Sustainability Policy and Materiality

FRC and Fukuoka Realty believe maximizing profits for unitholders over the medium to long term requires not only the pursuitof profitability, but also consideration for the environment, society, and governance. With this in mind, we focus on ESG

3. Contributing to the Creation of a Recycling Society• We will monitor water consumption and waste management at theproperties we manage and promote water saving and recycling throughbetter management, in an effort to utilize limited resources efficiently.
• We will investigate the adoption of water-saving equipment and waterreuse systems at the opportunities of renovating buildings.
4. Pursuing Well-Being and Safety• We will endeavor to provide healthy and comfortable indoor spaces atthe properties we manage, striving to enhance tenant satisfaction andproperty competitiveness• We will implement measures to prevent and reduce disasters at theproperties we manage, such as ensuring earthquake resistance and fully
preparing emergency equipment, to provide safe and secure buildings.

6. Enlightening Employees• To implement the Policy, we will provide our employees with educationand training sessions on ESG awareness in real estate investment andmanagement operations, heightening their awareness and enriching theirexpertise.
7. Collaboration with Tenants and Suppliers• In implementing the Policy, assuming that it is essential to obtainunderstanding and cooperation from the tenants of respective properties
and our major business partners including property managementcompanies, we will work to build good relations with each of them in aneffort to establish a collaborative structure.
8. Establishing Internal Organizations• In order to manage the implementation of what is provided in the Policy,
we will organize a sustainability promotion committee within the Company.
• We will set up specific objectives, etc. for each of our initiatives andreview them periodically.

Fukuoka Realty identifies materiality (important issues to address) in
its sustainability initiatives based on the requests and expectationsof its stakeholders and the expected impact on and importanceto the Investment Corporation. By promoting initiatives based onMateriality significant issues

Environment

2. Responding to Climate Change Risks• We will endeavor to help mitigate climate change risks by working to
reduce greenhouse gas emissions from the properties we manage
through utilization of renewable energy and other energy conservation
measures.

5. Utilizing Green Building Certifications• We will investigate the obtainment of green building certifications andother environmental assessments in order to visualize the results of ourinitiatives on the environment and society at the properties we manage
as well as to enhance property competitiveness.

9. Monitoring and Disclosing Environmental and Social Performances• We will continuously grasp the status and results of our efforts based on
the Policy, while monitoring the status of ESG initiatives on our own by
utilizing external assessment systems and surveys including GRESB.
• We will disclose information and achievements regarding our ESG
initiatives to unitholders and other stakeholders in a timely andappropriate manner.
Established January 29, 2018

materiality policies and targets derived through cooperation withstakeholders, the Company targets sustainable growth at FRC
alongside contributions toward solving social issues.

Policies and targets

Related SDGs

Reduction of environmental load

・Coordinate with Property Management and Building Management on promotion of management andreduction of energy consumption, greenhouse gas emissions, water consumption, and waste output

Maintenance and enhancementof environmental and construction
performance

・Carry out performance and function evaluation of properties on a regular basis and ameliorate any
deterioration in performance, etc.
・Maintain and improve competitiveness by acquiring green building certifications and through visual
representation of building performance

Creation ofpleasant
workplaces

Governance

1. Promoting Energy Conservation of Portfolio Properties• We will monitor the energy consumption levels of the properties wemanage, and work to improve management to lower the levels over the
medium to long term.
• We will endeavor to improve the energy consumption efficiency ofbuildings and facilities when undertaking renovations, so as to enhance
property value and mitigate environment-related risks as well as reduce
operating costs.

Identification of Materiality significant issues

Society

Sustainability Policy

Assetmanagementcompany・Improve quality of operations by enhancing and expanding employee education systems and promoting
acquisition of qualifications
・Continue to improve office environments and work on providing pleasant working environments
・Give consideration to work-life balance and boost employee satisfaction

Tenants

・Promote improvement of employee satisfaction and work toward increasing the job satisfaction of tenant
employees

Contributions to boosting theattractiveness and revitalization of
Fukuoka and Kyushu

・Enhance dissemination of information regarding the strengths and charms of Fukuoka and Kyushu
・Support research and studies on the local economy and industries; promote attractive urban development incollaboration with local business circles

Co-creation with the local community

・Deepen dialogue and collaboration with the local community through participation in community activities
and various initiatives using properties under our management to grow and develop together with the local
community

Information disclosure and dialogue
with stakeholders

・Disclose financial and non-financial information to stakeholders in an appropriate and timely manner
・Build relationships of trust through proactive dialogue with stakeholders and reflect stakeholder feedback in
our management strategy

Compliance / Risk Management

・Ensure thorough compliance, including with laws and ordinances, and the elimination of any conflict ofinterest with interested parties, and develop and operate an appropriate internal risk management system tomaintain and improve corporate value

Foundation Underpinning Management

Foundation Underpinning Management

issues as part of the real estate investment management process.

System for Promoting Sustainability
Fukuoka Realty has established the Sustainability Promotion
Committee to promote sustainability initiatives in a continuous andsystemic manner based on its Sustainability Policy. To achieve thegoals of the Sustainability Policy, the Company has put in place the"Regulations Concerning Sustainability Management" manual. In
the context of the Company s internal systems, collaboration withstakeholders, and information disclosure policy, the Committee
in principle meets at least twice a year to examine goals andmeasures related to sustainability. The Sustainability Promotion
Committee includes the CEO & Representative Director, and eachgeneral manager of the Property Management Dept., Investment
Dept., Finance Dept., Planning Dept., and Compliance Dept. The
CEO & Representative Director, who chairs the Committee, makes
a decision regarding the implementation of sustainability-related
measures. The chair of the Committee also periodically reports on
targets and results, as well as progress in certain issues, to theBoards of Directors of both the Company and FRC.

■ Organizational Chart for the Asset Management Company
General Meeting of Shareholders
Auditors
Board of Directors
Compliance Assessment Committee

Fukuoka REIT Corporation 2019

Compliance Department

Deliberations on compliance-related matters• General Manager of Compliance Dept. (Attorney)• Outside Compliance Committee Members (Attorneys,
Certified Public Accountant and Tax Accountant, Real
Estate Appraisers)

STEP 1

STEP 2

STEP 3

Identify social issues
Based on the needs of society and the expectationsof stakeholders within and outside of the Company,
prepare a list of social issues taking into accountconditions at other companies in the same industry,
items used at assessment agencies, ESG disclosure
standards, and SDGs.

Narrow and prioritize issues
Narrow and prioritize identified issues based on theirimportance to stakeholders and the importance toand degree of impact on the FRC s business basedon potential risks and opportunities. Prepare draft
proposals regarding materiality.

Deliberate at the management level, confirm appropriateness
Ensure that the Sustainability Promotion Committee, established by
the asset management company, deliberates on all draft proposals
regarding materiality. Materiality is identified after investigating
appropriateness based on the opinions and advice of experts acting
on behalf of stakeholders. Reports are ultimately delivered to theBoard of Directors of the asset management company and the Boardof Directors of the Investment Corporation.

CEO & Representative Director
Risk Management Committee
Deliberations regarding risk management

Executive Committee

Investment Committee

Decision-making on management matters ingeneralDecision-making in regard to the investment in andoperation of assets owned by FRC

Investment Department

We put in place the Sustainability Policy in January 2018 and established theSustainability Promotion Committee with the goal of continuously and systematicallySustainability Promotion Committee
Decision-making in regard to the promotion ofsustainability

Property Management Department

22

Process for Identifying Materiality

Finance Department

Planning Department

promoting initiatives based on the policy. We believe factoring ESG considerations
Akira Eguchi
Executive Managing Director
Fukuoka Realty Co., Ltd.

into our real estate investment management process is part of our responsibility as theasset management company for FRC, a regionally specialized REIT.

Fukuoka REIT Corporation 201923

Environmental Issues

FRC and Fukuoka Realty are promoting environmental initiatives in order to reduce the environmental impact of at FRC s

Acquiring External Certifications

Green Finance Framework■ Participation in GRESB Assessment 2019 ( Green Starand 4 Star Ratings)
The Global Real Estate Sustainability Benchmark (GRESB) wasestablished by a group of European pension funds and is thebenchmark for measuring sustainability in real estate companies
and managing organizations. FRC was given four Green Stars in
the five-level GRESB Real Estate Assessment conducted in 2019.

■ Ratio of Properties Certified as Green Buildings
As of the end of August 2019, the ratio of properties within theentire portfolio certified as green buildings was 68.7%.
The DBJ Green Building Certification is a third-party certification
system established by the Development Bank of Japan forreal estate properties that feature excellent environmental andsocial considerations. Fukuoka REIT Corporation has acquired
certification for nine of its properties owned as domestic top-class■ Initiatives We Support
In September 2018 Fukuoka Realty Co., Ltd. endorsed thePrinciples for Responsible Investment (PRI) and Principles for
Financial Action for the 21st Century (PFA21) and became asignatory to these initiatives. Through ESG-conscious asset
management, Fukuoka Realty is contributing still further to theachievement of a sustainable society.

buildings or buildings that exhibit exceptionally high environmental
and social awareness.
In addition, the Building Energy-Efficiency Labeling System (BELS)
is a system in which third parties evaluate, indicate, and certify theenergy conservation performance of non-residential buildings, basedon the Evaluation Guidelines for the Building Energy-Efficiency
Labeling System for Non-Residential Buildings (2013). FRC has
acquired certification for four of its properties owned.

2017

Canal City Hakata
Canal City Hakata・B
Park Place Oita
Canal City Business Center Building
Gofukumachi Business Center
Higashi Hie Business Center
Konoha Mall Hashimoto
LOGICITY Hisayama

2017

Higashi Hie Business Center II

2018Green Building
Certification

2018

68.7%

2018

(total floor space basis)

Funding used as investment to produce positive effects on theenvironment is called green finance, and the market, focused on
green bonds, is expanding year by year. Given the growing interestin environmental issues such as climate change, the market scale
for green finance is expected to expand moving forward as thenumber of investors focused on ESG investment increases.
As the preference by those providing funding to invest in
solutions to environmental issues and companies actively working
to reduce their environmental impact increases, we believe therelative cost of funding through green bonds and other instruments
may decline.

Based on these conditions and with the goal of further
advancing ESG activities and expanding funding methods, FRC
established the Green Finance Framework in June 2019 in line with
the Green Bond Principles 2018, the Green Bond Guidelines 2017by the Ministry of the Environment, and the Green Loan Principles.
In July 2019, FRC was the first investment corporation toundertake green financing, procuring ¥2.2 billion in green loans inline with this framework.

Use of Funds Procured through Green Finance

Eligible Green Projects

The funds procured through green finance will be allocatedtoward the acquisition of Eligible Green Projects, the repaymentof borrowings required in the acquisition of eligible green assets,or the redemption of investment corporation bonds issued andoutstanding.

Eligible Green Projects are specified assets held by FRC thathave received or are scheduled to receive one of the following
certifications from third-party certification organizations at the timeof procurement or the reporting date.

Foundation Underpinning Management

Foundation Underpinning Management

properties.

(1) DBJ Green Building certification of 4 or 5 stars or a 3-star evaluation(2) CASBEE certification of S, A or B+ rank
(3) BELS evaluation of 3, 4 or 5 stars

Maximum Green Finance Procurement AmountThe amount of liability (Eligible Green Project liability) derived bymultiplying the total acquisition price of Eligible Green Projects
by total assets LTV (debt/total assets) as of the end of thelatest fiscal period is recognized as the maximum green financeprocurement amount.

Total properties
owned¥195.9 billion(acquisition price)

29 properties★★★
(3-star)Eligible Green
Projects¥138.4 billion

70.6%

★★★★
(4-star)Eligible Green
Projects¥138.4 billion
10 properties★★★★★
(5-star)

ReportingAfter procuring green finance, FRC will announce the total
amount of Eligible Green Projects, the amount of liabilities related
to Eligible Green Projects and the amount of funds from green
finance as of the end of each fiscal period (February and Augusteach year). The Investment Corporation will also announce thefollowing indicators related to Eligible Green Projects as of the endof February each year.
• The number of properties classified as Eligible Green Projects,

and the number and type of obtained environmental certifications.
Total assets LTV

39.7%
Maximum green financeprocurement amount
Higashi Hie Business Center II

24

Fukuoka REIT Corporation 2019

Higashi Hie Business Center

LOGICITY Minato Kashii

LOGICITY Hisayama

Eligible Green Project liability¥54.9 billion

Fukuoka REIT Corporation 201925

Environmental Initiatives at Properties Owned

Retail

Our goal for retail facilities is to create environmentally friendly facilities. Accordingly, we are
implementing energy and resource-saving initiatives at these locations.

Canal Water Filtration System (rainwater utilization system)
Canal City Hakata s symbolic canal has botha recreational function and is a source of waterto fight fires in the case of an emergency. At
all times, this canal holds roughly 1,200 tonsof water, and rainwater is used in order toconserve resources.

OfficeBuildings

We are implementing heat island measures at office buildings. This includes the promotion of LED
lighting in common areas. Among other initiatives, steps have been taken to promote the greening of
exterior walls as well as the planting of exterior foliage.

Progress in the Conversion to LED Lighting

Other Initiatives• Gofukumachi Business Center (interior shared spaces, someexternal areas, etc.)• Sanix Hakata Building (interior recessed lighting)• Taihaku Street Business Center (entrance, interior sharedspaces, etc.)

We are working to reduce our environmental impact by promoting
energy and resource-saving measures, including the greeningof exterior walls, planting of exterior
foliage, installation of sensors that
detect the presence or absence ofhuman activity to reduce light usage,and implementation of waste recycling
initiatives.

Groundwater Filtration System (RO treatment system)

Higashi Hie Business Center

For Fukuoka, which has suffered water shortages in the past,water is a truly precious resource.
Canal City Hakata and Konoha Mall Hashimoto use dedicatedwaterworks facilities to produce all of the tap water they consume.
The facilities water treatment system uses a special film called RO
film (Note 1) to treat groundwater.

(Note 1) RO film: A film perforated with holes so incredibly tiny that water molecules are virtually the onlymolecules that can pass through them. Water passed through this film is purified, as
impurities and hazardous substances are unable to permeate it. RO film can thus be used
to generate drinkable water from even seawater and muddy water.

Foundation Underpinning Management

Foundation Underpinning Management

Environmental Issues

OthersCanal City Hakata

We are also working on environmental measures in logistics, housing, and other facilities.

Introducing Renewable Energy Equipment

Planting of Exterior Foliage

Solar panels have been installed on theroofs of LOGICITY Hisayama and LOGICITY
Minato Kashii.

At the Aqualia Chihaya property, we areconducting greening measures such as
replacement of trees and plants raised.

Sixth Annual Green Social Contribution Award (2018)
Solar panels

Canal City Hakata

Before planting

With the aim of creating an environmentally friendly facility, Canal City

After planting

Hakata is engaged in greening, recycling, and energy and resourcesaving activities. Canal City Hakata received a Sixth Annual Green Social
Contribution Award in recognition of its efforts to contribute to the regional
community and improve the environment since its opening. These efforts
include the creation of an area where visitors can relax, focusing on artificial
canals, and installing a rooftop garden at the facility hotel.

LOGICITY Minato Kashii

26

Fukuoka REIT Corporation 2019

LOGICITY Hisayama

Aqualia Chihaya

Fukuoka REIT Corporation 201927

Social Issues

We are actively engaged in employee and tenant-related measures to ensure a comfortable working environment.
As a member of the local community, we are focused on ensuring a safe and secure living environment while building a

Initiatives for Employees and TenantsInitiatives for Local Communities

Initiatives for Employees (* As of August 31, 2019)
Fukuoka Realty: Number of officers andemployees, number of credentialed employees
Average number of years of continuous
service by permanent employees:
8 years and 6 months
Number of full-time officers and employees:
41 (22 male and 19 female)・Employees seconded from sponsors: 2
・Employees seconded to a sponsor: 3
Number of credentialed personnel (aggregate total)
・Real estate brokers: 28
・Certified Building Administrators: 4
・First-class registered architects: 2・ARES Certified Masters: 19
・Real estate appraisers: 2・Attorneys: 2
・MBA: 1・Administrative Scriveners: 1
・SME management consultants: 1

Initiatives for Local Communities
Supporting flexible working styles
・Child-rearing support (maternity leave,
childcare leave system)
・Nursing care leave
・Leave for voluntary work
・No overtime days
・Employee welfare (401K, cumulative
investment system, etc.)
・Encouraging use of paid holidays etc.
Employee training
・Regular study groups by the Kyushu
Economic Research Center・Compliance training
・ESG training
・Nursing care training
・Overseas inspection
tour (Shenzhen) etc.
Support for career development

・Employee satisfaction survey, every year
・Self-assessment system
・Career interview
・Secondment system (dispatching employees
to sponsor companies)
・Promotion from contract employee topermanent employee status
・Offering of training programs tailored to eachmanagement level
・System for supporting acquisition ofqualifications (Real Estate Securitization
Master, Real Estate Transaction Agent, etc.)
・Support for language learning, the studying
of bookkeeping etc.

ESG training (waste disposal site tour)

Environment Promotion Events

At Canal City Hakata, employees
participate in events that involve
sprinkling water on sidewalks to coolthem down and promote well-being.

Safety Town Council

Clean-Up Days

Participation in Community Events

Support for Local Revitalization

At Park Place Oita, we established a
Safety Town Council that partners
with related institutions and groups to
conduct crime-prevention patrols andproactively strives to prevent youth
misconduct.

Executives and employees actively
participate in clean-up activities, ofwhich there have been 276 as of August
31, 2019.

Every year, male employees of theCompany participate in the Hakata Gion
Yamakasa festival (Hachiban Yamakasa
Kasariyama, Kamikawabata-dori). CEO
Etsuo Matsuyuki rode on a float at theevent in 2018.

In collaboration with DOGAN beta, INC.,
steps were taken to establish OnRAMP
with the aim of supporting and fostering
entrepreneurs in Kyushu.

Real Estate, Finance, and the Economy Gathering

Overseas inspection tour (Shenzhen)

We have held gathering to exchange information and opinions on

and Construction Industries

real estate, finance, and the economy annually since 2008 with the

Bureau of the Ministry ofcooperation of the Japan Real Estate Institute.

Land, Infrastructure, Transport

Local real estate companies, financial institutions, and government

and Tourism speaking on theagencies participate in the conference, which contributes to networking

promotion of ESG investment inand further stimulation of the local economy.

Japanese real estate. In the second part, Shuhei Yamada, Nikkei Asia

It has been designated as a continuing education course for ARES
The first part of the 12th lecture in 2019 featured Sachio Muto,
Recognized initiatives

・Undertaking of emergency drills intended to improve tenant safety andsecurity
・Implementation of tenant satisfaction surveys
・Distribution of sustainability guidebooks
・Sponsoring of events to improve sustainability awareness・Sustainability training, etc.

28

Fukuoka REIT Corporation 2019and opportunities stemming from rapid development. The lectures

head of the Real Estate Market Division within the Land Economy

were attended by about 230 people.

Other Activities

Promoting the Attractiveness of Fukuoka and Kyushu

Kyushu IR GroupThe Kyushu IR Group, which enteredits ninth year in 2019, was establishedin cooperation with the Japan Investor
Relations Association. The Group assists in learning about the latest
IR trends with IR employees of companies located in Fukuoka andKyushu, and fosters the forming of networks between participatingcompanies.

With the goal of promoting understanding of
the charms and strengths of Fukuoka andKyushu, we have published details of dialogue
between Fukuoka City Mayor Takashima
and Company CEO Etsuo Matsuyuki in a
publication aimed at foreign investors.

• There is a training system for employees• There is a support system for self-development initiatives• There is a system to support career advancement and to consult aboutcareer building• There is a certification acquisition support system as well as subsidized
English and bookkeeping training systems• The company has measures in place to encourage shorter working hours• There is a system in place allowing employees to take time off inincrements of hours or half-days• There is a personnel development system, including training contributing
to career advancement, etc.

Tenant Initiatives
With a focus on the health and comfort of tenant employees, we
improved the employee break room at Konohana Mall Hashimoto,a property owned by FRC.
We also engage in a variety of tenant initiatives each year topromote the understanding of sustainability.

Tech chief editor and Japan Center for Economic Research, spoke on
the light and shadow of the Chinese economy, specifically the risks

masters.

Creating a Comfortable Working Environment
Work style reforms at the Asset Management Company
Fukuoka Realty was certified as a Fukuoka Work Style Reform
Promotion Company on August 28, 2018. This system recognizes
companies that have achieved at least a certain number of theinitiative items that were selected by Fukuoka City as indicators
to advance work style reforms.

Foundation Underpinning Management

Foundation Underpinning Management

relationship of trust with members of the local community through participation in the planning of a variety of events.

Website■ FY2019 Study Group Themes■ Employee Resting Area

Schedule

Theme and Lecturer

ESG Disclosure and Internal Consensus
First Study Group(August 2019)

Seconds Study
Group (November
2019)

Third Study Group(pending)

BeforeAfter

Linking Japan

Sysmex Corporation
General Manager of the Corporate Communications
Division, Secretary General Manager

Ms. Noriko Okada

Preparing the Non-Financial Information Required by Investors
Resona Bank, Limited
Group leader for Asset Management Department s
Responsible Investment Group(pending)

Mr. Minoru Matsubara

FRC s website places an emphasis on being easy to use, easy tounderstand, and providing a wealth of information. The site aims to provide
not only financial information, but also information on the economy andmacroenvironment in Fukuoka and Kyushu, as well as the real estatemarket and details of measures being introduced at various properties
owned. The Investment Corporation also distributes a variety of information
through social networking sites andIR mail so that even investors who are
not familiar with Fukuoka and Kyushu
can gain a strong understanding ofcurrent conditions.

Fukuoka REIT Corporation 201929

Organizational Issues

As a listed REIT, FRC is working to strengthen corporate governance as part of its effort to fulfill its responsibilities to

Basic Policy on Customer-Oriented Business Operations

Governance System

Fukuoka Realty has adopted all seven principles set forth in the Principles for Customer-Oriented Business Conduct, announced by
the Financial Services Agency on March 30, 2017, and formulated a basic policy to realize customer-oriented business operations on
September 20, 2017.

When a transaction such as the purchase and sale of a property
between FRC and a stakeholder, including a sponsor, takes place,the asset management company must address any possibilityof prioritizing the interests of interested parties over investors.
Fukuoka Realty has accordingly established a Basic Policy on
Compliance, as well as compliance regulations and other internal
rules to prevent any conflict of interest. Based on these rules, we
obtain a preliminary assessment from the Compliance Department
General Manager and ensure deliberations by the Compliance
Assessment Committee, consisting of the Compliance Department
General Manager and three outside experts in order to engage
in the management of any conflict of interest pertaining to ourdealings with stakeholders in an appropriate manner.

■ Fukuoka Realty s Basic Policy

1
2

Fukuoka Realty is a financial business operator that operates listed REITs. We will constantly strive to provide high-quality services so that we canmeet the investment needs of unitholders.
Fukuoka Realty, as an asset management company knowledgeable about the particular circumstances of the region, strives to maximize the profit of
our unitholders by utilizing information and expertise, to provide investors with stable earnings over the medium to long term.

3

Fukuoka Realty will make the fiduciary duty entrusted to it by unitholders its primary consideration and appropriately manage any conflict of interest.

4

Fukuoka Realty s officers and employees will engage in honest and fair operations on a daily basis and act responsibly toward the Company s
investors and other stakeholders.

5

Fukuoka Realty will proactively engage in voluntary IR activities in addition to statutory disclosure and timely disclosure and increase the fairness andtransparency of information disclosure.

■ Decision-Making Process
Proposals from the responsible department

General Manager of Compliance Dept.

Deliberations by the Investment
Management Committee

Deliberations and resolution by theCompliance Assessment Committee

Resolution/decision-making reportby the Board of Directors■ FRC Directors
FRC Board of Executive Officers

Third-party assessment byexternal experts(Real estate appraisals)• Japan Real Estate Institute• The Tanizawa Sogo Appraisal
Co., Ltd.
• Daiwa Real Estate Appraisal
Co., Ltd.
[Market reports]• Analysis on trade areas andcompetitive environment• Adequate rent levels, etc.

Foundation Underpinning Management

Foundation Underpinning Management

unitholders and other stakeholders.

[Engineering reports]• Compliance with statutory andregulatory requirements andearthquake resistance• Check of soil contamination,
toxic substances, and thestatus of use• Replacement price, expenses
for long-term maintenance andrepairs, etc.

(Note) The prior consent of the Investment Corporation s Board of Directors is obtained in cases
falling under the provisions of Article 201-2 (1) of the Act on Investment Trusts and Investment
Corporations.

■ Seven Principles
Principle 1 Establishment and Announcement of Policy on Customer-Oriented Business Conduct
Fukuoka Realty is a financial business operator managing a listed REIT which, through investing in real estate properties, supports and facilitates asset formationof a wide range of investors. As such, we have established a clear basic policy to implement customer-oriented business conduct throughout the investment chain
and have publicized it on our website, etc. Moreover, we continuously check on the status of our endeavors in order to realize better customer-oriented businessconduct.
Principle 2 Pursuit of Customers' Best Interest
As a financial business operator, we maintain a high level of professionalism and professional ethics, and conduct operations with integrity and fairness forunitholders in an effort to secure their best interests. We also strive to ensure that such business conduct will be deeply rooted in our corporate culture.
Principle 3 Appropriate Management of Transactions with Conflicts of Interest
For transactions with our interested parties including Fukuoka Jisho Co., Ltd., one of our sponsors having 50% equity, which may cause conflicts of interest,
we work to accurately grasp the possibility of conflicts of interest with unitholders pursuant to laws and regulations as well as our internal rules, etc. If any suchpossibility is found, our Compliance Department investigates the matter in advance before the relevant transaction takes place, and deliberation is made in advanceat the Investment Committee and the Compliance Assessment Committee which invites outside experts if necessary. Through these steps, we appropriately
manage transactions that may have conflicts of interest. Specifically, when acquiring real estate from any interested party, for example, we follow the processes
established in our in-house rules for determining whether a certain deal is a transaction with a conflict of interest as stipulated in our Asset Management Guidelines.
By doing so, we prevent any disadvantage to unitholders from arising. When acquiring real estate from any interested party, we conduct an investigation andgive full consideration, for instance conducting the transaction at a price equal to or less than the appraisal value provided by a third party, before deciding on theinvestment.
Principle 4 Clarification of Fees and Commissions
We provide information through statutory and timely disclosure and voluntary disclosure so that unitholders can understand our asset management fees and othercommissions or expenses to be borne by the Investment Corporation, including what types of services are paid for.
Provision of Important Information in an Easy-to-Understand Manner
Principle 5
We do not solicit the sale or recommendation, etc. of financial instruments or financial services. However, as an asset management company of a listed REIT, we
provide important information that relates to investment decision-making for unitholders in an easy-to-understand manner through statutory and timely disclosure
as well as voluntary disclosure so that such information can be readily understood. We also post such information on our website in a timely manner in an effort toprovide information desirable for investors from an investor-oriented perspective.
Principle 6 Provision of Services Suitable for Unitholders
We strive to understand the needs and requirements of unitholders, and conduct asset management taking into account such needs and requirements. Specifically,
we aim to secure stable distributions, increase distributions over the medium to long term and conduct investment that can contribute to society, among otherendeavors.
Principle 7 Preparing a Framework, etc. for Appropriately Motivating Employees
We established a "Code of Conduct" to ensure our officers and employees always act in the best interest of unitholders. In addition, we regularly and continuously
carry out education and training on compliance for all of our employees so that they can secure fairness in business conduct and thoroughly implement appropriate
management for transactions that may involve conflicts of interest, as well as enhance their awareness on compliance.

30

Fukuoka REIT Corporation 2019

Risk Management

Supervisory Director

CEO and Representative Director

Supervisory Director

Yasuo Kawasho

Etsuo Matsuyuki

Hiroyasu Shindo■ Fukuoka Realty Governance Structure

We have established a system for comprehensively managing
risks by setting up the Risk Management Committee as theorganization to manage various risks. In terms of the basic policy
on risk management and the risk items to be managed, theCompany has established the Risk Management Regulations andthe Risk Management Committee monitors whether the risks areunder control.

Compliance Training
We carry out periodic compliance training to improve awarenesswithin the Company and to maintain the compliance system.

Director(Non-Executive)

Director(Non-Executive)

CEO and
Representative
Director

Hidenori Hara Yoshiro Watanabe Etsuo Matsuyuki

Executive
Managing
Director

Director(Non-Executive)

Auditor(Non-Executive)

Akira Eguchi

Hiroshi Shimuta Masanori Tasaka

Joint training with sponsors

In-house training (group discussions)

Fukuoka REIT Corporation 201931