Governance Initiatives

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Corporate Governance

MORI TRUST Hotel Reit’s Organization

The organization of MORI TRUST Hotel Reit consists of the General Meeting of Unitholders comprised of unitholders, one Executive Director, two Supervisory Directors, the Board of Directors comprised of the Executive Director and the Supervisory Directors, and the Accounting Auditor.

(1) General Meeting of Unitholders

Certain matters concerning MORI TRUST Hotel Reit as set forth in the Act on Investment Trusts and Investment Corporations (“Investment Trusts Act”) or the Articles of Incorporation are decided by a resolution of the General Meeting of Unitholders , which shall be composed of unitholders. Unless otherwise stipulated in laws or the Articles of Incorporation, a resolution at the General Meeting of Unitholders will be made by the majority of the voting rights of the unitholders present. However, certain important matters, including amendments to the Articles of Incorporation, require a resolution made by two-thirds or more of voting rights of unitholders present, provided that unitholders holding investment units equivalent to majority of total investment units issued are present (special resolution).
With regard to all investment units issued, each unitholder holds voting rights at a ratio of one voting right for each investment unit held by the unitholder.

(2) Executive Director, Supervisory Directors and the Board of Directors

The Executive Director executes the business of MORI TRUST Hotel Reit and also has the authority to take any judicial or extra-judicial acts related to the business of MORI TRUST Hotel Reit on behalf of MORI TRUST Hotel Reit. A Supervisory Director has the authority to supervise the conduct of business by the Executive Director. The Board of Directors has the authority to approve the execution of specific responsibilities as well as the authority set forth in the Investment Trusts Act and the Articles of Incorporation and the authority to supervise the execution of duties by the Executive Director.
The appointment and dismissal of Executive Directors and Supervisory Directors is determined by resolution of a General Meeting of Unitholders in accordance with the provisions of the Act on Investment Trusts and Investment Corporations and the Articles of Incorporation.

(Status of the Board of Directors)

(3) Accounting Auditor

MORI TRUST Hotel Reit has elected KPMG AZSA LLC as the Accounting Auditor. The Accounting Auditor will audit MTH’s financial statements and other relevant material, report to Supervisory Directors in the event of detection of a fraudulent act or material fact violating any law or the Articles of Incorporation concerning execution of duties of the Executive Director and perform other duties stipulated in laws.

Chart of MORI TRUST Hotel Reit's Organization System

Status of Directors

The status of the Executive Director and Supervisory Directors is as shown below.
In addition, the payment standards for Executive and Supervisory Directors' remuneration are stipulated in the Articles of Incorporation as follows, and any changes require a resolution of a General Meeting of Unitholders.
・ (Executive Director) Up to 800,000 yen per person per month as determined by the Board of Directors
・ (Supervisory Director) Up to 500,000 yen per person per month as determined by the Board of Directors

Please refer to "Overview of MORI TRUST Hotel Reit - Status of Directors" regarding their brief personal histories

(Note) Directors’ remuneration for the fiscal period ended August 2022 (6 months). The entire amount is fixed remuneration and there is no variable remuneration.

Status of Accounting Auditor

The status of the Accounting Auditor is as shown below.

(Note) Accounting Auditor's remuneration is for the fiscal period ended August 2022 (6 months). All remuneration consists of audit remuneration, and there is no non-audit remuneration.

The Asset Management Company’s Organizational Structure

MORI TRUST Hotel Reit entrusts asset management to the Asset Management Company. The Asset Management Company’s organizational structure is as shown below.

Compliance Structure

Basic Compliance Policy and Structure

The Asset Management Company has set compliance with laws, regulations and other rules as one of its management priorities and the Asset Management Company’s management is actively working to develop and strengthen the compliance structure and internal control structure. To establish an appropriate operational structure, the Asset Management Company has appointed a compliance officer as the person responsible for compliance-related matters at the Asset Management Company to ensure that internal checks and balances on other departments function effectively. Furthermore, through the establishment and operation of the Compliance Committee, the Asset Management Company has established a multi-tiered structure for ensuring MORI TRUST Hotel Reit’s compliance with laws, regulations and other rules.

(1) Board of Directors

The Board of Directors seeks to ensure compliance as the organization with ultimate responsibility for the execution of business and, besides receiving reports on matters approved by the Compliance Committee, also makes resolutions on important compliance-related matters at the Asset Management Company, including formulation and amendment of the basic policy on compliance and compliance program, formulation of the risk management plan and internal audit plan, as well as appointment and dismissal of Compliance Committee members and the Compliance Officer.

(2) Compliance Committee

The Compliance Committee is responsible for execution of the duties set forth in the Compliance Committee Rules in cooperation with the Board of Directors and Compliance Officer.

(3) Compliance Officer

As the person responsible for compliance at the Asset Management Company, the Compliance Officer works to establish an internal compliance structure and to raise awareness of norms for compliance with laws, regulations and other rules within the company. The Compliance Officer, therefore, constantly monitors whether the Asset Management Company executes asset management business in accordance with laws, regulations and other rules, and also monitors and supervises the status of compliance in the exécution of day-to-day operations.
In light of the importance of the Compliance Officer’s responsibilities, the Asset Management Company elects as Compliance Officer an individual who is sufficiently capable of examining and supervising business execution to achieve compliance with laws, regulations and norms.
The Asset Management Company has put in place a structure such that any act pertaining to the Asset Management Company’s business operations that violates or is likely to violate laws and regulations discovered by any officer or employee is reported immediately to the Compliance Officer.

Appropriate Management of Conflicts of Interest

To prevent the Asset Management Company from engaging in transactions with interested parties sharing certain interests with the Asset Management Company which may be harmful to the interests of MORI TRUST Hotel Reit, the Asset Management Company has identified types of interested party transactions and set forth interested party transactions standards and comprehensively judges whether to conduct a transaction through deliberation by more than one body. The Asset Management Company elects outside specialists as committee members to both the Compliance Committee and the Investment Committees that hold such deliberations.

If the acquisition of an asset or other transaction by an investment corporation which entrusts its asset management to the Asset Management Company constitutes an interested party transaction, the approval of the outside committee members of the Compliance Committee and Investment Committees as well as the approval of the investment corporation’s Board of Management are required. Details of this decision-making process are as shown below.

Decision-Making flow of the Asset Management Company in Transactions with Interested Parties

Preventing Conflicts of Interest among Management Entrusting Investment Corporations

The Asset Management Company is entrusted with the management of the assets of MORI TRUST Hotel Reit and MORI TRUST Sogo Reit, Inc. (In this paragraph, both investment corporations are referred to as the "Management Entrusting Investment Corporations.) The "Standards Concerning Prevention of Competition among Clients for Property Acquisition, Etc.," which set forth the order of priority, etc. concerning the consideration of acquiring hotel properties for the purpose of preventing arbitrary allocation of information and conflicts of interest among Management Entrustment Investment Corporations, have been established.

Exclusion of Antisocial Forces

The Asset Management Company has formulated the Basic Policy to Prevent Damages Caused by Antisocial Forces in order to exclude antisocial forces and groups that threaten public order or stability and obstruct the economic activity of companies and individuals.
The Policy sets out that the organization as a whole will deal with unjust demands by antisocial forces, that the Asset Management Company will establish close and cooperative relationships with external specialist organizations such as the competent police, the National Center for Removal of Criminal Organizations, and legal practitioners, that it have no relations with antisocial forces including business relations, and that it will refuse any unjust demands by antisocial forces.

Prohibition of Insider Trading

MORI TRUST Hotel Reit and the Asset Management Company established respectively its Corporate Information Management Rules to prohibit MORI TRUST Hotel Reit's officers and the Asset Management Company's all its officers and employees (including temporary employees, contract employees, and employees on loan or dispatched from other companies) from engaging in transactions such as trading securities including MORI TRUST Hotel Reit's investment units, based on corporate information or other special information that they have obtained in the course of operations by taking advantage of their titles and positions.

Relations with politicians and governments

The Asset Management Company’s Basic Policy on Compliance stipulates that it shall maintain transparent and sound relations with politicians and governments.
It has never made any political donations in the past.

Prevention of Bribery and Corruption

The Asset Management Company set out in its Rules of Employment and its Basic Policy on Compliance that its officers and employees will not engage in an acts of fraud or corruption including bribery  such as  offering or accepting gifts, entertainment and/or other benefits beyond socially accepted limits, and money laundering and that the Asset Management Company will take strict disciplinary action against any officer or employee who violates these rules.
There has been no material violation of laws and ordinances around these matters, and nor has there been any record of paying penalties, surcharges or settlement money in relation to any acts of corruption.
In addition, no employee has been subject to reprimand or dismissal due to acts in relation to bribery or corruption.

Establishment of Whistleblowing System

The Asset Management Company has a whistleblowing system in place for all its officers and employees (including temporary employees, contract employees, and employees on loan or dispatched from other companies).
In this system, a whistleblower can make a report anonymously. In addition, in accordance with the Whistleblower Protection Act, it is prohibited to carry out dismissal, disciplinary measures, retaliation or any other treatment that is disadvantageous to a whistleblower on account of such whistleblowing.

Provision of Regular Compliance Training

The Asset Management Company provides all its officers and employees (including temporary employees, contract employees, and employees on loan or dispatched from other companies) with training mainly aimed at raising compliance awareness on a regular basis.

Risk Management

Basic Risk Management Policy and Structure

The Asset Management Company positions risk management as one of its management policies and has established "Risk Management Regulations" for the purpose of ensuring the survival and stable growth of its business and soundness of its management, and promotes risk management.
The Asset Management Company has also established the following risk management system.

(1) Board of Directors

The Board of Directors makes decisions on the formulation and revision of plans for risk management (Risk Management Plan) and receives regular reports from the Compliance Officer on the progress of the plan.

(2) Compliance Officer

The Compliance Officer, as the Chief Risk Management Officer, establishes and maintains the risk management framework of the Asset Management Company and controls operations related to risk management.

(3) General Managers of Each Department

The general managers of each department as risk management managers establish and maintain a risk management framework for the department under their jurisdiction, and control and execute operations related to risk management for the department under their jurisdiction.

Risk Management Process

In accordance with the "Risk Management Regulations," the Asset Management Company practices company-wide risk management by conducting risk assessments and formulating a "Risk Management Plan" every fiscal year, as well as by regular checking on the progress of the plan. The risk management process is as follows:

(1) Identify risk items in each department by risk category
(2) Assessment of "frequency of occurrence (possibility of occurrence)" and "scale of damage (impact)" of each risk.
(3) Based on the results of the above assessment, determine which risk items could be material risk items.
(4) Set management targets and formulate response measures for each determined material risk item.
(5) Assessment of the implementation status of response measures, and report on the results of the assessment and corrective/improvement matters based on the assessment.

Other Initiatives

Information Security

The Asset Management Company enacted the Information Management Rules with the aim of properly utilizing company information and preventing information incidents including unauthorized access and the loss or leak of company information.
The rules aim to ensure information management by providing for training and audits on the management of confidential information, restriction of unauthorized access, prevention of information leaks, maintenance of information systems and information system.

Same Boat Investment by Sponsor Group

MORI TRUST Hotel Reit aims to improve unitholder value by aligning sponsor interests with those of unitholders (as of the end of August 2022).

Customer-oriented Business Conduct

The Asset Management Company adopted the Principles for Customer-Oriented Business Conduct announced by the Financial Services Agency on March 30, 2017 and set forth a Policy on Customer-Oriented Business Conduct as set out below.

1. Formulation and Announcement of Policies regarding Customer-Oriented Business Conduct

We have formulated and announced this Policy and we publish the status of the Policy’s implementation and also revise this Policy as appropriate.

2. Pursuit of the Customers’ Best Interest

As a financial service provider, we maintain a high level of expertise and professional ethics, conduct business with customers in a faithful and fair manner, and pursue customers’ best interests. The Asset Management Company also endeavors to ensure that such business conduct becomes firmly established as its corporate culture.

3. Appropriate Management of Conflicts of Interest

To accurately understand and manage potential conflicts of interests in transactions, we have established rules such as the Rules for Transactions with Interested Parties and Compliance Rules as voluntary rules in addition to the provisions of relevant laws and regulations, and we have established a policy for dealing with transactions involving conflicts of interest and an operating structure to ensure high independence.

4. Clarification of Various Fees and Commissions

The Asset Management Company properly provides information to help customers understand details of various fees and commissions paid to us by investment corporations which entrust their asset management to us, including details of the kind of services provided in exchange for these fees and commissions.

5. Providing Important Information in an Easy-to-Understand Manner

The Asset Management Company provides important information which might affect customers’ investment decisions in an easy-to-understand manner through statutory disclosure, timely disclosure, voluntary disclosure and other means.

6. Providing Suitable Service to Customers

We endeavor to understand customers’ needs and conduct asset management based on an awareness of these needs. We also provide easy-to-understand information that helps customers understand the status of operations of investment corporations who entrust their asset management to us.

7. Framework for Adequate Motivation of its Employees

To further promote customer-oriented business conduct, the Asset Management Company raises awareness of its Corporate Philosophy and its Basic Policy on Compliance as well as of the importance of this policy among individual employees through compliance training, etc.

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