Governance
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Corporate Governance
Based on the recognition that strengthening corporate governance is an important management issue, AEON REIT has established a highly transparent and fair governance system and is promoting initiatives to reinforce this system.
Governance of AEON REIT Investment Corporation
Management structure
The Investment Corporation's managing bodies are the General Meeting of Unitholders consisting of unitholders, an executive director, three supervisory directors, the Board of Directors consisting of all executive directors and supervisory directors, and the independent auditor.
Certain matters concerning the Investment Corporation, which are stipulated in the Act on Investment Trusts and Investment Corporations ("Investment Trust Act") or the Articles of Incorporation, are resolved at the General Meeting of Unitholders, which is composed of unitholders. Resolutions at the General Meeting of Unitholders will be passed by a majority vote of the unitholders at the meeting where unitholders holding a majority of the investment units issued and outstanding are present. However, for certain important matters such as amendments to the Articles of Incorporation, resolutions (special resolutions) must be passed by a majority of two thirds or more of the affirmative votes of the unitholders at a meeting where unitholders holding a majority of the investment units issued and outstanding are present. The General Meeting of Unitholders convenes at least once every two years.
The executive director has the authority to execute the business of the Investment Corporation and to represent the Investment Corporation in all judicial or extrajudicial acts related to its business. Supervisory directors have the authority to supervise the execution of duties by the executive director and assessments are based on reports on the status of asset management, compliance and risk management provided by the executive officer at Board of Directors' meetings.
The Board of Directors has the authority to approve the execution of important duties, the authority stipulated in the Investment Trust Act and the Articles of Incorporation and the authority to supervise the execution of duties by the executive director.
The independent auditor is selected through resolution of the General Meeting of Unitholders. The Investment Corporation has selected PricewaterhouseCoopers Japan LLC to act in this capacity. The independent auditor audits the Investment Corporation's financial statements, reports to the supervisory directors any wrongful act or material fact in violation of the law or the Articles of Incorporation discovered in connection with the execution of duties by the executive director and performs other legally stipulated duties.
Restrictions on trading of investment units by directors
In order to prevent insider trading, the Investment Corporation's "Insider Trading Management Regulations" generally prohibit directors of the Investment Corporation from trading in investment units and investment corporation bonds issued by the Investment Corporation.
Asset management fee structure
Method of calculation of fees etc. related to asset management
The Asset Management Company receives asset management fees (I and II), acquisition fees and disposal fees. The calculation method specified in the Investment Corporation's Articles of Incorporation is as shown below.
| Management fee structure | Calculation method | |
|---|---|---|
| Management fee | Management fee I | Total assets × 0.3% (maximum rate) × {No. of operating days / 365} |
| Management fee II | DPU before deducting Management fee II × NOI × 0.001% (maximum rate) | |
| Acquisition fee | Acquisition price × 0.5% (maximum rate) [Related party transactions: Acquisition price × 0.25% (maximum rate)] |
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| Disposition fee | Disposition price × 0.5% (maximum rate) [Related party transactions: no disposition fee paid] |
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Remuneration of the executive director and supervisory directors
The monthly remuneration of the executive director and supervisory directors is set with an upper limit of ¥1 million. Remunerations are determined by the Board of Directors and shall be amounts considered reasonable in light of remunerations of directors and supervisory directors who perform similar duties at public companies and other corporations as well as general price and wage trends.
Remuneration of the independent auditor
Remuneration of the independent auditor shall be determined by the Board of Directors and have an upper limit of ¥30 million in each period subject to audit.
Please refer "ESG Data" for the latest information of the remunerations.
Reinforcement of corporate governance
Details and roles of external members
An external member with no special interests in either committee is selected by the Board of Directors for each of the Investment Committee and Compliance Committee. Resolutions of each committee require the attendance and approval of these external members to ensure fairness, objectivity and appropriateness in decision-making by the committees. The external committee members are as follows.
| Position | Name |
|---|---|
| External member of the Investment Committee | Katsue Okuda |
| External member of the Compliance Committee | Aya Motomura |
Initiatives against conflicts of interest
①System to prevent conflict-of-interest
Transactions between the Investment Corporation, etc., whose management is entrusted to the Asset Management Company, and interested parties of the Asset Management Company will be subject to the examination procedures stipulated in the "Regulations for Interested Party Transactions." Going through this procedure, strict screenings are implemented to ensure that the Investment Corporation is not disadvantaged.
②Decision-making process in conflict-of-interest transactions
Resolutions concerning related party transactions such as the acquisition of assets from the Aeon Group must be confirmed and approved by the compliance officer in advance to ensure legal compliance. The matter is then discussed by the Investment Committee and Compliance Committee of the Asset Management Company before a resolution is formed. For the final part of the decision-making process, a report is sent to the Board of Directors and the Investment Corporation.
Resolutions concerning related party transactions require the attendance and approval of an external member (independent third party), who has no special interests with the Aeon Group, at each of the Investment Committee and Compliance Committee meetings. This forms part of the mechanism for more rigorous decision-making.
Compliance and risk management
AEON REIT aims to achieve the vision set out in our Basic Compliance Policy. By thoroughly adhering to laws and regulations and implementing rigorous risk management, we strive to maximize sustainable unitholder value.
Basic policy and system
AEON REIT Investment Corporation and AEON Reit Management Co., Ltd., which is commissioned to manage the assets of the Investment Corporation, are aware of their social responsibility and mission regarding society, which are derived from the fact that the Investment Corporation's asset management involves the management of its investors' funds. They have built an asset management system that is appropriate for promoting management prioritizing compliance to establish the trust of society by contributing to the development of the economy and society through healthy operations.
Organization chart of the Asset Management Company
The Asset Management Company has established Compliance Regulations, Compliance Committee Regulations and Compliance Manual as well as a Compliance Program, which is a specific execution plan to ensure compliance, as part of efforts to create and implement a robust compliance system. In addition, the Asset Management Company has adopted the Principles for Customer-Oriented Business Conduct issued by the Financial Services Agency and has formulated and announced a policy to carry out business operations for the Investment Corporation, which entrusts the Asset Management Company with business pertaining to asset management, and its unitholders. The Asset Management Company also regularly announces the status of activities under the policy with respect to key performance indicators (KPIs) and these Principles.
Role of each committee in the Asset Management Company
| AInvestment Committee |
Deliberates and makes decisions on matters concerning management policy, owned assets and sources of funding, etc. Members: All full-time directors including the representative director as well as general managers of the Investment Management Department, Asset Management Department, Finance and Planning Department, Business Administration Department and Accounting Department, an external member and a compliance officer |
| BCompliance Committee |
Deliberates and makes decisions on compliance-related issues, including those related to business ethics and corruption Members: A compliance officer, all full-time directors including the representative director as well as the general manager of the Compliance Department and an external member |
| CCompliance Officer |
Establishes the compliance system for the Investment Corporation and the Asset Management Company and has overall responsibility for compliance-related matters Appoints qualified individuals with sufficient capabilities for monitoring and supervising to ensure thorough compliance with laws and regulations within the company |
Initiatives to prevent corruption
The Aeon Group announced its participation in the United Nations Global Compact, which includes principles on preventing corruption proposed by the United Nations, on September 1, 2004. The Aeon Code of Conduct explicitly lays out policies that prevent bribery, including the prohibition of accepting gifts or hospitality from business partners.
The Asset Management Company has established various policies and procedures addressing topics such as anti-money laundering, counter-terrorism financing, prevention of bribery, rules for entertainment and gift-giving, and management of insider trading. The company has put in place a robust system to strictly forbid and prevent any activities that breach these regulations and the relevant laws. Additionally, the company prohibits not only actions that contravene laws and regulations but also behaviors that, while not illegal, can promote corruption or unfair practices and are deemed ethically unacceptable. This stance is reinforced by various guidelines and regulations, including a basic policy on corporate governance, Compliance Regulations, and the Compliance Manual.
Furthermore, to ensure transparency and fairness in business operations, the Group consistently promotes awareness among all employees through regular training on corporate ethical standards, including measures against misconduct and corruption. It also conducts internal audits and has established a Group-wide reporting mechanism, allowing for anonymous reporting both internally and externally.
Some of the guidelines and procedures established by the Asset Management Company are detailed below.
Anti-bribery regulations
The company and its executives must comply with anti-bribery laws, both domestic and international (including the Penal Code, Unfair Competition Prevention Act, other Japanese laws, and foreign laws). The following actions are strictly prohibited:
- 1. Bribery of public officials
- 2. Bribery of persons other than public officials
- 3. Accepting bribes
- 4. Assisting, brokering, or conspiring in acts of bribery
- 5. Facilitation payments
Procedures for entertainment and gift-giving
Whistleblowing system
The Asset Management Company strives to strengthen compliance management by promptly detecting and rectifying violations and unethical behaviors in the workplace, such as illegal activities, breaches of employment rules, human rights infringements, and acts of harassment. The Aeon Compliance Hotline has been established as a Group-wide internal reporting system based on the Whistleblower Protection Act and the Cabinet Office guidelines for private enterprises concerning the Whistleblower Protection Act. For internal consultations, Aeon Co., Ltd.'s corporate ethics team serves as the point of contact, while an external advisory law firm is designated as the outside point of contact. This system is available to all employees working in the Group. In every case, anonymous reporting is possible, and strict confidentiality of the reported information is maintained in accordance with laws and internal regulations. Additionally, any retaliatory measures, such as unfair treatment or harassment based on the act of reporting, are strictly prohibited, and this is explicitly stated in rules and regulations.
Reports and consultations are passed on to the Group company concerned as feedback through the corporate ethics team. Within two weeks, an investigation is conducted to ascertain the facts behind each report or consultation and a response is made, with the results, including corrective measures, reported to the corporate ethics team. The compliance officer at the Asset Management Company serves as a point of contact for consultation and takes corrective measures whenever necessary. If deemed necessary at each point of contact, the content of the consultation is reported to the representative director, who then conducts an investigation, considering the rights of the person consulting, and takes the necessary measures to resolve the issue.
Implementation of internal audits
The Asset Management Company has established Internal Audit Regulations stipulating basic matters concerning the planning, implementation, and reporting of internal audits to ensure these activities are promoted smoothly and effectively. Under the guidance of the representative director, a compliance officer has been appointed as the person responsible for internal audits. Each year, through a resolution of the Board of Directors, an internal audit plan is formulated, covering a wide range of topics including corporate ethics. Based on this plan, the internal audit department conducts annual audits targeting all departments and operations within the company. In addition to evaluating and confirming the status of legal compliance, identifying issues, and making proposals for improvements, the internal audit department verifies that basic actions pertaining to accountability, duty of loyalty, and duty of care befitting the risk characteristics of the Asset Management Company have been performed appropriately. Once an audit has been completed, a report is prepared and directives for improvement given as required. A report on the results is provided to the representative director and the Board of Directors.
Additionally, separate from the internal audit, every year an audit is conducted in collaboration with an external auditing firm based on a predetermined theme. This not only aims to enhance auditing skills but also ensures that the audit is highly effective.
Risk management system
The Asset Management Company has set forth its basic policy and management system concerning risks within its Risk Management Regulations and a Risk Management Manual in order to classify risks according to various factors and understand, analyze, evaluate and manage those risks. Risk assessments are conducted once every six months based on these regulations and manual with the primary objective of ensuring sound management and appropriate business operations.
Risk assessment process
Compliance training
Compliance training is provided on a regular and ongoing basis to all employees to maintain awareness of the need for compliance and understanding of matters covered by regulations. A total of 12 training sessions were held in fiscal 2022 with a participation rate of 100%.
Please refer "ESG Data" for details of fiscal 2023 training.
System for eliminating anti-social forces
The Asset Management Company has implemented a policy addressing anti-social forces to ensure appropriate management, with the fundamental principle of completely avoiding any association or dealings with anti-social forces. To proactively prevent any dealings with anti-social forces, the company will conduct appropriate pre-screenings as necessary when entering into various agreements. Furthermore, in contracts entered into by the Asset Management Company, anti-social forces exclusion clauses will be included as necessary to prevent anti-social forces from becoming business partners and to ensure that if it is later discovered that the business partners have ties to anti-social forces, the relationship with those business partners can be promptly terminated.
In the event that unjust demands are made by anti-social forces, or if it is later discovered that a business partner has ties to anti-social forces, or there are suspicions as such, these matters shall be promptly reported to the person responsible for dealing with anti-social forces (compliance officer). Instructions will then be provided on subsequent actions and all necessary measures will be taken to swiftly terminate any such relationships in order to ensure the appropriateness of the Asset Management Company's management. At that time, no funding or other benefits for the purpose of severing the relationship will be provided.
Information security
The Asset Management Company has established a fundamental policy aimed at appropriately protecting information assets and maintaining and enhancing the level of organizational management of information and information security. At AEON REIT and the Asset Management Company, we acknowledge information assets as vital corporate resources. The responsibility for managing them is designated to the head of the Business Administration Department, and we are dedicated to ensuring their proper management and secure storage in accordance with our internal regulations. In addition, we have developed internal regulations to ensure the proper utilization of information systems and to prevent occurrences of system failures and cybersecurity incidents, responding appropriately as needed.