【H1】Sustainability

Governance Initiatives

Governance Initiatives

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, two 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 October 28, 2020)

Title Name Brief Profile Equity Owned
Executive
Director
Hideyuki
Isobe
April 1993 Mitsui Fudosan Co., Ltd. 0
May 2002 MBA from Wharton School, University of Pennsylvania
June 2002 Colony Capital Asia Pacific
November 2003 Mori Building Urban Fund Management Co., Ltd.
(presently, Mori Building Investment Management Co., Ltd.)
April 2005 Mori Building Investment Management Co., Ltd, General Manager of Business Development Division
October 2005 Mori Building Investment Management Co., Ltd, General Manager of Investment Department
July 2007 Mori Building Investment Management Co., Ltd., General Manager of Investment Advisory Department
November 2007 Mori Building Co. Ltd., General Manager of Finance Planning Department, Finance Division
April 2008 Mori Building Co. Ltd., General Manager of the Business Development Department, Finance Division
June 2010 Mori Building Investment Management Co., Ltd.
President & CEO (current post)
April 2011 Mori Hills REIT Investment Corporation, Executive Director (current post)
Supervisory
Director
(The chair of meetings of the Board of Directors)
Masakuni
Tamura
April 1977 Mitsui Construction Co., Ltd. 0
September 1985 Seconded to Mitsui Trust Bank, Ltd. (presently, Sumitomo Mitsui Trust Bank, Ltd.), Real Estate Department
October 1986 Sigma Planning Institute, Inc.
February 1990 Registered as Real Estate Appraiser
September 1990 Sigma Planning Institute, Inc., Director
April 1997 ARC Brain, President (current post)
April 2004 Meikai University, Faculty of Real Estate Sciences, Department of Real Estate Sciences and Meikai University, Graduate School of Real Estate Sciences, Part-Time Lecturer
February 2006 Mori Hills REIT Investment Corporation, Supervisory Director (current post)
January 2018 Japan Medical Solutions Co., Ltd., Director (current post)
May 2018 Meiji University, the Organization for the Strategic Coordination of Research and Intellecual Properties, Project Professor (current post)
Supervisory
Director
Koji Nishimura April 1992 Registered as attorney 0
April 1992 Joined Matsuo Law Offices
April 2004 Chuo University Faculty of Law, Full-time Lecturer (current post)
November 2004 Matsuo & Kosugi, Partner (current post)
December 2014 Seraku Co., Ltd., External Director (current post)
April 2017 Mori Hills REIT Investment Corporation, Supervisory Director (current post)
June 2018 Ocean Network Express Holdings,Ltd. Auditor (current post)
October 2020 Plus Alpha Consulting Co., Ltd., External Director (current post)
(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 chair of meetings of the Board of Directors

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

Policy on gender diversity concerning director composition

There are currently no female directors, but the policy is to support and respect gender-diversity-oriented approaches and, going forward, raise the percentage of female directors.
(Target) Percentage of female directors: 30% or more (2021)

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.

Title Name Reasons for Election Attendance during
the 27th period
ended January 31, 2020
Executive
Director
Hideyuki
Isobe
Mr. Isobe was elected with the expectation that he would be able to undertake business management as Executive Director based on his knowledge and experience, etc. in the real estate financing business from a broad perspective. 5/5 times
(100%)
Supervisory
Director
(The chair of meetings of the Board of Directors)
Masakuni
Tamura
Mr. Tamura was elected with the expectation that he would be able to oversee the Company’s management based on his knowledge and experience, etc. as a Real Estate Appraiser from a broad perspective. 5/5 times
(100%)
Supervisory
Director
Koji
Nishimura
Mr. Nishimura was elected with the expectation that he would be able to oversee the Company’s management based on his knowledge and experience, etc. as a lawyer from a broad perspective. 5/5 times
(100%)

Evaluation of the Effectiveness of MHR’s Board of Directors

Self-evaluation is conducted once a year to identify issues and lead to improvement in the effectiveness of MHR’s Board of Directors.
In the evaluation implemented in May 2020, the evaluation was generally high, and the effectiveness of MHR’s Board of Directors is secured. On the other hand, the diversity of directors in terms of expertise, gender, etc. was recognized as an issue for further improvement. Reflecting the self-evaluation this time, MHR will continue to strive to further improve the effectiveness of MHR’s Board of Directors.

Director Pay, Director Equity Policy and Auditor

Director Pay
Title
Name
Main Concurrent Position
Total amount of compensation for 
 each position
during the period 
 (thousand yen)
Executive
Director
Hideyuki Isobe
Mori Building Investment Management Co., Ltd.,
President & CEO
Supervisory
Director
Masakuni Tamura
ARC Brain, President
2,100
Koji Nishimura
Matsuo & Kosugi, Partner, Attorney
2,100
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

the fiscal period ended
July 31, 2019
the fiscal period ended
January 31, 2020
Fees in relation to the Audit and Attestation Services 12,700 thousand yen 12,700 thousand yen
Fees in relation to the non-Audit Services 0 yen 0 yen

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
Title Name Status of Attendance at the Board of
Directors’ Meeting in Fiscal Period
Ended March 2020
President & CEO Hideyuki Isobe
10/10 times
(100%)
Director Kojiro Segawa
10/10 times
(100%)
Director Toshio Takano
10/10 times
(100%)
Auditor Atsushi Suginobu 10/10 times
(100%)

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 audit shall be conducted after the internal audit plan is formulated.
If problems are found, the Internal Audit Manager will give recommendations and instructions for improvement to the relevant departments, and the results of the audit will be reported to the directors of MIM.

In addition, we outsource part of the internal audit work to external specialized agencies to seek an external perspective for evaluation.

Compliance

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 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 being the person ultimately responsible for compliance and the Compliance Officer being the person responsible for overseeing compliance, we regularly conduct sessions to raise awareness for all employees, and have established a monitoring and consultation system incorporating an internal auditing and whistleblowing system for prevention of problems as well as early detection and correction measures.
The status of these efforts is reported to MIM’s Board of Directors and MHR's Board of Directors and supervised by both organizations.

In addition, regarding “transactions with new companies” and “transactions with intermediary agents,” which are determined as being high-risk in risk assessment, MHR will notify to and confirm with the counterparty mutually MHR’s policy to prevent fraud and corruption, as well as conduct checks regarding anti-social forces, insider information management structure, etc. in due diligence of the counterparty. Furthermore, in its internal auditing, MHR develops a system to confirm if there are any suspicious points in accordance with the items clarified at the risk assessment.

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
No. of compliance sessions held 4 4 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 allows all employees of MIM (including contract employees, part-timers, etc.) and all employees of its business partners (including contract employees, part-timers, 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.

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 2015 FY 2016 FY 2017 FY 2018 FY 2019
0 0 0 0 0

Risk Management

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.