Corporate Governance

Policy and Approach

In order to contribute to the realization of a sustainable society, we aim to maximize unitholder value over the medium to long term.
We believe that it is absolutely imperative to remain a company that is trusted by society.

By firmly acknowledging this belief, MHR and MIM work on building fair and effective corporate governance and strive to enhance internal control through thorough compliance and risk management based on an appropriate compliance and internal control structure.

Corporate Governance

In addition to a general meeting of all unitholders, MHR’s governance structure consists of one executive director, four supervisory directors, the board of directors and an accounting auditor as required by the Act on Investment Trusts and Investment Corporations.

The executive director undertakes executive management and represents MHR. The supervisory directors oversee the executive director's performance of the position’s duties. 

The board of directors is comprised of the executive director and the supervisory directors and makes important decisions regarding the execution of MHR’s duties, such as approval of the executive director's execution of MHR’s important duties and approval of financial statements.

The executive director reports to the supervisory directors from time to time regarding the status of asset management, compliance and risk management and other matters.
Each supervisory director oversees the execution of duties by the executive director through the reporting on investigation requested by the supervisory directors.

The Accounting Auditor performs the audit of financial statements etc. of MHR and reports to the supervisory directors in the event of discovering any serious actions in violation of laws and regulations or actions violating the proper execution of duties by the executive director.

Management Profiles

(as of June 19, 2024)

(Note)

Executive Director and Supervisory Director may be officers of corporations other than those listed above, but none of them has any interest in MHR.

Independence of supervisory directors and chairperson of the Board of Directors

Four supervisory directors are independent directors pursuant to the Act on Investment Trusts and Investment Corporations.
The chairperson of the Board of Directors is Masakuni Tamura, Supervisory Director.

Policy on gender diversity concerning director composition

• Current percentage of female directors: 40%

The policy is to support and respect gender-diversity-oriented approaches and we aim to make the percentage of female directors 30% or more.

Criteria for Electing Directors

Directors of MHR are elected based on the following criteria and on the condition that they are not disqualified per the stipulations in the Act on Investment Trusts and Investment Corporations, and related laws.
Directors are appointed as a result of the resolution of a General Meeting of Unitholders.

Skills Matrix of Directors

(Note)

The above table shows the representative skills of each director and does not contain all of the areas of knowledge and experience.

Director Pay, Director Equity Policy and Auditor

Director Pay

(Note)

Executive Director Isobe also served as President & CEO of MIM for the above periods and did not receive remuneration as Executive Director of MHR.

Director Equity Policy

Directors of MHR may not buy or sell investment units of MHR in order to prevent insider trading as stipulated in the Insider Trading Management Regulations of MHR.

Auditor

Auditor

• Ernst & Young ShinNihon LLC

Continuing Auditor Tenure

• From February 2006 to the present

Auditor’s Remuneration

Structure of Asset Management for the Investment Corporation

MHR entrusts the management of its assets to its asset management company. The following is the organizational structure of MHR’s asset management company.

Status of MIM’s Board of Directors’ Meeting

Internal Audit Structure

MIM has set up its Internal Audit Regulations and the General Manager of Compliance Department works as Internal Audit Manager under President & CEO. Internal audits shall be conducted every year targeting operations of all departments while also receiving support through outsourcing to outside specialized institutions, after formulating the internal audit plan encompassing a broad range of items including corporate ethics.
If problems are found, the Internal Audit Manager will give recommendations and instructions for improvement to the relevant departments, and the results of the audits will be reported to the directors of MIM.

Compliance and Corporate Ethics

Policy and Approach

From the viewpoint of securing the trust of financial markets and individual investors, financial institution business operators are required to have a management attitude that emphasizes compliance. MHR and MIM recognize that failure to ensure compliance is as an extremely serious risk factor and could diminish our public confidence and business base. 

By firmly acknowledging this fact, MHR and MIM strictly adhere to various laws and regulations in order to fulfill our public obligations and to faithfully and fairly engage in corporate activities as a basic principle of management. MHR and MIM strive for thorough compliance, holding a high ethical sense in our operations.

Status and efforts for compliance with laws and regulations

The team at MIM, with the board of directors at the top, along with the President & CEO, the Compliance Department, the Compliance Officer and the Compliance Committee determine and verify various matters concerning compliance in accordance with their respective authorities and responsibilities.

MIM has established a "Compliance Manual" which states the compliance-related principles, as well as internal regulations to control major risks related to compliance such as prevention of transactions involving conflicts of interest and blocking of relations with anti-social forces. MIM strives to prevent problems by maintaining and thoroughly informing all executives and employees through periodic training etc. In addition, MIM introduced monitoring and consultation systems such as internal audit and internal reporting procedures to find and correct problems proactively.

The status of these efforts is reported to the board of directors and utilized for periodic risk assessment.

Initiatives Against Transactions Involving Conflicts of Interest

MIM shall perform its business in good faith and with the due care of a prudent manager for MHR in line with the purpose of the investment management business, and is well aware that failure to ensure thorough compliance, especially inappropriate transactions or transactions involving conflicts of interest with the sponsor company group, may undermine investors’ trust in the securities markets, the corporate management base of MHR and MIM.

Therefore, MIM will use its efforts to prevent any negative impact from transactions involving conflicts of interest and carry out strict compliance as follows.

Process to Counter Transactions Involving Conflicts of Interest

(Note)

The Director (Part-time) is unable to participate in the resolution of the Board of Directors since this individual will be considered a board member of a related party when acquiring asset from a related party.

Blocking relations with Anti-Social Forces

MIM provides a statement on “severing all ties, including business ties, with anti-social forces” in its “basic rules on response to anti-social forces.”

Accordingly, MIM endeavors to develop an internal structure, such as assigning a person responsible for overseeing and managing responses to anti-social forces and a person responsible for preventing unjust demands, and also periodically ensuring that all officers and employees are thoroughly informed of how to respond to anti-social forces, etc. through in-house training, etc.

Preventing Fraud and Corruption

MIM has formulated a "Compliance Manual" that sets forth the corporate ethics standards such as principles of compliance-related behavior, strict compliance with various laws and regulations including banning bribery, banning insider trading, prohibiting acts that may cause conflicts of interests such as corporate entertainment, gifts and acceptance of benefits that gives rise to public suspicion or distrust.

When a compliance violation or fact of doubt of such is recognized, it is prescribed to report that matter immediately to the Compliance Officer, and when the compliance officer deems it necessary in compliance with law regulations, and other rules, the matter will be reported to the president of MIM and the compliance committee for execution of appropriate measures.

With regard to these prohibited acts, under the system with the president of the asset manager being the person ultimately responsible for compliance and the Compliance Officer being the person responsible for overseeing compliance, we regularly conduct sessions on prevention of fraud and corruption and other corporate ethics standards to familiarize all employees including contract employees and part-timers with these issues and have established a monitoring and consultation system incorporating an internal auditing and whistleblowing system which is official and anonymous and allow whistleblower to report directly to external attorneys for prevention of problems as well as early detection and correction.

	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023
No. of compliance sessions held	3	3	4	4	4
Total amount of political donations [yen]	0	0	0	0	0
No. of cases of exposure related to fraud and corruption	0	0	0	0	0
No. of cases of punishment/dismissal related to fraud and    corruption	0	0	0	0	0
Reconciliation cost of penalties/punishment related to fraud   and corruption [yen]	0	0	0	0	0

Whistleblower System

We have established a Whistleblower Protection System which is official and anonymous and allows all officers and employees of MIM (including contract employees, part-timers, retired employees, etc.) and all employees of its business partners (including contract employees, part-timers, retired employees, etc.) to report directly to external attorneys regarding acts that violate laws, internal rules, action principles and other acts that may be contrary to corporate ethics etc.
We strive to thoroughly inform all officers and employees to prevent, to detect and to correct problems at an early stage.

In the event of whistleblowing, the Investigation Committee with members appointed by external lawyers will conduct necessary investigations and countermeasures in accordance with MIM’s "Whistleblower Protection Regulations" by considering the confidentiality of the whistleblower and the privacy of the concerned parties.

Whistleblowers are provided legal protection under the Whistleblower Protection Act, and we prohibit retaliatory actions such as detrimental treatment and harassment due to whistleblowing and take appropriate measures to protect whistleblowers and to make "Whistleblower Protection Regulations" works properly.
Appropriate measures will be taken so that the work environment will not deteriorate after whistleblowing.

（Number of reports and outline of corrective measures）
FY 2019	FY 2020	FY 2021	FY 2022	FY 2023
0	0	0	0	0

Risk Management

Policy and Approach

There are various risks in corporate activities. When these risks materialize it may lead to a decline in business performance and a decrease in social confidence.

MHR and MIM are well aware that various risks in business execution may undermine our corporate value.
We identify risks according to changes in public perceptions and the business environment as well as implement appropriate monitoring and responses to prevent and minimize damage at the time of occurrence of incident.

Risk Management Structure

MIM has established Risk Management Regulations. The Board of Directors oversees the development of risk management policies and the development of an appropriate risk management system.
In addition, MHR’s Board of Directors will periodically receive reports from MIM and supervise risk management overall.

The practical operation will be carried out with the Compliance Officer of MIM being the supervisor and the General Manager being responsible for risk management of each department.
We will identify various risks related to the tasks involved, including ESG risks, management risks, financial risks, administrative risks and system risks, and monitor the appropriate level of each risk.
Furthermore, the Compliance Officer periodically reports the status of risk management to MIM’s Board of Directors and MHR’s Board of Directors where necessary measures are confirmed and the effectiveness of the risk management process is reviewed.

Information Security

Leakage of information will compromise the trust of the company and it will be a great inconvenience to various stakeholders including our unitholders.

MIM has established Information Management Regulations and has adopted steps to prevent the leakage of information to implement appropriate management of information handled in business. The Information Manager makes efforts to strengthen information security by monitoring usage and strengthening systems.