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Mori Hills REIT Investment Corporation TSE Code:3234

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【H1】Compliance and Risk Management

Compliance

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Compliance

Basic Policy

The directors of MHR ensure thorough compliance by complying with the Act on Investment Trusts and Investment Corporations, the Financial Instruments and Exchange Act, and other relevant laws and regulations and internal rules.

In addition, in order to ensure that the supervisory directors exercise their supervisory rights and investigative rights, MHR has established a system by which executive directors report to supervisory directors concerning execution of business and ensures that MHR’s board meetings can be held flexibly (such as by utilizing telephone conference or similar means of communication).
With respect to the two supervisory directors, MHR is making efforts to build a strong governance structure by appointing outside experts, namely as a lawyer and a real estate appraiser and by fully utilizing internal checking functions.

Mori Building Investment Management Co., Ltd. (MIM) is required to perform its business operations in good faith and with due care of a prudent manager for MHR in line with the purpose of the investment management business, and accordingly performs sincere asset investment and management pertaining to real estate properties based on an appropriate compliance structure and internal control structure in order for MHR to gain high trust from the securities market and investors.

In addition, well aware that failure to ensure thorough compliance can undermine investors’ trust in the securities market and the corporate management base of MHR and MIM, MIM positions thorough compliance as a basic principle of corporate management and, headed by MIM’s Board of Directors, the President & CEO (the person responsible ultimately for compliance), Compliance Department, Compliance Officer (the person responsible for overseeing compliance), and Compliance Committee make decisions on the various matters concerning compliance and conduct inspections of compliance (inspections of compliance with laws and regulations, etc.) under their respective authority and responsibility.

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)
Director (Part-time) is unable to participate in the resolution of the Board of Directors since the personnel will be concerned as a board member of related party when acquiring 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 ensures 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

MHR and MIM recognize bribery, corruption and other fraud as an extremely serious risk factor which significantly impairs trust from society. To maintain a strong relationship with our stakeholders and to earn their trust, we have formulated a "Compliance Manual" that sets forth the principles of compliance-related behavior, strict compliance with various laws and regulations including banning bribery and prohibiting corporate entertainment, gifts and acceptance of benefits that may cause conflicts of interests.

With regard to these prohibited acts, we regularly conduct sessions raising awareness for all officers and employees, and have established a monitoring and consultation system incorporating internal auditing and internal reporting system for prevention of problems as well as early detection and correction steps under the supervision of the President & CEO and the Compliance Officer.

The status of these efforts is reported to the board of directors and utilized for periodic risk assessment.

Whistleblower System

We have established a Whistleblower Protection System which allows all employees of MIM and its business partners 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)
  • Fiscal 2017: 0 cases

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