Basic Policies Concerning Compliance

Hankyu Hanshin REIT, Inc. (hereinafter "HHR") and Hankyu Hanshin REIT Asset Management, Inc. (hereinafter the "Asset Management Company"), the Asset Management Company that HHR has selected to manage its assets, strive to contribute to social and economic development through engagement with business partners, those using our properties, local communities and such considering the public nature of real estate investment trusts, while responding to the expectations of unitholders by complying with laws and regulations and sincerely acting in accordance with corporate ethics. In order to achieve this goal, HHR and the Asset Management Company have prepared the following compliance arrangements as the most important business agenda.

1. HHR
   

   HHR is aware of the importance of comprehensive compliance and regularly conducts discussions concerning compliance issues at its Executive Meetings. At these meetings, which are held roughly once a month, in addition to deliberating matters for resolution, we receive detailed reports on the operations of HHR and the Asset Management Company (defined in ②below). We also receive reports on the deliberation process for matters deliberated and determined by the Compliance Committee of the Asset Management Company. Through these reporting procedures, we ensure that the Supervisory Directors are able to obtain information appropriately and confirm the status of business execution by the Executive Director. In addition, we have prepared a decision-making letter for matters to be decided exclusively by the Executive Director to make the decision-making process more visible and facilitate ex-post verification. 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 HHR's supervisory and check functions.

2. 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 HHR and the drastic protection of unitholders, the Compliance Department has been formed independently from the Corporate Affairs Division as an organization that fulfills the check function. The Compliance Department formulates a compliance manual and compliance program as a basic action guideline, ensures awareness of compliance requirements in accordance with the compliance program implementation plan, verifies the status of compliance and cultivates awareness 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 appoints invited experts, and at present comprises one attorney and one certified public accountant that are not considered interested parties of the Asset Management Company or the sponsor company. These two outside 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, and part-time Directors, observers with the endorsement of the committee chair and the approval of the committee, may be present at the committee meetings and offer opinions (the observer is not permitted to participate in resolutions).

   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 content of a request for decision concerning execution of duties, which serves as a letter of intent, is closely inspected under required consensual decision making by Compliance Officers 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. The code of behavior in the Compliance Manual stipulates "We shall resolutely confront anti-social forces and associations" and sets forth the Asset Management Company's basic stance concerning the elimination of anti-social forces.

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 "confirmation at time of transaction," "creation and maintenance of records of confirmation at time of transaction" and "creation and maintenance of records of transactions" as well as properly reporting suspicious transactions to the supervisory authorities.