriate corrective actions will be implemented after
they consult with the compliance officers of their departments on
matters involving compliance issues, or when they are uncomfortable

5 times Transmission of information: 12 times

consulting with compliance officers due to the nature of the issues
involved.
The Compliance Hotline investigates issues reported and promptly
implements corrective actions by paying due consideration to theprivacy of whistleblowers.

Compliance Seminar
We regularly provide compliance seminars covering set themes toinstill awareness of compliance among all employees. In 2018, we
held training on the Stamp Tax Act, handling clerical mistakes, andother such topics. In addition to seminars on these overall themes,
we hold theme-based seminars on important themes including
Building Lots and Buildings Transaction Business Act and thematter of insider trading, in consideration of compliance specificto real estate businesses. Furthermore, we hold discussions in eachdepartment if appropriate.
We also post compliance-related news and Q&As to the Company's
intranet once a month. We compile comments on complianceseminnars, obtained through questionnaires, as feedback andreflect them in subsequent seminars.
Compliance Seminars in 2018
Frequency: 5 seminars implemented (four times for all employees,
once for executive officers), transmission of
information 12 times
No. of participants: All employees (including temporary staff)

Information Security Management
In an attempt to prevent information leaks, one of the critical risks
in relation to the performance of business, we have established an
information security management system, and enhanced operation
management in accordance with the information management
rules included in the information security policy. We more strictly
check the right of access to the shared server, regulate the use ofstorage media, and regulate instances where information assets
can be taken off-site. In our themed compliance seminars held on aregular basis, we thoroughly teach the significance of information
management and information security measures in terms of systems
in order to increase each employee's awareness. Additionally, we
carry out internal audits to check compliance with company rules
on information management.

WEB

Compliancehttps://www.hulic.co.jp/en/csr/governance/compliance.html

46Consolidated Financial Statements
Consolidated Balance Sheets

Consolidated Statements of Income(Unit: Million Yen)

Assets2017

2017

Current assets

Current liabilities
28,21732,387

Short-term loans payable

30,066

277

Notes and operating accounts receivable

5,244

4,390

Current portion of long-term loans payable

69,957

34,7960

7

Short-term bonds payable

11,9999,999

Real property for sale

111,458

143,901

Current portion of bonds

15,0008,000

Real estate for sale in process

15,037

4,701

Accrued expenses

3,994

4,681

Costs on uncompleted construction contracts

111

72

Income taxes payable

15,667

16,726

Supplies

44

163

Advances received

5,655

5,715

Operational investment securities

442

0

Provision for bonuses

403

482

Deferred tax assets

1,139

614

Provision for directors' bonuses

196

247

Other

3,221

1,782

(1)

(2)

164,913

188,018

Allowance for doubtful accounts
Total current assets

Other
Total current liabilities

7,095

6,712

160,036

87,640Non-current liabilities

Non-current assets

Bonds payable

23,00085,000Property, plant and equipment

Long-term loans payable

676,674

837,071305,060

Deferred tax liabilities

45,46437,036

Buildings and structures

280,085

Accumulated depreciation(80,150)(84,676)

Provision for directors' retirement benefits

91

101

Buildings and structures. net

199,935

220,384

Provision for stocks payment

741

1,135

Machinery, equipment and vehicles

4,132

4,538

Net defined benefit liability

1,265

1,351

Accumulated depreciation(1,432)(1,555)Long-term guarantee deposited

64,03970,403

Machinery. equipment and vehicles. net

2,700

2,983

Other

1,968

2,548

792,489

934,360

Total non-current liabilities

813,245

1,034,647

Construction in progress

9,010

3,588

Total liabilities

973,281

1,122,287

Other

2,154

3,217

Accumulated depreciation(1,126)(1,187)

Other. net

1,028

2,030

1,005,164

1,163,346

Land

Total property. plant and equipment

Goodwill

4,055

4,026

Leasehold right

21,994

21,364569

568

26,61925,959Investment securities

136,047

124,694

Guarantee deposits

13,257

15,923

Deferred tax assets

818

950

Other
Total intangible non-current assets

Investments and other assets

Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets

66

119

5,184

6,951

(0)

(0)

155,373

148,637

1,187,157

1,337,944

2017

2018

Capital stock

62,71862,718

Capital surplus

78,78378,783Retained earnings

193,697

227,660

Treasury shares(1,126)(1,127)334,072

368,034

Total shareholders' equity

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

41,382

32,671

Deferred gains or losses on hedges

(40)

(33)

Remeasurements of defined benefit plans

(9)

65

Total accumulated other comprehensive income

41,33232,703

Non-controlling interests

3,450

3,397

378,855

404,135

1,352,137

1,526,423

Total net assets
Total liabilities and net assets

2017

2018

289,618
204,970
84,647
20,39864,249287,513
189,118
98,39522,83075,564

9
1,761

8
1,986

Share of profit of entities accounted for using equity
method289

639

Income arising from cancellation of leasing contracts
Other
Total non-operating income

32
317
2,411

354
269
3,258

Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary income

4,468
321
4,790
61,870

5,629
663
6,292
72,530

211
0
－
24
－
5
241

20
42
126
62
91
8
352

1
370
483
11
97
963
61,14819,195(748)
18,44642,701299
42,402

1
436
393
－
33
865
72,01826,355(4,132)
22,222
49,795279
49,515

Operating revenue
Operating cost
Operating gross profit
Selling. general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income

Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on investments in silent partnership and others
Gain on bargain purchase
Penalty income
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Loss arising from building reconstruction
Impairment loss
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Consolidated Statements ofComprehensive Income
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Remeasurements of defined benefit plans. net of tax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income(Unit: Million Yen)

2017

2018

42,70149,795

7,572
10
(12)

(9,182)
7
47

382

497

7,953
50,655(8,629)41,16550,35440,886300

279(Comprehensive income attributable to)Deferred assets
Business commencement expenses

66—

Share issuance cost—

460

Total deferred assets

66

460

1,352,137

1,526,423

Total assets(Unit: Million Yen)

Net assets
Shareholders' equity

Intangible assets(Unit: Million Yen)

2018

Cash and deposits

Merchandise

47(Unit: Million Yen)

Liabilities

2018

Consolidated Statement of Cash Flows

Comprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests(Unit: Million Yen)

2017

2018

61,148
11,736
11
(24)
(2)
36
32

72,018
11,942
－
(62)
0
75
50

19

9

Increase (decrease) in provision for stocks payment
Increase (decrease) in net defined benefit asset and liability
Interest and dividend income
Interest expenses

300
126(1,771)
4,468

393
87
(1,994)
5,629

Share of (profit) loss of entities accounted for using
equity method

(289)

(639)

Loss on retirement of non-current assets
Loss (gain) on sales of property, plant and equipment
Loss (gain) on sales of investment securities
Loss (gain) on investments in silent partnership and other
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Decrease (increase) in investment securities for sale
Decrease (increase) in guarantee deposits
Increase (decrease) in guarantee deposits received
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

370
(209)
(0)
－
(946)
(20,334)590(3,889)
8,706
(406)
(530)
59,1401,866(4,343)(10,937)
45,724

436
(19)
(42)
(126)
1,264
62,399442(2,630)6,167
2,591(1,150)156,842
4,895(5,395)(25,368)
130,973

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments into merger of new consolidated subsidiaries
Purchase of newly consolidated subsidiaries
Collections of loans receivable
Payments on loans
Other
Net cash provided by (used in) investing activities－－(196,128)
11,458(1,003)(4,104)
1
－
0
500
(125)
312
(189,088)(153)
60(247,082)24(7,068)(3,549)
47
(971)
514
0
－
52
(258,127)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Net increase (decrease) in short-term bonds payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Payments on redemption of bonds
Redemption of bonds
Proceeds from exercise of share options
Purchase of treasury shares
Cash dividends paid
Proceeds from payment from minority shareholders
Cash dividends paid to minority shareholders
Other
Net cash provided by (used in) financing activities
Net increase/decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period

2,065
11,997
232,800(85,544)－－45(0)(11,911)
100
(130)
(938)
148,483
5,119
22,671(30,066)(2,000)
195,000(70,000)
69,457(15,000)－(0)(15,552)
20
(834)
(11)
131,0103,856
27,991

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in provision for directors'
retirement benefits

Net increase/decrease in cash and cash equivalent
with new consolidated subsidiaries
Cash and cash equivalents at end of period

200－

27,991

31,84748

Consolidated Financial Statements

External Evaluation

Consolidated Statements of Changes in Net Assets

Third-party Assurance
Shareholders' equity

2017(Unit: Million Yen)
Balance at the beginning of the current period

Capital stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders'equity62,69578,760163,206(1,140)303,523

22

22

With the aim of enhancing the credibility of our CSR Report, a set of selected environmental and social performance indicators for fiscal 2018 thatare disclosed in this Report have been assured by the third-party assurance provider, KPMG AZSA Sustainability Co., Ltd. (Indicators that have beenassured are marked with “★”.) We will continue to put our best efforts into improving the quality of our sustainability report going forward.

Changes of items during the current period
Issuance of new shares

45

Dividends of surplus(11,911)

Profit attributable to owners of parent

42,402(11,911)
42,402

Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

13

13

Change of scope of consolidation

(0)

(0)

Net changes of items other than shareholders' equity
Total changes of items during the current period
Balance at the end of the current period

22

22

30,49013

30,54962,71878,783

193,697(1,126)

334,072

Minority
interests

Total
net assets

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities
Balance at the beginning of the current period

33,449Deferred
gains or losses
on hedges

Adjustments
for cumulative
retirement
benefits

Consolidated
statements ofchanges in net
assets(50)(19)

33,3804,184

341,087

Changes of items during the current period
Issuance of new shares

45

Dividends of surplus(11,911)

Profit attributable to owners of parent

42,402

Purchase of treasury shares(0)

Disposal of treasury shares

13

Change of scope of consolidation
Net changes of items other than shareholders' equity

(0)
7,932

10

9

7,952

(734)

7,218

Total changes of items during the current period

7,932

10

9

7,952

(734)

37,767

Balance at the end of the current period

41,382(40)(9)

41,3323,450

378,855

Shareholders' equity
2018(Unit: Million Yen)
Balance at the beginning of the current period

Capital stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders'equity62,71878,783

193,697(1,126)

334,072

Changes of items during the current period
Dividends of surplus(15,552)

Profit attributable to owners of parent

49,515(15,552)
49,515Purchase of treasury shares(0)Change in ownership interest of parent due to transactions with
non-controlling interests

(0)

0

0

Net changes of items other than shareholders' equity
Total changes of items during the current period
Balance at the end of the current period—

033,962(0)33,962

62,71878,783

227,660(1,127)368,034

Minority
interests

Total
net assets

External Evaluation
We were highly appraised by various external institutions as a result of the proactive efforts that we put into the ESG (Environment, Social, andGovernance) issues that our stakeholders place emphasis on.

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities
Balance at the beginning of the current period

41,382

Deferred
gains or losses
on hedges

Adjustments
for cumulative
retirement
benefits

Consolidated
statements ofchanges in net
assets(40)(9)

41,3323,450

E nvironment

378,855

Changes of items during the current period

49

Dividends of surplus(15,552)

Profit attributable to owners of parent

49,515Purchase of treasury shares(0)Change in ownership interest of parent due to transactions with
non-controlling interests0

Net changes of items other than shareholders' equity(8,710)6

74(8,629)(52)(8,682)

Total changes of items during the current period(8,710)6

74(8,629)(52)

25,279Balance at the end of the current period

32,671(33)

65

32,703

3,397

404,135

S ocialG overnanceNikkei Environmental Management Survey/
Ranked 1st Top ranking for the ninth
consecutive year in the warehouse,real estate, and other categories

50