Development and Operation of a Process that Ensures Highly Workable Governance
TOKYU REIT and Tokyu REIM regard excellent governance as a source of competitiveness and a factor that contributes to the enhancement of unitholder value. TOKYU REIT implements steady operations pressing ahead with designing and developing governance that is fully satisfactory in terms of global standards as well so that investment securities issued by TOKYU REIT will be sought after by all types of investors both in Japan and abroad as global products.
Please refer to this page, about board of directors
|Board of Directors||The Board of Directors consists of 2 representative directors (the President and Chief Executive Officer (CEO) and Executive Vice President), 1 full-time directors and 5 part-time directors to ensure oversight of business execution.|
Compliance and Risk Management Committee
|The Compliance and Risk Management Committee is an advisory body to the Board of Directors that consists of 2 part-time directors of Tokyu REIM and 2 external committee members. It meets at the request of the Board of Directors to discuss important compliance and risk management matters (including matters related to individual transactions with interested parties and matters deemed necessary by the Executive Officer in charge of compliance or the Executive Director of the committee). It also deliberates on the appropriateness of interested-party transaction regulations and reports to the Board of Directors.|
|The Investment Committee is an advisory body to the Board of Directors that consists of Representative Director and President (committee chairman) of Tokyu REIM, Representative Director and Executive Vice President, 3 directors and a professional member qualified as a real estate appraiser. It meets at the request of the Board of Directors to deliberate on and resolve the formulation and revision of the Management Guidelines and Asset Management Plan, the asset allocation for the entire portfolio and investment decisions for individual properties, and reports to the Board of Directors.|
|Disclosure Committee||The Disclosure Committee consists of General Manager, Finance and IR (committee chairman), General Administration, Compliance Office and Business Planning & Development. Of the information subject to timely disclosure, the committee deliberates on disclosure of facts concerning TOKYU REIT, Tokyu REIM and TOKYU REIT's portfolio, and submits the results to the President and CEO. In principle, such disclosures are made with the approval of the President and CEO.|
Sustainability Promotion Committee
|The Sustainability Promotion Committee consists of the President and CEO (committee chairman), full-time directors, executive officers and the heads of each division. Progress and achievement related to matters discussed and reviewed by the committee are regularly reported to the Board of Directors and TOKYU REIT's Board of Directors.|
|President and CEO||The President and CEO is the chief executive officer of Tokyu REIM as well as the chief compliance and risk management officer.|
|Auditors||Tokyu REIM has appointed 2 auditors (part-time). It has also established a statutory auditors' secretariat to ensure that their audits are conducted effectively. In principle, the Auditors attend meetings of the Board of Directors, the Compliance and Risk Management Committee and Investment Committee, and conduct audits focusing on the legality of business execution. They also try to enhance the effectiveness of accounting and business audits by working with the Accounting Auditor and Compliance Office, which conducts internal audits, through the statutory auditors' secretariat.|
|Accounting Auditor||Tokyu REIM has voluntarily chosen to be a company with an Accounting Auditor in accordance with the Companies Act (Act No. 86 of 2005, as amended) and works to ensure the reliability of its financial statements by having its accounts audited by a different auditing firm than TOKYU REIT's Accounting Auditor. In addition, it actively provides information necessary for audits through regular meetings between the Accounting Auditor and representative directors and such.|
*Advantages and Disadvantages of Concurrent Positions
The President of Tokyu REIM concurrently holds the position of Executive Director of TOKYU REIT after notifying the Commissioner of the Financial Services Agency on May 13, 2015, in accordance with Article 31-4, Paragraph 1 of the Financial Instruments and Exchange Act. This concurrent position allows for faster and more specific reporting to TOKYU REIT's Board of Directors, a benefit TOKYU REIT takes full advantage of to eliminate the information gap between the Executive Director and contracted parties such as general administrators, asset custodians, lead managing underwriters, property management companies, etc. We are focused on maximizing TOKYU REIT’s Board of Directors’ monitoring of compliance and achieving a high level of quality in this area.
In addition, TOKYU REIT and Tokyu REIM have established an office space, filing system, email address, etc. exclusive for TOKYU REIT's Executive Director separate from the position of President of Tokyu REIM and implemented an approval process as TOKYU REIT's Executive Director, ensuring a system that monitors Tokyu REIM's business processes in order to avoid confusion of responsibilities for executing business.
Although there are possible disadvantages to having the President of Tokyu REIM concurrently serve as TOKYU REIT's Executive Director, such as risks arising from a conflict of interest between the two companies or a decline in monitoring due to an increased workload, TOKYU REIT works to mitigate risks and reduce the burden on those holding concurrent positions by strengthening supervision of executive directors and Tokyu REIM by supervisory directors, while Tokyu REIM conducts fair business operations in accordance with its self-imposed rules on related-party transactions and enhances and delegates authority to officers and employees supporting Tokyu REIM President.
*Management System for TOKYU REIT's Contracted Parties
TOKYU REIT's Board of Directors receives regular business reports and explanations from general administrators and asset custodians regarding the status of general administration and investigates as necessary. It also maintains broad supervision of asset management by requesting detailed explanations and reports from Tokyu REIM.
◆ Internal Control
■Resolution on “Basic Policy on Development and Operation of Internal Control System”
Being a company entrusted with asset management of a listed real estate investment trust corporation, Tokyu REIM has voluntarily resolved at its Board of Directors’ meeting the matters defined in Article 362, Paragraph 4, Item 6 of the Companies Act as the “Basic Policy on Development and Operation of Internal Control System.”
■Establishment of “Internal Control Policy”
Tokyu REIM has established its own “Internal Control Policy” for business operations and seeks to improve the efficacy and efficiency of tasks, credibility of financial reports, compliance with laws and regulations, etc. associated with business activities by clarifying basic policies for actual practices as well as to establish an internal control system for asset conservation and the strengthening of such.
◆Measures Against Conflict of Interest
Tokyu REIM has established “Related-Party Transaction Rules,” which comprise basic rules and individual rules, as voluntary rules and implements measures against conflict of interest for transactions with related parties (Note).
（Note）“Related Parties” is a collective term for “Tokyu Corporation and its subsidiaries,” “Affiliates of Tokyu Corporation except Tokyu Corporation's subsidiaries,” and “Tokyu Fudosan Holdings Corporation and its subsidiaries.”
1. “Tokyu Corporation and its subsidiaries” refers to any entity that falls under the following (1) to (3):
(1) Tokyu Corporation
(2) A consolidated subsidiary of Tokyu Corporation
(3) A tokutei mokuteki kaisha (TMK) or special purpose entity (SPE) that was established based on the intention of Tokyu Corporation or a consolidated subsidiary of Tokyu Corporation and where the share of investment by undisclosed associations or other investment shares in that entity by the respective company exceeds 50%.
2. “Affiliates of Tokyu Corporation except Tokyu Corporation’s subsidiaries” refers to affiliates within the scope of consolidation of Tokyu Corporation.
3. “Tokyu Fudosan Holdings Corporation and its subsidiaries” refers to any entity that falls under the following (1) to (3):
(1) Tokyu Fudosan Holdings Corporation (“Tokyu Fudosan Holdings”)
(2) A consolidated subsidiary of Tokyu Fudosan Holdings
(3) A tokutei mokuteki kaisha (TMK) or special purpose company (SPC) that was established based on the intention of Tokyu Fudosan Holdings or a consolidated subsidiary of Tokyu Fudosan Holdings and where the share of investment by undisclosed associations or other investment shares in that entity by the respective company exceeds 50%.
◆Investment Management Fee
Investment management fee structure linked to three performance indices aimed to balance conflicts of interest by “being in the same boat as unitholders.”
(Note) Standard cash flow here shall be the amount derived by subtracting an amount equivalent to 50% each of profit or loss from the sale of specified assets and profit or loss from the valuation of specified assets from the net income before income taxes, plus depreciation and amortization of deferred assets.
＊Apart from the above, TOKYU REIT pays predetermined fees, etc. to an asset custodian, general administrators, property management companies and an independent auditor, among others.
＊The above fees are all booked as expenses. TOKYU REIT does not adopt an acquisition incentive fee, which is capitalized on the balance sheet.
■Conducts internal audits
Tokyu REIM examines whether the company's operations are being conducted appropriately and efficiently in accordance with laws, regulations and internal rules, reports the results to the Board of Directors and the President and CEO and makes recommendations for improvement to the divisions subject to internal audits. Internal audits cover all organizations, divisions and operations, and in cases where some operations are outsourced to outside parties, the status of management by the outsourcing divisions is also included.
＜Major internal audit items＞
(１)Status of internal control systems
(２)Status of compliance systems, including prevention of complaints, accidents, fraud and violations of laws, regulations and Tokyu REIM's internal rules (Tokyu REIM Code of Conduct, etc.), as well as detection and handling after detection
(３)Status of risk management systems, including prevention of risks in business and operations and measures to deal with risks when they materialize
(４)Status of information security systems, including assurance of effectiveness, efficiency, reliability, compliance and safety in information management, such as personal information management and system management, as well as handling of incidents and failures, including loss, leakage, falsification, destruction and unauthorized access
(５)Other necessary matters
Promotion of Compliance and Risk Management
■Our Approach to Compliance
Recognizing its social responsibility and pubic mission as a listed real estate investment trust corporation, TOKYU REIT has established its own “Compliance Policy” and designs and develops governance with the aim of securing the confidence of investors and other stakeholders through compliance with ethics, laws and regulations, market rules (including global regulations applicable to TOKYU REIT), guidelines of the competent authorities, internal rules of TOKYU REIT, etc., in other words, thorough implementation of compliance.
Tokyu REIM has established “Tokyu REIM Code of Conduct,” “Basic Policy for Compliance,” “Compliance Rules,” “Tokyu REIM Compliance Manual,” “Compliance Program” and other internal rules, and implements thorough compliance of ethics, laws and regulations, market rules (including global regulations applicable to Tokyu REIM), etc., particularly focusing on proper management of information on corporations and personal information, securement of credibility on disclosure of financial reports and such.
・Chief Compliance Officer (CCO)
The Chief Compliance Officer is responsible for Tokyu REIM's overall compliance and the Executive Officer in charge of compliance assumes this post. The CCO oversees compliance operations and operates the compliance consultation counter. In addition, in accordance with the "Compliance and Risk Management Committee Regulations," the CCO makes sure that important matters related to compliance and risk management (including matters related to individual transactions with interested parties and matters deemed necessary by the Executive Officer in charge of compliance or the Executive Director of the committee) as well as matters related to the appropriateness of interested-party transaction regulations are appropriately brought to the attention of the Compliance and Risk Management Committee.
・In-House Compliance Training
In order to ensure viability of ethics, laws and regulations, market rules (including global regulations applicable to Tokyu REIM), internal rules, etc., Tokyu REIM conducts in-house training from time to time and strives to develop and strengthen its compliance system, foster awareness of compliance among officers and employees, etc.
・Whistleblower Protection System
To complement our compliance framework, we have established a whistleblower protection system and harassment consultation counter in compliance with the Whistleblower Protection Act (Act No. 122 of 2004, as amended) to prevent, promptly correct and prevent recurrence of compliance violations. All officers, employees (including temp workers) and retired employees can consult with these counters, both internally and externally (sponsors and outside attorneys), regarding compliance violations and other issues. To protect those who do, the "Compliance Rules" stipulate that anonymous reporting is allowed, that dismissal or other disadvantageous action will not happen and that appropriate measures will be taken to ensure that their work environment will not deteriorate because of their so doing.
The Chief Compliance Officer (CCO) and Compliance Office confirm the status of business compliance with laws, regulations and internal rules, and conducts compliance checks on transactions even in their routine business, including those by TOKYU REIT with parties related to Tokyu REIM, and when internal rules are established or revised.
Based on the recognition that it is essential to accurately identify various internal and external risks related to the REIT asset management business and to manage such risks in a rational and optimal manner from a company-wide perspective in order to maintain and maximize TOKYU REIT unitholder value, we have established and implemented a "Risk Management Basic Policy" and "Risk Management Rules."
■Three Lines of Defense in Risk Management
We appropriately manage risk through an operational structure based on the concept of three lines of defense.
|1st line||2nd line||3rd line|
|Self-assessment of control||Monitoring of risk management||Internal auditing|
・This line has primary responsibility for the risks inherent in the operations under its jurisdiction.
・This line establishes and improves a risk management framework.
・This line maintains independence and objectivity from the first and second lines, and verifies and evaluates their activities.
■Annual Risk Management Cycle
Recognizing that occurrence of natural disasters, accidents, and other risks has a material impact on its business operation and execution of management of TOKYU REIT’s assets due to economic loss, loss of credibility, significant obstacles in business operation, etc. caused by such risks, Tokyu REIM has established and operates its own “Basic Policy for Risk Management” and “Risk Management Rules” to minimize damage upon occurrence of risks and continuously fulfill its social responsibility and public mission as a company.
・Establishment of Risk Management Committee
・Establishment of BCP and preparation of risk management manual
・Preparation of stockpile, medicine, etc.
・Execution of large-scale earthquake drills and safety confirmation drills
Large-scale earthquake drill (2019)
Initiatives Concerning Compliance and Risk Management
■Response to Insider Trading Regulations
Tokyu REIM has established “Rules for Prevention of Insider Trading, Etc.” and builds and operates systems to prevent insider trading through proper management of information on corporations and such.
■Prevention of Money Laundering and Terrorist Financing
Recognizing that countermeasures against money laundering and terrorist financing are one of the most important management issues, we have established a "Basic Policy on Countermeasures against Money Laundering and Terrorist Financing" and are building an internal organizational structure and management structure for our contractors and business partners.
Tokyu REIM has established and operates its own “Basic Policy on Information Security” to ensure protection of information assets and their proper use.
・Establishment of an appropriate structure for system risk management
・Development of safety measures to deter/prevent unauthorized access, unauthorized acquisition of information, information leakage, etc.
Based on the financial sector's alternative dispute resolution system, we have a system in place for the resolution of complaints and disputes.
■Anti-Bribery and Corruption Measures
The "Work Regulations" and "Compliance Manual" stipulate that we will not engage in acts such as giving gifts, gambling, etc., and that we will severely punish any person who gives or receives illicit or unjust money or goods in connection with our business.
In addition, Tokyu Group has worked to prevent corruption based on Tokyu Group’s compliance policy and the code of conduct of each company. Furthermore, Tokyu Corporation, its sponsor, established the “Anti-Corruption Policy” targeting the company and its consolidated subsidiaries in May 2022, and stipulates the complete prohibition of the so-called corruption that abuses own or third-party authorities and positions in work, such as bribery (Note 1), conflict of interest (Note 2), embezzlement, forced provision of benefits and bid-rigging, as well as the disallowance of corruption by the customers, etc. of Tokyu Corporation and its consolidated subsidiaries.
Please refer to this page, about Tokyu Corporation's Anti-Corruption Policy
(Note 1) Refers to the provision or receipt of gift, loan, reward, remuneration or other benefits from a person beyond the scope of laws and regulations or social norms as a factor inducing acts that are unauthorized, illegal or breaching trust in businesses. Moreover, the so-called “facilitation payment” shall not be allowed regardless of the amount if it violates the laws and regulations, etc.
(Note 2) Refers to the execution of the act of inducing own interests in conflict with the interests of a company by a person who belongs to that company (officers, employees, etc.) in a private and inappropriate manner.
■Contractor Compliance Survey
We conduct periodic surveys on the status of compliance efforts by TOKYU REIT's main contracted parties to supervise them.