FRC and Fukuoka Realty 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.
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.
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

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 Companyʼs 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.

Fukuoka REIT Corporation 2020

Materiality significant issues

promoting initiatives based on materiality policies and targets
derived through cooperation with stakeholders, 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

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 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

Process for Identifying Materiality■ Organizational Chart for the Asset Management Company
General Meeting of Shareholders
Auditors
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 the 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 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

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

Akira Eguchi
Executive Managing Director
Fukuoka Realty Co., Ltd.

Property Management Department

28

Fukuoka Realty is taking steps to identify materiality (important
issues to address) in its sustainability initiatives based on therequests and expectations of its stakeholders and the expected
impact on and importance to the Investment Corporation. By

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.

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

Foundation Underpinning Management

Foundation Underpinning Management

Sustainability Policy and Materiality

Investment Department

Finance Department

In 2019, Fukuoka Realty reorganized its materiality matrix taking into consideration “events thatare important to stakeholders” and “issues that have a significant impact on the companyʼs
management.” In addition to identifying seven key “material issues,” Fukuoka Realty announced
details of its activity policy and targets. Amid the growing importance of sustainability worldwide,
events that could affect the companyʼs operations including climate change and COVID-19
continue to evolve. As a result, ongoing steps are being made to review the content and details ofmaterial issues. As the asset management company for Japanʼs first regionally specialized REIT,
we recognize the need to factor ESG considerations into our real estate investment management
process is part of our overarching mission.

Planning Department

Fukuoka REIT Corporation 202029

Acquiring External Certifications

Environmental Performance Data and Green Finance■ Participation in GRESB Assessment 2020
( “Green Star” and “3 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 "Green Stars" andthree stars in the five-level GRESB Real Estate Assessment
conducted in 2020.

■ Initiatives We Support

Environmental Performance Data (Total for five major retail facilities)

In September 2018, Fukuoka Realty endorsed the Principles
for Responsible Investment (PRI) and Principles for Financial
Action for the 21st Century (PFA21) and became a signatory tothese initiatives. Through ESG-conscious asset management,
the company is contributing still further to the achievement of asustainable society.

■ Electricity Usage■ Water Consumption

（Mwh）

（m3）

68,11480,00066,584600,000

60,000450,000

40,000300,000

20,000150,000

0

28th Fiscal Period-29th Fiscal Period
March 2018-February 2019

0

30th Fiscal Period-31st Fiscal Period
March 2019-February 2020

* Total value for the five properties of Canal City Hakata, Canal City Hakata・B, Canal City Business Center
Building, Park Place Oita, and Konoha Mall Hashimoto.
* The figure for electricity consumption for Canal City Hakata, Canal City Hakata・B, and Canal City
Business Center Buildings reflects usage for all of the buildings, including electricity usage for the portion,
which is not owned by the investment corporation.
* The figure for Park Place Oita covers only the main building section and excludes the section for
independently run stores.

■ Ratio of Properties Certified as Green Buildings
As of the end of August 2020, the ratio of properties within theentire portfolio certified as green buildings was 79.8%.
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. FRC has acquired certification for 11 of its

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

Canal City Hakata（2018）★★★★★ Canal City Hakata・B（2018）
Green Building
Certification

79.8%

★★★★

Park Place Oita
（2018）
Canal City Business Center Building（2018）LOGICITY Hisayama（2017）
Konoha Mall Hashimoto（2017）★★★

Gofukumachi Business Center（2018）
Higashi Hie Business Center（2018）
Higashi Hie Business Center Ⅱ（2017）★

SunLive City Kokura（2019）
Marinoa City Fukuoka (Marina Side Building) (2019)(total floor space basis)533,920519,609

28th Fiscal Period-29th Fiscal Period

30th Fiscal Period-31st Fiscal Period

March 2018-February 2019

Foundation Underpinning Management

Foundation Underpinning Management

Environmental Issues

March 2019-February 2020

* Total value for the five properties of Canal City Hakata, Canal City Hakata・B, Canal City Business Center
Building, Park Place Oita, and Konoha Mall Hashimoto.
* The figure for water consumption for Canal City Hakata, Canal City Hakata・B, and Canal City
Business Center Buildings reflects usage for all of the buildings, including water consumption for the
portion, which is not owned by the investment corporation.
* The figure for Park Place Oita covers only the main building section and excludes the section for
independently run stores.

Green FinanceWith the goal of further promoting ESG activities and expanding
financing options through an enhanced investor base, FRC
established the Green Finance Framework in June 2019 in line with
the Green 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 financewill be allocated toward the acquisition of Eligible Green Projects,
the repayment of borrowings required in the acquisition of eligible
green assets, or the redemption of investment corporation bonds

issued and outstanding.
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.
(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★★★
(3-star)

Total properties
owned
201.9 billion yen

Eligible Green
Projects
139.4 billion yen(acquisition price)

69.0%

31 properties★★★★
(4-star)Eligible Green
Projects
139.4 billion yen
10 properties★★★★★
(5-star)

Total assets LTV

41.4%

Maximum green financeprocurement amount
Eligible Green Project liability

57.7 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.

Higashi Hie Business Center

Higashi Hie Business Center II

LOGICITY Minato Kashii

LOGICITY Hisayama■ Green Finance (Actual)Type

LenderAmount borrowed(Millions of yen)Interest rate (annualized)

Loan date

Notes

Long-term loan
(Green loan)

Mizuho Bank
The Bank of Saga
The Higo Bank

2,200

0.521%＊1

July 31, 2019

Unsecured/unguaranteed
Lump-sum repayment
Fixed interest rate
Green loan assessment: Green 1＊2*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.
*2: FRC has received the highest “Green 1” rating from Japan Credit Rating Agency for our adherence to the Green Loan Principles.

30

Fukuoka REIT Corporation 2020

Fukuoka REIT Corporation 202031

Environmental initiatives

Disaster risk countermeasures［Retail］
Canal Water Filtration System (rainwater reuse system)
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.

Earthquake risk countermeasures
Greywater Plant (kitchen drainage reuse system)
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.

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, andother factors, and maintains earthquake insurance for all its properties.

■ Probabilistic Earthquake Prediction Map■ Earthquake PML Value (full portfolio) 4.9%

Probability of an earthquake with an intensity of six or greater over the next 30 years(average case / all earthquakes) (Reference date: January 1, 2018) (Updated in January 2019)

Foundation Underpinning Management

Foundation Underpinning Management

Environmental Issues■ Basic Earthquake Insurance Rate
Earthquake insurance with coverage beginning on January 1, 2019
Earthquake insurance can be purchased in Fukuoka Prefecture at a relatively
lower cost than in other areas.

25,000

Tokyo
Aichi
Osaka

Renovation of the Rooftop Garden
The rooftop garden at Grand Hyatt Fukuoka, which has beenused as a place for guests to relax and talk, was renovated in
May 2020. As part of
the renovations, we arepreserving biodiversity
by planting several
different species of
medium-sized to talltrees, shrubs, andgroundcover.

Sixth Annual Green Social Contribution Award (2018)
Canal City Hakata
With the aim of creating an environmentally friendly facility,
Canal City Hakata is engaged in greening, recycling, and energy
and resource saving activities. Canal City Hakata received a
Sixth Annual Green Social Contribution Award in recognition of
its efforts to contribute to the regional community and improvethe environment since its opening. These efforts include thecreation of an area where visitors can relax, focusing on artificial
canals, and installing a rooftop garden at the facility hotel.

Energy-Saving Initiatives Based on the Promotion of LED Lighting

Introducing Renewable Energy Equipment

We are focused on converting each property to LED-based lighting
in order to reduce energy consumption.

At LOGICITY Hisayama and LOGICITY Minato Kashii, we haveinstalled solar panels on the rooftops to generate renewable energy
and contribute to the formation of a recycling-based society.

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 theareas where the flooding was particularly harsh. Ongoing efforts
to implement anti-flooding measures have greatly improved flood
safety within the city limits.

20,00025,00030,000 （yen）■ Replacing and Installing New Water Stops (July 2020)

We reviewed the specifications and installation locations of existing water
stops throughout the Canal City Hakata premises and either repaired or
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.

■ Storm Water Storage Facilities
Storm water storage capacity
FY 2018: 128,300m3

FY 1999: No storm water storage facilities

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

From FY 2000 to FY 2018…
3,173

A steady decline inbuilding inundations

3,000

1,122

Since the launch of the
project in FY 2000…

1,000
3

Maximum hourly
precipitation (mm/h)

Storm waterdrainage capacity
increased sharply.

1,721

2,000

Fukuoka REIT Corporation 2020

15,000Countermeasures to Flooding Risks

4,000

LOGICITY Hisayama

10,000* 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■ Instances of Building Inundation in Fukuoka City (number of buildings)

Solar panels

5,000* 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, 2019).

Building

32

7,100

0

［Others（logistics facilities）］

LED lighting being used at the Sanix Hakata Building

12,600Fukuoka［Office Buildings］• Gofukumachi Business Center (interior shared spaces, some external areas, etc.)• Sanix Hakata Building (interior recessed lighting)• Taihaku Street Business Center (entrance, interior shared spaces, etc.)

14,400June 29,
1999

July 19,
2003

July 24,2009

August 30,
2013

79.5

104

116

72.5

Instances ofinundation havesteadily declined.

* Number of buildings: Total number of buildings inundated above and below the floor level. Period coveredis between June 29, 1999 and December 31, 2018.
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.

Canal City Hakata (north side of the building)

Canal City Business Center Building

Other Disaster Prevention Measures
Disaster Prevention Drills
We conduct comprehensive disaster drills
at Canal City Hakata, with all tenants
participating. We conduct fire and earthquake
evacuation drills to improve fire and disasterprevention awareness and strengthen
cooperation between tenants.

Disaster Prevention Products for the Office
We have prepared a lineup of disasterprevention products for all our employees touse in case of a emergency. As a company,
we are focused on corporate disasterprevention measures, including the creationof a business continuity plan (BCP) and thecontinued safety of our employees.

Fukuoka REIT Corporation 202033

Measures to prevent the spread of COVID-19

Initiatives for Employees and Tenants

Measures to prevent the spread of COVID-19

Initiatives for Employees and Tenants

We have strengthened measures aimed at preventing the further spread of COVID-19 at FRC properties in line with the guidelines issued by
the Ministry of Health, Labour and Welfare. The safety of our employees, customers, and tenants is our first priority and we are working tocreate the safest and most secure environment for them as possible.

FRC and Fukuoka Realty actively push forward initiatives for its employees and tenants. Through dialogue, every effort is made to provide
an attractive work environment where employees can continue to work with peace of mind as well as opportunities for human resource
development. From a tenant perspective, both FRC and Fukuoka Realty are committed to ensuring safe, secure, and comfortable spaces
while improving satisfaction.

［Retail］［Office Buildings］

Principal measures aimed at preventing the spread of COVID-19

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• 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

Initiatives for Employees
Fukuoka Realty: Number of officers and employees,
number of credentialed employees
Average number of years of continuous (* As of August 31, 2020)
service by permanent employees:
8 years and 10 months

Number of full-time officers and employees:
41 (20 male and 21 female) * Percentage of female employees 51.2%
・Employees seconded from sponsors: 2
・Employees seconded to sponsors: 4

Tenant (restaurant) support
Canal City Bento Market
Canal City Hakata restaurants sell

Number of credentialed personnel (aggregate total)

weekday-only take-out bento boxes

・Real estate brokers: 26
・Certified building administrators: 5
・First-class registered architects: 2・Real estate appraisers: 2
・ARES certified masters: 23
・Attorney: 1
・MBA: 1・Administrative scrivener: 1
・SME management consultant: 1(June 22–July 17, September 28–October 9)

Location-Specific Initiatives
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 visitors, we haveinstalled splash guards on the Park Place Oita and Konoha Mall
Hashimoto food court tables■ Konoha Mall HashimotoSupporting flexible work styles

Support for career development

・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 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 (Real Estate
Securitization Master, Real Estate Transaction Agent, etc.)
・Support for language learning, etc.

Employee training
・Regular study groups by the Kyushu
Economic Research Center・Compliance training
・ESG training
・Nursing care training
・In-house recreation, etc.

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

Pedal-operated
sanitizing stand34

Tenant Initiatives

Fukuoka Realty Co., Ltd. is working on a variety of measures aims
at preventing the spread of COVID-19 and protecting the health of
our employees.
In particular, we are working to establish satellite offices, considering
alternate schedules for commuting, implementing thorough measures
to prevent the spread of the virus to individuals, and strengthening
measures aimed at preventing the spread of the virus in the office.

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

Fukuoka REIT Corporation 2020

・There is a training system for employees
・There is a support system for self-development
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.

Average paid leave acquisition rate (FY2019) 70.9%

Employee Initiatives

・Establishment of a satellite office in Tenjin, Chuo Ward, Fukuoka City
・Telecommuting, staggered commuting
・Distribution of masks and thermometers
・Shifting of morning and other meetings to an online format
・Ensuring social distancing in offices
・Regular disinfecting of tables, chairs, and doorknobs

Overseas inspection tour
(Shenzhen DJI Showroom)

Creating a Comfortable Working Environment

・The average annual paid leave taken by permanent employees for the most recent
fiscal year is 70% or more
Air Buster unit

Foundation Underpinning Management

Foundation Underpinning Management

Social Issues(Fukuoka Realty Co., Ltd. reception)
Installation of splash guards and sanitizing
stations

Installation of splash guards and ozone
generators (disinfection equipment) inconference rooms

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

Improvements made to the employee lounge environment at Park Place Oita (September 2020)

Before renovation

After renovation

Fukuoka REIT Corporation 202035

Foundation Underpinning Management

Organizational Issues

Initiatives for Local Communities

Stakeholder Engagement

Initiatives for Local Communities
Environment Promotion Events

Safety Town Council

Clean-Up Days

Participation in Community Events

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

Environment

At Canal City Hakata, employees participate in
events that involve sprinkling water on sidewalks tocool them down and promote well-being. (Initiativesuspended in 2020 to prevent the spread of
COVID-19.)

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

Executives and employees actively participate inclean-up activities, of which there have been 284 asof October 15, 2020.

Every year, male employees of the Company participate
in the Hakata Gion Yamakasa festival (Hachiban
Yamakasa Kasariyama, Kamikawabata-dori). CEO Etsuo
Matsuyuki rode on a float at the event in 2018. (Initiativesuspended in 2020 to prevent the spread of COVID-19.)

Real Estate, Finance, and the Economy Gathering

The Kyushu Economic Research Center

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.

Fukuoka Realty and the Kyushu Economic Research Center have concluded
a memorandum of understanding in a bid to promote increased cooperationin the macroeconomic analysis and the Kyushu economy. Through thisinitiative, 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 specificto Fukuoka and Kyushu are held on a regularbasis.

・Customer satisfaction surveys at retailfacilities
・Tenants satisfaction surveys
・Collaboration in environmental and social
initiatives

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

Property
Clients
Tenants

Region andSociety

Property
Management
Firms

Unitholders
andInvestors

Foundation Underpinning Management

Social Issues

・Organizing community and other events
utilizing facility common areas
・Active participation in the Hakata Town
Planning Promotion Councilʼs activities
・Real estate, finance, and economic
education

・General Meeting of Unitholders
・Results briefings for investors (institutional
and individual investors)
・1on1 meetings (Japan and overseas)

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

Other Activities• IR Workshop

The Kyushu IR Group, which entered its 10th year in 2020, 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 the forming 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 2020)

Initiatives Aimed at Promoting Constructive Dialogue between Institutional Investors and Issuers
OMRON Corporation
General Manager, Investor Relations Dept., Global Investor & Brand Communication Headquarters• Participation in the ESG Dialogue Platform Provided by Japanʼs Ministry of the Environment
Japanʼs Ministry of the Environment provides the ESG Dialogue Platform
as an Environmental Reporting Platform Development Pilot Project for the
purpose of supporting effective disclosure of environmental information andsubstantive dialogue between parties including companies and investors.
In fiscal 2019, we participated in “ESG consultation meetings” targeted atcompanies that aim to directly engage in dialogue with investors concerning
ESG-related issues.

• 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.

• 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.

• Sponsoring the Fukuoka International Architectural Design Competition
In conjunction with the main sponsor, Fukuoka Jisho Co., Ltd., we are aco-organizer in the Fukuoka International Design Competition. With the
Residential Suites Fukuoka, a hostel located in Seaside Momochi, as thesite for the competition, participants are asked to submit entries based on
the concepts of “work” + “home” + “added value appropriate for Seaside
Momochi.”Fukuoka REIT Corporation 2020

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 human resources
are our greatest asset. As part of our efforts to create comfortable
and healthy workplaces, we are endeavoring to improve theefficiency of our operations by strengthening the office environment
and enhancing our systems. In addition, we provide IR informationinternally and disseminate details of results announcements online
as part of our efforts to facilitate internal communication.

Theme and Lecturer

Mr. Shunji Okumura

36

Dialogue with Investors & Unitholders

・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.

Fukuoka REIT Corporation 202037

Basic Policy on Customer-Oriented Business Operations

Corporate Governance

Basic Policy on Customer-Oriented Business Operations

Risk Management & Compliance Initiatives

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.

■ Managing Conflicts of Interest■ Fukuoka Realtyʼs Basic Policy

1

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.

2

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 Realtyʼs officers and employees will engage in honest and fair operations on a daily basis and act responsibly toward the Companyʼs
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

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.

■ Changes in Asset Management Fee Structure

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 dividends, increase dividends over the medium- to long-term and conduct investment that can contribute to society, among other endeavors.
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.

38

Fukuoka REIT Corporation 2020

［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.

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).
Management fees

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

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］
Supervisory Director

Executive Director

Supervisory Director

Yasuo Kawasho

Etsuo Matsuyuki

Takashi Tanabe■ Fukuoka Realty Directors(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

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%)

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 and givefull 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 5 Provision of Important Information in an Easy-to-Understand Manner

General Manager of Compliance Dept.

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

■ FRC Directors

Principle 3 Appropriate Management of Transactions with Conflicts of Interest

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.

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

■ 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.

Proposals from the responsible department

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.

Foundation Underpinning Management

Foundation Underpinning Management

Organizational Issues

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)

Director(Non-Executive)

Director(Non-Executive)

Hiroshi Shimuta

Hidenori Hara

Director(Non-Executive)

CEO and
Executive Managing Director,
Representative Director General Manager of Planning Dept.

Noboru Hashimoto Etsuo Matsuyuki

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

Akira Eguchi

Auditor(Non-Executive)

October 2017September 2018

October 2018September 2019

October 2019September 2020

8 times

7 times

6 times

Masanori Tasaka

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.

Fukuoka REIT Corporation 202039