Corporate Governance

Governance initiatives

HHR shall have at least one Executive Director(s) and at least two Supervisory Directors (and at least one more Supervisory Director than the number of Executive Directors).

The organization of HHR is comprised of the General Unitholders’ Meeting featuring unitholders, in addition to one Executive Director, two Supervisory Directors, the Executive Meeting, which includes all Executive Directors and Supervisory Directors, as well as the Accounting Auditor.

For details, please refer to Company Structure, Executive Directors.

Executive pay

HHR shall pay monthly remuneration to Executive Directors at an amount decided by the Executive Meeting, up to an amount equivalent to 800,000 yen per month for each executive director, and Supervisory Directors at an amount decided by the Executive Meeting, up to an amount equivalent to 600,000 yen per month for each Supervisory Director, no later than the last day of the relevant month.

Amounts of Executive pay are disclosed in Semi-Annual Report.

Overview of the Asset Management Company

Asset management of HHR has been entrusted to Hankyu Hanshin REIT Asset Management, Inc., the Asset Management Company.

As for the Organizational Structure of the Asset Management Company, please refer to Asset Management Company.

Decision-making structure for investment management

HHRAM establishes regulations for asset management and asset management guidelines, and sets forth basic approaches to investment management including investment policy, rules on transactions involving interested parties, and disclosure policy, etc.

Furthermore, HHRAM establishes asset management plans in accordance with the asset management guidelines, and makes decisions on acquisitions and other matters concerning asset management according to the investment policy and rules on conflict-of-interest transactions set forth in the asset management guidelines.

Decision-making flow

Initiatives towards conflicts of interest

HHRAM will accurately grasp potential conflicts of interest with the sponsor group, etc. If there is a potential conflict of interest with regards to transactions, HHRAM will appropriately manage such conflict of interest by having the Compliance Department verify the transaction prior to execution pursuant to laws and regulations as well as internal rules, and, when necessary, having the Compliance Committee that includes outside experts deliberate in advance while also obtaining prior approval at HHR’s Executive Meeting.

Management remuneration system

The management remuneration system has been changed for the purpose of improving investor value.

By heightening the linkage between the amount of management remuneration and the interest of investors, HHRAM will have an incentive to improve the quality of the portfolio.

• The above management remuneration system was approved at the 11th General Unitholders' Meeting of HHR held on August 25, 2020. Furthermore, the effective date for remuneration upon acquisition, remuneration upon transfer, and remuneration upon merger is September 1, 2020, and that for management remuneration 1 and 2 is December 1, 2020.

Compliance

Compliance

HHR and HHRAM build robust compliance and internal audit systems by systematically ensuring multiple check functions based on Basic Policies Concerning Compliance.

• Any conflict-of-interest transactions which meet certain standards shall be approved at an Executive Meeting of HHR.

Compliance training

HHRAM invites outside lecturers to conduct training targeting all of its officers and employees with the purpose of having them observe compliance and developing an awareness. In addition, training for managers and transferees is also provided by in-house lecturers in a timely manner.

Major themes in fiscal 2022 (provided by outside  lecturers)

Risk monitoring by HHRAM

HHRAM strives to enable accurate prevention activities for various risks surrounding business and appropriate response activities for crises when risks become apparent based on the risk management regulations and risk management manuals established by HHRAM.

Efforts to prevent corrupt practices

HHRAM has been working to prevent corruption based upon the Anti-Corruption Policy stipulated by Hankyu Hanshin Holdings, Inc., our parent company. (The below is excerpted from the website of Hankyu Hanshin Holdings, Inc.)

1. Preventing Bribery and Other Corrupt Practices
   All officers and employees of Hankyu Hanshin Holdings Group shall comply with all applicable laws in force in the countries where they operate and shall work to prevent corrupt practices. As used here, “corrupt practices” means practices in which officers or employees abuse the power entrusted to them to gain an illicit advantage or to commit an act that is contrary to law or ethical standards. Examples of corrupt practices include bribery, unfair trade practices (including abusing a superior bargaining position to exploit a weaker party), and insider trading. Officers and employees of Hankyu Hanshin Holdings Group shall observe the following anti-bribery rules:
   1. All officers and employees of Hankyu Hanshin Holdings Group shall on no account give, offer, or promise any money, privilege, hospitality, objects of value, or any other benefit or advantage to public officials, whether directly or indirectly. As used here, “public officials” includes persons who serve a role analogous to that of a public official. Additionally, officers and employees shall on no account accept any privilege, hospitality, objects of value, or any other benefit or advantage beyond that which can be justified as business practice or within social norms.
   2. Whenever officers or employees of Hankyu Hanshin Holdings Group pay money to public officials, they shall accurately record the payment and properly manage the record.
2. Organizational Support for Combatting Corrupt Practices
   Hankyu Hanshin Holdings Group shall provide training to ensure that its officers and employees fully understand this policy. Member organizations of the Hankyu Hanshin Holdings Group shall provide anti-corruption guidelines that are relevant to their business profile.
3. Organizational Response to Corrupt Practices
   Hankyu Hanshin Holdings Group shall provide information about, and facilitate the use of, the Corporate Ethics Consultation Desk, a means by which any of the Group’s officers or employees, or any trading partners or other interested parties, can swiftly report any violations or suspected violations. The Group shall address any reports swiftly and effectively.

Effective March 1, 2022
Hankyu Hanshin Holdings, Inc.