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Operating System Focused on Unitholder Return

Aligning unitholder return with the interests of the Hulic Group

Hulic Reit has built a system that aligns unitholder return with Hulic’s interests and in which Hulic Reit and Hulic can collaborate in business operations.

Investment Support from Hulic (“Same-Boat Investment”)

Under its sponsor support agreement, Hulic makes the undertakings listed below to Hulic Management Co., Ltd. in respect of investment units issued by Hulic Reit.

When Hulic Reit issues new investment units, Hulic will give good faith consideration to acquiring a portion of the new investment units.
When Hulic has a holding of Hulic Reit investment units, it will seek to retain the investment units held except in special circumstances.

Co-ownership of Properties with the Sponsor

It is Hulic Reit’s policy to consider co-ownership with Hulic where necessary in view of the size and individual characteristics of the property.

Management Fee System of Asset Management Company

In addition to management fees linked to the total value of the managed assets, Hulic Management Co., Ltd. has introduced a system of management fees linked to the value of cash distributions per investment unit.

Management fee Method of calculation
Management fee I Total value of assets at end of the immediately previous fiscal period × 0.50% (maximum %)
*In the first fiscal period of operation, value of acquisitions during period × 0.50% (maximum %)
Management fee Ⅱ Cash distributions per investment unit (DPU) before deduction of management fee II × operating income before deduction of management fee II × 0.004% (maximum %)
Acquisition fee Acquisition price × 1.0% (maximum %)
*0.5% (maximum %) in the case of acquisition from an interested party or similar
Transfer fee Transfer price × 1.0% (maximum %)
*0.5% (maximum %) in the case of transfer to an interested party or similar
*No fee is paid in cases where a loss is incurred on the transfer.

Remuneration System for Employees and Officers of the Asset Management Company

In its remuneration system for employees and officers, Hulic Management Co., Ltd. has introduced a system of incentive bonuses partially linked to cash distributions per investment unit.

Adopting operating systems to prevent conflicts of interest and ensure objectivity

Hulic Management Co., Ltd. appoints outside experts to both its Investment Committee and Compliance Committee. For resolutions on the acquisition of assets or similar matters, the agreement of a majority is required of the committee members in attendance, including outside experts and the Compliance Officer, for both the Investment Committee and Compliance Committee.

Asset management company’s decision-making procedure for interested party transactions

Asset management company’s decision-making procedure for interested party transactions

Adoption of voluntary rules to prevent transactions involving a conflict of interest

Regarding transactions with interested parties, Hulic Reit applies the general rules outlined below and works to prevent transactions where a conflict of interest might arise.

Property acquisition No acquisition is made at above the appraisal value (excluding acquisition costs) (Note 1).
Property transfer No transfer is made at below the appraisal value (excluding transfer costs).
Property leasing Properties are leased on terms considered appropriate based on an overall decision made after researching the market price, rates in the surrounding area, standard leasing terms for the property type, and other relevant factors.
Outsourcing of property
management operations
Outsourcing is undertaken on terms considered appropriate in accordance with the conditions stipulated in the operational guidelines, following due consideration of management performance and efficiency, and after taking account of the content of the services provided, the total volume of the operations, and other relevant factors. The outsourcing fees are determined based on market levels, the content of the services provided, the total volume of the operations, and other relevant factors.
Outsourcing of property purchase, sale, and leasing to agencies Outsourcing is undertaken on terms considered appropriate and at fees within the range stipulated in the Building Lots and Buildings Transaction Business Act, after taking account of the content of the services provided and other relevant factors.
Commissioning of construction work, etc. (Note 2) Construction work, etc., is commissioned on terms considered appropriate based on an overall consideration of the price, content, and other aspects of third-party estimates.
(Note 1) In cases where the interested party has incurred costs, for instance by temporarily creating a special-purpose company on the understanding that the interested party is to transfer the property to the investment corporation, the costs may be added to the appraisal value at the time of acquisition.
(Note 2) However, this does not apply where the estimate price is \10 million or below or in cases where urgent action is required.

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