Daiwa House REIT

TSE code : 8984

Font Size
S
L

JAPANESE

  1. HOME
  2. ESG Initiatives
  3. Governance Initiatives

Governance Initiatives

Corporate Governance

■Basic Approach to Corporate Governance

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

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

■Corporate Governance Structure

The Asset Manager conducts asset management operations entrusted to it by DHR under the organizational structure below. The various operations of the Asset Manager are divided among the Compliance Officer, the Compliance Department, the Investment Department, the Fund Management Department in Daiwa House REIT Division, the Asset Management Department in Daiwa House REIT Division, the Fund Management Department in Private Fund Division, the Asset Management Department in Private Fund Division, and the Administration and Accounting Department. The Compliance Officer is in charge of the Compliance Department, while the Investment Department, the Fund Management Department in Daiwa House REIT Division, the Asset Management Department in Daiwa House REIT Division, the Fund Management Department in Private Fund Division, the Asset Management Department in Private Fund Division, and the Administration and Accounting Department are overseen by the respective directors in charge.
In addition, the Asset Manager has the Compliance Committee as the organization that deliberates on compliance, the Daiwa House REIT Investment Management Committee as the organization that deliberates on the acquisition, disposition and management of DHR assets, the Private Fund Investment Management Committee as the organization that deliberates on the acquisition, disposition and management of private fund assets, and the Management Finance Committee as the organization that deliberates on important matters related to the management plans of the Asset Manager.

■Executive Directors and Supervisory Directors

≫Criteria / Reasons for election

The selection of candidates is based on the premise that they are not disqualified per the reasons set forth in various laws and regulations such as the Investment Trusts Act (Article 98 and Article 100 of the Investment Trusts Act and Article 244 of the Ordinance for Enforcement of the Investment Trusts Act). They are elected by resolution of the general meeting of unitholders based on the reasons for election below. The Board of Directors is currently comprised of persons with no special interest with DHR.

Title and post Name Reason for election Attendance at meetings
of the Board of Directors (Note)
Executive
Director
Toshiharu Asada Toshiharu Asada has a wealth of operational experience and knowledge not only in general finance but also in real estate. We have elected him as Executive Director based on his appropriate judgment pertaining to execution of business operations as well as his character and knowledge. 100%
(12 / 12)
Supervisory
Director
Tetsuya Iwasaki Tetsuya Iwasaki is familiar with accounting and tax matters as a certified public accountant and enrolled agent. In addition, he has experience as an outside director at a listed company. We have elected him as Supervisory Director because we determined that he possesses the good character and knowledge necessary to supervise the execution of duties by Executive Director as a Supervisory Director and to perform his duties as a member of the DHR Board of Directors. 100%
(12 / 12)
Supervisory
Director
Hiroshi Ishikawa Hiroshi Ishikawa is familiar with laws and regulations as an attorney-at-law. In addition, he has experience as an outside director at a listed company. We have elected him as Supervisory Director because we determined that he possesses the good character and knowledge necessary to supervise the execution of duties by Executive Director as a Supervisory Director and to perform his duties as a member of the DHR Board of Directors. 100%
(12 / 12)
(Note) Attendance at meetings of the Board of Directors held during the fiscal periods ended August 31, 2020 and February 28, 2021 is indicated in terms of number and percentage.

≫Compensation of Executive Directors and Supervisory Directors

The maximum monthly compensation for an Executive Director shall be 800,000 yen, and the maximum monthly compensation for a Supervisory Director shall be 350,000 yen. The amount shall be determined by the Board of Directors based on what is deemed reasonable based on trends in general costs of living, wage trends, and other such factors.

Title and post Name Main concurrent positions Total compensation per title
Fiscal period ended August 31, 2020 Fiscal period ended February 28, 2021
Executive
Director
Toshiharu Asada - ¥2,400 thousand ¥2,400 thousand
Supervisoty
Director
Tetsuya Iwasaki Certified Public Accountant and Enrolled Agent, Citia Certified Public Accountant Firm
Outside Director, Uoriki Co., Ltd.
¥2,100 thousand ¥2,100 thousand
Hiroshi Ishikawa Attorney, Ohhara Law Office
Outside Director, Japan Medical Dynamic Marketing, INC.
¥2,100 thousand ¥2,100 thousand
(Note 1) The Executive Director and Supervisory Directors do not hold investment units of DHR under their own or another person’s name. Any Supervisory Director may serve as an executive of a corporation other than those listed above, but such corporations including those listed above do not have any interest in DHR.
(Note 2) In regard to the liability set forth in Article 115-6, Paragraph 1 of the Investment Trusts Act, if a Director has acted in good faith and has not been grossly negligent in performing their duties, and it is deemed necessary considering the underlying facts, the status of the Director’s performance of their duties, and other such circumstances, DHR may exempt them from liability to the extent allowed by law by resolution of the Board of Directors.

■Compensation of the Audit Firm and the Asset Manager

≫Compensation of the Audit Firm

The maximum compensation for the audit paid to the Independent Auditor shall be ¥25,000 thousand per fiscal period subject to audit, and the amount shall be determined by the Board of Directors.

Title and post Name Total amount of compensation
Fiscal period ended
August 31, 2020
Fiscal period ended
February 28, 2021
Independent Auditor Ernst & Young
ShinNihon LLC
¥39,000 thousand (Note 2) ¥19,000 thousand (Note 3)
(Note 1) Dismissal or non-reappointment of the Independent Auditor shall be discussed at DHR’s Board of Directors pursuant to the provisions of the Investment Trusts Act for dismissal, taking into full account all relevant factors for non-reappointment such as the quality of audits and compensation for audits.
(Note 2) Out of the ¥39,000 thousand, ¥22,500 thousand is compensation for preparation of comfort letters.
(Note 3) Out of the ¥19,000 thousand, ¥2,000 thousand is compensation for preparation of comfort letters.

≫Compensation of the Asset Manager

Item Total amount of compensation
Fiscal period ended August 31, 2020 Fiscal period ended February 28, 2021
Management fees 1 ¥816,575 thousand ¥830,824 thousand
Management fees 2 ¥948,233 thousand ¥961,381 thousand
Acquisition/disposition fees ¥190,445 thousand ¥21,725 thousand
Total ¥1,955,253 thousand ¥1,813,931 thousand

■Handling of Conflict-of-interest Transactions

≫Policy and management structure for addressing conflict-of-interest transactions

The Daiwa House Group could significantly influence the decision-making of the Asset Manager and DHR. It is a close partner with the deepest understanding of the basic concepts at DHR. We recognize that proper coordination with these companies is a means to carry out our asset management operations more effectively.
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 the Daiwa House Group and other interested parties is one of the top compliance priorities in the asset management operations, DHR and the Asset Manager have established the following control system.

Under the regulations of the Asset Manager, when conducting transactions involving the acquisition, disposition, leasing, or outsourced management of portfolio, entering brokerage agreements related to these transactions or placing an order for construction thereof with an interested party more broadly defined than what is established by law, except when there are separate provisions for the transaction, the rule is that unanimous approval must be obtained at the Asset Manager’s Investment Management Committee and Compliance Committee and then a resolution by the Board of Directors before such a transaction can be executed. In addition, at DHR, approval must be obtained from the DHR Board of Directors, which is comprised of Directors who are not Directors or employees of the Asset Manager. When acquiring portfolio assets from an interested party, in principle, the maximum acquisition price shall be the appraisal value, and when selling portfolio assets to an interested party, in principle, the minimum selling price shall be the appraisal value. Furthermore, from the standpoint of transparency, when DHR conducts certain transactions with interested parties, information is promptly disclosed in an appropriate manner in accordance with the regulations of the Asset Manager and various provisions of applicable laws.
In addition, the Asset Manager has appointed an attorney at law familiar with the Financial Instruments and Exchange Act who possesses a solid track record as an outside expert member of the Compliance Committee. At meetings of the Compliance Committee, the outside expert member provides various on-point opinions and advice from the standpoint of a neutral expert, including in discussions on transactions carrying the risk of a conflict of interest, thereby contributing to fair and appropriate discussions, ensuring that customer interests are not unduly harmed.

For details on corporate governance at the Daiwa House Group, follow this link.

Compliance

■System for promoting compliance

The Asset Manager realizes compliance through the following system.

Organization/
Title and post
Main role
Board of Directors (1) Establish and revise compliance manuals and compliance programs as the decision-making body on fundamental matters related to promoting compliance.
(2) Ask for reports on progress made on compliance from the Compliance Officer as necessary.
Compliance Committee In principle, convened monthly and as necessary by the Compliance Officer for discussion of the agenda from the standpoint of compliance.
President and CEO (1) Supervise introduction of basic compliance policies and programs.
(2) Report to the Board of Directors on progress made on compliance at least every quarter and as 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 Engage in work related to compliance promotion, internal audits, verification of risk management, and more under the supervision of the Compliance Officer.

≫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.

≫Establishment of whistleblowing system and protections for whistleblowers

The Asset Manager has established a system for consultation and appropriate handling of reports related to acts that are (or could potentially be) problematic in terms of compliance, including organizational or individual legal violations and ethically questionable acts reported by whistleblowers based on the Whistleblower Protection Act and the Cabinet Office Guidelines for Private Businesses Concerning the Whistleblower Protection Act. Both internal and external points of contact are in place.

≫Severance of relationships with anti-social forces and prevention of money laundering

The Asset Manager’s Compliance Manual requires officers and employees to categorically reject all requests, both public and private, from anti-social forces that threaten the order and safety of civil society, including those for money and goods, donations, contributions, and subscriptions to informational magazines. In addition, officers and employees are to thoroughly verify the identity of customers, etc., keep transaction records, and report suspicious transactions as stipulated by the Act on Prevention of Transfer of Criminal Proceeds in order to prevent money laundering (hiding the source of profits from illegal acts).

≫Compliance training

The Asset Manager works to enhance internal education and training so that officers and employees are able to pursue the best interests of investors. Specifically, when it comes to internal education, we utilize a group textbook that provides easy-to-understand explanations by means of various case studies in order to ensure that Daiwa House Group employees are able to engage in proper decisions and actions according to “With our customers” and the other elements of the Principles of Corporate Ethics and Code of Conduct in their routine operations. As for internal training, we carry out compliance training on a continual basis to ensure that all officers and employees are acutely aware of pursuing the best interests of investors. We also include an assessment of whether employees are taking action on compliance with a continual awareness of other social demands in their performance evaluations. In so doing, we seek to raise awareness among our officers and employees.

■Prevention of Corruption

≫Policy

The Daiwa House Group has established a system to strictly prohibit and prevent corruption, such as bribery, money laundering, embezzlement, and other violations of the law. This includes the establishment of Anti-Bribery Regulations and Identity Verification Regulations. In addition, acts that encourage bribery or unfair trade or that are ethically unsound are prohibited by various policies and rules, such as our Principles of Corporate Ethics and Code of Conduct, even if they do not violate the law. In this way, we set forth rules for maintaining transparency in business operations and fairness in transactions.

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.

■Problems Related to Bribery and Corruption

There were no serious problems related to bribery or corruption at the Asset Manager that would influence stakeholders. (Fiscal year ended March 2021)

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 and 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.

■Readiness for Risk Management

DHR and the Asset Manager recognize the existence of the above risks and have established the risk management system below in order to fully address such risks.

(1) Readiness for risk management
The Asset Manager has prescribed Risk Management Regulations and endeavors to manage risks based on a fundamental policy of 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 information disclosure
DHR endeavors to develop the readiness to enable timely and appropriate disclosure of information to investors in compliance with the Investment Trusts Act 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 Fund Management Department in Daiwa House REIT Division of the Asset Manager is in charge of information disclosure.
(3) Thorough compliance
Timely and appropriate disclosure of the above must be the result of the operations of DHR and the Asset Manager being in compliance (in other words, sincere and fair corporate activities that are fully in line with social norms in addition to strict compliance with laws, regulations, internal regulations, and market rules). DHR and the Asset Manager have made the following preparations in relation to compliance as corporations that operate legally in accordance with the Investment Trusts Act as well as the Financial Instruments and Exchange Act.
The DHR Board of Directors is comprised of one Executive Director and two Supervisory Directors and supervises the execution of business by the Executive Director and the status of execution of services by the Asset Manager.
The Asset Manager’s Board of Directors has established and implements Compliance Regulations and other regulations that set forth the roles of and other matters pertaining to the Board of Directors, the President and CEO, the Compliance Committee, the Compliance Officer, and the Compliance Department in order to ensure that operations are conducted in accordance with compliance requirements. In addition, various regulations are in place for systematic stipulation of the rules of conduct for officers and employees to ensure thorough compliance.

■Business Continuity Planning

The Asset Manager establishes the necessary items for its disaster prevention and crisis management in relation to risks specified separately for natural disasters such as large-scale earthquakes, accidents, crimes, and other material facts. It has established an Emergency Response Manual for the purpose of preventing and avoiding risk, ensuring people’s safety and reducing/mitigating damage in the event of a disaster, preventing secondary accidents, and facilitating the resumption of DHR’s asset management operations as well as fulfilling its corporate social responsibility. 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 officers and employees and two storage batteries, at its office, warehouse for general affairs 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. 2020, the participation rate was 100%.

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

Back to Top