Hankyu REIT
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Compliance System

Basic Policies Concerning Compliance

(1) Hankyu REIT, Inc. (hereafter “Hankyu REIT”)
Hankyu REIT is aware of the importance of comprehensive compliance and regularly conducts discussions concerning compliance issues at its Executive meetings. At these meetings, which in principle are held once a month, in addition to deliberating matters for resolution, we also receive matters of resolution including a report regarding the deliberation process for determinations made by the Compliance Committee of the Asset Management Company (defined in (2) below). Additionally, as part of the supervision of the executive director on the part of the supervisory directors, a letter of intent is prepared upon the execution of duties within the exclusive jurisdiction of the executive director and confirmation is subsequently obtained from the supervisory directors. Furthermore, two experts from outside the company who are not considered interested parties of the sponsor company have been appointed as supervisory directors for the purpose of improving Hankyu REIT's supervisory and check functions.

(2) Hankyu REIT Asset Management, Inc. (hereafter “Asset Management Company”)
At the Asset Management Company, for the purpose of ensuring legitimate and fair management of overall operations and to prevent fraudulent practices, and toward robust growth of the Asset Management Company and Hankyu REIT and the drastic protection of investors, the Compliance Department has been formed independently from the Corporate Affairs Division as an organization that fulfills the check function. The Compliance Department has formulated a compliance manual and compliance program as a guide for basic policies concerning compliance as well as their implementation, ensures awareness of compliance requirements in accordance with the compliance program implementation plan, verifies the compliance situation and provides education in a systematic manner.

Additionally, as the organization responsible for compliance issues concerning asset management, it has established a Compliance Committee for the purpose of determining the propriety of transactions involving conflicts of interest in accordance with applicable rules and regulations. The Compliance Committee adopts invited experts, and at present, the members of the invited experts comprise one attorney and one certified public accountant who are not considered interested parties of Asset Management Company or the sponsor company. These two experts and the Compliance Officers attend the Compliance Committee meetings, and on the condition that no less than three-fourths of all the committee members including the committee chair are present, deliberation and decisions concerning conflict of interest issues are made with approval of all attendees. Furthermore, in addition to Auditors, with the endorsement of the committee chair and the approval of the committee, an observer may be present at the committee meetings and offer opinions (the observer is not permitted to participate in resolution). Issues that have been resolved at the Compliance Committee meetings – and the process by which the resolutions were achieved – must be reported to the Board of Directors meetings of the Asset Management Company and the Executive meetings of Hankyu REIT.

The Investment Management Committee exists as the organization responsible for deliberation and decisions concerning asset management and operational evaluation, and the participation of a member of the Compliance Department appointed by a Compliance Officer or Compliance Committee in the Investment Management Committee is required (the member must be the assistant to the General Manager of the Compliance Department), and this person is responsible for confirming that there are no compliance issues concerning matters for resolution or the resolution process.

Additionally, the contents of a request for a decision concerning execution of duties, which serves as a letter of intent, are closely inspected by the Compliance Department prior to a final determination.

Establishment of a structure for the elimination of anti-social forces

The Asset Management Company has formulated a compliance manual to serve as the basic policies to which all executives and employees are required to adhere, and ensuring practice in accordance with the compliance manual is one of the key responsibilities of the Asset Management Company. Within the Compliance Manual, the code of behavior is the Asset Management Company's stance concerning the elimination of anti-social forces: “Resolute confrontation of anti-social forces and associations”. Moreover, a manual for countermeasures against unreasonable demands by anti-social forces has been created.

Additionally, the Asset Management Company has selected a person to be responsible for the prevention of unreasonable demands in accordance with the Act on Prevention of Unjust Acts by Organized Crime Group Members, and has registered with the public safety commission in order to acquire the necessary knowledge and skill to handle unreasonable demands by crime syndicates.

Furthermore, selecting new tenants, we are endeavoring to eliminate anti-social forces by checking for relationships with anti-social forces in accordance with established standards.

Procedures for the “Reporting system of suspicious transactions” are formulated as part of Operational Guidelines and, in accordance with the Act on Prevention of Transfer of Criminal Proceeds, we routinely undertake the following activities:

(1) Confirmation at time of transaction
(2) Creation and maintenance of records of transactions and confirmations at time of transactions
(3) Reporting of suspicious transactions