□ Introduction

Sustainability Policy and Materiality□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

FRC and Fukuoka Realty Co., Ltd., believe maximizing profits for unitholders over the medium to long term requires not only
the pursuit of profitability but also consideration for the environment, society, and governance. With this in mind, we focus on
ESG issues as part of the real estate investment management process.

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.

7. Collaboration with Tenants and Suppliers• In implementing the Policy, assuming that it is essential to obtain understanding and cooperation from the tenants of respective properties andour major business partners including property management companies,
we will work to build good relations with each of them in an effort toestablish a collaborative structure.
8. Establishing Internal Organizations• To manage the implementation of what is provided in the Policy, we willorganize a sustainability promotion committee within the Company.
• We will set up specific objectives, etc., for each of our initiatives andreview them periodically.
9. Monitoring and Disclosing Environmental and Social Performance• 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 and appropriatemanner.
Established January 29, 2018

System for Promoting Sustainability
Fukuoka Realty Co., Ltd. has established the Sustainability Promotion Committee to promote sustainability initiatives in a continuousand systemic manner based on its Sustainability Policy. To achieve
the goals of the Sustainability Policy, the Company has put in place
the “Regulations Concerning Sustainability Management” manual.
In the context of the Companyʼs internal systems, collaboration
with stakeholders, 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 President and CEO, a full-time director,
and each general manager of the Real Estate Management Dept.,
Investment Dept., Finance Dept., Planning Dept., and ComplianceDept. The President and CEO, who chairs the Committee, makes
decisions 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.

Fukuoka REIT Corporation 2021

Policies and targets

Related SDGs

Reduction of environmental load

・Coordinate with Property Management and Building Management on promotion of management and reduction 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 of pleasant workplaces

Asset
managementcompany・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 toward 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 in collaboration 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

Process for Identifying Materiality■ Organizational Chart for the Asset Management Company
Shareholders General Meeting
Corporate Auditor
Board of Directors
Compliance Assessment Committee

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 FRCʼs 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 the Boardof Directors of the asset management company and the Board of
Directors of FRC.

President and CEO
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

Sustainability Promotion Committee
Decision-making in regard to the promotion ofsustainability

Akira Eguchi
Executive Vice President
Fukuoka Realty Co., Ltd.

Real EstateManagement Department

30

Materiality significant issues

Corporation. By promoting initiatives based on materiality policies
and targets derived through cooperation with stakeholders, theCompany targets sustainable growth at FRC alongsidecontributions toward solving social issues.

Foundation Underpinning Management

Foundation Underpinning Management

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.

Fukuoka Realty Co., Ltd., is taking steps to identify materiality(important issues to address) in its sustainability initiatives basedon the requests and expectations of its stakeholders and the
expected impact on and importance to the Investment

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 throughutilization 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.

Society

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

Governance

Sustainability Policy

Investment Department

Finance Department

In 2019, Fukuoka Realty Co., Ltd., identified seven key “material issues,” taking into consideration “events that are important to stakeholders” and “issues that have a significant impact on the
Companyʼs management,” as well as established its activity policy and targets. Amid the growing
importance of sustainability worldwide, events that could affect the Companyʼs operations continue to evolve. As a result, we are taking steps to review current material issues. In addition, we areengaging in discussions on materiality-related KPIs and the Task Force on Climate-related Financial
Disclosures（TCFD）
or equivalent climate change disclosures. As the asset management company
for Japanʼs first region-specific REIT, we recognize the need to factor ESG considerations into ourreal estate investment management process as part of our overarching mission.

Planning Department

Fukuoka REIT Corporation 2021

31

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Environmental Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Reduction of environmental load

Environmental initiatives
RetailEnvironmental Performance Data and Green FinanceIC

Natural Environment Conservation and Creation

At Canal City Hakata and Park Place Oita, we are making efforts tocoexist with various natural environments by providing green spacein communal areas, installing aquatic spaces, and creating shaded
spaces. We are creating habitats for wild fauna and flora that
contribute to the preservation of biodiversity, as well as providing
places where employees and visitors can relax and interact withnature.

RetailCanal Water Filtration System ( rainwater reuse system )IC

Environmental Performance Data
■ Electricity Usage

Canal City Hakataʼs symbolic canal has both a recreational
function and is a source of water to fight fires in the case of an
emergency. At all times, this canal holds roughly 1,200 tons ofwater, and rainwater is used in order to conserve resources.

（Mwh）
90,000■ Water Consumption(Data coverage)

70.1％
81,339

70.2% （Mwh/m²）

70.1%

190

79,474

184

71,192

175

180

60,00030,000

0

160

160

30th・31st
March 2019-February 2020

28th・29th
March 2018-February 2019

（m3）

70.1％

800,000(Data coverage)
70.1%

607,352

596,007

1.37

1.35

70.2%

（m³/m²）2.00
1.50

600,000
405,366

400,000

0.50

200,000

32nd・33rd
March 2020-February 2021

145

0

1.00

0.91

28th・29th
March 2018-February 2019

30th・31st
March 2019-February 2020

32nd・33rd
March 2020-February 2021

0.00

Notes: 1.Total value for 11 properties, including four retail facilities and seven office buildings.
Notes: 2.Per unit is calculated by adjusting the total floor area（m2）
by the occupancy rate.
Notes: 3.Data coverage is the area ratio of properties subject to data aggregation as compared to all properties and is calculated at the end of the fiscal period.
Notes: 4.The figure for Canal City Hakata, Canal City Hakata・B, and Canal City Business Center Building reflects total electricity and water usage for all buildings, including electricity and water usage by some theater areas
not owned by FRC.
Notes: 5.The figure for Park Place Oita covers only the main building section and excludes the section for independently run stores.

Green Finance

RetailGreywater Plant
 ( kitchen drainage reuse system )Food Residue Recycling ( raw garbage recycling )NEW

Canal City Hakata consigns the collection of raw garbage fromeach restaurant to a recycling company, which recycles it into
animal feed.
■ Food Recycling Flow Chart
Food residue (raw garbage)

Accumulation within
facilities

Restaurant tenants
Pig and poultry farmers, etc.,
sales to mixed feed makers

With the goal of further promoting ESG activities and expanding
financing options through an enhanced investor base, FRC
established the Green Finance Framework in 2019 in line with theGreen Loan Principles, the Green Bond Guidelines 2017 from the
Ministry of the Environment, and the Green Bond Principles 2018
in order to ensure implementation of green financing, including
green loans. The funds procured through green finance will beallocated toward the acquisition of Eligible Green Projects, therepayment of borrowings required in the acquisition of eligible
green assets, or the redemption of investment corporation bonds
issued and outstanding.

Conversion into animal feed

Energy-Saving Initiatives Based on the
Promotion of LED Lighting

We are focusing on converting each property to LED-based
lighting to reduce energy consumption.
〈Office buildings already converted to LED〉
• Gofukumachi Business Center (e.g., Interior shared spaces, some external areas)• Sanix Hakata Building（interior recessed lighting）• Taihaku Street Business Center（e.g., Entrance, interior shared spaces）• Tenjin North Front Building（common spaces） NEW(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

Recycling company(Kankyou Agency)

Pig and poultry
farmers, etc.

Office Buildings

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.

Eligible Green
Projects
131.8 billion yen(acquisition price)

65.2%

32 properties

Introducing Renewable
Energy Equipment

Others（logistics facilities） At LOGICITY Hisayama, LOGICITY Minato Kashii, and Konoha
Mall Hashimoto, we have installed solar panels on the rooftops togenerate renewable energy and contribute to the formation of arecycling-based society.

Total properties
owned
202.0 billion yen★★★
(3-star)★★★★★
(5-star)Eligible Green
Projects
131.8 billion yen
10 properties

Maximum green financeprocurement amount

Total assets LTV

41.2%

★★★★
(4-star)Eligible Green Project liability

Foundation Underpinning Management

Foundation Underpinning Management

At Canal City Hakata and Konoha Mall Hashimoto, kitchen
wastewater discharged by restaurants is collected and processed
as reclaimed water. It is then used as tap water in on-site
restrooms.

Retail54.3 billion yen

After 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 August each year). The Investment
Corporation will also announce the following indicators related to Eligible Green Projects as of the end of February each year.
• The number of properties classified as Eligible Green Projects, and the number and type of obtained environmental certifications.
■ Green Finance (actual)Type

Long-term loan
(Green loan)

Solar panels

LOGICITY Hisayama

LenderMizuho Bank
The Bank of Saga
The Higo Bank

Amount borrowed(Millions of yen)

2,200Interest rate (annualized)

0.521%(Note 1)

Loan date

Notes

July 31, 2019

Unsecured/unguaranteed
Lump-sum repayment
Fixed interest rate
Green loan assessment: Green 1(Note 2)

Notes: 1. FRC has concluded a swap agreement to establish a fixed interest rate on debt. The indicated interest rate reflects the effects of the swap agreement.
Notes: 2. FRC has received the highest “Green 1” rating from the Japan Credit Rating Agency for our adherence to the Green Loan Principles.

LED lighting being used at the Sanix Hakata Building

32

Fukuoka REIT Corporation 2021

Fukuoka REIT Corporation 2021

33

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Environmental Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Maintenance and enhancement of environmental and construction performance

Disaster Risk Countermeasures IC

Acquiring External Certifications

Aichi
Osaka

■ Storm Water Storage Facilities■ Replacing and Installing New Water Stops (July 2020)■ Instances of Building Inundation in Fukuoka City (zero instances since 2014)

Storm water storage capacity
FY 2020: 128,300m3

FY 1999: No storm water storage facilities

Storm water management capacity improved from 59.1mm/h to 79.5mm/h (city center)(Buildings)
4,000

From FY 2000 to FY 2020…
3,173

A steady decline inbuilding inundations

3,000

1,122

In September 2018, Fukuoka Realty Co., Ltd., endorsed thePrinciples for Responsible Investment (PRI) and the Principles
for Financial Action for the 21st Century (PFA21) and becamea signatory to these initiatives. Through ESG-conscious asset
management, the company is contributing still further to theachievement of a sustainable society.

Since the launch of the
project in FY 2000…

Instances ofinundation havesteadily declined.

3

Maximum hourly
precipitation (mm/h)

Canal City Business Center Building

Storm waterdrainage capacity
increased sharply.

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 “Green Stars” and“four stars (in the five-level)” GRESB Real Estate Assessment
conducted in 2021.

1,721

2,000
1,000

Canal City Hakata (north side of the building)■ Initiatives We Support■ Participation in GRESB Assessment 2021
( “Green Star” and “4 Star” Ratings)

Severe damage from flooding in Fukuoka City on June 29, 1999
contributed to the formulation of the Storm Water Management Action
Plan and the upgrading of rainwater drainage facilities in the areas where
the flooding was particularly harsh. Ongoing efforts to implement antiflooding measures have greatly improved flood safety within the city limits.

We reviewed the specifications and installation locations of existing water
stops throughout the Canal City Hakata premises and either repaired or（yen）installed equipment as part of our countermeasures to river flooding asa result of typhoons and locally heavy rains, which appear likely to comemore frequently and increase in severity due to global warming.

Fukuoka

AMC

FRC makes continuous improvements through feedback on the results it receives from acquiring external certifications.

Countermeasures to Flooding Risks

Tokyo

IC

June 29,
1999

July 19,
2003

July 24,2009

August 30,
2013

79.5

104

116

72.5

* Number of buildings: Total number of buildings inundated above and below the floor level. Period coveredis between June 29, 1999, and December 31, 2020.
Source: Fukuoka Realty Co., Ltd., based on data from the “Storm Water Management Action Plan 2026”
pamphlet for the Fukuoka City Storm Water Emergency Control Plan.

Fukuoka Prefecture is an area in which there are relatively few
earthquakes. According to the probabilistic earthquake prediction map
from the Office of the Headquarters for Earthquake Research Promotion,
Earthquake and Disaster-Reduction Research Division, Research andDevelopment Bureau, Ministry of Education, Culture, Sports, Science andTechnology, the probability of an earthquake with an intensity of six orgreater over the next 30 years is lower in Fukuoka Prefecture than in the

Kanto, Chubu, and Kansai areas. FRC establishes the insurance value ofeach property based on its replacement value, earthquake PML value,
and other factors, and maintains earthquake insurance for all its properties（buildings）. In addition, FRC continues to conduct annual property
surveys through external organizations to estimate earthquake damage toproperties based on various scenarios.

■ Probabilistic Earthquake Prediction Map■ Earthquake PML Value (full portfolio) 4.5%

Probability of an earthquake with an intensity of six or greater over the next 30 years(average case / all earthquakes) (reference date on January 1, 2020)■ Ratio of Properties Certified as Green Buildings
As of the end of August 2021, the ratio of properties within theentire portfolio certified as green buildings was 78.8%.
The DBJ Green Building Certification is a third-party certification
system established by the Development Bank of Japan for realestate properties that feature excellent environmental and social
considerations. FRC has acquired certification for 12 of its owned
properties that exhibit environmental and social awareness(including two properties that were recertified in June 2021).

Canal City Hakata（2018）■ Basic Earthquake Insurance Rate★★★★★ Canal City Hakata・B（2018）

Earthquake insurance with coverage beginning on January 1, 2021
Earthquake insurance can be purchased in Fukuoka Prefecture at a relatively
lower cost than in other areas.

27,500Tokyo

Green Building
Certification

78.8%

★★★★

Konoha Mall Hashimoto（2020）
Park Place Oita
（2018）
Canal City Business Center Building（2018）★★★

LOGICITY Minato Kashii（2020）LOGICITY Hisayama（2020）
Gofukumachi Business Center（2018）
Higashi Hie Business Center（2018）
Higashi Hie Business Center Ⅱ（2020）★

SunLive City Kokura（2019）
Marinoa City Fukuoka（Marina Side Building）（2019）(total floor space basis)

11,800Aichi

11,800

Osaka
7,400

Fukuoka

0

5,000

10,00015,000In addition, the Building Energy-Efficiency Labeling System(BELS) is a system in which third parties evaluate, indicate, andcertify the energy conservation performance of non-residentialbuildings, based on 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.

20,00025,000Foundation Underpinning Management

Foundation Underpinning Management

Earthquake Risk Countermeasures

30,000（Yen）

Note: The basic rate is 10 million yen for one year of insurance, mainly for steel-frame and concrete buildings.
Source: Fukuoka Realty Co., Ltd., based on data from the Ministry of Financeʼs Basic Rates for Earthquake
Insurance (earthquake insurance with contracts starting on January 1, 2021).

Other Disaster Prevention Measures
Disaster Prevention Drills
Note: The mesh for zero probability based on the model calculation conditions is shown in white.
Source: Office of the Headquarters for Earthquake Research Promotion, Earthquake and DisasterReduction Research Division, Research and Development Bureau, Ministry of Education, Culture,
Sports, Science and Technology

We conduct comprehensive disaster drills
at Canal City Hakata, with all tenants
participating. We conduct fire and earthquake
evacuation drills in case of emergency toimprove fire and disaster prevention awarenessand strengthen cooperation between tenants.

Higashi Hie Business Center

Higashi Hie Business Center II

LOGICITY Minato Kashii

LOGICITY Hisayama

（棟）

34

4,000
Fukuoka REIT Corporation 2021

3,173

Fukuoka REIT Corporation 2021

3,000
1,721

35

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Social Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Creation of pleasant workplaces

Initiatives for Employees and Tenants

Tenant Initiatives

Building a Pleasant Workplace Environment
FRC and Fukuoka Realty Co., Ltd., actively push forward initiatives for its employees and tenants. Through dialogue, every effort is madeto provide an attractive work environment where employees can continue to work with peace of mind and with opportunities for humanresource development. From a tenant perspective, both FRC and Fukuoka Realty Co., Ltd., are committed to ensuring safe, secure, andcomfortable spaces while improving satisfaction.
Initiatives for Employees

AMC

Fukuoka Realty Co., Ltd.: Number of officers and employees, number ofcredentialed employees
Average number of years of continuous（*As of August 31, 2021）
service bypermanent employees: 9 years and 6 months
Number of full-time officers and employees: 40（20 male and 20 female）

Employee training• Regular study groups by the Kyushu Economic Research Center• Real estate brokers: 28• Certified building administrators: 4• First-class registered architects: 3• Real estate appraisers: 3• ARES certified masters: 25• Attorney: 1• MBA: 2• Administrative scrivener: 1• SME management consultant: 1• CMA: 2• Compliance training• Sustainability training• Nursing care training• In-house recreation, etc.

Support for career development• Employee satisfaction survey• Career interview• Secondment system（dispatching employees to sponsor companies）• Promotion from contract employee to permanent employee status• Offering of training programs tailored to each management level• System for supporting acquisition of qualifications（e.g., Real Estate Securitization Master, Real EstateTransaction Agent）• Support for language learning, etc.

AMC

Work style reforms at the Asset Management Company

Fukuoka Realty was certified as a “Fukuoka ʻWork Style ReformʼPromotion Company” on August 28, 2018. This system recognizes
companies that have achieved at least a certain number of the“initiative items” that were selected by Fukuoka City as indicators
to advance work style reforms.
Recognized initiatives• There is a system to support career advancement andto consult about career building• There is a certification acquisition support system aswell 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 taketime off in increments of hours or half-days• There is a personnel development system, including
training contributing to career advancement, etc.

Customer and Business Partner Initiatives
Measures to Prevent the Spread of COVID-19

IC

During the fiscal year under review, we strengthened measures aimed at preventing the further spread of COVID-19 at FRC properties in linewith the guidelines issued by the Ministry of Health, Labour and Welfare. The safety of our employees, customers, and tenants is our firstpriority, and we are working to create the safest and most secure environment for them as possible.

RetailOffice Buildings

Principal measures aimed at preventing the spread of COVID-19• Installation of alcohol-based sanitizing stations and splash guards• Posting of social distancing reminders• Comprehensive health management through tenant employee
temperature checks• Clearing of common-area chairs and tables

Canal・LINE Order

NEW

This service enables users to ordertakeout items and make online
payments in advance anytime,
anywhere, and at any available store.

Location-Specific Initiatives
AMC

Fukuoka Realty Co., Ltd., is working on a variety of measures
aimed at protecting the health of its employees. With the aimof preventing the spread of COVID-19, in the fiscal year underreview we worked to implement thorough measures to preventthe spread of the virus to individuals - administering workplacevaccinations to interested employees and considering alternate
schedules for commuting - and strengthening measures aimed
at preventing the spread of the virus in the office.
• Installing thermo-monitors at office entrances and exits NEW• Distributing masks and thermometers• Shifting morning and other meetings to an online format• Ensuring social distancing in offices• Regular disinfecting of tables, chairs, and doorknobs, etc.

Fukuoka REIT Corporation 2021

• Supporting COVID-19 vaccinations for interested employees（e.g., providing venues）NEW• Holding emergency drills intended to improve tenant safety and security• Implementating tenant satisfaction surveys• Distributing sustainability guidebooks• Sponsoring events to improve sustainability awareness• Providing sustainability training, etc.

Adopted mobile ordering system• There is a training system for employees• There is a support system for self-development initiatives

36

promote sustainability.

Principal measures aimed at preventing the spread of COVID-19• Installation of alcohol-based sanitizing stations at office entrances• Enhanced ventilation in common areas• Posting of notices regarding efforts to prevent the spread of
COVID-19 in elevators

Hotel

Creating a Comfortable Working Environment

Improvement of the Working Environments

A COVID-19 vaccination support venue（July -August 2021）

Principal measures aimed at preventing the spread of COVID-19• Installation and expansion of alcohol-based sanitizing stations• Regular disinfection and sterilization work
• Strict enforcement of social distance at front desks andrestaurants• Thorough health management of hotel employees via
temperature-taking, etc.
Acceptance of COVID-19 patients（those with mild symptoms）NEW• Hotel FORZA Oita

Foundation Underpinning Management

Foundation Underpinning Management• Monitoring working hours• Checking and reporting deviations in working hours（monthly）• Health checkups and physical examinations• Influenza vaccinations• Health consultations with public health nurses

Number of credentialed personnel（aggregate total）• Child-rearing support（maternity leave, childcare leave system）• Nursing care leave• Leave for voluntary work
• No overtime days
• Employee welfare（e.g., 401K, cumulative investment system）• Encouraging use of paid holidays, etc.

With a focus on the health and comfort of tenant employees, we are improving the employee
lounge environments within retail facilities and renovating office building common areas.
Moreover, FRC is engaging in a variety of initiatives for tenants as a part of efforts to

Employee Health• Employees seconded from sponsors: 2• Employees seconded to sponsors: 4

Supporting flexible work styles

IC

IC

Sanitizing Measures

Measures to Prevent the Spread of COVID-19 in Food Courts■ Canal City Hakata■ Park Place Oita

We have implemented measures to prevent the spread of COVID-19 andstrengthen safety and security, including the installation of Air Buster units near theelevators and pedal-operated sanitizing stations in 32 places around the building.

With the goal of ensuring the safety and security of customers, wehave installed splash guards on the Park Place Oita and Konoha Mall
Hashimoto food court tables.

■ Konoha Mall Hashimoto(Fukuoka Realty Co., Ltd., reception)
Installation of splash guards and sanitizing
stations

Installing thermo-monitors
Air Buster unit

Pedal-operated
sanitizing standFukuoka REIT Corporation 2021

37

□ Introduction

Social Issues□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Organizational Issues

Related Materiality

IC

Related Materiality

・Contributions toward boosting the attractiveness and revitalization of Fukuoka and Kyushu
・Co-creation with the local community

Initiatives for Local Communities
Initiatives for Local Communities
Environment Promotion EventsIC

Stakeholder Engagement

AMC

Safety Town Council

Investment Corporation（FRC） AMC Asset Management Company

・Information disclosure and dialogue with stakeholders

Clean-Up Days

Various Events Held

Participation in Community Events

IC

AMC

FRC engages in proactive dialogue with its various stakeholders aimed at sustainable growth and higher corporate value. At the same time,
FRC recognizes that fulfilling its required social responsibilities leads to sustainable business activities. Valuing our relationships of trust withstakeholders, we will leverage this concept in our ESG initiatives.

Environment

At Canal City Hakata, employees of
the asset management company also
participate in events that involve sprinklingwater on sidewalks to cool them down
and promote well-being. (Initiativesuspended in 2021 to prevent the spreadof COVID-19.)

At Park Place Oita, we established a“Safety Town Council” that partners withrelated institutions and groups to conduct
crime-prevention patrols and proactively
strive to prevent youth misconduct.

Real Estate, Finance, and the Economy Gathering

Asset management company executives
and employees actively participate incleanup activities, of which there had
been 289 as of October 15, 2021.

AMC

Every year, male employees of the asset
management company participate in the
Hakata Gion Yamakasa festival（Hachiban
Yamakasa Kazariyama, Kamikawabatadori; Etsuo Matsuyuki, CEO at the time,rode on a float at the event in 2018).
（Initiative suspended in 2021 to preventthe spread of COVID-19.）

The Kyushu Economic Research Center

Region andSociety

Property
Management
Firms

Unitholders
andInvestors

・Organizing community and other events
utilizing facility common areas
・Active participation in the Hakata Town
Planning Promotion Councilʼs activities
・Offering real estate, finance, andeconomic education
・Timely disclosing of financial and nonfinancial information
・Announcing results at the Fukuoka Stock
Exchange

AMC

Fukuoka Realty Co., Ltd., and the Kyushu Economic Research Center haveconcluded a memorandum of understanding in a bid to promote increased
cooperation in the macroeconomic analysis and the Kyushu economy.
Through this initiative, both signatories to the memorandum will share
information on the current state of the Fukuoka-Kyushu economy as well
as issues to be faced thereby revitalizing
economic activity throughout the region. In
addition, study groups on seasonal topics
that are specific to Fukuoka and Kyushu areheld on a regular basis.

・Steps to share issues through regularmeetings
・Management firm evaluation andfeedback
・ESG training

Employees

・Hosting the General Meeting ofUnitholders
・Providing results briefings for investors（institutional and individual investors）
・Holding 1-on-1 meetings（Japan andoverseas）
・Timely disclosing of financial and nonfinancial information

・Various employee education systems
・Employee satisfaction surveys
・Career interviews with employees

In 2021, these gatherings were
held using online tools to preventthe spread of COVID-19.

Other Activities

AMC• IR Workshop

The Kyushu IR Group, which entered its 11th year in 2021, was established in 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 and Kyushu, and fosters theforming of networks between participating companies. Impacted by the COVID-19 pandemic, a study group was held also using online tools
this year.
■ Details of the Study Group
Schedule

First Study Workshop(August 2021)

Second Study Workshop(November 2021)

Theme and Lecturer“IR Trends in 2021- Against the Backdrop of the Revised Corporate Governance Code”
Ms. Yoshiko Sato, Executive Managing Director, Japan Investor Relations Association“ESG Initiatives and Integrated Report Enhancements”
Nahoko Kutsukake, Cheif Manager, Investor Relation Department, MARUI GROUP CO., LTD.

Fukuoka REIT Corporation 2021

Dialogue with Investors and Unitholders

Dialogue with Employees

FRC works to disclose information in a timely manner to reflect
the importance of dialogue with its unitholders and investors. To
prevent the spread of COVID-19, FRC undertakes various investor
relation activities mainly in an online format for domestic/overseas
institutional investors and individual investors.

FRC and Fukuoka Realty Co., Ltd., recognize that humanresources are our greatest asset. As part of our efforts to create
comfortable and healthy workplaces, we are endeavoring to
improve the efficiency of our operations by strengthening theoffice environment and enhancing our systems. In addition, we
provide IR information internally and disseminate details of results
announcements online as part of our efforts to facilitate internal
communication.

・General Meeting of Unitholders (once every two years)
・Results briefings for analysts, institutional investors
・IR for overseas investors
・IR for individual investors
・Enhanced IR tools, information disclosure, etc.

・Employee satisfaction survey
・President interviews, career interviews
・Internal IR・Counseling with public health nurses, etc.

“ESG Investor Perspectives”
Hiroyuki Horii, Managing Executive Officer, Sumitomo Mitsui Trust Asset Management Co., Ltd.

• Participation in the Hakata Town Planning Promotion Councilʼs Activities
We are an active participant in the Hakata Town Planning Promotion
Councilʼs activities and efforts to promote urban development mainly aroundthe Hakata Station area, the gateway to Kyushu and Asia. Through various
initiatives that comply with Hakata Cityʼs development guidelines, our goal is
to assist with efforts that lead to the development and growth of Hakata City
as well as Fukuoka as a whole.

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Property
Clients
Tenants

Foundation Underpinning Management

Foundation Underpinning Management

We have held gatherings to exchange information and opinions on real estate,finance, and the economy annually since 2008 with the cooperation of the Japan
Real Estate Institute (not held in 2020 in light of concerns over COVID-19).
Local real estate companies, financial institutions, and government
agencies participate in the conference,
which contributes to networking and further
stimulation of the local economy.
It has been designated as a continuing
education course for ARES masters.

At Canal City Hakata, the Farmers Marche
was held, which was realized from thecollaboration between “agriculture”
and “welfare,” providing a place to sell
agricultural products produced at a facility
for the disabled.

・Customer satisfaction surveys at retailfacilities
・Tenant satisfaction surveys
・Collaboration in environmental and social
initiatives• Participation in the Kyushu SDGs Management Promotion ForumWe are also participating in the Kyushu SDGs Management Promotion
Forum, an industry-academic-government-funded platform establishedby the Kyushu Bureau of Economy, Trade and Industry. As a participant
in this forum, energies are directed toward providing information between
companies and supporting SDG management endeavors aimed at solving
regional and social issues.(This event was not held in fiscal 2020.)

Fukuoka REIT Corporation 2021

39

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Organizational Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Compliance/risk management

Corporate GovernanceIC

Policies for Customer-Oriented Business Operations

AMC

Risk Management and Compliance Initiatives

Policies for Customer-Oriented Business Operations■ Decision-Making Process■ Managing Conflicts of Interest

Proposals from the responsible department

Third-party assessment by external
experts (Real estate appraisals)

General Manager of Compliance Dept.

• Japan Real Estate Institute• The Tanizawa Sogo Appraisal Co., Ltd.
• Daiwa Real Estate Appraisal Co., Ltd.

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 Co., Ltd., has accordingly established a Basic
Policy on Compliance, as well as compliance regulations and otherinternal rules to prevent any conflict of interest. Based on theserules, we obtain a preliminary assessment from the ComplianceDepartment General Manager and ensure deliberations by theCompliance Assessment Committee, consisting of the ComplianceDepartment General Manager and three outside experts in order toengage in the management of any conflict of interest pertaining toour dealings with stakeholders in an appropriate manner.

Note: The prior consent of the Investment Corporationʼs 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.

■ FRC Directors■ Changes in the Asset Management Fee Structure［Market reports］• Analysis on trade areas andcompetitive environment• Adequate rent levels, etc.

Deliberations by the Investment
Management Committee
Deliberations and resolution by theCompliance Assessment Committee
Resolution/decision-making reportby the Board of Directors
FRC Board of Executive Officers［Engineering reports］• Compliance with statutory andregulatory requirements andearthquake resistance• Check of soil contamination, toxic
substances, and the status of use• Replacement price, expenses for longterm maintenance and repairs, etc.

Management fees

Calculation Method［Three months following the day after the last fiscal period-end］

Policy 2 Pursuit of Customersʼ Best Interests
As a financial business operator, we maintain a high level of professionalism and professional ethics, conduct operations with integrity and fairness for unitholders, secure stable dividends, increase dividends over the medium to long term and conduct investment that can contribute to society, among other endeavors,
to achieve unitholdersʼ best interests. We also strive to ensure that such business conduct will be deeply rooted in our corporate culture. As an asset management company knowledgeable about the circumstances of the region, we will make efforts that leverage our expertise and ability to gather and provide information to achieve the best interests of our unitholders.
Policy 3 Appropriate Management of Transactions with Conflicts of Interest（1）
We place the highest priority on the fiduciary duty entrusted to us by our unitholders. For transactions with our interested parties, including Fukuoka Jisho
Co., Ltd., one of our sponsors having 55% equity, which might cause conflicts of interest, we work to accurately grasp the possibility of conflicts of interest withany of our unitholders pursuant to laws and regulations, our internal rules, etc. If any such possibility is found, our Compliance Department investigates the matter in advance before the relevant transaction takes place, and deliberation is made in advance at the Investment Committee and the Compliance Assessment
Committee, which invites outside experts if necessary. Through these steps, we appropriately manage transactions that might 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 and give 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 the investment.
（2）
As we do not sell financial products and do not have a corporate sales or management department within our company or the Group, there is no possibilityof a conflict of interest when soliciting sales or recommending financial instruments or when choosing an investment destination for assets.

Total assets at last fiscal period-end x 0.25% (previously 0.3%) x No. of days/365 days

Management fee 1 ［From the day after the aforementioned fiscal period-end to the next
(total asset basis)
fiscal period-end］(Total assets at the last fiscal period-end + acquired asset value – disposal
asset value) x 0.25% (previously 0.3%) x No. of days/365 days
Supervisory Director

Executive Director

Supervisory Director

Yasuo Kawasho

Etsuo Matsuyuki

Takashi Tanabe■ Fukuoka Realty Co., Ltd. Directors

Management fee 2
Operating revenue for the last fiscal period x 2.0%
(operating revenue basis)
Management fee 3 (Distributable profit amount before payment of management fee 3 for the last
(distributable profit basis) fiscal period) x 3.6% (previously 2.0%)
Management fee 4 Acquisition fee x 0.5%(acquisition remuneration) (0.25% in the event of acquisition from interested parties)
Management fee 5(sale remuneration)

Sale fee x 0.5%
(0.25% in the event of sale from interested parties)■ Compliance Training (including e-learning)

Vice President Board of
Directors(Non-Executive)

Vice President Board of
Directors(Non-Executive)

Yukitaka Ohara

Hiroshi Shimuta

Daisuke Yokoyama
General Manager of theCompliance Department
Fukuoka Realty Co., Ltd.

40

Policy 1 Establishing and Announcing Policies That Include Those Regarding Customer-Oriented Business Conduct
Fukuoka Realty Co., Ltd., is a financial business operator managing a listed REIT, which, through investing in real estate properties, supports and facilitates theasset formation of a wide range of investors. As such, we have established clear policies to implement customer-oriented business conduct throughout theinvestment chain and have publicized those on our website and via other methods. Moreover, we continuously check on the status of our endeavors to realize
better customer-oriented business operations.

Fukuoka REIT Corporation 2021

President and CEO

Zenji Koike

Executive Vice President Vice President Board of
Corporate Auditor
Directors(Non-Executive)
Akira Eguchi(Non-Executive)
Masanori Tasaka

October 2018September 2019

October 2019September 2020

October 2020September 2021

7 times

6 times

6 times

Noboru Hashimoto

The company prevents transactions with conflicts of interest based on strict rules for transactions
with interested parties in order to fulfill responsibilities entrusted to it on behalf of investors.
We naturally do not engage in transactions that unfairly benefit the company and interested parties
and believe that it is important to not avoid the appearance of impropriety. Accordingly, we take steps
to clearly record the decision-making process behind transactions to enable verification after the fact.
In addition, we verify the objective validity of transactions by receiving evaluations fromindependent third parties, including internal audits conducted by outside specialists.
Beyond this, we work to raise awareness of these issues by regularly conducting compliance training
aimed at ensuring that each employee is cognizant about managing assets entrusted to us by investors.

Policy 4 Clarification of Fees and Commissions（1）
Entrusted by the Investment Corporation to carry out all operations related to asset management, Fukuoka Realty Co., Ltd., in return receives asset management fees from the Investment Corporation. We have adopted an asset management fee system that enables asset management from a long-term perspective
while linking part of the asset management fee amount to the profitable returns to unitholders.
（2）
We provide information through statutory and timely disclosure and voluntary disclosure so that unitholders can understand our asset management fees andother commissions or expenses to be borne by the Investment Corporation, including what types of services are paid for.
Policy 5 Provision of Important Information in an Easy-to-Understand Manner（1）
As an asset management company of a listed REIT, we provide important information that relates to investment decision-making for unitholders in aneasy-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 to provide information desirable for unitholders from a unitholder-oriented perspective.
（2）
Not soliciting the sale or recommendation, etc., of financial instruments or financial services, we do not provide important information related to these to ourunitholders.

Foundation Underpinning Management

Foundation Underpinning Management

FRC revised management fees 1 and 3 with the aim ofincreasing linkage between asset management fees for the asset
management company and investor profits. The changes listed
below were approved at the Ninth General Meeting of Unitholders
held on May 26, 2020, and became effective on September 1,
2020 (33rd fiscal period start).

As an asset management company entrusted with asset management operations by Fukuoka REIT Corporation（FRC）, Fukuoka Realty
Co., Ltd., has adopted all seven principles set forth in the Principles for Customer-Oriented Business Conduct established by the Financial
Services Agency（announced on March 30, 2017; revised on January 15, 2021）. We have also formulated and announced our own Policies
for Customer-Oriented Business Operations as policies to realize better business operations for our customers.

Policy 6 Provision of Services Suitable for Unitholders（1）
We strive to understand the needs and requirements of unitholders and conduct asset management considering such needs and requirements. Specifically, we
aim to secure stable dividends, increase dividends over the medium to long term, and conduct investment that can contribute to society, among other endeavors.
（2）
We do not solicit the sale or recommendation, etc., of financial instruments or financial services.
Policy 7 Preparing a Framework or Other Mechanism for Appropriately Motivating Employees
Having established our Basic Policy on Compliance to ensure our officers and employees always act in the best interest of unitholders, we conduct assessmentsthat include items by which compliance is assessed in personnel evaluations. In addition, we regularly and continuously carry out education and training on
compliance for all our employees so that they can secure fairness in business conduct and thoroughly implement appropriate management for transactions thatmight involve conflicts of interest, as well as enhance their awareness on compliance.

Established September 20, 2017
Revised October 16, 2018
Revised June 30, 2021
Revised November 29, 2021

Fukuoka REIT Corporation 2021

41