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Corporate Governance

Basic Compliance Policy

The objective is (i) to ensure that the directors and employees of the Asset Management Company shall comply with the Law Concerning Investment Trusts and Investment Corporations, the Financial Instruments and Exchange Law, the Building Lots and Buildings Transaction Business Law and any other laws and regulations; various rules stipulated by the Tokyo Stock Exchange, Inc., and the Investment Trusts Association, Japan; and the internal rules of the Asset Management Company; (ii) to establish a system for the Asset Management Company to appropriately manage investment assets and (iii) to ensure appropriate business operations by the Asset Management Company.
"Compliance" indicates that the directors and employees understand the intent and contents of any applicable laws, regulations and various rules correctly, comply with them, and implement honest and fair corporate activities that do not violate social norms.

Compliance System

Sekisui House Residential Investment Corporation entrusts its asset management to the Asset Management Company, Sekisui House Asset Management, Ltd. The Asset Management Company shall manage the Investment Corporation's assets in accordance with the asset management agreement entered into with the Investment Corporation.

The organizational chart and administrative organs concerning compliance at the Asset Management Company are as follows.

 

Checking System for Transactions with Interested Parties

The Asset Management Company's internal rules stipulate that approval of the Investment Corporation's Board of Directors is required for transactions with Interested Parties, such as acquisition of investment assets and entrustment of property management operations, in addition to screening by the Risk Management and Compliance Office and discussions or resolutions by the Investment Committee, the Compliance Committee and the Board of Directors, with the purpose of more strictly checking such transactions.

Interested Parties shall mean:
(1) Interested persons, etc. as defined in the Law Concerning Investment Trusts and Investment Corporations; and
(2) Shareholders of the Asset Management Company
(3) Special purpose companies, etc. that have concluded discretionary investment contracts with (1) or (2)
(4) Special purpose companies, etc. where the investment ratio of above (1) and (2) exceeds 50%

Major Interested Parties of the Asset Management Company

Major related companies Interested Party or not
Sekisui House
Sekiwa Real Estate, Sekiwa Real Estate Kanto, Sekiwa Real Estate Tohoku,
Sekiwa Real Estate Chubu, Sekiwa Real Estate Kansai, Sekiwa Real Estate Chugoku,
Sekiwa Real Estate Kyushu, Sekiwa Kanri Kansai

Established stringent check system for the decision making process

As such, conflict-of-interest transactions (i.e., transactions with Interested Parties including interested persons, etc.) are subject to multi-tiered checks as they are first deliberated by the Investment Committee and the Compliance Committee, and then deliberated by the Board of Directors of the Asset Management Company, which is the decision making organ of the Asset Management Company with which the asset management of the Investment Corporation is entrusted, and finally obtaining approval of the Investment Corporation's Board of Directors. In addition, checks by the Compliance Officer, the external expert and the Investment Corporation's Supervisory Directors are conducted at the respective stages.

Standards for Transactions with Interested Parties

The Asset Management Company stipulates "Rules for Transactions with Interested Parties" concerning transactions between the Interested Parties of the Asset Management Company and the Investment Corporation as an internal rule, and manages risks concerning conflicts of interest by complying with the rules.

An overview of matters that require approval of the Investment Corporation's Board of Directors under the Rules for Transactions with Interested Parties are as follows:

Matters that require approval of the Investment Corporation's Board of Directors Standards for transactions
Acquisition of specified assets from Interested Parties The acquisition price (excluding taxes, costs related to the acquisition, etc.) shall be the amount equal to or less than the real estate appraisal value, etc. by the real estate appraiser applied in the acquisition.
Disposition of specified assets to Interested Parties The disposition price (excluding taxes, costs related to the disposition, etc.) shall be the amount equal to or more than the real estate appraisal value by the real estate appraiser applied in the disposition.
Payment of an agency fee to Interested Parties The agency fee to be paid shall be within the scope of reward stipulated in the Building Lots and Buildings Transaction Business Act.
Entrusting management, etc. of real estate and other assets to Interested Parties The party must meet the conditions stipulated in "Selection and Management Criteria for Property Management Companies" that was formulated separately by the Asset Management Company. (In principle, the party's adequacy for management will be verified once a year by an outside independent appraiser with no interested relation.)
Conclusion of leasing contract for real estate and other assets with Interested Parties The lease shall be deemed to be appropriate after considering actual market conditions and standard terms and conditions for leasing the target real estate and other assets.
Placing orders for construction work, etc. amounting to 5 million yen or more to Interested Parties The level of estimated price, and content of service to be provided etc., shall not significantly differ from that of third parties.

 

Risk Management Committee and Internal Audits

The Asset Management Company holds meetings of the Risk Management Committee and implements internal audits by the Compliance Officer to appropriately manage risks in providing asset management services for Sekisui House Residential Investment Corporation and to avoid, reduce or transfer risks and minimize damages when risks occur.

Holding of Risk Management Commitee meetings

Meetings of the Risk Management Committee comprising full-time directors, the Compliance Officer and each department head are, in principle, held at least once a month.
The Risk Management Committee discusses risk items, risk avoidance measures, etc. based on annual risk management plans, and monitors progress status of risk management plans every three months.

Internal audit by the Compliance Officer

The Compliance Officer regularly audits the risk management status of respective departments and reports findings to the Board of Directors.

 

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