Management Policy

Corporate Governance

Basic Concept

We believe in the importance of improving management efficiency and integrity through establishing a transparent and fair management organization, speeding up the decision-making for important matters on the management, and strengthening the supervisory function of business execution, which contributes to improving corporate value.
We are well aware that it is the duty of the Company’s directors and employees to put these ideas into practice, as well as complying with all laws and regulations and maintaining discipline, with consideration towards environmental and social issues to conduct a fair, transparent and appropriate business in an atmosphere of free competition. In this way, we show all stakeholders, including our shareholders, customers, business partners, employees, and local communities, that we value the trust that they place in us.
Our Company’s staff are small in number, allowing for uncomplicated information gathering and operations management when compared to a large-scale corporation with many staff members. Our corporate organization reflects this feature.
We also appropriately arrange our human resources and strive to maintain a sense of balance between each department and committee to fully exert the functions of our organization.

Corporate Governance Structure (from June 18, 2021)

Summary of Boards, Meetings, and Committees

Name Chairperson Summary Number of meetings held
(FY2020)

The Board of Directors

Chairman

As a general rule, the board holds a meeting once a month to determine important matters on the management and supervise the status of duties execution.

13 times

Audit & Supervisory Board

Audit & Supervisory Board Member (Standing)

The board audits the Directors’ execution of duties and the Company’s internal control system, and receives reports from the Independent Accounting Auditor on matters including the quarterly financial results and the year-end audit report.

12 times

Management Meeting

President

The standing officers and general managers in charge of each department attend this meeting to improve business operation efficiency by reporting and reviewing the status and plans of such operation under the basic policy determined by the Board of Directors.

12 times

Nomination and Remuneration Committee

Outside Director

The committee appoints Directors and deliberates on personnel matters. Matters such as compensation for Directors are also deliberated. The chairperson and the majority of the committee members are Independent Outside Directors.

4 times

Sustainability Committee

President

The committee, which is chaired by the president, consists of members of the Sustainability Promotion Group and several members selected from various departments. It convenes regularly and reports on its activities to the Management Meeting and the Board of Directors if necessary.

3 times

Compliance Committee

Executive Officer in Charge

The committee, which is an organization under the direct control of the President, consists of a chairperson and several members selected from various departments. It convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary.

3 times

Risk Management Committee

Executive Officer in Charge

The committee, which is an organization under the direct control of the President, consists of a chairperson and several members selected from various departments. It convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary.

4 times

Appointment Process for Directors and Audit & Supervisory Board Members

The President prepares a list of candidates for Directors, and the Board of Directors deliberates and makes decisions in light of reports on the results of deliberations in the Nomination and Remuneration Committee.

Members of the Boards (skill matrix and meeting attendance)

Name Nomination and Remuneration Committee Gender Term of office Expertise
( represents the outside members’ specialty)
Corporate Management Finance & Accounting Legal Risk Management Industrial Expertise Architecture Technology Energy

The Board of Director

Koichi Minami

Male

6 years

Tsuneo Wakabayashi

Male

1 years

Seisuke Isemura

Male

2 years

Takashi Yoshida

Outside
Independent

Male

5 years

Masao Nomura

Outside
Independent

Male

3 years

Takashi Tsuji

Outside
Independent

Male

2 years

Chiho Takeda


Outside
Independent

Female

-

Audit & Supervisory Board

Shigeru Nishida

Male

3 years

Hideharu Nagasawa

Outside
Independent

Male

1 years

Hideyuki Kamijo

Outside
Independent

Male

-

  1. The list above does not represent all of the expertise and experience that each member possesses.
  2. The Outside Director, Ms. Chiho Takeda has been in office as Outside Audit & Supervisory Board Member of the Company for a term of three years.
  3. The Audit & Supervisory Board Member, Mr. Shigeru Nishida was in office for four years as Director of the Company before taking office as Audit & Supervisory Board Member.

Independence Criteria for Independent Outside Officers

The Company has formulated the following criteria regarding the independence of outside officers, in order to ensure objectivity and transparency in the corporate governance of the Company. If outside officers do not fall under any of the following items, it is judged that they are sufficiently independent from the Company.

1

A person who is a principal business partner (*1) of the Company or its business executor (*2)

2

A person for whom the Company is a principal business partner or its business executor

3

A principal shareholder (*3) of the Company (If this is a corporation, association, or any other organization, this refers to a person belonging to such organization.)

4

A business executor of a corporation of which the Company is a principal shareholder

5

A person who belongs to an auditing firm that serve as the Company’s Independent Accounting Auditor

6

A consultant, accounting expert, or legal expert who receives money or other assets exceeding 10 million yen annually from the Company in addition to officer remuneration
(If the person receiving such assets is a law firm, auditing firm, consulting firm, or any other corporations, or association or any other organization, this refers to a person belonging to such organization.)

7

A person who receives donations exceeding 10 million yen annually from the Company
(If the person receiving such large amount of donations is a corporation, association, or any other organization, this refers to a person belonging to such organization.)

8

A person who belongs to a company with whom the Company has a relationship for the mutual appointment of Officers

9

A person whose spouse or relative within the second degree of kinship falls under any of the above items 1 through 8

10

A person who fell under any of the above items 1 through 8 within the past three years

11

A person who has been in office for a total of more than 8 years as an outside officer

12

In addition to the preceding items, a person who may have a conflict of interest with general shareholders, and who is reasonably judged to be unable to perform his or her duties as an independent outside officer

  1. “A principal business partner” refers to any of the followings:
    1. A person who has transactions with the Company, and the annual transaction amount is 2% or more of the consolidated net sales of either the Company or said person; or
    2. A financial institution from which the Company makes loans, and the outstanding loans from such institution is 2% or more of the Company’s total consolidated assets.
  2. A “business executor” refers to an executive director, corporate officer or executive officer.
  3. A “principal shareholder” refers to a shareholder who holds 10% or more of the Company’s voting rights in his or her own or another name as of the end of the most recent fiscal year.

Executive Officer System

The Company has introduced the Executive Officer System since April 2018. Executive Officers attend the monthly Management Meetings, and as necessary, the Board of Directors’ Meetings. They carry out their duties based on resolutions of the Board of Directors’ Meetings and report the operation policies and plans they have established. The Executive Officer System was adopted to separate business execution from supervision and reinforce the supervisory functions of the Board of Directors and improve the efficiency of business execution so as to revitalize the Board of Directors. Another purpose of the system is to ensure diversity of the Board of Directors by establishing a foundation for developing officer candidates within the Company’s human resources.

Executive Officers (As of June 21, 2022)

Position Name Title

President and Chief Executive Officer

Koichi Minami

-

Senior Managing Executive Officer

Shinji Yamamoto

Director of Sales

Managing Executive Officer

Junichi Tada

Director responsible for Administration

Executive Officer

Seisuke Isemura

General Manager of Property Management Department

Executive Officer

Toshiki Tabuchi

General Manager of Finance & Accounting Department

Executive Officer

Takao Matsumoto

General Manager of Business Department

Executive Officer

Yoshikatsu Okada

General Manager of Personnel & General Affairs Department

Executive Officer

Takao Hori

Corporate Planning Department
Sustainability Promotion Group

Executive Officer

Kazuma Ohashi

Head of Tokyo Branch & Investment Promotion Department

Analysis and Evaluation of the Overall Effectiveness of the Board of Directors

With the purpose of ensuring effectiveness in the Board of Directors and enhancing the corporate value, self-assessments have been carried out by the Board of Directors since 2017. In 2021, an external institution sent out a questionnaire to all Directors and Audit & Supervisory Board Members in January and February. In March, a discussion was held based on the summary of the questionnaire conducted by the external institution.
As a result, opinions were given that the Board of Directors was functioning effectively in general. As for the composition of the Board of Directors, which has been pointed out as an issue for some time, we verified that the increase in the number of Outside Directors has allowed us to make steady progress in promoting discussion and enhancing the effectiveness.
Among the other issues pointed out last year, with regard to those related to the business plan in terms of active discussion and securing time for consideration, we also verified that there was an improvement as we set the issue as an agenda regularly and provided more information in advance.
On the other hand, it turned out that we still need to improve the coordination among the outside officers and between the outside officers and internal auditing division. We also received constructive feedback on the aspect of providing training opportunities to the outside officers.

Progress on the issues

Issues pointed out in the past Details of progress on the issues

Diversity of the Board of Directors

  • Increased the number of Independent Outside Directors gradually to constitute a majority of the board
  • Appointed a female board member as Audit & Supervisory Board Member

Conducting a more objective evaluaation of the effectiveness

  • Conducted a survey by the external institution and evaluated the effectiveness based on the summary report

Promoting active discussions on business plans

  • Regularly discussing an agenda set up for the Board of Directors concerning the progress on business plans

Providing sufficient information to outside officers

  • Holding an informal gathering on the overall business matters with the top management annually
  • Holding a briefing session on industry trends, along with a site tour of properties we own

Activity Status of Nomination and Remuneration Committee

With an aim to ensure objectivity and transparency in matters related to the personnel and remuneration of the management, we have established a Nomination and Remuneration Committee. The majority of committee members, including the chairperson, are Independent Outside Directors.
The Nomination and Remuneration Committee deliberates on the following matters in advance of the Board of Directors, and reports the results of these deliberations to the Board of Directors.
The Board of Directors makes final decisions on matters deliberated by the Nomination and Remuneration Committee, but we believe the independence and authority of the committee is assured because the majority of members of the Board of Directors are Independent Outside Directors concurrently serving as the Nomination and Remuneration Committee members.

1. Personnel matters for management executives

  • Proposals for the Shareholders’ Meeting regarding the appointment of candidate Directors and dismissal of Directors
  • Establishment, revision, or abolishment of basic policies, rules, procedures, etc., regarding the appointment of candidate Directors
  • Appointment and dismissal of the President and the Chairman
  • Succession of the President and Chief Executive Officer
  • Appointment and dismissal of Executive Officers
  • Other matters recognized as necessary by the Nomination and Remuneration Committee

2. Matters concerning remuneration of management executives

  • Details of remuneration of individual Directors and Executive Officers
  • Establishment, revision, or abolishment of basic policies, rules, procedures, etc., regarding the remuneration of Directors and Executive Officers
  • Other matters recognized as necessary by the Nomination and Remuneration Committee
Name of the committee

Total committee members

Chairperson

Internal Directors

Outside Directors

Nomination and Remuneration Committee

6 persons

2 persons

4 persons

Outside Director

Remuneration to Officers

Remuneration paid to officers in fiscal 2021

Classification Number of members Subtotal by type Total amount of remuneration
Base remuneration Performance-linked remuneration Non-monetary remuneration

Directors

8 persons

129,300 thousand yen

14,314 thousand yen

31,307 thousand yen

174,921 thousand yen

Outside Directors

5 persons

33,000 thousand yen

-

-

33,000 thousand yen

Audit & Supervisory Board Members

4 persons

40,200 thousand yen

-

-

40,200 thousand yen

Outside Audit & Supervisory Board Members

3 persons

15,300 thousand yen

-

-

15,300 thousand yen

  1. The total amount includes remuneration for a Directors who retired at the conclusion of the Annual General Meeting of Shareholders held in June 2021.

Policy for determining Directors' remuneration

We determine remuneration for Directors in line with the shareholders’ interests so that it will serve as an appropriate incentive program leading to a sustainable increase in the shareholders’ value. As a basic policy, we aim to secure appropriate levels of remuneration for Director, corresponding to the degree of their responsibilities. The policy for determining the remuneration for Directors will be resolved by the Board of Directors, with due respect given to the opinion and advice from the Nomination and Remuneration Committee, whose majority is composed of Independent Outside Directors. The Board of Directors has approved the policy listed below, effective from the remuneration for the fiscal year ending March 2022.

Remuneration system

Executive Directors

The remuneration consists of base remuneration as fixed remuneration, bonuses as performance-linked remuneration, and restricted stock as non-monetary remuneration in line with the shareholders’ interest. The Nomination and Remuneration Committee will decide on the ratio of individual remuneration, where the performance-linked remuneration is set higher for the upper ranking positions reflecting the expected roles for achieving the goals of the Mid-Term Business Plan.

Chairman

The remuneration consists of the base remuneration as fixed remuneration and restricted stock as non-monetary remuneration as the Chairman will perform the expected role as a chairperson of the Board of Directors for increasing the shareholders’ value in the mid to long term, despite being not directly involved in business operations.

Outside Directors

The Company will pay only the base remuneration to Outside Directors in consideration of their duties.

Remuneration composition
* In the case of the performance indicators achieved at 100%

Remuneration amount

Base remuneration

It is provided as fixed remuneration monthly. The amount is determined based on the Company’s performance, individual’s duties, abilities, and the degree of contribution to the Company’s sustainable growth in a comprehensive manner.

Performance-linked remuneration

It is provided as cash reflecting the performance indicators to raise awareness for improving the Company’s performance in each fiscal year. The amount is calculated based on one of our key performance indicators, the achievement levels of goals set in the Mid-Term Business Plan for the consolidated ordinary income after tax before depreciation for each fiscal year. This remuneration is provided as bonuses at a certain time each year.

Non-monetary remuneration

It is granted in the form of restricted stock linked to the shareholders’ value. The number of shares given at a certain time each year will be calculated based on the duties and abilities of Chairman and Executive Directors, along with their contributions to the Company’s sustainable growth in a comprehensive manner.

Determining method

For determining the amount of individual remuneration, the President prepares the remuneration plan and seeks advice from the Nomination and Remuneration Committee, then the Board of Directors reviews and determines the amount, giving due respect to the committee’s opinion. In addition, the Board of Directors will determine the number of restricted shares allotted to individual Directors, based on the opinion of the Nomination and Remuneration Committee.

Compliance

Basic Concept

We position compliance as one of our most important management issues. We have created Compliance Regulations to comply with laws, regulations, and other social norms, as well as in-house standards, such as our Articles of Incorporation. Based on these standards, we have developed systems and measures to promote compliance within the Company.

Promotional Framework

Compliance Committee

We have established a company-wide Compliance Committee under the direct control of the President to ensure an in-house system based on compliance management and to maintain and enhance a sound corporate culture. It convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary. The committee formulates the Behavioral Standards, assesses the implementation status of compliance measures, and devises recurrence prevention measures. In addition, compliance education and training are provided to employees at all levels through in-house study sessions and other learning opportunities.

In-house study session

Compliance Structure

In-House Reporting System

The Company has established an In-House Reporting System that receives reports and provides consultations on compliance violations. The General Affairs Department, the Audit Department, and outside attorneys nominated by the Company are the contact points to receive reports from and provide consultations to the Company’s employees and others. This system has been developed so that individuals who report violations will not be treated disadvantageously.

Audit Department

The Audit Department works separately from the Compliance Committee to conduct compliance status audits appropriately. The results of these audits are reported to the President and Compliance Committee, and to the Management Meeting and the Board of Directors’ Meeting if necessary.

Risk Management

Basic Concept

For risk management, the Company is committed to realizing business policies and taking measures to eliminateas much as possible every risk that may occur in the course of its corporate activities. It aims to ensure the safety and profitability of all stakeholders and aims for a swift response and recovery at times of emergency.

Promotional Framework

The Company established its fundamental policies on risk management and responses towards various risks it faces in the Risk Management Regulations. Also, the Risk Management Committee was established as a company-wide organization under the direct control of the President to conduct overall management based on these regulations. The committee convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary. The committee confirms and evaluates each risk that the Company faces, formulates measures suited to the nature of each risk, follows the progress of such measures and regularly reexamines them. As such, the committee comprehensively brings together information on risk management status.

Measures for Major Risks

Risks Description of the risk Status of risk response
Natural disasters, man-made disasters, etc.

The Company’s buildings and facilities may be damaged and its business results and financial condition may also be affected in the event of a large-scale natural disaster, such as an earthquake, windstorm or flooding, sudden accident, or a man-made disaster, such as fire or a terrorist attack.

As a measure to mitigate these risks, the Company has been renewing its buildings to incorporate BCP measures. Furthermore, not just new buildings, but existing buildings are being transformed to structures that can withstand disasters, and the preparation and training for BCP measures are carried out for the implementation, in an effort to control the effects that such risks may have on business results and financial condition.

Building lease business

Lease business, such as rental buildings, tends to be easily affected by economic trends, corporate performance, and fluctuations in building supply and demand. There is the risk of our business results being affected by a fall in lease fees and a rise in vacancy rate. Any real estate acquisition tax or registration license tax imposed on real estate acquisition is expensed when incurred. Therefore, there is a possibility that the business results will fluctuate greatly due to expenses incurred in the event that the Company acquires large amounts of real estate.

As the Company’s leasing business covers a variety of properties including office buildings, datacenter buildings, WINS buildings, and commercial buildings and logistics warehouses, the impact of market fluctuations is comparatively small. We will continue to promote balanced development of these four leasing businesses while reducing risks by focusing on medium- to long-term profitability in new investments.

Business developments in the Osaka area

Our leasing properties are focused in the Kansai Region (particularly in Osaka). Sales for the building lease business in Osaka showed a high ratio during the fiscal year ended March 2021, at 79.4%. Consequently, there is a possibility that the Company’s business results will be impacted by a large-scale disaster, such as an earthquake, and fluctuations in the supply and demand trends for real estate leasing in the Osaka area.

As we have noted in our Mid-Term Business Plan, we are vigorously promoting investments in the Tokyo metropolitan area to reduce risks that may occur from excessive business concentration in the Kansai Region.

The level of dependence on specific clients

The Company has three clients that provide over 10% of all net sales. The performance of these clients may have a significant impact on the Company’s business.

We will strive to diversify our tenants by actively attracting tenants to vacant properties in existing buildings and through development and acquisition of new buildings. Furthermore, we aim to reduce risks of current tenants moving out, and maintain and improve our fee standards. To this end, we will continue to offer appropriate services and build stronger relationships with tenants.

Fluctuation in asset values

In the event of a fall in market prices or profitability of our assets (such as land, buildings, investment securities), there is a possibility that the Company’s business results will be affected by fixed asset impairment losses and processing based on financial instruments accounting.

We are striving to minimize the impact of a fall in market prices through distribution of regional portfolio and investments with a focus on location. Furthermore, we will work to prevent profitability decline such as by reshuffling assets and increasing their value. Every year, investment securities are individually examined at the Board of Directors’ Meeting from both a quantitative and qualitative point of view, and sales are considered for securities that are deemed to have little significance.

Spread of infectious disease

The situation remains uncertain regarding when and how the COVID-19 pandemic will come to an end. Since we rent various properties such as office buildings, datacenter buildings, WINS buildings, and commercial buildings and logistics warehouses at fixed rents, we are aware that fluctuations in market conditions have relatively little impact on our business performance. However, if the pandemic continues for a prolonged period, the worsened economy could adversely affect the Company’s business results.

We have a small number of employees, and most of them work at the head office. While this contributes to our efficient business, personal damage to our employees and others, in the event of an outbreak of infectious diseases, may negatively affect the Company’s business activities. We are striving to maintain the health and safety of employees by promoting flexible workstyles such as working from home and commuting at different hours, by installing non-contact temperature cameras and panels for preventing droplet infection in our offices, and by encouraging them to take thorough general infection prevention measures such as hand washing and alcohol disinfection.

Dependency on interest-bearing debt

The Company has promoted development and acquisition of leasing properties with an aim to expand and stabilize its business foundation. However, much of the funds for construction and acquisitions are procured by loans from financial institutions or bond issues. Although most of the interest-bearing debts have a fixed interest rate, there is still a possibility of the Company’s business results being impacted by fluctuations in interest rates in regards to loan renewals and new future investments.

We will take advantage of the current low interest environment to reduce the average procurement interest rate for interest-bearing debts. We are also taking measures to prolong the average repayment period to benefit from the merits of the low interest rates for longer periods of time.

Amendments to laws, regulations, and tax systems

In addition to the mainstay building lease business, the Company offers other services that accompany the core business, such as building management and construction contracting. Therefore, the Company’s business is required to comply with laws and regulations, such as those related to real estate and construction. Any changes to these laws and regulations may impact the Company’s business and performance. Furthermore, related tax system changes may affect the Company’s business results and financial condition.

We strive to constantly gather information on revisions in related laws, regulations and tax systems, and implement appropriate measures.

Disclosure

Basic Concept

The Company aims to improve corporate value and heighten management efficiency and transparency by flexibly taking-in diverse opinions, while informing shareholders and investors about the Company through active communication and appropriate information disclosure.

Fair and appropriate information disclosure

The Company complies with laws and regulations based on the Disclosure of Information stated in its Code of Conduct, and it strives to conduct the appropriate and fair disclosure of corporate information on the optimal timing. The Company discloses information in accordance with the Financial Instruments and Exchange Act and the timely disclosure regulations of the Tokyo Stock Exchange. Also, information that is not subject to these regulations but is deemed useful for our shareholders and investors is disclosed to the extent possible while taking into account the Fair Disclosure Rules.

Company briefing session for individual investors