Daiwa House REIT

TSE code : 8984

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Governance Initiatives

Basic Approach to Governance

The Asset Manager has established the following governance-related guidelines in its internal Compliance Manual.

(1) We are committed to thorough compliance as a fundamental management principle based on the realization that trust is our greatest asset and a keen awareness that compliance deficiencies can impair trust and, in turn, even undermine our management foundation.
(2) Recognizing the importance of our societal mission and responsibilities in the national economy as an asset manager that manages investment corporations’ assets, we will ensure compliance proactively and unremittingly.
(3) By putting compliance into practice, we will contribute to the sound development of the economy and society, thereby elevating our reputation among investors and broadly gaining societal trust.

Investor Relations Initiatives

The Asset Manager always endeavors to ensure the transparency of its asset management operations from investors’ perspective and to disclose clear information promptly, accurately and impartially, which will help investors make investment decisions in accord with the principle of self-responsibility. The Asset Manager discloses information in compliance with the Financial Instruments and Exchange Act, Act on Investment Trusts and Investment Corporations, and disclosure rules prescribed by the Tokyo Stock Exchange, Investment Trusts Association, Japan, etc. It also endeavors to proactively disclose even information not legally or otherwise required for disclosure if the information is deemed likely to influence investors’ investment decisions. Disclosure documents are posted on DHR’s website. Furthermore, DHR implements the following initiatives:

(1) The Asset Manager provides an IR News Mail Service to notify registered person by email of updates posted on DHR’s website.
(2) To monitor the adequacy of timely disclosure operations, the Asset Manager’s compliance staff verify disclosure documents, the date and time, method of disclosure and other relevant matters promptly after the disclosure and report the findings to DHR’s Board of Directors and other concerned parties.
(3) The Asset Manager will provide easily understandable information that investors need to make investment decisions by proactively participating in presentation and other events for individual investors.
(4) The Asset Manager conducts a semiannual questionnaire survey of unitholders residing in Japan and incorporates their input into operations.

■IR activities the period during April 2018 to March 2019

Results briefings for domestic institutional investors, analysts, etc. 2 times
IR meetings for domestic institutional investors, analysts, etc. 215 times
IR meetings for overseas institutional investors, analysts, etc. 114 times
Presentation meetings for individual investors 12 times
Results briefings/operation results briefing sessions for DHR unitholders 2 times

Learn more about Daiwa House Group’s communications with its shareholders

Compliance

■System for promoting compliance

The Asset Manager realizes compliance through the following system.

Organization Main roles
Board of Directors of
the Asset Manager
(1) Establish and revise compliance manuals and compliance programs as the decision-making body on fundamental matters related to promoting compliance.
(2) Request compliance progress reports from the Compliance Officer as the occasion demands.
Compliance Committee Deliberate on proposals from a compliance standpoint. In principle, the Compliance Officer convenes Compliance Committee meetings regularly once a month and whenever necessary.
President and CEO (1) Supervise introduction of basic compliance policies and programs.
(2) Report compliance progress to the Board of Directors at least quarterly and whenever necessary.
Compliance Officer (1) Conduct overall compliance planning, drafting and promotion as the head of compliance.
(2) Promptly report to the President/CEO and provide necessary suggestions or instructions to relevant departments whenever problems in the context of compliance arise or are likely to arise.
(3) Independently review from a compliance standpoint transactions and decisions pertaining to management of DHR’s assets as an entity independent of the Asset Manager’s other internal organizations without being influenced by other internal organizations’ judgments.
Compliance Department Perform practical tasks related to compliance promotion, internal audits, verification of risk management status and other such functions under the Compliance Officer’s supervision.

■Establishment and practical implementation of Compliance Manual

The Asset Manager has established a Compliance Manual in the aim of increasing the soundness and reliability of its management and organization as the manager of DHR’s assets and, in turn, earning the trust of unitholders and society by prescribing not only fundamental compliance-related principles by which its officers and employees should abide but also specific practical matters.

■Prohibition against receipt of gifts/favors

The Asset Manager’s Compliance Manual stipulates the following measures to prevent bribery and corruption.

(1) Directors and employees must not provide nor accept entertainment, gifts, favors or other benefits beyond normal social etiquette under socially accepted idea.
(2) Directors and employees must not provide any entertainment, gifts, favors or other benefits to any public servants, quasi-public servants or other such individuals.

■Severance of relations with antisocial forces and prevention of money laundering

Under the Asset Manager’s Compliance Manual, directors and employees must not give money or goods both officially and privately to antisocial forces that pose a threat to civil society’s order or safety, and shall resolutely refuse any requests from such antisocial forces, including requests for donations, other financial support and magazine subscriptions. Additionally, directors and employees shall prevent money laundering, which means concealing the origin of proceeds gained through illegal acts, by scrupulously verifying the identity of customers and other applicable parties, retaining records of transactions and reporting suspicious transactions in accord with Act on Prevention of Transfer of Criminal Proceeds.

■Handling of conflict-of-interest transactions

Policies and operation structure for handling conflict-of-interest transactions:
DHR’s sponsor company and other companies capable of significantly influencing DHR and the Asset Manager’s decision-making are close partners with the deepest understanding of the fundamental concept of DHR. The Asset Manager recognizes that appropriate cooperation with these companies is a means of more effectively managing DHR’s assets.
On the other hand, close relationships among companies are in fact conducive to acts that potentially pose conflicts of interest. Recognizing that preventing conflicts of interest with a sponsor company and other related parties is one of the top compliance priorities in the asset management operations, DHR and the Asset Manager have established the following control system.

Flow chart of decision-making process for prospective acquisitions of assets from interested parties:
After the Compliance Committee, the members of which include outside third-party experts, has unanimously approved an acquisition, the acquisition must be approved by a weighted-vote resolution of the Asset Manager’s Board of Directors and by DHR’s Board of Directors which is composed of members who have no special interests between them and DHR.

Learn more about Daiwa House Group’s corporate governance.

Risk Management

■Development status of readiness for risk management

The Asset Manager has prescribed Risk Management Regulations and Risk Management Implementation Guidelines regarding various risks that arise in the course of managing DHR’s assets. It endeavors to manage risk based on a fundamental policy of comprehensively and accurately identifying risks, qualitatively and quantitatively measuring and appropriately assessing the identified risks’ impacts on operations, formulating risk prevention measures, monitoring risk management status on an ongoing basis and formulating procedures for responding to risks when they surface. Additionally, the Asset Manager conducts annual internal audits to verify the appropriateness and effectiveness of readiness for the foregoing risk-management and implementation status of risk controls. The audit results are reported to the President/CEO. The Asset Manager is committed to ensuring that operations are conducted appropriately and soundly managed through such means as reporting to the Compliance Committee and Board of Directors as the occasion demands.
The risk management, improvements and other relevant matters are incorporated into annual Compliance Programs and reported to the Boards of Directors of both the Asset Manager and DHR.

■Investment risk management regime

Recognizing that the foregoing risks exist, DHR and the Asset Manager have implemented the following readiness for risk management to be able to respond to such risks to the maximum.

(1) Readiness for risk management
The Asset Manager endeavors to manage risk based on a fundamental policy of prescribing Risk Management Regulations, comprehensively and accurately identifying risks, qualitatively and quantitatively measuring and appropriately assessing identified risks’ impacts on operations, formulating risk prevention measures, and monitoring risk management status on an ongoing basis.
(2) Timely and appropriate disclosure of information
DHR endeavors to develop the readiness to enable timely and appropriate disclosure of information to investors in compliance with the Act on Investment Trusts and Investment Corporations and the regulations of the Tokyo Stock Exchange so that information needed by investors to make investment decisions in accord with the principle of self-responsibility can be appropriately and timely disclosed. The Asset Manager’s Finance and Corporate Planning Department is in charge of information disclosure.
(3) Thorough compliance
The foregoing timely and appropriate information disclosure is predicated on DHR’s and the Asset Manager’s not only operating in strict compliance with laws, regulations, internal regulations and market rules but also conducting corporate activities honestly, fairly and fully in accord with societal norms. As corporations that legally operate in compliance with the Act on Investment Trusts and Investment Corporations and Financial Instruments and Exchange Act, DHR and the Asset Manager have developed the readiness for compliance as summarized below.
DHR’s Board of Directors consists of one Executive Director and two Supervisory Directors. It oversees the Executive Director’s execution of his or her duties and execution of operations outsourced to the Asset Manager.
The Asset Manager’s Board of Directors has prescribed regulations, including Compliance Regulations, to thoroughly ensure that operations comply with applicable laws/regulations and societal norms. The regulations include provisions that delineate the Board of Directors, President/CEO, Compliance Committee, Compliance Officer and Compliance Department’s respective roles. In addition to putting these regulations into practice, the Asset Manager has systematically prescribed standards, including standards of conduct for directors and employees, to ensure thorough compliance with all of its regulations.

■Business continuity planning

With respect to the risk of major earthquakes, other natural disasters, accidents, crime and other significant adverse events, the Asset Manager has prescribed requirements for its disaster prevention and crisis management. It aims to prevent and avert such risks and, if a disaster occurs, ensure safety of people’s lives, limit and mitigate damage, prevent a secondary disaster and expeditiously resume its business of managing DHR’s assets. The Asset Manager has also established an Emergency Response Manual to fulfill its societal responsibility as a corporate citizen.
Furthermore, to ensure continuity of payment and disclosure operations from the standpoint of the business continuity requirements to which financial instrument business operators are subject, the Asset Manager plans to operate in accordance with a BCP Execution Plan it has formulated.
The Asset Manager has stockpiled supplies, including three days of emergency meals and drinking water for employees and two storage batteries, at its executive office, warehouse and elsewhere.

■Safety confirmation system

As part of corporate crisis management, the Asset Manager has adopted an online safety confirmation system to ascertain its directors and employees’ safety and post-disaster status at the time of disaster swiftly. The Asset Manager conducts safety confirmation drills at least once annually. In FY ended Mar. 2019, the participation rate was 100%.

Learn more about Daiwa House Group’s business and other risks

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